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archived - Making Choices: The Budget Process

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  • Introduction
  • Budget Document
  • Major Players
  • Planning
  • Budget Day


Most years, the Government of Canada tables a major document in Parliament that outlines how it plans to collect and spend taxpayers’ money: the federal budget. The Budget affects the lives of all Canadians.

Will taxes go up or down?

How much money will go to reducing the debt?

This presentation provides an overview of the federal budget process, including its major players, the planning cycle, and how the Budget is passed into law.

More about Budgets

Since Confederation, there have been 152 federal budgets. The first, delivered on December 7, 1867, consisted of a speech by then-Minister of Finance, John Rose,1 which was reported in the Parliamentary Hansard. It described spending of $5.3 million.2 Over the years, the Budget was assembled into a document, which grew in size and heft to its peak with Marc Lalonde’s 1984 Budget, which weighed over 14 pounds.3 The most recent Budget, for 2010, is about 450 pages long and describes spending of $280.5 billion.

1 Bryce, Robert B., Maturing in Hard Times. 1986. McGill-Queen’s University Press, Kingston and Montreal. Pp. 2-3.

2 Financial Statement of the Honorable John Rose, December 7, 1867. Ottawa. (Appendix A.)

3 Neddow, W.G., A Study of Department of Finance Publications. 1997. Unpublished. Pp. 3.

The Budget Document

Each year - and sometimes twice a year - a Budget is prepared to get Parliament’s approval to spend taxpayers’ money.

The Budget is the key policy document of the Government. It announces tax changes, new spending and anticipated revenues. It also provides an economic forecast. The Budget is a major vehicle for carrying out the Government’s priorities, which are defined by election commitments, the Speech from the Throne, and new developments.

More about the Budget

How big is the Budget? Consider this:

Stacked in a pile, 280.5 billion Canadian dollar coins – “loonies” – would stand almost 547,000 kilometres tall, or 1.5 times the distance to the Moon!

You know how Canadian hockey teams sometimes bury a loonie at centre ice for good luck? Well, 280.5 billion loonies in government spending would cover more than 124,000 Olympic-size hockey rinks!

The Budget is also a confidence measure. That is, if Parliament votes against it, the Government must resign. When Ministers of Finance present a Budget speech in the House of Commons, they also table a motion “that the House approves the general budgetary policy of the Government.”

Fundamentally, the Budget is defined by choices. The shopping list of demands for new spending, tax cuts and debt reduction is always greater than the money available. Tradeoffs must be made. The Budget process can be viewed as the mechanism for evaluating and making these tradeoffs in the most effective way.

More about Budget votes

The fate of a Budget often depends on whether a Government finds itself in a majority or a minority position. Two Governments have fallen in Canada on the basis of Budget votes in the House of Commons; the Liberal minority Government of Pierre Elliott Trudeau in 1974 and the Progressive Conservative minority Government led by Joe Clark in 1979. With a majority, the Prime Minister is assured of passing a Budget. However, if there is a minority Government, the budget process becomes very important to ensure the Budget enjoys the widest possible political support.4

4 Library of Parliament

Major Players

The major players that build and carry out the Budget are the civil service, the Cabinet and Parliament – all of whom go through the process with the goal of reflecting the views and priorities of Canadians.

Public Service

Within the public service, the key players are the Department of Finance, the Treasury Board and the Privy Council Office.


Cabinet is the key decision-making body of the Government. It is made up of Ministers. Spending proposals are developed in Cabinet committees. Cabinet must approve the Budget contents but the key decisions are made by the Prime Minister and the Minister of Finance.


Parliament must approve the Budget. Members of Parliament also participate in the Budget process through Parliamentary standing committees, especially the Standing Committee on Finance.

More about the Public Service

Central agencies, such as the Privy Council Office and the Department of Finance play a role in advising on the Budget.

The Department of Finance provides advice and analysis of economic and fiscal issues as well as such policies as taxation and transfer payments to provinces and individual Canadians. It also plays Devil’s Advocate, challenging the policy and program proposals of other departments.

The Privy Council Office provides advice to the Prime Minister and Cabinet and manages the Cabinet agenda.

The Budget Planning Process

Budget planning is a year-round process, or cycle. The fiscal year begins on April 1 and ends the following March 31. There is no rule for timing, but traditionally, the Minister of Finance presents the Budget before the new fiscal year begins – usually around February or March.


Usually between March and June, the Cabinet reviews the last Budget and decides what is important for the next one. Cabinet committees discuss how well the new policies and programs from the last Budget are working.

At this time, government departments write plans to show how they will spend the funds they got in the Budget. These plans must be approved by the Treasury Board. They are also reviewed by Parliamentary committees.


Between June and September, public servants, Cabinet committees and Parliamentary committees work on Budget strategies and options for the Minister of Finance to consider.

Should taxes be cut? Raised?

Can we afford to build new highways and bridges?

Should we create a new national park?

These are the kinds of choices these groups face. And they are often difficult choices. At this time, the Department of Finance prepares the Economic and Fiscal Update document, which includes forecasts of the fiscal outlook and economic growth, as well as potential risks to the country’s finances.


