Proceedings of the Standing Senate Committee on
National Finance
Issue 20 - Evidence
OTTAWA, Wednesday, March 5, 1997
The Standing Senate Committee on National Finance met this day at 5:15 p.m. to examine the Supplementary Estimates (B) laid before Parliament for the fiscal year ending March 31, 1997.
Senator David Tkachuk (Chairman) in the Chair.
[English]
The Chairman: This is the first meeting of the committee to examine Supplementary Estimates (B), the final supplementary for fiscal year 1996-97. Appearing from Treasury Board are David Miller, Assistant Secretary, Expenditure Management Sector, and Andrew Lieff, Assistant Director, Estimates Division.
Mr. David Miller, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada: Honourable senators, I am appearing before you today to discuss the government's Supplementary Estimates (B) for the fiscal year 1996-97. These are the final regular Supplementary Estimates for this fiscal year.
These Estimates were introduced in Parliament on March 3, 1997 and do not increase the expenditures for the current fiscal year as set out by the Minister of Finance in his 1996 budget. They are consistent with his budget tabled on February 18, 1997 as well.
Items included in these Supplementary Estimates serve two purposes. They seek Parliament's authority to spend money which, while provided for in the fiscal plan set out in the 1996 budget, was not included in the 1996-1997 Main Estimates. The authority sought from Parliament in these Supplementary Estimates is to spend $816.2 million for which provision has been made.
Second, they provide Parliament with information about changes in projections of statutory spending it has already approved in legislation. The statutory adjustments included in the Supplementary Estimates (B) reflect a net decrease in expenditures of $1,368.6 million from the amounts in the Main Estimates and Supplementary Estimates (A) for 1996-1997. These adjustments are consistent with information in the Minister of Finance's budget of February 18, 1997.
Some of the major items for which appropriations are requested include $128.4 million for National Defence for contribution to the provinces under the Disaster Financial Assistance Arrangements to provide assistance related to national disasters, $100 million of which was for the Saguenay flood.
Another item is $119.4 million for nine departments and agencies for separation programs for public service employees, such as the Early Retirement Incentive and the Early Departure Incentive, and includes $61 million for National Defence.
Another item is $108.3 million for 16 departments and agencies as the Operating Budget carry-over for 1995-96. This is now a standard item in each Supplementary Estimate. It reflects a feature of the government's approach to operating budgets and is intended to reduce year-end spending and improve cash management. This feature allows managers to carry forward, from one fiscal year to the next, an amount of up to 5 per cent of the operating budget of the previous fiscal year. The operating budget includes salaries, operating expenses and minor capital expenditures.
The next item is $63.3 million for Citizenship and Immigration for grants to certain provinces to help defray their cost of providing immigrant settlement services.
Another item is $61.7 million for Agriculture and Agri-Food Canada for grants under Phase II of the program to assist individuals and organizations to adjust to changes to the grain transportation system.
The final item is $54.3 million for National Revenue, required to implement tax measures announced in the 1996 federal budget, to pursue tax policy priorities and to prepare for the harmonized sales tax.
The $280.8 million balance is spread among a number of other departments, agencies and Crown corporations mentioned in the Supplementary Estimates.
In terms of the statutory programs, the major items are a further decrease of $1 billion in public debt charges from amounts forecast in the Minister of Finance's October 9, 1996 Economic and Fiscal Update, due to more favourable interest rates than originally forecast.
The next item is a decrease of $667 million in forecast payments from the Employment Insurance Account resulting from the reforms to the Employment Insurance system which have restrained the growth in benefits.
The next item is a decrease of $330 million in payments by Human Resources Development for Old Age Security, the Guaranteed Income Supplement and the Spouses Allowance, reflecting changes in the forecasts upon which these payments are based, such as the Consumer Price Index and the number of recipients.
The next item is a decrease of $214 million for the Department of Finance related to the cash component of the Canada Health and Social Services Transfer in recognition of a corresponding increase in the value of the tax component of the transfer flowing from higher-than-expected personal income and corporate tax yields. There is no net change in the overall entitlements for 1996-1997.
The next item is $291.7 million in transition payments to NAV CANADA from Transport Canada in 1996-1997. This amount is equivalent to the air transportation tax which the Government of Canada will continue to collect on the corporation's behalf until NAV CANADA establishes user fees, anticipated within the next two years, to replace the air transportation tax.
The next item is an increase of $253 million in equalization payments to provinces by the Department of Finance reflecting changes in the forecast upon which these payments are based, such as provincial tax levels, population and tax revenues.
The next item is $155.1 million for Human Resources Development for payments to provinces and territories under the Canada Assistance Plan. This is in accordance with the transitional arrangements made to settle provincial and territorial claims resulting from the replacement of the Canada Assistance Plan by the Canada Health and Social Transfer.
The $142.6 million balance is spread among a number of other departments, agencies and Crown corporations mentioned in the Supplementary Estimates.
Mr. Chairman, honourable senators, that concludes my opening remarks. I would be pleased to respond to any questions you may have concerning these items.
Senator Bosa: I have always thought that Supplementary Estimates are in addition to what has already been budgeted and spent. Are you telling me that this is not the case?
