Proceedings of the Standing Senate Committee on
National Finance
Issue 6 - Evidence
OTTAWA, Thursday, March 19, 1998
The Standing Senate Committee on National Finance met this day at 11:00 a.m. to give consideration to the Supplementary Estimates (B), laid before Parliament for the fiscal year ending March 31, 1998.
Senator Terry Stratton (Chairman) in the Chair.
[English]
The Chairman: I would thank the witnesses for returning. We thought we would continue with the questioning because Senator Bolduc and I have questions that we would like to ask. I hope that by 11:15 or 11:20 Senators Forest and Cools will be here so that, if we all feel comfortable that all the questions have been asked, we can then pass a motion to approve the Supplementary Estimates. If you do not have any comments that you would like to add from last night, I would ask Senator Bolduc to proceed.
Senator Bolduc: I have noticed that there is a huge decreasing amount of $4 billion, or something like that, in the 1997-98 budget because of the interest rate decrease. I have difficulty understanding the forecasting of the Minister of Finance on that subject. Something like 75 per cent of the debt is on a fixed rate, and you have something like $472 billion, I think, on the market. That means that there is about $150 million on which you have to make a forecast about the interest rate.
You have a result here of about $4.5 billion less in reality than what the Minister of Finance forecast about 18 months ago. Is that possible? It seems to me that $150 million is a huge error, technically speaking. Did you talk about that with the people at the Ministry of Finance, because when you see that the budget is going down you could put additional money into it? So finally the difference is only $1 billion today. You ask for $1 billion. As a matter of fact, you intend to spend about $4 billion or $5 billion, but because the amount for the debt services has decreased, that is why you ask for $1 billion. How can you explain that?
Mr. Rick Neville, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat: I will be pleased to explain that, senator. I think it is a very important question considering that it is a significant amount that is part of these overall Supplementary Estimates (B) for 1997-98. We talked about public debt charges decreasing by $4.5 billion from $46 billion, which was printed in 1997-98, to $41.5 billion, which are reflected in these Supplementary Estimates.
Public debt charges will decrease to $41.5 billion in 1997-98, but that reflects the impact of three components; it is not just one component. I think you referred, or you may have inferred, to one specific component, but there really are three. I want to lead you through them. I think that will help you to understand the rationale.
First of all, there is a decline in the interest rates, and I will talk about that; then there is a reduction in the net borrowing requirements. The third element, which is probably the little piece of the puzzle that will be most helpful, is that there has been a change in the accounting for pension interest. The accounting for the change in pension interest alone, and I will get back to it, is $2.5 billion. So right off the bat there is a $2.5-million component of the $4.5 billion, which is attributed to one item which we have not talked about.
Senator Bolduc: Otherwise, the forecast would have been wrong about that, marvellously wrong.
Mr. Neville: Therefore, there are three components. If we can talk about the three now, I think that will bring it home.
First of all, back in the 1997 budget, interest rates were expected to move higher in 1997 as the pace of economic activity accelerated. Finance was planning at that point in time on an increase in the rates. Including the prudence factors that were adopted in the 1997 budget, short-term interest rates were expected to average 4 per cent in 1997, and 10-year government bond yields were expected to average 7.1 per cent. For 1997 as a whole, the outcome for short-term rates was 3.2 per cent, so there was a decrease of 0.8 per cent on the interest rates and, for the long-term bond rates, 6.1 per cent. You had almost a 4-per-cent decrease. That is a significant component and that is why the interest rates, in terms of that aspect, gave us a decrease.
Financial requirements, excluding foreign exchange transactions, are used as a proxy for the amount of net new debt that the government issues on financial markets. The financial surplus is expected to be $12 billion in 1997-98. That is a significant improvement over the 1997 budget projection of a continued financial requirement of $6 billion. The corresponding lower government borrowing requirements also contributed to the net reduction in the public debt charges; so the fact that we did not have to borrow as much led to a reduction.
The most important one, as I alluded to a little earlier, for accounting purposes, is the pension interest component. The Auditor General and the Public Sector Accounting and Auditing Board, PSAASB, which is part of the Canadian Institute of Chartered Accountants, have recommended since 1996 that interest costs be calculated on the basis of the actuarial obligation of the pension plans rather than on the financial obligation.
Beginning in 1997-98, the government will change its accounting policies to conform to the recommendations of the PSAASB and the Auditor General. This will have the effect of reducing the public debt charges by approximately $2.5 billion per year. Therefore, when you add those three components together, that gives you the explanation for the $4.5 billion.
The Chairman: I want a clarification between "actuarial" and "financial".
Mr. Neville: If you were to take the Government of Canada's financial statements that are available today -- and the most recent ones would be for the 1996-97 fiscal year by way of the public accounts last fall, you would notice that one item on the balance sheet, which is by far the largest item on the balance sheet, is "pension plans" -- the federal government pension plans, all the pension plans together. It is approximately $110 billion.
That is the financial amount that is in the books of Canada and that is the amount that we have been using for interest purposes. We take the interest on $110 billion and we charge that as a cost and as part of the deficit. So far so good?
The Chairman: Yes.
Mr. Neville: Actuarially speaking, for a number of reasons the amount that we should have on the balance sheet that is actually owed, if all actuarial expectations were to accrue, would be approximately $80 billion. Just for the record, it would be $80 billion to $85 billion. Therefore, the Auditor General said that if your true costs are more like $80 billion to $85 billion according to actuarial calculations, which we update every year, then you should not be charging interest to the deficit based on $110 billion, thereby either increasing the deficit or increasing the surplus. You should not be charging it based on the $110 billion; you should be charging it on the $80 billion to $85 billion.
We have had second thoughts about that. We have discussed it. We have negotiated with the office of the Auditor General how best to deal with it. In all fairness, I think we have come to the conclusion that, if you follow normal accounting practices, it is appropriate to use the actuarial balance. What we have agreed to do for the 1997-98 fiscal year is to take the interest calculation based on the $80 billion.
Now, that means it is $2.5 billion less than what we had in the Estimates back when we started the process, and that we put in the Main Estimates. When we put the Main Estimates in, we anticipated a much higher amount for that particular calculation.
The Chairman: What is the interest rate?
Mr. Neville: The interest rate is the average bond rate for the last 20 years.
The Chairman: What is it?
Mr. Neville: Can I give you a range?
The Chairman: Yes.
Mr. Neville: I will give you an approximate number: 9 per cent, give or take.
The Chairman: That is a huge chunk of money. Of course, you always talk about privatization of something such as this so you get a greater return for those folks who are on or are going on pension. Has that gone anywhere?
Mr. Neville: I think it is fair to say that in the February 1998 budget speech there was reference to the fact that discussions would begin by my minister, the President of the Treasury Board, to discuss options on how to deal with the current pension plan. Those discussions began last week or the week before. I believe it is two weeks ago now. So the discussions have begun and they will come to fruition in due course.
Senator Bolduc: I do not want to get you involved in politics, but if it is good for the pension fund of the civil service to do that, why is it not good for the Canada Pension Plan?
Mr. Neville: May I respond to that? That is a valid question. I have asked myself that question as a concerned Canadian. The Canada Pension Plan is a provincial plan. It is not a federal plan. The federal government is responsible for its administration and has a very small reserve.
Senator Bolduc: No, I am talking of the new one, the one that is being put in place.
Mr. Neville: I am referring to the Canada Pension Plan because the Canada Pension Plan is a provincial plan.
Senator Bolduc: I am talking about the CPP.
Mr. Neville: That is what I am referring to. The Canada Pension Plan, as we know it today, is a provincial plan, so the provinces would have to make that decision.
Senator Bolduc: You are beginning to have a foundation.
Mr. Neville: Yes. Let me just back up then. The federal government has announced publicly that its intent is to begin negotiations with the various unions to look at options for the current pension plan.
Senator Bolduc: Are you talking about the civil service?
Mr. Neville: Yes.
Senator Bolduc: That is not what I am talking about. I said you want to privatize this system.
Mr. Neville: I am not sure if privatize is the right word.
Senator Bolduc: There is a debate on this. Let us say that it is good to do that. Why is it not good for the general pension plan, what we call the Canada Pension Plan, the CPP?
Mr. Neville: The answer to that is that maybe it is, maybe it is not, but it would be the provinces that would have to take the initiative to begin that discussion, because the plan is a provincial plan. The provinces are the ones who own the plan. It is not the federal government that owns the Canada Pension Plan. That is the difference.
Senator Bolduc: My second question is about a debt that was permitted to China for about $56 million. I saw that somewhere in the documentation.
The Chairman: Page 54.
Senator Bolduc: I can understand that being done for countries in difficulty, such as countries in Africa; we have done that many times. I remember that the Conservative government did that on many occasions, particularly after the Prime Minister had visited Africa and the Caribbean, and places like that. But that was done for very poor countries. It was also done a few times when there was turmoil in Eastern Europe and in Russia.
However, to do that for China with the Hong Kong money -- I have some difficulty with that. Those people are very rich. They are not poor. Maybe it is a little political, but if there is a good technical reason, I will take it.
The Chairman: It sounds like a trade-off.
Mr. Neville: I think it is a peculiar situation. I trust you will understand why when I explain to you the rationale.
The loan was made to a pre-communist government of the Republic of China.
Senator Bolduc: Those who are very rich now in Taiwan.
Mr. Neville: I do not know that, but I can say, however, that this is basically a loan that was made to a government that is no longer in power and is no longer recognized by the current government in power since it is a communist government today. This loan was made to a pre-communist government.
Senator Bolduc: Before 1949.
Mr. Neville: Yes. I will lead you all through that.
