Archived - The Fiscal Monitor A publication of the Department of Finance: 2017-01

January 2017: budgetary surplus of $1.2 billion

There was a budgetary surplus of $1.2 billion in January 2017, compared to a surplus of $1.1 billion in January 2016. Revenues increased by $1.9 billion, or 7.1 per cent, reflecting increases in most revenue streams, particularly corporate income tax and Goods and Services Tax (GST) revenues. Program expenses increased by $1.8 billion, or 7.7 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges decreased by $0.1 billion, or 5.9 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds.

April 2016 to January 2017: budgetary deficit of $12.8 billion

For the April 2016 to January 2017 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $12.8 billion, compared to a surplus of $4.3 billion reported for the same period of 2015–16. Revenues were largely unchanged, up $6 million, as an increase in tax revenues was offset by a decrease in Employment Insurance (EI) premium revenues and other revenues. Program expenses were up $18.5 billion, or 8.7 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $1.5 billion, or 6.9 per cent, largely reflecting lower average effective interest rates on the stock of interest-bearing debt.

There was a budgetary surplus of $1.2 billion in January 2017, compared to a surplus of $1.1 billion in January 2016.

Revenues in January 2017 totalled $28.7 billion, up $1.9 billion, or 7.1 per cent, from January 2016.

• Personal income tax revenues were up $0.2 billion, or 1.4 per cent.
• Corporate income tax revenues were up $0.7 billion, or 24.1 per cent.
• Non-resident income tax revenues were up $0.2 billion, or 17.9 per cent.
• Excise taxes and duties were up $1.0 billion, or 25.3 per cent. GST revenues increased by $1.0 billion, or 36.4 per cent, due to the timing of assessments. Energy taxes increased by $26 million, customs import duties increased by $13 million, and other excise taxes and duties decreased by $13 million.
• EI premium revenues were down $0.3 billion, or 11.3 per cent.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, revenues from sales of goods and services, returns on investments, net foreign exchange revenues and miscellaneous revenues, were up $0.1 billion, or 3.1 per cent.

Program expenses in January 2017 were $25.6 billion, up $1.8 billion, or 7.7 per cent, from January 2016.

• Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.9 billion, or 12.0 per cent. Elderly benefits increased by $0.2 billion, or 5.5 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.2 billion, or 10.3 per cent. Children's benefits increased by $0.5 billion, or 31.5 per cent, reflecting the new Canada Child Benefit, which replaced the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 2016.
• Major transfers to other levels of government consist of federal transfers in support of health and other social programs (primarily the Canada Health Transfer and the Canada Social Transfer), fiscal arrangements and other transfers (Equalization, transfers to the territories, as well as a number of smaller transfer programs), transfers to provinces on behalf of Canada's cities and communities, and the Quebec Abatement. Major transfers to other levels of government increased by $0.3 billion, or 4.9 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories, offset in part by an increase in the Quebec Abatement.
• Direct program expenses include transfer payments to individuals and organizations not included in major transfers to persons and other levels of government, and other direct program expenses, which consist of operating expenses of National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $0.7 billion, or 6.2 per cent. Within direct program expenses:
  • Transfer payments were largely unchanged, up $0.1 billion, or 1.6 per cent, largely reflecting offsetting increases and decreases across several departments.
  • Other direct program expenses increased by $0.6 billion, or 9.7 per cent, largely reflecting increases in Crown corporation expenses and pension and other future benefit expenses based on the Government's latest actuarial valuations.

Public debt charges decreased by $0.1 billion, or 5.9 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds.

For the April 2016 to January 2017 period of the 2016–17 fiscal year, there was a budgetary deficit of $12.8 billion, compared to a surplus of $4.3 billion reported during the same period of 2015–16.

Revenues increased by $6 million.

• Personal income tax revenues were down $0.8 billion, or 0.7 per cent.
• Corporate income tax revenues were up $1.3 billion, or 4.2 per cent.
• Non-resident income tax revenues were up $0.4 billion, or 6.9 per cent.
• Excise taxes and duties were up $1.0 billion, or 2.3 per cent, largely reflecting a $1.1-billion increase in GST revenues due to the timing of assessments. Customs import duties were up $0.1 billion, while energy taxes and other excise taxes and duties were each down $0.1 billion.
• EI premium revenues were down $0.1 billion, or 0.5 per cent.
• Other revenues were down $1.8 billion, or 7.5 per cent. This decline largely reflects the $2.1-billion gain realized on the sale of the Government's remaining holdings of General Motors common shares in April 2015.

For the April 2016 to January 2017 period, program expenses were $231.3 billion, up $18.5 billion, or 8.7 per cent, from the same period the previous year.

• Major transfers to persons were up $6.6 billion, or 9.6 per cent. Elderly benefits increased by $2.2 billion, or 5.9 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $1.1 billion, or 7.1 per cent. Children's benefits were up $3.2 billion, or 21.6 per cent, largely reflecting the new Canada Child Benefit.
• Major transfers to other levels of government were up $2.4 billion, or 4.4 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
• Direct program expenses were up $9.5 billion, or 10.7 per cent. Within direct program expenses:
  • Transfer payments increased by $5.4 billion, or 21.1 per cent, reflecting a number of factors including the accelerated repayment of contributions by Pratt & Whitney Canada in 2015–16, which decreased transfer payments in that year, as well as increased transfers in the current year related to claims and infrastructure funding.
  • Other direct program expenses increased by $4.1 billion, or 6.5 per cent, largely reflecting increases in Crown corporation expenses, operating expenses of National Defence, and pension and other future benefit expenses based on the Government's latest actuarial valuations.

Public debt charges were down $1.5 billion, or 6.9 per cent, largely reflecting lower average effective interest rates on the stock of interest-bearing debt.

The budgetary balance is presented on an accrual basis of accounting, recording government revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. In contrast, the financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government's investing activities through its acquisition of capital assets and its loans, financial investments and advances, as well as from other activities, including payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

With a budgetary deficit of $12.8 billion and a financial requirement of $6.7 billion from non-budgetary transactions, there was a financial requirement of $19.4 billion for the April 2016 to January 2017 period, compared to a financial requirement of $17.3 billion for the same period the previous year.

The Government financed its financial requirement of $19.4 billion and increased cash balances by $7.7 billion by increasing unmatured debt by $27.2 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds.

The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of January 2017 stood at $45.6 billion, down $4.6 billion from their level at the end of January 2016.

Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

For inquiries about this publication, contact Bradley Recker at 613-369-5667.

March 2017