Mr. Miller: When the Minister of Finance puts forward a budget, there is, within that budget, provision for items that will require parliamentary approval and are not yet finalized, simply because the legislation has not been passed or for some other reason. These would normally be included in Supplementary Estimates. The Main Estimates are tabled in February, but we make provision for two Supplementary Estimates during the year. We normally indicate at the beginning whether the amounts included in those Supplementary Estimates are within the overall plan presented in the budget of the Minister of Finance.
Thus, although we are asking Parliament for additional spending authority, it is within the original plan that was laid before Parliament in February of 1996.
Senator Bosa: When the Minister of Finance presents his budget, there are certain items that are not in the legislation. Therefore, he has to present legislation which would make it legal for the expenditure of those amounts.
Mr. Miller: That is one of the situations in terms of the items that are not included in the Main Estimates because, of course, we cannot anticipate the passage of such legislation. There are other items which make up the bulk of the items in these Supplementary Estimates which simply were not finalized. Either the details were not finalized or, in fact, the item may not have been known. There are general provisions put in there to accommodate those kinds of things.
Senator Bosa: I think you said that some $490 million were set aside for buy-outs for those people who want to take an early retirement. Is that a complete figure? The government announced that it would reduce the size of the civil service by 45,000 persons. That was started in 1993. Has that objective been met? If it has been met, was it met through attrition or through buy-outs?
Mr. Miller: The first figure I gave, senator, was $119 million for the nine departments and agencies. When these programs were announced, the government recognized the obligation to make these payments to these people. In fact, that is one of the other items which I did not include in my description of provisions in the plan of the Minister of Finance. However, under normal accounting rules, when the government makes an announcement wherein the economic event or obligation is actually there, the Auditor General requires us to record it at that time. When these programs were announced, the money was charged to the deficit for that year. In accounting terms, that is how it was treated. Parliament still must approve the actual expenditure of cash. Therefore, it moves from being simply an accounting entry to one where these ministries have the authority to make the payments to people.
At the time, we expected the departure costs in the program review to be about $2.3 billion. In recognition that there would be normal attrition in departments, as well as other things going on, over the four-year period that ends in 1997-1998 for the first phase of program review, which was extended one year into 1998-1999 for the second phase, we set aside $1 billion. We told departments, because there are costs they cannot control in order to achieve their reductions, those would be sought through Supplementary Estimates. The total costs, with the addition of the extra year I mentioned, are up to about $3 billion, and the number of people affected may be as high as 55,000. There was a provision made to make those payments. Although we are getting Parliament to approve it now, from an accounting perspective we are charging that item back to the year in which the government actually introduced the program.
Senator Bosa: The projection, then, in 1993 was increased by something in the order of 30 per cent; is that right?
Mr. Miller: No. There are two programs, which is why I was careful to distinguish. The first phase of program review took a four-year perspective out to 1997-98. It was then extended through the budget of 1996 to include 1998-99. It was the second portion of the program, therefore, which included further reductions. On average, they amounted to about 3.5 per cent per department. There was an additional cost by increasing the size of the program for that extra year. However, there has not been any additional costs so far in the Estimates of the original amount.
Senator Bosa: Did we exceed, then, the numerical reduction in persons employed by the government from 45,000, as was announced, to 55,000?
Mr. Miller: That change of about 10,000 is due to the extension into 1998-99. In fact, we are only half-way through the program itself. We still have the 1997-98 fiscal year, which is about to start, and the 1998-99 fiscal year.
In terms of the implications for the number of people laid off or who lose their jobs, it is important to note we are talking about jobs taken out of the public sector; they are not necessarily jobs lost. For example, the transfer of responsibility for the air navigation systems to a not-for-profit corporation moved 6,000 public servants out into that corporation. In fact, no one lost his or her job.
We try to avoid using the numbers 45,000 or 55,000. Certainly, the reductions in government spending are associated with the reduction. However, in fact, in that particular case, the jobs were continuing.
Thus far, there have been very few people who have actually been laid off as a result of this program. That is simply because many people have taken advantage of the departure programs. Others have been able to find other jobs within the federal public service.
Senator Bosa: Are the buy-out provisions still in force? If they are, until when are they in force?
Mr. Miller: The early retirement program ends at March 31, 1998. The early departure program ends in June 1998. The reductions will continue through into 1998-99, but the programs terminate at the beginning of that year.
[Translation]
Senator De Bané: Mr. Miller I would like to ask you some questions about the substantial cost reduction in the Department of Finance. Is this reduction due to the drop in interest rates or is it because the government has had to borrow less money or because of the slight rise in the Canadian dollar? What explains this cost reduction in the Department of Finance?
It is extraordinary to see that as far as your overall budget is concerned, you are within about 0.25 of one percent of what you predicted a year ago. You are extremely accurate in detailing expenditure. I see that in the Department of Finance costs are not as high as what you predicted. What are the reasons behind that?
[English]
Mr. Miller: First, with regard to the public debt, certainly, the bulk of the savings in the interest costs are due to a reduction in the rates as forecast.
When the Minister of Finance brings forward his budget, one of the conventions is that he will seek outside guidance on what economic assumptions should underlie those numbers, both in terms of the interest rates and the growth in the economy. Since those are what we consider to be conservative numbers, in fact, the actual change in interest rate has resulted in the largest proportion of that reduction.
In terms of the other elements, of course, as the Minister of Finance announced, the deficit for this year will move from approximately $24 billion down to $19.7 billion. There is a change, therefore, of $5 billion in the total amount of debt outstanding. However, since the total debt of the government is over $600 billion, the major part of the change is due to the change in the interest rate.
