- Fiscal Monitor 2006 -

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Highlights of financial results for November 2006

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Highlights

November 2006: budgetary surplus of $0.3 billion

There was a budgetary surplus of $0.3 billion in November 2006, slightly higher than the restated $0.1-billion surplus in November 2005. Budgetary revenues increased by $1.0 billion, or 6.0 per cent, due to strong growth in personal income tax revenues and a large gain in non-resident withholding taxes, partly offset by lower excise taxes and duties. Program expenses increased by $1.1 billion, or 7.8 per cent, reflecting increases in transfer payments and departmental operating expenses. Public debt charges were down $0.3 billion.

April to November 2006: budgetary surplus of $6.1 billion

For the first eight months of the 2006–07 fiscal year, the budgetary surplus is estimated at $6.1 billion, down $0.5 billion from the $6.6-billion surplus posted in the same period of 2005–06. Budgetary revenues rose $6.4 billion, or 4.6 per cent, reflecting solid growth in income tax revenues, partly offset by declines in excise taxes and employment insurance (EI) premium revenues. Program expenses were up $7.1 billion, or 6.4 per cent, due to both higher transfers and other program expenses. Public debt charges were down $0.1 billion.

Note to readers:

Beginning with the April Fiscal Monitor, to facilitate comparison with the 2006–07 monthly results, revenues and expenses from 2005 have been restated on a gross reporting basis, consistent with the presentation in Budget 2006. As well, revenues have been restated to evenly distribute the cost of the retroactive increase in the basic personal amount and the reduction of the 16-per-cent tax rate to 15 per cent for the 2005 taxation year. The restatement of revenues also has an impact on reported surpluses for the April-to-December 2005 period.

November 2006

There was a budgetary surplus of $0.3 billion in November 2006, up slightly from the restated $0.1-billion surplus in November 2005.

Budgetary revenues grew by $1.0 billion, or 6.0 per cent, to $18.3 billion.

  • Personal income tax revenues were up $0.8 billion, or 10.9 per cent, in November, following a gain of only 0.5 per cent in October.
  • Corporate income tax revenues rose $0.1 billion, or 4.1 per cent. Corporate income tax revenues can be volatile on a monthly basis, as large refunds or settlement payments may be recorded in any given month. In addition, assessments or reassessments, which can relate to activity that took place several years prior, can influence results in a given month.
  • Other income tax revenues—withholdings from non-residents—rose $0.7 billion, a significant part of which reflects a one-time payment in respect of the sale of Canadian assets by a non-resident firm.
  • Excise taxes and duties declined by $0.5 billion due to an
    18.4-per-cent drop in goods and services tax (GST) revenues, reflecting the 1-percentage-point reduction in the GST rate effective July 1, 2006.
  • EI premium revenues declined by 7.9 per cent, reflecting the decline in the premium rate from $1.95 to $1.87 per $100 of insurable earnings, effective January 1, 2006, as well as the transfer to the province of Quebec of the responsibility for delivering maternity and parental benefits in that province along with the associated premiums, effective the same date.
  • Other revenues, consisting of net profits of enterprise Crown corporations, revenues of consolidated Crown corporations, proceeds from the sales of goods and services, return on investments, foreign exchange revenues and miscellaneous revenues, rose $0.1 billion, or 3.5 per cent. This revenue stream is volatile on a monthly basis.

Program expenses in November 2006 were $15.3 billion, up $1.1 billion, or 7.8 per cent, from November 2005, reflecting increases in transfer payments and operating expenses of departments and agencies, including National Defence.

Transfer payments increased by $0.5 billion, or 5.6 per cent.

  • Transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, rose $0.3 billion, or 8.0 per cent. Elderly benefits increased by 5.3 per cent. EI benefit payments decreased by 0.9 per cent, reflecting declines in both maternity and parental benefits. Children’s benefits consist of the Canada Child Tax Benefit and the new Universal Child Care Benefit (UCCB), which began on July 1, 2006. Children’s benefits were up $0.2 billion, reflecting transfers under the new UCCB program.
  • Transfers to other levels of government, consisting of 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, transfers for early learning and child care and Alternative Payments for Standing Programs, were up $0.3 billion, or 8.9 per cent.
  • Subsidies and other transfers decreased by $0.1 billion, or 5.2 per cent. This component can be volatile on a monthly basis.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including National Defence, and also reflect the ongoing assessment of the Government’s liabilities. These expenses increased by $0.6 billion, or 11.8 per cent, reflecting increases across a number of departments.

