The Broadbent Blog


PBO sheds new light on federal budget with transparency push

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The Liberal election platform promised to “make the Parliamentary Budget Officer (PBO) truly independent” of the government and to make sure that the office is properly funded. The platform also promised to make government accounting “consistent and clear.”

It was, then, a bit surprising that the PBO had to make a formal request for information normally provided in the federal budge, and was forced to provide its own estimates for the missing numbers in its report to Parliament on April 6.  The Department of Finance finally released the requested information only on April 8, more than two weeks after the budget was delivered in the House of Commons (on March 22nd.)

Contrary to past practice, the budget did not identify the separate impacts on government finances of changing economic conditions and discretionary government decisions on spending and taxes. Nor did it provide the normal detailed projection of program spending over the next five years. These gaps were also publicly noted by former Deputy Minister of Finance Scott Clark.

With respect to the first issue, it is important to separate out how much of the increase in the deficit is due to discretionary government policy as opposed to reduced projections of economic growth. A budget is only stimulative to the extent that any increase in the deficit is due to policy changes rather than to reduced revenues from a slowing economy.

The numbers provided by the Department of Finance show that the deficit in 2016-17 will be $16.1 billion greater than was projected in February, 2016 due to the slowing economy and declining tax revenues, as adjusted for a prudence factor. This is more than one half of the headline projected deficit in 2016-17 of $29.4 billion.

It is unclear why this information was not provided in the budget. But it underlines the fact that the budget is less stimulative, and less of a supposed “big spending” document, than many pundits, both pro and con, have believed it to be on the basis of the headline deficit.

With respect to the second issue, the original budget provided only limited information on spending two years down the road after the fiscal year of 2017-18. The new information, still quite limited,  confirms that there is no planned increase in transfers to the provinces over a five year planning horizon, that new spending on programs will fall by $3 billion in 2018-19 from 2017-18 levels, and that new spending on transfers to persons will fall by almost $1 billion in 2018-19.

The key take-away is that about one third of the new program spending in the budget is temporary, explicitly so in the case of phase one of the infrastructure investment program and temporary increases to Employment Insurance benefits.

The government may well announce new spending or tax measures in the next budget, especially if the economy improves and tax revenues increase by more than has been projected. Or they may let spending fall if that is needed to keep the federal debt from rising as a share of GDP, as promised in the budget.

The fact that the government was unwilling to release this information in the budget suggests that they are still  undecided over whether the real priority is investment in programs, or sticking to the promise of not greatly increasing the public debt. The fiscal policy can has been kicked down the road, which will mean some tough choices ahead if the economy does not improve.

Regardless, hats off to the PBO for obtaining more budget information for Members of Parliament and all Canadians. Hopefully their reward will be the promised greater independence, and a larger budget.

 

Andrew Jackson is Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute.