PBO challenges Freeland’s fiscal restraint in fall economic statement

‘Would I qualify this as restrained spending growth? The answer is unsurprisingly, no,’ Yves Giroux told the Commons finance committee

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OTTAWA – Parliamentary Budget Officer Yves Giroux proved once again to be somewhat of a thorn in the finance minister’s side, as he challenged Chrystia Freeland’s assumption that her fall economic statement is fiscally prudent and pushed her department for more transparency.

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Freeland and Giroux were witnesses in front of the parliamentary finance committee on Monday and were questioned at length by MPs on the document unveiled earlier this month for one hour each.

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Answering Conservative MP Adam Chambers, Giroux said that the federal government intended to spend a “significant portion” of its $81 billion in additional fiscal room – due to strong economic growth and rising inflation – in its economic update unveiled earlier this month.

In total, the PBO’s office calculated that the government had announced $52 billion in net new measures over the span of six years.

“Would I qualify this as restrained spending growth? The answer is unsurprisingly, no,” said Giroux. “When the government has $81 billion in fiscal room, and spends $52 billion of that, even after taking into account new tax measures, it’s not called keeping one’s powder dry.”

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The PBO seemed to respond to Freeland who, when unveiling her update, said she strived to strike a balance between “being fiscally responsible, keeping our powder dry given the global economic uncertainty and (…) providing support to those people who need it”.

She had also pushed back against insinuations that using part of the federal government’s unexpected fiscal room was imprudent, adding that the investments made went to support low-wage communities and increase Canada’s productive capacity.

As an independent agent of Parliament, the PBO does not comment on government policies, but rather assists parliamentarians in their work and provides analysis on various subjects.

Parliamentary Budget Officer Yves Giroux waits to appear before appearing at the Senate Committee on National Finance on October 25, 2022.
Parliamentary Budget Officer Yves Giroux waits to appear before appearing at the Senate Committee on National Finance on October 25, 2022. Photo by Adrian Wyld/The Canadian Press/File

Giroux, however, was not shy in sharing his concern on approximately $14 billion in new measures which were included in the economic update without any specific details. He said this “lack of transparency” would represent challenges for parliamentarians in tracking the money.

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“Sometimes I think we get immune to these numbers when we hear about $500 billion of deficits and $1.2 trillion in debts. But $14.2 billion, that’s a big chunk of change,” commented Conservative MP Marty Morantz

Giroux said to the committee that he had made his concerns very clear to Finance officials on the secrecy surrounding that amount: “My opinions on that are no secret,” he said.

Morantz noted Freeland had not agreed to table a breakdown of that spending at committee when asked earlier.

The PBO also shared his concerns with the committee about the federal government pouring more money into governmental departments in order to meet service standards – at passport offices or for immigration applications, for instance – instead of making efficiency gains.

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“We’ve heard throughout the pandemic that people who work from home are at least as productive as they were when they work in the office, but that’s not what we have seen,” said Giroux in response to questions by NDP MP Daniel Blaikie on government spending.

“And that’s not what my office has seen when asking simple questions.”

Freeland’s testimony was interspersed by a series of testy exchanges with Conservative finance critic Jasraj Singh Hallan, who tried to corner her with sometimes lengthy diatribes about inflation, interest rates and government spending, and interrupted her while speaking.

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Freeland reiterated that Canada was in a good economic position compared to its G7 partners, even in a context of global inflation, and that the country had kept its triple-A credit rating according to Moody’s hours after the tabling of the fall economic statement.

“Most Canadians don’t care about a rating from Bay Street. Most Canadians don’t know what that rating even is,” said Hallan.

Freeland vehemently disagreed.

“I actually do think that Canadians care about Canada’s triple-A rating. I think Canadians are smart. And I think Canadians understand that Canada’s triple-A credit rating represents a non-partisan verdict on the management of our government’s finances.”

Morantz later tried to make Freeland cancel the planned tax hike on beer, set to raise by 6.3 per cent next April as reported by the National Post’s John Ivison, but Freeland used one of her favourite partisan attacks instead of answering the question.

“I guess that stands alongside crypto is one of the Conservative party’s main pieces of financial advice,” she simply said.

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