The Fiscal Monitor

A Publication of the Department of Finance

Highlights

July 2010: budgetary deficit of $0.5 billion

There was a budgetary deficit of $0.5 billion in July 2010, compared to a deficit of $5.8 billion in
July 2009.
Revenues increased by $1.9 billion, or 10.5 per cent, largely reflecting higher personal and corporate
income tax revenues. Program expenses were down $3.6 billion, or 16.6 per cent, primarily reflecting
one-time support provided to the automotive industry in 2009–10, as well as lower operating
expenses of departments and agencies, including National Defence. Public debt charges increased
by $0.2 billion.

April to July 2010: budgetary deficit of $7.7 billion

For the first four months of the 2010–11 fiscal year, the budgetary deficit stood at $7.7 billion,
compared to a budgetary deficit of $18.3 billion reported in the same period of 2009–10. About
$5 billion of the $7.7-billion deficit was attributable to actions taken under Canada’s Economic
Action Plan, including tax reductions, Employment Insurance (EI) related measures, and
infrastructure funding. Revenues were up $3.9 billion, or 5.5 per cent, reflecting higher Goods and
Services Tax (GST) and personal income tax revenues. Program expenses were down $6.8 billion,
or 8.6 per cent, largely reflecting one-time support provided to the automotive industry in 2009–10.
Public debt charges were up $0.1 billion on a year-over-year basis.

July 2010
There was a budgetary deficit of $0.5 billion $0.1 billion, or 5.1 per cent. Energy taxes
in July 2010, compared to a $5.8-billion deficit were up $0.1 billion, customs import duties
in July 2009. were down $20 million, and other excise taxes
and duties were up $0.1 billion.
Revenues increased by $1.9 billion, or
10.5 per cent, to $20.4 billion. • EI premium revenues were virtually
• Personal income tax revenues increased unchanged, increasing $6 million, or
by $0.7 billion, or 7.6 per cent. 0.4 per cent.

• Corporate income tax revenues were up • Other revenues, consisting of net profits from
$0.9 billion, or 52.0 per cent, reflecting a enterprise Crown corporations, revenues of
decline in refunds relative to July 2009. consolidated Crown corporations, proceeds
from the sale of goods and services, returns
• Non-resident income tax revenues were on investments, net foreign exchange
up $0.1 billion, or 17.9 per cent. revenues and miscellaneous revenues, were
• Excise taxes and duties were up $0.3 billion, up $0.1 billion, or 2.8 per cent.
or 6.4 per cent. GST revenues were up

Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

Department of Finance Ministère des Finances

Canada Canada
The Fiscal Monitor

Program expenses in July 2010 were April to July 2010

$18.2 billion, down $3.6 billion, or 16.6 per cent, For the first four months of the 2010–11
from July 2009, reflecting both lower transfer fiscal year, there was a budgetary deficit
payments and lower operating expenses. of $7.7 billion, compared to a deficit of
Transfer payments decreased by $2.6 billion, $18.3 billion reported during the same period
or 16.8 per cent. of 2009–10. About $5 billion of the $7.7-billion
• Major transfers to persons, consisting of deficit was attributable to actions taken under
elderly, EI and children’s benefits, decreased Canada’s Economic Action Plan.
by $0.1 billion, or 1.7 per cent. Elderly Revenues increased by $3.9 billion, or
benefits increased by $0.1 billion, or 5.5 per cent, to $75.1 billion.
1.9 per cent. EI benefit payments decreased • Personal income tax revenues were up
by $0.2 billion, or 10.3 per cent, reflecting $1.1 billion, or 3.2 per cent.
a decrease in regular benefits. Children’s
benefits, which consist of the Canada • Corporate income tax revenues were up
Child Tax Benefit and the Universal Child $0.1 billion, or 1.7 per cent, reflecting a
Care Benefit, increased by $18 million, or decline in receipts of about 10 per cent,
1.7 per cent. which was more than offset by a decrease of
roughly 24 per cent in refunds of taxes paid.
• Major transfers to other levels of government,
consisting of federal transfers in support of • Non-resident income tax revenues were down
health and other social programs (Canada $0.2 billion, or 12.3 per cent.
Health Transfer and Canada Social Transfer), • Excise taxes and duties were up $2.6 billion,
fiscal transfers, transfers to provinces on or 22.7 per cent, primarily due to a
behalf of Canada’s cities and communities, $2.4-billion, or 33.7-per-cent, increase in GST
and Alternative Payments for Standing revenues. Energy taxes were up $0.1 billion
Programs, increased by $0.4 billion, or while other excise taxes and duties were up
9.0 per cent, primarily reflecting legislated $0.2 billion. Customs import duties were
growth in the Canada Health Transfer and down $28 million.
increased gas tax transfers to Canada’s cities
and communities. The timing of transfers to • EI premium revenues were up $61 million, or
Canada’s cities and communities varies from 0.9 per cent. The premium rate was kept stable
year to year. at $1.73 per $100 of insurable earnings for
2009 and 2010.
• Other transfer payments were down
$2.9 billion, largely reflecting one-time • Other revenues were up $0.1 billion, or
assistance provided to the automotive 1.8 per cent.
industry in 2009–10.
Program expenses for April to July 2010 were
Other program expenses consist of operating $72.6 billion, down $6.8 billion, or 8.6 per cent,
expenses of Crown corporations, departments from the same period the previous year,
and agencies, including National Defence, primarily reflecting lower transfer payments.
and also reflect the ongoing assessment of Transfer payments for April to July 2010 were
the Government’s liabilities. These expenses down $6.1 billion, or 10.9 per cent, from the
decreased by $1.0 billion, or 15.9 per cent, over same period the previous year.
the prior year, primarily reflecting an inventory
adjustment recorded by National Defence in • Major transfers to persons were down
July 2010, as well as a one-time adjustment in $0.1 billion, or 0.3 per cent. Elderly benefits
July 2010 to reflect an over-accrual of employee increased by $0.3 billion, or 2.3 per cent, in
future benefit costs in prior months based on an line with growth in the elderly population. EI
updated estimate of benefit costs for the 2010–11 benefit payments were down $0.5 billion, or
fiscal year. Public debt charges increased by 7.3 per cent, reflecting a decrease in regular
$0.2 billion, or 8.5 per cent. benefits, consistent with a decrease in the
 The Fiscal Monitor

unemployment rate. Children’s benefits In contrast, the financial source/requirement