Under Vote 6, the department seeks to authorize the forgiveness of certain debts and obligations amounting to $49.4 million. Specifically, that involves funds owed to Canada by the government of the Republic of China. The amount involves the unpaid principal of a loan made to the pre-communist government of the Republic of China.
The loan consists of cash advances made between 1946 and 1948. This is not a new loan. It was made by the Export Credit Insurance Corporation under Part II of their Export Credit Insurance Act. These cash advances were consolidated in 1948 with a total debt amounting to $52 million, give or take change.
Interest accrued at 3 per cent per annum and the final semi-annual payment of principal and interest was due in December of 1977.
Between 1948 and 1951, China did repay us approximately $2.8 million towards the debt, thus leaving $49.4 million as the principal still outstanding. No payments have been received in the last 47 years.
The best available information indicates that those loans were at the time used for the purchase of Canadian goods and services, whether military supplies, equipment, material, or construction.
I can tell you that the People's Republic of China, PRC as we commonly refer to it, has shown no inclination to negotiate on or to recognize any debt incurred by the former nationalist regime. An attempt to resolve this situation did take place in 1973-74; there was an attempt to revive those negotiations, but to no avail.
Since this loan has been carried on the books for over 50 years and no payments have been received in the last 47 years, we feel that the forgiveness of this loan will contribute to or offer a more precise statement of the real financial position of the Government of Canada. Since there is very little probability that the unpaid principal, which is currently recorded as an asset in our financial statements, will be collected in the near future, there is little point in continuing to show it that way, and, therefore, we are of the opinion that it should be written off now.
To reiterate, the People's Republic of China has clearly indicated that it will not recognize any debt incurred by the former nationalist regime; so we are looking at a situation where it does not seem appropriate to keep it on our books. I should add that the interest in the amount of $71 million on March 31, 1998, was not recorded in the public accounts and will be remitted through an Order in Council.
Senator Bolduc: Usually, when a country behaves like that, we just grab assets in Canada of the people of the country involved. That was not done here, as I understand.
Mr. Neville: That may very well be. I think the decision that has been taken is that the debt is a 50-year old debt, so let us call it a day and walk away. It does not affect the deficit. That is important. We have already taken the hit in the deficit over the years, so it is a question of getting it off our balance sheet.
For somebody who is financially oriented, as I am, it does not make a lot of sense to keep having that as an asset on our balance sheets. We should get it off our balance sheet.
The Chairman: Why now?
Mr. Neville: It has been 50 years and it is time to walk away.
The Chairman: I understand that, but why not 25 years ago? Why not last year? Why this year?
Mr. Neville: I like to think that we have seen the light and it is better late than never.
The Chairman: Was there a trade-off, to your knowledge?
Mr. Neville: That is a good question. No, we understand there is no trade-off.
The Chairman: There is absolutely no trade-off. Are there other examples like this on the books?
Mr. Neville: There are no similar loans.
The Chairman: I am not speaking about loans to China, but to other countries that are 50 years old or thereabouts.
Mr. Neville: There are no similar loans of a similar vein, and we have no other loans where a debtor country does not recognize its liabilities. We leave a debt on. If a country believes that they owe us the money and it is just a question of repayment, then we are more than pleased to do that. However, in a situation such as this, which seems to be unique, we might as well deal with it now.
Senator Bolduc: I see that there is an amount of $120 million for paying the incentives to civil servants for early retirement.
Mr. Neville: Yes.
Senator Bolduc: Is it the same package as the one that is prevailing for the RCMP or for the armed forces which are not in the civil service, as you know, or is it a different kind of package? If it is different, why is it different?
Mr. Neville: Senator, to the best of our knowledge, the programs are similar but they are not exactly 100 per cent the same. There are three different programs: the RCMP, National Defence, and for the balance of the public service, we have to get back to you. I would rather do that than mislead you in stating what the differences are.
Senator Bolduc: Could you send us a table that would indicate the major differences?
Mr. Neville: I would be more than pleased to do that.
Senator Bolduc: Now let us talk about sports. We have the Pan-American Games coming to Winnipeg. We have had Nagano recently for the Winter Games. We have the Olympics in a few years. We have les Jeux de la francophonie somewhere, I do not know when. We have many of these events, in other words, plus the Canadian Games.
Do you have any criteria that guide you in determining the levels of help that will benefit those competitions? Is there a real policy on the way the federal government is involved? What are the criteria?
It is not my intention to criticize the government, because our government did the same, but we have a very huge delegation for a country of 30 million. For example, in Seoul, Korea, we were the third largest delegation. We are not India. We are not the United States. We are not Brazil. We are not Indonesia. We are a country of about 30 million people, and yet we send 200 or 300 athletes. I am not against the fact that we might have a little more than our population proportion. For example, it is well known that East Germany always had many athletes, and they were good, also. However, what are the criteria?
