SHAFAQNA (International Shia News Association)- Finance Minister Joe Oliver says he may have to use some of the $3-billion the federal government normally sets aside as a contingency for unanticipated expenses to keep the Prime Minister’s promise of a balanced budget.
“I am not precluding the use of the contingency fund,” Mr. Oliver told reporters on Monday. “That is something that the budget will reveal.”
With oil prices down 60 per cent since June, the federal Conservative government has been looking for ways to ensure that it can keep promises to Canadians, including an income-splitting plan announced last fall, and still head into an election later this year with balanced books.
Multiple cabinet ministers, including Mr. Oliver, said Monday there would not be large spending cuts. That means the government will have to find other ways to to keep itself in the black.
“The contingency fund is there for unexpected and unavoidable events of which a precipitous decline in oil prices is,” said Mr. Oliver. “So we may or may not need to use the contingency fund. But, if we do, it will be entirely consistent with government policy.”
As a way of budgeting for unforeseen events, the federal government regularly includes an “adjustment for risk” in its forecasts that assumes revenues will be $3-billion lower than they would otherwise be. This adjustment, sometimes referred to as a contingency fund, is meant to address the uncertainty that comes with estimating federal revenues. If the $3-billion is not required, it goes toward lowering the size of the annual deficit. If the government is in surplus, then the amount is put toward reducing the national debt.
The $3-billion contingency fund is included in budgets to cover events that could not be foreseen at the time a budget is released. It is not clear what Mr. Oliver is suggesting in terms of his approach to the 2015 budget, which has been delayed until at least April because of turbulent economic times.
Earlier in the day, government House Leader Peter Van Loan suggested the contingency fund would, in fact, be part of the government’s economic plan as it has been in previous years.
“The way the contingency fund works is it’s always been part of our budgets, it’s there for unforeseen circumstances,” Mr. Van Loan told reporters at a news conference to open the new sitting of Parliament.
“And, in the event it is not spent in any given year, as has happened in the past, then of course it gets applied to the rest of the country’s finances,” he said. “The same would happen in the normal course this year if no other unforeseen circumstances arose.”
Earlier this month, Social Development Minister Jason Kenney ruled out using the annual $3-billion contingency fund to achieve balance: “We won’t be using a contingency fund. A contingency fund is there for unforeseen circumstances like natural disasters,” he told Global’s The West Block.
Treasury Board President Tony Clement, who was cornered by reporters after Mr. Van Loan ended his news conference, said he has no plans for a deficit reduction action plan like the one he implemented in 2011 which required significant departmental spending cuts.
When asked where the government will get the money to balance the books, Mr. Clement replied: “Just watch us. We are going to be delivering a budget and we will balance the books.” The government, he said, has been operating in a prudent and responsible way “that has meant that, for four years running now, our operating expenditures as a government have declined.”
That answer is not good enough for the New Democrats, who accuse the government of eliminating its financial wiggle room with the introduction of an income splitting plan that the NDP says will benefit only the wealthy.
Opposition MPs aim to hit Prime Minister Stephen Harper hard on economic issues – something he has long promoted as his party’s strong suit – in the time that remains before the 2015 election.
NDP Leader Thomas Mulcair told the House of Commons during the first Question Period after a six week break that Mr. Harper has left the country at the mercy of falling oil prices by putting all of Canada’s economic eggs in the resource extraction basket.
“The Prime Minister has dithered as hundreds of thousands of well-paid manufacturing jobs have disappeared,” said Mr. Mulcair. “Where is the Prime Minister’s plan? When will he start creating the next generation of middle-class jobs? Where is the budget?”
And Liberal Leader Justin Trudeau said the Conservatives have responded to the drop in oil prices with confusion, delays and secrecy. “In the fall the minister tabled an update rejecting $81 per barrel for oil. Today oil is closer to $45. Exactly how much has that difference cost the government so far?” asked Mr. Trudeau.
Mr. Oliver did not directly answer that question. But, he said, the budget will rely on the projections of 15 private sector economists.
“And will base our projections on their projections,” said Mr. Oliver. “What we are saying to Canadians is that they should be reassured we have a strong economy, we will balance the budget and will honour our commitments.”