“UNBELIEVABLE, UNRELIABLE, AND INCREDIBLE”
These are the words used by the Minister of Finance in a short scrum with reporters to describe Kevin Page, the Parliamentary Budget Officer (PBO).
This was in response to a report released by the PBO that concluded that, with the new proposed funding formula for the Canada Health Transfer, unilaterally imposed on the provinces by Mr. Flaherty last December, the federal fiscal structure, with the current projected increases in elderly benefits, are in fact “sustainable” over the longer term. In other words, whatever the reasons for wanting to increase the age of entitlement from 65 to 67 for OAS/GIS, lack of sustainability or affordability is not one of them.
Why did the Minister of Finance react like a school yard bully by attacking the PBO? After all, surely the government must have its own research examining the long-term fiscal consequences of an ageing population?
The federal government has known for some time the challenges that would result from an ageing population. They affect government revenues as the tax base shrinks and the old-age dependency ratio increases. They affect government spending through increased outlays for public pensions, health, and care for the aged.
In the March 2007 Budget, the Minister of Finance committed to “publish a comprehensive fiscal sustainability and intergenerational report with the 2007 Economic and Fiscal Update”. He stated that such a report “will provide a broad analysis of current and future demographic changes and the implications of these changes for Canada’s long-run economic and fiscal outlook”.
He has yet to provide such a report to Canadians.
Surely such a report must exist? The recent actions by the Government – restraining the growth in the Canada Health Transfer from 6% per year to the three-year moving average in GDP and the claim by the Prime Minister that elderly benefits are unsustainable – suggests that such a report has been produced, the results of which are being hidden from Canadians.
The Minister of Finance should release his long-term fiscal calculations in the 2012 budget.
Long-term economic and fiscal projections are critical to sound policy making in the short and medium-term. According to the Organization for Economic Co-operation and Development (OECD), such reports “offer invaluable signposts to help current governments to respond to known fiscal pressures and risks”.
Indeed most member countries of the OECD prepare long-term economic and fiscal projections on a regular basis. Canada, however, is a notable exception.
Since the Government does not make such reports public, the PBO has produced long-term fiscal projections. The International Monetary Fund (IMF), in its 2010 Article IV Report for Canada, applauded the PBO’s initiative in producing such reports.
When the government first proposed the creation of the PBO, its mandate was to be very broad and the Office was to be given full access to departmental information and analysis for their work. This has not happened. The legislation establishing the PBO watered down its mandate from that promised prior to the election. Since its inception, the Minister of Finance has repeatedly criticized the work of the PBO, without providing any counterfactual evidence. Without the PBO, Canadians would lack credible, independent analysis of federal activities and the impact of new policy initiatives.
It is time the Government released its analysis of the aging of the population on the economy and on the federal and provincial long-term fiscal projections. We would strongly recommend that the government support the IMF conclusion in its 2010 Canada report on "the importance of increasing transparency and communication about these challenges (demographic) and their long-run implications, (and) to increase public awareness and contribute to a debate about possible solutions".
If the government fails to provide its long-term economic and fiscal projections in the 2012 budget then we can only conclude that it is in fact the Government that is “ unbelievable, unreliable, and incredible”.
 “The Budget Plan 2007” page 155.
 Ibid IMF