OTTAWA, April 30: Canadian Finance Minister Ralph Goodale, unhappy with being forced to change his budget to gain political support for his minority Liberal government, is trying to salvage planned tax cuts, but analysts say the damage to business sentiment is already done. The government struck a deal this with the small left-leaning New Democrats to support the budget in exchange for removing corporate tax cuts and adding C$4.6 billion ($3.7 billion) in spending on social and environmental programs.

Goodale soon said he would try to reintroduce his tax plans through a separate bill outside the budget, but that too raise little sympathy in the business community. Trying to reintroduce the tax measures, if anything, it just shows that they’re floundering, BMO Nesbitt Burns economist David Watt said.

So now they’re going to boost spending and plan to cut taxes. How can they maintain the idea that it’s not going to have negative consequences fiscally down the road? Watt said.

Goodale has indicated he was not overly happy that Prime Minister Paul Martin agreed to change the budget, saying it’s not my preferred choice. But despite the changes, Goodale’s reputation has not suffered greatly, said Garth Whyte, a spokesman for the Canadian Federation of Independent Businesses.

I think the political agenda has taken over and he’s caught up in this political storm.... If I were Mr. Goodale I would be hitting my head against the wall. I’m sure he is. JP Morgan economist Ted Carmichael agreed, adding that it is the government’s reputation that has been damaged within the business community, not Goodale’s.

I think the government as a whole has lost credibility. But a lot of that stems more from the revelations in the sponsorship inquiry than from the budget itself. I don’t think it was Mr Goodale’s decision to do a deal with the (New Democrats), Carmichael said.

Martin’s minority government is mired in a kickback scandal over a federal sponsorship program and faces the prospect of being defeated in the House of Commons next month. That could force an election as early as June 27, and could see the Liberals turfed from office for the first time in 12 years.

Over the years, a succession of Liberal governments has carved out a reputation of being fiscally tight-fisted — boasting eight straight years of budget surpluses — and had largely won the confidence of Canada’s business community.

Martin, who built his reputation as a fiscally conservative finance minister during the 1990s, has said the new spending over the next two years will come from the C$9 billion in contingency and prudence reserves.

Markets don’t like uncertainty.... The Canadian dollar has weakened somewhat during the period that we have been going through this uncertainty about whether we will have an election, JP Morgan’s Carmichael said.

I think from a market point of view the sooner that uncertainty is over the better, which would seem to suggest that the sooner we have an election the better.—Reuters