Accounting Group Speaks Out on Canada's Federal Budget
Canada’s Chartered Accountants expressed disappointment about the depth and breadth of program spending in Canada's federal budget and that so little attention is being paid to the federal debt.
"We have concerns that the amount of program spending and the rate of increase in spending, forecast over several years, doesn't afford the government enough flexibility should revenue or economic growth slow," said Pierre Brunet, FCA, Chair of the Canadian Institute of Chartered Accountants (CICA) Board of Directors. “Health care and defence are important priorities, and we recognize that. However, in our view too many commitments have been made with this budget, too far down the road, while not enough of the surplus has been assigned to pay down the debt. The magnitude of the current debt is this generation's responsibility to address, we should not be passing it down to our children."
The government says program spending will increase by 11.5% in 2002-2003. On a per capita basis, each Canadian household’s share of the federal debt is more than $43,000. The federal government’s debt-to-GDP ratio stands at 44.5% -- the CICA has set a debt-to-GDP target for the government of 40.0 per cent. The CICA warns that variables such as slower than expected economic growth or increased interest rates give the government less than optimal flexibility.
"We would also liked to have seen more of the surplus assigned to the debt than simply the three billion dollars in the contingency fund," said Brunet. "The government is to be commended for its sound fiscal management in producing a surplus – it is unfortunate that the government could not then have followed through and put a greater portion of that surplus towards the debt."
As of 2002, interest payments on the debt still consumed 21.8 per cent of all federal government revenue. “On a personal level, this is like an average Canadian earning $50,000 per year who must contemplate an $11,000 interest bill at the start of the year,” said Brunet. “How much flexibility would this give you for other needs and priorities?”
This was the federal government's first budget based on accrual accounting. "We applaud the government's move to accrual accounting, which we believe provides a more comprehensive set of indicators to describe the government's financial position," said Brunet.