On the third item, which is the impact of the Canadian dollar and whether it will go up or down, about 2 per cent, or $1 billion, of that amount is actually borrowed from outside Canada. Therefore, it has a marginal, if any, impact on the interest rates and the costs of the public debt.
[Translation]
Senator De Bané: Throughout the years when we had very high deficits we borrowed money on foreign markets. Now that there has been a slight change in the situation, do we continue to borrow on foreign markets or only in Canada?
[English]
Mr. Miller: A very small portion of the debt is borrowed externally. To the best of my recollection, for this year in particular, and probably for 1997-98, there would be no significant external borrowings. In fact, the projections of the Minister of Finance would lead us to a situation where, for the following year, there would be no borrowings outside by Canada at all. It would all be generated through accounts held by the federal government, principally the Public Service Superannuation Account, which is where the interest rate would make up the difference. Certainly for this and next year, there is virtually no external borrowings.
It is interesting that several years ago we actually encouraged foreign borrowings in order to have a broader variety of debt and debt instruments available to the Minister of Finance. Lately, we have been going in the other direction.
The Chairman: Could you repeat the latter portion of your answer? You mentioned the Public Service Superannuation Account.
Mr. Miller: Yes.
The Chairman: Are you borrowing from that?
Mr. Miller: This is an interesting item. It has been in the local papers over the last few days. In actual fact, 17 per cent of the total debt owed by the federal government is to the Public Service Superannuation Accounts, approximately $106 billion. This is in complete accordance with good accounting principles and is blessed by the Auditor General in our annual public accounts.
Other jurisdictions, notably the United States but also most of the other OECD countries, do not take into consideration those kinds of borrowings which are internal to the operations of government when they calculate their deficit.
We keep our numbers in two ways, which is important to remember: the public accounts basis, where we show a deficit which includes the amount of money borrowed from the superannuation accounts; and a national accounts basis which is used to compare us to other countries.
In actual fact, when our borrowing requirements get down to $9 billion or $10 billion, which can be financed from the amount of interest that is credited to the superannuation accounts, by international standards we will have balanced our budget.
These numbers are interesting and do not often come to attention even though the difference is so large. There are other minor adjustments, but that is the major difference.
[Translation]
Senator Mercier: In the case of National Defence, I see that there is a sum of $128 million allocated to additional grants including $100 million for the flood victims in the Saguenay. That is in addition to what was already given. Is Quebec contributing 10, 15 or 20 per cent of this amount of $100 million? Are there control mechanisms to ensure that the $100 million is actually being spent on disaster victims?
[English]
Mr. Miller: The arrangements we have in place for disaster assistance require that there are costs incurred which fall under the category of items where there is no insurance or which otherwise could not have been insured. We base the amount of money the federal government provides on how much the province has paid.
That $100 million represents a portion of the money that the province of Quebec has actually paid out to the recipients of the assistance. They pay out $1, the bills come in to the federal government which reviews the expenditure to ensure it is appropriate, and then we pay a portion of that dollar back to the provincial government, in this case, Quebec.
It is unusual in this case that we would be making the payments this quickly. However, given the size of the requirements, which could be in excess of $600 million, we had external auditing of the requirements and recognized that $100 million would be well within the eventual requirements for the federal government to compensate the province. We have provided that money quite quickly in this case, but it is based on actual provincial expenditures for assisting the flood victims.
[Translation]
Senator Mercier: Have those $100 million been spent? You gave theom? Perfect.
[English]
The Chairman: If they spend $1 in Quebec on Saguenay, they would send an invoice or something.
Mr. Miller: It is a whole bunch of invoices. It is a box of invoices.
The Chairman: What do you send back to Quebec when they spend $1?
Mr. Miller: I believe the federal compensation is between 30 and 40 per cent of the provincial expenditure.
The Chairman: So when Quebec spends $1, we send back 40 cents?
Mr. Miller: That is correct.
The Chairman: Is this $100 million amount spent on Saguenay by Canada alone, or does that include the amount of money that Quebec also spends?
Mr. Miller: That is in relation to the amount of money Quebec has already spent.
The Chairman: Did they spend $400 million?
Mr. Miller: They would have spent $300 million and sent that in. In fact, we have not received all the detailed invoices. We have done an external audit to ensure that the $100 million is within that amount, because it sometimes takes years to go through these and ensure that they are lined up. However, because of the size of the assistance and the auditing of actual provincial expenditures to date, there is no question that they have spent $300 million. We are, therefore, giving them $100 million because it is well within our ratio.
Senator Lavoie-Roux: I had heard that the contribution of the federal government to the Saguenay problem was much higher than the provincial one. I am surprised now to hear you say it would be $100 million federal or $300 million provincial. That is not what we heard last summer. I heard to the contrary, that the provincial contribution is only one-tenth that of the federal. Am I wrong?
Mr. Miller: This is only one program, and there are other assistance programs put into place. This program has been in place since the 1970s and has been standard assistance for disasters. There are other federal programs in place from an economic perspective to assist businesses, for example. In terms of actually providing relief for out-of-pocket costs, there are two components to this, but this would be part of our standard payment.
