The Conservative government ran a $614-million shortfall in November – raising this year’s deficit to $13.8-billion over the first eight months of the fiscal year.
Finance Minister Jim Flaherty is preparing to deliver his 2014 budget on Feb. 11, and erasing the deficit by the 2015-16 fiscal year is a major priority for the government.
From April to November, Ottawa’s deficit is slightly higher than the $13.6-billion deficit posted during the same period the year before. Friday’s Fiscal Monitor report from Finance Canada says two unique factors came into play.
The report notes that had it not been for the costs related to the 2013 Alberta flood and new revenue from selling some of Ottawa’s shares in General Motors, the deficit for April to November would have been $11.7-billion.
This year’s spending trends could add fuel to the debate over Ottawa’s approach to Employment Insurance. The Parliamentary Budget Officer has argued that Ottawa’s return to balance will be helped in part because E.I. premiums are being kept at a higher rate than necessary to cover the cost of benefits. Mr. Flaherty denies that he is using E.I. premiums to erase the deficit.
Friday’s report from Finance Canada shows Ottawa has so far collected over $2-billion more in E.I. premiums than it has collected in benefits. From April to November, Ottawa collected $13-billion in E.I. premiums and paid out $10.8-billion in benefits. Revenues from E.I. premiums are up 9.3 per cent so far this year, while the cost of paying benefits is down 0.3 per cent.
The government has also faced criticism over changes to E.I. policy, which labour groups argue is having the effect of denying benefits to unemployed Canadians who should qualify for support.
The Conservative government has said its plan to balance the books is focused on controlling spending that is directly under the control of federal departments. Friday’s report suggests it is having less success than last year. Total direct program spending is up 5.1 per cent to $72.9-billion from April to November, compared to a 3.1 per cent increase in the same period the year before.
Mr. Flaherty’s February budget will include an update of the government’s deficit projections. In November’s economic and fiscal update, Mr. Flaherty projected a $17.9-billion deficit for the 2013-14 fiscal year, followed by a $5.5-billion deficit in 2014-15 and a surplus of $3.7-billion in 2015-16.
Editor’s note: An earlier version of this story was based on an out-of-date report Finance Canada sent to media by mistake. This story is based on the correct report.