03/29/2012 07:28 EDT | Updated 05/29/2012 05:12 EDT

Federal civil service cuts trigger concern among Atlantic finance ministers

HALIFAX - Federal spending cuts that hit the military and the size of the civil service are a concern for Nova Scotia's finance minister.

With about 29,000 people in Nova Scotia who are paid by the federal government, including a military presence that accounts for more than half of that, federal jobs cuts are important for Graham Steele.

"Obviously that causes us some concern depending on how it all plays out because the Armed Forces are a critical element of Nova Scotia's fabric as well as being an important economic driver in our region," Steele said after Finance Minister Jim Flaherty tabled the federal budget Thursday in Ottawa.

Steele said he was "somewhat" reassured that the federal government has indicated the bulk of the job cuts will occur in the Ottawa area, and that the number of Armed Forces members would stay the same.

"It remains to be seen how that actually plays out on the ground, but that reassures us that we may be able to continue with this strong and very welcome federal presence in our region."

In St. John's, Newfoundland and Labrador's finance minister said the 19,200 jobs being cut in the public service might not affect the province as much as he had feared.

"I understand 7,000 of those are going to be through attrition, and that a third of them are going to be in the Ottawa region," Tom Marshall said. "So the job cuts, they're not as big as we were scared they might be, and we understand, at least we've been told, that they're going to be proportionate. But we'll wait and see."

Steele said Nova Scotia is also looking for assurances that a $25-billion contract to build new navy vessels in Halifax will remain untouched.

"It appears there will be no impact," said Steele. "That is not absolutely confirmed but we are hoping the minister of national defence will be able to confirm that for us."

Jay Paxton, a spokesman for Defence Minister Peter MacKay, reaffirmed the government's commitment to the shipbuilding deal.

"The federal government is committed to the shipbuilders of Nova Scotia and the 11 000 jobs that will flow into Atlantic Canada from the federal decision to spend $25 billion to build combat vessels at Halifax Shipyards," Paxton said in an email.

Nova Scotia is also trying to gauge the impact of federal cuts on the Atlantic Canada Opportunities Agency, the National Research Council and the Fisheries Department.

"It appears they will be suffering some significant reductions which could have a disproportionate impact on Nova Scotia," Steele said.

Overall, Marshall said the budget wasn't as tough as he expected.

"I was expecting that the cuts could be more draconian than they were," he said. "What it appears they're doing instead of slashing and burning and doing it all once, they're going to do it over a period of time.

"I think that could be a wise thing."

But Marshall questioned whether the budget helps business or resource development.

"They're eliminating for the oil and gas industry and the mining industry the Atlantic Investment Tax Credit, that's a tax credit for people in Atlantic Canada, a 10 per cent tax credit on their equipment purchases," he explained.

"Corner Brook Pulp and Paper, Vale Inco would have benefited from that and it's being eliminated I think over four years for the oil and gas and the mining industry. So that's going to negatively impact them."

— By Keith Doucette in Halifax and Sue Bailey in St. John's, N.L.