OTTAWA — The federal budget watchdog says the Liberals' inaugural fiscal plan was less transparent than those of past governments, making it tougher for people to assess the state of the public books.
A new report Wednesday by the parliamentary budget office said last month's federal budget failed to separate purely discretionary decisions by the Liberals — like new policy measures and changes in planning assumptions — from shifts in economic conditions, as past governments did.
"The government has made changes to the presentation of its fiscal plan that have made it more difficult for parliamentarians to scrutinize public finances," said the analysis by budget officer Jean-Denis Frechette.
Prime Minister Justin Trudeau and Finance Minister Bill Morneau speak to media during a post-budget press conference in Ottawa on Wednesday, March 22, 2016. (Photo: Jake Wright/CP)
The report came weeks after the Liberals tabled a budget projecting five years of deficits totalling more than $110 billion. The analysis said the government could have provided more clarity for the public in several areas.
Among Frechette's concerns, he questioned the Liberal decision to introduce a risk adjustment that lowered annual forecasts for nominal gross domestic product by $40 billion — a move that translated into knocking $6 billion a year off the projected budgetary balance.
He called the size of the adjustment "excessive" and said it eroded the independence of government's traditional practice of basing its projections on an average of private-sector economic forecasts.
Trudeau defends adjustment
In fact, the report said, in past years actual nominal GDP outcomes have typically exceeded their forecasts.
That $6-billion annual cushion has lowered fiscal forecasts to the point they could ultimately help the government reap political rewards by beating expectations.
Asked Wednesday about this criticism, Prime Minister Justin Trudeau argued that in recent years expert predictions missed the mark for nominal GDP by about $40 billion.
"It's been three or four years that every time they make predictions for the economy, they later say, 'Oh, we were wrong, it's going worse than we thought'," Trudeau said in French at a news conference in Montreal.
"So, instead of continuing to make these same errors and to allow these same errors, we say let's adjust it right away...
"It's by the desire of transparency and openness and veracity that we took this approach and it's an approach, by the way, that was applauded by economists and by the experts."
Watchdog not sold on impact of shortfalls
Trudeau has repeatedly insisted that running a string of annual budget shortfalls will enable the government to invest in the economy to boost long-term growth and create jobs.
But the budget office's analysis predicts a more-modest impact than the Liberals expect.
The Liberal budget projected near-term government investments — especially in infrastructure and tax relief for middle- and low-income households — to generate 0.5 per cent growth this year and one per cent in 2017-18. The plan also predicted the measures would create or maintain 143,000 jobs over the next two years.
The report said the measures are poised to create or maintain 86,000 jobs over the next two years, while boosting growth by 0.5 per cent this year and 0.8 per cent in 2017-18.
Frechette's report also noted that the Liberal budget shortened the traditional time horizon for detailed government cost estimates to two years from five.
"While uncertainty surrounds cost estimates, particularly five years into the future, a medium-term horizon is required to more fully assess the evolution of program costs," the report said.
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The Liberal government delivered its maiden budget Tuesday, March 22. A deficit of $29.4 billion in 2016-17, nearly three times the $10 billion promised during the fall election campaign, and a projected deficit of $17.7 billion in 2019-20 rather than the balanced budget that was promised in October. (Source: The Canadian Press)
One of the earmarks of the budget is a commitment to spending on aboriginal issues. This includes: - $2.6 billion over five years for primary and secondary education on First Nations reserves, including language and cultural programs, plus $969.4 million over five years for education infrastructure. - $1.2 billion over five years for social infrastructure for Aboriginal Peoples, including First Nations, Inuit and northern communities. - $10.4 million over three years for new women's shelters in First Nations communities, and $33.6 million over five years and $8.3 million ongoing for support services. - $40 million over two years for the inquiry into missing and murdered aboriginal women and girls. Read more here (Source: The Canadian Press)
The Liberals will be changing the structure of Canada's child benefits, ending income splitting and other tax credits for families and parents. This means: - $10 billion more over two years for a new Canada child benefit, absorbing and replacing both the Canada child tax benefit and the universal child care benefit. Targeted to low and middle-income families, the government says the new benefit provides an average increase of nearly $2,300 in 2016-17. - An end to income splitting for couples with children, the children's fitness tax credit and the children's arts tax credit. Read more here (Source: The Canadian Press)
The government will spend $2.5 billion over two years on a suite of changes, including reducing the required work experience for new entrants and re-entrants; halving the two-week waiting period; extending a pilot project to allow claimants to work while collecting benefits; simplifying job-search requirements; and extending the benefit eligibility window in specific regions with a higher unemployment rate. (Source: The Canadian Press)
- $5.6 billion more in benefits to veterans and their families over five years, including a disability award that increases to $360,000, retroactive to 2006, and an earnings loss benefit to injured vets of 90 per cent of pre-release salary. The government is also re-opening nine veterans' service offices across the country and adding a 10th. - Planned National Defence purchases worth $3.7 billion — ships, planes and vehicles — are being deferred indefinitely. Read more here (Source: The Canadian Press)
Planned National Defence purchases worth $3.7 billion — ships, planes and vehicles — are being deferred indefinitely. Read more here (Source: The Canadian Press)
The budget includes $3.4 billion over five years to increase the guaranteed income supplement top-up benefit by up to $947 annually for single seniors, and restore the old age security eligibility age to 65 from 67. Read more here (Source: The Canadian Press)
The Liberals broke a major campaign promise to cut the small business tax rate. Instead, the rate will remain at the current 10.5 per cent on the first $500,000 of active business income. Read more here (Source: The Canadian Press)
The Liberals will spend $1.53 billion over five years to increase Canada student grants to $3,000 from $2,000 for low-income students, to $1,200 from $800 for middle-income students and to $1,800 from $1,200 for part-time students. $2 billion over three years is also earmarked for a new strategic investment fund for infrastructure improvements at colleges and universities, in partnership with provinces and territories.
The Liberals' green infrastructure plan includes: - $2.2 billion over five years in water and wastewater treatment and waste management - $2 billion over two years for a low-carbon economy fund - Over $1 billion over four years to support future clean technology investments - $345.3 million over five years to Environment and Climate Change Canada, Health Canada and the National Research Council to take action to address air pollution. (Source: The Canadian Press)
The Liberals will spend $500,000 to help understand the role of foreign homebuyers in the country's housing market. The government says comprehensive and reliable data on the number of homes sold to foreign buyers does not exist right now. Read more here. (Source: The Canadian Press)
The marquee Liberal commitment to Syrian refugee resettlement could end up costing taxpayers close to $1 billion. The budget provided an additional $245 million over five years to bring in the remaining 10,000 people needed to meet the Liberal promise to resettle 25,000 Syrian refugees by the end of 2016. Read more here (Source: The Canadian Press)
$142.3 million over five years will be spent to add new national parks and improve access during the 150th anniversary of Confederation. (Source: The Canadian Press
The Grits will provide up to $178 million over two years for the provinces for urgent affordable housing needs. Read more here (Source: The Canadian Press)
The budget earmarks $38.5 million over two years to strengthen and modernize Canada's food safety system. (Source: The Canadian Press)