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Canada's budget trims deficit, avoids tax hike

Canada's Conservative Party government, its popularity at a record low, refrained from raising taxes in a new budget presented Tuesday but squeezed spending to trim the deficit. "This will not be an easy year," Finance Minister Michael Wilson said in the budget that forecast anemic economic growth in 1990.

The government appeared to heed the call of economists, business leaders and consumer groups to rely on spending cuts rather than trying to raise more from Canadians who have been hit hard in previous budgets and will begin paying a 7 percent value-added tax in 1991.

The government of Prime Minister Brian Mulroney, according to an opinion poll published Tuesday, has sunk to the lowest level of any government since the Gallup organization began polling in Canada in 1942.

Only 21 percent of Canadians backed the Conservatives in the poll, against 51 percent for the opposition Liberals and 22 percent for the New Democrats.

Many subsidies to business will be eliminated, the state-owned oil giant Petro-Canada will be privatized and payments to the provinces for health care and education will be frozen.

"This will place the emphasis more clearly on investing in economic development rather than subsidizing the private sector," Wilson told the House of Commons.

In the budget, the deficit is to fall to $28.5-billion Canadian ($23.7-billion U.S.) in fiscal 1991 from $30.5-billion Canadian ($25.3-billion U.S.) this year.

The government, under pressure at home and abroad to cut the deficit, said it expects the deficit to be halved to $14-billion Canadian ($11.6-billion U.S.) by 1994.

Budget revenues this year will rise 6.1 percent to $119.3-billion Canadian ($99-billion U.S.). Total expenditures, meanwhile, will rise 3.4 percent to $147.8-billion Canadian ($123-billion U.S.).

The government was forced to restrain spending because previous efforts to trim the deficit were derailed by higher than expected borrowing costs on the debt.