Federal budget watchdog says spending hit highest mark in 6 years

Federal spending under the Liberal government kicked off the fiscal year by hitting its highest mark in at least six years, says a new analysis by the budget watchdog.

But some of the spending came from leftover commitments made by the previous Conservative government, the parliamentary budget officer's report said Thursday.

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Jean-Denis Frechette found that expenditures under the Trudeau government were 5.7 per cent higher nearly $3.4 billion in the first quarter of 2016-17, compared with the same period from the previous year.

Ottawa's first-quarter spending reached $62.9 billion, while over the same three-month period last year the government paid out about $59.5 billion, the analysis found.

A chunk of the increased spending, including an extra $1.22 billion for child-benefit cheques, came from the Liberal government's Tory predecessor.

Infrastructure spending spike

However, an additional $1.22 billion was the result of a 19 per cent Liberal increase in infrastructure-related spending.

Frechette's report said the hefty increase, which was categorized under grants and contributions to outside entities, was disbursed at an "unprecedented" rate compared to recent years.

The Liberals have committed $11.9 billion towards infrastructure spending over two years as a way to help lift the sluggish economy.

It's unclear, however, exactly how much federal infrastructure spending over the first three months of the fiscal year came from pledges made by the Liberals and how much of it was left over from older Conservative commitments.

Finance Minister Bill Morneau was asked Thursday at a news conference how much of the extra spending identified by Frechette had translated into economic growth.

In his reply, Morneau said the Liberals entered government last year following a decade of low growth and after informing Canadians they intended to make investments in the economy.

"That's what you're seeing ... We will continue to make those investments," Morneau said in Toronto.

"It will result in, we believe, stronger economic activity. Obviously, the money actually has to flow into the economy for that increase in economic activity to happen and we think that we'll start to see the results of that now and through the course of the next several quarters."

Economic impact

He also said the government's fall economic and fiscal update will show how Liberal investments have started to have an economic impact.

Morneau would not say whether the update will also include policy measures, nor would he reply to a question whether the government would use any leftover fiscal space in its $6-billion contingency reserve to provide additional help to the weaker-than-expected economy.

"We'll continue to monitor the effectiveness of the programs we have in place and we will look at the effects on the economy and we remain ready to continue to create policies that will enhance our growth over the short, medium and long term," said Morneau, who made an infrastructure funding announcement Thursday at Ryerson University.

Government spending on infrastructure is difficult to track because of its disbursement over extended time frames, as well as the constant re-packaging and re-announcement of various funds and projects.

The final 2016 infrastructure numbers won't be available for months, but a recent scan of government tables showed that just six of 862 approved projects so far this year were actually underway.

729 projects approved

Later Thursday, a spokeswoman for Infrastructure Minister Amarjeet Sohi said the most-recent government data shows that 729 projects have been approved for funding to date and over 60 per cent of them are already underway.

With the aim of stimulating the economy, the Liberals have said they want to dole out infrastructure money more quickly than in the past.

"There's a little more push to get the money out of the door," said assistant parliamentary budget officer Mostafa Askari. "So, there's a different approach to it in terms of how the government is managing these funds."

Frechette's report also said federal operating spending increased 3.6 per cent in the first quarter of 2016-17 compared to a year before, despite a decrease in employee costs.

His report found direct capital spending fell 10.5 per cent, largely due to lower procurement spending by National Defence as a result of project delays.