Time to tighten the national belt: Flaherty

After months of urging consumers to rein in their spending and pay down debt, Finance Minister Jim Flaherty says the time has come for the government to do just that.

In a speech to the Canadian Club in Toronto, 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 federal programs that might have to be cut, nor did he say specifically where Ottawa is looking to reduce its spending.

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

Just don’t show up with suggestions for more spending or new government programs—Flaherty says that this is not the time for “dangerous” or “risky” spending schemes.

On the budget front, there was some good news out today. The federal government is on track to end fiscal 2011 with a smaller than expected deficit. The official estimate is $32.3 billion, but higher tax revenues have helped to close the gap a little. The deficit is now expected to come in at $31 billion.

The latest Fiscal Monitor report shows the deficit rose $2.5 billion in September, an improvement from the $3.9 billion in red ink the government posted last September. For the first half of the fiscal year, the government’s deficit stood at $13.2 billion–about $4 billion ahead of last year’s pace.

Federal revenues were up $4.3 billion, or 3.9%, in the first half of the year, almost all from taxes to individual Canadians. Corporate tax revenues rose about $900 million, but revenues from the GST fell $1.4 billion.

At the same time, government expenditures declined by $396 million, while debt service costs fell $500 million.

Analysts cautioned that government revenues and costs tend not to be recorded in even increments, so month-by-month deviations may not be significant.

But improvements in the first half of the year are likely indicative that the government fiscal position has not materially deteriorated, as yet, due to escalating volatility in global financial markets and a slowdown in Canada’s own economy.

In its fall economic update released last month, the government downgraded the expectation for economic growth this year to 2.1%, from 2.8% estimated in the June budget.