Furey a major contrast with Trudeau on affordability

From the Canadian Taxpayers Federation

If Canadians want to find an example of a Liberal politician who cares about affordability, they should look to St. John’s, not Ottawa.

Time and time again, Newfoundland and Labrador Premier Andrew Furey has stood on the side of taxpayers.

The latest example is his government’s decision to extend its 8.05 cent per litre gas tax cut for another year.

The gas tax cut has been in place for 21 months and has saved the average two-car Newfoundland and Labrador family more than $800. Another 12 months of lower gas prices will see family savings soar to more than $1,000.

Furey first announced the temporary tax cut in June 2022 and has now extended it twice.

The Furey government has also spoken out strongly about the detrimental impact of the carbon tax on Newfoundlanders and Labradorians.

In criticizing the Trudeau government’s carbon tax late last year, Furey noted “there is no subway” for his constituents to take as an alternative to the ever-increasing costs of driving a car to get to work or to bring kids to school.

That comment was a jibe at the infamous remarks federal Finance Minister Chrystia Freeland made when encouraging Canadians who can’t afford to pay the carbon tax to bike or take transit.

Furey noted if rural Canadians don’t have other transit options – and many don’t – then “the fundamental premise on which the [carbon tax] is based is flawed.”

Furey was also a leader in calling on Trudeau to take the carbon tax off all home heating, noting repeatedly that heating one’s home in Canada in the winter is not optional.

Under pressure, Trudeau finally did so through a temporary suspension of the carbon tax on home heating oil, which is a popular method of home heating in Atlantic Canada, but not in other regions of the country.

To Furey’s credit, he continued to call on the federal government to offer relief to Canadians who don’t use furnace oil for home heating.

Juxtapose that against the policies of Prime Minister Justin Trudeau.

Without campaigning on it, Trudeau sprung a carbon tax on Canadians in 2019. He’s increased it every year since. And he plans to keep jacking it up every year until 2030.

Trudeau has tried to sell his policies by claiming most Canadians are getting more money back from carbon tax rebates than they pay in carbon taxes. Many of Trudeau’s allies have suggested that somehow the carbon tax actually is an affordability measure.

But the Parliamentary Budget Officer has laid out the truth: the average Canadian family is losing money from the carbon tax, big time.

The average Newfoundland and Labrador family lost $347 from the carbon tax last year, even after the rebates. That’s set to climb to $1,316 a year by 2030.

For years, Trudeau told us families would be better off with the carbon tax. But after pressure from Furey and other Atlantic Canadian politicians, he temporarily removed the carbon tax on home heating oil for the next three years.

If that’s not a mea culpa that the carbon tax makes life less affordable, then Santa Claus and the Easter Bunny must be real.

The broader contrast between Furey and Trudeau is their approach to cost of living. Furey looks at what’s taking cash out of families’ wallets – gas and carbon taxes – and tries to lessen that burden by fighting for lower taxes. Trudeau’s solution to make life more affordable appears to be more taxes, more spending and more debt.

The bottom line is that Trudeau, who is sinking in the polls and faces frustrated taxpayers from coast to coast, should learn a thing or two from Furey. Canadians want life to be more affordable, and that means lowering the tax burden, not increasing it.

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Canada’s chief actuary fails to estimate Alberta’s share of CPP assets

Published on December 23, 2024

Todayville

From the Fraser Institute

By Tegan Hill

Each Albertan would save up to $2,850 in 2027—the first year of the hypothetical Alberta plan—while retaining the same benefits as the CPP. Meanwhile, the basic CPP contribution rate for the rest of Canada would increase to 10.36 per cent.

Despite a new report from Canada’s chief actuary about Alberta’s potential plan to leave the Canada Pension Plan (CPP) and start its own separate provincial pension plan, Albertans still don’t have an official estimate from Ottawa about Alberta’s share of CPP assets.

The actuary analyzed how the division of assets might be calculated, but did not provide specific numbers.

Yet according to a report commissioned by the Smith government and released last year, Alberta’s share of CPP assets totalled an estimated $334 billion—more than half the value of total CPP assets. Based on that number, if Alberta left the CPP, Albertans would pay a contribution rate of 5.91 per cent for a new CPP-like provincial program (a significant reduction from the current 9.9 per cent CPP rate deducted from their paycheques). As a result, each Albertan would save up to $2,850 in 2027—the first year of the hypothetical Alberta plan—while retaining the same benefits as the CPP. Meanwhile, the basic CPP contribution rate for the rest of Canada would increase to 10.36 per cent.

