The Economic Update: what does it mean for the cultural sector?

CCA Bul­letin 28/10

Novem­ber 8, 2010

 

 

Just the facts

On Octo­ber 12, fed­eral Finance Min­is­ter Jim Fla­herty deliv­ered his Eco­nomic and Fis­cal Update. The speech pro­vided updated infor­ma­tion on Canada’s eco­nomic and fis­cal con­text, but did not con­tain any spend­ing announce­ments, as has some­times been the case in past years.

On the eco­nomic side, so far, Canada is per­form­ing quite strongly in rela­tion to its G7 coun­ter­parts, notably the United States. On the fis­cal side, things are less rosy, par­tic­u­larly in the short-term. This year’s deficit will be the largest ever at the updated level of $55.6 bil­lion, up $1.8 bil­lion from the March esti­mate (most of the increase is due to account­ing changes that shift expen­di­tures for tran­si­tional assis­tance pay­ments to the provinces from the 2010/2011 fis­cal year to 2009/2010).

But the gov­ern­ment main­tains that it is still on track to reduce the deficit to a much smaller fig­ure by 2014/2015, even pro­ject­ing a sur­plus of $2.6 bil­lion in 2015/2016. How­ever, the Par­lia­men­tary Bud­get Offi­cer thinks oth­er­wise and projects that in 2015/2016, the deficit will still be at $11 billion!

If the Par­lia­men­tary Bud­get Offi­cer is cor­rect and the government’s deficit reduc­tion fig­ures turn out to be rather ‘rosy’, one can fear that deeper and more pro­longed cuts in pro­gram spend­ing may be on the hori­zon, with cul­ture being, as usual, one of the casu­al­ties of gov­ern­men­tal restraint.

As noted in the CCA’s analy­sis of the 2010 bud­get, as part of expen­di­ture restraint, from now on, strate­gic reviews will result in hard cuts, i.e., depart­ments will have to reduce their expen­di­tures by five per cent when they undergo a strate­gic review. The CBC, Canada Coun­cil for the Arts, National Film Board and Tele­film Canada all under­went strate­gic reviews in 2010 with no cuts – so they are ‘safe’ for the moment. On the other hand, the Depart­ment of Cana­dian Her­itage and Sta­tis­tics Canada will undergo a strate­gic review in 2011/2012, so a five per cent expen­di­ture reduc­tion is soon to take place at both depart­ments. Like other depart­ments, crown cor­po­ra­tions and agen­cies will also have to absorb infla­tion as well as gen­eral costs and salary increases.

Tell me more

Canada has recov­ered almost all of the eco­nomic activ­ity lost dur­ing the reces­sion: job growth is climb­ing, unem­ploy­ment has fallen to eight per cent and GDP is on the rise. The pri­vate sec­tor still fore­casts real GDP growth of just over three per cent in 2010, 2.9 per cent in 2011 and 2.8 per cent in 2012.

Inter­na­tion­ally, the recov­ery is still very frag­ile, par­tic­u­larly in the United States. While a ‘double-dip’ reces­sion is unlikely in Canada, the gov­ern­ment is remain­ing cau­tious with its eco­nomic pro­jec­tions in light of the uncer­tainty in the global econ­omy. As such, for pur­poses of fis­cal plan­ning, start­ing in the fourth quar­ter of 2010, it has adjusted pri­vate sec­tor fore­casts of eco­nomic growth down­ward by 0.5 per­cent­age points at annual rates for the next four quarters.

The eco­nomic update also states that the gov­ern­ment remains com­mit­ted to its strat­egy to reduce the deficit as out­lined in bud­get 2010: putting an end to stim­u­lus spend­ing as the econ­omy recov­ers, lim­it­ing growth in pro­gram expen­di­tures and cut­ting admin­is­tra­tive and over­head expenses.

Fed­eral Deficit Pro­jec­tions 2009/10 to 2014/15

Source: Finance Canada, Update of Eco­nomic and Fis­cal Pro­jec­tions, 2010; Par­lia­men­tary Bud­get Offi­cer, Eco­nomic and Fis­cal Assess­ment 2010.

Because of their spe­cific cir­cum­stances, large seg­ments of the arts sec­tor are feel­ing the pinch of the 2008/09 reces­sion with a delay. In this con­text, it is more impor­tant than ever that the sec­tor not be unduly bur­dened in this period of fis­cal restraint or worse still, that it face dis­pro­por­tion­ate reduc­tions com­pared to other fed­eral pro­grams and services.

Pre­serv­ing cul­tural fund­ing lev­els in this period of fis­cal restraint is essen­tial, and it will be impor­tant that all avenues to do so be explored. This will likely include a closer look at admin­is­tra­tive expenses asso­ci­ated with fed­eral cul­tural programs.

As indi­cated in the CCA’s most recent fed­eral bud­get analy­sis, admin­is­tra­tive expenses (salaries and other admin­is­tra­tive costs) asso­ci­ated with var­i­ous fed­eral cul­tural pro­grams can be quite sig­nif­i­cant (see table below for a sam­pling). It is expected that where such expen­di­tures can be reduced with­out com­pro­mis­ing the deliv­ery of pro­grams, the Depart­ment will do like the Canada Coun­cil in the 1990s and seek greater effi­cien­cies rather than cut­ting direct fund­ing to pro­gram recipients.

Admin­is­tra­tive Expenses Asso­ci­ated with Selected Fed­eral Pro­grams in the Cul­tural Sec­tor, 2010/2011 (millions $)

Pro­gram	Total Pro­gram   Fund­ing (mil­lions $)	Admin­is­tra­tive Expenses   (mil­lions $)	Per­cent­age of Pro­gram Fund­ing Accounted for by Administration
Canada Arts Pre­sen­ta­tion Fund	33.4	5.5	16.5
Canada Arts Train­ing Fund	24.1	1.4	5.8
Canada Cul­tural Spaces Fund	30.0	3.1	10.3
Canada Music Fund	28.1	2.3	8.2

Source: Depart­ment of Cana­dian Heritage.

What can I do?

Never miss an oppor­tu­nity to let your MP know about the impor­tance of sus­tain­ing invest­ments in the cul­tural sec­tor because the arts, cul­ture and her­itage sec­tor is still grap­pling with the effects of the reces­sion and because this sec­tor plays an impor­tant role in the shap­ing of a national dig­i­tal strategy.