A collapse in corporate profits and higher spending due to the recession helped send the federal government deep into the red in August, when Ottawa had a $5.3-billion deficit.
The Finance department’s monthly fiscal monitor shows Ottawa is now awash in red ink with a year-to-date deficit of $23.7 billion for the first five months of the fiscal year, which runs from April 1 to the end of next March.
That compares to a $1.1-billion surplus the government enjoyed at this point last year.
While timing issues makes it difficult to accurately gauge where the government stands regarding its projections, the shortfall so far would appear to be in line with Finance Minister Jim Flaherty’s forecast that the deficit will wind up at $56 billion for the 2009-2010 fiscal year.
The recession, which struck Canada last fall, has hammered government revenues from both personal and corporate tax receipts, while also increasing costs for such things as payouts to the unemployed, the department said.
For the April-August period, Ottawa’s revenues were down $10.6 billion, or about 11 per cent, with about half of those due to a deep drop in corporate income tax receipts.
Corporate tax revenues fell $5 billion, or 36.6 per cent in the five months, and were down $1 billion, or 78.6 per cent, in August alone.
Personal income tax revenues were down a more modest $2.7 billion, or 5.7 per cent, reflecting fewer people employed and tax cuts.
Meanwhile, expenses for running programs like employment insurance and bailing out the auto sector rose by $15.3 billion, or 18.6 per cent.
About $11 billion is directly tied to the federal government stimulus measures introduced in last January’s budget, including a jump of $3.1 billion in employment insurance benefits to laid-off workers, a 54 per cent increase over the previous year.
The rare benefit the government has derived from the recession is that mortgage payments on the national debt were down $1.1 billion on a year-over-year basis, largely due to lower interest rates.