7 years for balanced budget, Tories say
Deficit would start at $168B: PBO analysis
A new costing analysis suggests that if the Conservatives formed government after this election, their budget deficit would start at $168 billion in this fiscal year and then gradually fall to $25 billion by 2025-26.
The costing was done by the Parliamentary Budget Officer and released by the Conservative Party Wednesday afternoon, just hours before the national French-language debate was scheduled to begin.
The projection uses the baseline laid out in the Liberals' most recent budget in April 2021, and relies on the Conservatives' promise to run “a disciplined government that limits the growth of future spending and makes no cuts.”
The Conservatives have promised to balance the budget within a decade of forming government, and say the PBO's analysis puts them on track to potentially reach balance in seven years. However, they argue their deficits could fall even faster than the PBO projection because the PBO's analysis doesn't include any potential boost to economic growth from Conservative stimulus measures.
The Liberal election platform, meanwhile, projects deficits starting at $156.9 billion this year and gradually falling to $32 billion in 2025-26. (In releasing their own costing estimates, the Conservatives also argued the Liberal track record shows they can't be trusted to rein in future spending and will likely run much larger deficits than this.)
In all, the PBO provided costing estimates on 31 items in the Conservative election platform that party officials say represent the “overwhelming majority” of their spending plans.
One major item that helps the Conservatives cut the deficit is replacing the Liberal child care platform with their own. While the Liberals pledged $30 billion over five years to create a national child care program with the provinces, the Conservatives say they would cancel that and instead convert the existing child care expense deduction into a refundable tax credit to cover up to 75 per cent of the cost of child care for lower income families.
By doing that, the Conservatives wipe out billions in proposed Liberal spending over the next five years, including $8.3 billion in the year 2025-26.
Party officials, speaking to media on condition they not be named, said that provinces that recently signed on to the Liberal program will still receive that federal money for the next year before it's replaced by the Conservative program.
“Beyond this fiscal year, money will be going directly to parents as opposed to going to provinces,” a party official said.
The most expensive shortterm item in the Conservative platform is the proposed changes to equalization and the “fiscal stabilization” program, which could add $9.7 billion to the deficit in the next year.
This includes giving retroactive compensation to provinces that experienced “significant reductions in resource revenues over the last seven years” — in particular, Alberta, Saskatchewan and Newfoundland. It also includes putting aside contingency funds for provinces that have seen revenues plunge during the pandemic.
Longer term, the biggest ticket item in the Conservative platform is the doubling of the Canada Workers Benefit, which will cost the federal treasury more than $5.5 billion annually starting in 2022-23. The CWB is currently a refundable tax credit that helps low-income working individuals and families; along with doubling it, the Conservatives propose to pay it as a quarterly direct deposit.
Although the Conservatives have said their promise to boost the annual growth rate of the Canada Health Transfer to at least six per cent would cost the federal government around $60 billion over 10 years, the PBO analysis shows not much of this extra money is expected to flow in the first five years. In total, this promise would add about $3.6 billion to the deficits by 2025-26.
Party officials said that because the health transfers are tied to economic growth, and the economy is coming out of a pandemic recession, the biggest growth in spending won't come until later years. “What you're seeing is the reality of compound interest ... the biggest impact of this comes in later years,” an official said.
Finally, the PBO analysis expects the Conservatives to be able to recoup billions of dollars by giving more funding to the Canada Revenue Agency to crack down on tax evasion, including “stronger enforcement of taxation for multinational firms, taxation of large corporations, international taxation, and other tax evasion.” The analysis shows this could bring in $3.5 billion in annual revenue by 2025-26.