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Budget 2018: Issues for Parliamentarians.pdf
To assist parliamentarians in their budget deliberations, this report highlights key issues arising from Budget 2018.
The Government’s fiscal anchors
Despite commitments made in the Minister of Finance’s mandate letter and in Budget 2016, the Government has not explicitly mentioned its fiscal anchors of balancing the budget and continuing to reduce the federal debt-to-GDP ratio in subsequent Fall Economic Statements or budgets, including Budget 2018.
Parliamentarians may wish to seek additional clarity regarding the Government’s fiscal anchors and its Budget 2016 commitment to set a timeline to balance the budget.
Direct program expenses
The Government revised down its status quo forecast for direct program expenses by an average of $2.7 billion per year over 2017-18 to 2022-23. Budget 2018 lists several factors that contributed to this sizeable revision; however, the budget does not provide sufficient detail to reconcile the contributions of these factors to the $2.7 billion forecast revision.
Given the materiality of this revision, parliamentarians may wish to request that Finance Canada begin to publish greater detail on the contributions to status quo forecast revisions for direct program expenses in future budgets and Fall Economic Statements.
Budget 2018 provides an incomplete account of the changes to the Government’s $186.7 billion infrastructure spending plan. PBO requested the new plan but it does not exist. Roughly one-quarter of the funding allocated for infrastructure from 2016-17 to 2018-19 will lapse. Both legacy and new infrastructure programs are prone to large lapses.
Parliamentarians may wish to request more detail on plans to avoid further implementation delays, project-level progress updates and periodic updates of the Government’s entire $186.7 billion infrastructure plan.
In June 2017, the Government published Strong, Secure and Engaged: Canada’s Defence Policy (SSE), including a 20-year plan for the Department of National Defence’s operating and capital budget. This data has not been publicly reconciled to the Government’s fiscal outlook.
Parliamentarians may wish to request reconciliation between the SSE framework and Budget 2018 forecasts as is provided for other spending categories.
Budget and Estimates alignment
Budget 2018 includes, for the first time, detailed supplementary tables which link measures announced in the budget with the planned estimates for the 2018-19 fiscal year. Finance Canada’s improvements are a step in the right direction to improve Parliament’s ability to effectively scrutinize the Government’s spending plans. However, it does not guarantee that all of the issues have been addressed.
As noted in previous PBO reports, the Treasury Board of Canada Secretariat has not yet shown the ability to include all budget measures in the Estimates documents for that year. In recent Estimates, there is a gap between spending identified in the budget and the results departments expect to achieve.
Potential real GDP
Budget 2018 presents estimates of U.S. potential real GDP from the Congressional Budget Office to assess U.S. economic performance. Potential real GDP is a measure of the sustainable productive capacity of an economy.
Given the importance of potential real GDP for assessing economic performance, as well as the uncertainty surrounding estimates of potential real GDP, parliamentarians may wish to request that Finance Canada publish its own estimates of potential real GDP for the Canadian economy. This would help to inform them about the Government’s view of Canada’s economic performance (for example, whether the economy is operating above or below its potential).