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Finance Minister Jim Flaherty (Fred Chartrand/The Canadian Press)
Finance Minister Jim Flaherty (Fred Chartrand/The Canadian Press)

Odds of an election 50-50, Flaherty says Add to ...

Finance Minister Jim Flaherty is predicting a 50-50 chance of a federal election over his March budget, even though he says he's willing to pepper it with opposition demands.

With the House of Commons scheduled to resume sitting Monday amid pre-budget demands from the three opposition parties, assessing the odds of an election over the budget is the main topic of conversation on Parliament Hill.

On Friday, Mr. Flaherty offered his own assessment.

"Fifty-fifty really," he answered on the sidelines of the World Economic Forum in Davos, Switzerland, where he was asked by a Reuters reporter whether the budget will cause an election. "You can never predict exactly what the opposition parties will do. I'm willing to talk to them. You know, we can put some things in the budget that they would like. But fundamentally, the government has to set the course that we're on - we've made that clear - and then carry through."

The minister's latest comments - the clearest indication yet that Conservatives see an election as a real possibility - come as a new analysis of the government's revenue figures shows Ottawa is on track to beat its deficit target this year by about $7-billion.

The review of the federal books by two former senior Finance Canada officials warns there's no reason for Conservatives to celebrate, even though this year's numbers are looking better than expected. In fact, former Finance deputy minister Scott Clark and former fiscal policy director Peter DeVries accuse Mr. Flaherty of ignoring the budget troubles looming on the horizon due to an aging population and rising health-care costs.

In an open letter to the minister, the two retired public servants challenge his assertions that deep cuts are not needed in this year's budget.

"This complacency and your repetitive self-congratulations are misplaced," they write, stating that Ottawa has not done enough to meet its 2015 target for balancing the books.

Mr. Flaherty's office responded by accusing Mr. Clark of having "partisan Liberal ties" because he has met with Liberal Leader Michael Ignatieff to discuss financial issues. Mr. Clark and Mr. DeVries insist their work is non-partisan and that they would provide the same advice to Conservatives if asked.

Mr. Flaherty's spokesman, Annette Robertson, also noted the International Monetary Fund has described Canada's fiscal situation as being "among the best in the G20."

Finance Canada released its monthly Fiscal Monitor on Friday, updating Ottawa's revenue and expenses for the first eight months of the current year.

It shows a deficit of $26-billion over that period, down from $36.3-billion during the same eight months last year.

Finance Canada's October, 2010, update projected a $45.4-billion deficit in the current fiscal year ending March 31.

Friday's Finance report shows the deficit for November, 2010, was $4.5-billion, up slightly from the $4.4-billion deficit posted in November, 2009. The higher November, 2010, deficit is largely due to the impact of accounting measures tied to the sale that month of Canadian shares in General Motors.

According to an analysis by Mr. DeVries, who used to prepare the Fiscal Monitor report when he was Finance's director of fiscal policy from 1990 to 2005, this year's deficit is on track to come in at about $38.5-billion. That is a nearly $7-billion improvement over Finance's October, 2010, projection.



Mr. Flaherty's office would say only that Ottawa is "firmly on track" to meet its deficit target this year.



The final number remains to be seen because governments tend to book one-off expenses at the end of the fiscal year. One potential cost is the long-rumoured compensation for Quebec should a deal be reached over the harmonized sales tax. Ottawa will have to decide whether to use that room for more spending or post a lower-than-planned deficit.

In their open letter, the two retired Finance officials defend Parliamentary Budget Officer Kevin Page, who is also a former Finance bureaucrat. The letter supports Mr. Page's view that the Conservatives have not cut spending enough to make up for the loss in revenue caused by cutting the GST, leaving a permanent - or structural - deficit.

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