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The Politics of Money, a new podcast from the Institute of Fiscal Studies and Democracy, explores how public finance, politics, and institutions shape the world we live in.
Hosted by IFSD's Sahir Khan and Kevin Page, Canada’s first Parliamentary Budget Officer, our podcast blends deep subject-matter expertise with accessible conversation.
A trusted place where listeners can follow the money – and learn the real stories behind Canada’s big policy choices.
All right, welcome to the Politics of Money, the official podcast of the IFSD.
So I'm here with Kevin Page, Canada's first Parliamentary Budget Officer and CEO of IFSD.
Good to be with you.
Thanks as always.
Thanks for traveling so far because your office is right next door to this boardroom.
So it's a good try.
A lot of talk this time of year, Kevin.
We have Main Estimates coming out, departments put out their spending plans, and we get
into this situation every single year that
people are worried about what do we compare this to?
We just had a budget in November, arguably a good thing to have a budget ahead of Main
Estimates.
But the numbers don't line up and I think there's a lot of confusion as to why they don't
line up.
I thought maybe we could take a few minutes to talk about how our system works and even if
something says it is a government spending plan, it might not be the spending plan you're
thinking of
and why sometimes it's like comparing apples and oranges.
Okay, you're right.
We get to this moment every year and it seems like this year makes it seems more somewhat
consequential because there's a lot of spending in budget
2025 and the people are interested in the reallocation part.
Like how are we going to the spending cuts?
Government said they could find $30 billion or so over the next five years and they could
reallocate this to other spending.
particularly national defense.
So everybody's combing through these departmental spending documents and they're getting
confused.
We have these parallel systems.
We have a budget system, which people are familiar with.
And we saw budget 2025 and there's accounting principles behind that budget.
Parliament approves the strategy.
It's a big media moment.
There's lockups and there's all kinds of.
media coverage on this system.
And I think it's the system that people are most familiar with.
And then we have this other parallel system, right?
Which is some people refer to it as the Estimates, Main Estimates, Supplementary
Estimates.
And it's a system that runs alongside the budget, you know, that also leads to
departmental spending plans and performance reports uh done on a different accounting
system, done on a certain section of spending,
And it's critical.
Really, it's really critical to our system.
But it's really hard to do the crosswalk between the Estimate system and the budget
system.
And what we found, particularly last week, with the release of departmental spending
plans, people were looking at reference levels.
People are confused.
They can't do the crosswalk.
And it's interesting that we worked on the Estimates process at Treasury Board.
We worked on budgets, which is the fiscal plan.
And then we were in Parliament helping parliamentarians decipher all of those plus the
Estimates.
And it was hard.
And in some ways, we have a training program where we help public servants kind of trace a
budget measure from the budget document through Estimates to Public Accounts.
And Kevin, correct me if I'm wrong, more often than not, we can't see it.
Right.
Right.
And maybe we could talk about that every one of these involves maybe a different type of
decision.
Right.
Like you talk about the budget.
Which really means that the prime minister and the finance minister have okayed a fiscal
plan and Cabinet's blessed it.
And so it really represents a really critical decision gate that's political in nature,
right?
And the words give you all kinds of political guidance as to what their priorities are.
But it's a plan and I think we – it's not no one can spend money on a plan, right?
And so what happens next, Kevin?
um Why can't a department just read something in the budget and go spend it?
Yeah, so just on the budget, and before we start talking about the departments, on the
budget itself, again, it's a critical, it is the critical financial document of the
government.
It is a plan, five-year plan, tends to be five-year plan.
Definitely the media, citizens, Parliament are very focused on it.
The bond rating agencies are very focused on it.
They do fiscal analysis based on these spending plans.
Then there's this other parallel system, which is,
Departments don't get to spend money unless they get the approvals from Parliament to
spend the money.
So this system of the Estimates, department by department, a different accounting system
for every department.
Obviously a lot of focus on DND.
What is their operational budget?
There's a vote for operations.
What is their capital budget?
There's a vote ah on a cash basis for the capital budget.
What are the transfers, grants, and contributions?
This parallel system is a system that Parliament actually, they approve these voted
appropriations.
So again, there's a difference between statutes and voted appropriations.
Statutes, old age security, the Canada Health Transfer, they're approved by legislation
that's separate, there's the statutory authorities, but these voted appropriations, which
is a big chunk of overall spending,
more than $200 billion or $550 billion every year is voted appropriations.
it's the process that we work through Parliament to approve these actual authorities.
And it's not just one bill, right?