If the total expenses were $600 million, then the provincially eligible portion would be $300 to $340 million and the federal share would be $240 to $260 million. It is roughly 40 to 45 per cent that the federal government would pay. Under other programs providing assistance to industries, it would be completely different. I do not have that information with me, and it is not included in these Estimates.
Senator Forest: Going back to Senator Bosa's question about the separation programs for public service employees, you mentioned that in the case of privatization of navigational services, many employees would not lose their jobs but would be moved over to NAV CANADA. In those cases when their employment with the federal government ceases and they are moved to another agency, would they receive a severance package?
Mr. Miller: That is an important question. NAV CANADA is one of our first examples of a significant move from within the public service to outside. The employees received what we would call our standard separation package. In other words, as a public servant, I am entitled to roughly one week of leave for every year of service. That is the equivalent to people leaving in the private sector after a period of time.
In the NAV CANADA situation, those particular payments were provided to the employees. They started again in terms of accumulating severance payments with the new organization. No one leaving the government and going to NAV CANADA received payments under the special programs we had, which is the early retirement and the early departure incentives. What they received was strictly in recognition that they were no longer a public servant. They were moving out and they got their regular severance to which any public servant is entitled upon leaving the government.
Subsequent to that, we have put arrangements in place whereby those benefits will be transferred to the new organization, so there will not even be that payment of severance, in recognition that that should be paid upon overall retirement rather than in the change of employer.
This was a unique case because it was our first one. We have changed the process for subsequent devolutions outside.
Senator Forest: When we did a lot of out-sourcing at CN, that is the kind of thing that was done. They would, of course, have to start at the bottom, again, for seniority. Is that the case here, or would they carry their seniority with them?
Mr. Miller: It is my understanding that they carried their seniority with them, again because it was the same group of employees that was moved over. They were not being absorbed into another organization. They were actually the entire unit. By becoming a new organization, it is my understanding they negotiated to retain their seniority.
Senator Cools: Where could I find, in this document, the account of the moneys that were used by government to settle the Mulroney case? Would that be here?
Mr. Miller: It is not there. I do not believe there has actually been a settlement reached.
Senator Cools: That is the whole problem. That is one of the disadvantages under which we in Parliament labour. The newspapers said it was done. The Minister of Justice said it was done. How can we find out how it was done, where it was done and where is the accounting of those moneys?
Mr. Miller: I would assume that, if there was any settlement, the money would come out in the next fiscal year and obviously be included in the Supplementary Estimates for 1997-1998.
The Chairman: Why would that be?
Mr. Miller: They would appear in the Supplementary Estimates for next year only if there was a settlement and a payment that was actually made. Then it would appear in the Estimates for that year.
I hate to pick an example like the settlement in that case, but if the economic event had occurred, then it would be charged to the deficit of the year in which it occurred, as I mentioned in the case of the departure programs. However, the authority to actually make a cash payment, or whatever that is, would still require parliamentary authorization. Therefore, it would have to appear in Supplementary Estimates, or in the Main Estimates for that matter.
The Chairman: This would be different from the blended sales tax budgetary items which are placed in last year's records even though they took place in the year after?
Mr. Miller: It may not be. In fact, for the harmonized sales tax, the agreement was reached last year but the payment was not made. Therefore, the payment appeared in Supplementary Estimates (A) for this year.
From an accounting perspective, the Auditor General requires the government to recognize the obligation or liability with the occurrence of the economic event. The actual opportunity for Parliament to approve it occurs later. Of course, if Parliament did not approve it, then that item would be removed from the Estimates.
Senator Cools: I understand the witness to be saying that no money has been paid yet in the settlement of the Mulroney case, the Airbus case.
Mr. Miller: To the best of my knowledge, no, there has not been. Again, depending on the nature of the payment and on the amount, there may have been sufficient authority within the Main Estimates of the department or in the existing Supplementary Estimates.
I pointed out to this committee when we were discussing improving the reporting to Parliament that these Supplementary Estimates tend to be only incremental amounts. If things can be accomplished within that, we do not have the opportunity to point out those differences.
We would like to work with parliamentarians over the next year to improve on that because I do not think it actually represents the best way of portraying it.
Senator Cools: In any event, this subject matter has preoccupied our minds in several committee meetings. At some point in time, I strongly urge that this particular committee take a very careful look at those payments and how they are being made or how they have been made.
With regard to the Department of Justice, on page 89, under Votes 15B and 20B, regarding the Commissioner for Federal Judicial Affairs, there is an amount of $375,000. At the bottom of the page, it refers to legal counsel for defence of judges. The next item refers to inquiry and other legal costs. One item is $200,000. The other item is $375,000. Could I have an explanation for that?
Mr. Miller: Yes, the two items are related. Under the Commissioner for Federal Judicial Affairs, there is a requirement for them to go through the processes necessary to review the conduct of judges. Those two items reflect the cost of legal counsel to defend the judges. The next item is the cost of having the actual inquiry that reviewed the conduct of the judges. They are closely related, obviously.
Senator Cools: They are a little creative, too, in how they are reported.
Could you tell me who were the judges that were being defended and who were the legal counsel who were being paid?
Mr. Miller: I do not have any information on the legal counsel who were being paid to defend the judges, but I have information in terms of the actual inquiries.
Under the legal defence, there were five judges involved in different actions. There were two fairly high profile cases, Chief Justice Isaac and Mr. Justice Jean Bienvenue.
