Canada’s senior governments tend to spend more than they budget. From the 2000/01 fiscal year to 2019/20, only Newfoundland and Labrador spent less, on average, than it budgeted.
Over those 20 years, all senior governments together overshot budgeted expenses by a cumulative $119 billion. That means they went into the COVID-19 crisis spending $3,100 more per Canadian than they would have if they had fulfilled their past budget commitments.
A major reason for these expense overshoots seems to be revenue overshoots. Rather than spending less and taxing more in booms, and spending more and taxing less in busts, as textbooks prescribe, Canadian governments seem to underpredict revenue, and spend most of the resulting in-year “surprise”.
With spending and debt having ballooned during the COVID-19 crisis, Canadians will need better budget discipline from their governments in the future.
To learn more, read “Trouble on the Bottom Line: Canada’s Governments Must Produce More Reliable Budgets” by William B.P. Robson and Miles Wu.
