Brace for more spending, rising deficits in coming budget: experts

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OTTAWA — Don’t expect any belt tightening.

As the federal government prepares to release the Mark Carney Liberal government’s second budget in two weeks, David-Alexandre Brassard — chief economist with Chartered Professional Accountants of Canada (CPA Canada) told the Toronto Sun he doesn’t anticipate much in the way of cost-cutting.

“I’m expecting new spending, a bit of a lack of fiscal constraint,” he said.

Budget coming Nov. 5

While the federal government traditionally tabled budgets in the spring, last year’s budget was the first in a permanent restructuring of the federal government’s annual fiscal cycle, with budgets now arriving in the fall.

That change also shifts the government’s customary fall economic statements to the spring.

The new schedule allows fiscal planning to be based directly on audited public accounts from the previous fiscal year, rather than partial financial information.

Fall budgets also allow major spending plans to be easily integrated into the Main Estimates — the government’s formal spending requests to Parliament — before the start of the fiscal year.

New spending, little restraint

Brassard told the Sun he’s expecting new spending and little restraint, noting that every budget and fiscal update from the Carney government so far has featured new big spending commitments.

“The government did a comprehensive spending review, and the end result is that spending will grow by 2.8% over the next five years,” he said. “Every single year over the next five years, so not exactly that constraining, to be honest.”

The deficit currently sits at around 2.1% of GDP, Brassard said — a hefty sum for an economy not in recession.

Interest on Canada’s debt remains the fastest-growing line on federal spreadsheets, Brassard said, noting that interest costs has doubled over the past five years and is on track to cost every Canadian $2,000 by the end of the 2030 fiscal year.

“Debt should not be growing faster than the economy outside of a deep recession,” he said.

Among the asks coming from CPA Canada are commitments towards a declining debt-to-GDP ratio, a real path towards returning to balanced budgets and reporting that ties government spending to results — but Brassard isn’t optimistic.

“We’re going to have rising deficits,” he said. “We’re going to have a government that congratulates itself on not being as bad as the U.S.”

Tax system needs a re-think

Ryan Minor, CPA Canada’s tax director, told the Sun he expects to see new measures to bolster Canada’s lagging productivity and weak business investment, but he’s heard of no leaks regarding specific changes to taxation.

He said a full review of Canada’s tax system — which he said has been patched together since 1917 — would be welcome.

“We tend to … adjust the Income Tax Act in a piecemeal fashion without much introspection,” he said.

Neither Minor nor Brassard say they don’t expect any quick fixes in terms of boosting productivity.

“If the productivity challenge of Canada could be fixed by one single intervention, we would have fixed it by now,” Brassard said.

bpassifiume@postmedia.com
X: @bryanpassifiume

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