Highlights

September 2009: budgetary deficit of $5.0 billion

There was a budgetary deficit of $5.0 billion in September 2009, compared to a deficit of $0.6 billion in September 2008. The September 2009 deficit reflects the impact of the weaker economy on the Government's finances, as well as measures introduced under Canada's Economic Action Plan. Revenues were down $3.6 billion from September 2008, driven by declines in income tax revenues, as well as goods and services tax (GST) and other revenues. Program expenses increased by $1.1 billion compared to September 2008, largely reflecting higher Employment Insurance (EI) benefit payments and higher transfers to other levels of government. Public debt charges decreased by $0.3 billion compared to September 2008 due to lower average effective interest rates.

April to September 2009: budgetary deficit of $28.6 billion

For the first half of the 2009–10 fiscal year, the budgetary deficit was $28.6 billion, compared to a budgetary surplus of $0.5 billion reported in the same period of 2008–09. Over $11 billion of the $28.6-billion deficit was attributable to actions taken under Canada's Economic Action Plan, including tax reductions, enhanced EI benefits and support for the automotive industry. Revenues were down $14.2 billion, or 12.3 per cent, reflecting declines across most revenue streams, particularly personal and corporate income tax and GST revenues. The decline in revenues through September is generally in line with the projected quarterly pattern of economic growth, in which nominal gross domestic product (GDP), the broadest single measure of the tax base, is expected to be weak through the first six months of the fiscal year before strengthening in the October to December timeframe. The impact of the economic profile on revenue growth highlights the sensitivity of the 2009–10 revenue projections to the economic recovery.

Program expenses were up $16.3 billion, or 16.5 per cent, mainly reflecting higher EI benefit payments, higher transfers to other levels of government and support for the automotive industry. Public debt charges were down $1.4 billion on a year-over-year basis, reflecting lower interest rates.

September 2009

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There was a budgetary deficit of $5.0 billion in September 2009, compared to a $0.6-billion deficit in September 2008.

Revenues decreased by $3.6 billion, or 19.4 per cent, to $15.2 billion in September 2009.

• Personal income tax revenues decreased by $1.5 billion, or 16.2 per cent, reflecting lower employment, personal income tax reductions announced in Canada's Economic Action Plan and weaker quarterly instalment payments.
• Corporate income tax revenues were down $1.2 billion, or 58.9 per cent, reflecting higher corporate refunds and lower receipts.
• Non-resident income tax revenues were down $0.1 billion, or 31.8 per cent.
• Excise taxes and duties were down $0.3 billion, or 8.4 per cent, driven by lower GST revenues. GST revenues were down $0.3 billion, or 10.8 per cent. Energy taxes were up $7 million, customs import duties were down $29 million, and other excise taxes and duties decreased by $18 million.
• EI premium revenues were up $17 million. The premium rate was kept stable at $1.73 per $100 of insurable earnings for 2009 and 2010.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, proceeds from the sale of goods and services, returns on investments, foreign exchange net revenues and miscellaneous revenues, were down $0.5 billion, or 22.0 per cent, due in large part to a decline in receipts under the Atlantic Offshore Revenue Accounts, reflecting lower 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.

Program expenses in September 2009 were $17.9 billion, up $1.1 billion, or 6.3 per cent, from September 2008, largely due to higher EI benefit payments and higher transfers to other levels of government.

In September 2009, transfer payments were up $0.9 billion, or 8.4 per cent, from September 2008.

• Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.6 billion, or 11.7 per cent. Elderly benefits increased by $0.1 billion, or 5.2 per cent. EI benefit payments increased by $0.4 billion, or 31.3 per cent, reflecting significantly higher regular benefits due to rising unemployment, as well as benefit enhancement measures announced as part of Canada's Economic Action Plan. Children's benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, increased by $51 million.
• 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 $0.3 billion, or 7.6 per cent. An adjustment has been made in September 2009 to reclassify certain transfer payments within major transfers to other levels of government to reflect the presentation that will be used in the 2009–10 Public Accounts. This reclassification has no impact on the total amount of major transfers to other levels of government recorded during the month.
• Other transfer payments increased by $0.1 billion, or 2.8 per cent, reflecting increased transfers for infrastructure, largely offset by a decrease in agricultural assistance and a decline in transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

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 increased by $0.1 billion, or 2.4 per cent, over last year.

