Recently, changes to the Main Estimates process have come under attack by the federal Opposition parties as well as by both the current and former Parliamentary Budget Officer (PBO). The criticisms primarily center on the establishment of a new Budget Implementation Vote (BIV) of $7.0 billion for 2018-19, relating to the 247 spending initiatives proposed in the 2018 Budget.
The Conservative finance critic, the Hon. Pierre Pollievre, claims the BIV is a “slush fund” from which the Government will probably fund non-budget initiatives leading up to the 2019 election. Perhaps he remembers that his own Conservative government used a similar vote in 2009 to fund spending unrelated to its original purpose (the G20 meeting) to build a gazebo in the then President of the Treasury Board’s riding.
The current PBO, in a report “The Government’s Expenditure Plan and Main Estimates for 2018-19”, claims that “there remains a lack of alignment between the Budget initiatives and planned results” as eventually reflected in Departmental Spending Plans. He also claims that the new process not only provides parliamentarians with information that only marginally supports their spending reviews, but also places fewer controls on the spending they approve. Furthermore, he claims that it is unclear that the BIV would restrict the Government to funding the proposed budget spending measures in the amounts set out in the 2018 Budget.
The inclusion of the BIV in the Main Estimates is an attempt to better align the Main Estimates to the Budget Expenditure Plan. Previously, the Main Estimates were tabled in Parliament on or before March 1st. in order to ensure that the Government had sufficient resources to commence operations on April 1st. Since the mid-2000s, however, budgets have mostly been tabled in Parliament in mid to late March, resulting in the Main Estimates not being based on the budget’s planning assumption and not including any of the spending initiatives proposed in the budget for the current fiscal year. Budget spending proposals only appeared later in the year in Supplementary Estimates. This disconnect between the budget and the main estimates undermined Parliament’s ability to oversee government spending.
To address this disconnect, the President of the Treasury Board proposed a number of changes to take effect in 2018-19 and be effective for the following two fiscal years, at which time they would be reviewed. One of these changes included the tabling of “Interim Estimates”, on or before March 1st, for the first three months of the new fiscal year. The tabling of Main Estimates for the whole fiscal year would be delayed to/or before April 16th.
It was felt that the delay (to April 16) in tabling the full Main Estimates would give Treasury Board sufficient time to examine and approve the budget spending initiatives and include them in the Main Estimates and the Departmental Plans. However, given the number of new budget spending initiatives (247) there was not sufficient time to do a credible review of each spending proposal.
The BIV is not the only aggregate vote included in the Main Estimates. There are four other such votes included in the Main Estimates for the Treasury Board Secretariat. These are Government Contingencies, Operating Budget Carry Forward, Capital Budget Carry Forward and Compensation Adjustments, amounting to $3.6 billion in total.
Since the new budget spending initiatives could only be included in the Main Estimates in aggregate (the BIV), the individual spending proposals could not be included in individual department and agency reference levels. This will eventually happen when final Treasury Board approval is granted. Neither were they included in the Departmental Plans, as they must be consistent with Part II of the Main Estimates.
To provide parliamentary oversight in the new process, Treasury Board has committed to publishing on a monthly basis, a listing of the initiatives approved, by department and program. For each program approved, the amount of funding provided, along with any amounts held back, are also listed. For amounts not required, the funds are allowed to lapse to result in a lower deficit, all other things remaining equal. The lapsed funds cannot be directed to other spending initiatives.
If additional funding is required, the Government has to go back to Parliament for approval. In addition, information on the approved spending initiatives is provided in the next Supplementary Estimates (three Supplementary Estimates are normally tabled throughout the fiscal year). Although Parliamentarians cannot change the funding for any program, they can request that the funding level for the department or agency be reduced. As such, there is still considerable oversight by the parliamentary committees reviewing the Estimates.
The inclusion of a BIV is not unique to the federal government. Four provinces include a BIV or a similar mechanism in their Main Estimates. Australia also includes a kind of BIV in their Main Estimates.
We believe that the criticisms of the Budget Implementation Vote are not warranted. The BIV provides a more comprehensive reconciliation between the budget spending proposals and the estimates. There are also sufficient controls to ensure that this Vote cannot be used as a slush fund. Parliamentarians still have an important oversight role and they are now provided with more information than in the past. Furthermore, the changes are subject to review after three years.
The PBO has suggested that the Government could “streamline its own internal processes to make spending more efficient without the need for Parliament to cede information and control”. However, he does not provide any details as to how this could be achieved
Some have argued for an earlier tabling of the budget. Prior to the mid-1990s, budgets were usually tabled in mid-February. However, with the requirement that the Main Estimates be tabled no later than March 1st, this did not give Treasury Board much time to review and approve budget-spending proposals. Providing adequate time would require that the budget be tabled in November or early December. This would mean that important economic information would be missing for budget planning. Preliminary estimates of gross domestic product – real and nominal – are published in the first week of March, which are important inputs in the forecasting of the economy. One would like to have as much current information as possible in finalizing the budget economic forecast.
Rather than change the budget date, the Government has opted to delay the tabling of the Main Estimates. However, even with this change, it appears that there still is not enough time to do a comprehensive and credible review in order to incorporate all of the new spending initiatives in the Main Estimates. Furthermore, delaying the tabling of the Main Estimates into May or June would severely limit the time parliamentarians have to properly review and approve the Main Estimates.
We believe that the budget should be tabled before the Main Estimates and to the extent possible the Main Estimates should include as many of the new spending initiatives as possible. It is important that there is consistency between the two documents. The government has chosen to do this through the establishment of the Budget Implementation Vote.
At one time, the Department of Finance and the Treasury Board Secretariat worked closely together to ensure that the two expenditure plans were consistent. This was at a time when the budget was tabled before the Main Estimates and both the Budget Expenditure Plan and Main Estimates were basically on the same accounting basis.
With the tabling of the budget after the Main Estimates and the move to full accrual accounting for the budget while the Main Estimates remained on a modified cash basis of accounting, the Treasury Board Secretariat became less involved in budget planning.
With the tabling the Main Estimates after the Budget, the Finance Minister should consider once again involving the Treasury Board Secretariat in setting the Government’s Expenditure Plan. This would give the Treasury Board adequate time to examine and approve the spending initiatives proposed in the budget. A BIV may still be required but it would be considerably smaller. Most of the provinces table their Main Estimates with the budget. There is no valid reason why the federal government cannot do the same.
C. Scott Clark held a number of senior positions in the Canadian Government, including Deputy Minister of Finance from 1998-2001. He has a PhD in Economics from the University of California at Berkeley and is currently President of C. S. Clark Consulting.
From 1990 to 2005, Peter C. DeVries served as Director, Fiscal Policy Division, at the Department of Finance. In that capacity he was responsible for overall preparation of the federal budget. He is currently a consultant in fiscal policy and public management issues.
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