Ahead of Thursday's economic update, Liberals are increasingly talking about fiscal prudence

Finance Minister Chrystia Freeland is expected to deliver a fall economic update on Thursday that will strike a balance between greater fiscal prudence and helping Canadians deal with the cost of living crisis, Liberal MPs say.

Freeland, who reportedly told colleagues that any new spending would be funded by budget cuts in the next budget, is expected to show a lower-than-expected deficit thanks to economic growth, but also high inflation that has piled government coffers with Billions .

With the economy set to slow in the coming months and interest rates set to rise again, more and more of Freeland’s colleagues aren’t shy about talking about fiscal prudence.

“I think it’s important for us to be careful with people’s money and to make sure that we provide good services in the most efficient way possible,” said Greg Fergus, who is parliamentary secretary to the prime minister. and the President of the Treasury Board.

“I’m more of a balanced guy,” he added. “So as long as there’s a good balance in delivering the things that we need to do, if that means cuts in certain places (…), that works for me.”

Charlottetown MP Sean Casey pushed back against reporters’ suggestions that the federal government should reign in on its spending because it “kind of presupposes that spending has gone crazy” during the pandemic, he said. But he acknowledged that times are changing.

“I think there’s more opportunity to be thrifty,” he said.

Opposition parties are pulling Freeland in all directions, with the Conservatives urging him to keep his promise to fund any new spending through budget cuts and the New Democrats calling on him to pledge to help Canadians cope with the cost of living crisis.

Winnipeg MP Jim Carr, a former Liberal cabinet minister, described the development of this economic statement as a “balancing act” between what is affordable for the government and how to help Canadians cope with the urgent cost of living crisis.

“Minister Freeland has always been sensitive to the sweet spot and I expect we will know that in the economic statement,” he said.

The Public Accounts of Canada released last week showed a budget deficit of $90.2 billion for the fiscal year ending March 31, 2022. That’s $23.6 billion lower than the forecast for the same period in this spring’s budget, which was to be $113.8 billion for 2021-22.

Yves Giroux, the Parliamentary Budget Officer, said in a recent interview that a lower deficit is “partly due to economic growth, but also partly due to inflation which increases incomes”.

His office predicted in its economic outlook last month that the government can expect tens of billions in additional revenue over the next few years, and assuming it announces no new spending, it could expect that a balanced budget is within reach by 2026-2027.

On the other hand, the federal debt is now over $1 trillion and rising interest rates mean public debt charges are also rising and costing billions more per year.

Liberal MP Rachel Bendayan, who is also parliamentary secretary to the associate finance minister, told reporters on Wednesday that Freeland’s latest budget was “fiscally responsible” and that the government “plans to continue down this path.”

Carr said that at the same time, Canadians are feeling the effects of rising prices and want to know what their federal government can do for them, but also what opposition parties are suggesting.

He added that he hopes the fall economic statement will spark a debate on “the way forward.”

“I am a liberal. I believe the central route is the right route to take,” Carr said.

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