Archived - The Fiscal Monitor - November 2019

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Highlights

November 2019

There was a budgetary deficit of $2.7 billion in November 2019, compared to a deficit of $2.2 billion in November 2018. Revenues increased by $0.8 billion, or 3.1%, largely reflecting an increase in income tax revenues. Program expenses increased by $1.3 billion, or 5.2%, reflecting increases in major transfers to persons and major transfers to other levels of government. Public debt charges decreased by $0.1 billion, or 3.4%, reflecting in part lower monthly Consumer Price Index adjustments on Real Return Bonds.

Monthly budgetary balance

April to November 2019

For the April to November period of the 2019–20 fiscal year, the government posted a budgetary deficit of $11.8 billion, compared to a deficit of $2.1 billion reported for the same period of 2018–19. Revenues were up $5.7 billion, or 2.7%, largely reflecting an increase in personal income tax revenues. Program expenses were up $14.8 billion, or 7.5%, reflecting increases in major transfers to persons, major transfers to other levels of government and direct program expenses. Public debt charges increased by $0.6 billion, or 3.5%, largely reflecting higher Consumer Price Index adjustments on Real Return Bonds and a higher average effective interest rate on the stock of Government of Canada treasury bills.

Year-to-date budgetary balance

Revenues

Revenues in November 2019 totalled $26.2 billion, up $0.8 billion, or 3.1%, from November 2018.

• Tax revenues increased by $0.4 billion, or 1.8%.
• Fuel charge proceeds assessed under the federal carbon pollution pricing system totalled $0.2 billion.
• Employment Insurance (EI) premium revenues increased by $0.1 billion, or 8.5%.
• 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 7.6%.

For the April to November period of 2019–20, revenues were $215.7 billion, up $5.7 billion, or 2.7%, from the same period the previous year.

• Tax revenues increased by $3.7 billion, or 2.1%, driven largely by growth in personal income tax revenues. The increase in tax revenues for the April to November period includes $28 million from the federal portion of assessed cannabis excise duties.
• Assessed fuel charge proceeds totalled $0.9 billion over the period.
• EI premium revenues were up $0.4 billion, or 2.9%. 
• Other revenues were up $0.8 billion, or 4.0%.

Expenses

Program expenses in November 2019 were $27.2 billion, up $1.3 billion, or 5.2%, from November 2018. 

• Major transfers to persons, consisting of elderly, EI and children's benefits, were up $0.9 billion, or 11.8%. This is primarily due to an increase in EI benefits of $0.6 billion, or 50.0%, attributable to a change in the timing of payments to provinces and territories under the Labour Market Development Agreements, which fund skills training and employment assistance. In addition, elderly benefits increased by $0.3 billion, or 5.6%, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. Children's benefits were up $0.1 billion, or 2.5%.
• Major transfers to other levels of government were up $0.4 billion, or 6.6%, primarily reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories, and an increase in payments under home care and mental health transfers.  
• Direct program expenses were down $15 million, or 0.1%. Within direct program expenses:
  • Fuel charge proceeds returned reflected $7 million in payments under the federal carbon pollution pricing system.
  • Other transfer payments decreased by $0.1 billion, or 2.5%.
  • Other direct program expenses, consisting of operating expenses of the government's departments, agencies, and consolidated Crown corporations and other entities, increased by $0.1 billion, or 0.9%.

Public debt charges were down $0.1 billion, or 3.4%, reflecting in part lower monthly Consumer Price Index adjustments on Real Return Bonds.  

For the April to November period of 2019–20, program expenses were $211.0 billion, up $14.8 billion, or 7.5%, from the same period the previous year.

• Major transfers to persons were up $2.4 billion, or 3.7%. Elderly benefits increased by $1.8 billion, or 5.0%, reflecting growth in the elderly population and changes in consumer prices. EI benefits increased by $0.3 billion, or 2.8%. Children's benefits were up $0.3 billion, or 1.6%.
• Major transfers to other levels of government were up $4.6 billion, or 9.4%, reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories; an increase in Gas Tax Fund transfers due to year-over-year timing differences; an increase in payments under home care and mental health transfers; and, $1.9 billion in transfers under the new Hibernia Dividend Backed Annuity Agreement reached on April 1, 2019 between Canada and Newfoundland and Labrador.
• Direct program expenses were up $7.8 billion, or 9.2%. Within direct program expenses:
  • Fuel charge proceeds returned totalled $1.3 billion.
  • Other transfer payments increased by $1.1 billion, or 4.4%, reflecting increases across a number of departments.
  • Other direct program expenses increased by $5.4 billion, or 9.2%, reflecting in part an increase in personnel costs.

