ECONOMIST: Canada's Budget: Something doesn't add up

[Oscar]

THE ECONOMIST: Canada’s budget: Something doesn’t add up

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The process for approving the budget is broken

Feb 15th 2014 | TORONTO |

CENTRAL to the sovereignty of parliament is that it, not the executive, should ultimately control the public purse. Jim Flaherty, Canada’s finance minister, appeared to adhere to this principle when he presented a budget on February 11th which showed that the deficit, which reached a whopping C$55.6 billion ($48.6 billion) in 2009, will be eliminated next year and transformed into a surplus of C$6.4 billion during the 2015-16 fiscal year, just in time for an election.

The leaders of the opposition parties did their bit by criticising the budget. So will Canadian MPs in the coming weeks as they debate and vote on budget-implementation bills and spending estimates.

So much for appearances. Like many finance ministers in parliamentary democracies, Mr Flaherty knows the Conservative majority in the House of Commons will approve his revenue and spending plans even if they don’t understand them. But Canada’s budget process is designed to hamper rigorous scrutiny. Before he stepped down last year as the country’s first parliamentary-budget officer, Kevin Page said most MPs and civil servants would agree that “the system is broken”.

The opposition parties blame the ruling Conservatives for the mess, but things started to go awry when the Liberals were in power. Unlike the Australian government, which presents its budget and its spending estimates on the same day, the government in Canada presents these documents separately. In 2003 a Liberal finance minister changed the budget to full accrual accounting, which recognises revenues and costs when they are earned and incurred. But the more detailed spending estimates were still accounted for on a cash basis, which registers when money is actually paid in and out. As a result, some of the figures Mr Flaherty mentioned in his budget speech will appear as different amounts in the spending estimates. Some will not appear at all. A reconciliation of the two sets of figures no longer appears.

Scrutiny is further hampered by the government’s taste for omnibus bills that lump legislative changes stemming from the budget together with other measures it seeks. Stephen Harper, the prime minister, railed against Liberal omnibus bills in opposition but has taken them to new extremes in office. The 2010 budget-implementation bill, for example, came in at 883 pages and 2,221 clauses, all of which were supposed to be reviewed by MPs.

Few people noticed in time in 2007 when the government took away parliament’s power to authorise borrowing and gave it to the cabinet—because the move was buried in an omnibus bill. (The paralysing stand-offs over the debt ceiling in the United States can no longer happen in Canada.) The second of two omnibus bills in 2013 contained changes to the way Supreme Court justices are selected, an inclusion some thought was illegal because it was not mentioned in the budget and had no fiscal impact.

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