It took some doing but I managed to get my hands on a readable copy of the NDP's platform costing and I want to understand what I read.

It’s a good time to study election platforms and I owe all of the federal parties a debt of gratitude for new material to study and use for teaching.  Yesterday, the NDP put out an initial (?) or a preliminary (?) costing document and I’d like to make sure I understand what I’m reading in those numbers before I go and talk about it with my students.

Here are a few points that I’d like to raise (in no particular order of importance):

  • The NDP says it expects a 2% increase on the corporate income tax rate will yield a $3.7B annual increase in federal CIT revenues. Federal CIT revenues were projected (in Budget 2015) at $36.8B for the current fiscal year and $39.5B for next fiscal year, rising only modestly to $42.5B by 2019-20 (notionally the fiscal year of our next scheduled election – haha!).  Does the NDP have a source that demonstrates a 2% rate increase will yield a stable 9% increase in federal CIT revenues? Much smarter people than I have already raised questions about impacts on provincial treasuries and realistic parameters to the impact on federal revenues. Those models show more modest and declining revenue changes over time. How did the NDP get their projection to be so large and stable?

 

  • Where did $290M go from the $15/day national daycare plan? In October 2014 the NDP gave a 4-year federal cost estimate for its daycare commitment. Yesterday’s announcement offered $694M next year for “Helping Families” which the explanatory notes say includes the commitment on daycare.  Subtracting the October 2014 daycare promises yields a left over of $99M per year for 4 years that must be for “bringing families together” – the other item mentioned in the explanatory notes. The $290M the NDP originally booked for the first 60K of $15/day spots doesn’t seem to have been rolled into the 2016-17 year. This would have been a perfectly reasonable thing to do — likewise it would have made sense if the NDP had just restarted year 1 to be 2016-17.  Instead, it looks like $290M and 60K promised new spaces have been struck from the plan, or postponed or, I’m not sure.  Also, the October 2014 announcement projected that the program could yield a $3B return to the federal government (through higher tax revenue and lower costs) but I don’t think that was included in this costing which was a little surprising.

 

  • Media reports said the plan assumes a $1B annual contingency in each of the 4 years, is that right?  I don’t know what the correct level of federal contingency funding is, but I did notice that the fund had dropped in Budget 2015 to just $1B for the next 3 years (and the NDP noticed too) before it’s expected to rise again to $2B in 2018-19.  So, if it wasn’t ok to cut into the contingency fund in April will it be more ok in 2018-19?  Also, when did we start reporting surpluses before the contingency rather than after?

 

  • How much more tax can the CRA realistically collect? The NDP costing seems to build off of the Budget 2015 tax collection measures, noting they’ll keep the investments made to help CRA enforce tax compliance.  Those were $45M in this current year and $44M annually thereafter, but I can’t see where the NDP included that in their costing. The 2015 Budget also said the $45M would bring in about $191M a year in additional revenues through “compliance”.  And the Budget also promised additional tax revenues of $365M in 2016-17 (declining after that) through measures to promote “tax integrity” (which seems to mean closing loopholes). The NDP document, however, promises $500M annually in additional revenue from “tax integrity” plus another $500M annually by closing a loophole on stock-options. Is the NDP planning on much larger spending at CRA than the 2015 Budget and, if not, how do they plan to nearly double the Conservative’s projected revenues on tax compliance and integrity measures?

 

  • Did the NDP use the July 2015 PBO fiscal report or the risk-assessment reported in Budget 2015?  The NDP document (prudently) skirts the question of whether the federal books will close out the 2015-16 year in a surplus or deficit and instead it starts fresh in 2016-17. The document adopts the Budget 2015 projection of a $2.7B surplus (including the $1B contingency) and rising modestly after that. In the table below, I’ve tried to summarize what I could see in Budget 2015 (both the optimistic version as well as the risk-assessment segment in Chapter 5 that imagined a 1% decline in annual GDP growth vs Budget projections — and it seems very reasonable to think that may be happening). I’ve also added the numbers from the PBO July report.  Note also that those modest surpluses in 2016-17 and onward are based, in Budget 2015, on continued spending restraint doing the majority of the  work.
2015-16 2016-17 2017-18 2018-19 2019-20
NDP reported surplus from 2015 Budget NA 2.7 3.6 4.6 7.8
NDP claimed surplus after platform measures NA 4.1 3.4 3 4
Projected surplus as reported in Budget 2015 (April) 1.4 1.7 2.6 2.6 4.8
with contingency 2.4 2.7 3.6 4.6 7.8
Budget projected downside risk (April) -3.7 -4 NA NA NA
PBO projected balance (July) -1.0 0.6 2.2 NA NA

 

I think we could do much more for our parties and for ourselves in the electorate if we made parties use common assumptions and reporting for their platforms. In other countries, neutral public servants offer a detailed public report on the state of the nation’s finances and all parties use it for their costing.

Going one step further, we could even ask parties competing for the executive office to use a common nomenclature or classification system for their promises and costing. The Treasury Board Secretariat has a “Whole of Government Framework” that the feds have been using for 10 years to try to consistently classify and track federal spending and projections. It’s not perfect but it would be a start to let citizens more easily compare what different parties are promising and how our national finances would change as a result.

Parties are and should remain free to propose whatever they think is good for the country (I’m not yet cynical enough to think it’s all only ever about vote-buying). But it shouldn’t be hard to understand what the promises are, at what cost and what benefit.

*Thanks to Scott Cameron and Stephen Tapp who flagged that I had included the wrong numbers from the PBO July report. The table above has been corrected. My original point stands that the NDP costing doesn’t show evidence of taking the updated fiscal outlook into account in their costing document. I also humbly take the point that one should NOT transcribe numbers at 2 AM.