OTTAWA - Michael Ignatieff insisted Wednesday he has no plan to raise taxes, denying a report that he's about to embark on a politically risky "adult conversation" with Canadians about the painful measures necessary to eliminate the country's ballooning deficit.
Senior party insiders told The Canadian Press earlier Wednesday that the Liberal leader is about to launch a blunt discussion of the realistic options available for staunching the flow of red ink.
They said the discussion would include tax increases, major spending cuts, remaining mired in deficit for years longer than anticipated, or some combination of the three.
But in a statement late Wednesday, Ignatieff said he has no plan to raise taxes.
"I've been clear," he said. "Tax increases are not part of my plan.
"Our economy is fragile. It's bad policy to add to the burden of middle and low-income households or small businesses."
The insiders had said Ignatieff wouldn't disclose his own prescription for taming the deficit until the brink of an election, which now seems unlikely this year.
They said he wants a better idea of just how bad the fiscal books are and how willing voters are to bite the bullet before making any detailed proposal.
News that Ignatieff was prepared to even discuss the possibility of tax increases was greeted as a political gift by the Conservatives and NDP, who instantly began circulating the story and offering critical comment.
Voters typically balk at the notion of paying more taxes, even for a good cause -- as Ignatieff's predecessor, Stephane Dion, discovered when he proposed a carbon tax during the last election.
And the governing Conservatives are masters at framing the tax debate in its most simplistic terms: Taxes are bad; big-spending Liberals want to make you pay more.
Ignatieff felt the impact of the Tory spin machine last spring when he mused that tax hikes might be necessary down the road. The Tories pounced instantly and Ignatieff reversed himself before the day was out.
Since then, however, the insiders pointed out that this fiscal year's deficit has ballooned to $56 billion -- the largest deficit in Canadian history despite Prime Minister Stephen Harper's assurances only a year ago that the country could weather the global recession without plunging back into the red.
Moreover, independent parliamentary budget officer Kevin Page has forecast a structural deficit of almost $12 billion by 2013-14 -- a figure Liberals expect to go up in Page's next report in a couple of weeks.
The insiders said Ignatieff is now willing to gamble that Canadians want some honest, straight talk about the true depth of the deficit hole, and that they already know that climbing out of it cannot be pain-free.
"It's the elephant in the room," said one.
The insiders indicated Ignatieff intends to kick off discussion of the tough choices ahead with a speech Thursday to the Chamber of Commerce in London, Ont. That was to be followed by a series of townhall-style meetings to engage Canadians in the debate.
However, Ignatieff spokesperson Jill Fairbrother said late Wednesday that the leader intends only to continue demanding that the Tories "come clean" on the real fiscal numbers. As part of that, he'll continue to argue against what Liberals contend is a Tory attempt to muzzle Page.
"He doesn't believe you can develop a plan to get us out of this mess until you know what the real numbers are," she said.
"That is where we're at and there's no strategy beyond that."
For the past few days, Ignatieff has been laying the groundwork for the debate with repeated attempts to demonstrate that the Tories' relatively rosy fiscal projections are misleading, if not an outright lie.
Harper and Finance Minister Jim Flaherty maintain the deficit can be eliminated by 2015-16 through economic growth and some unspecified government belt-tightening. They've vowed not to raise taxes or slash transfer payments to the provinces for health care, post-secondary education and social assistance.
On Wednesday, Ignatieff slammed the government for including a stealth tax in last month's economic update: $15.5 billion worth of increased employment insurance premiums.
He pounced on a report by economist Dale Orr, who argued that increasing payroll taxes is one of the worst things a government can do as the economy is struggling to recover from a job-killing recession.
"Will the prime minister admit that his way out of his own deficit is to raise taxes and do so in such a way that it kills jobs?" Ignatieff demanded Wednesday in the House of Commons.
The government maintains the premium hikes are not a traditional tax increase but simply a temporary adjustment as a result of the way the EI program is structured to maintain an account balance over time.
Orr said he's planning to release another report next week which will recommend hiking the GST temporarily back to seven per cent for a couple of years. That would generate $14 billion a year in revenue and would ensure the deficit could be eliminated by 2015, he said.
Speaking prior to Wednesday night's denial, Orr said it's encouraging that Ignatieff seems ready to at least talk about the fact that the deficit will not just disappear painlessly.
"We do need to look seriously at these options, all right. We certainly do need to do that," he said in an interview.
Still, Orr said Ignatieff must disclose details of how he would tame the deficit before he'll be taken seriously.
"I'd like to see quite a bit of detail before I'd call it an adult conversation."