Senator Cools: There were five judges, you say.
Mr. Miller: Yes. I do not have any information on the other three. Because the Commissioner for Federal Judicial Affairs is responsible for over 800 federally appointed judges, it could be any of those. Those were the two high-profile cases. I cannot tell you the other three.
Senator Cools: But I take it that the Canadian Judicial Council is funded out of Commissioner Goulard's budget?
Mr. Miller: The commissioner has a budget for that provision; that is correct.
Senator Cools: It is not clear to me. It says here, "Commissioner for Federal Judicial Affairs -- Canadian Judicial Council -- Operating expenditures".
Mr. Miller: Yes. They are separate.
Senator Cools: I thought they were separate with separate budgets.
Mr. Miller: No. In fact, they are both under the agency called the Commissioner for Federal Judicial Affairs, but several years ago, to maintain the separation and segregation of those two functions, they were put under two separate votes, because in some cases, the judicial council could actually have some kind of action against the commissioner. Vote 15 relates to the commissioner and Vote 20 relates to the council. The council is, of course, the entity that undertakes the inquiries but the commissioner is responsible for the defence of the judges. In this way we are able to segregate those responsibilities.
Senator Cools: When one sees the costs of the Canadian Judicial Council per annum, the cost is extremely slight. However, when you look at these other numbers, then you begin to get a handle on the actual costs involved. If it is not here, it would be elsewhere. What is the cost of the Canadian Judicial Council per annum?
Mr. Miller: It is provided on this page. It is one of the things we do. It started out at $533,000.
Senator Cools: And then one inquiry and one set of defences cost $375,000.
Mr. Miller: Again, for the council, the inquiry, because of the profile and implications of it, cost $325,000 and there was another $50,000 for external counsel to that group to assist it.
Senator Cools: I am always interested in what these external counsel get paid. Is there any way you could give me some information as to who the external counsel are and the rates at which they are being paid?
Mr. Miller: Unfortunately, I do not have that information. We could provide it to the committee.
Senator Cools: Again, Mr. Chairman, some of my concerns seem to keep returning to the same department. At some point in time, perhaps we could have the deputy minister or the minister back before us.
I have another question from page 88, regarding the National Judicial Institute. Could you tell us what that money was needed for?
Mr. Miller: I certainly hope so.
Senator Cools: The National Judicial Institute has a lot of trouble explaining what it spends its money on.
Mr. Miller: May I read from the notes that have been prepared to deal with that?
Senator Cools: Who is the chairman of the National Judicial Institute?
Mr. Miller: Unfortunately, I do not have that information right now, but we can get that for the committee.
If I could read from the note here, the institute co-ordinates judicial education in Canada and sensitizes judges to current and emerging issues. In keeping with the joint commitment of the federal, provincial and territorial governments to provide annual joint funding of $610,000 to the institute, the federal government must increase, in 1996-97, the grant to the institute by $140,000 for a total of $280,000.
Senator Cools: But is the institute a university? Is this money being paid to a university? Is it a collection of lawyers and judges? What is the institute itself? It seems to me that the business of educating people is very well handled by universities.
The Chairman: Where would they meet?
Mr. Miller: Unfortunately, I do not have any other information.
The Chairman: Could you provide that for us? We would be interested in where they met and whether it was for a week or two weeks and so on.
Senator Cools: What it is, how it is constituted and composed.
On page 90, under the Department of Justice, what is that Human Rights Tribunal Panel?
Mr. Miller: The Human Rights Tribunal has always existed, and what this represented was a combined function for a tribunal that used to be included in the Estimates of the Human Rights Commission, and again for separation and clarity of function, they were divided in the Supplementary Estimates (A) into two distinct votes and, therefore, two distinct entities. They do have some cross-jurisdictional issues where the tribunal and the panel could actually have some common work. What this item in the final Supplementary Estimates represents is a fine-tuning of those costs that previously were all in the Human Rights Commission, segregating them properly into what is under the tribunal and what remains under the commission. This is the administrative part of running the tribunals.
Senator Cools: On page 61, we see CIDA grants. Could you tell me how much of that money was paid to the Canadian National Judicial Institute or the Commissioner of Judicial Affairs to send judges abroad to train judges in judicial independence in other countries?
Mr. Miller: Unfortunately I cannot tell you. I will have to get back to you with that information.
Senator Cools: You cannot tell me how much of that money went there? We were told there were judges who went to, I believe, the Cameroons and Hong Kong. Apparently, it is quite a few.
Mr. Miller: I was not aware of that but we can find out the information and provide it.
Senator Cools: The reason I am particularly curious is that we passed a bill, Bill C-42, by which we were trying to limit the international activity of the judges at the time. I suspect that people are continuing as though nothing has changed, so I am curious as to how much money is being paid, who is sent, who is receiving the money, who is deciding who goes, and so forth. It is very hard to get information.
Senator Forest: Are you suggesting, Senator Cools, that our judges should not be doing anything outside of Canada?
Senator Cools: That is what the law says. That is what the Judges Act says. We fought this last September. The Judges Act is extremely explicit that judges may not engage in any such employment.
In any event, I would appreciate any information that you can get. I have been searching for that information from CIDA, as to how that is processed, who is making the decisions and so on. It is not easy to get. Anything you could get for me would make me happy. It is a preoccupation with me that Canadian judges are developing international interests.
