Controlling the Public Purse: The Fiscal Accountability of Canada's Senior Governments, 2016

Abstract

With governments playing such massive roles in Canada’s economy and Canadians’ lives, we need transparency and accountability in fiscal policy as much as we need it anywhere. Over the past 15 years, Canadian governments have done much to improve their reporting, and stewardship, of public money. Yet major gaps remain, and the astonishing amounts by which revenue and spending have exceeded the amounts approved by legislators at budget time over the period show that failures of accountability have major real-world consequences. This latest edition of the C.D. Howe Institute’s annual report on the fiscal accountability of Canada’s federal, provincial and territorial governments assesses the quality of financial information these governments present, and looks at their success or failure in achieving their budgetary goals over the past 15 years. It measures the quality of financial reporting by a number of criteria. The key question is whether an intelligent and motivated non-expert – a citizen, taxpayer or legislator – could find valid consolidated numbers for revenue and spending in the budget each government presents at the beginning of the year, and in the financial statements released with its public accounts at the end of the year. The top presentation marks go to Alberta and Saskatchewan, with Ontario not far behind. British Columbia and New Brunswick also earn high marks for consistent and clear presentations, but auditor reservations push them out of the top tier. The federal government provides reliable numbers, but its budgets do not display them prominently, and the spending estimates members of parliament review are on an incompatible basis of accounting. As for success or failure in hitting budget targets, the dominant theme of the 15-year period is major overshoots of both spending and revenue. Cumulatively, Canada’s federal, provincial and territorial governments spent some $69 billion more than projected, with the Prairie provinces and the territories showing the biggest over-runs relative to the size of their budgets. Over the same period, revenues overshot budget projections by an even larger amount: $118 billion. More encouragingly, comparing the overshoots over the period shows some improvements: smaller misses generally, and less tendency for in-year revenue “surprises” to be accompanied by in-year spending “surprises.” Legislators and Canadians generally should insist on better financial information from governments, and use that information to hold governments to a higher standard when it comes to hitting their budget targets. Canada’s senior governments can improve their financial reporting and their adherence to targets, and legislators and voters should hold them accountable for doing so.

Keywords: Fiscal and Tax Policy

JEL Classification: H30, H50