Politics

Kevin Page warns of possible austerity, tax hikes to address mounting deficits

Canada's former parliamentary budget officer says the Liberal government's first budget includes billions in new spending with no plan to tame the mounting deficits, which could result in austerity measures and tax increases to get the books back to black.

Former budget watchdog says relatively robust growth figures could shrink Liberal deficit

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)

Canada's former parliamentary budget officer says the Liberal government's first budget includes billions in new spending but no plan to tame the mounting deficits, which could lead to austerity measures and tax hikes down the line.

"Through the mid-80s and 90s we ran these deficits year, after year, after year, that were structural in nature," Kevin Page said in an interview with Chris Hall on CBC Radio's The House.

"We got to a point in the mid 1990s where we had debt-to-GDP ratios that got very high — the rest of the world was concerned — and we had to go into a major austerity exercise. I think [Finance Minister Bill Morneau] would rather avoid that scenario. That's a scenario that we saw play out in southern Europe."

Page cautioned that government "can't keep piling on additional spending and think this is sustainable ... We will probably need to raise taxes at some point in time."

Lack of budget transparency

The current parliamentary budget officer, Jean-Denis Fréchette, starting waving red flags immediately after the budget was released in March. The budget both omitted data key to assessing the government's long-term projections, and included low economic growth targets.

He applauded Finance Canada's move to release financial projections — a move that came after some agitation from the PBO and reporters — but he said the exclusion of the underlying data for the final years of the budget is troubling.

"When you don't see the details, usually somebody is trying to hide something. There is a reason for the lack of transparency," he said. "We were looking for a plan that would have fiscal targets, you know, some plans that there would be tradeoffs if deficits get too large, and some analysis around the sustainability of this plan, and we didn't see any of that."

We will probably need to raise taxes at some point in time.- Kevin Page, former parliamentary budget officer

Page cautioned that the PBO, as well as all opposition MPs, need to be able to see the government's figures to debate their plans and challenge them publicly. 

He said this is a basic tenet of the Canadian federal system, since, "it is the House of Commons' job to hold the government to account. The power of the purse rests with parliament, not the executive."

Page fought with the Conservative government throughout his time in the position from 2008-2013. In 2012, he took the government to court over its refusal to release key budgetary information.

Downplaying growth numbers

The former Conservative government reined in spending after posting a series of large budget deficits in the wake of the 2008-09 fiscal crisis. They returned to a balance budget last fiscal year in advance of the Oct. 19 election.

The Liberals have taken a different path, ramping up spending to jump start what they have called a sluggish economy. The funds are directed at three areas including infrastructure, new child benefit cheques and Indigenous peoples. All of this amounts to a $29.4 billion deficit in 2016-17.

In the budget, Morneau estimated the economy would grow 1.4 percent this year. Earlier this week, Bank of Canada Governor Stephen Poloz projected growth would come in at 1.7 percent for the fiscal year.

"We have seen in the late months of 2015 and the early months [of 2016], a lot more growth in the economy, so we are probably expecting to see a first quarter with numbers much higher than what people thought," Page said, noting the budget deficit will likely shrink substantially given the economy is relatively robust.

Liberal budget less transparent than past spending plans: PBO

5 years ago
4:56
Liberal budget less transparent than past spending plans: PBO 4:56

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