OTTAWA — It’s official, at least for now: The new Liberal government did indeed inherit a budget deficit — just a small one — from the Conservative Party.
Both Prime Minister Justin Trudeau and Finance Minister Bill Morneau have argued that Stephen Harper’s Tory government over-estimated the amount of money that would be flowing into Ottawa’s coffers in the last fiscal year, providing a tiny surplus.
According to the Finance Department’s initial reading of fiscal 2015-16 — which ended on March 31 — the country actually finished the year in the red, by nearly $2 billion.
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Still, that’s much smaller than the $5.4-billion deficit estimated in the Liberal’s March 22 budget.
It can be argued that money is still rolling in, or out, and an updated accounting of revenues and expenditures might tip the balance one way or the other.
“There’s an adjustment period, so the numbers can still change from here. There still more additional information to come,” said Craig Wright, RBC’s chief economist.
“So, we won’t get the final number probably until the fall. Sometimes it comes a bit earlier.”
That’s happened before. In September of last year — one month before the national election that brought the Liberals to power — the Finance Department revised its 2014-15 fiscal position to a $1.9-billion surplus from the previous $2-billion-deficit reading.
There have also been accounting swings in fiscal 2015-16. Up until February, the 11-month budget picture was still positive with a $7.5-billion surplus. February alone showed $3.2 billion on the plus side.
But the March balance came in at a whopping negative-$9.4-billion, pushing the 2015-16 fiscal shortfall to the $1.96-billion level.
Needless to say, the Liberals ran on a platform to push the budget back into a deficit position — by tens of billions of dollars, beginning this fiscal year with an estimated shortfall of $29.4 billion and shrinking gradually over the next five years — to pay for infrastructure programs, tax benefits for middle-class Canadian families and other spending measures.
“The Fiscal Monitor shows what the minister and the Department of Finance have been telling us for some time — and what we had predicted — the previous government left us in a deficit position for the last fiscal year,” said Daniel Lauzon, Morneau’s director of communications.
“The Conservatives have always talked a big game when it comes to balancing the budget, but their legacy amounts to them leaving behind tens of billions in additional debt with little more than a slowing economy to show for it,” he said. “It’s why Canadians rejected their approach in the first place.”
Craig Alexander, vice-president responsible for economic analysis at the C.D. Howe Institute, said that “when the finance minister tells you there will be a small deficit for the fiscal year, you can safely bet there will be one.”
But, he added, “the issue of whether the Liberal government inherited a deficit is a bit tougher to assess. One needs to consider how much of the overrun is the result of the new government spending after the election.”