The federal government’s books will be back in balance in little more than a year and run a surplus from that point on, Finance Minister Jim Flaherty said Monday in generally upbeat testimony given separately to both the Senate and Commons finance committees.
“We will be balanced again in approximately 14 months and we’ll be in a position to run a surplus and make the policy decisions that are made then about what to do about the surplus,” Flaherty said.
The Harper government is counting on balancing the budget in 2015 in order to fulfil campaign promises made four years earlier that it would introduce partial income splitting for families among other tax cuts once the deficit is eliminated.
Flaherty has pledged to meet the target in the past, but the 14-month deadline was his most specific to date.
However, speaking later to reporters, he said his outlook is that the budget would be balanced sometime during the fiscal year 2015-16, not specifically in March 2015.
In his latest economic update, Flaherty forecast a surplus of $3.7 billion in 2015-16, but also gave himself some flexibility by including a $3-billion cushion, meaning the surplus could actually be almost double the official projection.
Some analysts have suggested that Ottawa may already be in the black — based on the monthly reporting — by the time Flaherty or some successor presents the 2015 budget.
Flaherty told the legislators he was particularly pleased he has been able to present a path toward a balanced budget without cutting transfer payments to provinces or to individuals, and without raising taxes.
At the Commons committee, he said his recently announced freeze on employment insurance premiums will save workers and employers $660 million next year alone, taking a partisan shot at the previous Liberal government for allowing the system to build up tens of billions of dollars in surpluses.
“We will not ever again do what the previous Liberal government did and that is steal money from the EI plan in order to balance the budget,” he said.
The minister was also relatively optimistic about the outlook for Canada’s auto sector, arguably Ontario’s most important industry and a key sector in the economy as a whole.
Responding to a question about the government’s remaining stake in General Motors, he said he was waiting for a good price before selling, boasting that he had got a better price than the United States earlier this year by waiting.
And he said he believes the future of the industry will be bright, adding that the Canada-European Union free trade deal, once it is implemented, will offer the domestic industry an opportunity to expand.
“This business has come back, it’s a global business…and we’re seeing companies now design cars for the European market, including right-hand drive cars, and they will export cars from Canada to Europe,” he said.
“This is a huge development and it puts us into the global market place, which is a good place to be.”
Later, he explained that “at least one” of the Canadian assembly plants will build cars for Europe and that CETA, as the trade deal is called, will encourage further expansion into the market.
Under the agreement, Canada will be able to sell up to 100,000 cars duty free in Europe — more than 10 times current shipments.
In other testimony, Flaherty said he was somewhat concerned that departments have underspent to the tune of about $10 billion a year on their approved budgets, saying in particular that procurement spending was “slow.” But he also told reporters that “it was good” the government was saving money.
In an unusual statement for a minister in the Harper government, Flaherty thanked the efficiency of the public service for how it managed the stimulus budgets of 2009 and 2010 that he said kept the country from falling into a much deeper recession with massive job losses.
“I think we took a risk (with the stimulus) and the risk worked, but it worked because the public servants got the job done and got the money out the door,” he said.