Mr. Neville: Senator, at the outset you specifically mentioned the Pan-American Games. They will be held in Winnipeg.
Senator Bolduc: I was not thinking specifically about those.
Mr. Neville: Before I get into the criteria, my question is: Would you like to know a little bit about the Pan-American Games specifically?
The Chairman: I do.
Mr. Neville: Is there a bias?
The Chairman: Absolutely. As an example of federal government funding on a comparative basis could you compare the Pan-American Games held in Winnipeg, the Commonwealth Games in Victoria, and the Winter Olympics in Calgary?
Mr. Neville: I will certainly deal with the 1999 Pan-American Games which are scheduled to be held in Winnipeg, because that is in the Supplementary Estimates (B). We are asking for financial support to be given to a number of private and public groups. In effect, the total cost for the 1999 Pan-American Games is estimated as $145 million. Of this total, about $53.5 million, or 37 per cent, will be provided by the federal government.
The Chairman: I can quote you on this?
Mr. Neville: You can quote me on this.
Senator Bolduc: Would you repeat the last sentence?
Mr. Neville: I sure will. The total cost of the 1999 Pan-American games is estimated at $145 million. Of this total, $53.5 million, or approximately 37 per cent, will be provided by the federal government. I will break that down for you. Previously approved for 1995-96: $3.2 million; for 1996-97: $6.4 million; for 1997-98: $5.2 million; for 1998-99: planned $10.2 million; for 1999-2000: planned $12 million, for a total plan at this point of $37 million. The 1997-98 Supplementary Estimates (B) is for $16.5 million. So in total there we are looking at the $53.5 million from the federal government.
Support for the 1999 Pan-American Games that will be in the form of direct federal expenditures for essential services and promotion of federal interests will be $7 million, and contributions totalling $46.5 million to the Pan-American Games Host Society, which will help to defray expenditures in the capital area, and marketing, operating, and other costs associated with the Games.
Having said that, it is important to note that this amount will also include some money from other departments that have already planned on assisting the Pan-American Games.
You had asked specifically about criteria. I will respond to that, and then I will come back to your last question, Mr. Chairman.
In 1995, the federal government adopted a policy for hosting international sports events. The policy describes a number of criteria or conditions which must be taken into consideration in deciding whether to support specific events. The criteria include: the extent to which an event will provide significant sport; economic, social and cultural benefits, which I think refers to the comments you made earlier; the availability of funding, which also takes into consideration our economic situation; contribution to sport development, and for that read: potential legacy of high-performance sport programming and facilities infrastructure; and a high level of community support. I should probably add, as well, demonstrated organizational and management capacity.
The hosting policy limits federal participation in major games to 25 per cent of their total cost. That being said, if you recall, I had mentioned that our participation at this point is planned to be close to 37 per cent. The reason that federal participation in the 1999 Pan-American Games is above this level is that it was approved prior to the policy being put in place. I think that answers your questions.
That still leaves one question that you raised, Mr. Chairman, and that is how that relates to other games. At this point, it has been finalized in terms of cost. The 1994 Commonwealth Games in Victoria cost $162 million, and the federal share totalled $62 million.
The Chairman: That was $162 million total. How much was the federal share?
Mr. Neville: It was $62 million. There have been media reports that the federal government has committed $12 million for les Jeux de la francophonie to be held in Hull, Ottawa, in 2001. That represents an estimate. I would like to stress that. It is an estimate only. That could be revised when the budget for les Jeux de la francophonie is finalized later this year. We do not have a hard number at this point.
Senator Bolduc: Do you have anything on Calgary?
Mr. Neville: No, I do not have anything on Calgary.
The Chairman: I think the world has changed dramatically since Calgary as far as spending money is concerned.
Mr. Neville: Does that answer your question, Mr. Chairman?
The Chairman: Yes. Thank you.
Senator Bolduc: I had a question on the research network grants to universities. Would you give us some information about that?
Mr. Neville: I would be pleased to.
We use the acronym CANARIE as common terminology. I think we should probably use the right terminology more often. It is the Canadian Network for the Advancement of Research, Industry and Education, but it is certainly easier to say "CANARIE".
The Department of Industry encompasses several ministries, as you can appreciate, and they are requesting an additional $55 million for this particular initiative.
First of all, I think it is important that you know that CANARIE is a not-for-profit, industry-led and -managed consortium. It was created back in 1993 as an innovative way for the federal government, the research community, and the private sector, to collaborate and stimulate development of the information highway in Canada.
CANARIE has over 120 fee-paying members from the telecommunications, broadband technology and computer sectors, as well as from the university and research communities. CANARIE's mission is to facilitate the development of Canada's communications infrastructure; stimulate next generation products, applications and services; and communicate the benefits of an information-based society. CANARIE fulfils its mission through its three core programs: Advanced Networks, Applications Development, and Outreach.
