- Fiscal Monitor 2006 -

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Highlights of financial results for January 2006

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Highlights

January 2006: budgetary surplus of $1.7 billion

There was a budgetary surplus of $1.7 billion in January 2006, down $0.7 billion from January 2005. Total budgetary revenues rose $1.3 billion, reflecting solid growth in all major tax streams. Program expenses were up $2.2 billion, reflecting the impact of $0.8 billion in assistance for grain and oilseed producers and $0.6 billion related to the Energy Cost Benefit. Public debt charges were $0.2 billion lower.

April 2005 to January 2006: budgetary surplus of $9.0 billion

For the first 10 months of the 2005–06 fiscal year (April to January), the budgetary surplus is estimated at $9.0 billion, down $3.9 billion from the $12.9-billion surplus reported in the same period of 2004–05. Budgetary revenues were up $6.5 billion or 4.1 per cent. This gain is net of the $4.0-billion cost of the personal income tax reduction measures announced in the November 2005 Economic and Fiscal Update pertaining to the 2005 tax year. Program expenses were up $11.1 billion or 9.5 per cent, primarily due to higher transfers to the provinces and territories for health care and equalization/Territorial Formula Financing (TFF). Public debt charges were $0.7 billion lower.

January 2006

There was a budgetary surplus of $1.7 billion in January 2006, down $0.7 billion from January 2005.

Budgetary revenues rose $1.3 billion or 6.9 per cent to $20.2 billion.

  • Personal income tax receipts were up $1.0 billion or 11.5 per cent, primarily due to stronger source deductions from employment income.

  • Corporate income tax revenues rose $0.2 billion or 10.2 per cent, reflecting ongoing profitability in the corporate sector.

  • Other income tax receipts—withholdings from non-residents—rose 14.7 per cent.

  • Excise taxes and duties rose $0.2 billion or 5.3 per cent, largely due to a $0.2-billion or 7.1-per-cent increase in goods and services tax (GST) revenues. Customs import duties were up $52 million, while sales and excise taxes were down $49 million. Revenues from the Air Travellers Security Charge were down $6 million.

  • Employment insurance (EI) premiums declined by 11.3 per cent, reflecting the decline in the premium rate from $1.95 to $1.87 per $100 of insurable earnings, effective January 1, 2006.

  • Other revenues, consisting of revenues from Crown corporations, sales of goods and services and foreign exchange revenues, were down 3.0 per cent. Other revenues can be volatile on a monthly basis.

Program expenses in January 2006 were $15. billion, up $2. billion or 15.8 per cent from January 2005.

Transfer payments were up $1.5 billion or 18.1 per cent.

  • Major transfers to persons, consisting of elderly and EI benefits, were up $84 million or 2.1 per cent. Elderly benefits increased 5.5 per cent due to both higher average benefits, which are indexed to Consumer Price Index inflation, and an increase in the number of individuals eligible for benefits. EI benefit payments decreased 2.8 per cent, reflecting a decline in regular benefits.

  • 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 $0.5 billion or 20.6 per cent. The increase in federal transfers in support of health and other social programs and higher fiscal transfers largely reflect increased funding under the 2004 agreements on health care and equalization/TFF.

  • Subsidies and other transfers increased by $0.9 billion or 46.7 per cent, largely reflecting transfers under the Grains and Oilseeds Payment Program (Agriculture and Agri-Food Canada) and the Energy Cost Benefit (Canada Revenue Agency and Human Resources and Social Development).

Other program expenses consist of transfers to Crown corporations, operating expenses for departments and agencies including National Defence, and the ongoing assessment of the Government’s liabilities. These expenses increased by $0.6 billion or 12.0 per cent.

Public debt charges decreased by $0.2 billion or 6.3 per cent due to a decrease in the average effective interest rate on the debt.

