Harper government's family tax measures leave no room for spending increases or tax cuts: PBO

In the lead-up to the October 2015 federal election, we expected the Harper government to offer Canadians a lot of goodies and tax cuts.

Well, it doesn’t look like that’s going to happen.

According to the Parliamentary Budget Officer — there’s really no more money left following the Harper government’s suite of tax measures, announced last week, targeted at families with children under the age of 18.

"As the Economic and Fiscal Outlook Update highlights, we now expect Canadian economic growth in 2014 to be higher than originally anticipated in our April outlook," the PBO Jean-Denis Fréchette told the House of Commons Standing Committee on Finance on Monday.

"As a result of this, we projected that the budget would move into a surplus this year, following six years of deficits. On average, we projected annual surpluses of $8.8 billion over the outlook.

"However, measures announced on October 30, 2014 have eliminated roughly half of this surplus. There is no longer any fiscal room for permanent tax cuts or spending increases. Introducing additional tax relief or spending initiatives would increase the risk of returning to deficits even further."

[ Related: Don’t like the Harper government’s tax cuts? Donate your savings to the federal government ]

In a telephone interview with Yahoo Canada Assistant PBO Mostafa Askari explained that his office looks at something called a policy room, which essentially excludes all temporary measures from the budget surplus.

"What you’re left with is the room you have for permanent policy measures," he told Yahoo Canada News.

"Before the measures that were announced last week, that policy room was positive throughout the forecast period…to 2019/2020. Once we take into account last week’s policy measures, then what you’re left with…negative room.

"What that means is that once those temporary factors are eliminated and once the economy goes back to operating at…the normal level of activity then we may see in fact a deficit."

The Department of Finance won’t say whether they agree or disagree with the PBO’s analysis.

"The Government remains on track to return to balanced budgets in 2015," a finance official said in an email exchange with Yahoo Canada News.

"A full update of the economic and fiscal outlook will be provided in the Update of Economic and Fiscal Projections."

But if the PBO’s numbers are accurate — we are certain to see a different kind of election campaign.

Instead of handing out anymore goodies, the Conservatives will likely borrow a page from the Christy Clark Liberal playbook from British Columbia.

In the 2013 British Columbia election, Clark ran a campaign on fiscal prudence painting the opposition NDP as spendthrift do-gooders who would raise taxes and stunt future growth.

As for the Liberals and NDP, they will have a little more wiggle room. They could, as the NDP have promised raise corporate taxes or run deficits. They can also promise to shift priorities.

Specifically, one of the things they’ll do is deride the Tories for wasting $2 billion of their surplus on ‘rich’ Canadians.

"Oil prices are below $80 and Canada’s job market has stalled. In response, the Conservatives are putting forward an income splitting program with a very basic problem. 85 per cent of Canadians will get absolutely nothing from it. Why is this government making middle class pay for tax credits for well-off families like mine and the prime minister’, Liberal leader Justin Trudeau asked in the the House of Commons on Tuesday afternoon.

"The conservative income splitting proposal will give a big tax credit to some of Canada’s wealthiest families. Forgotten are single parents, forgotten are parents in the same tax bracket. forgotten are families with kids over eighteen but who need going help going to college or university. They all get nothing"

Ultimately, that’s the kind of campaign we can expect.

If the PBO’s numbers are accurate, the goodie bag of promises part of the campaign is likely already over.

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