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Finance Minister Ralph Goodale tabled the first minority government budget since 1979 Wednesday, delivering a package of spending and tax relief aimed squarely at appeasing the opposition and assuring Canadians campaign promises haven't been forgotten.

The document, Mr. Goodale's second since taking the post, vows money for defence, the environment and cities alongside measures Ottawa promises will ease the tax burden for the Canadian taxpayer.

"Canadians will expect us to take major steps to deliver on our commitments," Mr. Goodale said, presenting the five-year spending plan in the House of Commons.

"And that's exactly what this budget does."

In total, Wednesday's plan — the eighth straight balanced budget - outlines new spending of $42-billion over five years, and projects an underlying $4-billion surplus for 2005-2006.

The spending outline also factors in $11-billion in savings from Ottawa's expenditure review program, with the bulk of that cash — roughly 89 per cent -- coming from "improved efficiencies" in government operations.

Central to the plan is $12.8-billion over five years for defence spending, $5-billion during the same period for climate change and environmental protection and a continued vow of a "new deal" for Canadian municipalities.

For the taxpayer, Mr. Goodale has proposed raising the tax-exemption level on Canadians incomes to $10,000 by 2009, eliminating the 30-per-cent foreign property limit on pensions and registered retirement savings plans and boosting the guaranteed income supplement for seniors by a total of $2.7-billion over five years.

"Behind all the words and numbers in this budget are decisions that reflect directions set and commitments made," Mr. Goodale said.

"And taken together they help share the course of our national journey."

Paul Martin's Liberal government came in to Wednesday's budget as the first minority government since 1979 to walk a tightrope between fiscal prudence and the need to keep the opposition at bay.

The last time — when Joe Clark's Conservative minority offered up a tough-measures budget, including a gas tax — the opposition balked, triggering an election. This time, the Conservative opposition has suggested that it would be loath to send Canadians back to the polls so soon after last June's vote unless Mr. Goodale's budget was "pretty bad."

Addressing Parliament, Mr. Goodale — who took the unusual step of consulting critics as he prepared the document -- made a veiled mention of the opposition's impact on shaping Wednesday's budget and the rancor that followed October's Throne Speech, specifically demands from the Conservatives for tax breaks for Canadians.

"I am announcing today a set of new measures that will provide further relief to tax payers — especially low-and-most income Canadians, as specifically recommended by this House last fall," he said.

Specifically, the budget raises the tax-emption limit — basically the amount Canadians can earn before they start paying taxes — to $10,000 by 2009. For the 2004 taxation year, the limit stood at $8,150.

The increase is seen largely as a benefit to low-and-medium income families, although all Canadians benefit because all taxpayers claim the basic personal amount. In Wednesday's budget, Ottawa estimated that the proposed change would remove about 860,000 low-income earners from the tax rolls, including about 240,000 seniors.

Also for seniors, the budget proposed boosting guaranteed income supplement benefits by $2.7-billion over five years. As a result, monthly benefits would climb by $36 for singles and $58 for couples by January, 2007.

As an example, a single person now receiving maximum GIS benefits of $560 a month in addition to old age security pension gets a total of $1,032. By 2007, that figure would rise to $1,068.

On the defence side, Mr. Goodale earmarked $12.8-billion over half a decade, marking the biggest five-year defence outlay in 20 years. Much of that money comes in the later stages of the five-year period and some of it goes toward restoring past cuts.

Next year, Ottawa will devote $80-million to expanding Canada's forces. In the Throne Speech, the government promised to increase defence forces by 5,000 members and reserves by 3,000. By 2009-2010, the amount for new troops rises to $1.18-billion, for a five-year total of $3.06-billion.

"This investment in our military means that we will be able to better meet our responsibilities," Mr. Goodale said.

In terms of the environment — and meeting Canada's commitments to the Kyoto global warming accord — the government outlined a $5-billion package over five years, providing $1-billion over that period for a so-called Clean Fund to encourage projects aimed at cutting greenhouse gas emissions.

As well, Mr. Goodale promised $225-million over the five-year time frame to quadruple the number of homes covered under the government's EnerGuide program, designed to make housing more energy efficient. Another $200-milion over five years will go to develop a sustainable energy science and technology strategy and $200-million to encourage the use of wind power.

Within the budget, Ottawa also floated the notion of a vehicle "freebate" that would not only offer a rebate to consumers buying energy-efficient vehicles but also "impose a fee on fuel-inefficient vehicles."

