Introduction - 2017–18 Estimates

This Document

Part I of this document, the Government Expenditure Plan, gives an overview of spending requirements for 2017–18 and comparisons to previous fiscal years.

Part II of this document, the Main Estimates, provides information on estimated spending by each federal organization requesting authority to spend through a 2017-18 appropriation bill.

Voted Expenditures

These Estimates support the government’s request to Parliament for authority to expend through annual appropriations:

• $102.1 billion for budgetary expenditures – operating and capital expenditures; transfer payments to other levels of government, organizations or individuals; and payments to Crown corporations; and
• $26.7 million for non-budgetary expenditures – net outlays and receipts related to loans, investments and advances, which change the composition of the financial assets of the Government of Canada.

These voted expenditures require annual approval from Parliament which is sought through an appropriation bill. The bill provides the specific wording that governs the purpose and conditions under which expenditures can be made and the funds subject to these terms and conditions.

Statutory Expenditures

Forecasts of statutory expenditures represent payments to be made under legislation previously approved by Parliament. Forecasts of statutory spending by departments are included in these Estimates to provide a more complete picture of their total estimated expenditures. Of these forecasts, $155.8 billion is for budgetary expenditures including the cost of servicing the public debt. The $155.8 billion does not include payments from the Employment Insurance Operating Account or expenditures legislated through the Income Tax Act (such as the Canada Child Benefit).

Significant changes in statutory spending include:

• increases in major transfer payments, most notably elderly benefits and the Canada Health Transfer;
• the replacement of the Universal Child Care Benefit and the Canada Child Tax Benefit by the Canada Child Benefit in July 2016;
• a decrease in interest on unmatured debt and other interest costs; and
• a decrease in employee benefits plan costs as the employer share of pension contributions decreases and a lower Employment Insurance Premium Rate comes into effect for 2017.

Forecast recoveries for statutory loans, investments and advances are expected to exceed cash outlays by $246.2 million.

The following graphs present the voted and statutory components of Main Estimates and a comparison of Main Estimates over the last ten years of Main Estimates.

Composition of Estimates

The majority of expenditures in 2017–18 Main Estimates are transfer payments – payments made to other levels of government, individuals and other organizations. Transfer payments make up approximately 63.7% of expenditures or $164.3 billion. Operating and capital expenditures account for approximately 28.0% of expenditures or $72.1 billion, while public debt charges are approximately 8.3% of expenditures or $21.5 billion.

Public Debt Charges

Total interest costs are approximately $21.5 billion, a projected decrease of $1.3 billion or 5.7% from previous Main Estimates and $1.2billion less than actual expenditures for 2015–16. The decrease largely reflects a decline in interest rates forecasted by private sector economists, consistent with the 2016 Fall Economic Statement, as well as a decrease in the average Government of Canada long-term bond rate that is used to calculate interest on the public sector pension obligations pertaining to service prior to April 1, 2000. Public debt charges are comprised of interest on unmatured debt of $14.9 billion and other interest costs of $6.6 billion. Interest on unmatured debt represents the interest resulting from certificates of indebtedness issued by the Government of Canada that have not yet become due. Other interest costs include interest on liabilities for federal public service pension plans, deposit and trust accounts and other specified purpose accounts.

Major transfer payments

Major transfer payments – significant transfers to other levels of government and transfers to persons – account for a large proportion of the government’s total expenditure framework.

Forecast expenditures for major transfer payments are included in the total budgetary Main Estimates of the responsible organization, with two exceptions. One is Employment Insurance, which is reported through the Employment Insurance Operating Account and is separate from any of the appropriated organizations listed in these Main Estimates. The other exception is Children’s Benefits, details of which are included in the Department of Finance’s Tax Expenditures and Evaluations report.

As presented in the table, major statutory transfers to other levels of government are projected to total $70.0 billion in 2017–18, an increase of $2.0 billion over the previous year’s Main Estimates.

The Canada Health Transfer (CHT) is a federal transfer provided to provinces and territories in support of health care. As of 2014–15, the CHT is distributed on an equal per capita cash basis. Starting in 2017–18, growth of the CHT is based on a 3-year moving average of nominal gross domestic product, with funding guaranteed to increase by at least 3% per year. CHT support is subject to the five conditions of The Canada Health Act: universality; comprehensiveness; portability; accessibility; and public administration, and the prohibitions against extra-billing and user fees. In 2017–18, the CHT will increase by nearly $1.1 billion from the 2016–17 amount to a total of $37.1 billion.

Fiscal Equalization refers to unconditional transfer payments to enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. These payments will be $18.3 billion in 2017–18, an increase of $373.2 million from the Main Estimates 2016–17, and $912.3 million more than 2015–16 actual expenditures. The growth path of Equalization is based on a three-year moving average of gross domestic product (GDP) growth. The increase of $373.2 million in 2017–18 represents the legislated annual program growth calculated by multiplying the 2016–17 level of $17.9 billion by the 2.09 per cent escalator derived using the relevant GDP data.

