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Federal Finance Minister Joe Oliver delivers the Economic Update and Fiscal Projections at a lunch meeting of The Canadian Club in Toronto on Wednesday November 12, 2014.Frank Gunn/The Canadian Press

The recent drop in oil prices has forced Ottawa to chop billions off its revenue projections, a development that when combined with new tax cuts means the government is expecting only modest surpluses in the coming years.

The annual fall fiscal update is based on an average forecast from private-sector economists, but those figures were delivered in early September and failed to capture the steep drop in oil prices over the past few weeks.

The private sector economists assumed North American crude would be around $98 (U.S.) per barrel, but prices have since dropped to around $81 (U.S.) per barrel.

That has a significant impact on revenues. The government is lowering its expectations for them by $500-million this year and $2.5-billion per year from 2015 to 2019, a move economists described as reasonable in light of the circumstances.

The impact of the reduction – when coupled with recent tax-cut announcements – is that the forecast for next year's surplus will be $1.9-billion.

In announcing the fiscal update, Finance Minister Joe Oliver made a heavily partisan speech, telling a Toronto business audience that only the Conservatives will fight bureaucracy and keep taxes low and accusing the opposition of promoting "risky experiments." He singled out Liberal Leader Justin Trudeau in particular.

The fall update revealed for the first time how the recent wave of tax-cut announcements – including income splitting for families with children under 18 – will affect Ottawa's bottom line. The update showed that Ottawa would have posted a small surplus this fiscal year, but is now forecasting a $2.9-billion deficit primarily due to the cost of recent announcements.

The full cost of the various tax cuts – which also include credits for small businesses and increased monthly child-care benefit cheques for parents – means the size of future surpluses will be about $5-billion less than they would have been without those announcements.

Mr. Oliver said those tax cuts, coupled with historically low government spending, give Canadians a clear choice.

"We trust Canadians to save and spend their hard-earned money better than all-knowing bureaucrats or social engineers," he told a Toronto business audience. "Granted, there are some people who don't agree, but that is what elections are about."

Mr. Oliver did not take questions from the media after his speech and left Wednesday evening for Australia to attend Group of 20 meetings.

NDP Leader Thomas Mulcair and Mr. Trudeau shot back Wednesday, saying the updated numbers show the government is giving billions in tax cuts to well-off Canadians while most will not receive anything.

Mr. Mulcair called income splitting a "reverse Robin Hood" tax move.

"Never before has a government come up with something like taking from the poor to give to the rich," said Mr. Mulcair, who spoke to reporters at the same Toronto hotel where Mr. Oliver delivered his speech.

The NDP Leader said his party will oppose income splitting in Parliament but declined to say definitively whether he would pledge to reverse it if elected. He suggested the NDP would fund its platform through higher corporate taxes.

Mr. Trudeau told reporters in Vancouver on Wednesday that the update reflects the impact of an "unfair" income-splitting policy. Liberal finance critic Scott Brison said Mr. Oliver should have delivered the update in Parliament and should not have used the speech for "cheap politics."

The revised forecasts show a string of annual budget surpluses beginning next year, starting at $1.9-billion in 2015-16 and rising to $13.1-billion in 2019-20.

The government is choosing to maintain its $3-billion "adjustment for risk" this year and in future years. That amount is set aside for unforeseen events and goes toward Ottawa's bottom line if it is not used. That would lower the debt in times of surplus.

The government sometimes uses fall updates to cut that contingency in half for the current year to reflect that the fiscal year is more than halfway over. The government is choosing not to do that this year in light of uncertainty, particularly around the price of oil.

While lower oil prices do generate some positive economic activity in terms of higher exports and lower costs for business and consumers, the government says the overall impact on growth is negative.

All of the additional caution in the numbers means the government could end up with a surplus in the current 2014-15 fiscal year. The update forecasts a $2.9-billion deficit, but that includes the $3-billion for unforeseen events. The official year-end numbers are normally released several months after the end of the fiscal year ending March 31.

The government has been posting smaller-than-projected deficits of late based largely on lower spending. For instance, the Feb. 11 budget said the deficit for 2013-14 would be $16.6-billion, but the final figure was significantly less at $5.2-billion.