Governments understandably don’t like criticism, but it’s part of the game. Governments won’t please everyone, yet their policies should be transparent, open and subject to scrutiny, especially when those policies reshape how the country’s finances are presented.
Over the past decade, the federal government has developed a habit of responding to criticism not with rigorous debate, but with media choreography: friendly experts pen op-eds, social media influencers post pre-packaged soundbites and coordinated messaging floods the airwaves.
This government has added to its playbook: swapping op-eds for third-party quotes from “experts,” including international institutions, that can be conveniently reshared and weaponized.
An example is the recent comments provided by a senior leader at the International Monetary Fund (IMF) who came out in support of the government’s lame proposal to separate the budget into “operating” and “capital” budgets. She also provided support for moving the budget cycle from the spring to the fall.
The problem with providing friendly op-eds or quotes is that they usually rely on the stature of the person or organization providing them instead of providing a robust counterargument. The quote from the IMF most certainly falls into that category. The IMF’s reputation doesn’t make every statement sacrosanct and the quote being circulated lacks the depth Canadians deserve on this issue.
To separate the budget into a capital budget and operating budget is simple deception . It won’t fool bondholders and credit rating agencies, but it can fool the financially illiterate into thinking that this method is a “modern approach” to budgeting cooked up by sophisticated experts.
Categorizing routine government expenditures as capital (by making the definition for this purpose very broad ) enables the government to shift those costs off the operating budget and then crow that the deficit has shrunk. Simple deception. Canadians need to critically think this through and reject vacuous quotes or op-eds that lack depth and offer no real analysis.
In the above spirit, let’s critically examine the proposed change to the budgeting cycle as laid out in a Department of Finance release on Oct. 6:
“The government is also modernizing its budget cycle to better align with the needs of builders, businesses, investors, provinces, territories, and municipalities. Starting with budget 2025, the federal budget will be tabled in the fall, with an economic and fiscal update released in the spring. This change will provide the certainty and predictability needed to plan ahead and ensure projects can begin as soon as construction season starts — helping every level of government make smarter, faster investment decisions.”
The government’s fiscal year starts annually on April 1 and ends the following March 31. And “fall” is generally from Sept. 21 to Dec. 21. So, in the extreme, the budget would be released more than six months in advance of the next fiscal year. In the best-case scenario, the budget would be released slightly more than three months ahead of the next fiscal year.
The timing of the budget’s release is not a new issue. In 1985, the federal government released a paper — The Canadian Budgetary Process: Proposals For Improvement — as part of that year’s budget, which proposed fixed budget dates and provided a thoughtful analysis of when the fixed budget date should be.
It explored the pros and cons of a fall budget date, saying the “most compelling reason for a fall budget date is the extra time it provides for the other steps in the budgetary process which follow the tabling of the federal budget.” It also highlighted the convenience that a fall budget date would provide to provincial governments in their budget planning.
Regarding the cons of a fall budget date, the paper said pre-budget consultations would be very difficult given that they must be carried out well in advance of the budget, which would mean the summer — a time when many people are on vacation.
But the most significant con presented was that a “fall budget forecast is likely to be less reliable for the simple reason that it is prepared too many months in advance of the fiscal year to which it applies.”
Like in 1985 — but even more so today — things can quickly change and those events can materially impact a budget. The paper ultimately concluded that a mid-January to mid-February fixed budget period would be most appropriate.
The purpose of a government budget is to provide a comprehensive statement of the government’s financial plans for a given fiscal year, including estimates of revenues, expenditures, borrowing and debt obligations, along with the policies underlying them. To prepare an annual budget too far in advance would seem to defeat its purpose regardless of whether there is a spring update or not.
History is always a good provider of lessons and guidance to learn from. The government said it is now taking a “modern” approach to budgeting cycles, but I’m not convinced.
What has materially changed from 1985 to overcome the recommendation and change to a fall budget cycle? Yes, lots has changed since that time, but those changes don’t change the 1985 conclusion that budgets prepared too far in advance will be less reliable. If something has changed, the government hasn’t made the case.
Governments that treat criticism as sabotage and lean on quotes from so-called external experts to seek credibility aren’t modernizing anything; they’re managing optics. The 1985 conclusion still holds: budgets prepared too far in advance are less reliable, no matter how well-packaged the rollout.
As Nicholas Dahir, a research officer at the C.D. Howe Institute, rightly said, “Transparent financial reporting is more than a best practice; it’s a democratic responsibility.”
Canadians deserve substance, not deceptive fiscal practices and soundbites.
Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at [email protected] and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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