Public debt charges decreased by $0.3 billion.

Revenues and expenses (April to November 2006)

April to November 2006

In the first eight months of the 2006–07 fiscal year, there was a budgetary surplus of $6.1 billion, down $0.5 billion from the $6.6-billion surplus reported for the same period of 2005–06.

Budgetary revenues through the first eight months of the fiscal year were up $6.4 billion, or 4.6 per cent, to $146.2 billion.

  • Personal income tax revenues rose $5.9 billion, or 9.2 per cent, reflecting solid growth in employment and wages and salaries combined with the progressivity of the personal income tax system.
  • Corporate income tax revenues increased by $1.7 billion, or 9.5 per cent, reflecting a higher corporate instalment payment base, which in turn reflects profit growth in 2005 and 2006. The corporate results to date are not indicative of the eventual outcome for the fiscal year as a whole. Roughly two-thirds of corporate income tax revenues comes from corporations with year-ends in October to December, which results in roughly half of corporate income tax revenues being received in the last four months of the fiscal year, when these corporations must make settlement payments in respect of any differences between their actual tax liabilities for the year and their instalment payments. Consequently, results for even the first eight months of the fiscal year can differ markedly from the final,
    full-year outcome.
  • Other income tax revenues rose $0.8 billion, or 28.8 per cent, boosted by a one-time payment related to the disposition of Canadian assets by a non-resident firm.
  • Excise taxes and duties declined by $1.9 billion, or 5.9 per cent, primarily due to a $2.0-billion drop in GST revenues, reflecting the impact of the July 1, 2006, GST rate reduction. Sales and excise tax revenues decreased by $0.1 billion, or 0.9 per cent. Customs import duties rose $0.1 billion, or 4.4 per cent, while revenues from the Air Travellers Security Charge were $12 million higher.
  • EI premium revenues declined by 7.3 per cent, reflecting the decline in the premium rate from $1.95 to $1.87 per $100 of insurable earnings, effective January 1, 2006, as well as the transfer to the province of Quebec of the responsibility for delivering maternity and parental benefits in that province along with the associated premiums, effective the same date.
  • Other revenues rose $0.8 billion, or 6.3 per cent.

Program expenses in the April-to-November 2006 period were $117.5 billion, up $7.1 billion, or 6.4 per cent, from the same period of 2005–06, due to both higher transfers and increased operating costs of departments and agencies, including National Defence. Public debt charges decreased by $0.1 billion.

Transfer payments, which account for about two-thirds of total program expenses, increased by $4.1 billion, or 5.8 per cent.

  • Transfers to persons grew by 5.1 per cent. Elderly benefits were up 4.8 per cent while EI benefits were down 3.9 per cent. The
    year-to-date decline in EI benefits is mainly attributable to a decline in maternity and parental benefits, which have decreased due to the transfer to the province of Quebec of the responsibility for delivering maternity and parental benefits in that province, effective January 1, 2006. Children’s benefits increased by 19.0 per cent, reflecting transfers under the new UCCB program, which began on July 1, 2006.
  • Transfers to other levels of government were up $1.8 billion, or 7.1 per cent, largely due to the impact of the 2004 agreement on health care, as well as a $650-million transfer to provinces and territories in July 2006 for early learning and child care.
  • Subsidies and other transfers increased by $0.6 billion, or 4.9 per cent, reflecting increases in transfer payments across a number of departments, most notably Agriculture and Agri-Food Canada.

Other program expenses increased by $2.9 billion, 7.5 per cent, due to an increase in the operating costs of departments and agencies as well as a one-time increase in September 2006 in the Government’s estimated pension liabilities.

Public debt charges were down 0.6 per cent due mainly to a decrease in the stock of interest-bearing debt.

Budgetary balance

Federal debt (accumulated deficit)

Financial source of $2.8 billion for April to November 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 requirement of $3.3 billion in the April-to-November period, reflecting payments made to provinces and international organizations pursuant to Bill C-48. This is down from an $8.0-billion requirement in the same period of 2005–06. The decrease in the requirement largely reflects the transfer of the Government’s holdings in the Canada Pension Plan to the Canada Pension Plan Investment Board in
2005–06, as well as an increase in the financial source from foreign exchange activities due to variations in the exchange rate.

With a budgetary surplus of $6.1 billion and a requirement of $3.3 billion from non-budgetary transactions, there was a net financial source of $2.8 billion in the first eight months of 2006–07 compared to a net financial requirement of $1.4 billion in the same period of 2005–06.

