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Budget 2001 - Budget Plan Chapter 7 |
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2001 |
2002 |
2003 |
|
|
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(per cent) |
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October 2001 private sector survey |
1.5 |
1.5 |
3.9 |
Budget 2001 |
1.3 |
1.1 |
3.9 |
October 2001 private sector survey |
2.6 |
1.6 |
1.9 |
Budget 2001 |
1.3 |
0.2 |
1.9 |
Nominal GDP growth |
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October 2001 private sector survey |
4.1 |
3.1 |
5.9 |
Budget 2001 |
2.6 |
1.3 |
5.9 |
3-month Treasury bill rate |
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October 2001 private sector survey |
4.0 |
3.2 |
4.7 |
Budget 2001 |
3.8 |
2.4 |
4.0 |
10-year government bond rate |
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October 2001 private sector survey |
5.5 |
5.5 |
5.9 |
Budget 2001 |
5.5 |
5.5 |
5.9 |
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The lower outlook for both nominal GDP growth and short-term interest rates has differing impacts on the private sector projections of the fiscal surplus.
Table 7.2
Budget 2001: Fiscal Outlook Before Measures Proposed in 2001 Budget
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2001- |
2002- |
2003- |
|
|
|||
(billions of dollars) |
|||
October 2001 private sector survey |
|||
Budgetary surplus: private sector average |
7.3 |
3.8 |
5.7 |
Impact of recent economic developments1 |
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Budgetary revenues |
|||
Personal income tax revenues |
-0.5 |
-0.4 |
-0.3 |
Corporate income tax revenues |
-1.0 |
-2.5 |
-1.6 |
Other revenues |
-0.1 |
-0.3 |
-0.3 |
Program spending |
0.2 |
0.1 |
0.1 |
Public debt charges |
0.3 |
1.4 |
1.1 |
Net impact |
-1.1 |
-1.7 |
-1.0 |
Budgetary surplus before 2001 budget measures |
6.2 |
2.1 |
4.8 |
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Note: Numbers may not add due to rounding. |
Table 7.3 presents the fiscal impact of the spending and revenue initiatives proposed in the 2001 budget. The net cost of the proposed actions is $4.7 billion in 2001-02, $111 million in 2002-03 and $2.3 billion in 2003-04.
Table 7.3
Spending and Revenue Initiatives Proposed in the 2001 Budget
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2001-2002 |
2002-2003 |
2003-2004 |
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(millions of dollars) |
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Spending initiatives proposed in this budget |
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Enhancing security for Canadians |
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Security |
1,067 |
1,217 |
1,236 |
Secure, open and more efficient Canada-U.S. border |
72 |
306 |
260 |
Total |
1,139 |
1,523 |
1,496 |
Bridging to the future |
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Investing in health |
105 |
78 |
78 |
Investing in skills, learning and research |
429 |
318 |
318 |
Strategic infrastucture and the environment |
207 |
181 |
234 |
Strategic Infrastructure Foundation: minimum commitment of $2 billion |
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Aboriginal children |
90 |
95 |
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International assistance |
215 |
285 |
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Africa Fund: commitment of $500 million |
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Total |
956 |
667 |
1,010 |
Departmental operations |
569 |
361 |
198 |
Total spending initiatives |
2,664 |
2,551 |
2,703 |
Revenue and cost recovery initiatives proposed in this budget |
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Deferral of corporate income tax instalments for small businesses |
-2,000 |
2,000 |
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Tax expenditures: |
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Investing in skills, learning |
-10 |
-20 |
-35 |
Investing in strategic infrastructure |
-10 |
-15 |
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Construction work camps |
-10 |
-10 |
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Air Travellers Security Charge |
430 |
445 |
|
50 |
50 |
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Total |
-2,010 |
2,440 |
435 |
Total spending, revenue and cost recovery initiatives |
4,674 |
111 |
2,268 |
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A number of initiatives have been taken in the aftermath of the September 11th terrorist attacks to enhance security for Canadians and make the Canada-U.S. border more open and efficient. These amount to $1.1 billion in 2001-02 and $1.5 billion in each of the next two fiscal years.
Table 7.4 summarizes the impact of the measures proposed in the 2001 budget on the adjusted fiscal projections.