"Over time, a freebate could contribute to the improvement of the fuel efficiency of vehicles purchased in Canada, reduced greenhouse gas emissions and improved air quality," Wednesday's budget said.

The government, the budget said, is now negotiating with the auto industry to strike an agreement that would improve the fuel efficiency of vehicles sold in Canada. Ottawa is also asking the National Round Table on the Environment and the Economy to develop options on a so-called freebate. No timeframe was given on the idea, which Ottawa said would be "revenue neutral" for the government.

On the tax side, Ottawa is also proposing increasing the incentive to invest in efficient and renewable energy generation equipment by accelerating capital cost allowance provisions. The CCA is a tax deduction for business related investment in capital property. The higher the rate, the faster a business can write off an asset and replace it with more modern equipment.

The budget proposes raising that rate for certain high-efficiency co-generation equipment and for renewable energy generation equipment — covering things like wind turbines and active solar heading equipment -- to 50 per cent from 30 per cent. The increased rate would apply to equipment bought over the next seven years with a review of its effectiveness taking place at the end.

For Canada's cities, the federal government's so-called "new deal" will see provide $5-billion to support environmentally sustainable infrastructure projects like public transit and water treatment over five years.

Starting next year, Canadian municipalities will get a share of federal gas tax revenue worth $600-million. That funding would then increase until it reaches $2-billion annually or about 5 cents a litre of gas tax revenue by 2009-2010.

"Our commitment was to transfer a total of $5-billion over five years — beginning with a penny per litre or $400-million in this coming year," Mr. Goodale said.

"We will do better — starting at $600-million, not just $400-million — and then rising as promised to 5 cents per litre or $2-billion in 2009-2010, and continuing thereafter indefinitely."

In terms of culture and heritage, the budget sets aside $1.6-billion over the five-year period. Ottawa has earmarked $60-million in 2005-2006 for the Canadian Broadcasting Corporation. Also, $46-million will be set aside over the five-year period to continue with the implementation of a national register of historic places and conservation areas. Other money has been set aside to fight racism and support community-based events aimed at offering "Canadians the opportunity to share their pride in their country."

Mr. Goodale's spending plan comes as the government projects broader economic growth of 2.9 per cent this year, just a shade below the economy's 3-per-cent potential. By 2006, growth is forecast to accelerate to 3.1 per cent.

Although Canada continues to maintain bragging rights that it is the only Group of Seven nation to expect to finish this year and next in a surplus, Mr. Goodale also cautioned that the economy faces headwinds.

The main concern continues to be the impact of the stronger dollar, he said. In the last two years, the loonie has gained nearly 30 per cent against its U.S. counterpart. Also, he said, the impact of the massive U.S. trade and budget deficits on that country's economy also casts a shadow north. Those imbalances could result in higher interest rates, slower U.S. growth and a further appreciation of the U.S. dollar. Because of Canada's trade with the United States, this country would be affected.

"We must be conscious of those risks, but not paralyzed by them," Mr. Goodale said.

"Rather, we must plan accordingly and continue to keep ourselves in a position of fiscal strength, the better to handle the risks, should they arise."

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Big ticket items

• A five-year spending plan that costs $41.8-billion.
• $12.7-billion — in tax relief for personal taxes, RRSP contribution limits, reducing corporate surtax and realigning capital cost allowance rates
• $12.8 billion over five years to boost 5,000 troops, along with 3,000 additional reservists. operational readiness, purchase new medium-capacity helicopters, trucks, utility aircraft and specialized facilities for Canada's elite anti-terrorist troops.
• $11-billion in savings identified by the Government's Expenditure Review Committee. Mostly from "improved efficiencies"
• $5-billion for a framework for day care
• Share $5 billion in gas tax revenues with cities over the next five years for investments in sustainable infrastructure. It will start at $600-million this year, rising to $2-billion in 2009—10.
• $3-billion over five years in new funding for environment with a total of $5-billion.
• $1.6-billion for heritage, arts and sports
• Balanced budgets or better in 2004—05 and in each of the next five fiscal years.
• To reduce Canada's debt-to-GDP ratio to 25 per cent by 2014—15.

Taxes:

• boost tax-free limit to $10,000, removing 860,000 people from tax rolls
• RRSP contribution limits boosted to $22,000. Also, eliminating 30 per cent foreign property limit on pensions.
• Corporate surtax lowered to 19 per cent from 21 per cent.
• Capital cost allowance rates "better aligned"