The first budget of Stephen Harper’s minority Conservative government features numerous visible tax breaks for individuals, both new and accelerated tax cuts for businesses and more money for the provinces.

The result is a fiscal picture very like that of recent Liberal budgets. Projections show only small surpluses once contingency reserves — which are renamed “debt reduction” by the Conservatives — are excluded. That means debt repayment will be $3 billion annually only if there is a $3 billion surplus at the end of each fiscal year. As of Mar. 31, 2006, the federal debt was $486.4 billion.

Nor was there any change in the way in which the government projects revenue and spending; projections continue to be based on private sector economic forecasts. The Conservatives are, however, doing without the economic prudence reserve that the Liberals included in their budgets. If there are unexpected expenditures or lower than anticipated revenue, the government may be left scrambling.

In addition to the commitment to repay debt at the rate of $3 billion annually if the money is available, the Conservatives plan to specify how at least part of unexpected surpluses will be spent. This was recommended by the review of Finance Canada’s economic and fiscal forecasting headed by Tim O’Neill, former chief economist at Toronto-based Bank of Montreal. The idea is to limit the amount of last-minute spending in which governments often indulge when faced with extra money. The Tories will discuss the possibility of allocating some monies to the Canada and Quebec pension plans.

The budget assumes Canadian economic growth of 3% this year and 2.7% in 2007, with inflation falling to 1.8% in 2007 from 2.9% in 2006. In both years, three-month treasury bills are expected to average 4% and 10-year Canada bonds 4.5%. While a reasonable scenario, there are risks. A severe slowdown in the U.S., possibly caused by a loss of consumer confidence in the face of continued high energy costs and rising interest rates, could lower export growth — quickly dampening Canada’s economic growth.

Unlike recent Liberal budgets, the Conservatives are focused on the tax side. Tax breaks of one kind or another account for three-quarters of the $35.2 billion allocated to new measures in all three fiscal years ended Mar. 31, 2006, 2007 and 2008.