Archived - The Fiscal Monitor A publication of the Department of Finance: 2014-07

July 2014: budgetary deficit of $1.2 billion

There was a budgetary deficit of $1.2 billion in July 2014, compared to a deficit of $2.0 billion in July 2013. Revenues increased by $1.9 billion, or 9.5 per cent, due mainly to higher personal and corporate income tax revenues. Program expenses increased by $1.1 billion, or 5.8 per cent, largely reflecting increases in major transfers to other levels of government and direct program expenses. Public debt charges increased by $14 million, or 0.6 per cent.

April to July 2014: budgetary deficit of $0.8 billion

For the April to July 2014 period of the 2014–15 fiscal year, the Government posted a budgetary deficit of $0.8 billion, compared to a deficit of $4.5 billion reported in the same period of 2013–14.

Revenues were up $4.4 billion, or 5.2 per cent, reflecting increases in tax revenues and Employment Insurance (EI) premium revenues, which were partially offset by lower other revenues. Program expenses were up $0.7 billion, or 0.9 per cent, reflecting increases in major transfers to persons and other levels of government, offset in part by a decrease in direct program expenses. Public debt charges were down $35 million, or 0.3 per cent.

There was a budgetary deficit of $1.2 billion in July 2014, compared to a deficit of $2.0 billion in July 2013.

Revenues increased by $1.9 billion, or 9.5 per cent, to $21.7 billion.

• Personal income tax revenues were up $0.6 billion, or 6.1 per cent.
• Corporate income tax (CIT) revenues were up $1.6 billion, reflecting timing issues which lowered July 2013 CIT revenues.
• Non-resident income tax revenues were down $31 million, or 6.4 per cent.
• Excise taxes and duties were down $0.4 billion, or 8.0 per cent. This decline is mostly due to a $0.5-billion, or 16.0-per-cent, decrease in Goods and Services Tax (GST) revenues, reflecting timing issues which increased July 2013 GST revenues. Energy taxes were down $3 million, customs import duties were up $25 million, and other excise taxes and duties were up $0.1 billion.
• EI premium revenues were up $0.1 billion, or 3.8 per cent, reflecting growth in earnings.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, revenues from sales of goods and services, returns on investments, net foreign exchange revenues and miscellaneous revenues, were down $20 million, or 1.0 per cent.

Program expenses in July 2014 were $20.5 billion, up $1.1 billion, or 5.8 per cent, from July 2013.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, decreased by $37 million, or 0.6 per cent. Elderly benefits increased by $0.2 billion, or 4.6 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $0.2 billion, or 13.2 per cent. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, were unchanged from the previous year.
• Major transfers to other levels of government consist of federal transfers in support of health and other social programs (primarily the Canada Health Transfer and the Canada Social Transfer), fiscal arrangements and other transfers (Equalization, transfers to the territories, as well as a number of smaller transfer programs), transfers to provinces on behalf of Canada’s cities and communities, and the Quebec Abatement. Major transfers to other levels of government increased by $0.5 billion, or 10.5 per cent, reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories, as well as an increase in transfers to Canada’s cities and communities, offset in part by a decrease in total transfer protection payments.
• Direct program expenses include transfer payments to individuals and other organizations not included in major transfers to persons and other levels of government, and other direct program expenses, which consist of operating expenses of National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $0.6 billion, or 7.6 per cent, from the previous year. Within direct program expenses:
  • Transfer payments increased by $0.1 billion, or 4.4 per cent.
  • Other direct program expenses increased by $0.5 billion, or 8.8 per cent, largely reflecting an increase in claims expenses.

Public debt charges increased by $14 million, or 0.6 per cent.

For the April to July 2014 period of the 2014–15 fiscal year, there was a budgetary deficit of $0.8 billion, compared to a deficit of $4.5 billion reported during the same period of 2013–14.

Revenues increased by $4.4 billion, or 5.2 per cent, to $88.9 billion.

• Personal income tax revenues were up $1.5 billion, or 3.6 per cent.
• Corporate income tax revenues were up $2.1 billion, or 21.6 per cent.
• Non-resident income tax revenues were down $14 million, or 0.8 per cent.
• Excise taxes and duties were up $0.6 billion, or 4.1 per cent. GST revenues, customs import duties and other excise taxes and duties each increased by $0.2 billion. Energy taxes increased by $49 million.
• EI premium revenues were up $0.3 billion, or 4.1 per cent, reflecting growth in earnings.
• Other revenues were down $0.2 billion, or 2.0 per cent.

For the April to July 2014 period, program expenses were $79.6 billion, up $0.7 billion, or 0.9 per cent, from the same period the previous year.

• Major transfers to persons were up $0.6 billion, or 2.6 per cent. Elderly benefits increased by $0.5 billion, or 3.9 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.2 billion, or 3.2 per cent, and children’s benefits were down $0.1 billion, or 2.1 per cent.
• Major transfers to other levels of government were up $0.8 billion, or 3.7 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
• Direct program expenses were down $0.7 billion, or 2.1 per cent. Within direct program expenses:
  • Transfer payments decreased by $0.8 billion, or 7.8 per cent, reflecting year-over-year timing differences as well as a decrease in expenses associated with the revaluation of the Government’s liability to Ontario for the province’s one-third participation in the value of the Government’s equity holdings in General Motors.
  • Other direct program expenses increased by $0.1 billion, or 0.4 per cent.

Public debt charges decreased by $35 million, or 0.3 per cent

The budgetary balance is presented on an accrual basis of accounting, recording government revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. In contrast, the financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government’s investing activities through its acquisition of capital assets and its loans, financial investments and advances, as well as from other activities, including payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

With a budgetary deficit of $0.8 billion and a requirement of $5.8 billion from non-budgetary transactions, there was a financial requirement of $6.6 billion for the April to July 2014 period, compared to a financial requirement of $18.2 billion for the same period the previous year.

The Government financed this financial requirement of $6.6 billion and increased cash balances by $7.5 billion through an increase in unmatured debt of $14.1 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds and treasury bills.

The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of July 2014 stood at $33.6 billion, down $0.6 billion from their level at the end of July 2013.

Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

For inquiries about this publication, contact Glenn Purves at 613-369-5655.

September 2014