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Finance Minister Joe Oliver answers a question in the House of Commons, Tuesday, Sept. 16, 2014 in Ottawa. THE CANADIAN PRESS/Sean KilpatrickThe Canadian Press

The Parliamentary Budget Officer is urging the Conservative government not to take balanced budget legislation too literally as it moves to deliver on a pledge from last year's Speech from the Throne.

The government has not yet revealed details of its plans nor has it indicated exactly when it will move in this direction.

However Parliamentary Budget Officer Denis Fréchette released a 28-page report Tuesday that looks at provincial and international examples for lessons Canada could learn.

The report notes that forcing a government's hand through stringent balanced-budget legislation could make for bad policy if it prevents politicians from taking action in the event of an economic downturn, such as the stimulus spending Ottawa approved in the 2009 and 2010 federal budgets.

The PBO warns that narrowly-focused legislation could force Ottawa into making spending decisions that hurt the provinces, which rely on federal transfers as a major source of annual revenue.

To get around this, the PBO recommends that any legal requirement for balanced budgets should be defined broadly in terms of an economic cycle of several years, rather than a single year.

"Balanced budget legislation can carry costs and unintended consequences that reduce social welfare," the report states. "Legislation can restrict the tools of public policy to smooth the business cycle, change the composition and timing of revenues and public spending, and lead to less transparent budgeting and more frequent policy changes. It can also affect provincial finances," the report states.

In order to limit or avoid these negative consequences, the PBO said legislation should have escape clauses for exceptional circumstances and economic downturns, contain provisions for beneficial borrowing for areas such as capital spending and the government's compliance with the rules should be monitored independently.

"Implementing a statutory balanced budget requirement that is designed according to these principles can enhance the law's value and extend its longevity," the report concludes.

Finance Minister Joe Oliver's office re-stated the government's commitment to the pledge, but offered no new details as to what it would look like. Nor would the minister's office confirm when the legislation will be introduced.

"Balanced budgets keep taxes low and ensure that important government services are sustainable over the long run for Canadians. That is why we will require balanced budgets during normal economic times and concrete timelines to return to balance budgets after a crisis," said the minister's spokesperson in an email, using virtually identical language to the government's original pledge from the 2013 Speech From the Throne.

The NDP issued a statement saying the PBO report shows balanced budget legislation is unnecessary and "has a long and well-documented history of failure."

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