- Fiscal Monitor 2007 -

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Highlights of financial results for January 2007

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Highlights

January 2007: budgetary surplus of $2.3 billion

There was a budgetary surplus of $2.3 billion in January 2007, up $0.7 billion from the $1.5-billion surplus in January 2006. Budgetary revenues rose $0.8 billion, or 3.9 per cent, due to strong growth in corporate income tax and non-resident withholding tax revenues, dampened by declines in other revenue streams. Program expenses decreased by $0.1 billion, or 0.3 per cent, reflecting a decrease in departmental operating expenses. Public debt charges were up $0.2 billion.

April 2006 to January 2007: budgetary surplus of $9.5 billion

The budgetary surplus is estimated at $9.5 billion for the first 10 months of the 2006–07 fiscal year, up from the $9.0-billion surplus posted in the same period of 2005–06. Budgetary revenues rose $8.6 billion, or 4.8 per cent, reflecting strong growth in income tax revenues, partially offset by declines in excise taxes and employment insurance (EI) premium revenues. Program expenses were up $7.8 billion, or 5.5 per cent, due to both higher transfers and other program expenses. Public debt charges were up $0.3 billion.

January 2007

There was a budgetary surplus of $2.3 billion in January 2007, up from the $1.5-billion surplus of January 2006.

Budgetary revenues increased by $0.8 billion, or 3.9 per cent, to $22.2 billion.

  • Personal income tax revenues declined by $0.2 billion, or 2.3 per cent. The decline partly reflects the inclusion of the monthly cost of the pension income splitting measure introduced in the October 31, 2006, Tax Fairness Plan, a measure which pertains to the 2007 tax year.
  • Corporate income tax revenues rose $0.3 billion, or 12.0 per cent. Corporate income tax revenues can be volatile on a monthly basis, as large refunds or settlement payments may be recorded in any given month. In addition, assessments or reassessments, which can relate to activity that took place in prior years, can influence results in a given month.
  • Other income tax revenues—withholdings from non-residents—rose $0.1 billion, or 18.1 per cent, reflecting ongoing strength in the corporate sector. Other income tax revenues can also be volatile on a monthly basis, as the timing of corporate dividend payments, and thus the corresponding tax withheld on those payments, can vary from year to year.
  • Excise taxes and duties were up $0.5 billion. A $0.5-billion gain in revenue from the one-time charge on duty deposit refunds under the Canada-United States Softwood Lumber Agreement more than offset the decline in goods and services tax (GST) revenues that resulted from the 1-percentage-point reduction in the GST rate effective July 1, 2006.
  • EI premium revenues increased by 12.9 per cent, reflecting improvements in employment and wages and salaries, which more than offset the decline in the premium rate from $1.87 to $1.80 per $100 of insurable earnings, effective January 1, 2007.
  • Other revenues, consisting of net profits of enterprise Crown corporations, revenues of consolidated Crown corporations, proceeds from the sales of goods and services, return on investments, foreign exchange revenues and miscellaneous revenues, decreased by $0.1 billion, or 3.2 per cent.

Program expenses in January 2007 were $17.1 billion, down $0.1 billion or 0.3 per cent from January 2006, reflecting a decrease in operating expenses of departments and agencies, partially offset by an increase in transfer payments.

Transfer payments increased $0.6 billion, or 5.2 per cent.

  • Transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, rose $0.4 billion, or 7.6 per cent. Elderly benefits increased by 4.0 per cent. EI benefits increased by 3.4 per cent, reflecting an increase in regular benefits. Children’s benefits consist of the Canada Child Tax Benefit and the new Universal Child Care Benefit (UCCB), which began on July 1, 2006. Children’s benefits were up $0.2 billion, reflecting transfers under the new UCCB program.
  • Transfers to other levels of government, consisting of transfers in support of health and other social programs (Canada Health Transfer and Canada Social Transfer), fiscal transfers, transfers to provinces on behalf of Canada’s cities and communities, transfers for early learning and child care and Alternative Payments for Standing Programs, were up $0.2 billion, or 7.0 per cent.
  • Subsidies and other transfers decreased by 0.6 per cent. Absent a $0.5-billion transfer related to the Softwood Lumber Agreement, subsidies and other transfers would have declined some 17 per cent.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including National Defence, and also reflect the ongoing assessment of the Government’s liabilities. These expenses decreased $0.6 billion, or 10.1 per cent, reflecting decreases across a number of departments.

Public debt charges were up $0.2 billion due to an increase in the average effective interest rate on the stock of interest-bearing debt.

