Surprise! Ottawa’s $13 billion surplus

The Annual Financial Report for the Government of Canada, fiscal year 2005/06, was released today, along with the updated Fiscal Reference Tables.

Before getting to the numbers, let me rant for a moment on how astonishing it is to see the cover of the Annual Financial Report, freshly downloaded from the Department of Finance, sporting Tory blue, along with the words “Canada’s New Government: Turning a New Leaf.” First of all, this is a bureaucratic report at fiscal year’s end full of numbers about our national finances – to see the Tories politicize it in this way makes me grumpy. Second, the report covers the fiscal year ending March 31, 2006, so the Tories were in power for only a small fraction of the time period represented by the report but are seeking to take credit for the surplus.

If anything the report cover ought to be Liberal red because, true to form, all of those pre-budget claims that the cupboard was bare ended up being so much hot air. The 2005 Budget was tabled as a balanced budget with $4 billion being held in check as “prudence”, the minimum surplus unless the economy went off the rails, which is a clear bias in the direction of debt reduction (more grumpiness: we have to wade in to page 258 before finding a table looking anything close to what one call a “budget” after page after page of public relations spin).

So they were off by $9 billion if we start with that $4 billion in contingency. But there’s more: the NDP pressed the minority Liberals to live up to their rhetoric and so they added another $4 billion in spending before the budget got passed (flashback to Belinda crossing the floor and corporate Canada freaking out). Thus, the original budget balance of zero was off by $17 billion. That’s Liberal budgeting for you.

The $13.2 billion surplus – the third highest ever – now goes to debt repayment, which I recall was not much of a priority for anyone. Our federal debt now stands at $481.5 billion, which sounds like a large number but is 35% of GDP, its lowest level since 1981/82. The point is that debt reduction has precluded other choices that could have been made, essentially taking those options off the table by hiding money in lowballed revenues.

Program expenditures in 2005/06, at 12.8% of GDP, were close to post-war lows of 12.1% recorded in each of 1999/00 and 2000/01. So it is not that we do not have the money to address pressing issues like homelessness, poverty and traffic congestion; we are just choosing not to do anything.

The story of “unexpected” surpluses is not a new one; this is just the latest chapter. Perhaps Canada needs some kind of independent fiscal forcasting entity that could depoliticize things and allow for a fuller democratic debate about how we allocate our budgets.