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Before the release of the federal 2023 Fall Economic Statement, we laid out a framework for grading it. We hoped for transparency about the government’s finances, frankness about the economic and fiscal challenges, and a halt to populist tax measures. Sadly, the Statement presented by Finance Minister Chrystia Freeland falls short — often far short — on all these priorities.

Our overall grade for the 2023 Fall Statement is a D. It puts dozens of pages of political messaging ahead of the key numbers, avoids the serious challenges that require major shifts in policy and prefigures more of the same fiscal measures that have led to our current plight.

Our grading framework started with a simple request: Cut the spin and give us the facts. While the Statement did provide some summary economic and fiscal information up front, the key numbers are not even in the body of the document. Readers who want the core information in a fall update — what is happening to current and projected revenues and expenses, for example — must scroll all the way down to page 74, in an appendix. For that, we award a C — which is generous.

We then turned to irregularities in accounting and the budget process. On that front, the Statement made no progress. The government continues to exclude billions of dollars in pension costs from its main tally of expenses. The Statement says nothing about reconciling the presentations in its budgets with the estimates on which members of parliament vote in order to authorize spending on specific programs. Nor does the Statement commit to release the 2024 budget before the start of the 2024/25 fiscal year. Parliamentarians still won’t be able to scrutinize spending plans before approving them. On these criteria, the government gets an F.

We hoped the Statement would provide a straightforward picture of the government’s management of the bottom line. Instead, we got spin. The Statement emphasizes other countries’ bad numbers and its own projections’ good numbers but does not acknowledge that Canada’s economy is operating at capacity, which means the federal budget should be balanced or better, not heading for $40-billion deficits next year and the year after. For that, we award a D.

Canada needs a credible path to federal fiscal sustainability. At different times the government has set out various anchors, indicators and “guardrails,” but when its actual behaviour went offside, it has either switched metrics or simply ignored them. Its current definition of success is a declining ratio of net debt to gross domestic product. Yet the Statement shows the debt-to-GDP ratio rising both this year and next. By 2028/29, its projections show, the ratio will be 39.1 percent, up from 32.1 per cent before the pandemic, and higher than at any time since 2003/04. The Statement projects public debt charges at above 10 per cent of revenue in the current fiscal year and every subsequent year through 2028/29. This is not good enough. Another D.

The Statement should have acknowledged Canada’s economic and fiscal challenges and laid out credible plans to address them. Productivity is stagnant and the stock of business capital per worker is falling. The OECD has pegged Canada’s prospects for long-term growth in GDP per capita as the worst among developed countries. The Statement projects high federal debt for years to come — yet we know more spending, not yet included in the projections, is coming. None of these realities is reflected in the rhetoric of the Statement. Yet another D.

The Statement should have said at least something about the conflict between the government’s professed concern about unaffordable housing and its immigration policies. Canada has neither the economic nor administrative capacity to admit 500,000 new permanent residents every year along with an unprecedented influx of temporary workers and students. The Statement’s many initiatives related to housing come nowhere close to what would accommodate the increase in population it is promoting. D again.

We have seen too many populist tax measures — some punitive, like the luxury tax on cars, boats and airplanes, or the surtax on financial institutions, others targeted to specific voters, like exempting heating oil from the carbon tax. These measures distort activity and undermine confidence in the tax system. The Statement does nothing to help — indeed, it pokes another hole in a system already resembling Swiss cheese by removing the GST/HST from psychotherapy. In that area, we also award a D.

The 2024/25 fiscal year begins next April 1st. The federal government should deliver its 2024 budget well before that — no later than the end of February. That budget should put the key fiscal numbers up front, lay out the challenges clearly and commit to measures that will promote investment, productivity and rising living standards. Canada badly needs a budget that merits a better grade than the D appropriate to its 2023 Fall Economic Statement.

Don Drummond is a Stauffer-Dunning Fellow at Queen’s University and a fellow-in-residence at the C.D. Howe Institute, where William Robson is CEO.

Published in the Financial Post