ESTIMATES REFORM The Finance Minister and the President of the Treasury Board Should Talk More Often
The President of the Treasury Board has recently released a four-pillar strategy (a 2015 election commitment) for Estimates Reform aimed at improving the ability of Parliament to properly scrutinize government spending. The four pillars are: timing of the tabling of the Main Estimates; the scope and accounting methods used in the Estimates and the Budget; changes to the current vote structure; and changes to the Reports on Plans and Priorities and the Departmental Performance Reports. This note examines the proposed changes to the tabling of the Main Estimates.
The government requires Parliamentary approval to spend, either through existing legislation or through annual appropriation bills. The former, referred to as “statutory” spending, accounts for about 60% of total spending. Statutory spending is included in the Estimates for information purposes only. The remaining 40%, referred to as “voted” spending, must be approved annually through appropriation bills.
The Estimates consist of the Main Estimates, which under existing rules, must be tabled on or before March 1stand up to three Supplementary Estimates tabled during the course of the fiscal year. Supplementary Estimates seek approval for new policy initiatives proposed in the budget but not sufficiently developed in time for inclusion in the Main Estimates or initiatives not anticipated at the time of the budget or Main Estimates.
This implies that if the Budget is tabled after or shortly before March 1st, the Main Estimates will not include any of the budget initiatives and would not be based on the economic assumptions underlying the budget forecast. As a result, Parliamentarians do not have the most complete or current spending information on which to base their review. Budget measures are instead included in the Supplementary Estimates over the remainder of the fiscal year. In addition, the spending estimates in the Main Estimates are based on out of date economic assumptions included in the previous year’s Fall Economic Update.
The previous Conservative government tabled 7 of their 10 budgets after the tabling of the Main Estimates, while previous governments tabled their budgets in February before the tabling of the Main Estimates, unless Parliament was in recess due to an election. The government in the early 1980s recommended that the budget be tabled before the Main Estimates to improve consistency. During those years, the Main Estimates included many of the initiatives proposed in the budgets and were based on budget economic assumptions. Officials in the Department of Finance and the Treasury Board Secretariat worked closely together to ensure consistency between the Budget and the Main Estimates. In addition, the Budget or the Main Estimates included a table reconciling the differences in the spending estimates.
The President of the Treasury Board is proposing that the Main Estimates be tabled after the Budget, but before May 1st. According to the President, this would ensure that the Main Estimates would include the Budget’s proposed initiatives and be based on the Budget’s economic assumptions. To ensure that departments/agencies have sufficient spending authority until such time as the Main Estimates are approved, the Government is proposing to introduce “Interim Estimates”, to be tabled on or before March 1st. These ”Interim Estimates” would be based on a fraction of the current year’s Estimates rather than the upcoming Main Estimates. Although Parliament would need to “approve” these Interim Estimates, they would not be subject to detailed review by the applicable Parliamentary Standing Committees.
As the Parliamentary Budget Officer (PBO) notes in his assessment of these changes (Considerations for Parliament in Reforming the Business of Supply), there is no guarantee that, under this proposal, the Main Estimates would include many of the initiatives proposed in the Budget. Typically, most of the new initiatives proposed in the Budget are included in Supplementary Estimates B, which are tabled in late November, rather than in Supplementary Estimates A, which are tabled in May.
PBO does not believe an extra eight weeks would result in a more comprehensive Main Estimates. In fact, if the Budget is tabled in late March, there would only be 4 weeks to ensure that the Main Estimates are consistent with the Budget. If this were possible, then Supplementary Estimates A in the past should have included more of the Budget initiatives.
There are legitimate reasons for not including all budget initiatives proposed in the Main Estimates. In many cases, the details of the proposed measures are not fully available at the time of the Budget. Notional amounts are put in the Budget with few details. These are worked on by the responsible department(s) and the Treasury Board Secretariat in the months following the Budget. The amounts of money involved are relatively minor in relation to the total appropriations bill. In addition, including the new initiatives in the Supplementary Estimates rather than in the Main Estimates offers the committees examining the budget initiatives more time and information to do their review.
The President does not believe in establishing a fixed date for the Budget, arguing that the government needs flexibility in order to address changing economic and fiscal developments. It would appear that the Finance might have inadvertently found a solution to the problem.
The Government introduced a significant change to budget formulation in 2016. On February 23, 2016, the Minister of Finance released a Backgrounder – Canadian Economic Outlook. It included the results from the latest survey of private sector economists and the implications on the fiscal outlook. In addition, it included the costs of a number of policy initiatives implemented since the November 2015 Update. The Backgrounder largely went unnoticed. The March 2016 Budget incorporated the results of the economic assumptions used in the Backgrounder, without change. The March 2016 Budget was primarily a policy document, outlining the proposed policy initiatives.
It appears this two-prong approach will be used again in 2017. The Minister met with the private sector economists on Friday February 13th. It is expected he will release another Backgrounder in late February with the “official” budget in mid-to-late March.
If so, there is no reason why the Main Estimates cannot be based on the economic assumptions in the Backgrounder. Supplementary Estimates A and/or B would include the details of the Budget’s policy initiatives. As a result, there would be no need to table “Interim Estimates” or to make any significant change with respect to timing.
It appears that the Minister of Finance has made the proposal by the President to change the timing of the Main Estimates irrelevant. Apparently they have not been talking to each other. The President should reconsider his proposal in light of the changes introduced by the Finance Minister. However, the Minister of Finance should be more upfront about his changes to the budgetary process. To date, he has been silent on this.
Presently, if the parliamentary committees have not finished their spending reviews by late June, they are “deemed” to be approved. The committees should be given sufficient time to complete their reviews, even if this means an extension of sitting days by Parliament