Public Administration and Financial Management

Week 9

Fiscal Policy and the Budget

Fiscal policy: The spending and revenue activities of government.

The Budget: The annual statement and planning document for the government’s fiscal policy.

Federal Finances

In 2010-11, federal government expenditures amounted to $270.5 billion.

Federal government revenues were $237.1 billion.

The annual deficit for 2010-11 was $33.4 billion.

The federal debt (or “accumulated deficit”), as of 2010-11, was $550.3 billion.

Total Public Debt

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

http://www.oecd.org/dataoecd/42/27/47986060.pdf [See page 326 - or the 18th page of this document]

November 8, 2011 Economic and Fiscal Update Government criticized for tabling update outside

of the House of Commons. Canada experienced significant job losses in

October (54,000 jobs lost). Finance Minister confirms that economic

turbulence and slow economic growth mean that the federal government will not be able to eliminate the federal deficit until 2015-16

Those projections are dependent upon cutting $4 billion per year in government spending.

“Your Tax Dollar”

Presentation from the Federal Finance Department, based on 2009-10:

http://www.fin.gc.ca/tax-impot/2010/eng/index.htm

Deficits to Surpluses and Back to Deficits For 27 straight years, from 1970-71 to 1996-

97 the federal government experienced annual deficits.

From 1997–98 to 2007–08 Canada experienced annual surpluses.

Canada experienced deficits every year since 2008-09 and the federal government currently projects deficits up to and including 2014-15.

Federal Debt begins to climb again Federal debt peaked at $562.9 billion at the end of

1996-97. Relative to the size of the economy, the federal debt

peaked in 1996-97 at 68.4% of GDP. [In historical terms, it increased from about 50% of GDP in 1930 to about 110% in 1945. It was then reduced to about 25% of GDP in the mid-70s.]

At the end of 2007-08, debt was $457.6 billion or equal to 29.8% of GDP (lowest level since March 1981).

As of 2010-11, the debt has climbed to $550.3 billion or 33.9% of GDP.

Table 3.3Summary Statement of Transactions     Projection

   

  2010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17

  (billions of dollars)

Budgetary revenues 237.1 243.5 251.8 268.8 285.1 298.4 310.6

Program expenses 239.6 243.0 247.4 252.5 257.6 265.3 272.4

Public debt charges 30.9 31.5 31.9 33.3 35.0 36.5 37.7

Total expenses 270.5 274.5 279.2 285.8 292.6 301.8 310.1

Budgetary balance -33.4 -31.0 -27.4 -17.0 -7.5 -3.4 0.5

Federal debt1 550.3 585.2 612.7 629.7 637.2 640.6 640.0

Per cent of GDP              

  Budgetary revenues 14.6 14.4 14.4 14.6 14.7 14.8 14.7

  Program expenses 14.7 14.4 14.1 13.7 13.3 13.1 12.9

  Public debt charges 1.9 1.9 1.8 1.8 1.8 1.8 1.8

  Budgetary balance -2.1 -1.8 -1.6 -0.9 -0.4 -0.2 0.0

  Federal debt 33.9 34.6 35.0 34.2 32.9 31.7 30.3

Note: Totals may not add due to rounding.1 The projected level of federal debt for 2011–12 includes an estimate of other comprehensive income, as well as estimated transitional adjustments related to enterprise Crown corporations’ adoption of International Financial Reporting Standards.

Taxing and Spending

In difficult economic times, it isn’t unusual to have a deficit.

That said, the federal government is spending more than it is collecting via taxes.

Does the government have a spending problem or a revenue problem?

Spending Priorities

Of course, government spending involves many different things.

Different governments have different priorities and spend on different things.

The growing size of the state and the onset of chronic deficits Federal governments have introduced a

succession of budgetary planning procedures.

Managing Government Financial Resources Line-item budgeting (or incremental

budgeting) until the 1960s Planning, Programming, Budgeting System

(PPBS), 1969 Policy and Expenditure Management System

(PEMS), 1979 Expenditure Management System (EMS),

1995 Expenditure Management Information

System (EMIS), 2007

Constructing the Budget

“The number of people directly involved in putting the budget together is very limited.”

“The key players are the prime minister, one or two of his senior advisors, the minister of finance, the clerk of the Privy Council, the deputy minister of finance and a handful of senior Finance officials” (Savoie, 1999: 656).

The Financial Cycle

Winter/SpringBudget speech (usually in February)Followed by tabling of the Main Estimates

FallEconomic and Fiscal UpdateDepartmental Performance ReportsPublic Accounts of Canada

Parliamentary Review of Spending Budget speech is followed by days of debate Estimates are sent to standing committees Departmental Performance Reports are

reviewed by standing committees. Standing Committee on Public Accounts reviews

Public Accounts and Auditor General reports Standing Committee on Government Operations

and Estimates reviews spending plans and expenditures of governmental organizations

http://www.hilltimes.com/news/2011/02/21/mps-says-they-dont-have-the-time-or-resources-to-properly-scrutinize-bills-spending/25514

Office of the Auditor General

Created in 1878 An officer of parliament, nominated by the

prime minister but officially appointed by parliament.

Serves for a term of 10 years or until the age of 65.

Sheila Fraser served as AG from 2001 to 2011 and she and her office gained a significant political profile.

Office of the Auditor General

• Michael Ferguson has recently been appointed as the Auditor General.

• His lack of bilingualism has generated a storm of controversy.

• One of the members of the Auditor General’s internal audit committee has resigned over the appointment.

Parliamentary Budget Officer

Created in 2006 Current (and only) PBO: Kevin Page Created by the Conservative government. The PBO has been critical of some of the

government’s actions (challenging the accuracy of its projections, criticizing the impact of tax cuts, questioning the cost of jets, pointing to the lack of information about the cost of the law and order agenda).

Conservatives have responded by criticizing the PBO.

Public Accounts Committee

Unlike other parliamentary committees, it is chaired by a member of the Official Opposition.

Finance Minister’s Shoes

The Parliament of Canada’s website maintains a page that discusses the federal tradition and tracks the history of the Finance Minister wearing new shoes to present the budget.

http://www.parl.gc.ca/ParlInfo/compilations/parliament/BudgetNewShoes.aspx?Language=E