Why would Albertans pay less under a provincial plan?

Because Alberta has a comparatively younger population (i.e. more workers vs. retirees), higher average incomes and higher levels of employment (i.e. higher level of premiums paid into the fund). As such, Albertans collectively pay significantly more into the CPP than retirees in Alberta receive in benefits. Simply put, under a provincial plan, Albertans would pay less and receive the same benefits.

Some critics, however, dispute the estimated share of Alberta’s CPP assets (again, $334 billion—more than half the value of total CPP assets) in the Smith government’s report, and claim the estimate understates the report’s contribution rate for a new Alberta pension plan and overestimates the new CPP rate without Alberta.

Which takes us back to the new report from Canada’s chief actuary, which was supposed to provide its own estimate of Alberta’s share of the assets. Unfortunately, it did not.

But there are other rate estimates out there, based on various assumptions. According to a 2019 analysis published by the Fraser Institute, the contribution rate for a new separate CPP-like program in Alberta could be as low as 5.85 per cent, while AIMCo’s 2019 estimate was 7.21 per cent (and possibly as low as 6.85 per cent). And University of Calgary economist Trevor Tombe has pegged Alberta’s hypothetical rate at 8.2 per cent.

While the actuary in Ottawa failed to provide any numbers, one thing’s for certain—according to the available estimates, Albertans would pay a lower contribution rate in a separate provincial pension plan while CPP contributions for the rest of Canada (excluding Quebec) would likely increase.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Business

The Strange Case of the Disappearing Public Accounts Report

Published on December 23, 2024

Todayville

David Clinton

A few days ago, Public Services and Procurement Canada tabled their audited consolidated financial statements of the Government of Canada for 2024. This is the official and complete report on the state of government finances. When I say “complete”, I mean the report’s half million words stretch across three volumes and total more than 1,300 pages.

Together, these volumes provide the most comprehensive and authoritative view of the federal government’s financial management and accountability for the fiscal year ending March 31, 2024. The tragedy is that no one has the time and energy needed to read and properly understand all that data. But the report identifies problems serious enough to deserve the attention of all Canadians – and especially policy makers.

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Following the approach of my Parliamentary Briefings series, I uploaded all three volumes of the report to my AI research assistant and asked for its thoughts. Each one of the observations that came out the other end is significant and, in calmer and more rational times, could easily have driven a week’s worth of news coverage. But given the craziness of the past few weeks and months, they’re being largely ignored.

With that in mind, I’ve made this special edition of the Parliamentary Briefings series fully accessible to all subscribers.

We begin with a summary of the purpose and scope of the three uploaded volumes of the Public Accounts of Canada for 2023–2024:

Volume I: Summary Report and Consolidated Financial Statements

Purpose: Provides a high-level overview of the federal government’s financial performance, presenting the consolidated financial statements audited by the Auditor General. It serves as the primary accountability report.
Scope:
- Audited financial statements.
- Analysis of revenues, expenses, and the accumulated deficit.
- Overview of assets, liabilities, and financial position.
- Discussion of economic context, risks, uncertainties, and ten-year comparative financial data.

Volume II: Details of Expenses and Revenues

Purpose: Presents the financial operations of the government, broken down by ministries and agencies, for detailed accountability.
Scope:
- Financial transactions segregated by ministry.
- Details of appropriations, revenues, and transfer payments.
- Summary tables on ministerial expenditures by type, object, and other dimensions.
- Appendices providing additional details on budgetary authorities and their sources.

Volume III: Additional Information and Analyses

Purpose: Offers supplementary analyses and financial data beyond what is included in the first two volumes, focusing on revolving funds, professional services, and shared-cost programs.
Scope:
- Financial statements of revolving funds (e.g., Passport Canada, Canadian Grain Commission).
- Expenditure details on acquisitions, transfer payments, and public debt charges.
- Analyses of federal-provincial shared-cost programs and claims against the Crown.
- Miscellaneous financial and operational data for broader transparency.

The Audit: Based on these documents, could you identify the most serious threats to Canada’s economic stability?

From the Public Accounts of Canada 2023–2024, several serious threats to Canada’s economic security can be identified. These threats emerge from the broader fiscal and economic analyses, contingent liabilities, and uncertainties highlighted in the documents.

1. Growing Public Debt and Debt Servicing Costs

Observation: Canada’s public debt charges increased significantly in 2024, rising by 35.2% year-over-year, largely due to higher interest rates on debt. The total accumulated federal debt stood at $1.24 trillion, representing 42.1% of GDP, up from 41.1% the previous year.
Risk: Rising debt servicing costs reduce fiscal space for critical public investments, making the economy vulnerable to future economic shocks or downturns.

