- Fiscal Monitor 2008 -

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Highlights of financial results for July 2008

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

July 2008

There was a budgetary surplus of $1.7 billion in July 2008, compared to a $1.1-billion surplus in July 2007.

Budgetary revenues rose by $1.7 billion, or 8.4 per cent, to $21.6 billion.

• Personal income tax revenues rose $0.8 billion, or 8.5  per cent.
• Corporate income tax revenues were up $0.5 billion, or 15.7 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 revenues—withholdings from non-residents—were up $7 million, or 1.6 per cent.
• Excise taxes and duties were up $0.3 billion, or 8.2  per cent, driven by higher GST revenues. GST revenues rose by $0.3 billion, or 11.4 per cent. As a value-added tax, the GST can yield volatile net collections on a month-to-month basis due to timing differences between GST owed to the Government and credits claimed for GST paid on inputs. Customs import duties rose by $24 million, sales and excise taxes decreased by $3 million, and revenues from the Air Travellers Security Charge were up $3 million.
• Employment Insurance (EI) premium revenues were virtually unchanged from a year ago, as gains in employment and wages and salaries offset 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 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, were up $0.1 billion, or 3.2  per cent.

Program expenses in July 2008 were $17.0 billion, up $1.1 billion , or 6.9 per cent, from July 2007, reflecting increases in subsidies and other transfers and operating expenses of departments and agencies.

In July 2008, transfer payments were up $0.4 billion, or 4.2  per cent, from July 2007.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased 0.3 per cent. Elderly benefits increased 2.9 per cent and EI benefits decreased 6.1 per cent. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, 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 down $0.1 billion, or 3.0 per cent .
• Subsidies and other transfers increased by $0.5 billion, or 34.3 per cent, reflecting increases in payments related to the investment in infrastructure announced in Budget 2007, which came into effect later in 2007, higher transfers to Newfoundland and Labrador and Nova Scotia under the Offshore Accords, and the timing of payments to international organizations.

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 11.9 per cent, between July 2007 and July 2008.

Public debt charges remained stable compared to July 2007.

April to July 2008

Through the first four months of the 2008–09 fiscal year, there was a budgetary surplus of $2.9 billion, down $3.8 billion from the $6.7-billion surplus reported in the same period of 2007–08.

Budgetary revenues increased by $0.6 billion, or 0.7 per cent, to $80.1 billion.

• Personal income tax revenues rose $1.5 billion, or 4.0  per cent, roughly in line with growth in wages and salaries.
• Corporate income tax revenues were down $0.5 billion, or 4.2 per cent.
• Other income tax revenues rose $0.1 billion, or 7.2  per cent.
• Excise taxes and duties decreased by $0.8 billion, or 5.2 per cent, due to a $1.0-billion or 9.6-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 increased by $0.1 billion, sales and excise taxes by $0.2 billion, and revenues from the Air Travellers Security Charge by $4 million.
• EI premium revenues were down $21 million, or 0.3  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 rose $0.4 billion, or 5.1 per cent.

Program expenses for April to July 2008 were $66.1 billion, up $4.9 billion or 8.0 per cent from the same period last year, reflecting an increase in transfer payments, Crown corporation expenses and operating expenses of departments and agencies.

Transfer payments for April to July 2008 were up $3.5 billion, or 8.8 per cent, from the same period last year.

•  Major transfers to persons were up $0.5 billion, or 2.5  per cent. Elderly benefits increased by 3.3 per cent and EI benefits by 2.8 per cent. Children’s benefits remained stable.
•  Major transfers to other levels of government were up $1.4 billion, or 9.4 per cent , reflecting legislated growth in the Canada Health Transfer, Canada Social Transfer and Equalization.
• Subsidies and other transfers were up $1.7 billion, or 26.5 per cent, mainly reflecting increases in payments related to infrastructure and higher transfers to Newfoundland and Labrador and Nova Scotia under the Offshore Accords.

Other program expenses increased by $1.4 billion, or 6.5 per cent, from last year’s level.

Public debt charges decreased by $0.5 billion, or 4.0 per cent, reflecting lower unmatured debt levels and lower interest rates.

Financial requirement of $20.3 billion for April to July 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 $2.9 billion and a requirement of $23.2 billion from non-budgetary transactions, there was a financial requirement of $20.3 billion in the April to July 2008 period, compared to a financial source of $6.8 billion in the same period last year. This difference reflects the financial requirement associated with loans to major Crown corporations which were announced in Budget 2007, as well as higher refunds related to the 2007 tax year.

Net financing activities up $14.2 billion

The Government financed this financial requirement of $20.3 billion by increasing market debt by $14.2 billion and reducing cash balances by $6.1 billion. The increase in market debt was achieved largely through the issuance 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. Cash balances at the end of July 2008 stood at $5.2 billion, $1.8 billion above their level at the end of July 2007.

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