So there'll be Main Estimates.
And in this system, we're hoping that a large number of those budget measures make it in,
but they don't necessarily make it in.
Because there's one step they have to do before they get there.
They all have to go to the Treasury Board.
So they got to get their internal spending authority to make sure that the
program structures, performance frameworks source of funds are all confirmed before we
even breathe life into that budget.
So departments, when they're putting out the departmental spending plan, that's the stuff
for which they have authority.
So they put a three-year reference level forecast, for example.
But they're only writing down in that what they already have authorities for.
So say, Kevin, a program sunset last year, and it's on track to get renewed or
put together with another program or cut absolutely If that wasn't done prior to Main
Estimates being tabled, it's not gonna show up, right?
Yeah, that's a really good way of explaining the confusion around this crosswalk between
the Estimate system and the budget.
Typically, with a voted appropriation, lot of these programs, it's almost by default that
they'll be, we'll give you a five year, you know,
period of time to run a certain program, could be a training program as an example,
they'll get a five-year authority from Cabinet, So the department knows that they have
five years to manage a certain, say a training program.
But they don't have, until they go back to Treasury Board, won't get, they don't have
assurances that the executive will approve that authority beyond the five years.
But from a budget perspective, the people at Department of Finance, where I worked, we'll
just assume that they'll get that extension will exist, that we'll continue on that
training program.
But from a department, a person in department could be the human resources department,
could be a training program.
That five years, that ends for them.
They don't have the authority from Treasury, so they won't put it in the department to
plan.
So yeah, right,
it's an example of an area where we see departmental authorities really drop off in these
plans because the department doesn't have the executive authority to kind of assume that
that sunsetter will continue.
Parliament, what they're looking at is this, they're going to get this annual voted
appropriation. The departmental spending plans are there to create the
context. But the annual appropriations on these voted appropriations, it's a one
year. So, again, the department can't
unless they have that annual voted appropriation.
And we also have kind of almost the opposite problem too.
Like we have a client of ours called and said, hey, the program that they're really
focused on wasn't in the budget.
And our point was, well, you our budget is typically, it's made up of two parts, the
incremental new measures and the fiscal plan includes all the stuff that was previously
approved by Cabinet all the way back to confederation.
And so we look at the Main Estimates, that's not just an incremental spending, that's all
the spending that's rolling over.
And sometimes for our students, we talk about, you know, we're at the University of
Ottawa, the Rideau Canal, we can see that outside our window.
And we say, that's been appropriated since before Confederation.
It rolls over.
You're not gonna see it in a federal budget to set the "X" allocation for the Rideau Canal
unless it's new money.
They're a UNESCO World Heritage Site, they gotta fix it up, because the UN says you have
to keep it at certain level.
That might show up in a budget, but the money that's rolling over year over year, that's
gonna show up in the Estimates.
So if you're looking in the wrong document for something, it's possible that you'll miss
it.
You'll miss it and it could be there, or you'll see and it's really subject to other
decisions that have not yet been taken.
So, Kevin, how do we know where all these systems kind of come together?
Like, how do you get a picture?
You're a Canadian, you're a taxpayer, you're the bond-rating agencies.
How do you know where Canada, at the end of the day, sits when you've got a cash-based
appropriation system and accrual accounting-based fiscal system, and we're trying to
figure out, all right, so what was the deficit?
Where do we go for this?
Well, it does come together in something called the Public Accounts.
And you see the systems kind of coming together in terms of there's volume one provides a
sort of big picture of accounting universes, overall spending, you know, links it back to
the budget.
In volumes two, three and four, you're getting breakdowns by department.
And so even when you go to the departmental breakdown, you can start to see, you know,
how, you know, we, we, we moved to a common accounting system and you can see the links
between, you know, on an operating or capital transfer kind of basis.
You see the adjustments for, for the accrual.
So it all, it comes together, but it comes together very late in the game, right?
Which is very confusing right now.
Cause you know, we have.
Parliament and media kind of combing through departmental plans and saying I'm confused as
hell.
So Kevin, you one of the things I remember when we were leaving for the Parliamentary
Budget Office, we a nice coffee, the Deputy Minister of Finance threw for us and kind of
was teasing us that we were going from a place at the Privy Council Office that arguably
had the most information in government to Parliament that has some of the least
information in government and I think what you're referring to is that the view that
Parliament gets and that Canadian gets very often is from these Estimate documents.
So, we talked about that they're in a different accounting language.
Why do we have our budget done in accrual accounting, which recognizes like, you you
capitalize expenses.