2. Contingent Liabilities and Indigenous Claims

Observation: The government recorded $16.4 billion in contingent liabilities related to Indigenous claims in 2024, reflecting ongoing efforts to address past injustices. These liabilities have been increasing at an average annual growth rate of 30% since 2016.
Risk: The unpredictable nature and scale of these liabilities could create significant financial pressures if settlements or court decisions require substantial payouts.

3. Legacy Costs from the COVID-19 Pandemic

Observation: The government recorded $4.7 billion in pandemic-related expenses for 2024, including write-offs for expired vaccines and provisions for unrecovered loans and benefits.
Risk: These costs highlight vulnerabilities in emergency financial planning and expose the government to further financial risks if similar large-scale public health crises occur.

4. Economic Pressures from High Inflation and Interest Rates

Observation: Inflation returned to the Bank of Canada’s 2% target by mid-2024 after 41 consecutive months above this threshold. However, elevated interest rates (peaking at 5%) contributed to a softening economy.
Risk: Prolonged periods of high interest rates could suppress household and business spending, slowing economic growth and increasing the likelihood of a recession.

5. Climate Change and Environmental Commitments

Observation: Significant spending is allocated to addressing climate change, with over $1 billion dedicated to environmental programs in 2024, including pollution pricing proceeds and clean energy initiatives.
Risk: Canada’s reliance on resource-intensive industries and increasing costs to meet climate targets create economic vulnerabilities, particularly in regions heavily reliant on fossil fuels.

6. Global Economic Instability

Observation: Global supply chain disruptions, energy price volatility, and geopolitical events (e.g., Russia’s invasion of Ukraine) significantly impacted Canada’s economy, with slower GDP growth (1.5% in 2023) and reduced trade.
Risk: External shocks could exacerbate domestic economic challenges, such as rising import costs or reduced demand for Canadian exports.

7. Labor Market and Productivity Challenges

Observation: While job creation remained positive, population growth outpaced employment gains, leading to an increase in the unemployment rate to 6.5% by October 2024. Productivity improvements have been uneven.
Risk: Labor shortages in key sectors and declining workforce participation among certain demographics (e.g., aging population) could undermine economic resilience.

8. Dependence on Resource Revenues

Observation: Volatile global commodity prices impacted nominal GDP growth, with gains slowing to 2.9% in 2023 after double-digit growth in prior years.
Risk: Fluctuations in resource revenues leave Canada exposed to external shocks, particularly in provinces like Alberta and Saskatchewan, heavily reliant on oil and gas.

These challenges underscore the need for proactive fiscal and policy measures to safeguard economic stability, manage liabilities, and address emerging risks.

The Audit: What would you recommend as the three most urgent areas to address to avoid deepening the economic crisis?

1. Manage Rising Public Debt and Debt Servicing Costs

Why It’s Urgent: The rapid increase in public debt charges (35.2% in 2024) is crowding out fiscal space for essential programs. The federal debt, at 42.1% of GDP, has become a significant liability, with interest rate fluctuations posing an ongoing threat.
Recommendations:
- Introduce stricter fiscal discipline by prioritizing expenditures that yield long-term economic benefits (e.g., infrastructure, innovation).
- Develop a comprehensive debt reduction strategy to stabilize the debt-to-GDP ratio in the medium term.
- Explore debt refinancing strategies to lock in lower interest rates where feasible.
Impact: Reducing debt servicing pressures will free up resources for critical investments and improve Canada’s fiscal resilience.

2. Mitigate the Economic Impact of Contingent Liabilities

Why It’s Urgent: Contingent liabilities related to Indigenous claims have grown exponentially (30% annually since 2016), creating fiscal unpredictability and potentially overwhelming future budgets.
Recommendations:
- Accelerate settlement negotiations to limit litigation costs and interest on outstanding claims.
- Establish a transparent reserve fund specifically for contingent liabilities, ensuring predictable future payouts.
- Increase collaboration with Indigenous communities to address systemic issues and prevent further claims.
Impact: Resolving liabilities promptly will reduce fiscal uncertainty and demonstrate Canada’s commitment to reconciliation.