Specifically, this $55 million will fund a next-generation network, the "NGN" as we refer to it, an initiative to accelerate the development and deployment of the next-generation, coast-to-coast broadband learning network. With increased data-carrying capacity and a higher speed of transmission, this network will provide the platform to ensure continued momentum in developing network technologies and new applications in learning, electronic commerce, and the multimedia industry.
You should be aware that the recipients of these contributions will range from small information technology companies with specific network expertise to large telecommunications carriers or equipment manufacturers, research institutes or universities. CANARIE also greatly encourages proposals from consortia.
With specific reference to the next-generation network initiative, CANARIE is interested in receiving proposals from national, facilities-based carriers and consortia made up of Canadian equipment manufacturers, regional networks, carriers and/or leading research institutes. There is an opportunity here for investment.
The plan at this point for the utilization of these funds is that they will be used to cover the capital and operating costs of experimental test networks and other R&D projects related to the high-speed network architecture and indications.
The funding to CANARIE Inc. announced in the February 1998 budget is in the form of a one-time grant of $55 million and is not repayable.
The next-generation network project is expected to be a joint R&D partnership. Accordingly, applicants are expected to propose making their own significant contributions to meet the cost of the program. These contributions can be made in kind or through direct funding.
I also have, if you are interested, who the board members are, who the chair is, and additional information.
Senator Bolduc: This is already public information.
Senator Kinsella: I would like you to turn to Privy Council, page 102, the Canada Transportation Accident Investigation and Safety Board. There is a request for a new appropriation of $1 million. The Canadian Transportation Accident Investigation and Safety Board deals with air safety. Is any of this new money that is being sought in this fiscal year related to the increase in air accidents this year?
Mr. Andrew Lieff, Assistant Director, Estimates Division, Expenditure Management Sector, Treasury Board Secretariat: Senator, I am afraid we do not know exactly to what those amounts are being applied. You will notice that the explanation that we provide is the "Operating Budget carry forward" provision. This is a standard provision offered to most departments to help them avoid year-end spending and to manage their cash better.
Departments that are being confronted with a series of pressures during the year or with changes from what they forecast, if they are getting towards the year end, in order to avoid having them buy a raft of computers or office furniture at the end of the year, we provide an amount of up to 5 per cent of the Main Estimates that they can carry forward, and they come in and we facilitate that. That is basically what this is for.
As to whether they are applying some of that, it could well be possible.
Mr. Neville: I would like to add, though, that we really stress that as part of the new expenditure management system we allow managers to manage their resources in a more efficient and effective manner, which means that we allow them this flexibility. We do not go back and ask them why there is a carry forward.
Senator Kinsella: Do you happen to have the total Estimates or the total expenditures of that agency for the previous year?
Mr. Neville: For the 1996-97 fiscal year?
Senator Kinsella: Yes. In other words, the total would be $20.5 million. Is that an increase?
Mr. Neville: No. We do have a forecast for the 1996-97 years. It is $23,305,000. Therefore, what is being requested this year is significantly less.
Senator Kinsella: It is less?
Mr. Neville: Yes.
Senator Kinsella: My other question, Mr. Chairman, is actually going back to the same Department of Canadian Heritage as our previous discussion on the games, but it is not on that item. My interest was the $4.1 million in loans to cultural industries, which would bring it to a total of $10.7 million for the total Estimates.
Are those loans then appearing as assets on the government's books or are they indeed forgivable loans and, therefore, maybe "loan" would be a misnomer.
Mr. Neville: Loans are shown as assets on our books as a general rule.
Senator Kinsella: If they are loans.
Mr. Neville: If they are loans.
Senator Kinsella: Does all of that amount, the $10.7 million, represent loans that are unforgivable? Perhaps you can make that distinction for us. Do you distinguish between loans for which there is an expectation that they will be paid back and therefore constitute an asset and forgivable loans where there is really no expectation that they will be paid back?
Mr. Lieff: This you will notice appears under the non-budgetary section, meaning that it is a loan that we expect to have paid back and is therefore an asset on the books. There is a distinction. Normally, we would not call them loans. We would call them grants or contributions, with repayable contributions.
Mr. Neville: It is an interesting discussion. I have been through that on a couple of occasions at other committees. Just so we are crystal clear, when we call it a loan, by definition there are terms and conditions associated with it which involve a repayment schedule; then we are back to the scenario we had earlier where, if they do not pay it, it falls under "debt", under the debt remission order that is required. There is quite a set of protocols and disciplines. Otherwise, we do not fall into that, we fall into something else and there is other terminology; read: "grants".
Senator Forest: If my question was asked while I was at the other committee, I will get the answer later, but it relates to the $49 million loan to China.
The Chairman: Yes, we did that.
Mr. Neville: Would you like me to start over again?
Senator Forest: No, I will get the information later.
Senator Kinsella: Give a précis.
Mr. Neville: I will go over it very quickly.
