The Parliamentary Budget Officer (PBO) today released his analysis of the Federal Cost of Minimum Sentences. This report focuses on the minimum sentence for “Possession of a prohibited or restricted firearm with ammunition”.
The Parliamentary Budget Officer (PBO) today released his distributional analysis of federal carbon pricing under the Government’s A Healthy Environment and A Healthy Economy (HEHE) climate plan.
Under the HEHE plan, the federal carbon levy is set to rise by $15 per year from $50 per tonne in 2022 until it reaches $170 per tonne in 2030. The report provides an update to previous PBO distributional analysis and incorporates the loss in economic efficiency from federal carbon pricing on household incomes.
“Incorporating economic impacts into our distributional analysis helps to provide a more complete picture of the overall impact of the federal carbon pricing system on households under the federal backstop,” says PBO Yves Giroux.
The report finds that when the economic impact is combined with the fiscal impact, that is the carbon levy and related GST paid less the rebate received, the net carbon cost increases for all households, reflecting the overall negative economic impact of the federal carbon levy under the Government’s HEHE plan.
“Under the Government’s HEHE plan, most households in Alberta, Saskatchewan, Manitoba and Ontario will see a net loss resulting from federal carbon pricing. That is, the costs they face—including the federal carbon levy, higher GST and lower incomes—will exceed the Climate Action Incentive rebate they receive,” adds Mr. Giroux.
Estimates of household net carbon costs continue to show a progressive impact, that is, larger net costs for higher income households. The report finds that the largest net cost is for households in the top income quintile in Alberta (2.8% of disposable income) and the largest net gain is for households in the lowest income quintile in Saskatchewan (2.3% of disposable income) in 2030-31.
The report also provides estimates of the impact of carbon pricing on federal budgetary revenues and program spending. “Under its HEHE climate plan, we estimate that carbon pricing will increase the budgetary deficit, other things being equal, by $0.9 billion in 2021-22 and ultimately by $5.2 billion in 2030-31,” says Mr. Giroux.
The scope of the PBO’s analysis is limited to estimating the distributional impact of federal carbon pricing and does not attempt to account for the economic and environmental costs of climate change.
The Parliamentary Budget Officer (PBO) today released his Economic and Fiscal Outlook. The report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.
The Parliamentary Budget Officer (PBO) today released his House Price Assessment. The report provides an assessment of house prices relative to a household’s capacity to borrow and pay for the purchase of a house in selected Canadian cities.
The Parliamentary Budget Officer (PBO) today released an estimated cost of the provincial and territorial aspects of the federal national child care plan announced in Budget 2021.
The Parliamentary Budget Officer (PBO) today released an independent estimate of the cost of cleaning Canada’s orphan oil and gas wells. The wells are mainly located in Alberta and Saskatchewan. Plugging wells protects underground and surface waters and avoids greenhouse gas emissions.
Provincial regulators require oil and natural gas companies to close inactive well sites. In cases where there is no known, financially viable operator capable of addressing the environmental liabilities associated with closing their wells, these wells are deemed orphaned. In Alberta, the number of orphaned wells has increased from 700 in 2010 to more than 8,600 in 2020, while in Saskatchewan it has increased from roughly 300 wells in 2015 to 1,500 in 2020. Most of this growth occurred in the last 5 years, with an average growth rate of 35 per cent per year. We estimate that more than 10,000 wells could become orphaned over the next five years, resulting in a total of almost 18,000 wells that would be deemed orphaned.
“As the number of orphan wells increase, so does the expected cost for cleaning up environmental liabilities. Our estimated cost of cleaning oil and gas wells, on a national level, is expected to rise from 361 million in 2020 to 1.1 billion by 2025” says Yves Giroux, PBO. “
In 2020, the federal government provided $1.7 billion to the governments of Alberta, Saskatchewan and British Columbia to fund the clean-up of inactive oil and gas wells, which suggests there should be sufficient funds to cover the liability. However, recent experience indicates that close to half of the funds in Alberta were disbursed to clean up wells owned by companies that are financially viable. If this trend of helping viable companies persist, existing funding could be insufficient to clean up wells that are orphaned.
The Parliamentary Budget Officer (PBO) today released his report on the Government’s 2021 Economic and Fiscal Update. The report highlights key issues arising from the Government’s Update published on December 14, 2021.
The Government released its Update on the same day that it tabled its audited financial statements for 2020-21—close to nine months after the close of the fiscal year (March 31st).
“The delay in the Government’s release of its audited financial statements has undermined parliamentarians’ ability to meaningfully scrutinize proposed Government spending,” says PBO Yves Giroux.
The PBO report notes that Canada falls short of the standard for advanced practice in the International Monetary Fund’s financial reporting guidelines, which recommends that governments publish their annual financial statements within six months.
