Liberals commit to deficits
THE ECONOMIC SITUATION WE’RE IN IS CHALLENGING: GLOBAL GROWTH IS CHALLENGED. — MORNEAU MORNEAU ANNOUNCES NEW SPENDING WITHOUT TIMETABLE FOR BALANCING BUDGET
The Liberal government expects to amass nearly $32 billion worth of additional red ink over the next five years, as it ratchets up capital spending and creates a Canada Infrastructure Bank to dramatically overhaul how large projects are planned, funded and delivered.
As the federal financial picture continues to erode — and spending increases — the government acknowledged Tuesday in its fall economic update that it has no timetable for balancing the budget.
Between 2016-17 and 2021-22, the government is expecting to run approximately $130 billion worth of combined deficits.
The new Canada Infrastructure Bank is one of the federal government’s centrepiece items announced in an economic update that downgrades projected growth and forecasts that a worsening financial situation will soon gobble up all of the billions of dollars in fiscal contingency that was included in the spring budget.
Finance Minister Bill Morneau also announced in the economic update the government is committing $81 billion in new infrastructure spending over 11 years on transit, green projects, and social infrastructure. However, most of the funding is earmarked for several years down the road, beyond the government’s current four-year mandate.
“Today is about the long term,” Morneau told reporters. “We know that the economic situation that we’re in is challenging.”
The government projects its budgetary balance will be $1.7 billion worse in the current 2016-17 fiscal year than it forecast in the budget, when factoring in economic developments, new spending and announcements.
Add it up, and the government’s fiscal position is $31.8 billion worse over the next five years than it forecast in the March budget, devouring within two years the $6 billion in annual contingency built into the forecast to absorb unexpected economic shocks.
The government now projects the deficit will total $25.1 billion in 2016-17, but it will only hit that target after using all of the $6-billion contingency that had been included in the budget. The budgetary shortfall is expected to increase to $27.8 billion in 2017-18 after using the $6-billion contingency next year.
By 2021-2022, the government believes the deficit could still be nearly $15 billion, and there’s no timeline or apparent plan for getting finances back into balance.
“We lost the contingency … Now it’s gone, we spent it. And we have this $130 billion of additional debt,” said former parliamentary budget officer Kevin Page, now the head of the Institute of Fiscal Studies and Democracy at the University of Ottawa. “Hopefully in the budget we’ll see a stronger fiscal planning framework, more fiscal rules, more deficit targets, maybe spending rule targets.”
Interim Conservative Leader Rona Ambrose said the government should be looking to stimulate the economy through tax cuts, instead of billions of dollars in new spending that seems to be doing little to create jobs and spur growth.
“What we’re seeing today is a doubling down of the prime minister’s agenda that we know has failed,” Ambrose said. “We’re seeing more spending, more deficits and that’s a huge concern.”
Starting in the 2017-18 fiscal year, the Liberals will start rolling out the next phase of its infrastructure funding, promising $81 billion more over 11 years.
The funding will include: $25.3 billion for public transit projects such as subways and light rail; $21.9 billion for green infrastructure like interprovincial transmission lines, renewable power projects, and water treatment facilities; and $21.9 billion for social infrastructure such as affordable housing, early learning and childcare, and recreational infrastructure.
As well, $10.1 billion will be allocated to a trade and transportation fund for more efficient corridors to international markets, and $2 billion for rural and remote communities for projects like building roads and expanding Internet connectivity.
The Liberals will table legislation in 2017 to create the Canada Infrastructure Bank, a Crown Corporation the government says will provide “innovative funding and financing” to help get more infrastructure projects built in Canada, in partnership with municipal, provincial and Indigenous partners.
The infrastructure bank will target large institutional investors to help finance “transformational” projects in Canada and get them built more quickly and at less of a financial risk to taxpayers. The government hopes to leverage potentially $4 or $5 of private sector investment for every $1 in federal, provincial and municipal funding for a project.
The infrastructure bank will invest at least $35 billion from the federal government into large projects that boost economic growth, through loans, loan guarantees and equity investments.