Federal finances sustainable over the long term—but most provinces and territories are not, says PBO

February 27, 2020, OTTAWA – The Parliamentary Budget Officer (PBO) today released his latest assessment of the long-term sustainability of government finances.

Fiscal Sustainability Report 2020 finds that current fiscal policy is sustainable over the long term for the government sector as a whole.

Based on the PBO’s assessment, the federal government, and the provinces of Quebec, Nova Scotia, as well as Ontario all have the fiscal flexibility to increase spending or to reduce taxes. Current fiscal policy in British Columbia is also sustainable over the long term.  Federal transfers play an important role in the fiscal sustainability of provinces and territories.

“While there has been significant improvement at the provincial level,” says Yves Giroux, PBO, “the public finances of most provinces and the territories are not sustainable under current policies. Permanent tax increases or spending reductions would be required to put these provinces and territories on a sustainable path.”

The report 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 these costs will continue to rise as the population ages,” adds Mr. Giroux. “We project that the Canada Health Transfer will not keep pace with the rising health costs in most provinces.”

The Fiscal Sustainability Report 2020 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.