UPDATE 2-Canada PM sets scene for battle over vote subsidy

* Cutting subsidies would help ruling Conservatives

* Move to scrap public cash provoked crisis in 2008

* Latest poll shows Conservatives would retain power

* Government promises billions to Quebec for tax deal
(Adds Ottawa promising money to Quebec)

By David Ljunggren

OTTAWA, April 1 (Reuters) – Canada’s Conservatives on
Friday reopened a debate that almost brought down their
government in 2008, promising to scrap public subsidies for
political parties if they win the May 2 federal election.

Prime Minister Stephen Harper said his government would
scrap the system — something that gives an annual $2 subsidy
to each major political party for every vote it got in the
previous federal election — if it won a majority in
Parliament, a goal that has eluded it so far.

“Taxpayers shouldn’t have to support political parties that
they don’t support,” he said in New Brunswick. “(It’s) this
enormous check that keeps piling into political parties every
month … that means we’re constantly having campaigns.”

The May 2 election will be Canada’s fourth in less than
seven years.

Canada has strict rules on fund-raising, banning corporate
and union donations and allowing individuals to give no more
than C$1,100 a year. In the last quarter of 2010, the
Conservatives raised C$5.2 million ($5.4 million) from the
public, compared with C$2.2 million for the Liberals.

The Conservatives tried to scrap the vote subsidy in
November 2008, a month after the last election. The three
opposition parties united against that, and Harper only escaped
defeat in the House of Commons by having Parliament suspended.

Eliminating the subsidy would help the Conservatives by
financially crippling opposition parties, which are less
efficient at raising money and rely on public cash.

The Conservatives received C$10.4 million in 2010 in
subsidy cash while the main opposition Liberal Party picked up
C$7.3 million.

Polls show the right-of-center Conservatives will win the
election and might even transform their minority government
into a more stable majority one.

Liberal leader Michael Ignatieff said Harper planned to
introduce what he called U.S.-style attack politics to Canada.

“We have a democratic system at the right price — it’s
economical, it creates a level playing field,” he said.

“Do you defend Canadian democracy or do you want to import
American-style democracy into this country? I don’t think so,
because you get big money, you get corruption, you get all the
problems that bedevil American democracy.”

Later in the day, the Conservatives said that if they win
the election, they will commit to striking a C$2.2 billion tax
harmonization deal with the French-speaking province of Quebec
by Sept 15.

Quebec, the second most powerful province with 75 of the
308 seats in the House of Commons, has been asking for the
money for years. The Conservatives had dipped in popularity
there in recent weeks after refusing to help pay for an ice
hockey stadium in Quebec City.

An Ekos poll released on Friday put public support for the
Conservatives at 36.9 percent, up from 35.3 percent in a survey
done by the same firm last week. Support for the Liberals
slipped to 26.2 percent from 28.1 percent while the New
Democrats were up to 17.2 percent from 14.2 percent.

The poll indicates the Conservatives would win another
minority if an election were held now. The survey of 2,565
adults was conducted between March 28 and 31 and is considered
accurate to within 1.9 percentage points, 19 times out of 20.

($1=$0.96 Canadian)
(Reporting by David Ljunggren; editing by Janet Guttsman)

UPDATE 2-Canada PM sets scene for battle over vote subsidy