OTTAWA—The decision to delay the next federal budget reflects little more than the Conservative government’s obsession with making sure it’s balanced before the next election, according to Parliament’s former financial watchdog.
Policy driven by politics is how Kevin Page, speaking to an NDP caucus strategy session in Ottawa, is characterizing Finance Minister Joe Oliver’s surprising decision to hold the budget until April at the earliest.
“‘We have to delay a budget because oil prices are moving.’ They almost always move, and it is a significant movement, but they are saying … ‘We can’t have a budget, we need to wait, there’s too much uncertainty to have a budget,'” Page said.
“Well I think we all know why we are not having a budget: Because it’s going to be very hard to meet this (balanced budget) commitment right now, because the world economy shifted on the government.”
Last week, Finance Minister Joe Oliver took the unusual step of saying the budget wouldn’t be released until April at the earliest, giving the government more time to evaluate the impact of falling oil prices.
Oliver was pestered the following day to be more specific about timing, but he refused to speculate.
“Look, I don’t want to get into negative hypotheticals,” he said when asked how late the government would be willing to wait.
“We’ve decided that we won’t issue the budget earlier than April because of the current instability and we’ll make a decision as we approach that date.”
In a note to clients, Douglas Porter, the chief economist with BMO Financial Group, said the current climate gives the government very little financial room.
Balancing the budget would require the government to spend its entire $3-billion contingency reserve, leaving nothing for new measures, Porter wrote.
“Of course, this is much more of a political issue than an economic issue, as record lows in long-term (Canadian government bond) yields suggest there is absolutely no market concern about Ottawa’s medium-term fiscal outlook,” he said.
The Conservatives had already left themselves a razor-thin margin due to the decision to unveil a multi-billion-dollar suite of family tax-and-benefit measures in late October, after world oil prices had started to tumble.
Those measures were promised during the 2011 election campaign, contingent on a balanced budget in 2015.
When Prime Minister Stephen Harper delivered on the promise late last year in a splashy, campaign-style event in the vote-rich suburbs outside Toronto, oil prices had already dropped to about US$80 per barrel from a high of around US$107 in June.
These days, they’re hovering around US$46.
Oliver was asked whether, in hindsight, the government regrets introducing the initiatives when they did.
“Well, we weren’t in the midst of a 50 per cent slide in the oil prices,” Oliver responded. “But the point is, a surplus isn’t there to look at. A surplus is there to provide benefits to Canadians.”
It was the government’s attitude toward achieving that surplus that caused the problem, said Page.
In the aftermath of the global recession, financial institutions were calling for more spending to keep the economy humming, but the Conservatives went the other way, he said.
They quickly wrapped up their own stimulus program, then cut billions of dollars in government spending without any analysis of its long-term implications.
Nor was there any debate about how to cope with the ongoing transformation of the Canadian economy.
“From my perspective, it’s a reflection of the Conservative government’s obsession to have a balanced budget in 2015,” he said.
“That’s not an action plan for jobs and growth.”
—With files from Diana Mehta