Senator Lavoie-Roux: Is it usual that the Governor General asks for an almost 10-per-cent increase in his budget? Are there special circumstances that justify this?
Mr. Miller: It is highly unusual that the Governor General would ask for an increase in operating costs. Normally that office has been subject to the same kinds of reductions as other federal department or agencies. We did a fairly thorough review of the incremental requirements to ensure that services continue. It was not anything specific. After several years of reductions, it was merely in recognition that that would be a requirement for incremental funding to maintain facilities and programs. It was simply in recognition that they needed some help after several years of reductions.
Senator Lavoie-Roux: Do you have the figures indicating by how much it was reduced? Right now the budget is almost $10 million. What was it when the reductions started?
Mr. Miller: The reductions actually started back in the early 1980s. It has been almost 15 years of continual change. There are other factors involved. I do not have that information. Honours programs have been added, as well as other things. I would have to come back with a report to the committee on the status of that item.
Senator Lavoie-Roux: Will you do the same thing for other people whose programs have been reduced year after year and are having a hard time? There is a catching up of sorts. Will you do that with everyone?
Mr. Miller: No. It was in recognition of the particular responsibilities of the Governor General in dealing with several different items that are beyond the control of the office, such as visits of foreign dignitaries and other things, for which assistance was provided.
We looked at it from the point of view that if they could control their costs, that is one thing. However, the additional money is for elements where they have to respond to decisions made elsewhere, such as visiting dignitaries or heads of state. It is strictly for operational expenses, the cost of minor repairs, ongoing paper requirements and things like that.
The Chairman: There was obviously a flood of them this year. Does that mean that for this coming year it will be less? In other words, if this was an unusual year, would next year's requirement be $724,000 less?
Mr. Miller: If my memory is correct, this was an adjustment that affected 1997-98 as well. To a certain degree, that increase was reflected in the Main Estimates tabled in February. However, I do not have that document.
Senator Lavoie-Roux: It would be a surprise for the average taxpayer to suddenly realize that the Governor General gets almost $1 million. To be exact, it is $724,000.
On page 3 of your presentation, you said $63.3 million went to Citizenship and Immigration in order to support certain provinces and help them assume their cost for establishing of immigrants. Can you break this down in terms of the amount of money given to each province?
Mr. Miller: This program started off in the Main Estimates for 1996-97 at $150 million. This additional amount represents an opportunity for the federal government to negotiate some changes in responsibility for the provinces. These negotiations have not been concluded. Therefore, it is premature to talk about the eventual allocation by province. In actual fact, this amount is in anticipation of the government's making arrangements with the provinces before the end of this fiscal year.
Senator Lavoie-Roux: My next question is in relation to the second paragraph under that one. You say that $54.3 million will go to National Revenue to apply fiscal measures which were announced in the budget and to prepare for the application of the harmonized sales tax. How is it being split? How much is going to the application of the harmonized sales tax?
Mr. Miller: We have those details. In terms of the different elements, the implementation of the 1996 federal budget measures will require an additional $23.7 million. We are dealing with in excess of 12 million taxpayers. Examples of changes that have an impact on Revenue Canada are the RRSP contribution limit freeze, child care expense deductions, charity enforcement capabilities and new non-taxable senior benefits. There are several of these things, but there are a multitude of changes to the system.
The unfortunate part is that with a process such as our tax system, while each change or added line does not seem like much, when you multiply them by 12 million, they become significant, particularly when you have several thousand people processing claims or adding information into the computers.
That would take care of measures identified in the 1996 budget.
The implementation of tax policy priorities is about $10 million. That is workload associated with things such as the open skies policy where we are encouraging an increase in travellers. Therefore, the customs and borders operations require an increase in personnel.
Preparations for the harmonized sales tax will be $16.6 million. Across Canada, we have about 1.7 million entities reporting under the GST. There are changes and harmonization requirements in order to deal with that.
Under the legislation of Revenue Canada or National Revenue, in order to prepare for these things, they are allowed to spend money on developing a system to allow us to put things in place smoothly.
Senator Lavoie-Roux: That does not take into account money that will be given to the provinces to allow them to harmonize their taxes. It would take almost $17 million to do that work.
Mr. Miller: To make the changes necessary, that is correct. However, that could result in significant administrative savings further down the line as well.
Senator Lavoie-Roux: You will tell us next year.
Mr. Miller: I would love to do that. Revenue Canada's budget is our largest operational requirement at about $2 billion. That cost is related, essentially, to personnel. It is a very comprehensive and complex department. I would love to find examples where we manage to save money through these things.
The Department of Finance has a tendency to implement tax policy and changes. It sounds wonderful. They have provincial agreements or whatever is necessary to do it. Then they give it over to Revenue Canada and tell them to go ahead. These items reflect one of the first occasions where Revenue Canada has actually been given additional funds to assist them in implementing significant adjustments to their collection and processing.
Senator Bosa: Apparently, the Department of Immigration is increasing its operating expenses. How is the cost recovery program assisting the department in keeping the budget down?
Mr. Miller: One of the elements that we use is cost recovery and the right of landing fees. We reimburse the department for their direct expenses associated with processing those people.
In actual fact, this portion of the Supplementary Estimates recognizes that these costs were incurred in relation to that. Since they cannot actually use that revenue, we provide it to them in the Supplementary Estimates. We are adding up the expenses that the department incurred and providing them with that amount, but it is against that program and the cost recovery initiative there.
