Government of Ontario optimistic spending plans: auditor (Reuters)

TORONTO (Reuters)-Ontario's latest spending forecasts are optimistic and aggressive, the province's Auditor General said on Tuesday, which can make it difficult for the Government to achieve its fiscal targets.

The auditor's report comes just three months before an election in October. The Liberal Government are final the main opposition Progressive Conservatives in recent surveys.

Under the legislation introduced in 2004, the Government of Ontario is required to release a pre-election report on the finances of the province, including revenue and expense projections for three years. It is also necessary that the tax plan should be based on assumptions.

"He's going to be very challenging ... This is a set of assumptions quite upbeat and aggressive. Really, things must go right, "Auditor General Jim McCarter told reporters.

"The risk would be basically you have a much greater risk of not meeting your goals tax if the things I hope they are going to happen does not happen," he added.

McCarter has ascertained that the Government's plan is largely tied to its ability to freeze public sector salaries, constituting half of public spending.

However, since government announcement to freeze salaries in 2010, he noted that about 60 percent of compensation agreements with the public sector have led to pay raises.

The forecasts were in line with estimates the budget in March, when the Government has predicted would be needed until 2017-18 to eliminate its deficit c 16.3 billion (16.6 billion dollars).

McCarter has concluded that the estimates of revenues and costs of interest on the debt of the province were in fact "prudent and cautious".

Expenses thus-the other half of the equation that the Government has actually control against economically driven-revenues were seen with more skepticism.

The auditor's report notes that the Government says it will spend an average of only 1.8% more in each of the next three years, although its annual spending growth over the past eight years, after adjusting for one-time expenses, an average of almost 7 percent.

Ontario Finance Minister Dwight Duncan said in response to the report which he has characterized the spending assumptions as aggressive, adding that the province's deficit targets are not at risk.

"In fact, we overachieved and he doesn't say that. I think what he says is that he speaks, he speaks of contingency. "He talks about the conservative nature of our revenue projections, Duncan told reporters.

"On balance, I thought that his report was right ... I think we're on target moving forward. "

($ 1 = $ 0.98 Canadian)

(Reporting by Claire Sibonney; editing by Rob Wilson)

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