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Ottawa keeps tight belt on spending while grappling with costs of health care, seniors

Treasury Board President Tony Clement speaks after delivering a speech in Ottawa on Oct. 8, 2013.

ADRIAN WYLD/THE CANADIAN PRESS

Ottawa has kept a tight squeeze on departmental spending as it tries to erase the deficit at the same time as it absorbs billions in added costs for health care and seniors.

Year-end numbers released on Wednesday in the Public Accounts show departments under-spent – or "lapsed" – their approved budgets by a combined $10-billion, of which only $2.2-billion can carry forward into the next year.

However, overall spending is still up considerably when compared with the period before it introduced stimulus measures worth billions of dollars to promote economic growth during the recession that hit in late 2008.

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Total expenses for the fiscal year that ended March 31, 2013, were $275.6-billion, up 0.1 per cent from the year before. That means federal spending has been above $270-billion for four years in a row.

In contrast, the total before the recession was $239-billion in 2008-09, and $209-billion in 2005-06, when Prime Minister Stephen Harper first came to office. In addition to stimulus spending and inflation, a large part of the increase over the years is due to the federal pledge to increase health transfers to the provinces by six per cent a year until 2016-17. The Health and Social transfer was $27.2-billion in 2006 and is now $40.7-billion, an increase of nearly 50 per cent.

Benefits for seniors are also becoming more expensive for Ottawa as a larger percentage of Canadians enter retirement. When the Conservatives first came to office, these expenses were were $29-billion. Now the annual cost is $40-billion, up six per cent from a year ago and 38 per cent from 2006.

Treasury Board President Tony Clement said a growing economy and population and locked-in costs have increased total spending over time, but Wednesday's numbers show Ottawa is tightening the spending that is under its direct control.

"I would argue a lot of it has to do with back-office operation consolidation and being more efficient," he said in an interview. "Obviously, we've reduced the number of public servants by close to 20,000 and so combine all those things together, you've got real success at constraining departmental spending."

The Public Accounts note that over the past two decades, the composition of total expenses has shifted greatly. In 1996-97, public debt charges were nearly 30 per cent of total federal spending. That has fallen by nearly two thirds to 10.6 per cent.

The government is clearly benefiting from record-low interest rates, as borrowing costs of $29.2-billion were down 6.2 per cent from the year before even though Ottawa's overall debt continues to grow in dollar terms as it posts yearly deficits. The government is planning to return to surplus in 2015-16.

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Some of the biggest changes at key departments include a 5-per-cent reduction at Canadian Heritage (including a 2-per-cent cut to the Canadian Broadcasting Corporation); a 4-per-cent cut at Citizenship and Immigration; a 7-per-cent cut to Parks Canada; a 4-per-cent reduction at Foreign Affairs and International Trade; a 5-per-cent increase at Human Resources and Skills Development and no change at National Defence. Spending was down 1 per cent on the Senate and up 1 per cent for the House of Commons.

The Privy Council Office, which serves the Prime Minister's Office and cabinet, saw a 17-per-cent spending cut.

Federal departments have repeatedly denied requests from the Parliamentary Budget Office and opposition MPs to provide a more detailed explanation of spending reductions.

With data analysis by Stuart A. Thompson in Toronto

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