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Highlights of financial results for November 2008

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Highlights

November 2008: budgetary surplus of $15 million

There was a budgetary surplus of $15 million in November 2008, compared to a surplus of $0.5 billion in November 2007. Budgetary revenues were down $0.8 billion, or 3.9 per cent, from November 2007, reflecting lower corporate income tax, goods and services tax (GST) and sales and excise tax revenues. Program expenses decreased by $38 million, or 0.2 per cent, compared to November 2007, reflecting increases in transfer payments offset by a decrease in other program expenses. Public debt charges decreased by $0.2 billion compared to November 2007.

April to November 2008: budgetary surplus of $0.2 billion

For 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 in the same period of 2007–08. Revenues increased by $0.5 billion, or 0.3 per cent, primarily reflecting growth in personal income tax and other revenues, offset by declines in corporate income tax and GST revenues. Program expenses were up $7.7 billion, or 6.2 per cent, due to higher transfer payments and operating expenses of departments and agencies.

Public debt charges were down $0.9 billion on a year-over-year basis, reflecting a lower average effective interest rate on the stock of interest-bearing debt.

Actions to support the availability of credit are reflected in the financial requirement. There was a financial requirement of $46.4 billion in the April to November period of 2008–09 compared to a financial source of $14.8 billion from the same period the previous year. This year-over-year difference reflects $25 billion in initial purchases of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC) under the Insured Mortgage Purchase Program, as well as the Budget 2007 announcement that the Government would meet all of the borrowing needs of the CMHC, the Business Development Bank of Canada and Farm Credit Canada through direct lending.

The results to date are reflected in the Budget 2009 projections.

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.

Revenues and expenses (April to November 2008)

 

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.

Federal debt (accumulated deficit)

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.

Table 1
Summary statement of transactions
  November April to November
 
  2007 2008 2007–08 2008–09
  ($ millions)
Budgetary transactions        
  Revenues 19,587 18,828 153,453 153,935
  Expenses        
Program expenses -16,285 -16,247 -124,382 -132,112
    Public debt charges -2,814 -2,566 -22,470 -21,605
     
  Budgetary balance (deficit/surplus) 488 15 6,601 218
Non-budgetary transactions -1,275 -12,610 8,219 -46,648
Financial source/requirement -787 -12,595 14,820 -46,430
Net change in financing activities 6,858 25,795 -23,992 69,427
Net change in cash balances 6,071 13,200 -9,172 22,997
Cash balance at end of period     12,035 34,244
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.
Table 2
Budgetary revenues
  November
April to November
  2007 2008 Change 2007–08 2008–09 Change
  ($ millions) (%) ($ millions) (%)
Tax revenues            
  Income taxes            
    Personal income tax 9,349 9,388 0.4 71,737 75,503 5.2
    Corporate income tax 2,866 2,311 -19.4 23,262 20,133 -13.5
    Other income tax 571 722 26.4 3,572 3,886 8.8
     
    Total income tax 12,786 12,421 -2.9 98,571 99,522 1.0
  Excise taxes and duties            
    Goods and services tax 2,932 2,536 -13.5 21,020 18,637 -11.3
    Customs import duties 270 292 8.1 2,562 2,732 6.6
    Sales and excise taxes 850 731 -14.0 6,600 6,509 -1.4
    Air Travellers Security Charge 29 27 -6.9 258 260 0.8
     
    Total excise taxes and duties 4,081 3,586 -12.1 30,440 28,138 -7.6
     
  Total tax revenues 16,867 16,007 -5.1 129,011 127,660 -1.0
Employment Insurance premiums 763 769 0.8 10,051 10,036 -0.1
Other revenues 1,957 2,052 4.9 14,391 16,239 12.8
Total budgetary revenues 19,587 18,828 -3.9  153,453 153,935 0.3
Note: Totals may not add due to rounding.
Table 3
Budgetary expense
  November   April to November  
 

  2007 2008 Change 2007–08 2008–09 Change
  ($ millions) (%) ($ millions) (%)
Transfer payments            
  Transfers to persons            
    Elderly benefits 2,678 2,839 6.0 21,099 21,942 4.0
    Employment Insurance benefits 1,063 1,110 4.4 8,835 9,210 4.2
    Children’s benefits 982 1,001 1.9 7,962 8,012 0.6
 

    Total 4,723 4,950 4.8 37,896 39,164 3.3
  Transfers to other levels
   of government
           
    Support for health and other social programs            
      Canada Health Transfer 1,804 1,887 4.6 14,277 15,087 5.7
      Canada Social Transfer 832 881 5.9 6,513 7,039 8.1
 

      Total 2,636 2,768 5.0 20,790 22,126 6.4
    Fiscal transfers 1,266 1,328 4.9 9,752 10,303 5.7
    Canada’s cities and communities 127 116 -8.7 722 830 15.0
    Alternative Payments for
     Standing Programs
-248 -277 11.7 -2,033 -1,952 -4.0
 

