According to the office’s latest report on federal economic and fiscal projections, the government has “failed to provide a concrete explanation” for the growing amount of unspent federal program funding.
Last year, federal departments spent a combined $10.1-billion less than was originally allocated in the 2012-2013 budget, and Mr. Flaherty’s latest Update of Fiscal and Economic Projections forecasts another $7-billion in lapsed spending this year and more than $6-billion in 2014-2015 and 2015-2016—the same year that the government expects to eliminate the deficit and post a $3.7-billion surplus ahead of the 2015 general election.
The PBO reports that lapsed spending accounted for $3.6-billion of the government’s improved balance in 2012-2013, and will “account for a significant portion of the Government’s budgetary improvement going forward.”
“Parliamentarians may wish to directly request this information from the government,” the latest PBO report suggests.
Assistant Parliamentary Budget Officer Mostafa Askari said that it’s possible that some of the lapsed spending in recent years was related to revisions of major projects funded as part of the government’s stimulus plan during the recession, but last year’s $10.1-billion was much larger than anticipated.
“There isn’t enough information for Parliament, for people, to assess how those lapses are measured, why they’ve increased, and how you can look forward and see what’s going to happen over the next few years,” Mr. Askari told The Hill Times. “One of the things that could be happening is that [departments] are introducing additional elements of prudence in their projections to ensure that their budget balance targets are met, and they may be becoming too cautious in terms how much they can spend.”
The PBO’s latest report also took issue with the government’s claim that it was “freezing” Employment Insurance premiums at $1.88 per $100 of insurable earnings for the next three years, and suggested that premiums could be lower based on improvements to the EI operating account in the last federal budget. Inflated EI premiums will mean $4.2-billion in additional revenue over the next two years, the PBO reported.
But the atest review by the PBO isn’t entirely at odds with the federal government. The latest update, released on Dec. 5, forecasts a surplus of $4.6-billion in 2015-2016, while the Finance Department projected a surplus of $3.7-billion for 2015-2016 in its November update. The PBO report states that it is 65 per cent likely that the feds will balance the budget in 2015-2016, the same year that Canadians will go to the polls.
The Finance Department did shed some light in November on how it would balance the budget over the next two years. In addition to billions in anticipated lapsed spending, the government is planning to freeze operational budgets until 2016, and is requiring that any wage increases for federal public servants come out of departments’ respective operating budgets.
The government is also planning major asset sales in the years ahead. In September, it sold off 30-million shares in General Motors and plans to sell its remaining shares in the automaker. The government is also planning to sell coal-rich properties and a coal terminal in British Columbia.
In return for balancing the budget in 2015, the Conservatives have promised a number of tax breaks, including income splitting for young families and increasing the annual contribution limits for Tax Free Savings Accounts.
NDP MP Peggy Nash (Parkdale-High Park, Ont.), her party’s finance critic, said that balancing the budget was “clearly an election issue” for the federal government.
“We absolutely support balancing the books, but as we heard from expert testimony at the Finance Committee, there’s no magic bullet to balancing the books next year as opposed to the year after,” Ms. Nash told The Hill Times. “If this money had been allocated and the House decided that it should be spent, they can’t just make it up as they go along and decide that they’re not going to spend the money.”
Glen Hodgson, senior vice president and chief economist at the Conference Board of Canada, said that the pace of the government’s efforts to balance the budget was a “good news-bad news story.”
It’s prudent, but it also takes some growth out of the economy, he said.
“It’s great to say heroic things about rebalancing the books a year early going into the election, but the truth is you are taking growth and job creation out of the economy in doing that,” said Mr. Hodgson, a former Finance Department and Export Development Canada economist. He called the government’s tax break promises “well-thought-through retail politics.”
“I would much rather reduce tax rates across the board by cleaning up the tax code, but we’re a long way from having that debate,” he said. “You end up with a debate between good policy and good politics.”
It remains to be seen what impact the ongoing cuts and lapsed spending will have on the government’s ability to operate and deliver public services.
Former Parliamentary budget officer Kevin Page ended his tenure in court, battling the Treasury Board for information on what impact the government’s ongoing budget cuts in the 2012-2013 budget would have on services. The office took to filing Access to Information requests with each department but was unable to produce a complete analysis.
“There’s a question to be raised as to whether such a sharp decline in spending would allow the government to provide services of the same level and quality,” Mr. Askari observed. “Appropriations are declining, and if on top of that [departments] also spend less than they were authorized to spend, one has to ask whether service levels can be maintained with that much of a decline in spending. That is really the question.”
The Hill Times contacted the Treasury Board Secretariat as to whether the department was reviewing recent and projected lapses in spending, but did not receive a response at the time of publication.
Mr. Hodgson questioned whether the lapsed spending would be better spent on projects that would generate long-term economic growth.
“The real issue is, do we have our priorities straight in terms of long term growth of the economy?” he said. “Are we giving up opportunities to make investments in things that our society and economy needs—human capital, skills development, and better infrastructure?”
Ms. Nash said that there needed to be more information on what impact budget cuts and lapsed spending are having on service delivery.
“For all of these improvised, de facto cuts, it’s money that’s not being spent,” she said. “It’s not a question of good fiscal management, it’s a question of the government jamming the brakes on public spending to reach a politically defined deadline for balancing the budget. How is that impacting Canadians? What are the programs that are affected? At this point, we don’t know.”
Original Article
Source: hilltimes.com
Author: Chris Plecash
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