were up $0.2 billion, reflecting in part measures the difference between cash coming
enhancements to the National Child Benefit in to the Government and cash going out. This
Supplement and the Canada Child Tax measure is affected not only by changes in the
Benefit which took effect in July 2009 as part budgetary balance but also by the cash source/
of Canada’s Economic Action Plan. requirement resulting from the Government’s
investing activities through its acquisition of
• Major transfers to other levels of government
capital assets and its loans, financial investments
were up $0.4 billion, or 2.1 per cent, largely
and advances, as well as from other activities,
reflecting legislated growth in the Canada
including payment of accounts payable and
Health Transfer.
collection of accounts receivable, foreign
• Other transfer payments were down exchange activities, and the amortization of its
$6.4 billion, primarily reflecting one-time tangible capital assets. The difference between
assistance provided to the automotive the budgetary balance and financial source/
industry in 2009–10. requirement is recorded in non-budgetary
transactions.
Other program expenses decreased by
$0.7 billion, or 2.9 per cent, from the previous With a budgetary deficit of $7.7 billion and a
year’s level, due in large part to the inventory requirement of $21.8 billion from non-budgetary
adjustment recorded by National Defence. transactions, there was a financial requirement
of $29.5 billion in the April to July period of
Public debt charges increased by $0.1 billion, or 2010–11, compared to a financial requirement
0.7 per cent. of $40.2 billion in the same period of 2009–10.
The decrease in the financial requirement
Financial requirement of $29.5 billion for in 2010–11 reflects the improvement in the
April to July 2010 budgetary balance, a reduction in the financing
The budgetary balance is presented on requirements of Canada Mortgage and Housing
an accrual basis of accounting, recording Corporation under the Insured Mortgage
government assets and liabilities when they Purchase Program (IMPP) due to the winding
are receivable or incurred, regardless of down in March 2010 of purchases of insured
when the cash is received or paid. mortgage pools under the IMPP, as well as
one-time assistance provided to the automotive
industry in 2009–10.
Revenues and expenses
(April to July 2010) Net financing activities up $9.2 billion
$ billions
Expenses
The Government financed this financial
9.9
Other transfer
payments
requirement of $29.5 billion by increasing
Revenues
EI premiums 6.5 10.2
Public market debt by $9.2 billion and reducing cash
debt charges
Corporate 8.6
balances by $20.3 billion. The increase in
income taxes
Other revenues 9.1 18.0
Major transfers to market debt was achieved primarily through
other levels of govt.
the issuance of marketable bonds. The level
Excise taxes 14.3
and duties of cash balances varies from month to month
22.2
Other program
expenses
based on a number of factors including periodic
large debt maturities, which can be quite
Personal 36.7
income taxes Major transfers
volatile on a monthly basis. Cash balances
22.4
to persons
at the end of July 2010 stood at $5.3 billion,
down $19.3 billion from their level at the end
75.1 82.8
of July 2009.
The Fiscal Monitor

Table 1
Summary statement of transactions
  July April to July
  2009 2010 2009–10 2010–11
($ millions)
Budgetary transactions
Revenues 18,441 20,386 71,204 75,095
Expenses
Program expenses -21,801 -18,192 -79,377 -72,576
Public debt charges -2,457 -2,667 -10,153 -10,222
Budgetary balance (deficit/surplus) -5,817 -473 -18,326 -7,703
Non-budgetary transactions -1,460 -6,249 -21,907 -21,812
Financial source/requirement -7,277 -6,722 -40,233 -29,515
Net change in financing activities 11,920 5,464 19,796 9,220
Net change in cash balances 4,643 -1,258 -20,437 -20,295
Cash balance at end of period 24,592 5,328
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Revenues
July April to July
  2009 2010 Change 2009–10 2010–11 Change
($ millions) (%) ($ millions) (%)
Tax revenues
Income taxes
Personal income tax 9,070 9,763 7.6 35,567 36,688 3.2
Corporate income tax 1,657 2,518 52.0 8,460 8,608 1.7
Non-resident income tax 397 468 17.9 1,702 1,493 -12.3
Total income tax 11,124 12,749 14.6 45,729 46,789 2.3
Excise taxes and duties
Goods and Services Tax 2,891 3,038 5.1 7,104 9,497 33.7
Energy taxes 390 440 12.8 1,594 1,661 4.2
Customs import duties 366 346 -5.5 1,199 1,171 -2.3
Other excise taxes and duties 472 558 18.2 1,720 1,922 11.7
Total excise taxes and duties 4,119 4,382 6.4 11,617 14,251 22.7
Total tax revenues 15,243 17,131 12.4 57,346 61,040 6.4
Employment Insurance premiums 1,350 1,356 0.4 6,432 6,493 0.9
Other revenues 1,848 1,899 2.8 7,426 7,562 1.8
Total revenues 18,441 20,386 10.5 71,204 75,095 5.5
Note: Totals may not add due to rounding.
 The Fiscal Monitor

