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Liberals' fiscal update shows billions more in deficits this year and next

Last Updated Dec 16, 2019 at 9:23 am PDT

Finance Minister Bill Morneau responds to a question during Question Period in the House of Commons Thursday December 12, 2019 in Ottawa. THE CANADIAN PRESS/Adrian Wyld

The federal books will be billions of dollars deeper into deficit by the end of this fiscal year, Bill Morneau says

Liberals' projected deficit of $19.8 billion for the 12-month period that ends in March now slated to hit $26.6 billion

Finance Department says deeper deficit largely driven by changes to how employee pensions, benefits are calculated

OTTAWA — Canada’s federal budget deficit will be billions of dollars deeper than it was supposed to be this year and next, according to the Finance Department.

The figures released Monday morning show the Liberals’ projected deficit of $19.8 billion for the 12-month period that ends in March is now slated to hit $26.6 billion.

And next year’s deficit is expected to be $28.1 billion, before accounting for promises the Liberals will unveil in their 2020 budget.

The Liberals’ election platform projected four years of deficits of more than $20 billion, including almost $27.4 billion in the upcoming fiscal year that begins in April 2020.

The Finance Department says the deeper deficit is largely driven by changes to how employee pensions and benefits are calculated, but also accounts for a tax break that takes effect on Jan. 1.

Still, the Liberals say their preferred measure of the state of federal finances — which calculates the deficit relative to the size of the economy — will keep improving, if not as quickly as it was supposed to.

Spending is also expected to go up faster on the Canada Child Benefit than the Liberals projected earlier this year, a reflection of pegging the value of payments to inflation and “an increase in the projected number of children eligible.”

The government also says that increased spending announced in the March 2019 budget will be “entirely offset” over the coming years by what the Liberals higher-than-anticipated personal and corporate income-tax revenue.

At the same time, revenues will decline for excise taxes and duties this year — largely from the Liberals’ lifting retaliatory tariffs on American steel and aluminum earlier than they planned — and over the coming years from “lower expected growth in taxable consumption.”

Federal officials are also promising the first phase of a spending and tax review that the Liberals say will result in $1.5 billion in savings starting next fiscal year, which the government has accounted for.

The update provided today from Finance Minister Bill Morneau comes on the heels of a week where the opposition Conservatives accused the government of creating the conditions for a “made-in-Canada recession.”

He says there are two main reasons for the rising amount of red.

“One is an investment by reducing peoples taxes – that’s significant. And the second is – you’re seeing that changes in interest rates are driving liability numbers.”

The government, however, projects that the economy itself will continue to grow over the coming years at roughly the rate calculated in the March budget.

Morneau says the economy is strong and the government is prepared for any bumps.

“[We’ll be able] to manage expenditures over the course of the term of our forecast, which will help us to not only have a strong economy, one that faces up to any challenges.”

The Finance Department projects growth will be 1.7 per cent this year and 1.6 per cent next year, after weakness late last year and early this year, particularly in the mining and oil-and-gas sectors. The projections would make Canada the second-fastest-growing economy among G7 countries, behind only the United States.

With files from Cormac MacSweeney