News

Prime Minister Stephen Harper will move to soften his minority government's right-wing image today with an election-ready budget heavy on social programs, the environment and education.

The budget will also offer substantial tax breaks and goodies, including incentives for fuel-efficient vehicles and "partial" action on a Conservative campaign pledge to provide capital-gains tax relief, sources say.

But the centrepiece of the Harper government's second budget is a transfer of about $3.5-billion to $4-billion in annual funding to provinces to pacify grievances about Ottawa not sharing the wealth.

It includes at least $1-billion for richer equalization payments to poorer provinces and territories. The cash -- the biggest slice of which will go to Quebec -- is the Harper government's answer to an election promise to fix a so-called fiscal imbalance that critics say denies provinces the cash they need to deliver social programs.

If defeated by the opposition parties, the budget could form part of the Tories' campaign platform during a possible election this spring.

The tilt toward social spending is in line with the mood of many in the Canadian electorate, according to a Strategic Counsel poll for The Globe and Mail and CTV News that found half of the poll's respondents think that increasing spending on social programs is the most important priority for the budget.

Only 19 per cent chose tax cuts as top priority.

Although the budget is being delivered amid heavy speculation about an imminent election, it's far from certain that Mr. Harper minority government will fall on its fiscal plan.

The Tories need only one of three opposition parties to vote for their plan in order for it to pass, and the budget is stuffed with spending and tax breaks that will make it risky for political rivals to oppose it.

Mr. Harper nevertheless warned Tory MPs and candidates this weekend to be ready for an election at any time, reminding Tories to see themselves as champions of average Canadians: ". . . hard-working people who didn't have the time to stage protests or the money to hire lobbyists."

In today's budget, Ottawa is also rounding out its massive transfers to the provinces with at least $1-billion in extra infrastructure cash for provinces and a $1.5-billion fund for efforts to fight climate change.

"Those transfers . . . are not high-in-the-sky transfers. They're for things that really matter to Canadian families, like postsecondary education, colleges, universities, infrastructure, public transit, making sure we have the necessary roads in the country [and] environmental spending," Finance Minister Jim Flaherty told reporters yesterday in Whitby, Ont.

The cash for social programs, education, environment and roads is a calculated effort to make political inroads into suburban Quebec and the Greater Toronto Area, two regions that figure heavily in the Conservative strategy to win a majority.

Mr. Flaherty is also expected to deliver as much as $3-billion in annual cuts, credits and breaks for individuals today, some of them targeted directly at specific groups and some that apply broadly. These include capital-gains tax relief, allowing couples to split pension income for tax purposes, a hike in the age credit for Canadians 65 or older and a Working Income Tax Benefit to make it worthwhile for some to quit welfare.

Mr. Flaherty confirmed yesterday on CTV's Question Period that the amount of personal tax relief flowing from a Tory "tax-back guarantee" would be about $1-billion. That's the amount of personal-tax reduction being funded by the interest saved from what Mr. Flaherty says will be a "significant [debt] repayment" to be announced in the budget.

He suggested yesterday that opposition parties will find his fiscal plan hard to defeat, almost daring them to vote it down. "If it turns out to be acceptable to the opposition, terrific," Mr. Flaherty said. "If they decide they don't like it, the Canadian people will decide they like it, so I am feeling good about it," he said.

Opposition parties were hedging their bets last night and appeared reluctant to trigger an election.

Liberal Leader Stéphane Dion even said he could see his party supporting the budget if it was adequate. "If it's a budget that is not as good as we would like . . . but, let's say acceptable, not detrimental for the Canadian people, we may vote for it," Mr. Dion told Question Period.

The NDP, which has made common cause with the Tories over the past year on the income-trust tax and bank fees, suggested it prefers to avoid an election if Parliament can be made to work.