Ottawa should be wary of turning surplus into tax cuts: budget watchdog

Canada’s budget watchdog says the country is on track to run a $3.6-billion surplus in 2014-15, delivering a balanced budget a year earlier than government predictions.

OTTAWA — Canada’s budget watchdog says the country is on track to run a $3.6-billion surplus in 2014-15, delivering a balanced budget a year earlier than government predictions.

However, a report released Tuesday by Parliamentary Budget Officer Jean-Denis Frechette urges Ottawa to proceed with caution when it comes to using surplus cash on new spending initiatives or to introduce permanent tax cuts.

If not, Frechette warns the government risks falling back into deficit once economic growth slows.

The Harper government has pledged to cut taxes ahead of next year’s election — long-promised reductions contingent on a balanced budget.

“Policy-makers should be wary of using surpluses to implement permanent tax relief or spending initiatives if they wish to avoid returning to deficits as economic growth subsides,” said the PBO’s latest economic and fiscal outlook.

The budget office predicts balanced budgets through 2019-20 when it says the federal surplus will reach as high as $11.3 billion. During that time, it expects average annual surpluses of about $10 billion, which can be used for repaying debt, boosting program spending and cutting taxes.

Frechette’s projection, however, for 2014-15 is at odds with Prime Minister Stephen Harper, who has insisted there won’t be a federal surplus until the 2015-16 fiscal year.

The Conservative government has pledged to reduce taxes once the books are balanced, with programs such as income splitting for couples with children under 18 and a doubling of the annual limits for tax-free savings accounts.

Earlier this month, Harper said last year’s federal deficit — for 2013-14 — would be more than $10 billion smaller than forecast, but he’s refused to predict the improving bottom line will pull Canada out of the red this fiscal year.

He announced a new $5.2-billion deficit figure for 2013-14 — down from the $16.6 billion shortfall projected in February’s federal budget.

Economists and budget watchers had already calculated that Ottawa might be headed to a surplus this fiscal year, which ends next March 31, before the prime minister’s announcement.

Last month, former senior Finance Department bureaucrats Scott Clark and Peter DeVries published a report that found Ottawa heading for a $4 billion surplus, which did not include a $3-billion “risk adjustment” cushion built into the 2014 federal budget. They based their estimates on last year’s deficit falling to about $10 billion.

Canada’s economic outlook has improved faster than expected in recent months, the budget office report said.

It found the country’s real GDP was stronger than expected and it predicts further growth due to the improving U.S. economy.

Just Posted

RDC cancels championship-winning golf program due to tight finances

Short season, small number of student golfers were also considerations

Fire investigators comb through industrial fire wreckage looking for answers

Industrial building in north Red Deer was completely gutted in Wednesday morning fire

Time for a central Albertan in cabinet, says chamber of commerce

Central Alberta had no cabinet ministers in last government

Trump Russia probe finally delivers some answers

WASHINGTON — After nearly two years of waiting, America is getting some… Continue reading

WATCH video of Innisfail resident creating the world’s biggest caricature

Watch as Innisfail resident Dean Foster creates the world’s biggest caricature of… Continue reading

Notre Dame rector: “Computer glitch” possible fire culprit

PARIS — A “computer glitch” may have been behind the fast-spreading fire… Continue reading

Lower price discounts to boost Q1 oil profits but uncertainty hangs over sector

CALGARY — Lower discounts on western Canadian oil prices have swollen producer… Continue reading

Local Sports: Hard training pays off for Red Deer runner Jared Howse

Jared Howse understands success doesn’t come easily. The 17-year-old has put together… Continue reading

CRA’s automatic benefit registrations give retirees reason to file on time

TORONTO — This is the time of year when procrastinators begin to… Continue reading

Study: Genetic test predicts middle-aged obesity risk

NEW YORK — Can a genetic test identify newborns at risk of… Continue reading

Downtown Red Deer Co-op Plaza Food store closing

Central Alberta Co-op is closing its downtown Red Deer Plaza food store… Continue reading

Earth, meet Polo: Ralph Lauren unveils plastic bottle shirt

NEW YORK — Earth, meet Polo. Polo Ralph Lauren on Thursday launched… Continue reading

Statistics Canada reports retail sales rose 0.8 per cent in February

OTTAWA — Statistics Canada says retail sales rose 0.8 per cent in… Continue reading

Most Read