William Gladstone, a four-time U.K. prime minister, warned in 1891 that if “the House of Commons by any responsibility loses the power of the control of public money, depend on it, your very liberty will be worth little in comparison.” Today in Canada, Members of Parliament, the Parliamentary Budget Office and the media have all flagged important gaps in the federal government’s fiscal transparency.
Those gaps limit the capacity of parliamentarians and citizens to assess the large fiscal supports for households and businesses during the pandemic.
The fiscal supports will continue in 2021, and there’s a need for timely assessment of how much the government is spending, where, and on what, as conditions in the economy evolve with the spread of the virus. We need to learn, from monthly administrative and economic data, how to adjust programs to best support vulnerable populations and industries.
All of this signals the urgent need for a fiscal transparency reset.
Trudeau government won’t say who got billions of dollars in aid
Increased transparency strengthens analysis, debate and accountability. According to OECD best practices on budgetary governance, not only do Parliaments play a key role in authorizing budgetary decisions and holding the government to account, they should “provide for an inclusive, participative and realistic debate on budgetary choices by offering opportunities for the parliament and its committees to engage with the budget process at all key stages of the budget cycle, both ex ante and ex post.”
This engagement isn’t happening properly in Canada right now.
According to the 2020 Fall Economic Statement (FES), program spending will increase to $642 billion in 2020-21 from $363 billion in 2019-20. This increase in spending includes an estimated $275 billion in pandemic-related fiscal supports. While much of the estimated increase reflects outlays related to two large programs – the Canadian Emergency Response Benefit for households, and the Canadian Emergency Wage Subsidy for business – there are more than 90 programs in the COVID-19 economic response strategy.
This increased spending necessitates improved transparency – not less. However, the government isn’t making it easy to follow where all that money is going and who benefits.
The Big Spend
Information provided by the government comes largely via three channels – fiscal updates (July and November); finance fiscal monitors (the latest is for September); and myriad departmental reports scattered across government departments.
The fiscal updates focus on forward-looking estimates for spending. There is limited disaggregated administrative data related to people, sectors and regions, and virtually no data and analysis on the monthly flow of supports.
The missing information is critical for elected representatives trying to explain spending to constituents.
Fiscal update unveils more relief, stimulus spending, record deficit
Despite the massive increases in government expenditures during the pandemic, the latest fiscal updates have been business-as-usual, except the documents are larger. The July and November updates were 170 and 220 pages respectively, and the important macro-fiscal information remains largely buried in the annexes with the debt management strategy. There is uncertainty-analysis with respect to the evolution of the virus (which is good), but no alternative scenarios for changes in interest rates (which is bad).
The government is controlling the messaging around its spending, while failing to provide the information necessary for the public to evaluate it.
Try figuring out the program-by-program spending increases associated with announcements before the November update versus new announcements, for example. The money trail is easily lost. The documents are essentially unreadable for the majority of citizens.
To use a phrase developed by Professor Balkin of Yale University, these documents promote “simulated transparency.” They obfuscate by requiring enormous amounts of time and attention to determine what is critical – how much is going to whom, and what the impact is.
The fiscal monitors and the myriad program reports released by government departments should provide critical and timely information on the flow of money. Statistics Canada uses this information, largely provided from monthly balance sheets collected by the Receiver General, to estimate the output and income impacts, with breakdowns for households and businesses. In the current crisis, the problem with the fiscal monitor is that the data on spending flows is aggregated and late (the most recent information is for September).
The political messaging in the federal economic update | At Issue
Besides the fact that it’s dated, there are two key challenges with the government’s release of program administrative data. One, good luck finding it. It is not easily accessible and there is no one-stop shopping.
Two, there are gaps.
Try to find basic things, such as the average number of times a unique applicant sought support at the provincial and national level; and/or the average period a unique applicant received funds at the provincial and national level; and/or the average dollar value of benefits an applicant received at the provincial and national level.
The format of the information is not friendly. Wage subsidy (CEWS) statistics are published as a series of tables in PDF and CSV format. Income support (CERB) applicants’ statistics are published as a table only on the department of Employment and Social Development Canada’s website, and payment information (dollar values) is available only as an Excel file.
THE BIG SPEND
With respect to timely administrative data, the United States, United Kingdom, and Australia are providing analysis. The U.K. and Australia publish detailed monthly reports explaining their statistics. New Zealand publishes visual representations of the statistics and a separate data file every month. The U.S. has created several interactive and very detailed dashboards explaining information on all government benefits in one location.
Canada does none of this.
If other countries can provide COVID-19 spending information with transparency, analysis, and accessibility, surely Canada can do so as well.
- Total number of applications
- Total number of applications that were approved and received funds
- Total amount paid (dollar value)
- Total number of unique applicants
- Average number of times a unique applicant applied
- Average period a unique applicant received funds
- Average dollar value an applicant received
This information should be provided for each benefit at the national and provincial level, with the ability to examine the information further by industry, age group, and gender.
The total number of applications that received funds, the total number of unique applicants, and the total amount paid should also be displayed as a percentage of the labour force at a national and provincial level.
The provincial totals and percentages should be displayed with a map of the country, so the public can easily see where the funds are needed the most ̶ as indicated by a higher percentage of the labour force applying for benefits ̶ and where the funds are going.
All the data should be updated on a monthly basis, allowing for a maximum two-month lag, which is standard across most countries providing similar reports.
An explanation of the meaning and impact of the statistics included in this COVID-19 benefit dashboard would also make the data presented more meaningful to people who are unfamiliar with statistics. And in addition to the dashboard, all information published should also be available as a raw data file to facilitate analysis by the public.
Chrystia Freeland on how pandemic supports will be financed
Finally, Canada needs to make our federal budgets more readable.
The current format is unwieldy, and the Finance Department has simply made the document thicker in response to increased expenditures. Budgets should look like fiscal plans, but the current versions look like policy communication documents. Canada should consider a separate citizen budget document, as is advocated by organizations like the International Budget Partnership.
The federal government is doing a poor job of fiscal transparency, and this affects all Canadians. Improvements need to be made quickly, and carried forward as the government considers additional spending to support the economic recovery.
There are costs to trust when citizens cannot read and understand their federal budgets. Budget 2021 should take a major step forward in terms of a fiscal transparency reset.