According to the Overview of Government Spending by Function, 2021/2022, total government expenditures on economic affairs decreased by 32.7% this year across municipal, provincial and federal governments. However, a True North exclusive uncovered concerns with the document's accuracy.
"These numbers are significantly skewed by the winding down of pandemic support programs and payments across the federal and provincial governments," said Carleton University Sprott School of Business associate professor Ian Lee. "If you examine total government spending in 2019 and compare it to 2021/22, government spending is much higher than pre-pandemic."
The report also claimed that governments spent 14.8% less on defence or $482 per capita this year, compared to $566 per capita in spending, reported last fiscal year. Social protection expenditures also declined per capita by 20.3% from $8,474 per capita to $6,755 per capita, whereas spending increased most in general public services (+8.3%), public order and safety (+5.6%), health (+5.1%), and housing and community amenities (+4.1%) per capita.
However, the Fraser Institute uncovered in August that total federal spending was 27% higher this year than in 2019/20 — an average annual increase of 9%.
The COVID-19 pandemic expenditures partly increased federal spending by 73% to $644.2 billion in 2020/21 before declining by 21% to an estimated $508 billion in 2021/22. However, much of the uptick in federal spending remained independent of the pandemic, "representing a permanent long-term ramping up of federal expenditure," according to the Fraser Institute.
As a result, between 2019/20 and 2020/21, the federal deficit-to-GDP ratio — an indicator of a jurisdiction's ability to pay its debt — went from -1.8 % to -13.2%, while its net debt-to-GDP ratio rose from 33% in 2018/19 to nearly 50% by 2021/22.
"In summary, while spending is declining in 2022 as the pandemic ends, total government spending across the board has increased dramatically since the year before the pandemic," added Lee.
At the provincial level, government spending rose 9.2% in 2020/21 to an expected $504.4 billion, primarily to minimize per-capita case counts of COVID-19. Spending rose another 5.6% to $532.9 billion the following fiscal year.
Consequently, the collective deficit-to-GDP ratio of the provinces went from -0.8% to -1.9%, while the collective provincial debt-to-GDP ratio went from 29% to approximately 31%.
Federal Conservative leader Pierre Poilievre lambasted Ottawa for "uncontrolled spending," which he attributes to the country's inflation crisis.
In September, economists warned that hefty federal spending passes the buck to consumers down the road, worsening inflation.
BMO senior economist Robert Kavcic said:
We're not going to deny that there are households seriously in need of help right now in this inflationary environment. But, from a policy perspective, we all know that sending out money as an inflation-support measure is inherently inflationary.
On Monday, Poilievre tweeted a video of Bank of Canada governor Tiff Macklem admitting lesser inflation had the federal government cut pandemic stimulus sooner. "The Liberals' uncontrolled spending with borrowed and printed cash led to the inflation and higher prices we have today. Even the Bank of Canada agrees."
Macklem told the House of Commons finance committee last week that he believed the federal government should have eased off on stimulus much sooner. "If we knew everything a year ago that we knew today, yes, I think we should have started tightening interest rates sooner to withdraw the stimulus," he said, citing less stimulus spending would have lessened the inflation uptick.
Macklem cautioned the finance committee that policies aimed at mitigating the effects of inflation on citizens need to "target the most vulnerable" and be "temporary."
According to ATB Financial Deputy Chief Economist Rob Roach, consumers face higher rent costs, groceries and utilities, and are still in for a tough year. The forecast said that despite inflation falling in October to 6.9% from its 8.1% peak in June, residents should expect the cost of living to remain an issue.