Flaherty: Privatization of BCE will lead to $1 billion in program spending cuts

News item #1:

Paul Vieira, Financial Post
July 04 2007

OTTAWA -- In the interview, the finance minister indicated he was comfortable with the role private equity and pension funds are playing in the economy. As a result, he does not believe Ottawa needs to review either the tax-exempt status of pension funds - which vied to take over Bell Canada - or rules that would apply to leveraged buyouts.

It is estimated Ottawa stands to lose over $1-billion in annual tax revenue should Bell Canada be privatized.

News item #2:

Les Whittington, Toronto Star
Apr 10, 2008
Flaherty says he'd cut to avoid a deficit

OTTAWA -- Finance Minister Jim Flaherty says the Conservatives will cut government spending if need be to avoid a budget deficit caused by the economic slowdown.

"No deficit – balanced budget," he said outside the Commons.

"We're not raising taxes," Flaherty added when asked how the federal Tories can avoid a budget shortfall if the weakening economy deprives Ottawa of expected tax revenues.

"There are other ways that governments can balance budgets, of course," Flaherty continued. "We can always restrain spending if that becomes necessary."

But he said the "cushion" in the Feb. 26 budget should be "adequate" to keep the books balanced.

The Conservatives have ushered in large hikes in program spending, which is expected to rise to $218 billion next year from $201 billion in 2007. At the same time, Flaherty has brought in cuts to corporate and personal taxes and the GST totalling $60 billion over six years.

As a result, the government's forecast surplus is only $2.3 billion for this year, and $1.3 billion next year.

With the Canadian economy performing worse than expected by the Bank of Canada and most private economic analysts, the lower-than-expected tax revenues could put the government on the edge of the first budget deficit in a decade.

"It's a combination of record increases in spending and big tax cuts – especially the GST, which is the biggest cut of the lot – bringing us perilously close to a deficit, so it doesn't take much of a further drop in forecasts to tip us into deficit," said Liberal finance critic John McCallum (Markham-Unionville).

"I hope it doesn't happen, but if it does, he (Flaherty) would have only himself to blame because he didn't leave enough of a cushion."

The Conservatives provoked widespread objections in 2006 when they announced $1 billion in spending cuts to status-of-women programs, as well as a program to help minorities mount court challenges and a range of other social and cultural projects.

Flaherty's comments on Ottawa's fiscal position came as the Washington, D.C.-based International Monetary Fund reduced its economic growth forecast for Canada as a result of the problems in credit markets and the slump in the United States, which buys most of this country's exports.

The IMF said Canada's economy would expand by 1.3 per cent this year, down from its January forecast of 1.8 per cent. The prediction for Canadian growth in 2009 is 1.9 per cent.

Both projections were well below the IMF's forecasts for world growth of 3.7 per cent this year and 3.8 per cent in 2009.