If you buy a tank and you think it's going to last 15 years, you record one-fifteenth of
that every year.
That's an example of how we treat capital under accrual.
But if you pay cash for the tank, Estimates record that cash amount.
And so this means that, you know, the financial reporting is a little bit different
between an accrual system
and a cash-based appropriation system.
Then we get back to Public Accounts, which goes back to an accrual system and presents it
in kind of two ways, the chart of accounts and a program activities approach.
Maybe talk about why that is and why we have those two views now in Public Accounts.
In terms of accounting standards, is,
you know, a standard for budgets to be presented on an accrual basis.
We want to see real capital budgeting.
I remember when you joined the government 20-plus years ago, one of the things you really
did was really like push capital budgeting across different departments and use that kind
of approach.
I remember when you costed fighter planes, how you, like you were educating people that,
you know, around life cycles and around, you know, depreciation, you costed a war.
I remember you talked about depreciation in a theater of war.
So these,
These concepts of how to manage finances in an appropriate way really play out across
departments on very specific issues that are very important.
But we maintain both systems all the time.
Accrual and cash, because ultimately when we're putting together a borrowing plan and
we're going to Canadians or foreigners and say, OK, we want you to buy our Treasury Bills
or government bonds.
that you need to know what the financial requirements of the government, you need a cash
balance.
more of a mystery why the Estimate systems, devoted appropriations, operating capital
transfers, where we pretty much we stick to this sort of cash basis.
I think we don't have to stick to a cash basis.
We could think of reforms in the future that can maintain both systems.
but actually start to bring more alignment between what we call the Estimate system, the
system we use to get approvals from Parliament.
With the planning system, as you alluded to, the budget.
So, but we could make these adjustments on the Estimate side.
We've chosen not to.
We're going to see defense budgets now really rise dramatically.
The cash is going to become very important.
Because we're going to be enormous borrowing requirements are going to be developed in the
short term because of military procurement amongst other things.
And it's good for Parliament to be mindful of the cash.
But yeah, we're running parallel systems.
But as you say, the Public Accounts, the accrual and the cash system kind of comes
together.
We get the presentation of budgetary surpluses or deficits on accrual
We get the same in terms of the accumulation of deficits, the size of the debt.
So I would argue that, you
It's natural if people maybe mix apples and oranges.
I think the only reason we have a system maybe that's this complicated is that's provided
employment for you and me for the last 20 years, right?
Like that's if it was straightforward.
Probably for the next 20 years.
Yeah.
Because there seems to be no impetus to reform the system.
So let's talk about that.
You know, the prime minister shifted the budget to November.
And I know we did an open letter to whoever is going to win the next election that, you
know, please maybe make this stuff a little more straightforward because other countries
don't have
separate, you know, incremental budgets and appropriations.
They kind of present like companies do The Budget, right?
Base and increment together all goes to the legislature to get approved together.
And moving it to November means, you know, they have a chance to get through Treasury
Board and get more things in Main Estimates and make Main Estimates way more meaningful.
So really positive step, but maybe we could talk about so what would a government do now
to maybe go a step further?
And regardless of who's prime minister, which party's in power, if you care about
Parliament being empowered to hold governments accountable, if you want citizens to
understand how money's being spent.
What are ways we can do to maybe simplify this so that you don't need a secret decoder
ring to kind of go from budget to Estimates to Public Accounts?
Because I think that's where we're at right now.
Well, I recall that when you and I, and our colleague, Mostafa Askari here at IFSD, we
went in front of the Operations and Estimates Committee.
I think it was chaired at that time by Pat Martin, of the NDP.
The NDP were the Official Opposition and we said the system is broken.
People are so confused and they can't do these crosswalks.
And I think that, know, so the pressure seems to build every five or 10 years.
I think we're actually in another moment right now where like we saw as you've alluded to
the prime minister saying, I'm moving the timing of the budget.
I'm changing the financial cycle.
I think we got, now, to have a fall budget is a really good idea.
I think it's time now where we can bring this appropriations system, the supply of
authority system, merge it almost with the budget system.
So when people see departmental plans, know, DND or Veterans or Agriculture or Fisheries
and Oceans, they could eventually, like we could see that align, nicely align up.
So the departmental plans, three or five years, should probably be five years.
It all rolls up.
So we can, the budget and these departmental planning systems would actually be the very
same.
gotta be hard for people in the House of Commons when they're voting on an operating vote
for a department or a capital vote or a transfer vote.
They need to understand, how does this link directly to the plan?
