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A budget to drive spending

Ottawa to announce range of measures from tax breaks to interest relief on credit cards

Globe and Mail Update

OTTAWA, TORONTO — The Harper government will aim to get consumers spending with a federal budget today that provides tax breaks for middle- and lower-income Canadians, incentives for home renovations and a promise of relief for credit-card borrowers.

The budget - which many are calling the most important since the deficit-fighting budgets of the mid-1990s - will also resolve the government's future, as opposition leaders decide whether to defeat the Tories and replace them with a Liberal-NDP coalition or force an election.

In addition to the $13-billion already announced, The Globe and Mail has learned that Finance Minister Jim Flaherty plans modest but permanent tax breaks for people in middle- and lower-income tax brackets, with one senior official saying the cuts will apply to those earning $80,000 a year or less. Money will also be provided for home renovations, although it's unclear how much the program will be worth.

Mr. Flaherty will also move to give Ottawa power to regulate credit cards, allowing the federal government to intervene if necessary, sources said.

The Finance Minister will outline his concerns about the lack of a uniform grace period for the payment of credit-card bills and insufficient disclosure of the terms consumers are signing up for when using them, including interest rates. The government will await responses from card companies, but sources said it expects it will ultimately have to regulate.

The grace period is the time between the statement date and the date payment is due. Banks and other credit-card issuers determine their own grace periods, which generally vary from 15 to 26 days. The longer the grace period, the less interest a customer could have to pay.

Mr. Flaherty signalled to bank chief executives at a meeting this month that he wanted to take some kind of consumer-oriented action on cards, according to sources.

The Finance Minister has said that the top concern he has heard from Canadians leading up to the budget is access to credit. He clashed with the banks last month when he said he wanted them to demonstrate that they are making credit more available.

The budget is expected to include a deficit of $34-billion in the fiscal year beginning April 1, and $30-billion in 2010-2011.

The overall stimulus package is expected to exceed $30-billion over a two-year period, putting Canada into deficit for the first time in 13 years.

Among other measures, sources said, the Tories expect to accelerate already planned corporate-tax reductions. The existing plan, laid out in a mini-budget last fall, calls for the rate, now 19 per cent, to sink to 15 per cent by 2012.

It's already slated to fall to 18 per cent in 2010, 16.5 per cent in 2011 and 15 per cent in 2012.

The government will also expand the amount of money available for lending to business via Export Development Canada and the Business Development Bank of Canada.

The home-renovation program is expected to go above and beyond the energy-retrofit program launched in 2007, which offered $220-million in grants to help Canadians improve the energy efficiency of their homes.

Prime Minister Stephen Harper told CTV News yesterday that the Conservatives will be expanding incentives for retrofit programs, but suggested the budget's efforts will go beyond that. "As you know in the Speech from the Throne in November, the government did say at the time that the energy-retrofit program is one of the things that this government will be expanding going forward," Mr. Harper said.

"Stay tuned for additional budget measures. Obviously, we want to make sure that consumers are participating in this recovery and that we are ensuring that construction activity on all levels stays strong across this country."

The Harper government has been floating the idea of a refundable tax credit for home renovations.

During an early January closed-door budget consultation in Montreal, Mr. Flaherty asked participants their opinion on a partly refundable tax credit for renovations. Some economists among the more than 20 attendees criticized the proposal while representatives of the building-trades sector lauded it.

Tax credits can be used to reduce the amount of taxes a person owes to the government, but refundable tax credits can benefit filers even if they have no taxes to be paid; in that case, they could get a refund based on the credit.

Sources said Mr. Flaherty will use the budget to advance his plan to create a national securities regulator, although they declined to say precisely what the minister would do. Such a move could further inflame relations with some provinces, especially Quebec and Alberta, where premiers have threatened to challenge Mr. Flaherty's bid in court. Earlier this month, a blue-ribbon panel endorsed Mr. Flaherty's long-held goal of replacing the country's 13 provincial and territorial bodies with a single entity.

Departing from convention on budget secrecy, the Tories have unveiled $13-billion of spending measures ahead of today's fiscal plan, including $7-billion in new infrastructure funding showcased by Transport Minister John Baird yesterday.

Mr. Baird said the Tories will create a $4-billion Infrastructure Stimulus Fund to help provinces, territories and municipalities get more job-rich public-works projects started.

Mr. Baird added an important caveat, though, saying that other levels of government will have to pitch in to get some of this new money.

But even as Mr. Harper was urging against an election, his party was using the risk of one to raise money. Senior Conservative fundraiser Senator Irving Gerstein sent a note to Tory faithful yesterday asking for donations for a possible election campaign.

"We need to be prepared should an election be forced by the opposition parties. That's why I'm asking all of our dedicated supporters like you to make a donation of $200 or $100 right now," Mr. Gerstein wrote in an e-mail.

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