Public debt charges decreased by $0.3 billion compared to September 2008 due to lower average effective interest rates on the stock of interest-bearing debt.

April to September 2009

Through the first half of the 2009–10 fiscal year, there was a budgetary deficit of $28.6 billion, compared to a surplus of $0.5 billion reported during the same period of 2008–09. Over $11 billion of the $28.6-billion deficit was attributable to actions taken under Canada's Economic Action Plan, including tax reductions, enhanced EI benefits and support for the automotive industry.

Revenues declined by $14.2 billion, or 12.3 per cent, to $101.5 billion.

• Personal income tax revenues were down $4.2 billion, or 7.5 per cent, reflecting lower employment and the impact of tax relief measures. These tax reductions included increases in the basic personal amount and personal income tax bracket thresholds, as well as the Home Renovation Tax Credit. Personal income tax revenues are expected to remain weak through the remainder of 2009 and then begin to rise year-over-year in the first quarter of 2010 reflecting projected wage growth and the expiration of the Home Renovation Tax Credit at the end of January 2010.
• Corporate income tax revenues were down $6.3 billion, or 39.5 per cent, reflecting an increase of roughly 50 per cent in refunds of taxes paid in previous years and a decline of about 12 per cent in receipts.
• Non-resident income tax revenues were down $0.3 billion, or 12.7 per cent.
• Excise taxes and duties were down $2.8 billion, or 13.4 per cent, primarily due to a $2.5-billion, or 17.9-per-cent, decline in GST revenues. GST revenues are projected to strengthen over the course of the fiscal year, reflecting the unwinding of timing impacts that dampened GST revenues early in the fiscal year and the projected recovery over the remainder of the fiscal year in consumer spending on items that are subject to the GST. Energy taxes were down $31 million, customs import duties were down $0.2 billion, and other excise taxes and duties decreased by $0.1 billion.
• EI premium revenues were up 0.2 per cent. The premium rate was kept stable at $1.73 per $100 of insurable earnings for 2009 and 2010.
• Other revenues were down $0.6 billion, or 5.5 per cent.

Program expenses for April to September 2009 were $115.1 billion, up $16.3 billion, or 16.5 per cent, from the same period last year, primarily reflecting higher EI benefit payments, higher transfers to other levels of government and support for the automotive industry.

Transfer payments for April to September 2009 were up $15.4 billion, or 23.8 per cent, from the same period last year.

• Major transfers to persons were up $4.6 billion, or 15.6 per cent. Elderly benefits increased by $0.9 billion, or 5.5 per cent, in line with growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $3.5 billion, or 50.1 per cent, reflecting higher unemployment and benefit enhancements introduced as part of Canada's Economic Action Plan. Children's benefits were up $0.1 billion.
• Major transfers to other levels of government were up $2.2 billion, or 9.4 per cent, reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer and Equalization, as well as the previously announced doubling of the gas tax transfer to provinces and municipalities, as of April 1, 2009.
• Other transfer payments were up $8.7 billion, mainly reflecting support for the automotive industry and increased infrastructure funding. This increase was partially offset by a decrease in transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

Other program expenses increased by $0.9 billion, or 2.6 per cent, from last year's level, due mainly to an increase in the operating expenses of National Defence.

Public debt charges decreased by $1.4 billion, or 8.5 per cent, as the increase in the stock of interest-bearing debt was more than offset by lower average effective interest rates on that stock.

Financial requirement of $55.7 billion for April to September 2009

The budgetary balance is presented on an 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 $28.6 billion and a requirement of $27.0 billion from non-budgetary transactions, there was a financial requirement of $55.7 billion in the April to September period of 2009–10, compared to a financial requirement of $15.9 billion in the same period of 2008–09. This year-over-year difference is due mainly to the deterioration in the budgetary balance.

Net financing activities up $30.7 billion

The Government financed this financial requirement of $55.7 billion by increasing market debt by $30.7 billion and reducing cash balances by $25.0 billion. The increase in market debt was achieved primarily through the issuance of marketable bonds. 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 2009 stood at $20.1 billion, $12.3 billion above their level at the end of September 2008.