Ottawa $9-billion ahead of last year’s pace in reducing size of deficit

OTTAWA — The federal government is well ahead of schedule in reducing the size of the deficit, even as it is preparing to cut back on pensions and the size of the public service.

The Finance Department reported Friday that November’s shortfall totalled $1.9 billion, well shy of the $4.5-billion of red ink penned during the same month last year.

The bigger story is that for the first eight months of the 2011-12 fiscal period that ends in March, Ottawa is about $9 billion to the good of where it stood last year. As of November the deficit stood at $17.3 billion compared to $26 billion for the same period in 2010.

With only four months to go in the 2011-12 fiscal year, Ottawa is well on pace to beat the $32.3-billion deficit target of the fall’s economic update.

In separate speeches Thursday, Prime Minister Stephen Harper and Treasury Board President Tony Clement struck a harsh note of austerity about the government’s future plans.

Harper stressed his government’s desires to slash spending with cuts to Canada’s pension system, particularly the Old Age Security benefits and noted he has already moved to reduce growth in health-care financing. Clement said the government is looking to achieve even more savings from cuts to the public service, to as much as $8 billion from the previously announced $4 billion.

The government’s plans are aimed at reining in costs for in preparation for the demographic squeeze down the road, when baby boomers move from taxpayers to receivers of social services.

In November, Ottawa said its revenues were down slightly, but expenses fell sharply by $2.5 billion, partly due to the windup of stimulus projects.

For the year so far, a combination of higher tax revenues and reduced spending is contributing to the better fiscal picture.

Revenues for the eight months were up $5.7 billion, or 3.9 per cent, primarily from higher income tax receipts. Meanwhile, expenses were down $3.5 billion, or 2.3 per cent.

Where the government books are not faring better, is in charges to service the debt, which are rising due to the ongoing need of governments to borrow. Public debt charges are about $500 million higher so far this year.

The government gives no reasons why it appears to be doing better than anticipated.

The Canadian economy grew by an unexpectedly strong 3.5 per cent in the third quarter — the July-September period — but for the year as a whole, growth is below what Ottawa had calculated on in the June budget.