    Total 3,781 3,935 4.1 29,231 31,307 7.1
  Subsidies and other transfers            
    Agriculture and Agri-Food 198 240 21.2 906 1,073 18.4
    Foreign Affairs and
     International Trade
166 246 48.2 1,501 1,833 22.1
    Health 213 229 7.5 1,367 1,404 2.7
    Human Resources and
     Social Development
119 231 94.1 1,096 1,455 32.8
    Indian Affairs and
     Northern Development
370 310 -16.2 3,260 3,248 -0.4
    Industry 110 140 27.3 1,236 1,345 8.8
    Other 914 731 -20.0 4,615 6,312 36.8
 

    Total 2,090 2,127 1.8 13,981 16,670 19.2
 

  Total transfer payments 10,594 11,012 3.9 81,108 87,141 7.4
Other program expenses            
  Crown corporation expenses            
    Canadian Broadcasting
     Corporation
58 93 60.3 868 744 -14.3
    Canada Mortgage and
     Housing Corporation
170 154 -9.4 1,296 1,472 13.6
    Other 327 345 5.5 2,587 2,902 12.2
 

    Total 555 592 6.7 4,751 5,118 7.7
  Defence 1,516 1,510 -0.4 11,340 12,069 6.4
  All other departments
   and agencies
3,620 3,133 -13.5 27,183 27,784 2.2
 

Total other program expenses 5,691 5,235 -8.0 43,274 44,971 3.9
Total program expenses 16,285 16,247 -0.2 124,382 132,112 6.2
Public debt charges 2,814 2,566 -8.8 22,470 21,605 -3.8
Total budgetary expenses 19,099 18,813 -1.5  146,852 153,717 4.7
Note: Totals may not add due to rounding.
Table 4
The budgetary balance and financial source/requirement
  November April to November
 

  2007 2008 2007–08 2008–09
  ($ millions)
Budgetary balance (deficit/surplus) 488 15 6,601 218
Non-budgetary transactions        
  Capital investing activities -146 -197 -1,393 -2,204
  Other investing activities -125 -13,988 -1,178 -40,655
  Pension and other accounts -24 325 5,118 3,405
  Other activities        
    Accounts payable, receivables,
     accruals and allowances
811 1,386 -708 -3,160
    Foreign exchange activities -1,988 -445 4,761 -6,268
    Amortization of tangible capital assets 197 309 1,619 2,234
 

    Total other activities -980 1,250 5,672 -7,194
  Total non-budgetary transactions -1,275 -12,610 8,219 -46,648
Financial source/requirement -787 -12,595 14,820 -46,430
Note: Totals may not add due to rounding.
Table 5
Financial source/requirement and net financing activities
  November April to November
 

  2007 2008 2007–08 2008–09
  ($ millions)
Financial source/requirement -787 -12,595 14,820 -46,430
Net increase (+)/decrease (-) in financing activities        
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds 2,133 8,344 -1,255 13,790
      Treasury bills 4,600 18,000 -17,000 53,700
      Canada Savings Bonds -1,457 -817 -1,910 -964
      Other -143 -2 -699 -518
 

      Total 5,133 25,525 -20,864 66,008
    Foreign currency borrowings 90 -879 -1,496 -359
 

    Total 5,223 24,646 -22,360 65,649
    Cross-currency swap revaluation 1,774 952 -2,586 3,399
    Unamortized discounts on debt issues -173 211 -170 485
    Obligations related to capital leases 34 -14 1,124 -106
  Net change in financing activities 6,858 25,795 -23,992 69,427
Change in cash balance 6,071 13,200 -9,172 22,997
Note: Totals may not add due to rounding.
Table 6
Condensed statement of assets and liabilities
  March 31, 2008 November 30, 2008 Change
  ($ millions)
Liabilities      
  Accounts payable, accruals and allowances 110,463 105,169 -5,294
  Interest-bearing debt      
    Unmatured debt      
      Payable in Canadian dollars      
        Marketable bonds 253,550 267,340 13,790
        Treasury bills 116,936 170,636 53,700
        Canada Savings Bonds 13,068 12,104 -964
        Other 1,042 524 -518
 
        Subtotal 384,596 450,604 66,008
      Payable in foreign currencies 9,498 9,139 -359
      Cross-currency swap revaluation account -1,420 1,979 3,399
      Unamortized discounts and premiums on market debt -6,213 -5,728 485
      Obligations related to capital leases 4,236 4,130 -106
 
      Total unmatured debt 390,697 460,124 69,427
    Pension and other accounts      
      Public sector pensions 137,371 139,042 1,671
      Other employee and veteran future benefits 47,901 49,584 1,683
      Other liabilities 5,895 5,946 51
 
      Total pension and other liabilities 191,167 194,572 3,405
    Total interest-bearing debt 581,864 654,696 72,832
  Total liabilities 692,327 759,865 67,538
Financial assets  
  Cash and accounts receivable 82,878 103,741 20,863
  Foreign exchange accounts 42,299 48,567 6,268
  Loans, investments and advances (net of allowances) 50,869 91,524 40,655
 
Total financial assets 176,046 243,832 67,786
 
Net debt 516,281 516,033 -248
Non-financial assets 58,644 58,614 -30
Federal debt (accumulated deficit) 457,637 457,419 -218
Note: Totals may not add due to rounding.

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