The Canada Social Transfer is a federal transfer to provinces and territories in support of social assistance and social services, post-secondary education and programs for children. The legislated 3% growth rate results in an increase of $400.4 million to $13.7 billion in 2017–18.

The Territorial Formula Financing Program provides unconditional federal transfers that allow territorial governments to provide their residents with public services comparable to those offered by provincial governments, at comparable levels of taxation. The transfers are based on a formula that fills the gap between a proxy of territorial expenditure requirements and a territory’s revenue-raising capacity. These payments will be $3.7 billion in 2017–18, $145.5 million more than the 2016–17 Main Estimates and $78.9 million more than the updated amount for 2016–17 shown in Supplementary Estimates (B).

The Gas Tax Fund provides predictable, long-term, stable funding for Canadian municipalities to help them build and revitalize their local public infrastructure while creating jobs and long term prosperity. Beginning in 2014–15, the Gas Tax Fund became a statutory payment. Prior to the 2014–15 fiscal year, payments were approved through Appropriation Acts (Voted).

The Additional Fiscal Equalization Offset Payment to Nova Scotia is a payment related to its 2005 Offshore Accord. This Accord guaranteed the province that its Equalization payments would not be reduced due to offshore oil and gas revenues that entered the Equalization formula. This is derived by applying the Equalization formula with and without offshore oil and gas revenues and comparing the resulting Equalization payments. The province will receive $20.0 million for 2017–18, a decrease of $13.3 million compared with the amount for 2016–17.

Additional Fiscal Equalization Payments to Nova Scotia are payments related to its 2005 Offshore Accord. Following the introduction of a new formula for Equalization in 2007, Nova Scotia was guaranteed that, on a cumulative basis beginning in 2008–09 over the lifetime of the Accord, the new formula would not reduce its Equalization payments and 2005 Offshore Accord payments when compared with what the province would have received under the formula that was in place when it signed its 2005 Offshore Accord. For 2017–18, the forecast recovery of $27.9 million is $43.9 million lower than the forecast in the 2016–17 Main Estimates and $38.5 million lower than the official determination of $10.6 million in the 2016–17 Supplementary Estimates (C) due to updated data entering the formula.

The Youth Allowance Recovery relates to tax points transferred to the province of Quebec for the Youth Allowance program, which has since expired. The equivalent value of the tax point reduction is recovered each year from the province of Quebec. The change in recoveries for the Youth Allowances Recovery Program is entirely due to year-over-year changes to the value of federal personal income taxes, the recovery being a percentage of these taxes. For 2017–18, the forecast recovery of $888.7 million is $2.0 million lower than the forecast in the 2016–17 Main Estimates and $49.6 million higher than that in the 2016–17 Supplementary Estimates (C) due to higher forecast levels of federal personal income taxes.

Alternative Payments for Standing Programs represent recoveries from Quebec of an additional tax point transfer above and beyond the tax point transfer computed under the Youth Allowances Recovery. The change in recoveries for the Alternative Payments for Standing Programs is entirely due to year-over-year changes to the value of federal personal income taxes, the recovery being a percentage of these taxes. For 2017–18, the forecast recovery of $4.0 billion is $20.5 million lower than the forecast in the 2016–17 Main Estimates and $212.2 million higher than that in 2016–17 Supplementary Estimates (C) due to higher forecast levels of federal personal income taxes.

Transfers to Persons

Elderly benefits include Old Age Security, Guaranteed Income Supplement, and Allowance payments. Elderly benefit payments are expected to be $51.2 billion in 2017–18, an increase of $2.8 billion over the 2016–17 Main Estimates and $5.7 billion more than actual expenditures in 2015–16.

The Canada Child Benefit took effect on July 1, 2016, replacing the previous federal system of child benefits that included the Universal Child Care Benefit and the Canada Child Tax Benefit, (which included the National Child Benefit supplement, a benefit targeted to low- and modest-income families).

The Canada Child Benefit is a tax-free, income-tested benefit that provides a maximum annual benefit of $6,400 per child under the age of 6 and $5,400 per child aged 6 through 17. With the introduction of the Canada Child Benefit, the government also continues to provide an additional annual benefit of up to $2,730 per child under the age of 18 who is eligible for the disability tax credit (the Child Disability Benefit).

Under the Canada Child Benefit, low- and middle-income families receive more benefits, while those with the highest incomes (generally over $150,000) receive lower benefits than under the previous federal system of child benefits. Canada Child Benefit payments are forecasted to total $17.2 billion in 2016–17 (for the July 1, 2016 to March 31, 2017 period) and $22.9 billion in 2017–18. These amounts include the Child Disability Benefit amounts.