“Consistent with the PBO’s mandate to promote fiscal transparency, I am recommending that Parliament consider legislative amendments to require tabling of the Government’s financial statements no later than September 30, which would avoid a repeat of the long delay experienced in 2021,” adds Mr. Giroux.
The PBO report includes several recommended amendments to the Financial Administration Act for consideration, including moving the required release date of the Public Accounts by three months, from December 31st to September 30th, as well as requiring Departmental Results Reports to be released no later than September 30th.
Fiscal measures since the start of the Pandemic
“Our report shows that since the start of the pandemic, the Government has spent, or has planned to spend, $541.9 billion in new measures—almost one third of which is not part of the COVID-19 Response Plan,” says Mr. Giroux.
Of the non-pandemic spending, the report identifies $69.2 billion in stimulus spending, $49.9 billion related to “building a better economy”, $24.2 billion in compensation to First Nations children and their families, and $33.3 billion in “other” measures.
The new measures announced in the Update are largely in addition to the measures included in the Liberal Party of Canada’s 2021 election platform. “We estimate that remaining platform measures would amount to $48.5 billion in net new spending over 2021-22 to 2025 26,” adds Mr. Giroux.
The Update continued to track selected labour market indicators (“fiscal guardrails”), highlighting the fact that Canada has recovered 106% of the jobs lost at the start of the pandemic.
The fiscal guardrail indicators in the Update showed that the employment rate, total hours worked and excess unemployment effectively returned to their pre-pandemic benchmarks by November 2021, well before the end of the 2021-22 fiscal year—the first year of the Government’s stimulus plan initially announced in its 2020 Fall Economic Statement.
According to Mr. Giroux, “the Government’s own fiscal guardrails indicate that stimulus spending should be wound down by the end of fiscal year 2021-22. It appears to me that the rationale for the additional spending initially set aside as ‘stimulus’ no longer exists”.
The Parliamentary Budget Officer (PBO) today released his fiscal analysis of the Government’s proposal to reduce mortgage insurance premiums charged by the Canada Mortgage and Housing Corporation (CMHC).
“We estimate that the 25% decrease in CMHC’s mortgage insurance premiums will result in a net cost of $1.4 billion to the government over five years”, says Yves Giroux, PBO.
PBO also estimates that Canadian households will have a one-time average savings of $5,341 in 2022-2023.
If implemented, it is also expected that private sector insurers will also reduce their premiums to closely match those of the CMHC, given the structure of the mortgage insurance market.
The Parliamentary Budget Officer (PBO) today released his fiscal analysis of an independent cost estimate of the Government of Canada’s procurement of two new heavy icebreakers.
The Polar Icebreaker Project, initially launched by the Government of Canada in 2008, aims to replace the Canadian Coast Guard’s existing fleet of heavy icebreakers with two new heavy icebreakers built to modern specifications.
The last Government estimate dates to 2013, at which time the cost of procurement for one ship was estimated at $1.3 billion. The Government of Canada has not yet released an updated cost estimate.
“We estimate the total cost of the icebreaker project at $7.25 billion, inclusive of project management costs of $346 million, design costs of $820 million, and acquisition costs of $6.1 billion”, says Yves Giroux, PBO.
Based on the recent experience of the Government of Canada’s shipbuilding procurement initiatives to date, as well as competing priorities at the partner shipyards, PBO assumes that construction activities for the first of the two ships will begin within the 2023-2024 fiscal year, with the second beginning in the following fiscal year. Deliveries of these vessels are anticipated for 2029-2030 and 2030-2031, respectively.
“A sensitivity analysis suggests that delays of either one or two years in the start of the construction for both vessels at each partner shipyard would increase total project costs by $235 million or $472 million, respectively”, added Mr. Giroux.
The Parliamentary Budget Officer (PBO) will be offering election campaign proposal costing services for the 2021 election. The service, available to all recognized parties represented in the House of Commons as well as parties without official recognition, is being launched today and will enable Canadian voters to make informed choices when they go to the ballot box.
The Parliamentary Budget Officer (PBO) is preparing to provide costing services for campaign proposals for the 44th Canadian federal election. The election will mark the second time the PBO has offered this optional service since the Parliament of Canada Act was amended in 2017 to introduce a role for the PBO during federal elections.
The Parliamentary Budget Officer (PBO) today released his assessment of the cost for implementing House of Commons Motion-77, tabled by Mr. Paul Manly from the Green Party which proposes several changes to long-term care for seniors.
Changes proposed in Motion-77 include providing long-term care to all persons who need such care, requiring an average of four hours of care per resident per day, increasing spending on home care to 35% of public spending on long-term care and increasing average employee pay and benefits for private long-term care providers.
