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Chretien: Cut spending or else

Canadians must accept either large cuts in government spending or a big increase in taxes, says Prime Minister Jean Chretien.

His comment followed remarks by Finance Minister Paul Martin, who wants $6-billion (Canadian) in spending cuts over the next two years to meet the government's deficit-reduction target.

Higher-than-expected interest rates have hampered the battle against the deficit, which could rise above its $32.7-billion target next year if nothing is done, Martin said.

There's speculation the government will reduce tax breaks for Canadians with retirement savings and begin taxing lottery winnings.

Tax breaks for such items as university tuition fees, capital gains, employer-paid health plans, and research and development expenditures could also end.

Chretien suggested other "tax loopholes" might be closed in next year's federal budget.

"If people don't want cuts, then the alternative is a hike in taxes," he said.

Health care reviewed

Canada's government-run health care system could take a turn for the worse unless costs are cut.

Chretien delivered that warning at the launch of a National Forum on Health that will look for ways to control costs and ensure adequate medical services.

"Health care costs have been increasing and we know they may not be sustainable," Chretien said.

Canada spent $72-billion (Canadian) _ 10 percent of the gross domestic product _ on health care last year, compared with 7 percent in much of Europe.

The United States is the only industrialized country spending proportionately more on medical care, "which isn't the solution to improving health and quality of life," Chretien said.

Retail battle is joined

Canadian retailers will fight the invasion of U.S. mega-chains, notably Wal-Mart, with renovations and expanded stores.

"It's a war all right," Kmart Canada president Donald Beaumont told a shopping center convention in Toronto. Canadian Tire president Stephen Bachand said competition from Wal-Mart and Price Club has squeezed out the "weak and sleeping."

Many Canadian chains plan big expenditures over the next few years to renovate, expand and relocate stores across the country to compete.

Earlier this year, Wal-Mart bought 122 Canadian Woolco department stores and is remaking them into its own as well as building new outlets.

Facts and figures

A weaker Canadian dollar prompted another increase in the key Bank of Canada interest rate, to 5.71 percent from 5.62 percent. The prime lending rate remained at 7 percent.

The dollar ended the week at 73.98 U.S. cents while the U.S. dollar was $1.3517 Canadian (exclusive of exchange fees).

Canadian stock markets were lower; Toronto's composite index closed at 4,305 points Friday.

Lotto 6-49: (Wednesday) 4, 9, 18, 22, 34 and 42; bonus 2. (Oct. 15) 10, 11, 32, 36, 45 and 46; bonus 43.

In brief

Canada will spend $30-million (Canadian) over the next six months to help rebuild Haiti. The aid package was announced after Haitian President Jean-Bertrand Aristide returned after a three-year forced exile. Canadian Mountie Supt. Neil Pouliot was named head of the United Nations commission retraining Haitian police.

Comedian Martin Short has joined the list of achievers named to the Order of Canada. Short, born in Hamilton, Ontario, and retired hockey greats Frank Mahovlich and Serge Savard are among the 51 new names in the order. The honor is for those who "exemplify the highest qualities of citizenship and whose contributions enrich the lives of others."

Calypso, the foul-mouthed parrot, has been pulled from her perch at Winnipeg's government-run casino. A woman complained that the colorful bird at Club Regent was swearing. A casino worker said the bird merely parrots gamblers upset over losing at the slot machines.