Canadian Prime Minister Stephen Harper’s budget was rejected by all three of the main opposition parties, setting the stage for elections.
Michael Ignatieff, leader of the main opposition Liberal Party, Gilles Duceppe, leader of the Bloc Quebecois, and Jack Layton of the New Democratic Party told reporters in Ottawa they won’t support the fiscal plan that was presented today by Finance Minister Jim Flaherty.
The Conservatives lack a majority of seats in the House of Commons and need the support of at least one of the opposition parties to pass the fiscal plan. Under Canadian parliamentary tradition, a budget vote is considered a matter of “confidence” in the government and would trigger elections if it is voted down.
The government “missed an opportunity to address the needs of working families,” Layton told reporters. “Nothing in this budget has persuaded me that Mr. Harper has changed.”
Harper, 51, faces several Parliamentary votes this week that could bring down his Conservative Party government about halfway through its current mandate. Aside from the budget, there may also be votes over incidents the main opposition Liberal Party calls an abuse of power, including the government’s reluctance to provide details on the cost of its legislation.
Flaherty pledged today to use an improving fiscal outlook to speed deficit reduction, while providing C$7.6 billion ($7.8 billion) in new spending and tax credits over five years in a bid to win support from opposition lawmakers.
“There is not a whole bunch of new measures,” said Pedro Antunes, director of economic forecasting at the Conference Board of Canada. “If the budget is not adopted, it’s pretty much status quo.”
The five-year fiscal plan projects a C$29.6 billion deficit in the fiscal year that begins April 1, down from C$40.5 billion in the current year and a record C$55.6 billion two years ago. A surplus is projected for the 2015-2016 fiscal year. The plan projects C$95.1 billion in cumulative deficits through March 2016, C$11.9 billion less than forecast last October.
At stake in an election are tax reductions valued at C$6 billion annually for businesses such as Royal Bank of Canada that the Liberals say are unaffordable and have pledged to reverse if elected. The Liberals also have said they would cancel the government’s plans to acquire 65 of Lockheed Martin Corp.’s F-35 Joint Strike Fighter jets.
Recent data have shown Canada’s recovery is accelerating, even as inflation remains tame. The economy added jobs for a fifth straight month in February, and expanded at a 3.3 percent annualized pace in the fourth quarter, the fastest in the Group of Seven.
Canadian government bonds have returned 4.6 percent over the past year according to Bank of America Merrill Lynch index data, compared with a 3 percent average for the G-7. Canada’s benchmark S&P/TSX Composite Index has risen 17 percent in the past 12 months, compared with a 7 percent gain for the Dow Jones Industrial Average.