Senator Bosa: Is the cost recovery program applied only to prospective immigrants who apply to come to Canada from outside, or does it also apply to political refugees or others who apply within Canada?
Mr. Miller: I am not sure. My understanding is that the fees were applied on application for people to come to Canada. In other words, you present your application and your $975. If you are not accepted, then you are reimbursed that amount of money. I am not sure if it applies to those who actually gain refugee status by arriving and claiming it at that point.
Senator Bosa: There are quite a number of people who want to immigrate to Canada who are already in Canada. They are asked to apply in Buffalo. They must apply from outside of Canada. Apparently, there is no provision for applying in Canada. Does cost recovery apply to those people as well?
Mr. Miller: My assumption is that it would. I am not sure that there would not be a difference between those applying and those using the refugee status to gain entry into the country.
We will clarify that for you and provide the information to the committee.
Senator Bolduc: I missed your opening statement because I was at the Foreign Affairs Committee meeting.
Have you talked about student loans?
The Chairman: No.
Senator Bolduc: Under the Human Resource Investment and Insurance Program, the department lists a $145 million increase for the provision of liabilities, including liabilities in the form of guaranteed loans under the Canada Student Loans Act. It also shows a $32 million decrease for the provision of funds for interest payments to lending institutions under the same act.
What do these two figures represent and how are they related? Are they student loans that have gone into default? How many loans are involved? If it is increasing, what do you intend to do about it?
Mr. Miller: First, yes, there have been some changes to the program. Concerning the $145 million increase, for example, the weekly loan limits were raised from $105 to $160 per week in 1994. Those kinds of things are working through the system.
There has been an increase in the ability of the financial institutions to identify the loans that are in default. Previously, it did not matter how old the account was. Basically, the banks were reimbursed upon saying, "We cannot find the individual. Therefore, pay us off".
Senator Bolduc: Did the students declare bankruptcy?
Mr. Miller: Many of them moved from whatever town they were in to some other town and the bank could not find them.
In the past, under this program, much of the onus was placed on the federal government to identify them and track them down.
Senator Lavoie-Roux: When the last figures for bankruptcy came out, they were very high. We were told that a large percentage of them were student bankruptcies.
Mr. Miller: Yes, and they do that basically to get the loan removed from their financial record after one year. However, I am not suggesting that is the case here. In fact, there has been an increase in the costs of the program.
We have another program under the Canada Student Financial Assistance Act. Instead of having the federal government guaranteeing the loan, the financial lender is responsible for the loan but we pay them a premium for the risk of taking on that requirement. In that way, we hope to minimize the federal government's liability under the entire program.
We are also trying to increase our ability to identify individuals who owe amounts under this program and to offset it with other programs. That is something that we have been working on for the last several years.
Senator Bolduc: Under the provincial legislation years ago, there was an agricultural loan system for farmers. At the beginning, the loans were for five or six years. When some farmers experienced difficulty repaying their loans, instead of saying, "We will squeeze you a little", they said, "Let us increase the loan to 10 years." After that, they had difficulty. Instead of saying that people had either claimed bankruptcy or not repaid their loans, they said, "Let us increase it to 15 years." I guess it is 40 years now. There was no difficulty to get the money back from the farmer except that the repayment period was long. Did you try that method?
Mr. Miller: No. In fact, the collection of accounts receivable is something in which we are very interested.
At the present time, the federal government has approximately $4 billion worth of accounts receivable. We are working with all the major departments to try to bring that number down. That excludes tax receivables.
We met with some officials from the United States last fall to see if we could learn anything from them. They showed us their numbers. They had $240 billion in receivables that were not related to income tax. Of that amount, almost half were for farmers and the loans were all over one year old.
By international standards, we are already very good at keeping our accounts receivable down, but we are trying to improve that as well.
The Chairman: Would that include all the Crown corporations such as the Federal Business Development Bank and the Farm Credit Corporation and all of those people?
Mr. Miller: My assumption is that these would be accounts owing rather than defaulted loans. Those financial intermediaries, such as the Farm Credit Corporation, would be outside of that calculation. Quite honestly, their requirements are fairly small on loan defaults; they are not substantial.
The Chairman: If they are not loans, why do people owe us money?
Mr. Miller: There are a variety of reasons such as overpayment of programs. There are loans but there are a variety of other mechanisms. For example, in agriculture, where you have advanced payments for crops, we provide producers with money ahead of time so that we can have a much better and more organized way of having producers or farmers sell their crops instead of having them all trying to do it the day after they harvest. There are those kind of loans or advances.
Obviously, a fair amount of that type of thing does on in different programs, so we end up with those kind of accounts receivable, but they are still very small in relation to the overall outstanding amounts.
The Chairman: Those are fairly current. Those are your advances on your quota system, is that right?
Mr. Miller: Yes.
The Chairman: Those usually roll in as the crop is harvested, so those would be fairly current. In other words, they would not represent a long-term debt.
Mr. Miller: No. We find that if you can make the payment within 30 days of noticing that the payment is past due, your success rate is 75 to 80 per cent. If you let that slip to three or six months, it drops off completely.
Senator Bosa: Those funds that you cannot recover are not a deductible expense for you, are they?
