Nunavut won’t get cut if Ottawa slashes deficit, Flaherty says

Jim Flaherty, the federal finance minister, speaks with reporters in the Storehouse bar and grill in Iqaluit Friday. Flaherty, in town for a meeting of the G7 finance minsters, downplayed concerns that Nunavut’s funding needs would be hit by Ottawa’s efforts to reduce the federal deficit, which now stands at $56 billion. (PHOTO BY CHRIS WINDEYER)

Nunavut shouldn’t worry that federal efforts to combat Canada’s $56-billion budget deficit will limit the territory’s access to federal money for capital projects, federal finance minister Jim Flaherty said Feb. 5.

“I can tell you that Nunavut will be treated more than fairly by our government,” Flaherty said.

Flaherty has made noises in the past about cutting federal spending to control Ottawa’s large budget deficit, which has grown because of the recession, economic stimulus spending and tax cuts.

But Flaherty said Nunavut’s relative lack of infrastructure and its potential for economic development mean the territory shouldn’t expect a drop in federal transfers if the Conservative government goes into deficit-fighting mode.

“We’re not going to limit those opportunities [for economic growth],” Flaherty said.

The next federal budget is due in early March.

Flaherty was in Iqaluit to play host to finance ministers and central bank governors from seven of the Western world’s richest economies. That means talks about banking reform proposals and aid for Haiti.

It also means talk about whether governments need to continue spending billions on stimulus to economies afloat and people employed.

And Flaherty didn’t sound like someone preparing to slash government spending, telling reporters “continued stimulus is necessary.”

That’s probably good news for Keith Peterson, Nunavut’s finance minister, who oversees a budget that’s 90-per cent supplied by Ottawa.

Nunavut is assured current levels of federal funding for operating costs until the end of the 2010-11 fiscal year under the Territorial Formula Financing agreement with Ottawa. After that? “We just don’t know,” Peterson said Friday.

As for money for capital and infrastructure projects, Peterson said his government, Nunavut’s MP Leona Aglukkaq, and the presence in Iqaluit of the head office of CanNor, the northern economic development agency, should help keep Nunavut’s needs on the federal radar.

Nunavut has a long wish list of infrastructure projects, including a highway between Manitoba and the Kivalliq, a deepwater port in Iqaluit and numerous airport improvements across the territory.

“We’re going to continue to make the business case for those projects,” Peterson said.

Nunavut’s finance minister made the comments following a speech on Nunavut’s economic future, part of a speakers’ series organized by the Government of Nunavut to coincide with the G7 meetings.

But crowds for the series were sparse. Peterson spoke mainly to GN and federal civil servants, with only one international reporter in attendance.

Peterson made the case that Nunavut’s economy has plenty of room to expand, with mining, hunting and fishing, tourism and scientific research as the main drivers of growth.

The global recession has caused a sharp drop in the amount of money available for financing large-scale projects, especially in the mining industry, which in turn caused a slowdown in mineral exploration in Nunavut.

But Peterson said economic forecasters are optimistic about a recovery in 2010, which should free up capital for junior mining companies looking to do exploration work in the territory.

He added there are potentially “trillions of dollars” worth of minerals, oil and gas that could pave the road to self-sufficiency for Nunavut. Peterson wants to see that wealth tapped in order to reduce the territory’s dependency on transfers from Ottawa.

“That [money] provides us with stability,” Peterson said. “Obviously we don’t want to depends on that forever. We have to grow our economy.”

Speaking on a day of clear skies, with unseasonably warm weather forecast for the next couple of days had Peterson feeling optimistic about Nunavut’s economic future.

“The future looks bright,” he said, “at least for this weekend.”