The loan is a 50-year old loan made to a pre-communist regime. The current government does not recognize that loan. We have tried over the years to recover it, but have not been successful. We have already taken the expenditure in terms of the hit on the deficit, so it is really a question now of taking it off our books.
Senator Cools: I have a related question. I notice at page 61, under Foreign Affairs and International Trade, CIDA, there is an item, "Debt forgiveness for four countries". Since your mind is so fresh on forgiving loans, perhaps you could just build on that and tell us why these four are being forgiven.
The Chairman: I was assured there were no other loans.
Mr. Neville: I am sorry, but I said that there were no other loans of that nature.
The Chairman: I have to be very definitive, obviously.
Mr. Neville: Mr. Chairman, if I could reassure you, not to leave you with any doubts, there are no other loans that we know of where the governments do not agree that there is a loan owing.
The Chairman: That is where I took you at your word, and I still take you at your word on that.
Mr. Neville: In this case, they are different and, therefore, we have to deal with them differently.
There can be write-offs of debts. In this case, there are four of them being proposed for Honduras, Nicaragua, Costa Rica and Colombia for $23.5 million. These are four Central American countries.
Prior to 1986, CIDA used loans rather than grants and contributions to deliver its aid program. This authority relates to loans prior to 1986, and therefore specific project details are not readily available. Having said that, having dealt with CIDA over the years in a different capacity but very close to their loan and aid programs, I believe this would probably have been for developmental projects -- infrastructure projects, if my memory serves me right.
The reason why these debts are being forgiven at this time is in accordance with the Latin America Debt Conversion Initiative that was launched at the 1992 Rio Summit on the Environment and pursuant to Article 24.1 of the Financial Administration Act. This is different. I had not seen this before, so bear with me as I explain it. The initiative consists of having Latin American debtor countries repay an agreed upon share of their outstanding debt in the local currency in exchange for the forgiveness of their debts. In other words, it is not a question of having the countries repay their debt totally to us but rather for a country to repay part of its debt in its own local currency internally, and then we will write off the balance of the debt.
Local funds created from this initiative are then used to help finance environmental and other sustainable development projects. The agreements with the countries range from one to six years in duration. To date, $11.9 million was forgiven in 1995-96 and $12 million in 1996-97. It is interesting to note that Peru and El Salvador have met the full requirements of the agreements.
Following their forgiveness for 1997-98, if approved, Nicaragua will also be complete.
The remaining countries will be complete by 1998-99. If I just take those four countries in question, for Honduras the total debt to be forgiven is $33 million. If you follow the formula, the amount to be paid by the country in local currency is $16.5 million over five years. Therefore, the debt forgiven to date is $11.5 million and the debt to be forgiven in 1997-98 is $3.3 million. That leaves a residual debt to be paid in 1998-99 of $1.7 million.
For Nicaragua, it is a bit better. The total ODA debt to be forgiven is $18 million. Their debt to be repaid by the country in local currency is $3.6 million over 3 years. The debt forgiven to date is $2.9 million. The debt to be forgiven in 1997-98 adds up to about $15 million, so there will be no remaining debt to be repaid in 1998-99.
Colombia, on the other hand, has a $16.5 million total ODA debt to be forgiven. That $16.5 million is to be repaid in local currency over six years. The debt forgiven to date is $11.3 million. The debt to be forgiven in 1997-98 is $2.8 million. There is a remaining debt in 1998-99 of $2.8 million.
In Costa Rica, $23.12 million is the outstanding debt; $11.4 million over the next five years is to be repaid in local currency. The debt forgiven to date is $4.6 million. The debt to be forgiven in 1997-98 is $2.3 million, and there is a remaining debt to be repaid in 1998-99 of close to $5 million.
That gives you, I think, an overview of what is occurring.
Senator Cools: Mr. Chairman, perhaps our witness could clarify an area of uncertainty or lack of clarity in CIDA. CIDA is not an agency that exists as a creature of Parliament. My understanding is that CIDA is called into existence not by an act of Parliament but by an Order in Council. Is that true? It is very questionable. It is a very peculiar sort of thing. It is something that is truly begging our examination.
Perhaps the witness could explain to us what CIDA is and how it receives its moneys because, while it is not suspect, it is a little unusual. My interest in CIDA arose because of the receipt of moneys through the Commissioner for Judicial Affairs from CIDA for judges' international travels. I am informed that the dollar amounts for these judicial programs around the world are now climbing to $79 million, but the actual information seems to be elusive.
Could you, as officials from Treasury Board, explain to us the premises and the ways in which CIDA receives money by parliamentary authorization when it is not a creature of Parliament?
Mr. Lieff: I may have to get back to you. I can start off by telling you what I know. As I understand it, CIDA is, in fact, a creature of Parliament, in that the piece of legislation is the Appropriation Act for CIDA, which establishes it and through which the money is supplied. There may be other supporting infrastructure.