Net financing activities down $7.4 billion

The Government used this net financial source of $2.8 billion and a reduction in its cash balances of $4.6 billion to reduce its market debt by $7.4 billion by the end of November 2006, largely through a reduction of treasury bills and foreign currency borrowings. 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 November stood at $13.3 billion.

Table 1
Summary statement of transactions

 

November

April to November

 

 

2005

2006

2005–06

2006–07

 

($ millions)

Budgetary transactions

       

  Revenues

17,268

18,311

139,767

146,188

  Expenses

       

    Program expenses

-14,193

-15,298

-110,392

-117,456

    Public debt charges

-2,990

-2,709

-22,789

-22,650

 

  Budgetary balance (deficit/surplus)

85

304

6,586

6,082

Non-budgetary transactions

47

-396

-8,020

-3,314

Financial source/requirement

132

-92

-1,434

2,768

Net change in financing activities

3,275

10,010

-8,697

-7,383

Net change in cash balances

3,407

9,918

-10,131

-4,615

Cash balance at end of period

   

7,025

13,346

Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Budgetary revenues

 

November

 

April to November

 
 
 
 
 

2005

2006

Change

2005–06

2006–07

Change

 

($ millions)

(%)

($ millions)

(%)

Tax revenues

           

  Income tax

           

    Personal income tax

7,718

8,560

10.9

64,339

70,252

9.2

    Corporate income tax

2,393

2,490

4.1

17,462

19,125

9.5

    Other income tax

343

994

189.8

2,684

3,457

28.8

 

    Total income tax

10,454

12,044

15.2

84,485

92,834

9.9

  Excise taxes and duties

           

    Goods and services tax

3,006

2,452

-18.4

22,997

21,036

-8.5

    Customs import duties

329

304

-7.6

2,327

2,429

4.4

    Sales and excise taxes

797

833

4.5

6,458

6,401

-0.9

    Air Travellers Security Charge

25

30

20.0

231

243

5.2

 

    Total excise taxes and duties

4,157

3,619

-12.9

32,013

30,109

-5.9

 

  Total tax revenues

14,611

15,663

7.2

116,498

122,943

5.5

Employment insurance premiums

896

825

-7.9

10,902

10,101

-7.3

Other revenues

1,761

1,823

3.5

12,367

13,144

6.3

Total budgetary revenues

17,268

18,311

6.0

139,767

146,188

4.6

Note: Totals may not add due to rounding.

Table 3
Budgetary expenses

 

November

 

April to November

 
 
 
 
 

2005

2006

Change

2005–06

2006–07

Change

 

($ millions)

(%)

($ millions)

(%)

Transfer payments

           

  Transfers to persons

           

    Elderly benefits

2,433

2,562

5.3

19,251

20,179

4.8

    Employment insurance benefits

1,050

1,041

-0.9

8,990

8,635

-3.9

    Children’s benefits

779

1,000

28.4

6,148

7,319

19.0

 

    Total

4,262

4,603

8.0

34,389

36,133

5.1

  Transfers to other levels of government

           

    Support for health and other social programs

           

    Canada Health Transfer

1,584

1,679

6.0

12,667

13,427

6.0

    Canada Social Transfer

685

709

3.5

5,483

5,667

3.4

 

    Total

2,269

2,388

5.2

18,150

19,094

5.2

    Fiscal transfers

1,045

1,125

7.7

8,492

8,856

4.3

    Canada’s cities and communities

0

38

n/a

394

344

-12.7

    Early learning and child care

0

0

n/a

0

650

n/a

    Alternative Payments for Standing Programs

-261

-227

-13.0

-1,939

-2,055

6.0

 

    Total

3,053

3,324

8.9

25,097

26,889

7.1

  Subsidies and other transfers

           

    Agriculture and Agri-Food

161

324

101.2

896

1,371

53.0

    Foreign Affairs and International Trade

182

189

3.8

1,389

1,311

-5.6

    Health

173

208

20.2

1,183

1,261

6.6

    Human Resources and Social Development

132

136

3.0

1,045

1,078

3.2

    Indian Affairs and Northern Development

563

351

-37.7

3,239

3,105

-4.1

    Industry

118

135

14.4

1,247

1,252

0.4

    Other

532

421

-20.9

2,939

3,149

7.1

 

    Total

1,861

1,764

-5.2

11,938

12,527

4.9

 

  Total transfer payments

9,176

9,691

5.6

71,424

75,549

5.8

Other program expenses

           

  Crown corporation expenses

           

