Morneau planning another late-December release of long-term deficit forecast

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Finance Minister Bill Morneau is planning another deficit surprise for the Christmas holidays.

The Globe and Mail has learned that, for the second year in a row, the Liberal government has opted to release its long-term fiscal forecasts in late December, rather than as part of the fall fiscal update.

The forecast Mr. Morneau released on Tuesday contained an update of the projected bottom line for this year – a $19.9-billion deficit – and the following five fiscal years. However, Finance Canada officials also produce a longer-term forecast that covers the next 40 years, which is meant to provide a general guide as to the long-term sustainability of federal spending.

In response to recommendations from the Auditor-General and the Parliamentary Budget Officer, the Conservative government began publishing long-term fiscal forecasts as part of the fall fiscal update in 2013. This was repeated in 2014. No long-term forecast was published in the fall of 2015, when the last federal election was held.

Internal documents obtained and previously reported on by The Globe revealed that Finance Canada officials had included long-term projections in draft versions of Mr. Morneau's 2016 fall fiscal update. Yet when the final version was made public on Nov. 1, the long-term projections had been removed.

The Liberal government opted to publish them quietly online without a news release just days before Christmas, at a time when they would be unlikely to garner much attention. That 2016 report showed annual deficits are on track to continue until the 2050s.

Daniel Lauzon, a spokesman for Mr. Morneau, confirmed to The Globe that the government is planning to release this year's long-term forecast on Dec. 22. Mr. Lauzon did not say why. Mr. Lauzon said in February that the two 2016 forecasts were released separately so as not to "create confusion."

Last December's report showing deficits until the 2050s was frequently cited by Conservative MPs in their criticism of the government's financial performance.

Conservative finance critic Pierre Poilievre said the government is trying to hide the fact that it has no plan for erasing the deficit.

"Instead of admitting that in the update, they will quietly release it when people are gathered around Christmas dinner thinking happier thoughts," he said. "The current plan of the government is to run deficits forever. But eventually, Justin Trudeau will run out of other people's money."

The Parliamentary Budget Officer also publishes long-term forecasts. Its most recent fiscal sustainability report, released on Oct. 5, concluded that federal finances are sustainable over the long term and that the federal debt will be eliminated entirely by 2060 when measured as a percentage of gross domestic product (GDP). The PBO's data reached that conclusion even though annual deficits are expected to continue until 2042, five years earlier than the PBO had estimated in its 2016 report.

After decades of hearing from Liberal and Conservative finance ministers about the importance of the annual bottom line, Prime Minister Justin Trudeau's government has said that a more important measurement of fiscal health is the debt-to-GDP ratio.

By that measure, Ottawa's financial health can be improving even in an era of permanent deficits.

Economists agree that the debt-to-GDP ratio is a more important measurement of a government's financial health than whether or not it is in balance in any particular year. However, many economists have urged Mr. Morneau to set a clear target for erasing the deficit as a vehicle for instilling internal discipline over public spending.

Tuesday's fiscal update showed the federal debt-to-GDP ratio is on track to decline from 31.2 per cent last year to 28.5 per cent by 2022-23, bringing it down to levels not seen since the 1970s and well below the peak of 66.8 per cent reached in 1995-96, which coincided with the modern political focus on deficits.

Assistant Parliamentary Budget Officer Mostafa Askari said he would prefer to see Finance Canada return to publishing the long-term forecasts along with the fall fiscal update.

Mr. Askari said ensuring the debt-to-GDP is sustainable over the long term is far more important than whether finances are in deficit or surplus in any given year.

"We think that what matters is whether over time, given the current fiscal structure, you can actually reduce the debt-to-GDP ratio and eventually balance the budget," he said. "But the balancing of the budget – whether it's a $200-million deficit or a $200-million surplus – it doesn't really matter on a year-to-year basis from our perspective."