Federal government spending has ballooned since the onset of the pandemic, and the budget watchdog says over 35 percent of new measures are not related to the pandemic response.
The spending for the COVID-19 response plan peaked in the 2020–2021 fiscal year with $261.8 billion, and it is going down to $90.7 billion in 2021–2022 and $11.8 billion from 2022–2023 to 2026–2027.
The report also tracks new government spending that was announced in the Liberal Party’s election platform.
It says the $34.9 billion in new measures announced since the 2021 economic fall update (EFU) includes a number of platform promises, such as measures to address the housing crisis like the Housing Accelerator Fund and the Tax-free First Home Savings Account.
The PBO says that after including the measures announced in the EFU, the remaining electoral promises would amount to an estimated $48.5 billion in net new spending.
“The implementation of any remaining platform measures, as well as additional commitments not included in Budget 2022, such as Pharmacare, will impact the budgetary balance going forward.”
The PBO also highlights that the government is investing $1.2 billion over five years in the Canada Revenue Agency (CRA) to increase tax compliance, which is expected to recover $3.4 billion over the same period.
But the watchdog points out there appears to be no allocated funding to deal with objections and appeals that could arise from entities challenging a CRA decision, with the PBO citing a 2016 report from the Auditor General that found it took 1,424 days on average to process an objection.
While the situation could have improved since, the PBO says a slow-processing capacity could impact the speed at which the government would be able to recover tax dollars.
The PBO addresses the government’s plan to reduce spending and says the aim is to cut $9 billion on a cumulative basis over four years beginning in the 2023–2024 fiscal year. However, specific details have yet to be announced.
“It is unclear whether this will primarily target operating spending, direct program expenses, or total program expenses,” says the report.
The report also addresses transparency issues and recommends that the government’s financial reporting be better aligned.
For example, Budget 2022 was presented a month after the government’s Expenditure Plan, and this means it does not contain any of the $9.2 billion the government wants to spend in 2022–2023, says the report.
The misalignment is apparent in the National Defence budget, with no explanation for a balance of close to $15 billion.
“The department’s 2022 Departmental Plan indicated that it planned to spend $77 billion between 2022–23 and 2024–25. The corresponding numbers in Budget 2022 are roughly $23 billion higher. While part of this spending (approximately $8 billion) pertains to new policy measures presented in Budget 2022, there is no explanation for the balance.”
The PBO report concludes that parliamentarians would benefit from adopting a framework to better align the government’s various financial reports.
“In this case, a fixed budget date earlier in the year would allow time for new measures to be incorporated into the Government’s Expenditure Plan and integrated into departments and agencies’ multi-year operating plans. This, in turn, could enhance the transparency of financial reporting and comprehensibility for parliamentarians and the public.”
