- Fiscal Monitor 2008 -

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Highlights of financial results for September 2008

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September 2008

There was a budgetary deficit of $0.4 billion in September 2008, compared to a surplus of $11 million in September 2007.

Budgetary revenues fell by $0.1 billion, or 0.6 per cent, to $18.6 billion.

• Personal income tax revenues rose $0.8 billion, or 8.6 per cent.
• Corporate income tax revenues were down $0.4 billion, or 17.6 per cent.
• Other income tax revenues—withholdings from non-residents—were down $0.1 billion, or 19.8 per cent.
• Excise taxes and duties were down $0.1 billion, or 2.7  per cent, driven by lower GST revenues. GST revenues declined by $0.3 billion, or 11.1 per cent, due in part to the 1-percentage-point reduction in the GST rate effective January 1, 2008. The decline in GST revenues was partially offset by increases in customs import duties (up $36 million) and sales and excise taxes (up $0.2 billion). Revenues from the Air Travellers Security Charge were virtually unchanged.
• Employment Insurance (EI) premium revenues were largely 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 down $0.2 billion, or 11.3 per cent. Other revenues (and corresponding operating expenses) in September 2007 have been reduced by $0.3 billion to reflect certain internal government transactions in a manner consistent with September 2008.

Program expenses in September 2008 were $16.4 billion, up $0.4 billion, or 2.6 per cent, from September 2007, reflecting higher transfer payments and operating expenses of departments and agencies.

In September 2008 transfer payments were up $0.2 billion, or 1.7 per cent, from September 2007.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $0.4 billion, or 8.0 per cent. Elderly benefits increased by $0.1 billion and EI benefits by $0.3 billion. 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 3.3 per cent.
• Subsidies and other transfers decreased by $0.1 billion, or 2.3 per cent.

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 $0.2 billion, or 4.6 per cent, over the prior year.

Public debt charges declined $0.2 billion compared to September 2007.

April to September 2008

Through the first six months of the 2008–09 fiscal year, there was a budgetary surplus of $0.8 billion, down $5.8 billion from the $6.6‑billion surplus reported during the same period of 2007–08.

Budgetary revenues increased by $0.6 billion, or 0.5 per cent, to $116.4 billion.

• Personal income tax revenues rose $2.8 billion, or 5.2  per cent, roughly in line with growth in wages and salaries.
• Corporate income tax revenues were down $2.0 billion, or 11.0 per cent. This decline reflects the impact of the 1.5‑percentage-point reduction in the general corporate income tax rate and the elimination of the corporate surtax in 2008, as well as weaker economy-wide profitability.
• Other income tax revenues rose $0.1 billion, or 2.7 per cent.
• Excise taxes and duties decreased by $1.2 billion, or 5.2  per cent. GST revenues were down $1.5 billion, or 9.9 per cent, reflecting 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 $3 million.
• EI premium revenues were down $21 million, as the decline in the premium rate from $1.80 to $1.73 per $100 of insurable earnings, effective January 1, 2008, was largely offset by gains in employment and wages and salaries.
• Other revenues rose $0.8 billion, or 7.5 per cent.

Program expenses for April to September 2008 were $99.1 billion, up $6.8 billion, or 7.4 per cent, from the same period last year, reflecting higher transfer payments, Crown corporation expenses and operating expenses of departments and agencies.

Transfer payments for April to September 2008 were up $4.5  billion, or 7.4 per cent, from the same period last year.

• Major transfers to persons were up $0.9 billion, or 3.3 per cent. Elderly benefits increased by 3.4 per cent and EI benefits by 5.8 per cent. Children’s benefits remained stable compared to the same period last year.
• Major transfers to other levels of government were up $1.4 billion, or 6.6 per cent, reflecting legislated growth in the Canada Health Transfer, Canada Social Transfer and Equalization.
• Subsidies and other transfers were up $2.1 billion, or 20.9 per cent, mainly reflecting increases in payments related to infrastructure and higher transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

Other program expenses increased by $2.4 billion, or 7.4 per cent, from last year’s level.

Public debt charges decreased by $0.4 billion, or 2.6 per cent, reflecting lower interest rates.

Financial requirement of $15.9 billion for April to September 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 $0.8 billion and a requirement of $16.7 billion from non-budgetary transactions, there was a financial requirement of $15.9 billion in the April to September 2008 period, compared to a financial source of $13.4 billion in the same period last year. This difference reflects the financial requirement associated with higher refunds for the 2007 tax year related to the tax cuts announced in the October 2007 Economic Statement and loans to major Crown corporations. The increase in these loans reflects the Budget 2007 announcement that the Government would meet all of the borrowing needs of the Business Development Bank of Canada, Canada Mortgage and Housing Corporation and Farm Credit Canada through direct lending to these Crown corporations in order to reduce overall borrowing costs and improve the liquidity of the government securities market.

Net financing activities up $12.5 billion

The Government financed this financial requirement of $15.9 billion by increasing market debt by $12.5 billion and reducing cash balances by $3.5 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 September 2008 stood at $7.8 billion, $4.6 billion above their level at the end of September 2007.

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