Canada's Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland walk holding the 2023-24 budget, on Parliament Hill in Ottawa, on March 28.PATRICK DOYLE/Reuters
The federal Liberals have gone to some length to position the budget tabled on Tuesday as a document of fiscal restraint, touting plans to constrain the cost of government through wide-ranging spending reviews.
The budget points to $15.6-billion in savings, a declining deficit and an easing of the debt burden relative to the economy. Indeed, Finance Minister Chrystia Freeland described Tuesday’s budget, her third, as an effort in line with Canada’s “proud tradition of fiscal responsibility.”
That is all a fiscal fantasy: the Liberal budget is built on a cloud of sleight-of-hand projections and the hope that Canadians are suffering from collective amnesia.
To start with, more than half of the savings touted by the Liberals were announced in last year’s budget, with a review to find and reallocate $9-billion in spending through to fiscal 2027-28. This year’s budget merely fills in some details.
And the government’s austerity measures are exceptionally unambitious. Spending on travel and consulting is to decline by 15 per cent – but that is only discretionary spending rather than the entire budget line. And the full savings don’t kick in until two years from now.
Even worse, the second part of the Liberals’ fiscal restraint efforts, a 3-per-cent reduction in “eligible” spending, will deliver savings of exactly $0.00 in the coming fiscal year.
The remainder of the so-called savings come from reallocating $6.38-billion in previously announced budget measures that, somehow, the government was unable to spend. Rather than taking the smallest step toward fiscal prudence – simply not spending that money – the Liberals have instead chosen to roll those funds into future budgets, with the added temerity of touting that as proof of “effective government.”
The Liberals are projecting what looks like a significant cut in real terms in the operating expenses of government, with such expenses dropping from $131.4-billion in the current fiscal year to $119.9-billion three years hence, in fiscal 2026.
Prudence incarnate, yes? No, not if one flips through last year’s budget, when operating expenses for fiscal 2026 were projected at $113.8-billion – or in the budget before that, with forecasted operating expenses of $110.1-billion for that fiscal year. In reality, the government is larding on another $10-billion from what it foresaw just two years ago.
Sustaining the fantasy of Liberal prudence depends on Canadians acting like memory-challenged goldfish, forever surprised by each turn of the fiscal cycle.
It’s a similar story with this government’s deficit projections. This year’s budget predicts a steady decline in the deficit, dropping from $43-billion this year to $14-billion in fiscal 2028. That might be of some solace for Canadians worried about fiscal sustainability, except for the fact that last year’s fall economic statement laid out a path to a modest $4.5-billion surplus in fiscal 2028.
Rather than adjust priorities and staying on that plausibly prudent path, the Liberals have – yet again – chosen to simply spend more. It’s not a habit they plan to break any time soon. When asked what the government would do if looming public-sector wage settlements turn out to be richer than expected, the response boiled down to: We’ll add it to the deficit.
It’s not as if the government has not had ample manoeuvring room. Revenue in the coming fiscal year is a stunning $60-billion higher than what Ms. Freeland forecast in her debut budget in 2021.
If the Liberals had simply stuck with their 2021 spending plans – which were none too tightfisted – they would have tabled a surplus in the neighbourhood of $11-billion for the coming fiscal year. Instead, the Liberals have managed to spend cash even faster than it has flooded into federal coffers.
But the fastest growing expenditure is one that did not rate a mention in the Finance Minister’s speech, or its own bold-faced chapter title in the budget: the cost of Canada’s mounting public debt under the Liberals.
Public debt charges were $24.4-billion in fiscal 2019-20, and dropped even lower the next year as interest rates were slashed in the early weeks of the pandemic. For the coming fiscal year, however, debt charges will surge to $43.9-billion and continue to climb to $50.3-billion in fiscal 2028, more than doubling in eight years.
That number is a stark reminder of the consequences of a government failing to make responsible choices, failing to stick with its own more prudent plans, and failing to respect the tradition of fiscal responsibility that Ms. Freeland touts.