Toronto Star

Tories left us billions in red, Liberals say

Sputtering economy and Harper’s spending will lead to a $3B deficit for 2015: Minister


OTTAWA— Canadians will have to wait to find out how the Liberals plan to pay for their big-ticket spending pledges after the government said its finances are in much worse shape than expected.

An economic update released Friday by Finance Minister Bill Morneau showed the Liberals may be forced to run much larger budget deficits if they want to keep their promises to bolster Canada’s cities and provide more financial help for families.

The cause, Morneau said, was lower tax revenues from a sputtering economy, coupled with a raft of spending measures last year by former prime minister Stephen Harper.

The deficit for 2015 alone will be $3 billion rather than the $2.4-billion surplus forecast by the Conservati­ves.

Barely a month into their mandate, it’s now unclear how the Liberals will fulfil

“Theis that simplethe truth economy has not performed as well as projected in the last budget.”


their election promises.

Prime Minister Justin Trudeau’s government was elected on a promise to try to jump-start the economy by spending billions more on bridges, transit and other infrastruc­ture and increasing family support payments from Ottawa.

To do so, the Liberals said they would run annual budget deficits of up to $10 billion for three years before balancing the federal government’s books in 2019. Now that has changed.

The budget surpluses over the next few years predicted by the Conservati­ves in the spring have disappeare­d because of the hit on the economy from the oil-price plunge. Instead of budget surpluses, the Liberal government is starting very much in the hole, with budget deficits now expected until 2019.

“We wanted to show this is the situation that we’ve inherited,” Morneau, the Toronto business executive who was named to the finance portfolio on Nov. 4, told reporters. “The simple truth is that the economy has not performed as well as projected in the last budget.

“The road ahead is challengin­g, but we remain optimistic.”

He said it’s too soon to say how the Liberals can keep their promises to spend more without ushering in a period of runaway deficits.

“Our goal is to meet all the commitment­s that we’ve made to Canadians,” Morneau remarked. “We also know that Canadians want us to be prudent in moving to a budgetary balance” by 2019, he added.

Morneau said the government will lay out its plans in the 2016 budget announceme­nt: “Canadians would expect us to spend the time together with the department of finance to fully understand our fiscal situation as completely as we can and then to put our campaign promises in the budget.”

He wouldn’t say when the budget will be unveiled, but it is usually in February or March. Trudeau is expected next month to move quickly on one budget element, however — the Liberals’ pledge to reduce middle-class income taxes while increasing taxes for those making more than $200,000 annually. This measure is likely to be introduced right after Parliament convenes on Dec. 3, with the aim of having it in place by January.

On Friday, Morneau did not calculate the potential impact on Ottawa’s books of any of the Liberals’ campaign spending pledges.

But based on the new figures sup- plied by the finance department, the Liberals are in line to run a $14-billion deficit in 2016 and 2017 rather than the deficits in the $9-billion range the party forecast using prediction­s from earlier this year.

Morneau wouldn’t say if the Liberals are willing to live with higher deficits to fulfil their election promises or whether the government will be forced to make cuts to other programs.

The government is already committed to weeding out $3 billion a year in inefficien­t or outdated programs within four years, as well as an effort to pare down Ottawa’s $100 billion worth of personal and business tax breaks.

Another possible way to save money is by slowing implementa­tion of programs, a finance official pointed out.

“We committed to being prudent and fiscally careful with all of our decisions,” Morneau said. “We have said that we believe that we can find efficienci­es as we look at the overall government finances.”

After oil prices collapsed in midand late-2014, the Canadian economy took a big hit, and performed even worse than the Conservati­ves projected in Budget 2015, the update showed. It said real gross domestic product dropped by 0.8 per cent in the first three months of 2015, and 0.5 per cent in the second quarter of the year, led by the drops in the energy sector.

Economic growth in Canada resumed in the summer months after five consecutiv­e months of decline but “remains subdued,” the update said.

Neverthele­ss, the finance department sees signs of underlying strength in the U.S. economy that will be good news for Canada and its exporters. Though senior officials signalled uncertaint­y over how long it will take Canadian manufactur­ers to respond to a lower Canadian dollar, the update said that there was a strong rebound in the manufactur­ing sector, with manufactur­ing sales growing by 4 per cent and non-energy merchandis­e exports, which re- present the vast majority of Canadian exports, rebounding by 13.3 per cent.

The Conservati­ve Party disputed the updated numbers released by the finance department, pointing to the Parliament­ary Budget Office which it claimed backed the Conservati­ve campaign and spring budget projection­s of surplus.

“We certainly believe that we’re in a surplus position now and we also believe what the Parliament­ary Budget Officer said, that we’ll be in a budget surplus again at the end of this year of $1.2 billion, and prudent fiscal management will get you to that goal,” said Conservati­ve finance critic Lisa Raitt.

She and Maxime Bernier suggested the Liberal government may already have spent untold billions, given the plan to bring in Syrian refugees, and urged Morneau to “exercise restraint so we don’t have a situation where these budgets are very large because we do see a lot of instabilit­y both politicall­y and economical­ly in the world.”

 ??  ??

Newspapers in English

Newspapers from Canada