Inside Logistics

Canadian governments overspend budgets

New report busts budget-busting federal and provincial governments

July 11, 2019

TORONTO – Canada’s federal, provincial and territorial governments have spent a combined total of $91 billion more than they said they would since 2000, according to a new C.D. Howe Institute report.

In “Big Spenders: Canada’s Senior Governments Have a Bad Budget Habit,” authors William B.P. Robson and Farah Omran compare the budgets of Canada’s senior governments with the revenues and expenses published in their audited year-end financial statements. They find governments routinely spend and tax more than projected in their budgets – and that those overshoots have materially raised the size and cost of government over time.

“Over the 18 fiscal years since 2000/01,” commented Robson “these governments have overshot their spending targets by a cumulative $91 billion. They are now spending almost $2,500 more, per Canadian, than they would be if they had hit their targets.”

“Over the same period, revenue has overshot budget projections by an even larger amount: a cumulative $142 billion, or nearly $4,000 per Canadian. In short, Canada’s senior governments are spending more, and taxing Canadians more heavily, than they would be if they had delivered on their budget commitments.”

Ottawa came closest to hitting the mark on spending, with an annual average overshoot of 0.6 percent. Ontario and New Brunswick took the second and third position with 0.8 percent and 0.9 percent overshoots respectively. Nunavut and Yukon were furthest from target with 5.6 percent and 5.3 percent respectively, and Alberta, at 3.7 percent away from target, was third worst.

Only Newfoundland and Labrador spent less than budgeted over the period studied, with an average undershoot of -1.1 percent.

“Most governments, most of the time, seem to be more intent on managing their annual bottom line than on stabilizing their economy, tax rates and programs,” added Robson.

“For all the attention budgets receive and the formal legislative accountability that surrounds both budgets and the estimates, governments’ projections are far less reliable than they should be. Legislators and voters alike should demand that Canada’s federal, provincial and territorial governments improve their budgets and their record in achieving them.”

Robson and Omran note that the overshoots and suspicious patterns of in-year “surprises” have become less serious in recent years, and make several recommendations to further improve fiscal accountability:

  • Governments should give legislators better information, particularly when it comes to the estimates that authorize specific expenditures;
  • Legislators must ensure that contingency reserves do not become slush funds to cover spending that would not otherwise pass inspection;
  • Interim and final results should be timely: a government that wants to achieve its fiscal targets in the face of unexpected developments needs timely operational and financial information to adjust course;
  • Governments should stay fiscally healthy: deficit and debt concerns create temptations to massage the numbers to achieve a bottom line target

Read the full report