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Opinion: Ottawa now underreports true level of spending


During the pandemic, while Canadians were distracted by other things, the government changed the way federal spending is disclosed. As a result, Ottawa now underreports its true level of spending and presents an incomplete picture to Canadians.

Prior to 2020, federal budgets and other financial disclosures only differentiated between public debt charges (i.e. interest costs on federal debt) and program spending (all spending except interest costs, including transfers to Canadians and other levels of governments, and direct spending on programs such as national defence).

It was fairly easy to identify how much Ottawa planned to spend and how much interest was paid on debt for past borrowing. But this simplicity and transparency was reduced in 2020 when “net actuarial losses” were removed from program spending and added as a separate item. Even the term itself sounds ominous.

Net actuarial losses is a fairly standard term in financial reporting. Specifically, these costs arise when the expected contributions from employees and employers, and the earnings from the monies invested, are insufficient to pay for the expected employee benefits and pensions over a prescribed period of time. This deficiency means the government (or a firm) must contribute more to these plans to ensure sufficient resources are available to pay for promised benefits.

The 2019 federal budget included an estimate for program spending of $329.4 billion for 2019-20. But in 2020, in its economic update—recall there was no federal budget that year—the government separated program spending (then estimated at $338.4 billion) from the actuarial loss of $10.6 billion. In other words, under the old classification, program spending would have been $10.6 billion higher at $349.0 billion. 

This separation of expenses also affects the forecast for government spending as a share of the economy, since it excludes the actuarial loss.

These sums are not insignificant. The government has reclassified its spending going back to 2008-09. The total amount of spending on actuarial losses between 2008-09 and 2020-21 is $135.7 billion, which is now no longer categorized as program spending, thus underestimating how much Ottawa is actually spending. And the federal government expects to incur another $28.5 billion in net actuarial losses between 2021-22 and 2025-26.

The question is why differentiate between the two? Firms don’t generally care about the composition of the compensation to employees. What they care about is the total cost. Similarly, it’s not clear why taxpayers should care about a differentiation between wages and salaries and the costs of government-sector pensions. What they care about is the total cost of compensation for federal employees. Moreover, given that more than 87 percent of government employees are covered by registered pensions and that employee compensation comprises more than 10 percent of total federal spending, there’s a strong argument that actuarial losses should return to being consolidated with all other program spending. 

The ability to hold elected politicians and bureaucrats accountable remains premised on an agreed set of facts. Financial disclosures that obscure the total cost of federal spending make such accountability more difficult and less transparent for average Canadians. Reforms to ensure better clarity and transparency are needed.

Peter Menzies: Countering the government’s incoherent media and online legislation—Advice for the next leader of the Opposition


The last Conservative that talked tough about defunding the CBC quickly disposed of that notion once it served its purpose, which was to win him the party leadership.

Some say it was Erin O’Toole’s abandonment of “true blue” Tory antipathy for the Canadian Broadcasting Corporation that ultimately led to his demise. Perhaps. And, conceivably, the decision not to campaign on that red-meat-for-the-Tory-masses posture was pure pragmatism. Many Canadians do, after all, harbour good feelings towards the CBC, at least in theory.

So there’s every reason to suspect that the “defund the CBC” hellfire emanating from party leadership frontrunner Pierre Poilievre will wind up parked on the same shelf.

After all, most of the files involved are political minefields built on francophone existentialist angst, and who, really, wants to poke that bear? 

On the other hand, the Trudeau government has so much contentious legislation flying around to regulate this, protect us from that, and generally “save democracy” by “making us safer” that eventually someone’s going to have to slop out the barns. So, whether it’s Poilievre, Jean Charest, or another candidate, the development of a sound, sensible, predictable national communications and news media industry strategy has to be a priority.

The problem isn’t so much that Bill C-11—the Online Streaming Act—is bad (which it is).Bill C-11: An Act to amend the Broadcasting Act and to make related and consequential amendments to other Acts Or that the Online News Act—Bill C-18—is based on a fantasy (it most certainly is).Bill C-18: An Act respecting online communications platforms that make news content available to persons in Canada Or even that the ambitions fuelling Online Harms legislation have been so thuggish as to be compared to North Korea’s first instincts. It’s not even that pretty much every media outlet in the country is now dependent on the politicians they are supposed to hold to account.

