Parliamentary Budget Officer Yves Giroux waits to appear before a standing committee at the Senate in June, 2024.Spencer Colby/The Canadian Press
The Parliamentary Budget Officer says his office can’t assess the federal government’s pledge to balance the so-called operating budget because Ottawa has not yet provided “a clear definition” of how this category of spending will be measured.
Yves Giroux’s statement accompanied the Thursday release of a new PBO report that updates forecasts for fiscal and economic trends.
Prime Minister Mark Carney’s minority Liberal government said in last month’s Speech From the Throne that it “will balance its operating budget over the next three years by cutting waste, capping the public service, ending duplication, and deploying technology to improve public sector productivity.”
The speech echoed a pledge from the Liberal Party’s election platform, and both also said that the government’s operating budget, which the Throne Speech refers to as “day-to-day government spending,” has been growing by 9 per cent every year. The speech said Ottawa will introduce measures to bring it below 2 per cent.
The Finance Department told The Globe and Mail in late May that the 9-per-cent figure is a reference to growth in a category of spending called direct program spending, which amounted to $236-billion in the 2023-24 fiscal year. Total federal expenses that year were $521-billion.
The Liberal platform said the deficit in the operating balance would decline to a surplus of $222-million by 2028-29 from $9.2-billion in the current fiscal year.
The platform also outlined projections for the deficit, as it has historically been measured, that are larger than the government had previously forecasted in the December economic and fiscal update.
According to the platform, the Liberals projected a $62.3-billion deficit for the current fiscal year that began April 1. Mr. Giroux’s report Thursday does not provide a new estimate for this year’s deficit, but he told a Senate committee earlier this week that it is likely to be larger in light of the government’s recent announcement to spend $9.3-billion more this year on defence.
The PBO report does revise the PBO’s projected deficit for the fiscal year that ended March 31, at $46-billion. That’s $4.3-billion lower than the PBO’s most recent projection in March and $2.3-billion lower than what the government projected in the 2024 fall economic statement.
The report attributes this change to higher tax revenue because of economic growth that was stronger than projected.
In the report, the PBO pointed out that focusing on balancing the operating budget would not necessarily mean that federal finances would be placed on a sustainable path.
“PBO also notes that the government could fulfill its operating budget goals, and yet at the same time the federal debt-to-GDP ratio could grow because of additional borrowing for non-operating spending,” the report states, pointing to military spending as an example.
“This means that the Government could achieve its fiscal objective and yet be fiscally unsustainable. Parliamentarians may wish to seek additional clarity regarding how the Government plans to measure its fiscal anchor and how it will ensure federal finances remain sustainable.”
Conservative MP Sandra Cobena raised the PBO’s report Thursday in Question Period, accusing the government of leaving Parliament’s fiscal watchdog “in the dark” about the state of Ottawa’s spending plans.
“There is no private sector discipline here, only secrecy, broken promises and no budget,” she said.
Liberal MP Wayne Long, the Secretary of State for the Canada Revenue Agency and Financial Institutions, did not directly address the PBO’s concerns in his response to the Conservative criticism.
Finance Department deputy spokesperson Marie-France Faucher said Thursday in an e-mail that details related to the government’s new budgeting approach “will be released in due course.”