Budget BS
Ottawa, ON – When Mark Carney announced he would be splitting operating and capital spending in the budget, it was met with widespread worry that he would use the change to cook the books. Today, the Parliamentary Budget Officer (PBO) confirmed that’s exactly what is happening.
Carney’s new definition of capital spending “is overly expansive” and “expands beyond the current treatment in the Public Accounts and international practice based on the System of National Accounts (SNA), such as that adopted by the United Kingdom.” Instead of following international accounting standards, Carney lumped in corporate tax breaks and subsidies that “would not be considered capital formation” within international guidelines.
After using a more accepted definition, the PBO found that capital investment spending was 30 per cent lower than what the Liberals claimed – a $94 billion difference. Furthermore, they found that Carney won’t even balance the operating budget over the next five years, abandoning a key fiscal anchor.
That’s after Carney abandoned the Liberals’ previous fiscal anchor of reducing the federal debt-to-GDP ratio. The PBO found the debt-to-GDP ratio will be even higher than the last economic update, and Canada “is no longer projected to be on a declining path over the medium term.”
Last year’s Fall Economic Statement, put together while Carney was the Liberals’ economic advisor, noted a declining debt-to-GDP ratio was “key not only for fiscal sustainability, but also to preserve Canada’s AAA credit rating, which helps maintain investors’ confidence and keeps Canada’s borrowing costs as low as possible.”
The PBO had previously warned in September that Canadians could be paying more for debt if the Liberals tried to change accounting standards. Already, Fitch Ratings agency warned the budget “underscores the erosion of the federal government’s finances” and puts pressure on Canada’s credit rating.
Instead, Carney replaced it with a new fiscal anchor to maintain a declining deficit-to-gross GDP ratio. But even after changing the goal posts, the PBO found there’s only a “7.5 per cent chance that the deficit-to-GDP ratio will decline” over the next five years and that “it is unlikely that the Government’s declining deficit-to-GDP fiscal anchor will be respected.”
They threw further cold water on the Liberals’ so-called Expenditure Review, noting the complete “lack of detail regarding the impact on individual programs within each organization.” So far, there have been no details on how it will impact service levels, personnel or how progress and results will be reported.
Even if the reduction results in the claimed $50 billion in savings, the budget will still have resulted in a $90 billion net increase in new spending, $5,400 per Canadian family.
It’s not the only thing the Liberals aren’t being transparent about. For the second year in a row, the Liberals failed to table the Public Accounts, the audited financial statements of the federal government, for more than seven months after the end of the fiscal year. That’s after they took almost nine months to release the Public Accounts for 2023-24.
Mark Carney told Canadians he was a serious economist who could be trusted to “spend less” and “invest more.” Instead, his budget reveals less to Canadians while costing them more in bigger deficits and debt.
We cannot afford the costs of Carney. Conservatives will continue to hold the Liberals to account for breaking their commitments and fight to restore Canada’s promise: a country where hard work leads to a home with a yard, meat and potatoes on the dinner table, and safe streets under a proud flag.