Archived - The Fiscal Monitor

Highlights of financial results for November 2008

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

November 2008

There was a budgetary surplus of $15 million in November 2008, compared to a surplus of $0.5 billion in November 2007.

Budgetary revenues decreased by $0.8 billion, or 3.9 per cent, to $18.8 billion in November 2008.

• Personal income tax revenues rose $39 million, or 0.4 per cent. This weak growth reflects the inclusion of the $183-million cost for January to November 2008 of the temporary reduction in Registered Retirement Income Fund minimum withdrawals announced in the November 27, 2008 Economic and Fiscal Statement.
• Corporate income tax revenues were down $0.6 billion, or 19.4 per cent.
• Other income tax revenues—withholdings from non-residents—increased by $0.2 billion, or 26.4 per cent.
• Excise taxes and duties were down $0.5 billion, or 12.1 per cent. GST revenues declined by $0.4 billion, or 13.5 per cent, due in part to the one‑percentage-point reduction in the GST rate, effective January 1, 2008. Customs import duties were up $22 million, sales and excise taxes fell by $0.1 billion, and revenues from the Air Travellers Security Charge were virtually unchanged.
• Employment Insurance (EI) premium revenues were virtually unchanged, up $6 million from one 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, revenues from the sales of goods and services, returns on investments, foreign exchange revenues and miscellaneous revenues were up $0.1 billion, or 4.9 per cent.

Program expenses in November 2008 were $16.2 billion, down $38 million, or 0.2 per cent, from November 2007, reflecting a decrease in operating expenses of departments and agencies.

In November 2008, transfer payments were up $0.4 billion, or 3.9 per cent, from November 2007.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $0.2 billion, or 4.8 per cent. Elderly benefits have been restated to adjust for a correction to Old Age Security benefits. Including the impact of this adjustment, elderly benefits increased by $0.2 billion in November 2008, EI benefit payments increased by $47 million or 4.4 per cent, and 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 up by $0.2 billion or 4.1 per cent.
• Subsidies and other transfers increased by $37 million, or 1.8 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 fell by $0.5 billion, or 8.0 per cent, over the prior year.

Public debt charges declined by $0.2 billion compared to November 2007.

April 2008 to November 2008

Through the first eight months of the 2008–09 fiscal year, there was a budgetary surplus of $0.2 billion, down $6.4 billion from the $6.6 billion surplus reported during the same period of 2007–08.

Budgetary revenues increased by $0.5 billion, or 0.3 per cent, to $153.9 billion.

• Personal income tax revenues rose $3.8 billion, or 5.2 per cent.
• Corporate income tax revenues were down $3.1 billion, or 13.5 per cent. This decline reflects both weaker profits and 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.
• Other income tax revenues—withholdings from non-residents—rose by $0.3 billion, or 8.8 per cent.
• Excise taxes and duties decreased by $2.3 billion, or 7.6 per cent. GST revenues were down $2.4 billion, or 11.3 per cent, reflecting the 1‑percentage-point reduction in the GST rate, effective January 1, 2008. Customs import duties increased by $0.2 billion, sales and excise taxes were down by $0.1 billion, and revenues from the Air Travellers Security Charge increased by $2 million.
• EI premium revenues were down $15 million, or 0.1 per cent, 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 by $1.8 billion, or 12.8 per cent. Roughly half of the net increase was due to strong growth in receipts under the Atlantic Offshore Revenue Accounts, resulting from growth in offshore production and oil prices. 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. As noted in the October Fiscal Monitor, other revenues (and corresponding operating expenses) for 2007–08 have been restated. This adjustment has no net impact on the budgetary balance.

Program expenses for April to November 2008 were $132.1 billion, up $7.7 billion, or 6.2 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 November were up $6.0 billion, or 7.4 per cent, from the same period last year.

• Major transfers to persons were up $1.3 billion, or 3.3 per cent. Elderly benefits increased by 4.0 per cent and EI benefits increased by 4.2 per cent. Children’s benefits remained stable compared to the same period last year.
• Major transfers to other levels of government were up $2.1 billion, or 7.1 per cent, reflecting legislated growth in the Canada Health Transfer, Canada Social Transfer and Equalization.
• Subsidies and other transfers were up $2.7 billion, or 19.2 per cent, mainly reflecting increases in payments related to support for labour market training and higher transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

Other program expenses increased by $1.7 billion, or 3.9 per cent, from last year’s level.

Public debt charges decreased by $0.9 billion, or 3.8 per cent, reflecting lower interest rates.

Financial requirement of $46.4 billion for April to November 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 $0.2 billion and a requirement of $46.6 billion from non-budgetary transactions, there was a financial requirement of $46.4 billion in the April to November 2008 period, compared to a financial source of $14.8 billion in the same period last year. This difference reflects the Budget 2007 announcement that the Government would meet all of the borrowing needs of the Canada Mortgage and Housing Corporation (CMHC), the Business Development Bank of Canada and Farm Credit Canada through direct lending to reduce overall borrowing costs and improve the liquidity of the government securities market. The financial requirement also reflects the initial purchase of $25 billion in insured mortgage pools through the CMHC under the Insured Mortgage Purchase Program (IMPP) to support the availability of longer-term credit. The requirement for foreign exchange activities mainly reflects the impact of exchange rate movements on the Canadian-dollar value of foreign‑denominated assets.

Net financing activities up $69.4 billion

The Government financed this financial requirement of $46.4 billion and increased its cash balances by $23.0 billion by increasing unmatured debt by $69.4 billion. The increase in debt was achieved largely through the issuance of Treasury bills. Cash balances at the end of November 2008 stood at $34.2 billion, $22.2 billion above their level at the end of November 2007. The increase in cash balances mainly reflects increased balances at the Bank of Canada to support the Bank’s operations to provide liquidity to financial markets and to cover some of the Government’s own funding needs for the IMPP.

For inquiries about this publication,
contact Chris Forbes at 613-995-6391.
January 2009