Fiscal Monitor for April – May 2018: Great Start to the New Fiscal Year


For the first two months of fiscal year 2018-19, the federal government posted a surplus of $$3.2 billion compared to a surplus of only 68 million in the same two months of 2017-18.

Most of the surplus was included in April ($2.5 billion), while a surplus of $0.6 billion was recorded in May. Budgetary revenues were up $4.3 billion, program expending increased by $0.7 billion, while public debt charges were up $0.5 from year earlier levels.


Within budgetary revenues, strong increases were reported in personal income tax revenues (7.8% or $1.8 billion), corporate income tax revenues (16.8% or $1.2 billion), goods and services tax revenues (12.5% or $0.8 billion0 and employment insurance premiums (5.1% or $0.2 billion). The Department of Finance provided no explanations for these increases. The increases in personal and corporate income tax revenues far exceed the increases in their applicable tax bases. As such, part of the increase could be attributable to timing factors or adjustments related to converting the monthly cash collections to accruals.  The increase in employment insurance premiums partly reflects an increase in maximum insurable earnings. 


Within grogram expenses, major transfers to persons were up 0.7% or $107 million.  Elderly benefits increased 5.1% or $419 million, reflecting in an increase in the eligible population and higher average benefits which are indexed to inflation.  Children’s benefits increased by 4.2% or $164 million, primarily due to an increase in the eligible population.  Partially offsetting these increases was a decline in employment insurance benefits (13.2% or $478 million) reflecting a decline in the number of unemployed.


Major transfers to provinces and territories were up 3.7% or $436 million. The increases in the components reflected the increases as set out in their appropriate legislation.


Direct program expenses, which includes other subsidies and transfers and the operating costs of government, increased by 1.0% or $192 million.  Other transfers declined by 4.6% or $263 million.  This was more than offset by an increase in other direct program expenses of 3.6% or $455 million. This was largely due to an increase of 8.9% or $675 million in personnel costs. Other subsidies and expenses declined by 13.1% or $285 million.


With this Fiscal Monitor, the Department of Finance provided additional details on the composition of direct program expenses.  This is welcomed.  However, such detail is not provided in the budgets, which makes analysis of the monthly movements difficult to track in relation to their fiscal year forecasts. In providing this additional detail, the Department no longer provides details on the departmental expenses for transfers and subsidies, thereby making it extremely difficult to understand what is happening in this major component.  In addition, monthly information on Crown corporations and defence has been eliminated.
We would strongly recommend that the Department again publish details on the components of transfers and subsidies and for Crown corporations and defence.  In addition, the budget should include the annual forecasts for these components as well as for the components of other direct program expenses.

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