Canada faces May election over budget rejection

OTTAWA (Reuters) - A Canadian federal election looked inevitable on Tuesday after all three opposition parties said they would vote against the minority Conservative government’s latest budget.

Canada's Finance Minister Jim Flaherty (2nd R) shakes hands with Prime Minister Stephen Harper after delivering his budget as Minister of Industry Tony Clement (L) and Foreign Affairs Minister Lawrence Cannon (R) applaud in the House of Commons on Parliament Hill in Ottawa March 22, 2011. REUTERS/Chris Wattie

If they go ahead with that threat, or vote against the Conservatives on another big issue, the government will fall within the next week, paving the way for an early May election -- Canada’s fourth federal vote in less than seven years.

An election campaign will pit Conservative assurances that only they can be trusted to manage an economy that is still emerging from recession against opposition charges of government sleaze and waste.

Polls point to Prime Minister Stephen Harper easily retaining power, although he may not win enough support to transform his minority right-of-center government into a majority one that cannot be easily defeated.

Finance Minister Jim Flaherty -- who dismissed the idea of rewriting the budget to respond to opposition criticism -- had added several inducements to win the support of the left-leaning New Democrats, seen as the opposition party most likely to vote with the Conservatives.

But NDP leader Jack Layton refused to take the bait.

“We looked at this budget very carefully. We set out clearly where we wanted the budget to go and Mr Harper chose not to take us there,” he said.

The Conservatives, who back low taxes and stress the need to cut the deficit, say Canadians don’t want an election, a view that’s also borne out in opinion polls.

That said, opposition parties are confident they can benefit from a series of ethical problems facing the Conservatives.

This week a special Parliamentary committee slapped the government with the first contempt ruling in Canada’s history, deciding that the government had hidden the full costs of a spending program.


Michael Ignatieff, leader of the main official opposition party, said the budget was not credible.

“We’re forced to reject the budget and we’re also forced to reject a government that shows so little respect for parliamentary democracy and our democratic institutions,” he told reporters.

The party will decide on Wednesday whether to propose a vote of non-confidence in the government, and that could take place on Friday.

Layton’s rejection came as something of a surprise, since he was diagnosed with prostate cancer last year and had hip surgery this month. He dismissed the suggestion that his ailments would hinder a typically energetic campaigning style.

The campaign is also bound to focus on ethics. Last week police were asked to investigate allegations of misconduct by a former top Harper aide.

Last month, four Conservative officials were charged with violating financing rules during the 2006 election campaign that brought the party to power with a promise to stamp out the sleaze that had surrounded the previous Liberal government.

The party won a minority in early 2006 and retained power in October 2008, again with a minority that needed support from at least one opposition party to stay in power.

The Canadian dollar dipped on the news of a likely election, edging as low as C$0.9815 to the U.S. dollar, or $1.0188, from C$0.9799 to the U.S. dollar, or $1.0205 earlier.

Canada emerged from recession in a far better fiscal shape than most other big industrialized countries even though the budget deficit hit a record C$55.6 billion last year as the government primed the economic pump.

But the gap looks paltry compared to the record US$1.645 trillion shortfall the United States faces in 2011, and austerity measures Flaherty had planned are far less severe than those planned by the British coalition government, for example.

($1=$0.98 Canadian)

Additional reporting by Howaida Sorour, Chandra Ramarathnam, Allan Dowd and Jeffrey Hodgson; Editing by Janet Guttsman; Writing by David Ljunggren