Federal Surplus Comes with Social Costs, Critics Say

If Canadians want to see how the federal government managed to reach a surplus for the 2014-15 fiscal year, they should think of veterans struggling with post-traumatic stress disorder and other wounds, said veterans' advocate Tom Beaver.

The Conservative government ran a surprise $1.9-billion budget surplus last year, its first since 2008. The surplus has been attributed in part to government "lapses" in spending, in which departments do not spend their full allotted budgets for the year.

Veterans like Beaver have complained a $1.1-billion lapse in spending over several years at Veterans Affairs could have been used to keep department bureaus open across the country, or to help vets who were wounded in the line of duty.

The government has also changed its lifetime pension payments for wounded soldiers to lump-sum payouts, and that has resulted in a court battle.

Beaver said news of the surplus feels like a slap in the face, and the government shouldn't lapse spending in needed departments. "The [Conservatives] could have had more money if they didn't spend thousands fighting veterans in the courts," he said sarcastically.

Beaver said he knows the money didn't only come from veterans, but from Canadians in general.

On Monday, the Ottawa Citizen reported the government underspent by $8.7 billion in total across government departments last year.

Lapses increased since 2008: CCPA

David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, said there's nothing new about spending lapses, but their frequency has increased since the 2008 financial crisis and ensuing stimulus.

He said during the early 2000s, about seven per cent of government department budgets would lapse, but last fiscal year that number was around nine per cent and has gone as high as 10 per cent.

There are many reasons why government money could go unspent, such as cautious managers worried about running out of payroll funds, he said.

But another issue has been money set aside that is hard to access, such as infrastructure funding reserved for municipalities to fund public-private partnerships.

Macdonald said those funds can be overly complicated to apply for, so municipalities don't bother, leaving a pile of money to go back to the treasury.

That causes problems for the public interest, he said.

"It's going to delay implementation of programs," Macdonald said. "That infrastructure project with money sitting there ready to go, it's tied up in a process that doesn't allow it to get out."

National Defence, Aboriginal Affairs and Veterans Affairs all saw spending lapses last year, he said.

In the meantime, economic growth leading to employment and other benefits are delayed, he added.

That goes against the claim made by Tory MPs in Parliament that their spending lapses represent fiscal prudence, Macdonald said.

"Parliament votes for the money to be spent that they think is going to be spent. To not spend that money by delaying projects or making it harder for cities to access money that's sitting there doesn't make a lot of fiscal sense," he said.

"[The government] shouldn't delay particular projects or wrap them up in bureaucratic red tape in order to delay them so there's a possibility down the road they can say, 'Look, there's all this extra money.'"

Small surplus not the issue: Stanford

According to Unifor economist Jim Stanford, a surplus or deficit of such a small magnitude shouldn't be an election issue anyway.

Stanford said the real issue is why the Conservatives have kept Canada walking a tightrope of recessions and deficits for most of their time in office.

During that time, the country's employment rate has never managed to reach levels prior to the 2008 recession, he has argued in the past.

Now, Stanford said, the government's focus on austerity is making matters worse for the outlook of job creation.

"It's certainly true the spending cutbacks have worsened the situation and in that regards contributed to the recession," he said. "There's no doubt that government austerity made the economy much weaker, and thereby allowed the low oil price to tip the whole economy into negative territory."