Table 7.4
Budget 2001: Fiscal Outlook
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2001-2002 |
2002-2003 |
2003-2004 |
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(billions of dollars) |
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Budgetary surplus pre-2001 budget measures |
6.2 |
2.1 |
4.8 |
Budget 2001 measures |
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Spending initiatives |
-2.7 |
-2.6 |
-2.7 |
Revenue measures |
-2.0 |
2.4 |
0.4 |
Net impact |
-4.7 |
-0.1 |
-2.3 |
Less: Contingency Reserve |
1.5 |
2.0 |
2.5 |
Budgetary balance |
0.0 |
0.0 |
0.0 |
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Note: Numbers May not add due to rounding. |
Balanced budgets or better are projected for 2001-02 and each of the next two fiscal years.
Table 7.5
Summary Statement of Transactions: Budget 2001
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2000- |
2001- |
2002- |
2003- |
|
---|---|---|---|---|
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(billions of dollars) |
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Budgetary revenues |
178.6 |
171.3 |
174.7 |
180.7 |
Program spending |
119.3 |
130.5 |
136.6 |
140.2 |
Operating balance |
59.2 |
40.7 |
38.2 |
40.4 |
Public debt charges |
42.1 |
39.2 |
36.3 |
38.1 |
Less: Contingency Reserve |
1.5 |
2.0 |
2.5 |
|
Budgetary balance |
17.1 |
0.0 |
0.0 |
0.0 |
Net public debt1 |
547.4 |
547.4 |
547.4 |
547.4 |
Loans, investments and advances |
-1.7 |
-1.9 |
-1.9 |
-2.2 |
Pensions and other accounts |
1.3 |
-1.7 |
0.0 |
2.6 |
Other |
2.2 |
1.7 |
0.9 |
0.8 |
Total |
1.8 |
-1.9 |
-1.0 |
1.2 |
Financial requirements/source |
19.0 |
-1.9 |
-1.0 |
1.2 |
Per cent of GDP |
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Budgetary revenues |
16.9 |
15.8 |
15.9 |
15.5 |
Program spending |
11.3 |
12.0 |
12.4 |
12.1 |
Public debt charges |
4.0 |
3.6 |
3.3 |
3.3 |
Net public debt1 |
51.8 |
50.5 |
49.9 |
47.1 |
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Note: Numbers may not add due to rounding. |
Based on the adjusted economic forecasts, the debt burden – net public debt as a per cent of GDP – is projected to fall from 51.8 per cent in 2000-01 to under 50 per cent in 2002-03. This would be the lowest ratio in 17 years.
Budgetary revenues are projected to decline by $7.3 billion in 2001-02, reflecting the impact of the second year of the tax reduction plan, the 2001 budget proposal to defer monthly income tax instalment payments for small businesses, and the weakness in nominal income growth. Most of the rebound in 2002-03 is attributable to the deferral of these payments. In 2003-04 budgetary revenues are expected to rebound somewhat.
Table 7.6
Budgetary Revenues
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2000- |
2001- |
2002- |
2003- |
|
---|---|---|---|---|
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(billions of dollars) |
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Income tax |
||||
Personal income tax |
82.3 |
80.3 |
80.0 |
84.3 |
Corporate income tax |
28.2 |
23.6 |
25.4 |
24.6 |
Other income tax |
4.3 |
4.0 |
4.1 |
4.2 |
Total income tax |
114.8 |
107.9 |
109.5 |
113.1 |
Employment insurance revenues |
18.7 |
17.8 |
17.6 |
17.5 |
Excise taxes/duties |
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Goods and services tax |
25.0 |
25.7 |
26.9 |
28.8 |
Customs import duties |
2.8 |
2.9 |
2.9 |
3.1 |
Other excise taxes and duties |
8.3 |
8.6 |
8.9 |
9.2 |
Total |
36.1 |
37.2 |
38.8 |
41.1 |
Total tax revenues |
169.7 |
162.9 |
165.9 |
171.7 |
Non-tax revenues |
8.9 |
8.4 |
8.8 |
9.0 |
Total budgetary revenues |
178.6 |
171.3 |
174.7 |
180.7 |
Per cent of GDP |
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Personal income tax |
7.8 |
7.4 |
7.3 |
7.3 |
Corporate income tax |
2.7 |
2.2 |
2.3 |
2.1 |
Employment insurance revenues |
1.8 |
1.6 |
1.6 |
1.5 |
Goods and services tax |
2.4 |
2.4 |
2.5 |
2.5 |
Other excise |
1.1 |
1.1 |
1.1 |
1.1 |
Tax revenues |
16.1 |
15.0 |
15.1 |
14.8 |
Non-tax revenues |
0.8 |
0.8 |
0.8 |
0.8 |
Total |
16.9 |
15.8 |
15.9 |
15.5 |
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Table 7.7
