May 10, 2018 – Over the past 15 years, Canada’s federal, provincial, and territorial governments have regularly missed budget spending and revenue targets, with spending overshoots of $69 billion combined. The new report from the C.D. Howe Institute, “Blown Budgets: Canada’s Senior Governments Need Better Fiscal Controls,” reveals a consistent lack of fiscal accountability by Canada’s senior governments.
Authors William B.P. Robson and Farah Omran compare the expenses and revenues projected in the budgets of Canada’s senior governments at the beginning of the year with the results reported in their public accounts after the end of the year. This comparison highlights persistent spending overshoots, as well as a cumulative revenue overshoot adding up to $104 billion – much more tax collected than prefigured in budgets.
“Canadian governments miss their targets in predictable ways: expenses and revenue typically come in above what the budgets promised,” said Robson. “Had they delivered on the past budget commitments, Canadians would now enjoy lower taxes and smaller governments.”
Expenses
Ottawa’s average overshoot of 0.5 percent annually makes it the best – that is, the least bad over-spender – among the 14 governments. Ontario and Nova Scotia come second at 0.7 percent, followed by Quebec and New Brunswick with average overshoots of 1 percent. Saskatchewan and Alberta had the largest overshoots – 3.4 and 3.9 percent – among the provinces. Yukon and Nunavut – with average overshoots of 5.5 and 5.7 percent – had the worst records of all.
The Institute’s annual Pinocchio index further details the cumulative spending overshoots.
Revenues
Ontario was the only jurisdiction to undershoot its revenue projections over the period. Ottawa, Nova Scotia, New Brunswick and PEI had the smallest overshoots: 0.8 percent or less annually. Not surprisingly, provinces more dependent on natural resource revenues overshot by more: Alberta, Saskatchewan, and Newfoundland and Labrador were the worst.
While Canada’s senior governments have improved their stewardship of public money during the past 15 years, their tendency to overshoot most of the time is a concern, as is an annual pattern of spending “surprises” that coincide with revenue “surprises” – suggesting that governments are spending windfalls and managing their bottom lines. The authors recommend several steps to improve fiscal controls of public finances at the federal, provincial and territorial level.
- More timely estimates presented in the context of the government’s fiscal plan;
- Stronger role for legislative committees that authorize spending;
- Faster and more frequent publication of actual results.
“Control of public funds in Canada is looser than it should be,” said Omran. “Senior governments should improve the quality of their budget forecasts and their adherence to those forecasts, and legislators and voters should hold them accountable for doing so.”
Click here for the full report.
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.
For more information, contact: William B.P. Robson, President and CEO, or Maria Mikey, Communications Coordinator at the C.D. Howe Institute, at 416-865-1904 or mmikey@cdhowe.org.