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As Finance Minister Jim Flaherty puts the finishing touches on his March 4 budget, new numbers from his department highlight the crunch he faces due to lower tax revenues and an aging population.

Through the first nine months of the current fiscal year, Canada's deficit sits at $39.4-billion, with three more months to go. That pace suggests Mr. Flaherty's estimate last fall of a $56-billion deficit may still be right, but the final numbers could come in lower than that.

The new figures released Friday are part of the Department of Finance's monthly Fiscal Monitor report, which breaks down the money flowing in and out of the government's general revenues.

The December 2009 deficit was $3.1-billion, which compares to a small surplus of $0.3-billion in December 2008.

The April to December 2009 deficit of $39.4-billion is in contrast to a surplus of $0.4-billion reported during the same nine month period a year earlier. Over $16-billion of this year's deficit is attributable to the Conservative government's stimulus measures - called the Economic Action Plan - which includes tax cuts, more generous Employment Insurance benefits and transfers to the automotive sector.

Revenues were down $19.4-billion and program expenses were up $22-billion.

Parliamentary Budget Officer Kevin Page has repeatedly warned the government that its broad range of tax cuts has created a permanent revenue shortfall for the government. He has also warned that the government has yet to craft a plan for ever-increasing expenses due to an aging population.

Friday's report underlines both trends.

Personal income tax revenues in December were down 7.4 per cent from the same month a year earlier, "reflecting lower employment and the impact of personal income tax deductions announced in Canada's Economic Action Plan," states the report.

Meanwhile elderly benefits increased by $1.1-billion, or 4.4 per cent over the first nine months of the year, "in line with growth in the elderly population and changes to consumer prices, to which benefits are fully indexed."



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