    Canadian Broadcasting Corporation

100

126

26.0

868

890

2.5

    Canada Mortgage and Housing Corporation

172

172

0.0

1,366

1,355

-0.8

    Other

185

241

30.3

2,154

2,218

3.0

 

    Total

457

539

17.9

4,388

4,463

1.7

  Defence

1,249

1,435

14.9

9,540

10,252

7.5

  All other departments and agencies

3,311

3,633

9.7

25,040

27,192

8.6

 

  Total other program expenses

5,017

5,607

11.8

38,968

41,907

7.5

Total program expenses

14,193

15,298

7.8

110,392

117,456

6.4

Public debt charges

2,990

2,709

-9.4

22,789

22,650

-0.6

Total budgetary expenses

17,183

18,007

4.8

133,181

140,106

5.2

Note: Totals may not add due to rounding.

Table 4
The budgetary balance and financial source/requirement

 

November

April to November

 

 

2005

2006

2005–06

2006–07

 

($ millions)

Budgetary balance (deficit/surplus)

85

304

6,586

6,082

Non-budgetary transactions

       

  Capital investing activities

-193

-247

-1,171

-1,289

  Other investing activities

-251

-849

-2,386

-2,634

  Pension and other accounts

-15

498

-549

3,384

  Other activities

       

      Accounts payable, receivables, accruals
       and allowances

584

157

-6,491

-6,398

      Foreign exchange activities

-314

-207

544

1,585

      Amortization of tangible capital assets

236

252

2,033

2,038

 

      Total other activities

506

202

-3,914

-2,775

  Total non-budgetary transactions

47

-396

-8,020

-3,314

Net financial source/requirement

132

-92

-1,434

2,768

Note: Totals may not add due to rounding.

Table 5
Financial source/requirement and net financing activities

 

November

April to November

 

 

2005

2006

2005–06

2006–07

 

($ millions)

Net financial source/requirement

132

-92

-1,434

2,768

Net increase (+)/decrease (-) in financing activities

       

  Unmatured debt transactions

       

    Canadian currency borrowings

       

      Marketable bonds

3,253

3,299

-1,410

3,554

      Treasury bills

900

8,200

-2,500

-3,700

      Canada Savings Bonds

-448

-1,338

-945

-1,808

      Other

-15

-3

-196

-1,133

 

      Total

3,690

10,158

-5,051

-3,087

    Foreign currency borrowings

-217

58

-3,498

-3,964

 

      Total

3,473

10,216

-8,549

-7,051

  Cross-currency swap revaluation

48

92

-27

218

  Unamortized discounts on debt issues

-231

-285

-184

-487

  Obligations related to capital leases

-15

-13

63

-63

  Net change in financing activities

3,275

10,010

-8,697

-7,383

Change in cash balance

3,407

9,918

-10,131

-4,615

Note: Totals may not add due to rounding.

Table 6
Condensed statement of assets and liabilities

 

March 31, 2006

November 30, 2006

Change

 

($ millions)

Liabilities

     

  Accounts payable, accruals and allowances

101,432

96,139

-5,293

  Interest-bearing debt

     

    Unmatured debt

     

      Payable in Canadian dollars

     

        Marketable bonds

261,134

264,688

3,554

        Treasury bills

131,597

127,897

-3,700

        Canada Savings Bonds

17,342

15,534

-1,808

        Other

3,102

1,969

-1,133

 

        Subtotal

413,175

410,088

-3,087

      Payable in foreign currencies

14,085

10,121

-3,964

      Cross-currency swap revaluation account

-2,258

-2,040

218

      Unamortized discounts and premiums on market debt

-6,780

-7,267

-487

      Obligations related to capital leases

2,927

2,864

-63

 

      Total unmatured debt

421,149

413,766

-7,383

    Pension and other accounts

     

      Public sector pensions

131,062

133,626

2,564

      Other employee and veteran future benefits

43,369

44,449

1,080

      Other pension and other accounts

5,493

5,233

-260

 

      Total pension and other accounts

179,924

183,308

3,384

    Total interest-bearing debt

601,073

597,074

-3,999

  Total liabilities

702,505

693,213

-9,292

Financial assets

     

  Cash and accounts receivable

82,843

79,333

-3,510

  Foreign exchange accounts

40,827

39,242

-1,585

  Loans, investments and advances (net of allowances)

41,889

44,523

2,634

 

  Total financial assets

165,559

163,098

-2,461

 

Net debt

536,946

530,115

-6,831

Non-financial assets

55,447

54,698

-749

Federal debt (accumulated deficit)

481,499

475,417

-6,082

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January 2007