Budget watchdog questions Ottawa’s projections
OTTAWA — A new report from Canada’s budget watchdog suggests the Harper government might be in position to spring a good news deficit surprise before the next federal election.
Parliamentary Budget Officer Kevin Page’s analysis on the government’s economic update budget projections suggests Finance Minister Jim Flaherty may be painting a bleaker picture than the current slowdown in the economy warrants.
On average, Page’s analysis shows the government may be overestimating the hit to its annual revenues and impact on expenses from a weaker economy by $4.7 billion a year over five years.
That’s a big enough difference to put the government solidly in a surplus position when the finance minister of the day delivers the pre-election budget in the spring of 2015.
Instead, the official update anticipates the deficit will be balanced a year later, after the October 2015 election mandated by law.
The report does not say the government is purposely cooking the books to make itself look good when it beats expectations.
The report leaves the issue unanswered, aside from asking Finance officials for more information on how they arrived at their bottom line numbers.
But Page said in an email response to a media inquiry that is one interpretation.
“Finance may have made some technical adjustments to the projections, or there could be political fiscal management considerations,” he wrote.
“The latter could reflect a desire to beat deficit targets, or presenting a fiscal track that encourages more restraint efforts over the medium term to get back to balance.”
A backgrounder from Finance shows at least half the gap stems from a $3 billion carry forward decline in revenues based on a set-back in the 2011-12 budget year.
Finance is anticipating the loss will carry on in subsequent years, which the PBO says suggests Ottawa has reduced the “revenue yield assumptions” from the one-year result.
Flaherty’s director of communications, Chisholm Pothier, said Page appears to be all over the map.
“One day he’s saying our deficit is higher, the next day he’s saying it’s lower,” said Pothier.
“The economic update was transparent and provided clear explanations . . . including that revenues were revised down due to lower nominal gross domestic product, lower projected interest rates and lower than expected tax revenues from lower commodity prices, and program expenses increased due to the impact of lower interest rates on pension and benefits obligations.”