From September to December in most years, Cabinet reviews the strategies the Minister of Finance puts forward for the next Budget. The Department of Finance begins preparing the economic and fiscal forecasts for the next year, as well as possible financial targets.

Around this time, the Minister of Finance begins consultations with the public, the provinces, territories and other stakeholders.

Later, the Standing Committee on Finance submits its report on its consultations with Canadians, which includes a list of recommendations. The Minister of Finance draws on this material and recommendations from public consultations, provincial finance ministers and the Cabinet committees to develop a Budget strategy.

More about Consultations

Traditionally, the budget process was immensely secretive with little consultation. Under Prime Minister Louis St. Laurent, the Finance Minister would type the entire Budget himself so that no secretary could read it. This secrecy was felt to be needed so individuals could not profit from upcoming Government decisions.

In recent years, Governments have worked to open up the process to consult with interested groups. For example, during its pre-budget consultations, the Standing Committee on Finance meets with hundreds of groups and individuals across Canada.

In 2006, the Department of Finance conducted its first web-based Budget consultation with the public.


Cabinet reviews the Budget strategy, including fiscal targets, new spending initiatives and cuts. The Prime Minister and the Minister of Finance make the final choices.

The Department of Finance prepares the Budget documents relating to government revenues and spending priorities.

During this period, there are regular meetings between the Prime Minister and the Minister of Finance. The resulting Budget strategy is submitted to Cabinet for review.

More about Forecasting

Contrary to some reports, the economic forecast used by the Government to plan its budget is not based on a secret hidden formula!

Each year since 1994, the Department of Finance has surveyed leading private-sector forecasters to obtain their estimate of how the economy will grow. The economic forecast is the average of this sample. In Budget 2010, the sample included 16 leading Canadian economists.

This process gives the Government an important outside view of the economy and is supported by such organizations at the International Monetary Fund.

The Department of Finance uses the economic forecast to plan how much to spend and to collect in revenues – the fiscal forecast.

Thanks to its strong fiscal performance, Canada enjoys a Triple-A rating in financial markets. This benefits not only Ottawa but the provinces, municipalities, families and businesses – everybody who is paying less in interest charges -- because it is the federal government’s ranking that effectively sets the credit rating for the country

Budget Day

By tradition, the Budget speech is delivered in the House of Commons following the daily Question Period. Many drafts of the speech will have been written before the final version is ready.

Long before the Minister rises to speak, the formidable task of distributing the Budget plan is well under way.

One of the key elements of this task is the lockups for members of the opposition, representatives of provincial governments, business representatives as well as the media. For example, in order to give journalists enough time to prepare their reports, they are secured en masse in a room, where they get advance copies of the Budget and background briefings by Finance officials. Secrecy is very tight. RCMP patrol the room, scanning for electronic transmission devices. Journalists must keep the embargo conditions until the Minister of Finance begins to deliver his Budget speech begins or risk losing privileges, including access to future media lock-ups. Once the Minister rises to speak, journalists race to be first to report the details.

More about Budget secrecy

Before the widespread use of the Internet, printing and distributing the Budget document was an extraordinary feat.

Printing of the document began three weeks before Budget day, and printing staff were often kept in “lockdown” conditions so they could not leak Budget secrets.

During the 1970s and 1980s, it was considered essential that all Canadians have instant access to the Budget upon its release. So the Department of Finance dispatched heavy-lift Hercules aircraft across the country, laden with Budget documents. A typical flight plan included stops in Thunder Bay, Winnipeg, Regina, Calgary, Vancouver and Victoria. Another flight would take care of Eastern Canada. Once on the ground, the Budget documents were then escorted under guard by RCMP officers to Bank of Canada offices in each city, where they were stored in locked vaults for several days.

Before dawn on Budget day, planes were also sent to London, Paris and Washington to carry the document to diplomats in time for the speech – but not before!

Budget tradition

One of the more curious elements of the Budget speech is the Minister’s shoes. Beginning with Mitchell Sharp in the 1960s, it has become an on-again-off-again practice for the Minister of Finance to wear new shoes on Budget day. Hoping to solve the riddle of the origin of this “tradition,” the Library of Parliament began to ask former Ministers or their staffs about it. They came up dry. No Minister knew the reason.

The Library researchers found seven Ministers wore new shoes, including John Crosbie, who wore mukluks, and Paul Martin, who wore workboots -- a gift from Prime Minister Jean Chrétien. In recent budgets, Minister of Finance Jim Flaherty has purchased a new pair of skates for his son to reinforce family-friendly measures; and worn a pair of re-soled shoes as a symbol of frugality.

Post Budget

Soon after the Budget has been tabled, the Budget Implementation Act is introduced. This bill enacts the major tax initiatives and spending measures of the Budget. More technical or complex tax measures are often implemented in supplemental Budget Implementation Acts.

Even before these Acts are introduced, however – and before the Finance Minister’s new shoes have been properly broken in - the entire Budget cycle begins anew.