April 2005 to January 2006

In the first 10 months of the 2005–06 fiscal year, there was a budgetary surplus of $9.0 billion, $3.9 billion below the $12.9-billion surplus reported in the same period of 2004–05.

Budgetary revenues were up $6.5 billion or 4.1 per cent to $165.7 billion.

Revenues and Expenses

  • Personal income tax revenues rose $3.0 billion or 4.1 per cent. This gain is net of the $4.0-billion cost of the personal income tax reduction measures announced in the November 2005 Economic and Fiscal Update pertaining to the 2005 tax year.

  • Corporate income tax revenues were up $2.7 billion or 13.7 per cent, reflecting gains in corporate profitability in 2005.

  • Other income tax revenues increased by $1.0 billion or 34.9 per cent, reflecting increased dividend payments to non-residents.

  • Excise taxes and duties rose $1.9 billion or 5.1 per cent. GST revenues increased $1.8 billion or 6.8 per cent, broadly consistent with the growth rate of retail sales of 6.6 per cent over the same period. Customs import duties were up 12.9 per cent. Sales and excise taxes were down 2.1 per cent, while the Air Travellers Security Charge was down 14.2 per cent, reflecting reductions in the charge effective April 1, 2005.

  • EI premiums were down 1.6 per cent, as the impact of the reduction in the premium rate in January 2005 more than offset the impact of higher employment and wages and salaries.

  • Other revenues were down $1.9 billion or 16.0 per cent, reflecting the impact of the one-time gain ($2.6 billion) from the sale of the Government’s remaining shares in Petro-Canada in September 2004.

Budgetary balance

Program expenses in the April 2005 to January 2006 period were $128.7 billion, up $11.1 billion or 9.5 per cent over the same period of 2004–05, with most of the increase attributable to higher transfers to provinces and territories for health care and equalization/TFF. Public debt charges declined by $0.7 billion.

Transfer payments, which account for nearly two-thirds of total program expenses, increased by $8.7 billion or 11.7 per cent.

  • Transfers to persons advanced by 2.1 per cent. Elderly benefits were up 4.3 per cent while EI benefits were down 2.2 per cent. The year-to-date decline in EI benefits is mainly attributable to a decline in regular benefits, which is in turn due to improved labour market conditions compared to the same period in 2004–05.

  • Transfers to other levels of government were up $6.0 billion or 23.5 per cent, reflecting the impact of the 2004 agreement on health care and the new framework for equalization and TFF.

  • Subsidies and other transfers increased by 14.7 per cent, reflecting the impact of measures from recent budgets as well as transfers under the Grains and Oilseeds Payment Program and the Energy Cost Benefit.

Federal debt (accumulated deficit)

Other program expenses increased by 5.6 per cent.

Public debt charges were down 2.5 per cent due to a decline in the stock of interest-bearing debt and a decline in the average effective interest rate on that debt.

Financial source of $3.8 billion for April 2005 to January 2006

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.

Non-budgetary transactions resulted in a net requirement of $5.2 billion in the April-to-January period, up $0.2 billion from the requirement in the same period of 2004–05.

With a budgetary surplus of $9.0 billion and a net requirement of $5.2 billion from non-budgetary transactions, there was a financial source of $3.8 billion in the first 10 months of 2005–06 compared to a financial source of $7.9 billion in the same period of 2004–05.

Net financing activities down $18.2 billion

The Government used this financial source of $3.8 billion and a reduction in its cash balances of $14.4 billion to reduce its market debt by $18.2 billion by the end of January 2006, largely through a reduction 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 January stood at $2.7 billion.

