Canada budget watchdog says bigger deficit numbers inexplicable

Thu Nov 29, 2012 1:08pm EST
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By Louise Egan

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.   Continued...