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.
Fiscal transparency
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.
Fiscal guardrails
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”.
