- Fiscal Monitor 2008 -

Archived - The Fiscal Monitor

Highlights of financial results for  February 2008

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February 2008

There was a budgetary surplus of $2.9 billion in February 2008, compared to a $4.7-billion surplus in February 2007.

Budgetary revenues fell $0.1 billion, or 0.5 per cent, to $22.8 billion.

• Personal income tax revenues rose $0.8 billion, or 8.7 per cent, as solid growth in wages and employment more than offset the tax relief introduced in the October 2007 Economic Statement.
• Corporate income tax revenues were down $0.9 billion, or 13.4 per cent, reflecting lower year-end settlement payments than were recorded last year. As indicated in previous months in The Fiscal Monitor, this decline is consistent with expectations and largely reflects the fact that many corporations on average underpaid their tax liabilities during the first part of last fiscal year, but then made significant settlement payments in the last two months of the fiscal year, particularly in February 2007.
• Other income tax revenues—withholdings from non-residents—were virtually unchanged, increasing $1 million or 0.2 per cent.
• Excise taxes and duties were down $0.4 billion, or 11.9 per cent, largely due to lower GST revenues. GST revenues declined by $0.4 billion, or 19.1 per cent, as a result of the 1-percentage-point reduction in the GST rate to 5 per cent effective January 1, 2008. Customs import duties decreased by $40 million, sales and excise tax revenues increased by $59 million and revenues from the Air Travellers Security Charge increased by $5 million.
• EI premium revenues were down 9.4 per cent, reflecting the decline in the premium rate from $1.80 to $1.73 per $100 of insurable earnings effective January 1, 2008, as well as a one-time adjustment that lowered February 2008 premium revenues relative to those recorded in February 2007.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, proceeds from the sales of goods and services, returns on investments, foreign exchange revenues and miscellaneous revenues, rose $0.6 billion, or 33.5 per cent.

Program expenses in February 2008 were $17.2 billion, up $1.7 billion or 11.0 per cent from February 2007, reflecting higher transfer payments and operating expenses of departments and agencies.

Transfer payments were up $1.0 billion, or 9.7 per cent.

• Major transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, increased by 0.7 per cent. Elderly benefits increased by 4.2 per cent while EI benefits decreased by 5.2 per cent. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit (UCCB), remained stable.
• Major transfers to other levels of government, consisting of federal 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, and Alternative Payments for Standing Programs, were up $0.3 billion, or 10.3 per cent, reflecting Budget 2007 measures.
• Subsidies and other transfers were up $0.6 billion, or 33.7 per cent, due in part to an increase of $259 million related to the extension of the Veterans Independence Program announced in Budget 2008.

Other program expenses consist of operating expenses of Crown corporations, departments and agencies, including National Defence, and also reflect the ongoing assessment of the Government’s liabilities. These expenses rose $0.7 billion, or 13.6 per cent.

Public debt charges decreased by $0.1 billion, or 2.5 per cent.

April 2007 to February 2008

For the first 11 months of the 2007–08 fiscal year, there was a budgetary surplus of $12.9 billion, down $2.4 billion from the $15.3-billion surplus reported during the same period of 2006–07.

Budgetary revenues increased by $9.6 billion, or 4.5 per cent, to $221.2 billion.

• Personal income tax revenues increased by $0.9 billion, or 0.9 per cent, reflecting $3.3 billion in tax relief measures announced in the October 2007 Economic Statement.
• Corporate income tax revenues were up $4.7 billion, or 14.6 per cent.
• Other income tax revenues rose $0.2 billion, or 3.0 per cent.
• Excise taxes and duties declined by $0.1 billion, or 0.1 per cent. GST revenues decreased by $0.1 billion, or 0.3 per cent. Customs import duties increased by $0.2 billion, sales and excise tax revenues were down $0.2 billion, and revenues from the Air Travellers Security Charge increased by $30 million.
• EI premium revenues were down $0.3 billion, or 2.2 per cent, reflecting the declines in the premium rate to $1.80 per $100 of insurable earnings effective January 1, 2007, and to $1.73 effective January 1, 2008.
• Other revenues rose $4.3 billion, or 23.3 per cent, boosted by a gain from the sale of seven federal office properties in 2007. The increase also reflects higher receipts under the Atlantic Offshore Revenue Accounts, due to strong growth in offshore production and oil prices to date in 2007–08. This revenue is transferred to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords, such that there is no net impact on the budgetary balance.

Program expenses for April 2007 to February 2008 were $177.7 billion, up $12.5 billion or 7.6 per cent from the same period of 2006–07, reflecting an increase in transfer payments, Crown corporation expenses and operating expenses of departments and agencies.

Transfer payments increased $8.1 billion, or 7.6 per cent.

• Major transfers to persons were up $2.0 billion, or 3.9 per cent. Elderly benefits increased by 4.5 per cent and EI benefits by 0.7 per cent. Children’s benefits were up $0.6 billion, as transfers under the UCCB began part way through the 2006–07 fiscal year, in July 2006.
• Major transfers to other levels of government were up $3.2 billion, or 8.8 per cent, reflecting legislated growth in the Canada Health Transfer, as well as increases to the Canada Social Transfer and Equalization introduced in Budget 2007 as part of the Government’s package to restore fiscal balance in Canada.
• Subsidies and other transfers were up $2.9 billion, or 15.3 per cent, mainly reflecting increases in payments related to the historic investment in infrastructure announced in Budget 2007 and higher transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

Other program expenses increased by $4.4 billion, or 7.5 per cent.

Public debt charges decreased by $0.5 billion, or 1.5 per cent, largely reflecting lower unmatured debt levels.

Financial source of $15.7 billion for April 2007 to February 2008

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.

With a budgetary surplus of $12.9 billion and a source of $2.8 billion from non-budgetary transactions, there was a financial source of $15.7 billion for April 2007 to February 2008, compared to a financial source of $8.4 billion in the same period of 2006–07.

Net financing activities down $31.9 billion

The Government used this financial source of $15.7 billion and a reduction in its cash balances of $16.2 billion to reduce its market debt by $31.9 billion by the end of February 2008. The reduction in market debt was achieved largely through a reduction of treasury bills. 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. Amendments made to the Financial Administration Act in 2007 regarding the Government’s borrowing authority, which provide increased flexibility to meet financial requirements, along with the more frequent use of short-dated borrowing instruments, will facilitate carrying lower cash balances at fiscal year-end. Cash balances at the end of February 2008 stood at $5.0 billion, $3.9 billion below their level at the end of February 2007.

Table 1
Summary statement of transactions

Table 2
Budgetary revenues

Table 3
Budgetary expenses

Table 4
The budgetary balance and financial source/requirement

Table 5
Financial source/requirement and net financing activities

Table 6
Condensed statement of assets and liabilities