Public debt charges increased by $0.6 billion, or 3.5%, largely reflecting higher Consumer Price Index adjustments on Real Return Bonds and a higher average effective interest rate on the stock of Government of Canada treasury bills.

The following table presents total expenses by main object of expense.

Revenues and expenses (April to November 2019)

Financial requirement of $17.6 billion for April to November 2019

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 $11.8 billion and a requirement of $5.8 billion from non-budgetary transactions, there was a financial requirement of $17.6 billion for the April to November 2019 period, compared to a financial requirement of $11.9 billion for the same period the previous year.

Net financing activities up $17.2 billion

The government financed this financial requirement of $17.6 billion by decreasing cash balances by $0.4 billion and increasing unmatured debt by $17.2 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds. 

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 November 2019 stood at $39.6 billion, down $0.6 billion from their level at the end of November 2018. 

Federal debt

The federal debt, or accumulated deficit, is the difference between the government's total liabilities and total assets. The year-over-year change in the accumulated deficit reflects the year-to-date budgetary balance plus other comprehensive income or loss. Other comprehensive income or loss represents certain unrealized gains and losses on financial instruments and certain actuarial gains and losses related to pensions and other employee future benefits reported by enterprise Crown corporations and other government business enterprises. 

The accumulated deficit increased by $12.9 billion over the April to November 2019 period, reflecting the $11.8-billion budgetary deficit as well as $1.1 billion in other comprehensive losses.

Notes

1. The Fiscal Monitor is a report on the consolidated financial results of the Government of Canada, prepared monthly by the Department of Finance Canada. The government is committed to releasing The Fiscal Monitor on a timely basis in accordance with the International Monetary Fund's Special Data Dissemination Standard Plus, which is designed to promote member countries' data transparency and promote the development of sound statistical systems.
2. The financial results reported in The Fiscal Monitor are drawn from the accounts of Canada, which are maintained by the Receiver General and used to prepare the annual Public Accounts of Canada.
3. The Fiscal Monitor is generally prepared in accordance with the same accounting policies as used to prepare the government's annual consolidated financial statements, which are summarized in Section 2 of Volume I of the Public Accounts of Canada, available through the Public Services and Procurement Canada website.
4. The financial results presented in The Fiscal Monitor have not been audited or reviewed by an external auditor.
5. There can be substantial volatility in monthly results due to the timing of revenue receipts and expense recognition. For instance, a large share of government spending is typically reported in the March Fiscal Monitor.
6. The April to March results reported in The Fiscal Monitor are not the final results for the fiscal year as a whole. The final results are published in the annual Public Accounts of Canada and incorporate post-March end-of-year adjustments made once further information becomes available, including the accrual of tax revenues reflecting assessments of tax returns and valuation adjustments for assets and liabilities. Post-March adjustments may also include the accrual of measures announced in the budget that are recorded upon receipt of Royal Assent of enabling legislation.
7. A Condensed Statement of Assets and Liabilities is included in the monthly Fiscal Monitor following the finalization and publication of the government's financial results for the preceding fiscal year, typically in the fall.
8. Accounting Change and Restatement
   
   The monthly financial results for 2018–19 presented for comparative purposes in The Fiscal Monitor have been restated to reflect the following change in accounting policy.
   
   Canadian Commercial Corporation
   
   During 2018–19, the Canadian Commercial Corporation determined that it acts as an agent in its commercial trading transactions. As a result, the revenues and expenses and related asset and liability balances arising from these transactions are no longer consolidated in the government's financial results. This accounting change has no net impact on the budgetary balance, as the decrease in the government's revenues is offset by an equal reduction in expenses. Similarly, this change has no net impact on the federal debt, as the decrease in the government's assets is offset by an equal reduction in its liabilities.
   
   The following table provides an overview of this restatement of the 2018–19 financial results.

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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.

January 2020