26 February 2008

Thrifty budget to prop up auto industry and fund cities

The following article is excerpted from the 25 February 2008 edition of “globeandmail.com”.

The Harper Conservatives will aid the ailing automotive sector and provide assistance for infrastructure construction in a modest budget Tuesday aimed at managing a potential economic slowdown….  

Sources said Finance Minister Jim Flaherty will address both sectors in a spending document that would shore up political weaknesses in Ontario and in urban Canada. The government would funnel close to $1-billion for infrastructure and another $200-million for the auto industry….

The Finance Minister reiterated Monday that there will be no major pledges in the spending document. However, he did say there would be “one or two” surprises….

The minister said the budget will be balanced and suggested he will accelerate a government spending review process he put in place one year ago to find increased savings.

It's also widely expected the Conservatives will unveil a tax measure for investors that serves as an incentive to save, possibly one to shelter capital gains. This would be an attempt to make up for the fact the Tories have so far failed to deliver on a two-year-old campaign pledge to provide some tax relief on capital gains.

The Tories are also concerned about the slowing Ontario economy, which has seen the manufacturing industry hit hard while other provinces, such as Alberta, have seen their resource-based economies roar. The Conservatives are sitting on a hefty budget surplus for the year ending March 31, one that could be as high as $13-billion instead of the $11.6-billion expected.

Other measures expected Tuesday include an extension of a temporary $565-million annual tax break for manufacturers which allows investments in equipment to be written off more quickly, and an overhaul of government support for research and development….

A focus on Ontario and on urban Canada may make it easier for the federal Liberals to swallow the budget, thereby avoiding a late winter election campaign. Liberal s