Invest surplus in program enhancement, not costly tax cut agenda--report

November 10, 2004

OTTAWA--Despite recently well-publicized spending commitments, the federal government will post surpluses totaling $24.1 billion over the next three years, according to the Alternative Federal Budget's (AFB) Economic and Fiscal Update.

In keeping with the Chretien-Martin Liberals' practice of amassing significant surpluses--belying dire economic predictions from the Finance Department--the AFB forecasts a $7.7 billion surplus in fiscal year 2004-5, rising to $7.4 billion in 2005-6 and $9.0 billion in 2006-7.

Now that the federal surpluses have been acknowledged by other economic forecasters, including the Department of Finance itself, a debate is growing about how to use the surplus: program spending, tax cuts or debt reduction.

"It is entirely appropriate that the federal government use the three-year $24.1 billion surplus to fund necessary enhancements to program spending," says CCPA Senior Economist Ellen Russell. "Canadians may be under the impression that the federal government has met its program spending obligations, but this is simply not the case."

After adjusting for population growth and inflation, program spending grew less than 3.9% per year from 1999-00 to 2003-4--hardly an explosion.

Just meeting a handful of widely recognized spending priorities--the infrastructure deficit, early learning and childcare, housing, post-secondary education, Kyoto agreement obligations, and Aboriginal needs--would exhaust the projected federal surplus, leaving no room for either tax cuts or debt repayment.

"The majority of Canadians have indicated their priority is program spending, not tax cuts. Given the tremendous need for--and significant cost of--repairing the effects of the spending cuts enacted to balance the budget in the mid-1990s, for the federal government to implement tax cuts would not only be unaffordable, it would also be irresponsible," concludes Russell.


The 2005 Alternative Federal Budget Economic and Fiscal Update is available on the CCPA web site at

For more information contact Kerri-Anne Finn, CCPA Communications Officer at 613-563-1341 x306.