Thank you very much.
Good morning, everyone.
I would first like to thank you, on behalf of myself and my colleague Gabriel Giguère, for inviting us to appear before you today.
For those who aren't familiar with the Montreal Economic Institute, or MEI, I'd say we're an independent think tank with offices in Montreal, Ottawa and Calgary. The institute has been involved in Canadian public debate since 1998 through its research and media interventions. One of the key topics we're looking at is the sound management of public finances. That's what we're here to talk about today.
We're concerned about the Canadian fiscal path of the past decade. Each of the last 10 fiscal years has ended in a deficit. A deficit is projected for the current fiscal year, and we still don't see a balanced budget on the horizon. If nothing changes, the federal deficit will reach $117 billion in 2035, nearly twice what it is today. That's not good fiscal management.
Despite the federal government's predicted unending deficits, new programs are still being announced, as though we're wallowing in surpluses. The best example is probably the creation of the Canada Strong Fund announced by the Prime Minister the day before the tabling of this economic update.
The model most often cited when we talk about sovereign funds is that of Norway, specifically its Government Pension Fund Global, whose assets now exceed 20 trillion Norwegian kroner, or $3.5 trillion Canadian. I would point out that we're talking about billions in French, which is trillions in English.
The situations in Canada and Norway are quite different. While Norway has run only one deficit since the beginning of the century—at the height of the pandemic, in 2020—Canada ran more deficits than ever before, and still has no realistic plan to return to balanced budgets. In other words, every dollar Ottawa invests in this new fund won't come from a surplus generated through sound management, but rather from borrowing at high cost in debt markets.
Because of its regulatory framework, the Norwegian sovereign fund is not allowed to invest its money in Norway to avoid overheating its economy. This also limits the possibility of political interference in the allocation of funds.
The fund put forward by the current government proposes instead to allocate funds exclusively to Canada in a handful of selected sectors, when it needs to be a sovereign fund like Norway's. Instead, the federal government is proposing to create yet another business support fund, whose only innovation is to allow individuals to put their money there, if they believe public servants and oversight bodies are better than them at managing their money. Looking at the various projects subsidized by the various levels of government, I doubt that.
While the federal government can play a role in driving our economic prosperity, it is not well equipped to play a financial role, nor should it play such a role. Individuals and institutional investors who risk their own money are in a much better position to do that.
What the government is fairly well equipped to do, and where it's appropriately engaged, is to create an environment conducive to growth and investment. It should review the environment and the tax and regulatory costs it imposes on all Canadian families, rather than trying to select a handful of businesses or winning or losing sectors.
Unfortunately, by proposing a debt-financed fund managed by public servants, the government seems to persist in a top-down approach that has cost Canada a lot of money, with very little to show for it in recent years.
Thank you for your time and attention.