Federal government still mum on how to spend surplus

The fall economic and fiscal update that's expected later this month will almost certainly herald a return to surplus for next year. But the size of that surplus and what will be done with it remain very much up in the air.

As the ink in the government's ledgers turns from red to black,promises the Conservatives made in the last election will be triggered.

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"We can turn the page and talk more about how we can get more money in the jeans of the average taxpayer," said Treasury Board President Tony Clement.

The government promised in 2011 to introduce an adult fitness tax credit, double the amount that can be deposited annually into tax-free savings accounts, and the big ticket item introduce income splitting for families.

Not just taxcuts

However, Clement says his government isn't planning on spending all of the surplus on taxcuts alone.

"We've always tried to take a balanced approach," Clement told Evan Solomon, host of CBC Radio's The House.

"We continue to allocate money to important projects that help stimulate job growth and economic growth in the Canadian economy. SoI think what you've got from us is a balanced approach and I would be surprised overall over the next year as we roll out budgeting for 2015 if that is not the approach," Clement said.

Healso sounded a familiar caution."Canada is not an island. We have impacts as a result of general global economic trends."

Canada's economy continues to grow, but the pace has slowed. Clement and economists point to uncertainly in Asia and Europe as well as falling oil prices.

Oilon the slide

Although oil represents a small percentageof the federal government's revenues, the swing in prices could cutthe expected surplus in half and give the government much less room to manoeuvre.

For Alberta Premier Jim Prentice, the market price of oil is of much greater concern, although he is sounding confident.

"We have weathered lower prices and we will weather this low-price environment," he also told Solomon onSaturday's edition of The House.

Prentice concedes that ifoil prices remain just over the $80 (U.S.) mark per barrel for an extended period of time, then growth in the energy sector would likely be stifled as companies are forced to make "decisions" about their capital spending.

"There will be an equilibrium set because some oil will be taken off the market at these prices and prices will rebound to some extent," he said.