The Fiscal Monitor
A publication of the department of finance

August 2012

There was a budgetary deficit of $3.2 billion in August 2012, compared to a deficit of $3.1 billion in August 2011.

Revenues increased by $0.4 billion, or 2.0 per cent, to $19.1 billion.

• Personal income tax revenues were up $0.5 billion, or 5.3 per cent.
• Corporate income tax revenues were down $0.2 billion, or 13.5 per cent.
• Non-resident income tax revenues were down $13 million, or 3.9 per cent.
• Excise taxes and duties were up $0.1 billion, or 1.2 per cent. GST revenues were up $0.2 billion, or 6.1 per cent. Energy taxes were down $0.1 billion, customs import duties were up $2 million, and other excise taxes and duties were down $34 million. 
• EI premium revenues were up $0.1 billion, or 7.8 per cent, consistent with the 2012 premium rate of $1.83 per $100 of insurable earnings.  
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, revenues from sales of goods and services, returns on investments, net foreign exchange revenues and miscellaneous revenues, were down $19 million, or 0.9 per cent. 

Program expenses in August 2012 were $20.0 billion, up $0.5 billion, or 2.6 per cent, from August 2011.        

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $0.1 billion, or 1.2 per cent. Elderly benefits increased by $0.3 billion, or 8.8 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $0.2 billion, or 13.0 per cent, reflecting a decrease in regular benefits. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, increased by $12 million.
• Major transfers to other levels of government, consisting of federal transfers in support of health and other social programs (primarily the Canada Health Transfer and the Canada Social Transfer), fiscal arrangements and other transfers (Equalization, transfers to the territories, as well as a number of smaller transfer programs), transfers to provinces on behalf of Canada’s cities and communities, and the Quebec Abatement, decreased by $0.1 billion, or 1.8 per cent, as legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories was more than offset by a decrease in transfers to Canada’s cities and communities, reflecting a year-over-year difference in the timing of payments.
• Direct program expenses include operating expenses of National Defence and other departments, expenses of Crown corporations, and all other transfer payments to individuals and other organizations. Direct program expenses were up $0.5 billion, or 5.8 per cent, from the previous year.
  • Transfer payments, which include transfers for Aboriginal peoples, assistance to farmers, foreign aid, and support for research and development, infrastructure and regional development, were down $0.6 billion, or 20.8 per cent. This decrease primarily reflects a decrease in transfers at Aboriginal Affairs and Northern Development Canada, lower transfers under Foreign Affairs and International Trade Canada due mainly to the timing of payments, and a decline in infrastructure transfers, consistent with the wind-down of the stimulus provided through Canada’s Economic Action Plan.
  • Other direct program expenses, which include salaries and benefits of federal employees, amortization of facilities and equipment, and supplies, increased by $1.1 billion, or 18.2 per cent, due to a one-time adjustment in August 2012 to reflect an updated accrual estimate of employee and veteran future benefit costs based on actuarial valuations prepared for the Government’s 2011–12 financial statements.   

Public debt charges decreased by $0.1 billion, or 3.1 per cent.

April to August 2012

For the first five months of the 2012–13 fiscal year, there was a budgetary deficit of $6.2 billion, compared to a deficit of $9.0 billion reported during the same period of 2011–12. 

Revenues increased by $3.4 billion, or 3.4 per cent, to $102.4 billion.

• Personal income tax revenues were up $1.9 billion, or 3.8 per cent. 
• Corporate income tax revenues were up $0.1 billion, or 1.3 per cent, reflecting a decrease in receipts of about 2.9 per cent and a decrease of 10.5 per cent in refunds of taxes paid.
• Non-resident income tax revenues were up $34 million, or 1.8 per cent. 
• Excise taxes and duties were up $1.0 billion, or 5.5 per cent, largely reflecting an increase in GST revenues of $0.7 billion, or 5.9 per cent. Energy taxes, customs import duties and other excise taxes and duties each increased by $0.1 billion. 
• EI premium revenues were up $0.6 billion, or 7.2 per cent, reflecting growth in insurable earnings and the 2012 premium rate of $1.83 per $100 of insurable earnings.
• Other revenues were down $0.3 billion, or 2.6 per cent.

For the April to August 2012 period, program expenses were $96.2 billion, up $1.4 billion, or 1.5 per cent, from the same period the previous year.

• Major transfers to persons were up $0.8 billion, or 2.7 per cent. Elderly benefits increased by $1.0 billion, or 6.7 per cent, reflecting the introduction of the Guaranteed Income Supplement top-up benefit in July 2011, as well as growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $0.3 billion, or 3.9 per cent, reflecting a decrease in regular benefits. Children’s benefits were up $27 million, or 0.5 per cent.  
• Major transfers to other levels of government were up $0.4 billion, or 1.6 per cent, mainly reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories, offset in part by lower transfer protection payments to provinces, lower transfers to Canada’s cities and communities and an increase in recoveries under the Quebec Abatement.  
• Direct program expenses were up $0.3 billion, or 0.7 per cent. 
  • Transfer payments were down $0.7 billion, or 5.8 per cent, primarily reflecting a decrease in transfers at Aboriginal Affairs and Northern Development Canada, lower transfers under Foreign Affairs and International Trade Canada due mainly to the timing of payments, and a decline in infrastructure transfers, consistent with the wind-down of the stimulus provided through Canada’s Economic Action Plan. 
  • Other direct program expenses increased by $1.0 billion, or 3.5 per cent, largely reflecting an increase in the accrual cost of employee and veteran future benefits.

Public debt charges decreased by $0.9 billion, or 6.7 per cent, reflecting lower Consumer Price Index adjustments on real return bonds and a lower effective interest rate on the stock of interest-bearing debt.

Financial requirement of $20.9 billion for April to August 2012

The budgetary balance is presented on an accrual basis of accounting, recording government revenues and expenses 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 $6.2 billion and a requirement of $14.8 billion from non-budgetary transactions, there was a financial requirement of $20.9 billion for the April to August 2012 period, compared to a financial requirement of $24.8 billion for the same period the previous year. 

Net financing activities up $27.7 billion

The Government financed this financial requirement of $20.9 billion and increased cash balances by $6.8 billion by increasing market debt by $27.7 billion. The increase in market debt was achieved primarily through the issuance of marketable bonds and 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 August 2012 stood at $20.1 billion, up $9.0 billion from their level at the end of August 2011.  

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

For inquiries about this publication, contact Brian Pagan at 613-995-6391.
October 2012