Ottawa better at forecasting than any province, think tank says

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Ottawa's budget forecasts are more accurate than those from any of Canada's provinces, according to a new report by the C.D. Howe Institute that slams the way many provinces are reporting their spending.

While Western Canadian provinces are often cited as the economic stars of Confederation, the report finds Saskatchewan, Alberta and Manitoba are the country's three worst forecasters.

Ontario – which was criticized earlier this month by the Fraser Institute for its high debt levels – comes out in the C.D. Howe report as the province with the most accurate budget forecasts.

The peer-reviewed analysis of a decade's worth of spending plans between 2003-04 and 2012-13 includes the release of what the Institute calls the "Pinocchio Index" to show which governments have the best track record.

Comparing spring budget forecasts to final results in Public Accounts documents proved to be a difficult exercise in many provinces.

"In our modern climate of rising expectations for accountability, a director of a private company who accepted such poor information – and increasingly few would – would run a serious risk of being replaced or sued by unhappy shareholders," the report states. "Canadians can and should demand further improvements in the way federal, provincial and territorial governments report on, and manage, public funds."

The decade surveyed does include the deep recession of 2008-09, which caught governments off-guard around the world and made a mess of budget forecasts as governments plunged into deficit spending. Nonetheless, all Canadian governments had to deal with the major shifts in revenue and spending that resulted.

The report acknowledges that comparing results when provinces and territories use very different accounting methods raises potential objections over methodology. The report offers several measurements, including average spending overshoot and accuracy regardless of whether the final number was over or under the original forecast. The report's "Pinocchio Index" is based on cumulative spending overruns by each government measured over the decade as a percentage of budgeted spending.

By that measure of accuracy, the federal and provincial governments were ranked best to worst in the following order:

• Ottawa (1 per cent)
• Ontario (5 per cent)
• Nova Scotia (7 per cent)
• Prince Edward Island (14 per cent)
• British Columbia (15 per cent)
• Newfoundland and Labrador (15 per cent – and the only government to have undershot its spending plans)
• New Brunswick (15 per cent)
• Quebec (15 per cent)
• Manitoba (22 per cent)
• Northwest Territories (22 per cent)
• Alberta (27 per cent)
• Saskatchewan (37 per cent)
• Yukon (43 per cent)
• Nunavut (63 per cent)

Over the 10-year period, the report states that governments in Canada overshot their spending plans by a collective $47-billion.

The authors say this is a concern because "such a large bias toward overshoot across the country over 10 years suggests that prudence and other factors have led to tax takes well beyond what legislators voting budgets intended."