Liberals made public finances harder to scrutinize: watchdog

The federal budget watchdog says the Liberal government’s inaugural budget has made it more difficult for people to scrutinize public finances.

The Parliamentary Budget Office says in a new report that last month’s budget failed to separate purely discretionary decisions, like new measures and changes in planning assumptions, from shifts in economic conditions, as past governments did.

The budget office is happy with the Liberal’s decision to update Canadians more regularly about the country’s economic situation and how it will impact government spending. But the government also needs to square new numbers with ones released in the budget, so that Canadians can get a true understanding of public spending, it adds. The government has started including the possibility of the economy doing better or worse than expected in its budgets, a move the PBO says is encouraging. The information lets Canadians gauge the economy’s impact on spending plans.

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Budget officer Jean-Denis Frechette’s report also says the Liberal decision to introduce a risk adjustment that lowered the projected budgetary balance by $6 billion a year was excessive and eroded the independence of using private-sector forecasts. He says that 13 of the last 21 private-sector forecasts underpredicted Canada’s economic growth. See this chart from the PBO’s report:

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Frechette says the Liberal budget also shortened the traditional time horizon for government cost estimates to two years from five — which makes it difficult to fully assess the evolution of program costs.

The budget projects five years of deficits totalling more than $100 billion — which the government insists will boost long-term economic growth.

The budget office report also estimates the positive economic impact of those measures will be more modest than the Liberals predict — creating 86,000 jobs instead of 143,000. The watchdog notes that the reasons for the different predictions are hard to pinpoint because of how many complicated assumptions go into any economic model. But, the government could have asked academics and other private forecasters to double-check their numbers. In 2009, the government asked economists at the University of Toronto and the Conference Board of Canada to run their own analyses.

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Staff, with files from The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.