Mr. Miller: Actually, the federal government has to make provision for the amounts it may not be able to recover.
The Chairman: Where would we find the item detailing the money spent for our troops going to Rwanda and Zaire. I gather that that would not have been a planned expense.
Mr. Miller: It would not be a planned expense but, given the size of the overall budget of the Department of Defence, they did not require incremental funding for that. The items you see in here for defence are ones for which they received incremental funds for a specific purpose. Within their $9 billion or $10 billion, if something was a priority, it would be done.
Most of our missions, either for the UN or NATO, the cost of some of which are recovered afterwards, are just part of the ongoing base of National Defence. Quite often those items will not appear in Supplementary Estimates if they can find the funds elsewhere.
The Chairman: Even if they found the funds elsewhere, would they not ask for a decrease somewhere and an increase somewhere else in Supplementary Estimates?
Mr. Miller: We are paying the soldiers anyway. The salaries are there, as the operational costs may be. They have one vote to cover operational expenses. If they had to buy all new tanks or something, that may require a shift of money between capital and operating. However, right now the vote structure for DND is based on inputs. All the salaries and operating costs are in one vote and capital expenses over a certain level are in another vote. If there is no requirement to move between those two, those items become invisible to Parliament.
As I mentioned earlier, that is one of the problems that I personally see with our fundamental rule of Supplementary Estimates. We do not come to Parliament to ask for additional money if we can find it somewhere else within the amounts already approved, and that tends to distort the information a little.
Senator Bosa: Do soldiers not get extra salary when they are in a war zone?
Mr. Miller: I am not sure what the difference would be or whether it applies in all cases for these types of missions. Just for your information, the salary budget alone of National Defence is $5 billion.
Senator Lavoie-Roux: What about the cost of the operation in Haiti, not just from the point of view of the soldiers, but also from the point of view of training police? They are prolonging it for some time. What is the cost of that?
Mr. Miller: I do not know what the cost of that is or how it is funded. We can provide that to the committee.
I do not know whether there is a significant number of people there. We will provide some information on that. I do not know whether that is cost-recovered. I doubt if it is within the mandate of the RCMP to do that so it is probably paid through Foreign Affairs.
Senator Lavoie-Roux: In addition to training police, our soldiers are there and they have decided to prolong their stay. What is the cost of that and what is the purpose of it?
Mr. Miller: I do not have that information here. We will have to report back to the committee on that.
The Chairman: Is there a separate item under Canadian Heritage for the flags? Was that a planned item in the budget?
Mr. Miller: The Canadian Identity Program is found at page 38. Under "Explanation of Requirement" you will see additional operating costs of $15 million. That figure was offset by a transfer in, which is identified further on down the page, from Vote 10 "due to reduced contribution requirements". In fact, the next vote item on that line shows where it went. Basically, we are asking Parliament to move $15 million from their contribution program into their operating vote.
The total cost of the flag campaign was $15.5 million over two fiscal years. The minister mentioned that that would be funded from within the department. That transfer of funds represents the source of funding for that.
The Chairman: When you say "contribution program", that would be contribution to whom?
Mr. Miller: Within Canadian Heritage, there are several different contribution programs. Within the Canadian Identity Program, the contributions total some $323 million. Fundamentally, there have been some adjustments in the individual programs to ensure that those funds were available for them to cover off the costs of the flag program, as the minister indicated.
The Chairman: To whom does that $323 million go?
Mr. Miller: That is identified in the Main Estimates. The largest program is roughly $200 million for official languages; the smallest one is $390,000. There are probably 30 or 40 different items which could have been adjusted slightly to make up for that. We do not have any specifics on which ones were adjusted.
Senator Lavoie-Roux: I heard that the flags cost $16.5 million. The rumour, or the announced official figure, of $33 million is not correct, then?
Mr. Miller: That is right.
Senator Lavoie-Roux: Why did no one retract that amount?
Mr. Miller: I cannot comment on that, senator. What is interesting, too, is that people requested over 1 million flags during that time period, which ended in February of this year. The cost was $15 million.
The Chairman: This is a controversial item, which I find interesting. Was that $15 million for the cost of the flags?
Mr. Miller: I would presume that was the cost of the program, including distribution, promotion and so on.
The Chairman: Who made the flags?
Mr. Miller: Unfortunately, I do not have that information here.
The Chairman: Is it possible to find out whether this was tendered out, whether a number of people made flags and to how many households these 1 million flags were sent?
Mr. Miller: They were all to individuals.
The Chairman: I know that. I have talked to many households in which mom, dad and all the kids got flags for their windows and drapes, et cetera. I would like to know how many addresses those 1 million flags represent.
Mr. Miller: I am not sure we can provide that information. However, I will see if it is available from Canadian Heritage.
The Chairman: I am sure they have it. Did they keep a list of the names of those people?
Mr. Miller: I do not know. I just know the number of flags that were issued.
The Chairman: They would all be in some government computer. I think it would be easy to obtain such a list. It would suffice to find out the number of addresses versus the number of flags sent out. The names of those people would still be there.
Mr. Miller: I will try to obtain that information.
Senator Bosa: Mr. Chairman, I move that the Chair present the committee report on Supplementary Estimates (B), without amendment, to the Senate.
The Chairman: Is that agreed, honourable senators?
Hon. Senators: Agreed.
The Chairman: The motion is carried.
The committee adjourned.