Time to pay down debt, Flaherty says

Despite calls from some quarters to increase economic stimulus, federal Finance Minister Jim Flaherty says the government must continue to do exactly what it has been telling consumers to do: get spending under control and reduce debt.

Mr. Flaherty, who will start national consultations for the 2012 federal budget early next month, said Friday he’s looking to hear ideas from Canadians on how to create jobs and growth while still keeping taxes low.

In a speech to the Canadian Club in Toronto, Mr. Flaherty said he wants to focus on getting spending under control, and that means getting rid of programs or initiatives that do nothing for the economy. He did not name any specific federal programs that might have to be cut, nor did he say where Ottawa is looking to reduce its spending.

“As we do every year, we will hear from various groups including the Opposition, calling for more spending, new programs and bigger government,” Mr. Flaherty said.

However, the Finance Minister reiterated that the Conservative government plans to stay the course on deficit cutting and tax reduction.

“By sticking to our target of eliminating the deficit in the medium term and finding savings within government operations, we will follow through on our pledge to Canadians, while focusing on what truly matters: jobs and growth.”

Both Mr. Flaherty and Bank of Canada Governor Mark Carney have been warning for months that Canadians need to start reducing debts racked up during a long period of ultra-low interest rates, in case they are unable to pay them off down the road if rates move higher.

Mr. Flaherty called on his provincial counterparts “where necessary” to also get their financial houses in order.

“Since there is only one level of taxpayer, all governments must work together” and be prepared “for whatever economic crises heads our way in the future,” said Mr. Flaherty, who will be meeting with his provincial counterparts in British Columbia shortly before Christmas.

Mr. Flaherty also renewed his call for Europe to deal with its sovereign debt and banking crises, which he called a “dire and pressing problem [that] threatens not only Europe but all other countries.”

He also defended the government’s recent announcements to increase the threshold that requires the large banks to be held widely by investors to $12-billion in equity from $8-billion and to give Ottawa the final say on foreign acquisitions that increase the assets of medium and large financial institutions by 10 per cent.

Mr. Flaherty said the changes were not prompted by any particular concern but were part of a regular five-year review and the need to keep up with current with recommendations put forward by the Superintendent of Financial Institutions and the industry itself.

“This is just a matter of fiscal prudence, financial prudence maintaining the integrity and reputation of our financial system and our banks in Canada,” he said.

Meanwhile, the Minister took a tough line on anyone who comes to budget consultation hearings with suggestions for more spending or new government programs, saying that this is not the time for “dangerous” or “risky” spending schemes.

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Source: Globe&Mail