It was only eight weeks ago (January 13th to be precise) that Joe Oliver announced that he was postponing the budget until sometime after April 1st. His excuse was that rapidly falling oil prices were creating an unusual high degree of uncertainty for budget planning and that he needed more time to assess the future course of oil prices and their impact on the economy.

As we have said in earlier articles, this was all “hogwash”. Budget planning always involves uncertainty. Indeed, the greater the uncertainty, the greater the need for a government to have a budget to show that it has a plan to deal with the uncertainty.


The decision to postpone the budget was a “panic response” to the stark reality that the Conservative election plan to announce major tax cuts in October, while still promising to balance the budget in 2015-16, had just gone over the “cliff”. Plan A was in the process of evaporating and the Conservatives, in their ideological arrogance, had never thought to consider plan B. For the PM and Joe Oliver, this would be a serious problem for their Conservative voting base.


Recent economic news has not been good for the government. The U.S. recovery may have taken hold but there are no indications yet that the Canadian economy is being pulled out of its economic doldrums. The completely unexpected decision by the Bank of Canada to cut the bank rate by 25 basis points was a clear indication that the Bank is concerned about Canada’s economic prospects.


No one is certain as to the overall impacts of falling oil prices on the Canadian economy. But what is certain is that the economy is struggling to even keep up with potential economic growth, or even worse, struggling not to fall even farther behind.


What is certain, however, is that this is the time when a budget is needed to set out a clear economic strategy to strengthen economic growth and provide federal leadership to the provinces.


But this is not going to happen because a budget is the last thing the Conservatives want.


Let’s be clear, there is no legislative requirement for the government to have an annual budget. No budget was tabled in 2002. Nor is there any legislative requirement to have a budget in any particular month. The government can choose to have a budget, if it wants one, at any time that it wants.


Up until 2006, previous governments, both Liberal and Conservative, saw budgets as the most important policy document of the year. For the most part, they liked to have them in February. It provided the government with an opportunity, not just to outline its financial situation, but also to set out new initiatives the government intended to take in all areas of public policy. Budgets were seen as strategic and in some cases even visionary documents.


The Conservative government has never regarded budgets in the same way. They have never seen budgets as important strategic policy documents. The fundamental vision of Prime Minister Harper has always been lower taxes, lower spending and a smaller federal government.


The one deviation from this vision was in 2009 when the G-20 collectively agreed to undertake massive temporary stimulus spending to support global economic demand. Harper had no choice but to agree. It also gave him an opportunity in 2010 to reassert his fiscal dogma of deficit elimination even more strongly and that has been his mantra ever since.


The only area where budgets were important to Harper and to Jim Flaherty was that they allowed them to introduce massive omnibus budget bills (over 1000 pages in 2012), which included changes to legislation not even mentioned on the budget.


The budgets and their omnibus bills gave Harper the opportunity to end-run Parliament. At the present time, there doesn’t seem to be a need for another big omnibus bill since it would not likely  be passed before the next election without time allocations and closure. At the same time, the government would want to avoid the kind of political controversies that have surrounded previous budget omnibus bills.


Joe Oliver and the PM don’t need a 2015 budget because they don’t have a plan B to announce that would deal with the challenges of a low oil price economy. They have nothing new to say despite these completely different economic circumstances. So unless there is going to be a remarkable change in government orthodoxy that will surprise everyone, they don’t want to “lock-up” a couple of hundred journalists in the old Ottawa train station to read a lot of documents that say absolutely nothing other than spout government speaking points. This would not lead to a “positive” media assessment od the budget.


The government does not need a budget to get Parliamentary approval to spend money. Spending authority comes with Parliamentary passage of the Main Estimates, which were tabled by the government last week, and through enabling legislation.


Parliamentary Committees are now reviewing departmental spending estimates, but even if these reviews are not completed, under Parliamentary rules, the Estimates will still “been deemed to be approved by Parliament” by the end of June. Additional spending can be added to these estimates under Supplementary Estimates tabled during the course of the year.


The government does not need a budget and Parliamentary approval to borrow money. The government successfully did away with that responsibility of Parliament in a 2007 budget omnibus bill.


The government does not need a budget to introduce new tax changes. In fact, the “real 2015 budget “ already happened last October with the PM’s announcement of the Family Tax cut package and enhancements to the youth fitness tax credit. The Canada Revenue Agency changed the tax forms for taxation 2014 to implement these changes. The authority to do this was provided through the tabling of the Notice of Ways and Means Motion. At some point in time, legislation will be required but there is no time frame for this. Similarly the government does not need a budget to implement  a doubling of the limits for the Tax Free Savings Account  as promised in the 2011 election, although given recent criticisms of this proposal, you would have to wonder why they would do it. 


So why should the PM and Joe Oliver bother with a budget?


One could make the argument that, without tabling a budget and having some budget debate in Parliament, the government would come under severe political and public criticism. This is a valid argument but avoiding Parliamentary debate has never bothered the PM in the past.


In the case of public criticism, the only group that Harper cares for is his political base. He doesn’t care about the almost two-thirds of voters who don’t vote for him.


Moreover, if the only issue that the media and some Canadians are interested in is how the government will live up to its claim that it will balance the budget in 2015-16 then this issue can be addressed without a full-fledged budget.


At the present time, the government only needs to account for budget outcomes in2014-15 and 2015-16. No one is that interested in the period after 2015-16 and any criticism could be easily deflected. This approach would also have the advantage of forcing both the NDP and the Liberals do prepare their own fiscal forecasts.


It is very clear now that the government will record a surplus in 2014-15. According to Department of Finance data just released, the federal government posted a deficit of only $0.9 billion for the April to December period. In other words the government would need to record a surplus of only $0.9 billion over the rest of 2014-15 to post a balanced budget. Based on the experience of the previous fiscal year this will be easily achieved.


Unless oil prices average around US$80 in 2015, the federal government will not show a balanced budget for 2015-16. Currently the price of oil is below $50 a barrel and no one is expecting a rapid increase for the remainder of the year. Both the PM and Oliver have said the budget will be balanced.  The only question is how Joe Oliver manipulates the data to show a balanced budget?  No doubt the Finance Department will come up with some “once-off” adjustments. The Contingency Reserve will also be completely used but not to pay down debt, which was the government commitment made by Joe Oliver last November, but who cares?


A full budget isn’t needed to explain budget outcomes and certainly not a daylong media lock-up. A late June fiscal update report released by the Minister of Finance (fill in the name of an Ontario town) would suffice. Finance bureaucrats could provide a couple of hours of briefing if necessary.


It is becoming increasingly obvious, even perhaps to the Conservatives, that sound economic and fiscal management may not be their trump card. Better to avoid that debate until next fall..


Terrorism and fear seemed to be working just fine for the Conservatives, so why change the political narrative with a budget?














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