Federal watchdog says Trudeau budget introduces $39.3B in new debt

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The Trudeau government’s latest budget adds $61.2 billion in new spending over six years that’s only partially offset by $21.9 billion in revenue-raising measures, says the federal government’s financial watchdog.

The Office of the Parliamentary Budget Officer has released its detailed analysis of the federal budget.

Titled “Budget 2024: Issues for Parliamentarians,” it raises questions on both the spending and savings sides of the equation.

The review finds $39.3 billion in new debt from 2023-24 to 2028-29, the difference between the budget’s added spending and new revenues.

The PBO says it’s the third consecutive fiscal plan in which the government’s new measures – even after accounting for revenue-raising and spending reviews – have exceeded the incremental fiscal room it has to spend.

The result is projected budgetary deficits that are $5.3 billion higher annually, it adds.

The budget officer also questions a few of the federal government’s saving measures.

It notes that the budget attempts to achieve savings mostly through natural attrition in the federal public service. The government expects the number of full-time equivalents to decrease by approximately 5,000 over the next four years.

“This planned reduction would represent a shift in the trend increase in the size of the federal public service in recent years,” it adds.

Between 2006-07 and 2022-23, a period of 16 years, the number of full-time staff in the civil service rose from 335,000 to 432,000, an increase of over 96,000.

Meanwhile, in last year’s budget the Trudeau government stated that it would be “refocusing government spending to deliver for Canadians,” with the goal of reducing the pace and scale of growth in government spending back to a pre-pandemic path.

This first phase of that plan represented $15.4 billion in savings over five years, starting in 2023-24, and $4.5 billion annually thereafter.

But the PBO states that a decision to reallocate previously announced spending that has yet to be spent remains without details, adding “it remains difficult to track the overall plans, progress, and results of these measures as there is no central tracking document which is publicly available.”

The federal watchdog also takes aim at the government’s claim to “maintain its commitment to its fiscal objectives and achieve its fiscal anchor to reduce the federal debt-to-GDP ratio over the medium-term.”

“Based on the outlook presented in Budget 2024, the federal debt-to-GDP ratio is projected to increase, remaining above its 2022-23 level of 41.7 per cent for two years, before gradually declining over the medium term to reach 39.0 per cent in 2028-29,” reads the PBO analysis.

“On a status quo basis – that is, without additional measures and given possible economic outcomes surrounding the private sector outlook – we estimate that there is a 72 per cent chance that the federal debt-to-GDP ratio in 2028-29 would be below its 2022-23 level of 41.7 per cent.”