Panel 1 in the Table below provides cost estimates for most of the Liberal election promises so far.

In some cases, it was not possible to provide estimates since not enough detail was provided.  The Liberals have announced a number of major policy proposals, including the middle-income tax cut, increased funding for child care and for the environment – the latter was only partially costed.  In addition, they have promised increased support for Aboriginal programs; the most important being a commitment to eliminate significant “gaps” between Aboriginal and non-Aboriginal Canadians. So far, they have provided no costing, but stated they would remove the existing 2% annual cap on spending. Paul Martin, in his Kelowna Accord, which amounted to $5 billion over five years, made a similar commitment to eliminate “gaps”. It would be difficult for Trudeau to commit less. Assuming this to be the case, the new Aboriginal commitment could result in a financial commitment of about $1 billion annually. The total cost of these initiatives to date we have estimated at $1.8 billion in 2015-16, rising to $8.4 billion in 2019-20.

Panel 2 provides estimates of how the Liberals plan to pay for their election promises.  First, there are funds still available in the April budget beginning in 2016-17. Using the Bank of Canada forecast growth of 1% for 2015, we have estimated that there would be a deficit of $1.6 billion in 2015-16 but have maintained the April budget forecast for the remaining years. Second, the Liberals have indicated that they would eliminate the Conservative promise of income splitting for families with children under eighteen and introduce a new tax rate for anyone earning over $200,000.  They have also indicated that they would keep the maximum annual contribution to the TFSA at $5,000. These three revenue reallocations would raise about $1.3 billion in 2015-16 rising to $5.5 billion in 2019-20.

Panel 3 provides an estimate of the net impact of the proposed spending and revenue increases on the April 2015 budget balance. The net impact of the Liberal platform to date would leave the April budget with small deficits for each of the next four years and a small surplus in 2019-20.

Restoring the contingency reserve to normal levels would worsen the deficit outlook. In order to honor their commitment to balancing the budget, they would need to fine additional revenue sources by eliminating more of the Conservatives’ boutique tax expenditures, reduce/eliminate some existing programs, and/or change the profile of their election proposals.

PA