Table 1
Summary statement of transactions

January April to January


2005 2006 2004–05 2005–06
($ millions)
Budgetary transactions
  Revenues 18,856 20,150 159,202 165,713
  Expenses
    Program expenses -13,638 -15,793 -117,587 -128,729
    Public debt charges -2,857 -2,676 -28,714 -27,986


  Budgetary balance (deficit/surplus) 2,361 1,681 12,901 8,998
Non-budgetary transactions -880 2,023 -5,014 -5,226
Financial source/requirement 1,481 3,704 7,887 3,772
Net change in financing activities -2,027 -5,434 -21,657 -18,163
Net change in cash balances -546 -1,730 -13,770 -14,391
Cash balance at end of period 3,480 2,730
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Budgetary revenues

January April to January


2005 2006 Change 2004–05 2005–06 Change
($ millions) (%) ($ millions) (%)
Tax revenues
  Income taxes
    Personal income tax 8,677 9,673 11.5 73,101 76,108 4.1
    Corporate income tax 2,358 2,599 10.2 19,854 22,573 13.7
    Other income tax revenue 607 696 14.7 2,899 3,910 34.9


    Total income tax 11,642 12,968 11.4 95,854 102,591 7.0
  Excise taxes and duties
    Goods and services tax 3,125 3,346 7.1 26,679 28,502 6.8
    Customs import duties 192 244 27.1 2,511 2,836 12.9
    Sales and excise taxes 759 710 -6.5 8,154 7,983 -2.1
    Air Travellers Security Charge 28 22 -21.4 325 279 -14.2


    Total excise taxes and duties 4,104 4,322 5.3 37,669 39,600 5.1


  Total tax revenues 15,746 17,290 9.8 133,523 142,191 6.5
Employment insurance premiums 1,891 1,677 -11.3 13,604 13,381 -1.6
Other revenues 1,219 1,183 -3.0 12,075 10,141 -16.0
Total budgetary revenues 18,856 20,150 6.9 159,202 165,713 4.1
Note: Totals may not sum due to rounding.

Table 3
Budgetary expenses

January April to January


2005 2006 Change 2004–05 2005–06 Change
($ millions) (%) ($ millions) (%)
Transfer payments
  Transfers to persons
    Elderly benefits 2,362 2,491 5.5 23,194 24,184 4.3
    Employment insurance benefits 1,615 1,570 -2.8 11,982 11,714 -2.2
 

    Total 3,977 4,061 2.1 35,176 35,898 2.1
Transfers to other levels of government
  Support for health and other social programs
    Canada Health Transfer 1,054 1,583 50.2 10,542 15,833 50.2
    Canada Social Transfer 652 685 5.1 6,521 6,854 5.1
    Health Reform Transfer 125 0 n/a 1,250 0 n/a
 

  Total 1,831 2,268 23.9 18,313 22,687 23.9
  Fiscal transfers 933 1,059 13.5 9,387 10,597 12.9
  Canada’s cities and communities 0 14 n/a 0 670 n/a
  Alternative Payments for Standing Programs -210 -261 24.3 -2,203 -2,461 11.7
 

  Total 2,554 3,080 20.6 25,497 31,493 23.5
Subsidies and other transfers
  Agriculture 146 777 432.2 826 1,693 105.0
  Foreign Affairs 310 333 7.4 2,010 1,933 -3.8
  Health 234 207 -11.5 1,494 1,547 3.5
  Human Resources Development 264 232 -12.1 1,050 1,144 9.0
  Indian and Northern Development 347 368 6.1 3,618 3,986 10.2
  Industry and Regional Development 100 159 59.0 1,491 1,610 8.0
  Other 593 850 43.4 3,269 3,871 18.4
 

  Total 1,994 2,926 46.7 13,758 15,784 14.7
 

  Total transfer payments 8,525 10,067 18.1 74,431 83,175 11.7
Other program expenses
  Crown corporation expenses
    Canadian Broadcasting Corporation 108 50 -53.7 972 1,028 5.8
    Canada Mortgage and Housing Corporation 170 171 0.6 1,685 1,707 1.3
    Other 200 161 -19.5 1,731 1,511 -12.7
 

    Total 478 382 -20.1 4,388 4,246 -3.2
  Defence 1,156 1,221 5.6 10,905 11,987 9.9
  All other departments and agencies 3,479 4,123 18.5 27,863 29,321 5.2
 

  Total other program expenses 5,113 5,726 12.0 43,156 45,554 5.6
Total program expenses 13,638 15,793 15.8 117,587 128,729 9.5
Public debt charges 2,857 2,676 -6.3 28,714 27,986 -2.5
Total budgetary expenses 16,495 18,469 12.0 146,301 156,715 7.1
Note: Totals may not sum due to rounding.

