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A new report by a former public servant says the way the federal government manages spending is broken.
The report by John Lester, a fellow at the conservative-leaning C.D. Howe Institute, argues that the government’s current Expenditure Management System (EMS), which guides the implementation of its spending plans, is failing to ensure federal programs provide value for taxpayers’ money and is in dire need of reform.
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“The federal EMS looks very good on paper,” said Lester, a former federal government economist whose report was released Thursday. “A closer look, however, reveals some important flaws and gaps.”
According to Lester, the first big problem is that spending programs under the Income Tax Act, totalling tens of billions of dollars per year, aren’t subject to performance evaluations, though they should be. He also found that the evaluation of programs is inconsistent and that some results aren’t even published.
Another problem, Lester said, is the lack of requirements to show that spending program proposals provide the average Canadian taxpayer with value for money, rather than just those who benefit from the program.
He says the Treasury Board considers value for money “only in the context of operational efficiency,” with Finance Canada requiring a short assessment of how proposed programs would affect “quality of life indicators and other indicators where appropriate.”
“However, this information is inadequate to make an informed judgement on whether the program is likely to pass a public interest test, because the benefits are assessed qualitatively and costs are not considered,” Lester said.
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Value-for-money assessments, Lester said, should be mandatory and run by the Treasury Board.
“Spending proposals should be screened using a simplified version of the benefit-cost framework, and their assessments should be made public, as they are for regulatory proposals and environmental initiatives,” Lester said.
He said governments also need spending limits, suggesting they adopt a binding five-year cap on spending affected by policy decisions at the beginning of their mandates.
A Parliamentary Budget Officer (PBO) report published last week found that the federal government’s finances are sustainable over the long term. And while the government has committed to cutting down on spending, the Canadian Taxpayers Federation, however, said Wednesday that supplementary PBO data shows that the federal government won’t balance the budget until 2040.
Lester said program spending has increased by almost 2 percentage points since before the pandemic and that “without a self-imposed constraint, performance evaluation loses much of its punch.”
“While five-year spending plans are announced each year in the budget, they are not binding,” Lester said. “A self-imposed ceiling on spending would reinforce the proposed reforms to evaluation policy by giving the government a greater incentive to set priorities and eliminate underperforming programs.”
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