The "Scorecard"
This section compares the outcome for selected economic indicators for 1998, and for the financial results for fiscal year 1998-99, with the forecasts presented in the February 1998 and 1999 budgets.
The government targeted a balanced budget for 1998-99 in both the 1998 and 1999 budgets. Under the Debt Repayment Plan, the fiscal target for each year is based on:
- prudent economic planning assumptions – the average of private sector economic forecasts available at that time adjusted to include an additional element of prudence; and
- the inclusion of an annual Contingency Reserve to cover risks arising from unpredictable events and unavoidable inaccuracies in the economic and fiscal models used to translate the economic assumptions into detailed budget forecasts. For 1998-99, the Contingency Reserve was set at $3.0 billion.
1998 budget
Economic growth for 1998 was significantly weaker than assumed at the time of the 1998 budget, primarily reflecting the impact of the Asian financial crises. In contrast, interest rates turned out to be lower than those used for budget planning purposes.
Based on sensitivity analysis, the change in nominal income should have resulted in a deterioration in the revenue outcome for 1998-99, compared to the 1998 budget projections. However, positive revenue developments in the final quarter of 1997-98 – the results of which only became available after the tabling of the 1998 budget – carried over in 1998-99. As a result, budgetary revenues were $4.7 billion higher than forecast in the 1998 budget, with all major components up except excise taxes and duties. Public debt charges were $2.1 billion lower than projected in the 1998 budget, attributable in part to the lower-than-assumed outcome for interest rates and the lower stock of market debt.
The net impact of the higher revenues and lower public debt charges resulted in an improvement in the budgetary balance of $6.8 billion.
However, program spending was $6.9 billion higher than projected at the time of the 1998 budget. This was attributable to initiatives announced since the 1998 budget, which totalled $5.2 billion, and the impact of prior-year adjustments, which increased Equalization entitlements by $2.4 billion. In contrast, major transfers to persons were lower, primarily reflecting the impact of the lower-than-expected number of unemployed on employment insurance benefits.
The net impact of these developments was a requirement of $0.1 billion. As the balanced budget target for 1998-99 included a Contingency Reserve of $3 billion, there was a surplus of $2.9 billion. This surplus was applied to reducing the public debt, as specified under the Debt Repayment Plan.
Non-budgetary transactions were $2.6 billion higher than assumed in the 1998 budget. As a result, the financial surplus, excluding foreign exchange transactions, was $5.5 billion higher than projected in the 1998 budget.
1999 budget
Budgetary revenues for 1998-99 were $0.8 billion lower than projected in the 1999 budget, primarily due to transfers from personal income tax revenues to the Provincial Tax Collection Account, for underpayments with respect to both the 1997 and 1998 taxation years. Program spending was $0.7 billion lower, primarily due to lower direct program spending.
Non-budgetary transactions were $2.9 billion lower than assumed in the 1999 budget. As a result, the financial surplus, excluding foreign exchange transactions, was unchanged from the 1999 budget projection.
Table 6
The "scorecard": comparison of outcomes to 1998 and 1999 budget estimates
Outcome: Difference from
1998 budget
1999 budget
Economic indicators (1998) Nominal GDP (percentage points) -1.6
0.0
Interest rates 91-day Treasury bill rate (basis points) -68
-8
10-year government bond rate (%) -110
0
Financial results (1998-99) (billions of dollars)
Budgetary revenues Personal income tax 1.5
-1.2
Corporate income tax 1.1
-0.4
Other income tax 0.6
0.0
Employment insurance premium revenues 0.8
0.2
Excise taxes and duties -0.6
0.0
Non-tax revenues 1.2
0.4
Total 4.7
-0.8
Program spending Major transfers to persons Elderly benefits -0.1
0.0
Employment insurance benefits -0.7
-0.2
Major transfers to other levels of government Canada Health and Social Transfer 3.6
0.1
Fiscal arrangements 2.4
0.0
Direct program spending 1.5
-0.7
Total 6.9
-0.7
Public debt charges -2.1
0.0
Net impact on budgetary balance -0.1
-0.1
Contingency Reserve -3.0
-3.0
Budgetary outcome 2.9
2.9
Non-budgetary transactions 2.6
-2.9
Financial requirements/surplus (excluding foreign exchange transactions) 5.5
0.0
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