The PBO’s Cost Estimate for Motion 77: Improvements to Long-Term Care found that implementing these changes would require increasing public spending by $13.7 billion per year.
“We estimate that approximately 52,000 people are on wait lists for long-term care, including those in hospitals”, says Yves Giroux, PBO. “Meeting the needs would require a 26% increase in the number of long-term care beds in Canada at a cost of $3.1 billion.“
Motion 77 also includes an increase in average wages and benefits for persons providing long-term care in the private and non-for-profit sectors to $25/hour, which represents a 15% increase in hourly wages, at a cost of $1.1 billion.
In addition, this motion is intended to ensure that seniors in long-term care receive an average of at least four hours of direct care per day. According to Mr. Giroux, “This increase in the number of hours of care provided to residents in long-term care facilities would cost $4.3 billion per year.”
The final change proposed in Motion 77 would increase spending on home care to 35% of public spending on long-term care. To reach the motion’s target an additional $5.2 billion would have to be spent each year on home care.
The Parliamentary Budget Officer (PBO) today released his assessment of the long-term sustainability of government finances. The assessment reflects all measures in recent federal and provincial-territorial budgets.
The PBO’s Fiscal Sustainability Report 2021 finds that current fiscal policy, if maintained over the next 75 years, is not sustainable over the long term for the government sector as a whole. Increasing government indebtedness is primarily driven by the provincial-territorial sector, which will more than offset the fiscal flexibility at the federal level.
“Relative to the size of the Canadian economy, total net debt would ultimately rise above its initial level over the long term”, says Yves Giroux, PBO. “That being said, government indebtedness is projected to remain well below its peak observed over the last 30 years.”
Based on the PBO’s latest assessment, the federal government, and the provinces of Quebec, Nova Scotia, as well as Ontario, all have some fiscal room to increase spending or reduce taxes. Status quo fiscal policy is not sustainable in the remaining provinces and the Territories in light of the demographic projections.
The assessment identifies Canada’s ageing population as a key pressure for all provinces and territories. “Healthcare makes up a large share of provincial and territorial spending and it will continue to outpace growth in the economy as the population ages,” adds Mr. Giroux. “In most jurisdictions, the Canada Health Transfer will not keep pace with rising healthcare spending.”
According to Mr. Giroux, “Given their temporary nature, federal COVID-19 support measures do not have a material impact on long-term fiscal sustainability.” The estimate of federal fiscal room is effectively unchanged from the PBO’s November 2020 assessment and reflects an improvement in the medium-term outlook for nominal GDP and revenues.
The PBO’s Fiscal Sustainability Report is designed to identify whether changes in current fiscal policy are necessary to avoid unsustainable growth of government debt and estimate the magnitude of those changes using the fiscal gap.
The Parliamentary Budget Officer (PBO) today released his estimate, under various scenarios, of the cost of firearm compensation as part of the Government’s proposed firearm buy-back program.
The Parliamentary Budget Officer (PBO) today released his assessment of the impacts of the Government’s plan to exceed the 2030 target for Canada’s greenhouse gas emissions under the Paris Agreement.
The Parliamentary Budget Officer (PBO) today released his impact assessment of Budget 2021 measures.
The report extends the PBO’s previous assessment of Budget 2021 stimulus spending to include additional budgetary measures, as well as the potential monetary policy response. The report also provides a sensitivity analysis on the resulting post-budget scenario.
“We estimate that Budget 2021 measures will provide a temporary boost to real GDP growth in 2021 and 2022. By the end of 2025, we estimate that Budget 2021 measures will increase employment by 89,000 net new jobs,” says PBO Yves Giroux.
In the PBO’s assessment, monetary policy responds to the increase in economic activity and higher inflation, raising the policy rate by 50 basis points in the second half of 2022, relative to the PBO’s pre-budget outlook.
“Higher interest rates will dampen the stimulative impact of Budget 2021 measures. This means that government revenues will not increase to their full extent. The cost of servicing the Government’s existing debt will also be higher,” adds Mr. Giroux.
The PBO’s post-budget scenario does not include any new economic developments since the March pre-budget outlook. It reflects only the impacts of Budget 2021 measures relative to the PBO’s pre-budget outlook.
Under the PBO’s post-budget scenario, the budgetary deficit reaches $36 billion (1.2 % of GDP) in 2025-26 and the federal debt settles at 49.2 % of GDP in 2025-26.
To illustrate the uncertainty surrounding the post-budget scenario, the report presents distributions of possible future outcomes based on the past forecast performance of private sector economists in Finance’s Canada survey.
