Parliamentary Budget Officer Yves Giroux waits to appear before the Commons Finance committee on Parliament Hill in Ottawa on March 10, 2020. Parliament’s spending watchdog says the estimated federal deficit for the year has likely risen to about $260 billion with new spending measures rolled out in recent weeks. Budget officer Yves Giroux made the comment during an appearance before a Senate committee, which will hear from Bank of Canada governor Stephen Poloz later today. THE CANADIAN PRESS/Adrian Wyld

Parliamentary Budget Officer Yves Giroux waits to appear before the Commons Finance committee on Parliament Hill in Ottawa on March 10, 2020. Parliament’s spending watchdog says the estimated federal deficit for the year has likely risen to about $260 billion with new spending measures rolled out in recent weeks. Budget officer Yves Giroux made the comment during an appearance before a Senate committee, which will hear from Bank of Canada governor Stephen Poloz later today. THE CANADIAN PRESS/Adrian Wyld

Federal deficit likely now at $260 billion due to COVID-19, PBO says

Coronavirus programs have added on costs to Canada’s budget

Parliament’s spending watchdog says the estimated deficit for the year has likely risen to about $260 billion, leaving the government with little fiscal firepower to stimulate an economic rebound.

Budget officer Yves Giroux previously estimated the federal deficit at $252.1 billion this fiscal year on account of a sharp increase in spending on emergency aid and a subsequent drop in economic activity related to the COVID-19 pandemic.

Speaking to the Senate finance committee Tuesday, Giroux said the government has added about $7.6 billion in spending since his last report, pushing the potential deficit ever deeper.

Giroux said that level of spending isn’t sustainable for more than a few years. He said emergency aid would have to eventually sunset “otherwise we’ll be looking at a level of taxation that’s not been seen for generations in this country.”

Federal finances could be helped by an economic recovery that would lower the deficit, which Giroux said is feasible alongside balanced, or close to balanced, budgets.

But to get the economy to lift-off speed, as Giroux has said, will require stimulus spending because of the number of businesses already saying they won’t survive the pandemic.

“It’s quite clear right now that there will be some need for stimulus measures. We just don’t know their magnitude, their scope and which sectors … will need more particular assistance,” Giroux told the committee.

Spending would have to be very targeted because, he said, ”there’s not that much firepower left without incurring significant, structural deficits.”

Federal spending to date has topped $151.7 billion, with $40.33 billion going to 8.21 million people through the Canada Emergency Response Benefit. There is $5.7 billion more flowing through a wage subsidy program, according to the most recent figures posted online.

The federal New Democrats have used the $2,000-a-month CERB as an example of why the country should move to a basic income program. Bank of Canada governor Stephen Poloz in a recent interview suggested a CERB-like measure could help the country more easily respond to economic shocks in the future, particularly with little room for the bank’s monetary policy to help.

“If there’s a lesson to be learned, it is that some of the elasticity of those fiscal policies is very attractive,” Poloz told the same committee Tuesday, “like an automatic fiscal stabilizer that could be relied upon in future episodes that would be worth developing more deeply.”

Giroux said a basic income program — generally a no-strings-attached transfer to citizens, often in lieu of myriad targeted benefits — could have lessened the need for the CERB, though not the wage subsidy.

The last time the PBO looked at basic income, it estimated the federal cost at between $76 billion and $86 billion annually.

Giroux said his office will provide an updated cost for the concept in the coming weeks. A basic income would make some federal programs redundant, leading to some savings, but Giroux said early analysis suggests the net cost to be in the billions of dollars.

The bank has not put a firm number on its economic outlook, providing a best- and worst-case scenario for the foreseeable future, citing uncertainty about the course of the pandemic.

Poloz told the committee he believes the best-case scenario is still within reach. He said pent-up demand would play into a “robust recovery,” even if some sectors like travel face financial difficulties.

