Exclusive: Canada's Conservative leader to drop pledge to balance budget in two years

By Steve Scherer

OTTAWA (Reuters) - Canada's Conservative Party Leader Andrew Scheer on Friday plans to drop a previous pledge to balance the budget within two years if elected, saying Prime Minister Justin Trudeau's Liberal government has made it impossible to do so responsibly.

Scheer, 40, is challenging Trudeau in an election set for October and polls show him leading nationally.

In a speech on his economic policy he will deliver at the Canadian Club in Vancouver, British Columbia on Friday, Scheer will promise to make a balanced budget part of his platform, but within about five years instead of two.

“In the last three years, Trudeau has made an even bigger mess of the budget than I thought possible... All of this has made it impossible for anyone to immediately and responsibly balance the budget,” according to the text of the speech seen by Reuters on Thursday.

“Even the most optimistic projections don't have the Liberals balancing the budget for 20 more years ... But if Canadians elect a Conservative government this fall, we will balance the budget in about a quarter of that time,” the text reads.

In 2015, Trudeau promised to balance the budget by this year, which he has not done. But even with the deficit, Canada's net debt-to-GDP ratio is lower than its G7 rivals and debt as a share of output is expected to decline over the coming years from about 31 percent currently.

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Scheer's announcement on Friday will follow a major economic policy speech he gave in Toronto last week where he said he will rein in spending, build oil pipelines and put the country on a path to energy independence by 2030 if he is elected.

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The decision also comes as Scheer's ally Doug Ford, the premier in Ontario, seeks to balance the budget of Canada's most populous province by 2023-24.

The Canadian Public Health Association and 10 former Ontario health ministers have complained that Ford's cuts undermine some public healthcare services, and pollster Frank Graves at Ekos Research said recent surveys have shown Ford's support is falling in Ontario.

“Ford has lost 11 percentage points since mid-January up to this week,” Graves said, citing his own unpublished polls. “The Conservatives want to stop the bleeding in Ontario and keep it from spilling over to the rest of the country.”

Canada's economy has slowed this year from last and the Bank of Canada late last month held interest rates steady and removed wording around the need for future hikes, while lowering its growth forecast for 2019.

“More moderate voters don't want there to be cuts in public spending that will lead to slowdown or a recession,” Graves added.