The Conservative government's annual budget update hit all the right notes. Unveiled last month by Finance Minister Jim Flaherty, it laid out a three-point plan. Government debt will be eliminated by 2021. Annual interest savings from a lower debt will be plowed back to taxpayers by cutting personal income taxes - he calls this the Tax-Back Guarantee. And the government will "maintain a tight rein on spending."

This is all music to taxpayers' ears. Yet none of it will happen. The minister is instead proposing a series of gimmicks.

Take the pledge to pay down "total government net debt." To most Canadians this means one thing - paying off Ottawa's $481.5-billion federal debt, which incidentally costs taxpayers $34-billion in annual interest costs. (That's $93-million each day.) National debt, as it is commonly understood, is the sum of annual deficits accumulated by the federal government since Confederation.

But Mr. Flaherty isn't proposing eliminating this debt. He will eliminate "government net debt," an altogether different proposal. His net debt includes federal debt plus provincial, territorial and municipal government liabilities less the accumulated assets of the giant Quebec and Canada Pension Plans (Q/CPP). By including the funds earmarked to pay future Q/CPP benefits to pensioners, Mr. Flaherty's no "net debt" objective will easily be achieved. Ottawa will only need to reduce its debt by $3-billion a year, for a total reduction of $48-billion over the next 16 years.

Debt reduction is supported by many Canadians. It is akin to paying off the national mortgage. In fiscal 1996/97, Canada's debt stood at $562.9-billion. The federal budget was balanced nine years ago and debt repayment has since totaled $81.4-billion, which saves billions and billions of dollars in annual interest payments. Mr. Flaherty's scheme will pay down less debt than reductions made over the past nine years. Redefining "debt" makes his meek 16-year "net debt" plan appear a great leap forward.

Mr. Flaherty calls this fable a "bold new plan." Liberal finance critic John McCallum accused the minister of using "an arcane statistic" to confuse people. (And he's right.) Taxpayers call it phantom debt relief - a political gimmick.

A last point on debt: the minister's pledge to apply every surplus dollar to bring down the debt is nothing to celebrate either. It is already federal law. The Financial Administration Act wisely requires that 100% of any surplus be directed to debt repayment.

As for Mr. Flaherty's promises of tax relief, according to the November update, Ottawa's surplus will total more than $50-billion over the next six years. Yet Mr. Flaherty announced that the GST will not be cut again until 2011. And his so-called Tax-Back Guarantee ties future personal income tax relief to his debt relief schedule.

Under his plan, there will be no income tax relief without significant debt interest savings. This is an excuse for Ottawa to keep taxes high. The proposal to pay off $3-billion in debt each year will save taxpayers approximately 10 bucks annually - a trivial amount.

Last is the Conservative commitment to keep spending under control, a policy already in tatters. In his update, Mr. Flaherty scolded the Liberal government for its awful spending record, "Over the past five years of the previous government, total program spending grew by an average of 8.2% each year." He added, "This growth was neither sustainable nor desirable."

The Conservatives will be more disciplined. Mr. Flaherty said, "The government is committed to keeping the growth of program expenses below the growth of the economy over the medium term." In Parliament he repeated "...our new economic plan proposes to keep the growth rate of program spending on average below the rate of growth in the economy."

And why is this important "To the extent spending growth is kept below the growth in the economy, this will contribute to further reductions in public debt and in taxes given the commitment to dedicate interest savings to tax reductions," said the minister. His message is clear: tax and debt reductions are conditional on spending restraint.

But the ink on the update wasn't even dry and the Conservatives already betrayed the commitment to keep spending "below the growth of nominal GDP." Mr. Flaherty's May budget stated program spending will "rise 5.4% in 2006/07 ... below the growth of nominal GDP." His update reports "nominal GDP is projected to grow 5.0% this year and 4.6% in 2007."

So how does Mr. Flaherty explain this little ditty from the update: "Program expenses are expected to grow by 7.1% in 2006/07" This level is much higher than nominal economic growth. Moreover, it is only a stone's throw away from the Liberal's 8.2% spending spree routinely disparaged by Conservatives.

Meager tax relief, Liberal spending levels and less debt repayment all dressed up as a bold new plan. Taxpayers had hoped for some straight talk from the Conservative government. Instead Minister Flaherty is selling a false bill of goods.