Table 3
Expenses
July April to July
2009 2010 Change 2009–10 2010–11 Change
($ millions) (%) ($ millions) (%)
Transfer payments
Major transfers to persons
Elderly benefits 2,822 2,877 1.9 11,410 11,667 2.3
Employment Insurance benefits 1,643 1,474 -10.3 6,974 6,465 -7.3
Children’s benefits 1,082 1,100 1.7 4,134 4,312 4.3
Total 5,547 5,451 -1.7 22,518 22,444 -0.3
Major transfers to other levels of government
Support for health and other
social programs
Canada Health Transfer 2,040 2,157 5.7 8,159 8,630 5.8
Canada Social Transfer 979 931 -4.9 3,694 3,726 0.9
Total 3,019 3,088 2.3 11,853 12,356 4.2
Fiscal transfers 1,262 1,338 6.0 5,759 5,803 0.8
Canada’s cities and communities 0 232 n/a 957 858 -10.3
Alternative Payments for Standing Programs -235 -246 4.7 -907 -983 8.4
Total 4,046 4,412 9.0 17,662 18,034 2.1
Other transfer payments
Agriculture and Agri-Food 73 93 27.4 347 321 -7.5
Foreign Affairs and International Trade 282 365 29.4 1,002 1,084 8.2
Health 276 321 16.3 972 913 -6.1
Human Resources and Skills Development 324 435 34.3 1,062 1,216 14.5
Indian Affairs and Northern Development 335 429 28.1 1,820 1,884 3.5
Industry 212 300 41.5 602 653 8.5
Other 4,389 1,073 -75.6 10,479 3,784 -63.9
Total 5,891 3,016 -48.8 16,284 9,855 -39.5
Total transfer payments 15,484 12,879 -16.8 56,464 50,333 -10.9
Other program expenses
Crown corporations 720 805 11.8 2,787 2,997 7.5
Defence 1,791 1,048 -41.5 6,055 5,191 -14.3
All other departments and agencies 3,806 3,460 -9.1 14,071 14,055 -0.1
Total other program expenses 6,317 5,313 -15.9 22,913 22,243 -2.9
Total program expenses 21,801 18,192 -16.6 79,377 72,576 -8.6
Public debt charges 2,457 2,667 8.5 10,153 10,222 0.7
Total expenses 24,258 20,859 -14.0 89,530 82,798 -7.5
Note: Totals may not add due to rounding.
The Fiscal Monitor

Table 4
The budgetary balance and financial source/requirement
  July April to July
  2009 2010 2009–10 2010–11
($ millions)
Budgetary balance (deficit/surplus) -5,817 -473 -18,326 -7,703
Non-budgetary transactions
Capital investing activities -112 -1,017 -331 -1,916
Other investing activities -4,489 -541 -12,951 -6
Pension and other accounts 693 708 2,443 2,209
Other activities
Accounts payable, receivables, accruals and allowances -3,760 -5,873 -17,648 -23,277
Foreign exchange activities 6,077 154 5,539 -120
Amortization of tangible capital assets 131 320 1,041 1,298
Total other activities 2,448 -5,399 -11,068 -22,099
Total non-budgetary transactions -1,460 -6,249 -21,907 -21,812
Net financial source/requirement -7,277 -6,722 -40,233 -29,515
Note: Totals may not add due to rounding.

Table 5
Financial source/requirement and net financing activities
  July April to July
  2009 2010 2009–10 2010–11
($ millions)
Financial source/requirement -7,277 -6,722 -40,233 -29,515
Net increase (+)/decrease (-)
in financing activities
Unmatured debt transactions
Canadian currency borrowings
Marketable bonds 9,231 4,658 20,785 19,384
Treasury bills 8,900 1,600 7,900 -9,400
Retail debt -175 -45 -15 -245
Other -2 -3 -66 -390
Total 17,954 6,210 28,604 9,349
Foreign currency borrowings -2,775 -386 -3,790 -152
Total 15,179 5,824 24,814 9,197
Cross-currency swap revaluation -2,798 -394 -4,744 -36
Unamortized discounts on debt issues -449 46 -210 120
Obligations related to capital leases -12 -12 -64 -61
Net change in financing activities 11,920 5,464 19,796 9,220
Change in cash balance 4,643 -1,258 -20,437 -20,295
Note: Totals may not add due to rounding.

For inquiries about this publication, contact Doug Nevison at 613-995-6391.

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September 2010