3. Address Structural Labor Market and Productivity Challenges

Why It’s Urgent: Despite job creation, rising unemployment (6.5% in late 2024) and productivity stagnation threaten long-term economic growth. Labor shortages in critical sectors further exacerbate vulnerabilities.
Recommendations:
- Expand skilled immigration programs to address labor shortages in healthcare, technology, and green industries.
- Increase investment in workforce retraining programs, particularly for sectors undergoing automation or transition due to climate policies.
- Promote workplace flexibility and childcare access to increase labor force participation, particularly among women and aging workers.
Impact: Enhancing workforce productivity and participation will strengthen the economic foundation and support GDP growth.

Rationale for Prioritization

These areas represent the most immediate threats to economic security and fiscal stability. Addressing them proactively can reduce vulnerabilities and position Canada for sustainable growth.

The Audit: What are the most surprising and disturbing details in these documents?

1. Rapid Growth of Public Debt Charges

Detail: Public debt charges increased by 35.2% year-over-year to $47.3 billion, representing one of the fastest-growing expense categories. This reflects a combination of higher interest rates and the significant size of Canada’s debt.
Why Disturbing: Such a rapid increase in debt servicing costs could divert funds from essential public services and programs. It also signals limited fiscal flexibility in the event of future economic shocks.

2. Ballooning Contingent Liabilities

Detail: The federal government recorded $16.4 billion in expenses for Indigenous contingent liabilities in 2024. This is part of an ongoing surge, with liabilities increasing by 30% annually since 2016.
Why Disturbing: While reconciliation efforts are vital, the sheer scale and rapid growth of these liabilities are fiscally unsustainable without structural changes or dedicated funding mechanisms. The risk of further liabilities emerging adds to fiscal uncertainty.

3. Significant Write-offs and Provisions for Pandemic Programs

Detail: The government wrote off $1.2 billion in expired COVID-19 vaccines and therapeutics and recorded $3.5 billion in provisions for unrecovered pandemic-era loans.
Why Disturbing: These figures highlight inefficiencies in planning and administration during the pandemic response, leading to substantial financial losses. The scale of unrecovered funds also raises questions about accountability in the deployment of emergency programs.

4. Rising Unemployment Despite Job Creation

Detail: While 475,000 jobs were created in 2023, the unemployment rate rose to 6.5% by late 2024 due to population growth outpacing employment gains.
Why Surprising: Despite strong job creation, an inability to keep pace with population growth signals structural issues in labor force integration. This poses a risk to Canada’s economic competitiveness and social cohesion.

5. Declining Corporate Income Tax Revenues

Detail: Corporate income tax revenues decreased by 0.7%, driven by reduced taxable income despite an overall increase in total revenues.
Why Surprising: The decline in corporate tax revenues during a period of economic recovery raises concerns about potential tax avoidance, economic inequality, or over-reliance on other revenue streams, such as personal income taxes.

6. Substantial Environmental and Climate Spending

Detail: Over $1 billion was allocated to environmental programs, including pollution pricing proceeds. However, the documents note Canada’s slow progress toward net-zero targets and risks to resource-dependent provinces.
Why Disturbing: While necessary, this spending may be insufficient given the scale of the climate challenge. The mismatch between spending and measurable progress on climate goals risks long-term environmental and economic consequences.

7. Unanticipated Costs of Indigenous Reconciliation

Detail: Beyond contingent liabilities, the government is facing unpredictable settlement costs due to increasing litigation and the complexity of claims. These have already exceeded $60 billion since 2016.
Why Disturbing: The ongoing financial impact of these settlements reflects Canada’s historical neglect of Indigenous issues. Resolving these claims is essential, but the lack of predictability or dedicated funding highlights systemic shortcomings in reconciliation strategies.

8. Softened GDP Growth and Inflation Challenges

Detail: Real GDP growth slowed to 1.5% in 2023, and inflation remained high throughout the year, only reaching the Bank of Canada’s 2% target by mid-2024.
Why Disturbing: The prolonged inflationary period and sluggish growth signal a fragile recovery. These economic conditions could exacerbate income inequality and lead to further fiscal strain.

9. High Provisions for Unrecovered Loans

Detail: Provisions of $3.5 billion were recorded for emergency loans provided during the pandemic. The government continues to face difficulties in recovering these funds.
Why Disturbing: This provision raises serious questions about the efficiency of loan administration and the government’s ability to safeguard public funds during emergencies.

10. Heavy Dependence on Volatile Resource Revenues

Detail: Nominal GDP growth slowed to 2.9% in 2023, largely due to easing commodity prices after a surge in 2022. Resource dependence remains a key economic vulnerability.
Why Surprising: Despite global shifts toward renewable energy, Canada’s reliance on resource revenues remains high, posing long-term risks to economic diversification and stability.