Budget Officer Page Sees Canada Deficit in 2015-16, Contradicting Flaherty

Canada will have a budget deficit that persists for five years because of higher spending, the country’s budget officer said, contradicting Finance Minister Jim Flaherty’s view the shortfall will be eliminated by then.

The deficit will be C$11 billion ($10.9 billion) in the 2015-16 fiscal year, most of it due to “structural” factors that require spending cuts or tax increases to eliminate, the budget office run by former finance department official Kevin Page said today in a report from Ottawa. Flaherty said Oct. 12 there will be a C$2.6 billion surplus that year.

The difference in forecasts stems from the budget office’s prediction that spending will advance faster than Flaherty says it will, with the report citing a lack of detail on spending cuts in Flaherty’s budget update. The government is relying on higher employment insurance premiums, coupled with restraint in defense and operating spending, to help the country lower its deficit, and Flaherty has also promised to end emergency stimulus spending by March.

“Policy actions to increase revenues and/or reduce spending relative to their projected paths would be required to ensure that the budget is balanced once the economy returns to its potential,” the report said.

Canada will run deficits totaling C$139 billion through 2016, the budget office said, greater than the government’s estimate of C$107 billion.

The report predicted operating expenses will expand an average of 3.2 percent annually, equal to the growth of population plus inflation, compared with a government prediction of a 1.4 percent increase. Spending rose by an average 6.4 percent annually in the five years before the government’s stimulus package began.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Christopher Wellisz at cwellisz@bloomberg.net

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