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Canada Tories to follow tax-cut, pro-business agenda

Source: Thomson Reuters Foundation - Tue, 3 May 2011 19:49 GMT
Author: Reuters
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* Western Canada, energy sector given assurances

* Conservatives free to pursue tax cut plans

* Business community welcomes Conservative agenda (Recasts with Harper comments on energy sector, adds market reaction)

By Jeffrey Jones and Janet Guttsman

CALGARY/OTTAWA, May 3 (Reuters) - Canadian Prime Minister Stephen Harper, now backed by a powerful parliamentary majority, said on Tuesday the energy sector can rest easy that his government will not impede plans to vastly expand the country's oil sands output and ship some of the crude to Asia.

Harper, in his Western Canadian home base of Calgary on the morning after his Conservatives won big in the federal election, singled out the Western-based oil industry as being a beneficiary of his party's pro-business agenda, which will also include corporate tax cuts and deficit reduction. Investors greeted the result with relief.

"There were a lot of policies being quoted by the other parties, whether it's on West Coast transportation or the energy sector, that simply did not reflect the needs and concerns of this part of the country," he told reporters.

"I actually argued during the campaign that the policies of our opponents were actually quite dangerous to the country as a whole, but obviously some specific policies seemed to be almost targeted to do damage to Western Canada."

The Conservatives won 167 of 308 seats in the House of Commons in Monday's vote, giving Harper a third mandate since 2006 and his first majority. Until now, the Conservatives' minority-government status has meant they had to compromise with other parties on many policies.

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For a graphic on the election results, click here http://r.reuters.com/zet39r

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The left-leaning New Democratic Party (NDP), which made record gains in Monday's vote to become the official opposition for the first time, and the Liberals, who suffered a drubbing and finished third, both opposed increased tanker traffic on the Pacific Coast.

The idea of shipping tar-sands derived oil to Asia is key to Enbridge Inc's <ENB.TO> proposed C${esc.dollar}5.5 billion (${esc.dollar}5.8 billion) Northern Gateway pipeline to the coast from Alberta. Harper has said he would not try to block tanker traffic.

Canada is already the largest oil supplier to the United States. The oil industry is looking to expand production and diversify markets to increase returns, but is opposed by environmentalists and many politicians on the left.

Jack Layton's NDP had promised to cut C${esc.dollar}2.2 billion in what he called annual government subsidies to the energy industry and wanted to set up a carbon emissions trading scheme, which scared some investors who feared high costs.

The Conservatives have long planned to cut the corporate tax rate to 15 percent next year from 16.5 percent. Their stated goal: to help business compete in a global market.

They say other tax breaks, including a family-friendly plan that will lower tax rates for couples with children, will follow once they eliminate a record-breaking budget deficit.

SEPARATISTS ROUTED

The election polarizes the political scene, with the centrist Liberals essentially defanged. Their leader, Michael Ignatieff, said on Tuesday he was quitting after the party's seat count fell to 34 from 77. [ID:nN0349127]

Also, the separatist Bloc Quebecois is in tatters after the vote and the party's leader without a seat. The Bloc Quebecois advocates independence for the province of Quebec. [ID:nN03270746]

That leaves the Conservatives and New Democrats -- parties on opposite sides of the political spectrum -- with the significant positions in Parliament.

"By getting a clear (Conservative) majority in the Parliament, markets are able to handicap investment opportunities better," said Stephen Wood, chief investment strategist for North America at Russell Investments in New York. He said oil and gas shares will probably get a boost, as will tax-sensitive and interest-rate sensitive sectors.

"The outcome of this election gives certainty for a policy continuity and it allows fundamentals to drive investments more."

Investors initially drove the Canadian dollar higher following the vote. But the election result was quickly overshadowed by global growth concerns that wiped out its gains and sent stocks more than 2 percent lower.

Still, the currency outperformed its commodity-linked peers and Canadian government bonds fared better than safe-haven U.S. Treasuries.

Harper's policy priorities will likely include eliminating the Canadian Wheat Board's monopoly position on wheat and barley exports from Canada's western provinces, and ending public financing for political parties, something that may cripple opposition parties less adept at raising funds than the Conservatives.

MARKET MERGER BOLSTERED

His government is more likely to approve foreign investment in Canada than the New Democrats would have been, boosting the chances that the London Stock Exchange's <LSE.L> takeover bid for its Toronto rival, TMX Group <X.TO>, will win a Canadian green light.

However, Harper said on Tuesday he would not seek to privatize the country's publicly funded health care system or impose socially conservative policies on Canadians, which his opponents have long said are part of a hidden Conservative agenda.

His rivals have said he is beholden to social and religious conservatives who want to curb abortion rights and scrap gay marriage laws, although he has said he has no plans to reopen the abortion debate and would work to block anyone who tried to do so. Abortion is legal in Canada.

"One thing I've learned in this business is that surprises are generally not well-received by the public, so we intend to move forward with what Canadians understand about us and I think what they're more and more comfortable with," he said.

(${esc.dollar}1=${esc.dollar}0.95 Canadian) (Additional reporting by David Ljunggren in Ottawa and Ka Yan Ng and Jeffrey Hodgson in Toronto; editing by Peter Galloway)

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