OTTAWA — Ottawa is past the halfway mark to the biggest deficit in the country’s history, the Finance Department reported Friday.
The department’s monthly fiscal monitor shows that six months into the 2009-10 fiscal year, Ottawa’s deficit has already ballooned to $28.6 billion, adding another $5 billion in September.
That is on pace to meet Finance Minister Jim Flaherty’s latest calculation of a $56.2-billion hole for the fiscal year that ends March 31.
At the corresponding period last year, the government was half a billion in the black, but Ottawa’s fiscal position changed dramatically with the advent of the deep recession that hit the country in October.
The downturn not only resulted in the government increasing spending to stimulate the economy but also severely cut into Ottawa’s revenue stream.
In the first six months, revenues were down $14.2 billion, or 12.3 per cent, reflecting the steep fall-off in income taxes, corporate taxes and GST receipts paid to Ottawa.
Meanwhile, stimulus programs such as cuts to income taxes, increased employment insurance payouts and the auto bailout has cost Ottawa $11 billion in the first six months.
For the month of September, revenues were down $3.6 billion, while program expenses rose $1.1 billion.
“The decline in revenues through September is generally in line with the projected quarterly pattern of economic growth in which nominal gross domestic product, the broadest measure of the tax base, is expected to be weak before strengthening in the October to December timeframe,” the department said.
“The impact of the economic profile on revenue growth highlights the sensitivity of the 2009-10 revenue projections to the economic recovery.”
The biggest hit has come from corporate taxes, which are down almost 40 per cent, or $6.3 billion, in the first six months. Ottawa said it has had to pay about 50 per cent more in refunds to firms on taxes paid in previous years.
As well, receipts from taxes on individuals have dropped 7.5 per cent, or $4.2 billion, reflecting both tax cuts introduced in the January budget and the fact that fewer people working.
Canadians have also paid $2.5 billion, or 17.9 per cent, less in GST than the corresponding period last year.
Meanwhile, spending by the government is up $16.3 billion, or 16.5 per cent over the first half of the fiscal year, with EI payments to newly unemployed workers jumping 50 per cent, or $3.5 billion.
The main positive from the downturn is low interest rates, which has allowed the government to save $1.4 billion in mortgage payments on the $500-billion national debt.