November 29, 2012 / 6:13 PM / 5 years ago

Canada budget watchdog says bigger deficit numbers inexplicable

OTTAWA (Reuters) - Canada’s budget watchdog said the Conservative government appears to have overstated its budget deficit by an average of C$4.7 billion ($4.74 billion) a year for the current and next three fiscal years.

Finance Minister Jim Flaherty revised the budget outlook on November 13, projecting federal budget deficits for this year and the following three years that were on average C$5.8 billion bigger than the government estimated in its March budget. He also said the federal government would wipe out a small deficit in 2016-17, a year later than previously forecast.

But both Flaherty and Prime Minister Stephen Harper have since contradicted their own report, pledging to balance the books before the next election in 2015.

The finance minister has said the different is due to a C$3 billion cushion in its latest forecasts that won’t be used if the economy performs well.

In a report assessing Ottawa’s revisions, the parliamentary budget officer (PBO) said on Thursday the picture painted by the government is more pessimistic than is warranted.

Its calculations - based on the same forecasts the government uses - showed higher revenue and lower program expenses than was estimated by the government.

The report stressed, however, that the federal Department of Finance did not provide the PBO with enough information about its underlying assumptions and methods for it to properly explain the difference.

“Given the changes to the government’s economic assumptions, and excluding the impact of policy decisions, the changes to Finance Canada’s fiscal outlook since Budget 2012 are somewhat larger than what its sensitivities would suggest,” the report said.

The “sensitivities” refer to the estimated impact on revenue and expenses of downward revisions to nominal gross domestic product and interest rates.

The PBO said that according to its calculations, the budget balance would be C$1.1 billion lower this year and a similar amount over the next three years, compared with Flaherty’s report showing an average $5.8 billion downward revision

The PBO speculated that Ottawa’s projections on the effective tax rate may be different from its own.

Some pundits have speculated that Harper wants to deliver a good news “surprise” on the budget by 2015, which might help the Conservatives get re-elected that year.

“Finance Canada does not provide sufficient information and data related to its assumptions and methods ... which would be required to conduct a thorough assessment,” the PBO said.

“PBO believes that providing this information and data would significantly improve budget transparency.”

A finance department spokesman said the government would likely comment later on Thursday.

Kevin Page, who heads the PBO, has been clashing for months with the government over its refusal to hand over certain data and information that he says he needs to fulfill his mandate to advise lawmakers on budget matters.

The government says the information he wants is confidential and that Page is overstepping his bounds.

Last week Page and Thomas Mulcair, leader of the New Democratic Party - the main opposition - asked the federal court to settle the dispute by clarifying the PBO’s mandate.

Editing by Steve Orlofsky

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