Revenues and expenses

April 2006 to January 2007

In the first 10 months of the 2006–07 fiscal year, there was a budgetary surplus of $9.5 billion, up $0.5 billion from the $9.0-billion surplus reported for the same period of 2005–06.

Budgetary revenues were up $8.6 billion, or 4.8 per cent, to $187.6 billion.

  • Personal income tax revenues rose $6.6 billion, or 7.8 per cent, reflecting the interaction of solid growth in employment and wages and salaries with the progressivity of the personal income tax system.
  • Corporate income tax revenues were up $2.8 billion, or 12.4 per cent, reflecting ongoing gains in profitability in 2005 and 2006, particularly in the energy sector.
  • Other income tax revenues rose $0.8 billion, or 19.7 per cent, boosted by a one-time payment in November 2006 related to the disposition of Canadian assets by a non-resident firm.
  • Excise taxes and duties declined by $1.8 billion, or 4.5 per cent, primarily due to a $2.5-billion drop in GST revenues, reflecting the impact of the July 1, 2006, GST rate reduction. This decline was partially offset by $0.5 billion in one-time revenue from the charge on duty deposit refunds under the Softwood Lumber Agreement, which raised sales and excise tax revenues by $0.5 billion, or 6.5 per cent. Customs import duties rose $0.1 billion, or 4.3 per cent, while revenues from the Air Travellers Security Charge were up $16 million.
  • EI premium revenues declined by 4.8 per cent, reflecting the declines in the premium rate in 2006 and 2007, as well as the transfer to the province of Quebec of the responsibility for delivering maternity and parental benefits in that province along with the associated premiums, effective January 1, 2006.
  • Other revenues rose $0.9 billion, or 6.0 per cent.

Program expenses in the April 2006 to January 2007 period were $149.7 billion, up $7.8 billion, or 5.5 per cent, over the same period of
2005–06 due to both higher transfers and increased operating costs of departments and agencies, including National Defence. Public debt charges increased by $0.3 billion.

Transfer payments, which account for about two-thirds of total program expenses, increased by $5.2 billion, or 5.6 per cent.

  • Transfers to persons grew 5.5 per cent. Elderly benefits rose 4.8 per cent while EI benefits declined by 2.8 per cent. The year-to-date decline in EI benefits is mainly attributable to a decline in maternity and parental benefits, which have decreased due to the transfer to the province of Quebec of the responsibility for delivering maternity and parental benefits in that province, effective January 1, 2006. Children’s benefits increased by 20.6 per cent, reflecting transfers under the new UCCB program, which began on July 1, 2006.
  • Transfers to other levels of government were up $2.3 billion, or 7.3 per cent, largely due to the impact of the 2004 agreement on health care, as well as a $650-million transfer to provinces and territories in July 2006 for early learning and child care.
  • Subsidies and other transfers increased by $0.5 billion, or 2.9 per cent, reflecting an increase in agricultural assistance and transfers under the Softwood Lumber Agreement.

Other program expenses increased by $2.6 billion, 5.2 per cent, due to an increase in the operating costs of departments and agencies as well as a one-time increase in September 2006 in the Government’s estimated pension liabilities.

Public debt charges were up 1.2 per cent due mainly to an increase in the average effective interest rate on the stock of interest-bearing debt.

Budgetary balance

Federal debt

Financial source of $6.3 billion for April 2006 to January 2007

The budgetary balance is presented on a full accrual basis of accounting, recording government assets and liabilities when they are receivable or incurred, regardless of when the cash is received or paid. In contrast, the financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government’s investing activities through its acquisition of capital assets and its loans, financial investments and advances, as well as from other activities, including payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

Non-budgetary transactions resulted in a requirement of $3.2 billion in the April 2006 to January 2007 period, reflecting payments made to provinces and international organizations pursuant to Bill C-48. This is down from a
$4.9-billion requirement in the same period of 2005–06. The decrease in the requirement largely reflects the transfer of the Government’s holdings in the Canada Pension Plan to the Canada Pension Plan Investment Board in
2005–06.

With a budgetary surplus of $9.5 billion and a requirement of $3.2  billion from non-budgetary transactions, there was a net financial source of $6.3 billion in the first 10 months of 2006–07 compared to a net financial source of $4.1 billion in the same period of 2005–06.

