The COVID-19 pandemic strained the finances of Canada’s senior governments, and also undermined their accountability, says a new report from the C.D. Howe Institute.
In Fiscal COVID: The Pandemic’s Impact on Government Finances and Accountability in Canada, the C.D. Howe Institute’s William B.P. Robson and Nicholas Dahir examine the pandemic’s impact on the finances of Canada’s federal, provincial and territorial governments, and also look at the quality of the information those governments provided to legislators and Canadians about its impact.
On the financial side, they tally expenses of all senior governments at $1,140 billion during the 2020/21 fiscal year – $309 billion higher than in 2019/20. Federal spending jumped as never before in peacetime – up 73.3 percent.
Notwithstanding surprisingly robust revenues – with provinces and territories receiving federal transfers and stimulus supporting tax revenues – governments’ bottom lines deteriorated sharply. The federal government’s accumulated deficit deteriorated by an amount equal to 90 percent of its expenses, sharply reducing its capacity to provide services in the future.
As for accountability and transparency, Robson and Dahir highlight serious gaps in the information governments provided to legislators and the public. The federal government produced no budget for 2020/21 – an unprecedented failure that meant Canadians had no formal fiscal plan against which to judge the impact of additional federal spending and borrowing. Ontario, Saskatchewan, Newfoundland and Labrador, and Prince Edward Island produced their budgets well after the fiscal year had started and the pandemic was already under way, which also impeded judgements about the impact of the pandemic on their finances.
The public accounts senior governments produced after 2020/21 contained much less information on COVID’s impact than a crisis of that magnitude warranted. Even documentation of health-related expenses was patchy, and only one of the 14 governments provided a full accounting of COVID’s impact on revenues, expenses, and the bottom line. Moreover, the information governments did provide revealed some peculiarities. Among them, the federal government added about $10 billion in contingent liabilities after the federal auditor general had already signed its 2020/21 financial statements – an amount, and a precedent, that deserved more scrutiny than they received during the pandemic.
Because governments provided too little systematic information about COVID’s impact in their public accounts, and because health spending is a natural focus for questions about their responses to the pandemic, Robson and Dahir look at other data on health spending from Statistics Canada and the Canadian Institute for Health Information. These sources suggest that government’s responses, both their COVID-specific spending and other health spending in the pandemic year, varied widely in ways that are hard to relate to the severity of COVID in different provinces and territories. Robson and Dahir argue that legislators should demand more timely and complete information from their own governments, rather than needing to resort to other sources of information that are less timely, and less useful for holding governments to account.
A crisis as severe and with such major fiscal consequences as COVID confronted Canada’s senior governments with a test of their transparency and accountability – a test most of them did not pass, say the authors. COVID’s impact upped the stakes for Canada’s senior governments, in general, and in the event of future crises. “The pandemic prompted increases in expenses that will persist for years and increases in debt that will persist for decades,” they conclude. “Legislators and voters should demand more timely and complete fiscal plans, and better accounting for success or failure in achieving them, in the future.”
William B.P. Robson is Chief Executive Officer, C.D. Howe Institute.
Nicholas Dahir is a Research Assistant at the C.D. Howe Institute.