Management of the Fiscal Framework June 2016

Managing the Fiscal Framework All about fiscal planning / budgeting Projecting total revenues, expenses and the budgetary balance of the Government Setting a fiscal policy rule or objective Working with the Government to ensure that the fiscal plan is achieved in concert with its other priorities and objectives 2 Will walk you through the steps – in general within context of Budget 2016

The Budget The key annual policy document Vehicle to implement Government priorities Sets out economic and fiscal forecast (2-5 years) 3

Managing the Fiscal Framework 4 Cabinet Retreat – Broad Policy Objectives Fall Update – Baseline Fiscal Projections Soliciting Budget Proposals Budget Decisions and Final Fiscal Projections Budget Tabled Spending-Tax Authority Program Implementation Late Summer Fall- Winter (Oct-Dec) Winter (Jan-Feb) Winter (Feb-Mar) Spring (April-June)

Government reviews existing priorities  Election Commitments, SFT, Emerging Pressures  Minister of Finance reviews economic and fiscal developments since Budget Cabinet Retreat  Cabinet begins shaping the Budget in light of the economic and political climate, reports on public issues and concerns  Provides central agencies and departments with broad direction to guide them with budget preparations 5 Budget Preparation (Summer)

5-year Update of Economic and Fiscal Projections  Discusses risks associated with economic and fiscal projections  Sets framework for consultations with stakeholders Ministers send Budget letters to Minister of Finance Public Consultations  House of Commons Standing Committee on Finance  Minister of Finance public consultations (across country)  Consultations conducted by other Ministers  Minister of Finance meeting with P/T finance ministers 6 Consultation (Fall - Winter)

Finance Canada updates its fiscal projections  Private sector survey (economic side)  Revenue forecast  Expenditure forecast Regular meetings - Prime Minister and Minister of Finance  Budget themes, structure, strategies  Budget timing  Specific measures 7 Development and Decision (Winter)

Consideration of Budget Proposals Finance 2-pager with recommendations/options/conditions Authored by Finance Analysts (Tax Policy, EDCF, Social Policy, International Trade and Finance…) TBS and PCO consulted Recommendation to Minister of Finance for decision Prime Minister receives Minister of Finance decision and PCO recommendation Some subject to Cabinet committee approval Booked in the Fiscal Framework (source of funds)

9  Budget usually tabled in February or March  Budget lock-up and Budget Speech  Parliamentary Approval of the Budget and Budget related-legislation:  Concurrence on Notices of Ways and Means Motion; administration of tax measures  Budget debate - vote on Budget as a package (Vote of Confidence)  Approval of legislation implementing the budget, by both House and Senate (Budget Implementation Act(s)) Approval (Winter to Spring)

 Complete unfinished policy development work and develop Memoranda to Cabinet  Present submissions to Treasury Board to access funds  Present Main and Supplementary Estimates to Parliament for Approval 10 Implementation (Spring)

Budget 2016 Economic and Fiscal Outlook

Economic and Fiscal Projections Economic and Fiscal Forecast Private Sector Survey 15+ forecasters Key variables – Nominal GDP, Interest Rates, CPI, employment Fiscal forecast of key revenue and expenditure streams based on these outlooks Cost of New Measures

Federal Revenues and Expenses Composition of RevenuesComposition of Expenditures Total Revenues: $282.3 billionTotal Expenditures: $280.4 billion

Winter 2016 – Economic Conditions Deteriorate Further Canadian Nominal GDP Outlook

Budget 2016 – Forecasted Budgetary Balance Source: Department of Finance. Budget 2016 Budgetary Balance ($B) -$ 5.4B

The Government is committed to reducing the federal debt-to-GDP ratio to a lower level over a five-year period Sources: Department of Finance; Public Accounts of Canada ; Statistics Canada. Federal Debt-to-GDP Ratio

The Government will set a timeline for balancing the budget when growth is forecast to remain on a sustainably higher track Note: The February 2016 survey scenario is based on the average private sector economists’ projection for nominal GDP, without any forecast adjustment. The top-end survey scenario is based on the average of the four most optimistic projections for nominal GDP among the economists surveyed. Sources: Department of Finance survey of private sector economists; Department of Finance calculations. Projected Budgetary Balance Sources: Department of Finance survey of private sector economists; Department of Finance calculations. Projected Federal Debt-to-GDP ratio

Budget 2016 – Decision Process  Budget Implementation Act  Expedited Supplementary Estimates A process Decisions provided to Treasury Board Secretariat Treasury Board submissions and decisions Parliamentary Approval through Supplementary Estimates A

Moving forward – Budget 2017 and beyond… The Government will build on this momentum, leading towards the development of its Growth Strategy, Fall Update, and Budget Late Summer 2016 Cabinet retreat and priority setting Provides officials with broad direction in lead-up to Budget 2017  Fall/Winter 2016 Update of Economic and Fiscal Projections Proposals to Cabinet Committees Launch of Public Consultation Process Ministerial Letter Exchange

Moving forward – Budget 2017 and beyond… Winter 2017 Final Private Sector Survey 2-pager Analysis and Decisions Budget 2017 release (typically February or March)  Spring/Summer 2017 Treasury Board and other Conditions to be met Parliamentary Approval - Estimates

Management of the Fiscal Framework June 2016