Changes to the Budgetary Process that Have Gone Largely Unnotic

Finance Minister Bill Morneau introduced some significant changes to the budgetary process in 2016 which went largely unnoticed by the media and financial commentators. In February last year he released  “Backgrounder – Economic Outlook”, which, included the Department of Finance’s latest survey of private sector economists for 2016 and 2017.  This in itself was not new. The previous government had also published revised economic forecasts in advance of the budget.

What was new was that the Backgrounder also included updated simplified fiscal projections for 2015-16, 2016-17 and 2017-18.  These “status quo” projections were intended to form the basis for the 2016 budget . This allowed the budget  to focus primarily on the policy measures. In order to properly assess the March 2016 Budget fiscal projections, one needed to refer back to the Backgrounder.

It appears that Mr. Morneau will be following the same process again this year.  He met with the private sector economists to discuss the economic forecasts to be used for the upcoming budget on January 13th.  It is expected that he will release a Backgrounder within the next few weeks, presenting updated economic and status quo fiscal forecasts over the short term.  The budget will follow sometime in mid- to late-March.

The 2016 Backgrounder revealed a significant deterioration in the Government’s finances.  The deficit for 2016-17 was revised up from $3.9 billion to $18.4 billion and for 2017-18 from $2.4 billion to $15.5 billion. Such significant changes to the budgetary balance should not be announced through a press release but rather in Parliament to the House of Commons Standing Committee on Finance. The Backgrounder has become just as important as the Fall Economic and Fiscal Update.

These changes to the budgetary process have important implications for the Main Estimates. Eight of the last eleven budgets have been tabled in March or April.  However, Main Estimates, under current rules, must be tabled on or before March1st. As such, most of the Main Estimates have not incorporated the economic assumptions included in the budget but instead were based on the “out of date” economic assumptions included in the last Economic and Fiscal Update.

With the release of the Backgrounder before March 1st  the Main Estimates can now be based on the revised economic assumptions in the Backgrounder, as these will be same as those in the budget.  This was an issue that was not properly addressed in the reforms that the President of the Treasury Board is currently proposing to the Main Estimates.

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