The government’s unprecedented $309 billion spending spree during the Covid-19 pandemic has put the fiscal future of the country at risk, according to a new report.
The C.D. Howe Institute’s study titled Fiscal COVID: The Pandemic’s Impact on Government Finances and Accountability in Canada blasts the public sector for untransparent “on the fly” decision making by government leaders.
“The decisions that got made that are going to affect our future for years and decades to come, were really made on the fly without appropriate deliberation,” said C.D Howe chief executive and report co-author, Bill Robson.
“We need more transparency from our governments about how they’re spending our money, especially when something like COVID happens.”
The response to the pandemic jeopardized the Canadian economy by worsening public finances and crucial checks and balances meant to curb spending and debt accumulation.
“Here we had this major crisis. We have all these debts that are going to now have to be serviced,” said Robson.
Part of the impending problem is that with high insurance rates, debts will be even more expensive to pay off.
A February report by the Fraser Institute found that Canadians paid $68.6 billion on interest payments alone for federal and provincial government debts in the 2022 to 2023 fiscal year. Additionally, federal debt surpassed the $1-trillion mark in 2021.
“So you got to, at some point, have a broad-based tax increase to pay for all this stuff. And we’re not hearing about that… We have a few lean years ahead,” warned Robson.
In the fiscal year 2020/21, spending by all senior governments increased significantly – by 7% on average for provinces and territories, and by a whopping 70% for the federal government, the report concluded.
Despite receiving federal transfers and support, provinces and territories still ran higher deficits due to increased expenses. The federal government borrowed so much money that it reduced its ability to provide services to Canadians in the future.
“Future historians of public finances in Canada will see from a glance … that something remarkable happened in the 2020/21 fiscal year,” wrote the report’s authors.
Not only was the issue a lack of transparency, Robson says, but a lack of elected representatives holding the government to account in legislatures.
“I think part of the problem (was) that you didn’t have enough MPs standing up and saying, wait a minute, like you’re totally sidelining Parliament,” said Robson.
“We ought to be able to rely on the government to present the information and for MPs to act on it. And in this instance, the government didn’t present the information, and MPs were willing to let it go. I think we need to call them on it and say, ‘Do your job.’”
