Finance, Budgets And Shuffles

Finance, Budgets And Shuffles

Elizabeth May

In the last few weeks, there were a few shake-ups on the Canadian political scene. Allison Redford resigned as Premier of Alberta, the Supreme Court ruled that Stephen Harper’s new Quebec appointee did not meet the requirements of the Constitution, and his long-serving Finance Minister, playing that role since 2006, Jim Flaherty resigned.

All three events seemed to catch pundits by surprise. Regrouping, the commentaries poured in for Mr Flaherty’s ‘steady hand’ over the last eight years. It made me reflect on the nature of budgets and the real bottomline of Canada’s finances.

It was a rare privilege to hear Canada’s first Parliamentary Budget Officer Kevin Page speaking March 13, hosted by Salt Spring Forum. His commitment to public service, to evidence-based decision-making and to the institutions of Westminster Parliamentary democracy is unparalleled. He has sacrificed for these principles, in particular for his commitment to the principle that Parliament must control the public purse.

That principle is simply no longer respected. Parliament is marginalized as the Prime Minister’s Office pushes through fiscal decisions for which Parliamentarians have inadequate information.

As Parliamentary Budget Officer, Page went to court to obtain information to which Parliamentarians are entitled. He went to court to obtain the details of where cuts had been made throughout the Government of Canada and how those cuts had affected public service.

Even after the court ruled that the PBO had the right to such information, over a year later and despite continued efforts from Page’s successor at PBO, the information is still being denied.

On February 11, 2014, Jim Flaherty brought down what will be his last ‘budget’. However, that document should not be described as a budget. It did not contain the basic elements of a budget. There was no statement of total revenue, of expenditures, and no bottom-line. There was no breakdown, department by department of how the money is to be spent.

Here’s a pretty standard definition of a budget, as related to government spending:

A ‘budget’ is a plan for the accomplishment of programs related to objectives and goals within a definite time period, including an estimate of resources required, together with an estimate of resources available, usually compared with one or more past periods and showing future requirements. (Smith, Robert W. and Thomas D Lynch. (2004) Public Budgeting in America. 5th Edition. Pearson; Upper Saddle River, New Jersey. 37.)

Years ago, I used to go to the budget lock-ups and read budgets that did include such information, but no longer. I have suggested, and not lightly, that we should stop calling the spring economic propaganda device a ‘budget’. It should be called the seasonal ‘thick brochure’.

The only news media to make note of these new-style budgets was The Economist (February 15, 2014) in its editorial, ‘Canada’s budget: Something doesn’t add up.’

It opened with this sentence, ‘Central to the sovereignty of parliament is that it, not the executive, should ultimately control the public purse. It ends with this: ‘So much for sovereignty.’

The Economist quoted Kevin Page: ‘the system is broken,’ a point Mr Page made in spades in his comments on Salt Spring.

While we have ‘budgets’ that no longer meet the definition, Mr Flaherty has re-organized the revenue flow to Canada’s Consolidated Revenue accounts. Dramatically reduced have been the revenues from corporate taxation. Slashing the corporate tax rate is something about which Conservatives boast, but it has been so steeply reduced that Canada now has the lowest corporate tax rate in the industrialized world. Some may recall Mr Flaherty’s framing of these cuts as liberating the ‘job creators’. But Canada’s unemployment rate remains rather flat, at 7 %, (and twice that level for youth).

Meanwhile, corporate bank accounts are awash in so much cash that it is now labeled ‘dead money’. The term, first used by the former Governor of the Bank of Canada, Mark Carney, described over $600 billion worth of cash—equal to an astonishing 32% of our GDP. It isn’t creating jobs. It isn’t being invested in research and development. It is doing nothing.

Cutting the GST and dozens of other boutique tax-cuts have been criticised by even conservative economists. Flaherty and Harper have vastly complicated the tax code, serving up highly specific pandering cuts, eliminating what had been budgetary surpluses even before we hit the 2008 financial crisis.

There will be debates about the legacy of Mr Flaherty as Finance Minister. Largely, as is the case for all ministers in this administration, his freedom of action was severely limited by the tightly centralized PMO operation under Stephen Harper. Still, it is my hope that we can focus attention on the fundamentals. We need to return to fiscal decisions supported by evidence. Parliament must control the public purse. And we need a budget that actually allows Parliament to understand what is being planned with the nation’s finances.

Originally published in Island Tides