Government secrecy over details of spending cuts in the 2012 budget is unnecessary and prevents MPs from performing their constitutional role as watchdogs of the public purse, the Parliamentary Budget Officer warns.
In two new reports released Wednesday, Kevin Page touches on a wide range of current economic issues. The reports urge departments to address the lack of transparency over spending cuts, suggest the government is relying on overly-positive assumptions for economic growth and warn of growing inequality in Canada between regions, as well as between the rich and poor.
The PBO also estimates that four years from now, the prolonged period of federal spending cuts will shrink Ottawa’s debt-to-GDP levels down to rates not seen in Canada since 1980.
The two PBO reports include one on “ Strengthening Transparency and Oversight in an Era of Consolidation,” and another on the PBO’s economic and fiscal outlook.
The first report takes issue with the fact that the government, as recently explained by Treasury Board President Tony Clement, is of the view that existing rules prevent departments from fully detailing the cuts until as late as spring 2013. The minister’s comments appeared to contradict a pledge he made before the March 29 budget was released, when he promised to provide MPs with “timely and accurate” information on spending cuts.
The PBO report says the promised spending cuts in the 2012 budget and previous budgets lack the most basic information. For instance, Ottawa says it is cutting $5.2-billion a year, but from what?
“Despite PBO requests, the government has not provided clear baseline information used for any of the expenditure reduction initiatives in a manner that would allow Parliament to assess impacts on government programs and services,” states the PBO report.
The PBO says it has sent a form to all departments to fill out that, if answered, would provide MPs with the information needed to cast informed votes on government spending. The PBO says this information, when received, will be reported to Parliament.
Sean Osmar, a spokesman for Mr. Clement, said Parliament will receive a “complete picture” of the government’s spending through a series of reports that are tabled throughout the year. He said departments cannot make details public until public servants are told internally about how they may be affected.
In the second report, the PBO provides its own forecasts of future economic growth, as well as expected deficits and surpluses, that are roughly similar to the government’s 2012 budget numbers.
The PBO’s numbers do project slower real GDP growth than the average private sector forecasts used by the government in the 2012 budget over the period from 2012 to 2014. As a result, the PBO projects a deficit of $4.8-billion in 2014-15, in contrast to the government’s estimate of a $1.3-billion deficit. The PBO agrees with the government’s forecast of returning to balance the following year, but PBO expects the surplus for 2015-16 will be $2.4-billion rather than the government’s estimate of $3.4-billion.
That report also includes some analysis of Canada’s challenges in the areas of productivity, industrial change, income inequality and regional income disparity.
It notes that between 1976 and 2009, the incomes of the richest 20 per cent of Canadians has grown dramatically, while the rest of Canada has seen little to no gain.
“Rising inequality matters because it may weaken social cohesion and can increase demand for government programs and corrective policies,” the report states. Possible factors contributing to income inequality – according to the PBO – are changing demands for high-skilled workers, product market deregulation, reduced employment protection legislation and declining unionization and unemployment insurance coverage.
On regional disparities, the report notes that British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador have been growing faster than the national average.
“If global commodity price changes were to continue to drive large differences in provincial growth within Canada, then over time this could have longer-term implications for tax and transfer programs that redistribute resources among the provinces, such as the equalization program,” it states.