PBO asks parliamentarians to solve mystery of unspent billions

OTTAWA – Canada’s budget watchdog is asking parliamentarians to get to the bottom of why the Harper government is spending less than it has been authorized.

As Global News reported last week, the Parliamentary Budget Officer is highlighting that the government has been unable to, or not spent, about $10 billion—$700 per household on average—that the House of Commons has approved in each of the past three years

READ MORE: Ottawa sits on more than $10 billion in 2012-13, statements show

The issue arises again, the PBO says, because the government is asking for an additional $5.4 billion to spend in the latest supplementary estimates and—given the record—it is unclear whether all, or any of it, is required.

“As suggested in the report, Parliament may want to examine whether all of the $5.4 billion sought in these supplementary estimates is actually required and, if so, what measures will be undertaken by departments and agencies to ensure that spending approved by Parliament occurs,” Jean-Denis Frechette said.

The federal government had expected so-called “lapsed spending” to rise during the roll-out of stimulus budgets following the 2008-09 economic crisis, but that was supposed to start returning to more normal levels starting in the 2012-13 fiscal year. Instead it rose slightly to about $10 billion.

READ MORE: Feds will balance books by 2015, despite slow growth: PBO

For the three years, lapses have averaged over 11 per cent of the total allotted spending, or about twice the average prior to the recession.

“It is not unusual for departments to lapse expenditure authorities — the law requires that departments do not exceed their authorities—so departments will try their best to come close to their expenditure limit without surpassing it,” the watchdog said.

“What is unusual in this instance is the size of the lapses and the consistent upward trend that we’ve seen over the past few years.”

The over-estimation of spending is reminiscent of the Liberal budgets of the early years of the last decade when then-finance minister Paul Martin routinely surprised MPs and Canadians with annual, oversized budget surpluses, which went to pay off the national debt.

Critics, including Conservative MPs, complained at the time that the government was taxing more than required to meet their obligations.

That is not the situation today, although Finance Minister Jim Flaherty last month reported the deficit in the year 2012-13 was about $7 billion less than it calculated, with the majority of the savings due to lapsed spending.

The minister has vowed to balance the budget in two years and recently tabled an economic update projecting a $3.7-billion surplus in 2015-16.

Eliminating the deficit in 2015 would allow the Conservative government to fulfil its 2011 campaign commitment to introduce partial income splitting for tax purposes —a budget measure that would cost about $2.7 billion in lost revenue—in time for the fall election, on the condition the budget is in the black.

The PBO has calculated that the Conservatives are on track to meet their deadline, in part because of spending restraint.

Even with the approval of the further $5.4 billion for the current fiscal year, the total budget authorities would increase to about $259.9 billion, which is only 0.3 per cent more than what Ottawa was authorized to spend the previous year.

The PBO says over half of the additional funds the government seeks is aimed at increased transfer payments, including for negotiating First Nations’ claims, and to reimburse costs for natural disasters, such as the Alberta floods.

The remainder is earmarked for departmental operating budgets, including almost $1 billion to cover accumulated severance benefits for public servants. The government’s cost-cutting measures have eliminated approximately 20,000 positions over the past two years.

As well, the estimates contain $925 million in new spending initiatives, including funding for enhanced funeral benefits for veterans.