Senator Cools: I do not think so. I do not think CIDA was established by the Appropriation Act. Senator Kinsella knows a great deal about the machinery of government.
Senator Kinsella: I do not.
Mr. Lieff: I would have to get back to you on the machinery of government aspect, but my understanding is that it is established by virtue of the funding provided by the Appropriation Act, which is an act of Parliament.
Senator Cools: I understand that it receives funds and that all these dollars come through the Appropriations Act, but my understanding, and I am quite prepared to be wrong, is that CIDA itself exists by the authority of an Order in Council, not by any act of Parliament.
I have not raised the issue today, but you may recall that at the last meeting at which Mr. Miller was present I raised the whole issue of the cost of judges' international travels and the allocation of moneys from CIDA to the Commissioner of Judicial Affairs for those purposes.
I am sure you have been reading the record. This is an abiding interest of mine. To the extent that we saw this allocation here for CIDA, quite significant dollar amounts for the forgiveness of loans, it gave me the opportunity to raise my concerns yet again.
Mr. Neville: By definition, CIDA is an agency. I do not believe there is legislation for it as a department because it does not have a designation as a department.
Senator Cools: I am told that they want to keep it that way and that is why it seems to elude our scrutiny.
Mr. Neville: Your question is quite specific: Is there legislation that has set up CIDA?
Senator Cools: Is there legislation that establishes CIDA?
Senator Bolduc: The answer is no. It was constituted by an Order in Council.
Senator Cools: That is my understanding. It is something we should bring into our purview for greater examination.
Mr. Neville: We should answer that once and for all. We should get to the bottom of this.
Senator Cools: We should, because the dollar amounts that that agency is utilizing and spending are growing quite extensively. Not only are the dollar amounts growing, but also the purposes; so it is time for us to take a look at it.
Senator Kinsella: Your minister could be very helpful, as a former president.
Mr. Neville: It is the first question we will ask him this afternoon. We will officially research that.
Senator Bolduc: It was a $3 billion a year business.
Senator Cools: It is a massive thing.
Senator Bolduc: It is a lot of money. Now it is around $2 billion. They do so many things in so many fields all over the world that sometimes I have the impression that it is a kind of saupoudrage all over the place. There is a lack of priorities in that business, in my opinion.
Sometimes they say, for example, that we are giving money to the poorest countries; but, when you look at it, you see that there is money for Costa Rica, which is not a poor country in relation to others.
Senator Cools: I think we should definitely be taking a look at it. As I said, I never pay much attention to CIDA. My interest comes through the parliamentary rejection of international judges' travel expenses, which have basically been ignored. Parliament's admonishments have basically been ignored.
Senator Bolduc: Parliament says that that is paid by CIDA. Why not by the Supreme Court or Foreign Affairs?
The Chairman: Why is it not paid by Justice? I know that in the past we have asked about CIDA and I know that the criteria have been explained to us, that they rate countries by risk as far as investing in them, I believe. That is how you arrive at where they put their dollars. I know in my other life that we had tried to do a hotel in Leningrad, for example. Russia at that time was a very high risk level. I do not think it went through.
Senator Kinsella: It was a risk in what sense?
The Chairman: Stability and the ability to repay.
Senator Cools: Just to add to what the Chairman is saying, and perhaps our researcher could find the information for us, it seems to me that this business of the constitution of CIDA and its expenditure of dollars has actually been raised by the Auditor General. Perhaps our researcher could find the answers to some of those questions.
Mr. Neville: Mr. Chairman, should I leave that to your researcher, as suggested by Senator Cools, that the research can be done from within your own committee?
Senator Cools: Leave it with us until we get back to you.
Mr. Neville: Will you do us a favour and share that with us?
The Chairman: As we progress through this study, we will go into a certain number of things.
Mr. Neville: On that one, if you just cared to give us a call or shared it with us, we would appreciate it.
The Chairman: Employment equity is coming down the track. How is it being booked? Is it booked in the current, the next, the previous? How much is it and where do we find it?
Mr. Neville: That is a loaded question. Let me start at the beginning.
The issue of employment equity has been with us for several years. I always like to divide that into two components. First of all, we have settled employment equity issues with some of the unions, or with one of the unions specifically. We have not been able to settle employment equity with the largest union.
We have on numerous occasions sat down and discussed options, and as an official position we have put on the table $1.3 billion to resolve that. That has already been booked. It is already part of the overall deficit, so that we have provided for it as we should in accounting terms.
This is where we are today: There is a significant deviation between the amount that the federal government has put on the table and where the union is. I stress "today". The deviation is material, and the government at this point has not been able to negotiate an agreeable amount with the union. Discussions are ongoing. There is a lot of pressure to try to get this resolved as soon as possible, but within the parameters that have been discussed between the parties concerned. That is where we are today.
The Chairman: Is it at an impasse?
