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Finance Minister Jim Flaherty speaks to reporters in Ottawa on March 2, 2011. (CHRIS WATTIE/REUTERS)
Finance Minister Jim Flaherty speaks to reporters in Ottawa on March 2, 2011. (CHRIS WATTIE/REUTERS)

Budget Watch

Parties ponder options with budget date set, election a possibility Add to ...

The federal budget will be released on March 22, ending the guessing game over when the Harper government will unveil its potentially election-triggering spending plan. The budget will force all three opposition parties to decide whether to risk a federal vote with polls showing a healthy lead for the Conservatives.

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The Liberals and the Bloc Québécois have already signalled they are highly unlikely to support the budget, leaving the fate of the Conservative government in the hands of the NDP. But the political calculations are only beginning, and many options are still in play.

Cash for Quebec

While all eyes are on Jack Layton and the 35 other New Democratic Party MPs, small signs emerged on Parliament Hill on Wednesday suggesting there's still a chance the Bloc Québécois will vote to keep Prime Minister Stephen Harper in power.

Bloc Leader Gilles Duceppe has been largely written off as a potential budget supporter for his high-cost laundry list of demands, but an opportunity exists for the Conservatives to win the Bloc's 47 votes.

The party has indicated that its sine qua non budget demand is $2.2-billion in compensation for Quebec for harmonizing federal and provincial sales taxes, a subject of long-running negotiations between Ottawa and Quebec.

Mr. Flaherty has repeatedly said the talks are highly unlikely to conclude in time for the budget. But in announcing the budget date on Wednesday, the minister later spoke more positively about the negotiations.

"We've had good discussions with the government of Quebec. Negotiations continue with the Quebec government. I hope that we can have an accord, but it's not certain," he said in French.

Mr. Flaherty's office would not clarify whether the minister meant he was hopeful a deal could be reached before March 22. The Bloc would be hard-pressed to vote down a budget that confirmed such a major deal with the Quebec government. Yet the Bloc also wants budget cash for a professional sports arena, and Ottawa announced this week there will be no national program to fund such facilities.

Mr. Duceppe noted on Wednesday that his party voted for Conservative budgets in the past.

"If it's good for Quebec, we'll support it. If not, we'll oppose it," he said.

For its part, Quebec has argued for weeks that an agreement-in-principle on HST compensation could be signed now.

Corporate tax cuts

If the Conservatives really want to avoid an election, this is the easiest way to do it. The Liberals and NDP oppose a further corporate tax cut scheduled for Jan. 1, 2012. Even so, there's virtually no chance the government will change course.

"There'll be nothing about corporate taxes in the budget. Nothing," said Mr. Flaherty on Wednesday, using his clearest language yet.

Seniors

Conservatives hint this is where they are prepared to spend cash on opposition demands. Both the Bloc and the NDP want help for low-income seniors by expanding the Guaranteed Income Supplement (GIS).

The Liberals and NDP also want a pledge to expand the Canada Pension Plan.

The government has suggested more narrow support for female seniors who do not qualify for CPP.

The Conservatives are already on record as supportive of further talks with the provinces on expanding the CPP, but the NDP wants a hard commitment to raise benefits.

The deficit plan

Conservatives are taking a lot of heat from economists and Parliamentary Budget Officer Kevin Page on this one. The Harper government insists the budget will be balanced by 2015 without resorting to higher taxes or drastic cuts.

A main reason cited by Mr. Page for his skepticism that Ottawa's target will be met is that the government hasn't detailed spending cuts announced a year ago in the 2010 budget. Treasury Board President Stockwell Day, in charge of the trimming, says those plans went to cabinet in the fall and will be included in the 2011 budget.

Health care and the long-term stability of Ottawa's finances

Major negotiations with the provinces over health care and other transfers loom. Mr. Flaherty receives regular briefings on the transfer talks, but avoids much public discussion of what Ottawa has in mind.

All three major transfer deals with the provinces - covering health, social spending and equalization - expire in 2014. Several provinces face far more serious financial situations than Ottawa and want to know what the future holds as soon as possible.

Election day

Now that March 22 is confirmed as budget day, it is possible to estimate the most likely spring election date, should there be one. It is impossible to pick a firm date because the government controls the timing of parliamentary votes. The government can also choose to set an election campaign that is longer than the legislated minimum of 36 days.

Assuming budget votes are scheduled quickly, the most likely election days are May 2 and May 9.

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