OTTAWA - The Harper government's most recent plan to balance the federal budget is still about $10 billion short, says Canada's budget watchdog.
Weighing in on the government's projections, Parliamentary Budget Officer Kevin Page said Thursday that Ottawa still needs to take more steps if it hopes to balance the books in five years.
And he said Finance Minister Jim Flaherty's assumptions were not "a prudent basis for fiscal planning," noting that the minister had failed to build in a cushion for the unexpected.
The assessment drew a sharp response from the minister.
"The Parliamentary Budget Officer was wrong before and he's wrong again," Flaherty told the House.
Asked later by reporters when Page had been wrong before, he replied: "Last January. He's usually wrong."
The reference to January was aimed at Page's report prior to the 2009 budget. A spokesman for the minister noted that both Page and Flaherty used similar consensus economic projections in January 2009, but only Flaherty has subsequently admitted the numbers were wrong after the recession proved much deeper than expected.
Both Flaherty and Page use a consensus of private sector economists, although they often come to different conclusions.
Flaherty and Page have sparred before over the budget projections, particularly over the watchdog's contention that the government has a structural deficit which growth alone won't solve.
The disagreement this time is relatively minor given the size of the budget and the economy: $3.1 billion three years out, $7.8 billion four years out and $10.5 billion in 2014-15.
In the first two years, Page actually forecasts a slightly smaller deficit than Flaherty.
The gaps in the outgoing years stem from Page's projecting $6 billion less in corporate tax revenues, and about $4.5 billion higher spending, in part due to higher service charges on the national debt.
Page got the usual defence from opposition MPs, but Flaherty received some heavyweight support as well, this time from TD Bank chief economist Don Drummond, a former high-ranking Finance Department official during the successful war on the deficit of the 1990s.
Drummond said corporate revenues may indeed be less than Ottawa expects, but noted that business tax receipts are notoriously difficult to predict.
But he said Page's insistence that Ottawa build in a contingency fund against rainy days, as Paul Martin did in the 1990s, was not necessary under current conditions and might even be self-defeating.
"We were on the precipice of a debt crisis and we had 25 years of almost uninterrupted history of being on the wrong side of forecasts, so I thought in that case you have to bias it," he said of Martin's contingency planning.
"But as time went on, prudence actually became a liability to sensible planning. It led to creating unanticipated surpluses and led to the government literally blowing the money out the door at the last minute because they were almost embarrassed."
Page continues to say that Ottawa has built in a structural deficit that growth alone won't overcome.
In a report on aging last month, he warned that the structural deficit could get worse after the 2014-15 horizon.
In Thursday's analysis, the budget watchdog said he doesn't doubt that the government has the ability to balance the budget, but said Ottawa will have to take additional measures besides what it has already announced.
"Achieving budgetary balance would require the economy operating significantly above potential, actions to increase revenues or reduce spending (beyond the budget measures) or some combination thereof," Page wrote in his report.