Mr. Neville: That is a good question. The report of the Canadian Human Rights Tribunal was due in the fall, but it appears that it will be forthcoming only in the late spring of 1998. It is hoped that that report will give us an indication of the appropriateness of the claim that has been submitted. That will probably help all parties to address the impasse.
The Chairman: Would that recommendation be imposed or would it be a negotiating tool?
Mr. Neville: I do not believe it is being imposed. I believe it is their assessment of the claim and that it is for the parties to work it through.
The Chairman: It is a negotiating tool.
Mr. Neville: That would be my guess. It can be appealed, as well.
The Chairman: There are no other questions. We wanted to make sure that we had a full discussion. The reason for this second meeting was to make sure that discussion had taken place. If we are comfortable with it, then we could terminate at any time.
Senator Cools: Are we going to report now?
The Chairman: What we would like now is a motion.
Senator Cools: I move that we report.
The Chairman: It will be reported next Tuesday.
Senator Cools: I move then that we complete our discussion on the subject-matter and that we adopt a motion to report the Estimates to the chamber.
The Chairman: Is it agreed?
Hon. Senators: Agreed.
The Chairman: Are there any other discussions regarding our schedule or our future?
Senator Cools: I would like to make sure that the report --
The Chairman: Perhaps you would like to see a draft.
Senator Cools: Absolutely. Before it goes to the chamber, I would like to see a draft. I would just like to say also that it should continue the high quality of committee reports that we have been seeing in the last year or so, where we summarize some of the concerns raised by members. In this case, these concerns include CIDA, the money handed over regarding judges' international travel, and the Airbus affair, and those recurring, abiding questions. You can handle that.
The Chairman: We are in a very tight time-frame.
Senator Cools: Do your best.
Senator Kinsella: This is on the Supplementary Estimates today. Next week we will be into the Main Estimates and maybe we can pick up the report then.
Senator Cools: We can. I was just suggesting that he use some of his own words, even from his last report. Anyway, it is not that pressing. Are you comfortable with that? Do you want me to write it for you?
The Chairman: The problem is that we have to write the report, have it translated in time to read it in draft form and get it approved and then table it by next Tuesday.
Senator Cools: Do you want to introduce it today?
The Chairman: You cannot introduce it today. It has to be written.
Senator Cools: You cannot handle this big a job between today and tomorrow?
The Chairman: The problem is with the translation.
Senator Cools: How much time do they need?
Mr. Guy Beaumier, Researcher: They will not get it until Friday. I will not get it back until Monday.
Senator Cools: No, no, no. Hold on. We have done this many times before.
Senator Kinsella: Mr. Chairman, I think we should be able to excuse the witnesses.
The Chairman: Yes. Gentlemen, thank you very much.
I would like to adjourn the meeting, but there is one thing more to cover off. It is simply the date of the next meeting. We have a tentative date for March 24, which is a Tuesday. That is not a normal time frame for us. Our normal time frame is 5:30 on Wednesday and 11 o'clock on Thursday, March 26. The Parliamentary Secretary is agreeable to appearing on March 24. Do you feel comfortable that you have enough time to meet in the normal slots of March 25 and March 26 or would you like to go to March 24 as well?
Senator Kinsella: The problem of going outside our slot is the conflict with other committees.
The Chairman: The problem is attendance.
Senator Kinsella: Yes.
The Chairman: We will keep it at March 25. Do you agree with that, honourable senators?
Senator Forest: We will cancel March 24.
The Chairman: Yes.
Senator Kinsella: March 24 is not a regular meeting day of this committee.
Senator Forest: No, I understand.
Senator Kinsella: We are going to have to bring some discipline to bear on committees meeting in their official time slots and not meeting when the Senate is sitting.
Senator Cools: We never meet when the Senate is sitting.
Senator Kinsella: No, but other committees do.
Senator Cools: We will have to wrestle them out of that.
The Chairman: Everybody is in favour of maintaining the current time slots, and that is how we will meet next week.
Senator Bolduc: There is some difficulty for me, because on Wednesday afternoon we have Foreign Affairs at 3:15, but this week it was in the Victoria Building. When we had the meeting here at 5:30, the other meeting was not finished and I had to leave to come here for 5:30. Maybe it is not possible to do otherwise. It is exceptional also that we were in the Victoria Building on Wednesday. If it is always going to be like that, there will be a problem. We had four witnesses yesterday. It is a little embarrassing for me if I have to leave when there are witnesses.
The Chairman: I had to leave Agriculture to come here. It is the same problem.
Senator Bolduc: If we could get those two held in this building, that would help.
The Chairman: I thought that is the way it was and you were only temporarily at the Victoria Building with Foreign Affairs.
Senator Bolduc: Probably it was new, because usually we do it here.
Mr. Denis Robert, Clerk of the Committee: Usually you do it in room 256. Yesterday there was a reception of some sort. Your committee was gracious enough to move.
The Chairman: If there are no other items on the agenda, we will adjourn.
The committee adjourned.