Economic prudence, or ‘cuts by stealth?’ Federal departments left $8.7 billion unspent last year

Posted on in Governance Debates

NationalPost.com – Politics/Canadian Politics
September 15, 2015.   Lee Berthiaume, Postmedia News

Conservative Leader Stephen Harper on Monday defended federal departments for holding on to billions of dollars last year. The unspent money was instead returned to the federal treasury, and played a huge role in the Conservative government posting a $1.9-billion budget surplus in the last fiscal year.

Finance Canada reported the federal surplus Monday, after initial projections in April had suggested a $2-billion deficit. The report said a variety of factors were responsible for the surplus, including a slight bump in government revenue from corporate and personal income tax.

But federal departments and agencies also chipped in by handing back an estimated $8.7 billion for different programs that had been requested — and in some cases publicly announced — by the government and approved by Parliament.

Chart: “A Surprise Surplus”  < http://wpmedia.news.nationalpost.com/2015/09/na0916_budgetbalance_c_jr.jpg?w=620&h=400 >

Speaking at an event in Kamloops, B.C., Harper seized on the surplus to bolster his economic credentials heading into the second half of this year’s marathon election campaign. He dismissed concerns about the unspent billions, including whether the measures may have pushed the economy back into recession.

“The government’s lapses are completely normal,” Harper said. “Obviously we always make sure government departments have more than enough money but we don’t expect them to spend every single dime. We expect them to spend effectively.”

However, last year’s lapse, as unspent federal funds are called, was anything but normal. The Conservatives’ own budget plan in April, which projected only a $7.2-billion lapse, said government spending through February was “well below the historical average.” Spending to that point was also “at the lowest level in a decade.”

While the Conservatives have portrayed lapses as proof of economic prudence, critics say they amount to cuts by stealth. They say this is how the government can take money from Veterans Affairs, National Defence and other departments without actually cutting budgets.

During a campaign stop in Toronto, Liberal Leader Justin Trudeau accused the Conservatives of having erased the federal deficit by “under-spending and making cuts” across government “so he could balance the books in time for his election.” Trudeau is the only main party leader to promise deficits if elected to power.

NDP Leader Tom Mulcair, who has promised a balanced budget if elected, didn’t speak to the unspent funds.

Canadians won’t know exactly which departments or programs were affected until after the election, when the government publishes its annual detailed accounts. But figures produced by the Parliamentary Budget Office over the weekend provide an idea of where some of the money came from.

It’s a big chunk of spending. And it’s not easy for a lot of the departments

The PBO figures aren’t final as not all departments, agencies and Crown corporations have reported their full end-of-year spending. But they do suggest hundreds of millions set aside for new military equipment, processing refugee applications, First Nations communities and transportation infrastructure went unspent.

In contrast, the Royal Canadian Mounted Police, Canada Border Services Agency and Canadian Food Inspection Agency were among a small number of federal departments or agencies that spent all their money – or even appeared to go over budget.

Former parliamentary budget officer Kevin Page said he had no doubt the Conservative government ordered senior public servants to “put the brakes” to spending to ensure a surplus during the election campaign. “It’s a big chunk of spending,” he said. “And it’s not easy for a lot of the departments.”

Page, who now teaches at the University of Ottawa, said lapsed funding has a direct impact on Canadians, and whoever wins the election will face a difficult situation that may involve either re-opening the taps or making more cuts.

“They’re going to look at that spending framework and say, ‘Is this sustainable?’” he said. “Is the Coast Guard going to function the way it should function? Are we going to have the sort of food inspection we need? Are we going to be able to get the cheques out the door for seniors and unemployed people?”

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