Net financing activities down $20.7 billion

The Government used this net financial source of $6.3 billion and a reduction in its cash balances of $14.4 billion to reduce its market debt by $20.7 billion by the end of January 2007. This reduction in market debt is $2.2 billion higher than the $18.5-billion reduction during the same period last year, due to the larger financial source over the April 2006 to January 2007 period. The reduction in market debt was achieved largely through a reduction of treasury bills, marketable bonds and foreign currency borrowings. The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of January stood at $3.6 billion.

Table 1
Summary statement of transactions

  January April to January
 

  2006 2007 2005–06 2006–07
  ($ millions)
Budgetary transactions        
  Revenues 21,399 22,242 178,937 187,557
  Expenses        
    Program expenses -17,185 -17,128 -141,913 -149,711
    Public debt charges -2,676 -2,835 -27,986 -28,312
 

  Budgetary balance (deficit/surplus) 1,538 2,279 9,038 9,534
Non-budgetary transactions 2,126 72 -4,929 -3,188
Financial source/requirement 3,664 2,351 4,109 6,346
Net change in financing activities -5,390 -2,838 -18,485 -20,725
Net change in cash balances -1,726 -487 -14,376 -14,379
Cash balance at end of period     2,780 3,578
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Budgetary revenues

  January   April to January  
 
 
 
  2006 2007 Change 2005–06 2006–07 Change
  ($ millions) (%) ($ millions) (%)
Tax revenues            
  Income taxes            
    Personal income tax 10,378   10,139 -2.3 83,872 90,435 7.8
    Corporate income tax 2,599 2,911 12.0 22,573 25,361 12.4
    Other income tax 696 822 18.1 3,910 4,681 19.7
 

    Total income tax 13,673 13,872 1.5 110,355 120,477 9.2
  Excise taxes and duties            
    Goods and services tax 3,345 3,174 -5.1 28,502 26,051 -8.6
    Customs import duties 244 277 13.5 2,836 2,957 4.3
    Sales and excise taxes 711 1,326 86.5 7,983 8,505 6.5
    Air Travellers Security Charge 22 27 22.7 279 295 5.7
             
    Total excise taxes and duties 4,322 4,804 11.2 39,600 37,808 -4.5
             
  Total tax revenues 17,995 18,676 3.8 149,955 158,285 5.6
Employment insurance premiums 1,677 1,894 12.9 13,381 12,734 -4.8
Other revenues 1,727 1,672 -3.2 15,601 16,538 6.0
Total budgetary revenues 21,399 22,242 3.9 178,937 187,557 4.8
Note: Totals may not add due to rounding.

Table 3
Budgetary expenses

  January   April to January  
 
 
 
  2006 2007 Change 2006–07 2005–06 Change
  ($ millions) (%) ($ millions) (%)
Transfer payments            
  Transfers to persons            
    Elderly benefits 2,491 2,590 4.0 24,184 25,335 4.8
    Employment insurance benefits 1,570 1,623 3.4 11,714 11,388 -2.8
    Children’s benefits 781 999 27.9 7,711 9,303 20.6
 

  Total 4,842 5,212 7.6 43,609 46,026 5.5
  Transfers to other levels of government            
    Support for health and other social programs            
      Canada Health Transfer 1,583 1,678 6.0 15,833 16,783 6.0
      Canada Social Transfer 685 708 3.4 6,854 7,083 3.3
    Total 2,268 2,386 5.2 22,687 23,866 5.2
    Fiscal transfers 1,061 1,139 7.4 10,597 11,123 5.0
    Canada’s cities and communities 14 0 -100.0 575 548 -4.7
    Early learning and child care 0 0 n/a 0 650 n/a
    Alternative Payments for Standing Programs -261 -227 -13.0 -2,461 -2,508 1.9
 

    Total 3,082 3,298 7.0 31,398 33,679 7.3
  Subsidies and other transfers            
    Agriculture and Agri-Food 871 556 -36.2 1,931 2,257 16.9
    Foreign Affairs and International Trade 333 834 150.5 1,937 2,410 24.4
    Health 207 231 11.6 1,527 1,603 5.0
    Human Resources and Social Development 463 197 -57.5 1,608 1,383 -14.0
    Indian Affairs and Northern Development 367 376 2.5 3,986 3,929 -1.4
    Industry 158 147 -7.0 1,610 1,665 3.4
    Other 681 720 5.7 4,123 3,956 -4.1
 

    Total 3,080 3,061 -0.6 16,722 17,203 2.9
 

  Total transfer payments 11,004   11,571 5.2 91,729 96,908 5.6
Other program expenses            
  Crown corporation expenses            
    Canadian Broadcasting Corporation 50 96 92.0 1,028 1,042 1.4
    Canada Mortgage and Housing Corporation 171 205 19.9 1,707 1,715 0.5
    Other 285 294 3.2 2,761 2,872 4.0
             
