In his fall 2012 report released Tuesday, Auditor-General Michael Ferguson concluded the Department of Finance Canada often does not take into account the impact of tens of billions of dollars of spending and tax measures on the government’s long-term fiscal sustainability.
Furthermore, the lack of federal reporting about long-term economic consequences of major government decisions means parliamentarians are forced to vote blindly on some budget measures without knowing their true impact on the country’s finances, the report says.
Long-term financial projections are important because Canada faces many challenges that could impact the country’s fiscal sustainability, such as changing demographics, climate change and ageing infrastructure, Ferguson said.
If public debt grows faster than the economy, public finances could become unsustainable, and reduce living standards of future generations, his report says.
The Harper government promised in its 2007 budget to publish a comprehensive report on government’s fiscal sustainability that would provide a broad analysis of current and future demographic changes and the implications on Canada’s long-term fiscal outlook. A draft report was prepared in 2007, but it has not been published.
Furthermore, long-term fiscal sustainability analyses have been regularly prepared since 2010, but have not been made public.
In contrast, governments in several Organization for Economic Co-operation and Development (OECD) countries have regularly published such reports.
“This lack of reporting means that parliamentarians and Canadians do not have all the relevant information to understand the long-term impacts of budgets on the federal, provincial and territorial governments in order to support public debate and to hold the government to account,” the audit says.
The report found the Finance Department examined the long-term fiscal sustainability implications of major policy decision only when officials considered it relevant, an approach the Auditor-General said is reasonable. However, the report also concludes Finance Minister Jim Flaherty was not provided with projections about the long-term financial impact of measures announced in the March 2012 budget until August 2012.
“This means that senior management and the Minister of Finance were not informed of the overall impact on the government’s long-term fiscal position until well after they had approved the budget measures,” the report says.
The federal government did not conduct long-term fiscal projections of the impacts of multibillion-dollar major policy decisions such as reducing the GST to five per cent and offering a GST/HST credit to low-income earners, since it did not expect the costs relative to GDP to grow, nor did it examine the long-term fiscal implications of pension income-splitting.
Federal officials did, however, examine the long-term fiscal implications of other major measures examined by the auditor, including trimming the annual funding increases in health transfers to the provinces, and increasing the eligibility age for Old Age Security to 67 from 65.
The Conservative government has agreed to implement recommendations from the Auditor-General, including:
- Beginning with Budget 2013, the Finance Department will provide the Finance Minister with an assessment of the overall long-term fiscal implications of new budget measures before the budget is finalized; and
- The Finance Department will publish long-term fiscal analyses for the federal government on an annual basis, by 2013 at the latest.
The findings from the Auditor-General come as Parliamentary Budget Officer Kevin Page has been calling on the federal government to fully release information on the impacts of cuts announced in the 2012 budget. Page has said he’s willing to go to court to get the details of budget cuts from several major federal departments if they’re not released.
A recent report from the PBO concluded the Harper government’s reforms over the past year to the Canada Health Transfer and Old Age Security, along with its ongoing savings in operating spending, mean the federal government’s finances are sustainable over the long term.
Original Article
Source: national post
Author: Jason Fekete
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