Ottawa eyes more dramatic spending cuts: paper

OTTAWA (Reuters) - The Conservative government may chop federal spending by C$8 billion ($7.87 billion) in each of the next three years, twice the amount it previously estimated, La Presse newspaper said on Friday.

Canadian Finance Minister Jim Flaherty attends the first ministerial meeting of APEC finance ministers at the APEC Summit in Honolulu, Hawaii. November 10, 2011. REUTERS/Jim Young

Conservative lawmakers are pushing for the more drastic cuts, which would be announced in the budget in early 2012, after Finance Minister Jim Flaherty said last month he would take one year longer than promised to balance the books, the Montreal French-language paper said citing unnamed members of Prime Minister Stephen Harper’s caucus.

“We haven’t respected our electoral promise. We have to now reduce spending much more. We have no choice,” the paper quoted one Conservative source as saying.

The office of Tony Clement, the minister in charge of identifying spending cuts, told Reuters on Friday that no final decision has been made.

“Everything is still under review,” said Jenn Geary, director of communications for Clement, who is president of the Treasury Board.

“Across-the-board cuts is not the way the committee is approaching this deficit reduction exercise ... We are approaching this in a responsible manner,” she said.

Government departments have been asked to present two different scenarios for tightening their budgets, one that cuts costs by 5 percent and another that cuts by 10 percent. Political sources have indicated that Ottawa is leaning toward the 10 percent option.

The Conservatives won a majority government in a May 2011 election on a platform of strong economic stewardship that included a promise to restore Canada’s prized fiscal surplus by 2014-15.

Under pressure from the European debt crisis and a weak U.S. economy, the government backtracked from that pledge in November. At that time, Ottawa said it would achieve modest savings in the first two years of its program, reaching “at least” C$4 billion a year of ongoing savings by 2014-15.

The original deficit-reduction plan contemplated cutting C$11 billion ($10.8 billion) in government spending over four years.

Flaherty will speak to reporters at 2 p.m. (1900 GMT) on Friday.

($1=$1.02 Canadian)

Reporting By Louise Egan; Editing by Peter Galloway