NEWS

Wireless spectrum auction profit already counted toward deficit

03/05/2015 06:08 EST | Updated 05/05/2015 05:59 EDT
The final tally isn’t yet known, but Industry Minister James Moore on Friday is expected to announce the government has netted between $3 billion and $4 billion in the latest auction of wireless spectrum.

Although all of that money will be in the government’s coffers before the end of April, it will be of little help to Finance Minister Joe Oliver as he continues the difficult task of presenting a 2015 federal budget that is both balanced and believable.

The spectrum licences being auctioned off are good for 10 years, and the government is accounting for the revenue over the lifetime of the licences.

In other words, when it comes applying this income toward the bottom line, it will count for only $300 million to $400 million a year for the next decade.

What’s more, as this auction and a subsequent one planned for April have been in the works for a long time, the government has already factored in this revenue when presenting the 2014 budget and the fiscal and economic update this past November.

In its planning assumptions, the government is counting on a total of $1.5-billion in 2015-16 from the proceeds of the sale of government assets — including the spectrum auction.

As of November, only $300 million had been applied toward that line item — much of that coming from the last spectrum auction that brought in $5.3 billion and is being spread over the 20-year life of the licences that went with that batch.

Can't be double counted

All of this means that this and the next round of spectrum auction results, while welcome revenue, will do nothing to alleviate the tight spot the government finds itself in.

To balance the budget this year — as has been promised by the government since the last election and reiterated as recently as Monday by Prime Minister Stephen Harper — Conservatives are contending with expensive tax breaks and much lower than expected oil revenues.

In January, Oliver announced he was delaying the budget until at least April; although there is no formal rule, budgets are normally delivered in February or March.

The stated reason was to allow time for the markets to become more "stable" after the sudden fall in the price of oil in the last part of 2014 and early 2015 — most observers agree the government was biding its time in hope the price of oil would recover and bolster government revenues.

Economists and the Parliamentary Budget Office agree the government will likely be in a position to table a balanced budget — but there is very little room to manoeuvre or deal with the unexpected.

In this scenario, any little bit of unexpected revenue could be a big help.

Unfortunately for the government, the money to be raised by the wireless spectrum action has long been expected — and already counted.

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