Archived - The Fiscal Monitor A publication of the Department of Finance: 2016-10

October 2016: budgetary deficit of $1.5 billion

There was a budgetary deficit of $1.5 billion in October 2016, compared to a deficit of $0.9 billion in October 2015. Revenues increased by $2.5 billion, or 11.3 per cent, reflecting increases in all major revenue streams. Program expenses increased by $3.1 billion, or 15.0 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges decreased by $0.1 billion, or 3.1 per cent.

April to October 2016: budgetary deficit of $9.3 billion

For the April to October 2016 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $9.3 billion, compared to a surplus of $0.6 billion reported in the same period of 2015–16. Revenues were up $0.6 billion, or 0.4 per cent, as increases in income tax revenues and Employment Insurance (EI) premium revenues were partially offset by decreases in other revenues and excise taxes and duties. Program expenses were up $12.0 billion, or 8.2 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $1.4 billion, or 8.9 per cent, reflecting a lower average effective interest rate on the stock of interest-bearing debt.

There was a budgetary deficit of $1.5 billion in October 2016, compared to a deficit of $0.9 billion in October 2015.

Revenues in October 2016 totalled $24.5 billion, up $2.5 billion, or 11.3 per cent, from October 2015.

• Personal income tax revenues were up $0.8 billion, or 7.6 per cent.
• Corporate income tax revenues were up $0.5 billion, or 16.0 per cent.
• Non-resident income tax revenues were up $0.3 billion, or 95.2 per cent.
• Excise taxes and duties were up $0.6 billion, or 14.1 per cent, largely due to a $0.6-billion increase in Goods and Services Tax (GST) revenues. Customs import duties and energy taxes increased by $5 million and $1 million, respectively, while other excise taxes and duties decreased by $21 million.
• EI premium revenues were up $18 million, or 1.5 per cent.
• 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 up $0.2 billion, or 9.7 per cent.

Program expenses in October 2016 were $24.0 billion, up $3.1 billion, or 15.0 per cent, from October 2015.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $1.0 billion, or 15.4 per cent. Elderly benefits increased by $0.3 billion, or 6.9 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.3 billion, or 25.1 per cent. Children’s benefits increased by $0.4 billion, or 29.2 per cent, reflecting the new Canada Child Benefit, which replaced the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 2016.
• 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 $0.4 billion, or 6.4 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 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 $1.8 billion, or 20.1 per cent. Within direct program expenses:
  • Transfer payments increased by $1.2 billion, or 46.6 per cent, reflecting increases across several departments, including claims expenses, social housing assistance and infrastructure transfers.
  • Other direct program expenses increased by $0.6 billion, or 9.5 per cent, due in large part to an increase in pension and other future benefit expenses based on the Government’s latest actuarial valuations, as well as an increase in operating expenses of Crown corporations.

Public debt charges were down $0.1 billion, or 3.1 per cent, reflecting a lower average effective interest rate on the stock of interest-bearing debt.

For the April to October 2016 period of the 2016–17 fiscal year, there was a budgetary deficit of $9.3 billion, compared to a surplus of $0.6 billion reported during the same period of 2015–16.

Revenues increased by $0.6 billion, or 0.4 per cent, to $163.9 billion.

• Personal income tax revenues were up $1.3 billion, or 1.7 per cent.
• Corporate income tax revenues were up $0.4 billion, or 1.7 per cent.
• Non-resident income tax revenues were up $0.1 billion, or 1.8 per cent.
• Excise taxes and duties were down $0.1 billion, or 0.4 per cent. Energy taxes and other excise taxes and duties were each down $0.1 billion, while customs import duties were down $9 million. These decreases were partially offset by a $0.1-billion, or 0.4-per-cent, increase in GST revenues.
• EI premium revenues were up $0.2 billion, or 1.6 per cent, reflecting growth in earnings.
• Other revenues were down $1.2 billion, or 6.7 per cent. This decline largely reflects the $2.1-billion gain realized on the sale of the Government’s remaining holdings of General Motors common shares in April 2015, offset in part by growth in other components in the current year, including interest and penalties revenues.

For the April to October 2016 period, program expenses were $158.8 billion, up $12.0 billion, or 8.2 per cent, from the same period the previous year.

• Major transfers to persons were up $4.2 billion, or 9.0 per cent. Elderly benefits increased by $1.5 billion, or 5.6 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $1.0 billion, or 9.1 per cent. Children’s benefits were up $1.8 billion, or 17.4 per cent, largely reflecting the new Canada Child Benefit.
• Major transfers to other levels of government were up $1.9 billion, or 4.9 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 up $5.8 billion, or 9.6 per cent. Within direct program expenses:
  • Transfer payments increased by $2.7 billion, or 15.8 per cent, reflecting increases across several departments, including the accrual of liabilities for disaster assistance and claims expenses, as well as social housing assistance and infrastructure transfers.
  • Other direct program expenses increased by $3.1 billion, or 7.1 per cent, due in large part to an increase in pension and other future benefit expenses based on the Government’s latest actuarial valuations, as well as an increase in operating expenses of Crown corporations.

Public debt charges decreased by $1.4 billion, or 8.9 per cent, reflecting a lower average effective interest rate on the stock of interest-bearing debt.

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 $9.3 billion and a requirement of $13.0 billion from non-budgetary transactions, there was a financial requirement of $22.3 billion for the April to October 2016 period, compared to a financial requirement of $15.2 billion for the same period the previous year.

The Government financed this financial requirement of $22.3 billion and increased cash balances by $5.4 billion by increasing unmatured debt by $27.8 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 October 2016 stood at $43.3 billion, up $2.7 billion from their level at the end of October 2015.

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

For inquiries about this publication, contact Bradley Recker at 613-369-5667.

December 2016