“Assuming no future policy actions, we estimate that there is only a 5% chance the budget will be balanced or in a surplus position in 2025-26. We also estimate that there is a 35% chance the federal debt ratio in 2025-26 will be above its 2021-22 level of 51.3% of GDP,” says PBO Yves Giroux.
The Parliamentary Budget Officer (PBO) today released an analysis of the Canada Infrastructure Bank’s (CIB) spending and investment commitments since its inception in 2017 as part of the Government’s $187.8 billion Investing in Canada Plan.
The Parliamentary Budget Officer (PBO) today released his pre-budget outlook. The report incorporates fiscal measures announced by the federal government in its Fall Economic Statement, except for the $70-to-$100 billion earmarked for stimulus spending.
Based on current policy, the PBO projects economic growth of 5.6% in 2021 and 3.7% in 2022, up by almost a full percentage point in both years compared to the September 2020 outlook.
Before any Budget 2021 measures, budgetary deficits for 2020-21 and 2021-22 would amount to $363.4 billion and $121.1 billion, respectively (or 16.5% and 5.0% of GDP). The federal debt-to-GDP ratio would rise to 49.8 per cent of GDP in 2021-22 and then gradually decline to 45.8 per cent of GDP in 2025-26.
“The improved outlook reflects higher commodity prices, a stronger U.S. recovery and the earlier-than-expected arrival of effective vaccines,” says PBO Yves Giroux. “We project employment to reach its pre-pandemic level by the end of 2021 and the unemployment rate to decline steadily through 2022.”
Compared to the PBO’s pre-crisis outlook, the projected level of nominal GDP is essentially unchanged over 2022 to 2025. This rebound in the Government’s tax base effectively returns budgetary revenues to their pre-pandemic path.
Setting aside the Government’s earmarked stimulus and potential Budget 2021 measures, the risks to the improved outlook are roughly balanced.
“However, the Government’s $70 to $100 billion earmark for stimulus spending and potential budget measures pose an upside risk to our economic outlook and will increase the deficit,” adds Mr. Giroux.
According to Mr. Giroux, “Should measures in the upcoming budget translate into new permanent programs that are deficit financed, the sustainable debt-to-GDP trajectory we project over the medium- and long-term could be reversed.”
The Parliamentary Budget Officer (PBO) today released an updated cost estimate of the Canadian Surface Combatant (CSC) program. This report was prepared in response to a request from the House of Commons Standing Committee on Government Operations and Estimates (OGGO).
The report, The Cost of Canada’s Surface Combatants: 2021 Update and Options Analysis, examines the cost of the existing CSC program, which is intended to replace both the current fleet of Halifax-class frigates and three decommissioned Iroquois-class destroyers with a new fleet of 15 warships, based on the Type 26 ship design.
“We estimate the fleet of new ships, based on the Type 26 design, will cost $77.3 billion to build”, said Yves Giroux, PBO. “A one-year delay would increase that cost to $79.7 billion, and a two-year delay would see the cost rise to $82.1 billion.”
The PBO’s latest cost estimate to build the Type 26 ships shows an increase of $7.5 billion over his 2019 estimate due to updates in the ship’s specifications and production timelines.
The report also presents a cost analysis of two other ship designs: the FREMM European multi-mission frigate and the Type 31e, a class of general-purpose frigates planned for the United Kingdom’s Royal Navy.
The cost of acquiring 15 FREMM ships is estimated at $71.1 billion, while the cost of a fleet of 15 ships based on the Type 31e design is estimated at $27.5 billion. These estimates are inclusive of cancellation costs, running a new competitive design selection process, and an additional four-year delay in the start of construction. It is important to note that these ships have different characteristics and capabilities.
The report also considers the cost of a mixed fleet: three of the Type 26 ships and 12 ships of either of the alternate designs. Under this scenario the costs increase to $71.9 billion for the mixed FREMM fleet, and $37.5 billion for the mixed Type 31e fleet.
The Parliamentary Budget Officer (PBO) today released an independent analysis of the federal government’s spending to address Indigenous housing needs in urban, rural and northern areas. This report was prepared in response to a request from the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities (HUMA).
The report, Urban, Rural, and Northern Indigenous Housing, examines Indigenous housing in all areas of Canada except for on reserves.
Canada has 677,000 Indigenous households living in urban, rural or northern areas. Of those households, 124,000 (18%) are in housing need.
“After accounting for the impact of current programs, there remains a $636 million annual gap between what Indigenous households in urban, rural and northern areas can afford to pay for adequate shelter, and the cost of obtaining it”, said Yves Giroux, PBO.
Canada’s federal government has explicitly allocated $179 million per year to address Indigenous housing over the 10-year term of Canada’s National Housing Strategy. Federal transfers also contribute to the capacity of provinces and territories to provide housing support to Indigenous households.