Tories to use $13.2-billion surplus to pay down debt

STEVEN CHASE

Globe and Mail Update

Ottawa — The federal government racked up a $13.2-billion surplus for last fiscal year and the Stephen Harper administration will apply all of it towards the national debt, The Globe and Mail has learned.

This is one of the largest,single debt repayments in Canadian history. It will help bring Canada's debt down to $481.5-billion.

Canada's federal debt has shrunk by $81.4-billion over the past decade, down from a peak of $562.9-billion in 1996-1997. The national debt as a percentage of the country's economic output is now at its lowest level in 24 years.

Finance Minister Jim Flaherty and Treasury Board President John Baird will reveal more this afternoon when they also announce $1-billion in cuts to government spending this year and next.

The savings will not yield new dollars for the Tories to spend because they've already been booked the savings in the 2006 budget to offset the cost of other Conservative measures.

The cutback exercise was announced in the May 2006 federal budget and Mr. Flaherty and Mr. Baird will update Canadians on their progress today.

Last week, Mr. Flaherty acknowledged some of the cuts will draw flak but said they're necessary to redirect dollars to more urgent priorities.

"Any time you reducing spending in an area or stop spending on particular programs, someone will be concerned," he said.