    Total 506 595 17.6 5,496 5,629 2.4
  Defence 1,569 1,422 -9.4 12,335 13,049 5.8
  All other departments and agencies 4,106 3,540 -13.8 32,353 34,125 5.5
 

  Total other program expenses 6,181 5,557 -10.1 50,184 52,803 5.2
Total program expenses 17,185 17,128 -0.3 141,913 149,711 5.5
Public debt charges 2,676 2,835 5.9 27,986 28,312 1.2
Total budgetary expenses 19,861 19,963 0.5 169,899 178,023 4.8
Note: Totals may not add due to rounding.

Table 4
The budgetary balance and financial source/requirement

  January April to January
 

  2006 2007 2005–06 2006–07
  ($ millions)
Budgetary balance (deficit/surplus) 1,538 2,279 9,038 9,534
Non-budgetary transactions        
  Capital investing activities -301 -177 -1,815 -1,749
  Other investing activities 359 -20 -2,028 -974
  Pension and other accounts 205 -156 -103 3,697
  Other activities        
    Accounts payable, receivables, accruals 
    and allowances
1,339 1,706 -6,129 -6,344
    Foreign exchange activities 284   -1,487 2,597 -282
    Amortization of tangible capital assets 240 206 2,549 2,464
 

    Total other activities 1,863 425 -983 -4,162
  Total non-budgetary transactions 2,126 72 -4,929 -3,188
Net financial source/requirement 3,664 2,351 4,109 6,346
Note: Totals may not add due to rounding.

Table 5
Financial source/requirement and net financing activities

  January April to January
 

  2006 2007 2005–06 2006–07
  ($ millions)
Net financial source/requirement 3,664 2,351 4,109 6,346
Net increase (+)/decrease (-) in 
financing activities
       
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds 221 2,120 -7,771 -2,968
      Treasury bills -5,100    -5,700 -5,200 -12,600
      Canada Savings Bonds -103 -74 -1,471 -1,951
      Other -18 0 -223 -1,160
 

      Total -5,000 -3,654 -14,665 -18,679
    Foreign currency borrowings -428 507 -3,559 -3,431
 

      Total -5,428 -3,147 -18,224 -22,110
  Cross-currency swap revaluation 0 96 -70 1,431
  Unamortized discounts on debt issues 43 219 -252 29
  Obligations related to capital leases -5 -6 61 -75
  Net change in financing activities -5,390 -2,838 -18,485 -20,725
Change in cash balance   -1,726 -487 -14,376 -14,379
Note: Totals may not add due to rounding.

Table 6
Condensed statement of assets and liabilities

  March 31, 2006 January 31, 2007 Change
  ($ millions)
Liabilities      
  Accounts payable, accruals and allowances 101,432 94,860 -6,572
  Interest-bearing debt      
    Unmatured debt      
      Payable in Canadian dollars      
        Marketable bonds 261,134 258,166 -2,968
        Treasury bills 131,597 118,997    -12,600
        Canada Savings Bonds 17,342 15,391 -1,951
        Other 3,102 1,942 -1,160
 
        Subtotal 413,175 394,496 -18,679
      Payable in foreign currencies 14,085 10,654 -3,431
      Cross-currency swap revaluation account -2,258 -827 1,431
      Unamortized discounts and premiums 
      on market debt
-6,780 -6,751 29
      Obligations related to capital leases 2,927 2,852 -75
 
      Total unmatured debt 421,149 400,424 -20,725
    Pension and other accounts      
      Public sector pensions 131,062 133,986 2,924
      Other employee and veteran future benefits 43,369 44,719 1,350
      Other pension and other accounts 5,493 4,916 -577
 
      Total pension and other accounts 179,924 183,621 3,697
    Total interest-bearing debt 601,073 584,015 -17,028
  Total liabilities 702,505 678,905 -23,600
Financial assets      
  Cash and accounts receivable 82,843 68,236 -14,607
  Foreign exchange accounts 40,827 41,109 282
  Loans, investments and advances 
  (net of allowances)
41,889 42,863 974
 
  Total financial assets 165,559 152,208 -13,351
 
Net debt 536,946 526,697 -10,249
Non-financial assets 55,447 54,732 -715
Federal debt (accumulated deficit) 481,499 471,965 -9,534

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