Parliamentary Budget Officer Yves Giroux is urging MPs to take a closer look at how the federal government plans to cut $1.5-billion a year from federal spending.
The PBO released a report Thursday that reviews Finance Minister Bill Morneau’s economic and fiscal update, which was released Monday.
The update includes an entry stating that the government will find $1.5-billion – or $7.5-billion over five years – through a “comprehensive” review of government spending and tax expenditures.
Thursday’s PBO report said the government is providing “incomplete” information as to where these savings will be found.
“No details have been published regarding the process or the criteria that will be used to assess programs, making it difficult to determine the viability of these savings,” the PBO report states. “Parliamentarians may wish to request details on the specific mix of tax policies and operational actions the government plans to introduce to reach the $1.5-billion annual target.”
The savings targets announced Monday were more modest than what the Liberal Party included in its 2019 election campaign platform. That document said a spending review would find $2-billion in its first year, followed by $2.5-billion in each of the two following years and $3-billion in the fourth year, or $10-billion over four years.
The platform said this review would “ensure that wealthy Canadians do not benefit from unfair tax breaks.” It also said the review would include “taking steps to crack down on corporate tax evasion and avoidance.”
In terms of its assessment of Ottawa’s latest bottom line, the PBO notes that Monday’s report is based on economic forecasts from September. The PBO said more recent data have been less positive, meaning there is a risk the deficits could be slightly larger than estimated.
The PBO’s own forecasts show deficits are $2.6-billion larger a year than the government projections. However if the government’s $3-billion risk adjustment is included, the PBO forecasts (which do not include a risk adjustment) are essentially the same.
Monday’s fiscal update said this year’s deficit is on track to come in at $26.6-billion, followed by a deficit of $28.1-billion in 2020-21 and $22.1-billion in 2021-22. The figures were significantly higher than projections in the March, 2019, budget, primarily owing to higher public-sector pension obligations triggered by lower-than-expected interest rates, as well as accounting for a new personal-income tax cut. The deficit figures in the update did not account for most of the Liberal Party’s campaign promises.
In a recent mandate letter to Mr. Morneau, Prime Minister Justin Trudeau said the Finance Minister should “continue to reduce the government’s debt as a function of our economy.”
However, the PBO notes the government’s own numbers show the opposite.
“The fiscal outlook … does not meet the government’s commitment to reducing debt relative to GDP, as the government is forecasting a 31 per cent debt-to-GDP ratio in 2019-20 and 2020-21, higher than 30.8 per cent in 2018-19,” Thursday’s report states. “A combination of additional spending restraint, revenue increases or faster economic growth would be needed prior to March 31, 2020, to put the debt-to-GDP ratio on a declining path in 2019-20."
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