Nope. The problem is that other than an apparent obsession with controlling the internet, none of these initiatives appear to be the spawn of a coherent economic vision. It all looks, and feels, like watching a train wreck in slow motion.

Here’s a roundup of what’s going to need fixing:

  • To assist traditional news media in financial peril, the government created $120 million worth of annual tax credits that were intended to cover, primarily, print media for five years while they transitioned into viable digital operations. No transition occurred and the credits are now permanent. (As Ronald Reagan said, there is nothing more permanent than a temporary government program.) The same will likely happen with the $10 million per year Local Journalism Initiative that subsidizes the Canadian Press. Throw in the longstanding Canadian periodicals fund and there is more than $200 million in annual support for news platforms (approved by government appointees), many of which have business models that no longer make sense.
  • Bill C-18 is built on the unproven assumption that tech companies such as Google and Facebook profit unfairly from the news produced by the likes of the Toronto Star, Postmedia, the CBC, Bellmedia, etc. The bill forces foreign big tech companies to reach “commercial agreements” with domestic news providers and is based on Australian legislation where news media are now convinced they don’t need to innovate; they just have to tie on the Facebook feedbag. In Canada, the Canadian Radio-television and Telecommunications Commission (CRTC), which has no experience in online industrial matters, will approve the agreements and how newsrooms spend the proceeds.
  • Bill C-11 (the Online Streaming Act) amends the Broadcasting Act by defining all audio and video on the Internet as “broadcasting” and putting it under the control of the CRTC which—and this cannot be overemphasized—has no experience in this area. It came into being when the Liberals were convinced by a largely Montreal-based lobby that the billions of dollars streaming companies have been investing in Canada over the past decade weren’t enough. Or, to be more precise, the normal quota of one-third French, two-thirds English wasn’t being fulfilled by market forces. That meant, Heritage Minister Pablo Rodriguez and others thought, that large streaming companies such as Netflix needed to be brought into “the system.” But instead of just doing that, Heritage Canada staff created a sweeping piece of legislation that interferes with free expression, provokes retaliatory action from the USA, has even some of its proponents worried it gives the CRTC too much power and—oops—puts the incomes of about 100,000 creators making money on YouTube at risk.J.J. McCullough explains why Canadian YouTubers fear the government’s online streaming bill
  • Coming up is the Online Harms legislation. It sells itself on the need to crack down on child pornography, non-consensual sharing of intimate images, hate speech, incitement to violence, and terrorism, all of which are already illegal under the Criminal Code and cracked down on daily. Behind that beard, though, is a determination to create a “digital safety commissioner” to patrol the internet for behaviours and comments of which the government disapproves but falls short of being illegal (lawful but awful). Rodriguez is now on his third round of consultations, having been cautioned at every stage so far to, basically, stop thinking like a third-world thug. The government is, however, determined to think like one. How a new regulator would interact with the CRTC, which under the Broadcasting Act is already bound to ensure content under its supervision is of “good standard”, is unknown and very confusing.
  • While legacy media try to build subscriptions, the government continues to subsidize the CBC which then floods the market with free news and competes for advertising. The CRTC, meanwhile, insists that virtually every radio station it licenses—regardless of market size—covers news whether it wants to or not.

There’s more, much more. And the Liberals have smuggled in all kinds of booby traps such as moving to ensure the Canada Media Fund—the largest government source of funds for TV and film production—delegates 40 percent (up from 33 percent) on francophone productions (serving 22 percent of Canada), leaving the other 60 percent (down from 66 percent) for the rest. Just try to pry Montreal’s hands off that pot of gold once that falls into place.

Where should the new Tory leader start?

Work under the overarching values of consumer choice, personal liberty, and innovation.

When it comes to the news industry, affairs are urgent and the CBC is a priority that has to be dealt with. Its dual commercial/public broadcaster role is distorting the market and has to end.

That’s job one and, if handled swiftly and correctly, will inform the next steps.

Job two? Kill Bill C-11. If francophone producers need more money, just give them more money; there’s no need to regulate the internet to make that happen.

Third? Table a Social Media Responsibility Act that ensures online platforms support free speech and moderate misconduct in an even-handed fashion.

And, last but not least, create a new Canadian Communications Commission to replace the CRTC.

Simple, isn’t it?