Federal budget lacks transparency, overstates job creation, watchdog says

theglobeandmail.com
April 6, 2016
By Bill Curry

The Liberal government’s first budget is less transparent than Conservative budgets under Stephen Harper and overestimates the number of jobs that will be created, Ottawa’s non-partisan fiscal watchdog says.

The Parliamentary Budget Officer takes issue with the budget’s claim that its package of tax cuts and spending measures will create or maintain 100,000 jobs by 2017-18. It notes that these estimates were created entirely by the government, while the previous Conservative government subjected similar estimates to an outside review in its 2009 stimulus budget.

According to the PBO’s own analysis, the jobs estimate should be 60,000, not 100,000.

The PBO report is unwelcome news for a government that came to power with a pledge to be more open, particularly when it comes to how budget numbers are presented.

On fiscal transparency, Mostafa Askari, the assistant Parliamentary Budget Officer, says the 2016 budget is a step backward on several fronts.

“What they have provided is not sufficient. It’s certainly much less than what was produced over the last 15 budgets that I remember,” he said, referring to a period that covers both the Harper and past Liberal governments.

In the report, the PBO takes issue with several points related to how the budget numbers are presented.

The removal of key financial data from this year’s budget has limited the office’s ability to report to MPs and makes it harder for parliamentarians to review government spending, according to the PBO.

The PBO is critical of the government’s decision to add $6-billion a year in risk adjustments to its forecasts, concluding that this is “excessive” and is not presented in a clear and transparent way. As a result, the PBO says the forecast deficit of $29.4-billion for 2016-17 will likely end up being smaller than that, barring unforeseen events.

Budget forecasts for revenue and expenses are based on an average of private-sector growth forecasts for the economy. Previous budgets have often reduced revenue forecasts by about $3-billion as an adjustment for risk.

The 2016 budget does not have a clear line that shows any adjustment for risk. Instead, the growth forecasts for Canadian GDP were reduced by $40-billion a year, which has the effect of reducing revenue forecasts by $6-billion a year.

Prime Minister Justin Trudeau was elected on a campaign platform that specifically promised to “raise the bar on fiscal transparency.”

Speaking in Montreal Wednesday, Mr. Trudeau defended the government’s approach. He said private-sector forecasts have frequently overestimated economic growth and the budget aims to take that into account.

“We want to be transparent and open about this,” he said.

The PBO does acknowledge the 2016 budget contains an element of additional transparency by showing how changes in economic growth would change the projected bottom line.

The office, however, criticizes the fact that the budget ended the previous practice of projecting the cost of various policies over five years. Instead, the cost of specific budget measures are presented over a two-year horizon. The budget does project the cost of the government’s overall program over five years.

The Liberal platform promised to improve transparency by increasing the PBO’s budget and making the office fully independent of government. However, the issue was not mentioned in the March 22 budget.

“We have not heard anything in terms of what their plans are for the PBO yet,” Mr. Askari said.

Conservative finance critic Lisa Raitt said the Liberals are not living up to their own promises.

“I’m very concerned with a significant 40-per-cent drop in terms of how many jobs that PBO thinks they’re going to create,” she said. “So let’s see the real plan for creating the jobs because that’s what Canadians do care about. If they’re going to spend $30-billion and [have] a deficit, let’s see what they’re going to get out of it.”