Because they want to hold the government accountable to the plan.
So I think there's pressure on the government, particularly now when they're talking about
massive reallocation, you know, going towards, you know, Department of National Defense,
going towards capital investment and trying to get to something called an operating
balance in three years.
Let's actually over the next number of months put together, you know, departmental
spending plans that are actually consistent with the budget.
You know, put the pressure on the government now.
And I think the first step was there, know, fall budget.
And I think now the pressure
is there's an opportunity to create departmental plans that are consistent with the
budget.
We've seen that happen in some past budgets with pressure from Parliamentarians.
I want to see the spending plans by department that are consistent, but we didn't get that
in last budget.
And so maybe I'll pick up on one point that maybe gave rise to some of the issues that we
saw in the media, which is there were cuts announced, right?
Like this was a significant reallocation budget, the likes of which we really haven't
seen.
in our careers.
We've seen fiscally driven cuts, we've seen things that may be more motivated by
priorities.
Rarely have we seen this kind of reallocation.
So you can sense why the system might look at this and see a department being reduced and
react, right?
And if a document says the government spending plan, in a way, what else would you
believe?
But I want to talk about the fact that we were on a spending track that one could argue
was starting to drift towards the
less sustainable level under the kind of the previous, the Trudeau government.
And with the kind of the hinge moment, the need to kind of defend Canada's sovereignty, to
spend on defense, a reallocation was necessary, right?
And so I think while there's a natural reflex to think about, well, there are cuts, there
also need to be cuts.
And so maybe we could talk about,
Kevin, you've been at this since, you know, before program review and
and been involved in designing, implementing, overseeing these reviews since the late 80s.
Let's talk about the necessity.
Why do we need an operating budget balance?
And what does that mean for the way the government operates and the way it spends money?
Yeah, so we are running in budget 2025, the government basically said that they were
prepared to run deficits that were
relatively high relative to kind of normal circumstances in the two to two and a half
percent range size of GDP, you know, over the next number of years.
But over the next three years, they said like this, we get to three years out if we get
consistent with a certain planning environment, they did not want to be deficit financing,
operational type spending, spending that will be consumed in a given year spending like,
know, transfers to persons or other transfers to governments.
They wanted basically only to be deficit financing capital.
So that's their fiscal target, their fiscal role.
Which is fine.
And we've seen that other countries have employed these sorts of fiscal targets and fiscal
rules.
And I think in the context of this hinge moment that you referred to, this pressure to get
to a NATO target of three and a half to five percentage points of GDP, depending on your
measurement.
The need to kind of diversify trade in a very different way.
Because of an eruption of relationship with the United States.
Also the need to actually make sure that Canada is taking advantage of these potential
opportunities with these new technologies, AI, biotechnology, clean tech, et cetera.
So the public sector still it needs to be constrained.
We're a AAA country, as you say, we're sustainable, but the level of debt relative to GDP
is at a higher level, but still sustainable.
So I think there is the pressure on the government to do this sort of reallocation, right?
So that it's not always, you know, we're going to move to a more balanced framework in a
three-year time, operating balance in three-year time.
Deficits, but only for capital investment as defined in the budget.
I think like, I think that my sense is the markets are, they're comfortable with that.
Like general OECD, IMF were relatively positive on the Carney, the fiscal plan.
But there's going to be real pressure in terms of a very slow economy to actually
constrain spending in a certain way.
There needs to be focus on spending restraint.
So it's not a good thing when you have departmental plans that are creating just
confusion.
We've got to get to a better place.
And the pressure's got to be for this government to release departmental spending plans
that are consistent with the budget so we can monitor these spending reductions.
And you're right, we need to have restraint.
And the restraint's going to go beyond just reductions in the size of the civil service.
There's going to have to be
restraint on a lot of these voted appropriations.
And wouldn't have been a good practice to start to see the plan for reductions by the time
you get to Main Estimates, right?
Like you do want to have Parliament in on where the cuts are happening, right?
Like that is a, if Parliament's going to hold government account, it's not just on what it
spends, but also the choices that it makes on where not to spend?
Yeah.
And we want media to be, you know, be able to understand these documents and not be
confused.
We want members of Parliament so when they're actually doing their voting on
appropriations, it could be on, again, whether it's operating or capital or some transfer,
they need to know what's actually in it.
And to hold the government to account, they need to know how it relates to the overall
planning framework.
So we're not in a good place right now.
The system is still broken.
We keep kicking the can down the road.
We've tried these different reviews.
I think the prime minister made the move to get the budget in a better place in terms of
the financial cycle.
