Thank you very much for that question. Just to step back, if I could, on forecasting, as you noted, sir, a lot of changes have been made, and the process is much more open now. I think this is a result of actually, in some cases, some pressure by parliamentarians as well and work by different finance ministers to open up the process.
Now the Department of Finance is taking an average of a number of private sector forecasts on the economy and they're working with, as you say, sir, three other fiscal forecasters to look at and prepare their fiscal projections. So the process is quite a bit different.
Even within that process, though, even in the last economic fiscal update in the budget, one would note that there was quite a bit of range between the low side and the projections on the high side. I think we're in a period of quite significant fiscal uncertainty as we look forward.
We think it is true that most of the private sector forecasters got it wrong last year, particularly on the fiscal side. If you look back historically, there are probably different reasons for that. I think last year they probably got it wrong because we were fooled partly by just the strength of the Canadian economy, particularly on the income side, and the relationship between how incomes were growing and the tax collections. Tax collections on the revenue side, both on the personal income tax side and the corporate side, came in much stronger relative to the income growth that we did see in the economy. I think that fooled almost all the forecasters.
These can change pretty rapidly, though--for instance, if the economy were to turn in a significant way, potentially due to, if one looks farther out, U.S. economic weakness. So while we all erred on one side, we could see a different type of erring, or more balanced erring, as we look forward.
In terms of prudence that's built into the forecast, there have been changes. Certainly in the mid-1990s I think the sense was, by the government of the time, that we needed to build in substantial prudence. So we built in contingency reserves of about $3 billion a year in these forecasts. We built in economic prudence of different varying amounts over time. Government made a conscious choice to make sure that they erred on that side. In terms of fiscal planning, I think that was a very prudent thing to do at the time.
I think, as well, this government has decided that with the progress we've made on lowering the debt—in absolute terms, over $100 billion over the past 10 years and almost a cutting in half of the debt as a percentage of GDP—federally that's a substantial improvement. We didn't need as much prudence. In a relative sense, I think that probably is true; you could probably get away with less prudence. But now we're seeing a lot of uncertainty in the economy, particularly to the south of us, and we're worried about the impact it may have. But there is less prudence in the forecast now in general.
So the error really was just a surprise around the relationship between income and collections.