- Fiscal Monitor 2008 -

Archived - The Fiscal Monitor

Highlights of financial results for April and May 2008

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April and May 2008 budgetary results

Through the first two months of the 2008–09 fiscal year, there was a budgetary deficit of $0.5 billion, compared to a $2.8-billion surplus reported during the same period of 2007–08.

Budgetary revenues declined by $1.6 billion, or 4.1 per cent, to $37.3 billion.

• Personal income tax receipts rose $0.1 billion, or 0.6 per cent, through April and May, made up of a decline of 3.0 per cent in April, largely reflecting timing factors, and an increase of 4.9 per cent in May, in line with growth in employment. Starting with this Fiscal Monitor, monthly personal income tax revenues for both 2007–08 and 2008–09 will be adjusted to reduce volatility caused by the timing of large processing days.
• Corporate income tax revenues declined by $1.1 billion, or 16.6 per cent. Corporate income tax revenues can be volatile on a month-to-month 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 receipts—withholdings from non-residents—rose $47 million, or 5.9 per cent.
• Excise taxes and duties were down $1.0 billion, or 14.0 per cent, caused by a $1.0-billion, or 20.9-per-cent, decline in GST revenues partly as a result of the 1-percentage-point reduction in the GST rate effective January 1, 2008. Customs import duties were down $14 million, sales and excise taxes increased by $36 million, and revenues from the Air Travellers Security Charge were $7 million lower.
• Employment Insurance (EI) premium revenues were down $20 million, or 0.6 per cent, reflecting the decline in the premium rate from $1.80 to $1.73 per $100 of insurable earnings, effective January 1, 2008.
• Other revenues, consisting of net profits of enterprise Crown corporations, revenues of consolidated Crown corporations, sales of goods and services, return on investments, and foreign exchange revenues, increased by $0.4 billion, or 11.7 per cent.

Program expenses in the April to May 2008 period were $32.4 billion, up $2.1 billion, or 7.0 per cent, from the prior year, reflecting an increase in transfer payments and operating expenses of departments and agencies. The monthly profile of growth in spending will initially be quite high but by mid-year will moderate considerably, consistent with the 3.4 per cent annual growth projected in Budget 2008. This monthly profile is due to the pattern of spending in 2007–08, which was low in early months but rose in the second half of the year once Budget 2007 fiscal balance and spending measures came into effect.

Transfer payments increased $1.5 billion, or 7.5 per cent.

• Major transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, rose $0.2 billion, or 2.2 per cent, on a year-over-year basis. Elderly benefits increased 3.4 per cent and EI benefit payments increased 1.2 per cent. Children’s benefits, which consist of the Canada Child Tax Benefit and the new Universal Child Care Benefit, remained stable compared to the prior year.
• Major transfers to other levels of government were up $0.8 billion, or 12.0 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. The increase in these transfers announced in Budget 2007 came into effect later in 2007, which explains their rate of growth on a year-over-year basis.
• Subsidies and other transfers were up $0.5 billion, or 13.2 per cent, mainly reflecting increases in payments related to the investments in infrastructure announced in Budget 2007, which came into effect later in 2007, and higher transfers to Newfoundland and Labrador and Nova Scotia under the Offshore Accords.

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. On a year-over-year basis, these expenses increased $0.6 billion, or 6.2 per cent.

Public debt charges decreased $0.4 billion, or 7.1 per cent, largely reflecting lower unmatured debt levels.

Financial requirement of $12.7 billion for April to May 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 deficit of $0.5 billion and a requirement of $12.2 billion from non-budgetary transactions, there was a financial requirement of $12.7 billion in the April to May period of 2008–09 compared to a financial source of $8.5 billion in the same period the previous year. This year-over-year difference is largely due to tax refunds related to the tax cuts announced in the October 30, 2007 Economic Statement and to the financial requirement associated with loans to major Crown corporations which were announced in Budget 2007.

Net financing activities up $14.9 billion

The Government financed this financial requirement of $12.7 billion by increasing market debt by $14.9 billion. The increase in market debt was achieved largely through an increase in treasury bills. Cash balances were also increased by $2.2 billion by the end of May 2008. 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 May 2008 stood at $13.4 billion, $2.8 billion above their level at the end of May 2007.

Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

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

For inquiries about this publication, contact Chris Forbes
at 613-995-6391.
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July 2008