Bloomberg News

Harper Plans Deficit Cuts With Investment for Canada Growth

June 03, 2011

(Updates with OECD’s Gurria comment in ninth paragraph.)

June 3 (Bloomberg) -- Canadian Prime Minister Stephen Harper outlined a program for his freshly seated parliamentary majority today that includes plans to accelerate deficit reduction, diversify trade and attract more foreign capital to protect the country from being damaged by a faltering U.S. recovery.

Harper, the first Conservative to govern with a majority in two decades, announced his agenda in the Speech from the Throne, the ceremonial opening of a new legislative session in Ottawa. A budget will follow June 6.

“The global economy remains fragile, and risks to our recovery persist,” Harper said in the speech, which by tradition was read in the Senate by the country’s governor general, David Johnston. Creating jobs and economic growth remain the government’s top priority, it said.

The speech shows the priorities for Harper’s majority government, his first. It repeats policies advanced in Finance Minister Jim Flaherty’s March 22 budget, which wasn’t passed before the May 2 election, as well as promises made during the campaign.

In the speech, Harper pledged to eliminate the deficit one year earlier than planned by reviewing government spending to find savings. In the March fiscal plan, the government promised to eliminate the deficit by the fiscal year beginning April 2015.

Welcoming Investment

Harper also said his government would allow foreign investment “that benefits Canada,” without specifying industries. The last throne speech mentioned lifting foreign- ownership restrictions in the satellite and telecommunications sectors. Harper also promised to complete a free-trade agreement with the European Union by 2012 and with India by 2013, as the party pledged during the election campaign.

The government also said it will move forward with “willing partners” on establishing a national regulator for the country’s financial markets. Several provinces, including Quebec and Alberta, have opposed the proposal and the Supreme Court has been asked to rule on whether the government has the constitutional authority to pass the law.

Successive minority governments introduced legislation three times to impose tougher copyright restrictions on music, films and other works, only to have the bills expire without being passed. In today’s speech, the government said it will seek “swift passage” of a new law.

Structural Policies

Canada’s government now has “the consensus through a majority in order to put these structural medium and long-term policies together,” Jose Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a June 3 Bloomberg interview in Ottawa.

Harper, 52, also reiterated a promise to work with Canada’s 13 provinces and territories to implement a new system that would allow employers to offer pension plans that would be administered by financial institutions. The opposition New Democratic Party has called on the government to enhance the Canada Pension Plan, a public pension system.

The speech spoke of long-term fiscal problems facing the nation. “Canada’s workforce is aging, and it will no longer grow as it has in the past,” it said. “This demographic challenge will impact our economic future and put long-term pressures on our pension and health systems that must be addressed.”

The government said it will continue to increase health transfers to the provinces at an annual growth rate of six percent, once a deal with the provinces expires in 2014.

‘Number of Disappointments’

The speech contained “quite a number of disappointments,” Opposition New Democratic Party Leader Jack Layton said. “We didn’t hear anything about real job creation” or climate change, he said.

Interim Liberal leader Bob Rae said the government’s agenda has an “air of complacency” and mostly repeats promises already made by the government, while not addressing long-term economic and social challenges.

During the speech, a woman stood on the floor of the Senate and held a sign saying “Stop Harper.” She was removed from the chamber. Brigette Marcelle, who said she is a 21-year-old page, issued a statement calling for the government’s agenda to be “stopped with creative action and civil disobedience.”

--Editor: With assistance from Greg Quinn in Ottawa. Paul Badertscher, Kevin Costelloe

To contact the reporters on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net; Theophilos Argitis in Ottawa at targitis@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net.


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