The Finance Department closed the books on the 2018-19 fiscal year Tuesday, reporting that the federal government ran a $14-billion deficit.
The official figure for the year that ended March 31 is a slight improvement over the government’s estimated deficit figure of $14.9-billion, which was provided in Finance Minister Bill Morneau’s March budget.
Liberal Leader Justin Trudeau campaigned in 2015 on a plan to run short-term deficits and to balance the books by 2019, but the March budget had previously confirmed that this target will not be met.
While Mr. Trudeau mentioned 2019 as his target for erasing the deficit, the 2015 Liberal platform specified that a return to surplus would not occur until the 2019-2020 fiscal year, which began April 1.
That is no longer the Liberal plan. Mr. Morneau’s March budget estimated that the size of the deficit would be larger this fiscal year and next – $19.8-billion and $19.7-billion – before declining to $9.8-billion in 2023-2024.
Since then, Mr. Trudeau has made new spending promises on the campaign trail. The Liberal Party has not yet released a fully-costed platform with a revised projection for the federal bottom line to accommodate those promises.
The Parliamentary Budget Officer released a report in June with its latest estimate for the state of Ottawa’s bottom line. The PBO said the size of the deficit will peak at $23.3-billion in 2020-21 before declining gradually to nearly zero – or $200-million – by 2028-29.
Conservative Leader Andrew Scheer is promising to erase the deficit within five years. On the campaign trail, he has announced a package of tax cuts that will ultimately reduce federal tax revenues by over $8-billion a year.
Mr. Scheer said this week that his party’s platform will show how a Conservative government can cut taxes and balance the books.
Tuesday’s Finance Department report also shows that tax revenue as a share of GDP reached 15 per cent for the first time in a decade, up from 14.5 per cent in 2017-18, the previous fiscal year. Federal tax revenues as a share of GDP exceeded 15 per cent for four consecutive decades until 2008-09. After Stephen Harper’s Conservative government reduced the GST from 7 per cent to 5 per cent, tax revenues dropped below 15 per cent for the next decade.
Government spending also rose, from 14.4 per cent of GDP in 2017-18 to 14.6 per cent in 2018-19.
The report says personal income tax revenues increased by $10.3-billion in 2018-19, or 6.7 per cent, “driven by high employment and a strong labour market.”