Saturday February 27, 2016

Liberal fiscal plans less transparent than under Harper, Kevin Page says

Kevin Page, Canada's former parliamentary budget officer, says the Liberal government is even less transparent on fiscal matters than their Conservative predecessors.

Kevin Page, Canada's former parliamentary budget officer, says the Liberal government is even less transparent on fiscal matters than their Conservative predecessors. (Sean Kilpatrick/Canadian Press)

Listen 9:40

Canada's former parliamentary budget officer says the Liberal government is even less transparent on fiscal matters than the Conservative government it succeeded.

"I don't think it is [more transparent]. The documents — they're not better from a government that promised to be better, more transparent ... there's no more information, perhaps even less information, than what we got from the previous government," Kevin Page said said in an interview CBC Radio's The House.

"I don't think we've seen the transparency yet," he said.

Prime Minister Justin Trudeau campaigned on a pledge to run three "modest" deficits of no more than $10 billion a year. But Finance Minister Bill Morneau released his second fiscal update this week ahead of the March 22 federal budget, and his figures show it will be much higher than that.

The deficit will balloon to $18.4 billion in 2016-17 and $15.5 billion in 2017-18 — and that is before any new spending Morneau outlines in the March budget. Those numbers are drastically different from the $3.9-billion and $2.4-billion shortfalls forecast just three months ago.

"A less ambitious government might see these conditions as a reason to hide, to make cuts or to be overly cautious. But our government might see that the economic downturn makes our plan to grow the economy even more relevant than it was a few short months ago," Morneau said Monday.

Page, who frequently squared off with the previous Conservative government over their fiscal secrecy, says his concerns about transparency stem from a lack clarity around the deficit figure.

Morneau Economy 20160223

Finance Minister Bill Morneau said Monday that the Liberal's budget position "is much further back than we thought. In order for us to provide the growth the middle class needs, short-term deficits will be larger than expected." (THE CANADIAN PRESS/Sean Kilpatrick)

Morneau pointed to lower oil prices, and a sluggish GDP growth rate for the the mounting deficit but Page said a larger-than-normal $6 billion contingency fund is a clear attempt to create some political "wiggle room."

Fiscal 'fudge factor'

Morneau could be inflating the budgetary problems now, only to come in substantially under projections — to much political fanfare — at a later date.

Page said the government took the private sector forecast for Canada's economy in the next fiscal year and then cut an extra $40 billion from the projected growth, something he calls a fiscal "fudge factor."

"It just wasn't explained. This is a government that wants to be more transparent, more analytical, more evidence-based and he missed an important opportunity to explain to people why the outlook is changing. And I think we're going to hear, in a few weeks, that they want a big stimulus package," Page said. 

Page says that Morneau should have also have released fiscal targets to put Canadians at ease.

"We shouldn't give an unlimited leash to the finance minister. I think that's never a good idea. I think he missed an opportunity this week to say 'Yeah the situation has deteriorated ... but we'll not allow the deficit to go above $30 billion, we'll get back to balance somewhere over the medium term.'

"I think he would have reduced some of the anxiety that's out there about the situation deteriorating so quickly."

'Very, very weak economy'

Page said Canada is facing a "very, very weak economy," and while it's not the fiscal "cliff" we faced during the 2008-09 recession, the job losses will continue to pile up and the GDP growth rates will be anaemic for the next number of years.

Page said a well constructed stimulus package is likely the best option for a finance minister facing such daunting constraints, and he has the support to open up the fiscal floodgates.

"I think there is license. It comes from the global community, I think there will be all kinds of support from the IMF, the OECD for this type of approach. They got some license from the Canadian population, the citizens at large to run these kind of deficits."

He said the Liberals are earmarking billions of dollars for infrastructure projects, which will be a shot in the arm for the economy, but getting it right is always sticky for any government.

"Can we get good infrastructure projects without wasting money? Can they be implemented? That's been a challenge for the previous government, you know, select good projects, [have] good front-end due diligence, monitor those projects, come in on time, on budget, that'll be the next shoe to drop."