The set-aside for contingencies will be used, if not required, to reduce the debt.
Balanced budgets lead to a declining debt burden, which helps to instill confidence in consumers and investors, keeps taxes low, strengthens the country’s ability to respond to longer-term fiscal and economic challenges, and preserves the sustainability of public services.
Since 2006, the Government’s approach to fiscal policy and its debt reduction strategy have been successful. The Government recorded balanced budgets between 2005–06 and 2007–08, reducing Canada’s debt by more than $37 billion and the federal debt-to-GDP ratio to 28.2 per cent.
As the global economy fell into recession, the reductions in the debt-to-GDP ratio allowed the Government to take action to reduce the impact of the global crisis, and positioned Canada to emerge from the recession faster and stronger than virtually any other major advanced economy.
In successive budgets, beginning with Budget 2010, the Government gradually wound down fiscal stimulus and controlled spending to engineer a return to balanced budgets. A key element of the Government’s fiscal planning has been the inclusion of an annual set-aside for contingencies, which has helped the Government fulfill its promise of balancing the budget by 2015.
Having balanced the budget, the set-aside for contingencies will continue to protect the fiscal outlook from global economic uncertainty, and will be used to reduce the level of federal debt, if it is not required. This responsible use of taxpayers’ money will help ensure that the Government meets its debt reduction commitments, while continuing to provide tax relief to hard-working Canadian families.
At the G-20 Leaders’ Summit in 2013, Prime Minister Stephen Harper announced Canada’s commitment to achieve a federal debt-to-GDP ratio of 25 per cent by 2021. In the 2013 Speech from the Throne, the Government committed to reduce the debt-to-GDP ratio to pre-recession levels by 2017. The Government remains on target to meet both commitments.