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Stockwell Day is sworn in as President of the Treasury Board and Minister for the Asia-Pacific Gateway at Rideau Hall as Prime Minster Stephen Harper looks on in Ottawa on Tuesday, Jan. 19, 2010. (Fred Chartrand/THE CANADIAN PRESS/Fred Chartrand)
Stockwell Day is sworn in as President of the Treasury Board and Minister for the Asia-Pacific Gateway at Rideau Hall as Prime Minster Stephen Harper looks on in Ottawa on Tuesday, Jan. 19, 2010. (Fred Chartrand/THE CANADIAN PRESS/Fred Chartrand)

PM taps Day to put a lid on spending Add to ...

Stephen Harper took the first step toward turning off the taps of deficit spending in Ottawa, using a cabinet shuffle to designate the new face of fiscal restraint in Canada.

Stockwell Day, a former Alberta finance minister with a reputation for fiscal rectitude, must now help tackle what some observers say is a structural, or permanent, deficit that cannot be erased without $19-billion in cuts to annual spending.

His elevation to president of Treasury Board - overseer of government spending - was part of a federal cabinet shuffle Tuesday that saw 12 portfolios change hands, from Public Safety to Revenue.

It featured two demotions: Lisa Raitt was downgraded to Labour from Natural Resources after a string of 2009 gaffes, while Peter Van Loan was sent to International Trade to replace Mr. Day after what senior officials say was a disappointing run in the Public Safety portfolio.

But Mr. Day's appointment looms largest as the Tories prepare for a March 4 budget and years of trying to balance the books - which are $56-billion in the red this year.

Governments around the world are struggling with the question of when and how to turn off the stimulus spending taps, for fear that an ill-timed shutdown could prolong the downturn or kill fresh economic growth.

The Harper government's plan is to end stimulus spending by March 31, 2011 and Mr. Day's job will be to help lay plans for the restraint that follows.

Said to be among Mr. Harper's favourite ministers, Mr. Day will be the new Dr. No in Ottawa: the man whose job is to rain on colleagues' spending plans. It's a role he will relish. When he served as treasurer in Alberta, Mr. Day famously wore a loonie pinned to his lapel to recognize how hard taxpayers work for their "sweat-soaked" dollars.

On Tuesday, he warned openly of a tighter lid on spending.

"I think we'll be hearing two words: no and no," Mr. Day told reporters after his appointment at Rideau Hall.

His promotion is the latest stage in a comeback for the Okanagan-Coquihalla MP whose political career was scorched in 2000 and 2001 when, as leader of the Canadian Alliance, he lost a federal election and then a leadership contest - to Stephen Harper.

Mr. Harper and his office went out of their way to underline the importance of Mr. Day's appointment Tuesday - effort which suggest the Treasury Board post is being elevated in importance. It also signals that the Prime Minister's Office has decided it can't rely solely on Finance Minister Jim Flaherty to preach restraint.

The Prime Minister noted that Mr. Day has "distinguished himself in every portfolio he has held" and predicting he will play a "critical role in overseeing government expenditures."

Mr. Day said Conservative MPs are now canvassing Canadians on how to make cutbacks, leading up to a March 4 budget that will lay out "introductory notions" on how to get back to a balanced budget.

The Conservatives must to find $19-billion a year in savings if they want to balance the books by 2014 without raising taxes, according to the latest analysis from Parliamentary Budget Officer Kevin Page.

Mr. Flaherty has disagreed, predicting that future economic growth and holding down increases in program spending will do the job. (The minister has ruled out tax increases, as well as cuts to transfers to the provinces or individuals).

Mr. Day's job will be to seek savings in the $100-billion program budget.

But a recent analysis by two former finance department insiders warns that much of this $100-billion is untouchable - either legally or politically.

Scott Clark, who was deputy minister of finance from 1997 to 2000 and associate deputy minister before that, along with the department's former director of fiscal policy, Peter DeVries, conclude that public service salaries and benefits are the only significant area left to cut. These amount to just under $35-billion a year, according to the government's latest Public Accounts.

In reaction to the cabinet shuffle, federal public service union leaders spoke of starting off on the right foot with Mr. Day and noted that he got along well with employees in his past portfolios.

Yet Gary Corbett, President of the Professional Institute of the Public Service of Canada, said his members are also aware of his reputation as a cost-cutter.

"You can read into it that maybe the Prime Minister is planning on some difficult times ahead for the public service. Yes, it concerns me," he said. "I think there's always the propensity for a government to make political hay out of reductions in the public service."

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