Payments for the Universal Child Care Benefit and “Other Children’s Benefits” (which includes the Canada Child Tax Benefit, the National Child Benefit supplement and the Child Disability Benefit) are forecast to total, in 2016–17, $2.0 billion and $2.7 billion, respectively. These measures were replaced partway through fiscal year 2016–17 (i.e. as of July 1, 2016). For 2017–18, the Universal Child Care Benefit and the Canada Child Tax Benefit will be fully replaced by the Canada Child Benefit.

Employment Insurance provides temporary financial assistance to unemployed Canadians who have lost their job through no fault of their own, while they look for work or upgrade their skills. Employment Insurance is reported through the Employment Insurance Operating Account and is separate from any of the appropriated organizations listed in these Main Estimates.

Votes

The basic structural units of the Estimates are the Votes. The following kinds of Votes appear in the Estimates:

A program expenditures vote is used when there is no requirement for either a separate “capital expenditures” vote or a “grants and contributions” vote because neither equals or exceeds $5 million. In this case, all expenditures are charged to the one vote.

An operating expenditures vote is used when there is also a requirement for either a “capital expenditures” vote or a “grants and contributions” vote or both; that is, when expenditures of either type equal or exceed $5 million.

A capital expenditures vote is used when the aggregate of capital expenditures equal or exceed $5 million. Capital expenditures are those made for the acquisition or development of items that are classified as tangible capital assets as defined by Government accounting policies. For example, the acquisition of real property, infrastructure, machinery or equipment, or for purposes of constructing or developing assets, where an organization expects to draw upon its own labour and materials, or employs professional services or other services or goods. Expenditure items in a Capital Expenditures Vote are for items that generally exceed $10,000; although an organization may select a reduced threshold to be applied to different capital classes.

A grants and contributions vote is used when grants and/or contributions expenditures equal or exceed $5 million. It should be noted that the inclusion of a grant, contribution or other transfer payment item in the Estimates imposes no requirement to make a payment, nor does it give a prospective recipient any right to the funds. It should also be noted that in the vote wording, the meaning of the word “contributions” is considered to include “other transfer payments” because of the similar characteristics of each.

A non-budgetary vote, identified by the letter “L”, provides authority for spending in the form of loans or advances to, and investments in, Crown corporations; and loans or advances for specific purposes to other governments, international organizations or persons or corporations in the private sector.

Where it is necessary to appropriate funds for a payment to a Crown corporation or for the expenditures of a legal entity that is part of a larger program, a separate vote is established. Where this is the case, a separate vote structure is established for each. A legal entity for these purposes is defined as a unit of government operating under an Act of Parliament and responsible directly to a Minister.

To support the Treasury Board in performing its statutory responsibilities for managing the government’s financial, human and materiel resources, a number of special authorities are required. These authorities are described in the vote wording found in the Proposed Schedules to the Appropriation Bill.

Information Presented in the 2017–18 Main Estimates

Changes to Government Organization and Structure

Following the tabling of the 2016–17 Main Estimates on February 23, 2016, the following changes were made:

• the National Inquiry into Missing and Murdered Indigenous Women and Girls was designated as a department for the purposes of the Financial Administration Act with the Prime Minister as the appropriate Minister (Order in Council P.C. 2016-0737);
• Schedule III of the Financial Administration Act was amended to add PPP Canada Inc. as a parent Crown corporation, and the Minister of Infrastructure, Communities and Intergovernmental Affairs was designated as the appropriate Minister (Orders in Council P.C. 2016-0678 and 2016-0679); and
• the President of the Queen’s Privy Council for Canada was designated as the appropriate Minister with respect to the Canadian Transportation Accident Investigation and Safety Board for the purposes of the Financial Administration Act (Order in Council P.C. 2016-0656).

Changes in Voted Authorities

This sub-section lists Votes which contain specific authorities that differ from those included in the previous year’s Estimates as well as new expenditure authorities appearing for the first time.

Changes in Organizational Names Used in Estimates

Changes (shown in bold text) have been made to reflect the complete name of the following organizations as shown in the Financial Administration Act:

• Atomic Energy of Canada Limited / Énergie atomique du Canada, Limitée
• Office of the Correctional Investigator of Canada / Bureau de l’enquêteur correctionnel du Canada
• The National Battlefields Commission / Commission des champs de bataille nationaux

Departmental Results Framework

Starting in 2017–18, organizations will be adopting new departmental results frameworks that describe, at a high level:

• What the department does (core responsibilities);
• What results the department is trying to achieve (departmental results); and
• How progress will be assessed (departmental indicators).

The new frameworks will replace the program alignment architecture.