Former parliamentary budget officer Kevin Page confirmed the funding shift—called a “reallocation” of planned funding not yet allocated to specific acquisition projects or funding that cannot be spent due to unforeseen delays in planned projects—effectively reduced what would have been a projected $30-billion federal deficit for 2017-18 by $1.052 billion.
With the postponement of the unidentified projects included in the budget plans, and critics hammering the Liberal government over a projected deficit of $29.4-billion for the current 2016-17 fiscal year, the budget instead forecasts the deficit beginning a steady decline next year at $29 billion.
“They’re pushing some of the spending forward on an accrual basis, they’re not ready to move forward on some of the military procurement, so it does look like there’s some savings over the medium term, but the money just gets re-profiled into the future,” Mr. Page told The Hill Times between television appearances in the foyer outside the House of Commons after Mr. Morneau (Toronto Centre, Ont.) delivered his first budget speech in Parliament.
A table in Mr. Morneau’s main document detailing the budget plans in the context of economic and social goals, to be followed by a detailed budget implementation bill and Parliamentary requests for spending authority later, shows the reallocation of defence acquisition funding as a net minus entry for the 2017-18 fiscal year.
Asked whether the notation brings the deficit down for the year, Mr. Page replied: “It does.”
He said he did not believe it was a “trick” to artificially begin the deficit turnaround sooner than would have been the case otherwise. “I think they could have done a better job explaining it,” he said. “We would have had some higher deficits in the medium term, so it effectively means that we’ll have more spending pressure, maybe higher deficits in the longer term,” Mr. Page said.
The budget document stated: “This is not a reduction in National Defence’s budget. This will ensure that funding is available for large-scale projects when it is needed. Funding is being shifted into future years to align with the current timing of National Defence’s major acquisition major acquisitions.”
The note explains: “To ensure that funding is available when key capital acquisitions will be made, funding that is not yet allocated to specific projects, or that cannot be spent due to unforeseen delays in planned projects, can be moved forward into future years when it will be needed.”
There have been delays and controversy over two multi-billion-dollar defence acquisition plans—acquisition of fighter aircraft to replace Canada’s aging CF-18s and the renewal of Canada’s navy ships. But the Canadian Armed Forces Defence Acquisition Guide, an annual planning document posted on the Department of National and Canadian Forces website, contains dozens of other planned or anticipated acquisition projects, from navy tub boats to $1.5-billion for Arctic and offshore patrol boats.
Interim Conservative Leader Rona Ambrose (Sturgeon River-Parkland, Alta.) singled out the reallocation of $3.7-billion in Department of National Defence acquisitions to accuse the government of cutting defence spending, and rejected government claims that the measure was taken because of procurement mismanagement.
“Why would they have taken $4-billion out of the Defence budget? To me that’s unexplainable,” Ms. Ambrose said during a CPAC interview.
“You can buy whatever you want anytime, under the procurement rules that we have in place, because if it’s a national security issue, which it always can be if you’re in the middle of a war or an emergency situation, you can literally buy something within days. That’s a very political statement for them to make,” said Ms. Ambrose. “The truth is they’ve taken billions of dollars out of the Defence budget, and there is no explaining why that happened.”
Forecast spending in a range of other areas, with indigenous peoples and their communities benefiting the most on a per capita basis, included a total of $11.9-billion on infrastructure, $1.2-billion in social infrastructure for First Nations, Inuit and northern communities, $1.4-billion for affordable housing, $400-million for early learning and child care, $342-million for cultural and recreational infrastructure and $3.4-billion for public transit.
Mr. Page sided with other critics who said the budget was heavy on planned spending programs over the next five years, but lacked fiscal details, including the absence of a target to return the federal budget to a balance.
“It could be better in transparency, but I still think it’s a significant budget. The government is moving forward on big policy initiatives. There’s a lot of money there to deal with issues, like on child care, for aboriginals, for veterans, for infrastructure as well,” Mr. Page said. “I think there’s a lot of positives. I think on the other side of it, it’s kind of a budget without a fiscal plan.”
Because of this, he said there could be concerns about structural deficits. “I think there’s going to be a lot of concerns that some of these deficits over the medium term, that they’re going to be around for a long time. Behind those deficits, there are programs, the child care program, that’s a permanent program,” Mr. Page said. “I think there’s going to be pressure to raise taxes with this kind of spending in the budget.”
The budget projects program spending to rise from $270.9-billion in 2015-16 to $323.2-billion in 2020-21. By that time, the budget predicts, public debt charges will have risen to $35.5-billion from $25.7-billion in 2015-16. But, because of anticipated growth in Canada’s $2-trillion economy, the federal debt as a share of gross domestic product is forecast to rise initially, but decline to 30.9 per cent in 2020-21 from 31.2 per cent in 2015-16.
Author: TIM NAUMETZ