October 1, 2020 – Canada’s federal, provincial and territorial governments have spent a combined total of $97 billion more than they promised in their budgets since 2000, a figure set to worsen with the advent of the COVID-19 pandemic, according to a new C.D. Howe Institute report.
In “Busted Budgets: Canada’s Senior Governments Can’t Stick to Their Fiscal Plans,” authors William B.P. Robson and Farah Omran note that since 2000, Canada’s senior governments have spent $97 billion – some $2,600 per Canadian – more than they budgeted and raised $161 billion more in revenues – around $4,300 per Canadian.
This annual comparison of governments’ budget targets with what they actually ended up spending and raising at year-end shows governments went into the COVID-19 crisis spending far more, and taxing far more heavily, than they would have if they had met their budget promises over the past two decades.
In measuring how accurately these governments hit their budgeted expenses over the period studied, Quebec and Ontario seem to perform the best with an average of 1.4 percent deviation from their year-end actual expenses. New Brunswick and Nova Scotia were not far behind with a 1.7 percent deviation. The federal government’s 2.6 percent deviation puts it in the middle of the pack. Alberta’s and Saskatchewan’s expense targets were the least reliable among the provinces, with deviations of 4.4 percent and 4.3 percent, respectively, while those of Nunavut (5.4 percent) and Yukon (5.6 percent) were the worst of all.
“With the COVID-19 crisis having driven Canada’s senior governments so deeply into the red that their future capacity to deliver services is in doubt, more reliable budget targets and better adherence to those targets is vital,” said Robson. “Legislators and voters should ensure that budgets and results align better in the future.”
The authors note that leading up to the COVID-19 crisis, the chronic overshoots of Canada’s senior governments were becoming less serious. They recommend a number of measures to further and strengthen this improvement in fiscal accountability:
- Governments should give legislators better information, particularly when it comes to the estimates that authorize specific expenditures;
- Legislators must ensure that contingency reserves do not become slush funds to cover spending that would not otherwise pass inspection;
- Interim and final results should be timely: a government that wants to achieve its fiscal targets in the face of unexpected developments needs timely operational and financial information to adjust course;
- Governments should stay fiscally healthy: deficit and debt concerns create temptations to massage the numbers to achieve a bottom line target.
For more information contact: Farah Omran, Policy Analyst; Alexandre Laurin, Director of Research; or David Blackwood, Communications Officer, C.D. Howe Institute, phone 416-873-6168, email: firstname.lastname@example.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.