Giroux said the federal government could easily provide the same kind of best- and worst-case scenarios so Canadians would have an idea about the course of federal finances. He urged the Liberals to table a fiscal update.

He added that his office will update its estimates of federal finances, including the deficit and debt, some time in June.

Jordan Press, The Canadian Press

CanadaCoronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Langley RCMP say they arrested two suspected mail thieves Tuesday morning. (Black Press Media files)
Aldergrove mail thieves caught with letters scattered in Jeep

Both suspects were violating probation orders, police say

Langley School District's board office. (Langley Advance Times files)
There are a number of locals hoping to win the Feb. 27 byelection

There are now seven candidates vying to fill the vacant seat on… Continue reading

This suspect allegedly stole a charity donation jar from a Langley store in November. (Langley RCMP/Special to the Langley RCMP)
Thief snatches charity donation jar from Langley store

The suspect is one of several Langley Mounties are searching for linked to recent thefts

Winners of the “Shop Your Heart Out” contest put on by the Downtown Langley Business Association posed for a group photo in McBurney Plaza on Tuesday, Jan. 12 (Special to Langley Advance Times)
Thank you for your support, Langley Hospital Auxiliary tells customers

Penny Pincher Thrift store was a winner in voting for ‘Shop Your Heart Out’ contest

Langley activist Dorscie Paterson celebrated her 108th birthday on Monday, Jan. 25 at the Cedar Hill long term care facility. Because of the pandemic, she remained inside, able to see, but not shake hands with visitors. (Dan Ferguson/Langley Advance Times)
VIDEO: Langley’s Dorscie Paterson celebrates her 108th birthday

Pandemic required her to remain behind a window, able to see, but not make contact with visitors

Rolling seven-day average of cases by B.C. health authority to Jan. 21. Fraser Health in purple, Vancouver Coastal red, Interior Health orange, Northern Health green and Vancouver Island blue. (B.C. Centre for Disease Control)
2nd COVID vaccine doses on hold as B.C. delivery delayed again

New COVID-19 cases slowing in Fraser Health region

A woman wearing a protective face mask to curb the spread of COVID-19 walks past a mural in Victoria, B.C., on Monday, Dec. 7, 2020. THE CANADIAN PRESS/Marissa Tiel
Five big lessons experts say Canada should learn from COVID-19:

‘What should be done to reduce the harms the next time a virus arises?’ Disease control experts answer

A Vancouver Police Department patch is seen on an officer’s uniform as she makes a phone call. THE CANADIAN PRESS/Darryl Dyck
Vancouver man calls 911 to report his own stabbing, leading to arrest: police

Officers located the suspect a few blocks away. He was holding a bloody knife.

Vernon has agreed to a goose cull to control the over-populated invasive species making a muck of area parks and beaches. (Morning Star file photo)
Okanagan city pulls the trigger on goose cull

City asking neighbours to also help control over-population of geese

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

FILE – Canadian Prime Minister Justin Trudeau delivers his opening remarks at a news conference outside Rideau cottage in Ottawa, Tuesday, January 19, 2021. THE CANADIAN PRESS/Adrian Wyld
Vaccine CEO ‘very, very clear’ that Canada’s contracts will be honoured: Trudeau

Trudeau says he spoke to Moderna CEO on the morning of Jan. 26

Ben Tyler was working on a Nicola area ranch when he disappeared. File photo
Ben Tyler was working on a Nicola area ranch when he disappeared. File photo
2 years after his riderless horse was found, police believe Merritt cowboy was killed

Two years after he went missing, Ben Tyner’s family makes video plea for information

A ground worker wearing a face mask to curb the spread of COVID-19 unloads lobsters from a WestJet Airlines flight at Vancouver International Airport, in Richmond, B.C., on Thursday, January 21, 2021. THE CANADIAN PRESS/Darryl Dyck
Trudeau teases stricter travel measures; Canadians flying to U.S. now need COVID test

Prime minister says measures need to not hurt imports and essential trade

Most Read