The new Conservative government will have a hard time finding its planned savings in time for a spring federal budget, suggest TD Bank economists in a new report.

The report notes that most of the emphasis in the Conservative Party’s platform was on proposed tax cuts and spending increases in certain areas. Although, it suggests that in order to achieve its fiscal objectives, five-year cumulative savings of $22.5 billion would also be required.

These savings would likely come by lowering spending on grants and contributions and operating budgets of government departments and agencies. This was to be on top of the $6.8 billion cumulative five-year savings from reallocating money out of the climate change fund and from the Liberal child care plan, it adds.

However, the platform gave little indication how the savings from departmental budgets would be achieved and there has been almost no public attention to this aspect of the Conservative plan, TD says. It concludes that the required internal savings, “are heroic, far surpassing what was identified by the Expenditure Review Committee for the 2005 Budget but more modest than that of the watershed Program Review in the 1995 Budget”.

“Looking at the assumed savings in the context of the pot that can be trimmed and putting the exercise into the context of the previous two rounds of expenditure cuts makes it clear that savings of the magnitude identified in the Conservative Plan will not be easy to secure,” TD concludes. “It will certainly take more time than is available before the first Conservative Budget, which we believe is likely to be in mid-to-late April.”

“That suggests that this budget will either plug in the assumed savings without identifying details, or the budget will only have a short timeframe, perhaps two years rather than the tradition in recent years of extending to five years,” it says.

“The conclusion from this analysis is that it will be a difficult, but not unprecedented exercise, to generate the internal spending savings the Conservatives need to achieve their fiscal plan. No doubt the new Government is seized with this issue internally,” it says.

“It may appear from the plan that there is some wiggle room if the full extent of the assumed savings is not realized. After all, on top of the $3 billion annual contingency reserve, the plan does show a surplus remaining of $1.7 billion in 2006-07 and roughly $5 billion per year thereafter. But there are many pressures against these sums,” it suggests.

Some of these pressures include: the commitment to address the (federal-provincial) “fiscal imbalance”; nothing was allocated to reduce “waiting times” in healthcare; TD suggests that the cost of the proposal to defer capital gains taxation on investment roll-overs has been grossly understated; and, it says the platform underestimates the cost of cutting the GST by almost $500 million per percentage point, among other things.

“If the Conservatives want to maintain flexibility to act on these remaining commitments and pressures, they will need to secure at least the internal spending savings assumed,” it concludes.