Justin Trudeau’s Liberals are planning, if elected, to scrap a law entrenching federal balanced budgets in order to run deficits to finance a spike in infrastructure spending.

The party confirmed its policy on the Conservative legislation after recently making the contentious deficit-boosting pledge the centrepiece of its campaign in the run-up to the Oct. 19 vote, drawing criticism from both the Conservatives and the NDP.

The issue of whether to balance the books is shaping up as a key dividing line in the federal campaign.

Liberal candidate John McCallum said the balanced-budget measure is not serious and would be replaced.

“If we have to get rid of a gimmick to do what is right, then it’s what we would have to do,” he said Wednesday in an interview with The Globe and Mail. “We do not think this is a serious piece of legislation and so we are determined to implement our plan.”

The NDP isn’t going that far, insisting it has no plans to drop the law even though it opposes it – and may have to live by it – should the party form government and the current fiscal year’s books slip into deficit.

The Conservative government passed the Federal Balanced Budget Act in June just as the 41st Parliament was coming to a close. It was included as a separate act buried inside an omnibus budget bill, meaning the legislation received less study than it would have had it been introduced as a standalone bill.

With the current fiscal year at risk of shifting from a projected surplus into a deficit due to slower-than-expected growth, the legislation is something that any future government could face.

The Conservatives are standing by their April budget, which projected that the government would post a small surplus this year for the first time since 2007-08. At a campaign stop in North Bay, Conservative Leader Stephen Harper criticized opposition policies on deficits Wednesday. He said the NDP promises don’t add up and he accused the Liberals of being inconsistent, switching from criticizing to embracing deficit spending.

Mr. Trudeau, the Liberal Leader, recently announced his party would run three years of deficits to fund new infrastructure spending aimed at boosting economic growth.

The NDP is making no fiscal promises for the current 2015-16 fiscal year, arguing that it will have occurred largely on the Conservatives’ watch. However, the party is promising to balance the books starting in 2016-17. A deficit in 2015-16 could potentially trigger the Federal Balanced Budget Act’s provisions.

NDP candidate and finance critic Nathan Cullen said the party is not planning to scrap the law, even though it dismisses the need for balanced-budget legislation.

“We haven’t planned for repealing [the law]. We just want to run a balanced budget and we think that’s what Canadians are looking for,” he said.

The Conservatives have run six consecutive deficits dating back to 2008-09. They have budgeted that the 2014-15 fiscal year will show a seventh consecutive deficit when the final figures are announced in the coming weeks, though economists say that could turn out to be a small surplus. The Conservatives promised to return to surplus in the current 2015-16 fiscal year, but the Parliamentary Budget Officer has said the year is on track for a $1-billion deficit.

The balanced-budget law indicates that if a projected surplus ends up being a deficit in the final accounting, the government must take a series of steps. The bill outlines two levels of severity in terms of consequences for running a deficit.

If the deficit is due to a recession, which the law defines as two consecutive quarters of negative economic growth as reported by Statistics Canada, the consequences are less severe. The government would be required to freeze all operating spending at existing levels. The pay of the Prime Minister, cabinet ministers and deputy ministers would also be frozen.

If the deficit is not caused by “a recession or extraordinary situation,” then no department is allowed to increase its operating budget to fund wage increases and the Prime Minister, cabinet and deputy ministers receive a 5-per-cent pay cut.

Conservative candidate Jason Kenney accused the Liberals of flip-flopping on the issue, noting that Mr. Trudeau called balanced-budget legislation a “reasonable proposal” in 2013, when it was first mentioned in the government’s Throne Speech.

“They seem to be making this up as they go along,” Mr. Kenney said.

OTTAWA — The Globe and Mail
Published Wednesday, Sep. 02, 2015 5:33PM EDT
Last updated Thursday, Sep. 03, 2015 12:06AM EDT