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Michael Ignatieff's grip on the reins of the Liberal party faces its first test as at least two MPs are threatening to vote against the federal budget.

Two of six Liberal MPs from Newfoundland and Labrador say they'll break ranks and vote against the budget if the government refuses to back off measures they say will cost their province $1.6-billion over three years.

And the other four could yet follow suit, having signalled their unhappiness with the budget.

Mr. Ignatieff has decreed that Liberals will allow the budget to pass Tuesday, when the House of Commons will be asked to give approval in principle.

But Scott Andrews, who represents the riding of Avalon, said he's prepared to risk a reprimand or even ejection from the Liberal caucus rather than support a budget that singles out his province.

"I have no choice," Mr. Andrews said in an interview, noting that he campaigned for election last fall specifically on the issue of ensuring Newfoundland gets its fair share of federal funding.

"I have no idea what the repercussions might be. It might be a slap on the wrist or you're out."

Judy Foote, MP for Random-Burin-St. George's, has also said she'll vote against the budget if it's not changed to protect Newfoundland's funding under the 1985 Atlantic Accord.

The accord ensures that Newfoundland receives federal compensation to offset the loss of equalization payments due to offshore oil revenue. The province calculates that a change in the equalization formula will cost it about $1.5-billion in offset payments, plus another $80-million in lost health transfers.

Mr. Andrews said last Tuesday's budget pours money into measures aimed at stimulating the economy all across the country. But when it comes to Newfoundland, he said, Prime Minister Stephen Harper is saying: "Here's the shaft for you."

Premier Danny Williams, who has called on the six Liberal MPs from his province to vote against the budget if it isn't changed, applauded their stand.

"I know they're in a tough spot," Mr. Williams said.

Mr. Ignatieff, who has called on the Prime Minister to work out a solution with the province, was not available to comment Friday on the break in Liberal ranks.

But there was speculation he might allow his six Newfoundland MPs to vote against the budget, while insisting that all other Liberals fall in line to ensure that it still passes. Jack Harris, the province's lone New Democrat MP, mocked that solution.

"If [Newfoundland MPs]can't persuade their Liberal colleagues and their leader to support [them]... I don't know how they stay part of that caucus," Mr. Harris said.

Ralph Goodale, the Liberal House Leader, said the provisions penalizing Newfoundland appear to be a "mistake" which could be rectified in the detailed budget implementation bill. That bill is to be introduced next Wednesday or Thursday - after the preliminary vote on the budget in principle.

Mr. Goodale pointed out that Liberals are supporting the budget only on condition that the government produce periodic economic progress reports, the first due in March. The reports must show how effective the budget has been in reaching specified objectives, including regional fairness.

Hence, if the government refuses to fix the measures that penalize Newfoundland, Mr. Goodale said Liberals could use "future confidence motions to send them packing."

However, Mr. Andrews said he can't support the budget in principle on Tuesday in hopes that it may be changed or defeated at some future time. He said his constituents would dismiss such "mumbo jumbo" as an attempt to dodge the issue.

Mr. Williams wants Mr. Ignatieff to support a one-year delay in the budget changes that adversely affect Newfoundland and other provinces that receive equalization. But he stressed he's not holding Ignatieff responsible for the problem.

"This is not a matter between myself and Michael Ignatieff. Michael Ignatieff is doing his best to try and remedy a very terrible situation," the Premier said.

"I lay this squarely on the shoulders of Mr. Harper and his cohorts."

Mr. Williams said he's so far garnered the support of premiers Robert Ghiz in Prince Edward Island, Rodney MacDonald in Nova Scotia, Jean Charest in Quebec and Gary Doer in Manitoba for the one-year delay.

While Newfoundland and Labrador no longer receives equalization, it continues to receive money under the 1985 Atlantic Accord, which sets out the rules for sharing revenue from the province's offshore energy industry and is influenced by equalization calculations.

Finance Minister Jim Flaherty has not acknowledged Mr. Williams's claims that Newfoundland is poised to lose $1.5-billion in payments under the 1985 Atlantic Accord.

But he has said the province will get $1.2-billion in Atlantic Accord payments over the next three years - $1.5-billion less than the province says it's entitled to receive under the agreement.