How Will The Conservative Numbers Add Up?

April 8, 2011

1-minute read

If you head to the end of the Conservative platform, you will find that they plan to add almost $1 Billion in net new spending/tax cuts  in 2014-15, rising to $3.1 Billion in 2015-16, while still balancing the Budget in 2014-15.

The new spending is on income splitting for families with children, fitness tax credits, new spending related to the crime agenda, and some other items. While contingent on balancing the Budget, a real political commitment has been made.

Does it all add up? Not without some draconian spending cuts that we won't find out about till after the election.

Former senior finance official Peter Devries - who probably knows more than anyone about the federal books - believes that the deficit in 2014-15 will, in fact, be $12.6 Billion as opposed to the $0.3 Billion forecast in the March Budget. He cites a number of reasons, including the risk of further equalization payments to Ontario, and  the lack of detail we have been given re assumed administrative savings which he thinks will be very hard to realize. The Parliamentary Budget Officer has also been skeptical that the Budget will be close to balance in 2014-15.

Not to worry, the Conservatives implied in the March Budget. A new round of  cuts set to yield $4 Billion in 2014-15 would be enough to close the small projected deficit and even produce a modest surplus.

That $4 Billion in unspecified cuts was not included in the Budget fiscal track, but it does show up in the Conservative Platform as the "revised fiscal track."

Of course, we get absolutely no details on how $4 Billion will be cut from federal spending. It represents a 5% cut on the base for review, on top of the 5% already cut from that base through strategic reviews (and we don''t have the details of the last round of that exercise.)  Cuts that deep will not be achieved from purely administrative savings, but will require cuts to programs and services.  Those potentially affected include pretty well everything except transfers to people (not that we should assume EI is safe) and transfers to the provinces. (The Prime Minister has now promised that health transfers will continue to grow at 6% per year.)

The key point is that the Conservatives have now promised to balance the Budget AND to proceed with their preferred new measures in 2014-15, based on optimistic assumptions of the underlying balance, AND  also based on a major new round of spending cuts.

I think we should be very worried, not that the Conservatives will fail to deliver on their promises of a balanced budget plus tax cuts and action on their stated priorities, but that the consequence will be draconian cuts to federal programs to pay for the whole exercise.

That is, of course, why they "need" a strong and stable majority.

Andrew Jackson is Chief Economist with the Canadian Labour Congress and a CCPA Research Associate.

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