Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Deputy Prime Minister and Minister of Finance Chrystia Freeland, right, arrives with Prime Minister Justin Trudeau ahead of the tabling of the federal budget, in Ottawa, on April 19, 2021.

Justin Tang/The Canadian Press

The Liberal government’s 2021 budget underestimates the likely size of federal deficits by about $5.6-billion a year and puts Ottawa on a long-term path of higher debt, says Parliamentary Budget Officer Yves Giroux.

He issued two reports Wednesday, including one that looks at the broad assumptions in Finance Minister Chrystia Freeland’s April budget and another that focuses on a budget announcement to raise $2.1-billion over five years through higher tobacco taxes.

The budget projected the deficit for the 2020-21 fiscal year will be $354.2-billion, followed by a deficit of $154.7-billion this fiscal year and deficits that continue to decline in size through to 2025-26.

Story continues below advertisement

However, the Office of the Parliamentary Budget Officer (PBO) said it projects annual deficits that are $5.6-billion higher on average over those six years. The PBO said the government appears to be underestimating the cost of emergency programs such as the Canada Emergency Wage Subsidy and overestimating the economic stimulus impact of the new budget spending.

The PBO notes that while Ms. Freeland promised in her November economic statement that the 2021 budget would include up to $100-billion in stimulus measures, the new spending in the budget is not clearly broken down in terms of what costs are related to emergency support versus stimulus. The budget listed $101.4-billion in new spending over three years.

“We think the deficits are probably underestimated to the tune of about $5.6-billion per year on average, which normally would be a significant amount,” Mr. Giroux said in an interview. “But when you were talking about deficits upwards of $300-billion, that sounds small. But it’s not inconsequential.”

Mr. Giroux said the budget “lumped” new stimulus spending in with older spending announcements and extended spending on pandemic support programs.

“When you disentangle these types of measures, what you’re really left with is up to $69.2-billion in stimulus measures over three years,” he said.

The PBO also highlights a chart in the budget that shows the federal debt-to-GDP ratio will not return to prepandemic levels until about 2055. Mr. Giroux said this means Ottawa can’t afford major new spending over the coming decades without cutting elsewhere or raising taxes. That could have implications for Prime Minister Justin Trudeau’s pledge to eventually raise health transfers to the provinces.

Ms. Freeland’s press secretary, Katherine Cuplinskas, responded to the report by saying that the government’s fiscal plan is “prudent and responsible” and that Canada has the lowest net debt-to-GDP ratio in the Group of Seven.

Story continues below advertisement

Conservative MP and finance critic Ed Fast said the PBO report confirms his party’s concerns.

“This budget is not at all about generating economic growth or creating jobs for Canadians. It’s about pre-election spending to advance the partisan interests of the Liberal Party,” he said.

NDP MP and finance critic Peter Julian said the Liberals should be following the lead of the U.S. and other countries by including new taxes on the wealthy to offset the cost of pandemic-related spending.

“This is what makes the Liberal government’s refusal to have the ultrarich in this country pay their fair share of taxes incomprehensible,” he said.

In its related report on tobacco taxes, the PBO said it estimates a tax hike announced in the budget will raise $2.04-billion over five years, which is just shy of the government’s revenue estimate of $2.14-billion.

The spike in federal tobacco taxes, which was followed a few days later by a provincial hike in the British Columbia budget, was praised by health advocates as key step to reduce smoking rates.

Story continues below advertisement

Anne Kothawala, president and CEO of the Convenience Industry Council of Canada, an association that includes tobacco companies as members, said the tax increases won’t curb smoking unless the federal government increases enforcement to hit back at the contraband market.

Mr. Giroux said in an interview that there is a link between higher taxes and increased contraband, but that it is difficult to measure without a full understanding of Ottawa’s approach to addressing the illegal market.

The link between tobacco taxes and contraband was recently detailed in a December report by the Canada Revenue Agency, which estimated that Ottawa loses out on about $486-million a year because of uncollected cigarette taxes. The figure used 2014 data to estimate the “tax gap” on cigarette tax revenue.

The CRA report did not attempt to calculate the cigarette tax gap on provincial revenues, but it noted that the Quebec government has said it loses $125-million a year because of tax evasion in the tobacco industry.

Kelly Masotti, vice-president of advocacy for the Canadian Cancer Society, said the PBO report shows tobacco tax increases are “a win-win,” by both decreasing smoking and increasing government revenue.

In an interview, she said higher tobacco taxes are the most effective way of reducing smoking rates, particularly among price-sensitive youth, and she said contraband concerns are often overblown.

Story continues below advertisement

“We strongly support the federal tobacco tax increase as well as the B.C. increase,” she said in an interview.

Lesley James, senior manager, policy for the Heart and Stroke Foundation, also welcomed the PBO’s findings.

Ms. James said she would have liked to see a pledge in the federal budget to devote the $2.1-billion from higher tobacco taxes toward anti-smoking programs.

“We definitely need to reinvest this money into proper measures and help smokers who are addicted,” she said.

Personal finance columnist Rob Carrick outlines the federal budget’s plans for discounted child care, money for seniors and extending the interest-free period for student loans. But the budget is light on details on how Ottawa will pay for pandemic recovery measures and what it will do to cool the housing market.

Know what is happening in the halls of power with the day’s top political headlines and commentary as selected by Globe editors (subscribers only). Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies