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Ignatieff to call for changes to budget

Liberals unlikely to vote for current plan

From Wednesday's Globe and Mail

OTTAWA - Liberal MPs emerged from a meeting last night saying they expect their leader, Michael Ignatieff, will demand changes to yesterday's Conservative budget in return for their support.

Mr. Ignatieff, who will outline his approach today, said earlier he was torn by the decision over whether to support the minority Conservatives' budget, which pledges $40-billion in spending to fight the recession and a deficit of $85-billion over five years.

It's unclear whether the Liberals would demand substantive changes or more minor concessions.

Some MPs, speaking on condition they not be named, said all options appeared possible, but that it was unlikely the Liberals would vote for the budget in its current form. It seemed probably they would propose amendments.

"Obviously, that could still lead to an election if they're not co-operative," one MP said.

At the top of the Liberals' concerns were objections that there was not enough softening of the employment-insurance rules, and that the tax cuts announced yesterday could leave the federal government mired in deficit years from now, even after the economy recovers.

Sources said Mr. Ignatieff spent the early evening listening to caucus concerns and did not say which way he was leaning.

"I think the objective for the Liberal Party is to let Canadians know that they do have a different vision of the country," said another MP.

The MP said there would be some Liberal positioning on the issue, but that more individuals were leaning toward letting the government live than pushing to defeat it.

Finance Minister Jim Flaherty characterized his budget as necessary to protect jobs and businesses from the ravages of the financial crisis.

Mr. Flaherty's financial plan devotes about half the new spending to construction projects that the government hopes will revive the economy by creating new jobs and stoking demand for lumber and other Canadian-made goods.

In his fourth budget in three years, Mr. Flaherty offers consumers a tax break on home renovations this year and pledges to expand employment-insurance benefits for two years.

The Conservative government also said it would make another $70-billion in credit available to businesses that are struggling to get affordable loans as a result of the global financial crisis.

Deficits will return in the fiscal year ending March 31, earlier than Mr. Flaherty had previously projected.

Still, Mr. Flaherty said his measures would create 189,000 jobs and keep the pledge Canada made to its international allies to spend at least 2 per cent of its economy on programs aimed at boosting demand.

"Our government will spend what is necessary to stimulate our economy, and we will invest what is necessary to protect our future prosperity," he said in the House of Commons.

The leaders of the Bloc Québécois and the New Democratic Party reiterated their intention to vote against the budget, saying they have lost confidence in Prime Minister Stephen Harper's commitment to co-operate with opposition parties in confronting Canada's first recession since the early 1990s.

Mr. Ignatieff said there were some "good things" in the budget, which offers $12-billion to build and repair roads, hockey arenas and other infrastructure, a measure that Liberals said ahead of the budget was a necessary part of an effective stimulus program.

"It is up to this party to decide whether the choices they made today are the right ones," Mr. Ignatieff told the Commons. "It will be a tough call. We will make this choice calmly and serenely."

In Newfoundland and Labrador, Premier Danny Williams said the government should be defeated, saying the budget would drive up his province's deficit.

"I would actually ask the Liberals and Mr. Ignatieff to vote this down," Mr. Williams told CTV News last night.

Canada's economy is in the middle of a recession that the Bank of Canada predicts will endure for most of this year — even with considerable government spending.

The Finance Department, citing private forecasts, said the economy would shrink 0.8 per cent in 2009, and then bounce back to growth of 2.4 per cent in 2010.

The Conservatives tabled a budget that could be difficult for the Liberals to vote against. Mr. Flaherty's financial plan hewed closely to the types of initiatives that Liberals said were needed to win their support and what most economists said would comprise an effective stimulus program.

"I'm confident this will work," said Glen Hodgson, chief economist of the Conference Board of Canada and a former Finance official.

The bulk of Mr. Flaherty's pledges are one-time expenditures, something analysts said is necessary to encourage consumers and business to spend now, when the economy most needs it, and to avoid long-term commitments that would cause deficits to become entrenched.

An example of this is the 15-per-cent tax credit for home renovations exceeding $1,000, which would end on Feb. 1, 2010. The non-refundable credit would provide tax relief of up to $1,350 for Canadians if they spend the maximum $10,000 eligible for the break.

The government's pledge to extend employment-insurance benefits for five weeks would snap back to the current 45 weeks after 2010.

"These are not ideological things," Mr. Flaherty said at a news conference. "We heard from Canadians this is what we need to do. I'm a pragmatic person. We're doing what we need to do to ensure we respond to protect Canada."

One exception to temporary measures is a sprinkling of permanent personal income tax relief worth about $3.2-billion annually that benefits the working poor, seniors and lower-income earners the most.

Under the budget, a two-parent family with two children earning $80,000 would get $199 relief while the same family, if it earned only $20,000, would get $539.

The return to red ink follows 11 consecutive years of budget surpluses, and promises by Mr. Harper and Mr. Flaherty as late as October that they would never allow deficits.

Mr. Flaherty, who was inspired to enter politics by the massive deficits Bob Rae accumulated as premier of Ontario in the 1990s, said it would have been irresponsible for him to balance the budget amid a global recession.

"Canadians regret the need to run a deficit in order to invest in our economy," Mr. Flaherty told MPs in his budget speech. "Our government shares that regret. We have chosen this course because it is necessary and because we know it will be temporary."

The Conservatives offered relatively little for corporate Canada in the short term, aside from a handful of smaller measures such as allowing businesses to deduct 100 per cent of the cost of a computer from their taxes.

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A plan for troubled times

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More significant for companies could be Mr. Flaherty's pledge to further improve access to financing and lending by increasing by nearly $70-billion the amount being made available under the "Extraordinary Financing Framework" it established last fall.

The additional efforts, through the use of guarantees, lending and borrowing, includes a Canadian Secured Credit Facility, which would provide $12-billion to support financing of vehicles and equipment for consumers and businesses.

With reports from Brian Laghi and Jane Taber

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