Tyler Meredith explains how government budgets get made

On this week’s episode of Free Lunch by The Peak, we sat down with Tyler Meredith to talk about how the federal government puts its budgets together. Before becoming a partner at Meredith Boessenkool Policy Advisors, Tyler was one of the driving forces behind no fewer than six federal budgets and served as the top economic advisor to Prime Minister Justin Trudeau and two finance ministers.

Who comes up with the big ideas that make it into the federal government’s budget?

“The finance minister goes out and surveys all of their colleagues to get input on the things that other ministers in the cabinet would want to undertake. That can come to 300 or 400 different proposals, and potentially $100 billion or $200 billion worth of proposed spending measures. So you then have to decide, ‘What is the stuff that I actually want to look at?’ You'll throw out 50 to 100 items, and then once you've got that universe of ideas, you have to then decide between the prime minister and the finance minister what might be missing but should be talked about.”

How does the government generate its forecast for the economy?

“The Department of Finance surveys a set of institutions — all of the Big Five banks, a couple of the large pension funds, a few insurance companies, the University of Toronto even has a chief economist who submits to the process. And they're asked to give their views on 10 or 12 different variables over a number of quarters over a number of years. That input has a huge impact on the rest of the budget because it creates an average baseline that establishes, based on historical patterns, the relationship between, say, revenue and GDP.”

Once the budget is passed, how does the money actually get distributed? 

“Quite literally, the budget is one massive Excel sheet. It's a planning document. There's nothing underlying that Excel sheet that does anything. In most cases for establishing a new program, the Treasury Board has to take all of the things that were approved in the budget and go back to those departments to deliver an assessment to see if the departments are set up with a plan on how to spend the money. There's a whole bunch of work behind the scenes to make sure that the plan will be ready. Then we go and get money. Once we've gotten the money, then departments can actually start to do stuff. And if all of this sounds like it's a bit of a delayed process, it is. It means that any new idea that may have started for the first time in a budget may not actually start to move until 12 months later.”

This interview has been edited for clarity and length. Listen to the full conversation here.