Now let's put pressure on the Treasury Department or Treasury Board Secretary, the Finance
Department, and the line departments to actually marry those two systems, vote
appropriations to get authorities by Parliament to move forward.
And the sort of broader planning system.
And you're right, you and I have done work in different parts of world, including Jamaica.
When they present a budget, it's an integrated budget.
You could add and subtract, you can
add it up from a departmental perspective, or you can, you know, kind of look at the top
down perspective we get in our budget, the transfers to persons, other levels of
government, etc.
But the planning and the appropriation system, it's really, it looks like it's one
integrated piece.
Ours is not integrated.
When we have this kind of rupture and, and, and global order starting to breakdown, the
money, we talk about the money of politics, being able to explain the money gets to be
really important because we need to build confidence.
in the legislature with Canadians.
It's tough when the documents don't tell you what you need them to say.
And so, you you'll get reporting that might start to look a little offside with how things
actually operate.
But by the same token, you know, we probably need more dialogue.
We need better dialogue when we're dealing with a crisis that's now persisting.
And I think at the election, there was a sense that, well, maybe the rupture with the US
was temporary and we get back to normal, but it's not.
And I think when we were evaluating platforms,
You know, we took some criticism because we thought this was now going to be a longer term
feature.
And I think we are now going to have to get the public service to start thinking about,
how do we organize to have better dialogue with Parliament, Because we're now making more
fundamental, bigger decisions.
We had a 10-year span where there was money and a lot of transfers and wealth transfer in
particular and spending after a 30-year period where we had 12 to 13 % of GDP and
spending, we jumped around 16.
And we were so sustainable, but all of that pre- rupture, pre- hinge moment.
And so as we make the shift, the country has to make the shift.
And I don't know if our systems are have caught up, right?
They have not caught up.
Yeah, the systems have not caught up.
And you're right.
For those big, you know, those big tectonic plates that you talked about that are shifting
right now, we need to bring these systems together so that, you know, the Parliament media
and Canadians they know
basically how finances are being managed.
I think what we Sahir last week was a moment of confusion around media kind of moving out
and saying taking these departmental plans and trying to link two very different
accounting systems.
A system built on appropriations, and a planning/budget system.
And that is not a good thing.
That will lead to an erosion of trust.
um I think the time has come that we need to address this issue of our financial system
because they don't understand it.
They can't do the crosswalk between these appropriation systems and the budget.
We need to integrate these two systems and address this kind of trust deficit.
So we can accept that there's confusion, but we shouldn't accept that we can't do better.
When you have this much uncertainty or confusion around these different systems, in the
context of that rupture or hinge moment you talk about, it's a bad dynamic.
So yeah, we need to get to a better place.
And we can.
You and I worked in these central agencies.
We've been in front of committees, the Pat Martin Committee of Operations and Estimates,
probably 15 years ago, talking about how to redesign the system to totally integrate them.
Consistent accounting, different ways to vote, right?
Not on operating capital transfer vote, but actually voting on big programs that people
can really understand.
So, yeah, this like if we need common sense and we need to reduce the amount of
uncertainty.
It's interesting that, you know, the move that the prime minister made in to move the
budget to November, there are plenty of people say, that couldn't be done.
you know what?
Once the prime minister says it can be done, it will be done.
Okay.
So if the prime minister says now, like come the fall,
you know, and I don't think they could do it for the spring update, but come the fall or
budget 2026, we're going to present an integrated planning picture.
I think he could do it.
And I think the message from him, that would be powerful.
I'm sure the bureaucrats can get behind it.
And Parliament would get behind it too.
Right.
And we'll be less employable because the system will no longer require the secret decoder
rings that we've acquired.
But we'll find other things to do.
We will definitely.
think landscaping is Kevin's always suggested.
Thanks for listening.
This is a complicated topic.
I don't think we simplified it, but hopefully we've explained why there's this confusion.
It happens regularly.
And it's about a system and processes that are complex and like appropriations, they're
ancient.
This is all the way back to Runnymede and Magna Carta.
And there are processes where the Commons has to give authority to the government, to the
King, to spend money.
That's in the Constitution.
The budget's not in the Constitution.
So these are serious processes that require serious attention.
Can we fix it?
For somebody, a prime minister, a finance minister, a president of the Treasury Board to
say, we are going to fix this stuff, that would be such a positive legacy going forward
for future parliaments and Canadians.
And we need it now.
There you have it.
It's doable.
Let's hope that make it happen Thanks for watching.
Thanks for listening