Table 4
Budgetary balance and financial source/requirement

  January April to January
 

  2005 2006 2004–05 2005–06
  ($ millions)
Budgetary balance (deficit/surplus) 2,361 1,681 12,901 8,998
Non-budgetary transactions        
  Capital investing activities -86 -300 -1,088 -1,815
  Other investing activities -531 316 -1,914 -2,460
  Pension and other accounts -565 206 -1,974 -103
  Other activities        
    Accounts payable, receivables,
      accruals and allowances
928 1,277 -5,699 -5,994
    Foreign exchange activities -868 284 3,091 2,597
    Amortization of tangible capital assets 242 240 2,570 2,549
 

    Total other activities 302 1,801 -38 -848
  Total non-budgetary transactions -880 2,023 -5,014 -5,226
Net financial source/requirement 1,481 3,704 7,887 3,772
Note: Totals may not sum due to rounding.

Table 5
Financial source/requirement and net financing activities

  January April to January
 

  2005 2006 2004–05 2005–06
  ($ millions)
Net financial source/requirement 1,481 3,704 7,887 3,772
Net increase (+)/decrease 
  (-) in financing activities
       
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds 387 221 -15,523 -7,771
      Treasury bills -2,450 -5,100 1,200 -5,200
      Canada Savings Bonds -96 -103 -1,964 -1,471
      Other 0 -19 -28 -223
 

      Total -2,159 -5,001 -16,315 -14,665
    Foreign currency borrowings 69 -428 -5,473 -3,559
 

      Total -2,090 -5,429 -21,788 -18,224
    Obligations related to capital leases 63 -5 131 61
  Net change in financing activities -2,027 -5,434 -21,657 -18,163
Change in cash balance -546 -1,730 -13,770 -14,391
Note: Totals may not sum due to rounding.

Table 6
Condensed statement of assets and liabilities

  March 31, 2005 January 31, 2006 Change
  ($ millions)
Liabilities      
  Accounts payable, accruals and allowances 90,473 84,573 -5,900
  Interest-bearing debt      
    Unmatured debt      
      Payable in Canadian dollars      
        Marketable bonds 266,570 258,799 -7,771
        Treasury bills 127,199 121,999 -5,200
        Canada Savings Bonds 19,080 17,609 -1,471
        Other 3,393 3,170 -223
 
        Subtotal 416,242 401,577 -14,665
     Payable in foreign currencies 16,286 12,727 -3,559
     Obligations related to capital leases 2,932 2,993 61
 
      Total unmatured debt 435,460 417,297 -18,163
    Pension and other accounts      
      Public sector pensions 129,579 131,281 1,702
      Other employee and veteran future benefits 41,549 42,848 1,299
      Other pension and other accounts 8,680 5,576 -3,104
 
      Total pension and other accounts 179,808 179,705 -103
    Total interest-bearing debt 615,268 597,002 -18,266
  Total liabilities 705,741 681,575 -24,166
Financial assets      
    Cash and accounts receivable 76,281 61,984 -14,297
    Foreign exchange accounts 40,871 38,274 -2,597
    Loans, investments and advances 
      (net of allowances)
33,860 36,320 2,460
 
    Total financial assets 151,012 136,578 -14,434
 
Net debt 554,729 544,997 -9,732
Non-financial assets 54,866 54,132 -734
Federal debt (accumulated deficit) 499,863 490,865 -8,998

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