Program Spending
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2000- |
2001- |
2002- |
2003- |
|
|
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(billions of dollars) |
||||
Major transfers to persons |
||||
Elderly benefits |
24.3 |
25.3 |
26.4 |
27.4 |
Employment insurance benefits |
11.4 |
14.1 |
15.9 |
15.5 |
Relief for Heating Expenses |
1.5 |
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Total |
37.2 |
39.3 |
42.3 |
42.9 |
Major transfers to other levels of government |
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13.5 |
17.3 |
18.6 |
19.3 |
|
Medical Equipment Fund |
1.0 |
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Fiscal arrangements |
12.7 |
12.2 |
12.4 |
13.1 |
Alternative Payments for |
-2.5 |
-2.4 |
-2.5 |
-2.6 |
Total |
24.7 |
27.1 |
28.5 |
29.8 |
Direct program spending |
57.5 |
64.1 |
65.8 |
67.5 |
Total program spending |
119.3 |
130.5 |
136.6 |
140.2 |
Per cent of GDP |
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Major transfers to persons |
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Elderly benefits |
2.3 |
2.3 |
2.4 |
2.4 |
Employment insurance benefits |
1.1 |
1.3 |
1.5 |
1.3 |
Total1 |
3.5 |
3.6 |
3.9 |
3.7 |
Major transfers to other levels of government |
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Canada Health and Social Transfer |
1.4 |
1.6 |
1.7 |
1.7 |
Fiscal arrangements |
1.2 |
1.1 |
1.1 |
1.1 |
Alternative Payments for Standing Programs |
-0.2 |
-0.2 |
-0.2 |
-0.2 |
Total |
2.3 |
2.5 |
2.6 |
2.6 |
Direct program spending |
5.4 |
5.9 |
6.0 |
5.8 |
Total program spending |
11.3 |
12.0 |
12.4 |
12.1 |
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1 Includes Relief for Heating Expenses. |
The fiscal projections are extremely sensitive to changes in economic assumptions – particularly to changes in real GDP growth, inflation and interest rates.
Table 7.8
Sensitivity of Fiscal Outlook to Economic Shocks
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---|---|---|
Year 1 |
Year 2 |
|
|
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(billions of dollars) |
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Estimated change in fiscal position from: |
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1-per-cent decrease in real GDP growth |
||
Revenue impact |
-1.8 |
-1.9 |
Expenditure impact |
0.5 |
0.7 |
Deterioration in budgetary balance |
-2.4 |
-2.6 |
1-per-cent decline in GDP inflation |
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Revenue impact |
-1.9 |
-1.8 |
Expenditure impact |
-0.5 |
-0.5 |
Deterioration in budgetary balance |
-1.4 |
-1.3 |
100-basis-point decrease in interest rates |
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Revenue impact |
-0.4 |
-0.5 |
Expenditure impact |
-1.1 |
-1.9 |
Improvement in budgetary balance |
0.8 |
1.4 |
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Note: Numbers may not add due to rounding. |
To assess the fiscal impact of differing views on Canada’s economic prospects, two alternative scenarios are presented for illustrative purposes: the recent International Monetary Fund (IMF) forecast and the average of the four most pessimistic economic forecasts in the December survey.
Table 7.9
Alternative Economic Assumptions: Lower Growth Scenarios
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---|---|---|
2002 |
2003 |
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|
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(per cent) |
||
Real GDP growth |
||
December 2001 private sector average |
1.1 |
3.9 |
0.8 |
3.6 |
|
Average of four most pessimistic private sector forecasts |
0.6 |
3.9 |
|
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2002-2003 | 2003-2004 |
|
(billions of dollars) |
||
Fiscal impact |
||
Budget 2001 budgetary surplus |
2.0 |
2.5 |
Estimated change in fiscal position: |
||
International Monetary Fund |
-0.7 |
-1.5 |
Four most pessimistic |
-1.4 |
-1.6 |
Adjusted budgetary balance |
||
International Monetary Fund |
1.3 |
1.0 |
Four most pessimistic |
0.6 |
0.9 |
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Last Updated: 2003-02-04 |