Prime Minister Paul Martin says Canada won't run up a budget deficit but instead will bring down its ratio of debt to gross domestic product.

Speaking to business leaders at The Empire Club in Toronto Thursday, Martin reiterated a pledge he has made since signing a deal with the New Democrats: that the budget agreement was predicated on the assumption there would be no deficit.

"Never again can we allow government to live beyond its means," Martin said, adding: "We will not return to deficit. That's not a guideline... it's a condition of the agreement."

"The most important tool, if you're going to control spending, is disclipline," he continued.

"There is a line and you cross it at your peril. Let yourself slip into deficit and you may well discover, as so many industrial nations have found this decade, that it is nearly impossible to reverse course."

The Liberals were able to secure 19 NDP votes for their federal budget by promising $4.6 billion more for housing, the environment, foreign aid and education.

Martin noted Thursday that the budget changes represent an overall increase in spending of about one per cent.

Martin noted that Canada's debt-to-GDP ratio had fallen to 38 per cent from almost 70 per cent when he took over as finance minister in November 1993.

"Over the next nine years we're going to be down to an acceptable 25 per cent," he vowed.

The opposition Conservatives have accused the Liberals of acting irresponsibly in their compromise deal with the NDP.

Finance Minister Ralph Goodale has also insisted Ottawa can afford its promises, including modest tax cuts, without running into the deficit. He says the money promised under the NDP deal will come out of rainy-day funds this year and next, but will still leave enough for small debt repayments.

He has predicted a $4-billion surplus in the current fiscal year, most of it earmarked for debt reduction.