Pleaded To Cut The Spending

Pierre Trudeau’s last finance minister Marc Lalonde warned cabinet that federal overspending was a looming disaster, like “keeping its finger in the dike,” according to declassified records. The Parliamentary Budget Office has calculated current deficits are running at the highest rate to GDP since Lalonde’s era.

“We have been walking a very narrow tightrope because the pitfalls on either side are very dangerous,” Lalonde told a confidential 1984 cabinet meeting. Lalonde said the deficit was “bad enough” but cautioned: “Bad as it is, it could easily become even worse.”

The federal deficit at the time was $37.2 billion, the modern equivalent of $86 billion. Parliament’s current deficit is $381.6 billion, by official estimate.

“A number of very tough decisions will be required simply to get back to that track, let alone to make the further progress in managing the deficit that the investment community demands and that may well become essential,” Lalonde was quoted in secret Cabinet Minutes. The records were disclosed through Access To Information.

The finance minister at an earlier 1982 meeting described year over year overspending as “extraordinary” and disastrous. “It remained essential however for the government to reinforce its commitment to retain control of the fiscal situation, or in effect to ‘keeping its finger in the dike’ through a vigorous effort to finance any new initiatives through cuts and reallocations,” said Lalonde.

“Given the current rate of growth of the deficit ‘there were simply no surpluses out there,’” he said. Cabinet at an October 14, 1982 meeting debated new luxury taxes to raise revenue. “Some Ministers suggested increasing taxes to permit an increased deficit to fund additional jobs,” said Cabinet Minutes. “One suggestion was for a luxury tax. Another was for a surcharge or a Canadian National Recovery Tax.”

The current deficit is the equivalent of 8.5 percent of GDP, according to an April 9 Budget Office report Scenario Analysis Update: Covid-19 Pandemic And Oil Price Shocks. “To put this in historical perspective, the last time the budgetary deficit was near 8.5 percent of GDP was in 1984,” wrote analysts.

Successive deficits resulted in a 1995 austerity budget that cut 45,000 public service jobs, raised taxes on large corporations by 12.5 percent and privatized Canadian National Railways. Other measures imposed by then-Finance Minister Paul Martin were required to “eliminate waste and abuse and ensure value for the taxpayer’s dollar,” Martin said at the time.

Cuts included a fifteen percent reduction in defence spending, a 21 percent cut to foreign aid, thirty percent cut in dairy subsidies, abolition of Prairie freight rate subsidies dating from 1897 and repeal of the 1927 Maritime Freight Rates Act.

The austerity budget also wound up seventy-three federal agencies, closed cabinet ministers’ regional offices, introduced a $975 immigration fee, imposed $200 million in administration cuts in employment insurance programs, cut postal subsidies eight percent and saw replacement of the two-dollar banknote with cheaper coinage.

Parliament in 1996 balanced its budget for the first time since 1969. Modern parliaments have not balanced the budget since 2007.

By Staff

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