Proceedings of the Standing Senate Committee on
National Finance
Issue 7 - Evidence
OTTAWA, Wednesday, March 25, 1998
The Standing Senate Committee on National Finance met this day at 5:30 p.m. to examine the Main Estimates laid before Parliament for the fiscal year ending March 31, 1999.
Senator Anne C. Cools (Deputy Chairman) in the Chair.
[English]
The Deputy Chairman: Honourable senators, I see a quorum. I call the meeting to order.
Senators need no reminder that the reference before us is the examination of the Main Estimates laid before Parliament for the fiscal year ending March 31, 1999.
As honourable senators can see, with us this evening is Mr. Ovid Jackson, Parliamentary Secretary to the President of the Treasury Board. He is accompanied by Mr. Michael Joyce, Ms Mary-Jane Jackson and Ms Shirley Siegel.
Mr. Jackson has been a dear friend and colleague for many years.
Welcome to the National Finance Committee, Mr. Jackson. I believe this is your first appearance before this committee.
Mr. Ovid Jackson, M.P., Parliamentary Secretary to the President of the Treasury Board: Yes it is, Madam Chairman.
The Deputy Chairman: Have you a prepared statement you would like to read?
Mr. Jackson: Yes. Madam Chairman and honourable senators, it is my pleasure to be here today on behalf of the President of the Treasury Board, my colleague Marcel Massé. I have officials accompanying me today from the Expenditure Management Branch and the Senior Level Retention and Compensation Division of the Treasury Board.
There are to be votes in the House of Commons at 6:30 p.m., so I will be able to remain here only until that time.
While a month has passed since the tabling of the budget, the fiscal achievements are still making news. For the first time in 30 years, the federal budget will be balanced this fiscal year. Since 1993, we have exercised unwavering discipline in controlling federal spending. Program Reviews I and II have been the cornerstones of this strategy.
In the span of five years, we have created a leaner, more cost-effective federal government that is more efficient at delivering quality services to Canadians. In fact, as a share of the economy, federal government spending is headed back to where it was in the post-war era of the 1940s. Program spending as a percentage of GDP fell from 16.6 per cent in 1993-94 to 12.4 per cent in 1997-98.
The Treasury Board, in its capacity as a central agency, has contributed significantly to these achievements. With a sounder fiscal environment and by restructuring and realigning government programs, we now have a more appropriate base from which to prioritize areas of concern to all Canadians.
We have also continued with our efforts to improve the quality of the information provided to Parliament through the Estimates. Last year, we tested out a new approach to Part III of the Estimates with 16 pilot departments. That approach has now been extended to all department and agency Part IIIs. Performance reports were tabled in the fall of 1997, providing improved reporting on results some six months earlier than had been the case with the previous Part III approach.
This year, we are piloting a split approach to tabling the Estimates. The Main Estimates were tabled on February 26 in accordance with the usual March 1 deadline, but we have been permitted to table what amounts to the future planning half of the previous Part IIIs -- the Reports on Plans and Priorities -- up to the last sitting day in March. In fact, the President of the Treasury Board tabled it at three o'clock today.
This measure allows departments and agencies time to make their Reports on Plans and Priorities consistent with the spending plans contained in the Minister of Finance's budget.
These documents provide the benchmarks against which actual government performance will be measured. Performance reports that will be tabled in the fall will report on results against these benchmarks.
Together, these documents represent the Government of Canada's commitment to measuring and reporting on results, transparency and accountability. They also reflect our efforts to improve the reporting of information to Parliament. We will continue to evaluate these new approaches and will be consulting with parliamentarians and other key stakeholders. We would be delighted to discuss the views of this committee on these changes, or indeed on other improvements that could be considered.
The comptrollership function is at the very heart of the public service's effectiveness and the government's accountability to Parliament. By moving it from a narrow and specialized function to one that seeks to integrate financial and non-financial performance information so that the public service managers have a better understanding of past and future performance, we are ushering in a profound cultural change that will stretch over a number of years. The focus of modern comptrollership is on results, accountability and managing risk. The modernization of comptrollership and the evolution of departmental business plans support the Treasury Board Secretariat's role as a management board for the government.
Over the past several years, we have realigned the role of government. At the same time, we are implementing a number of new initiatives in support of the dynamic, motivated and flexible workforce that we need. The new Universal Classification System will give public servants greater mobility, reduce costs and simplify pay and staffing systems.
Collective bargaining is an important step in the government's fostering of a positive labour relations environment. We have signed seven collective agreements to date.
Continuous improvement and innovation in the management and delivery of programs, as well as citizen involvement, has been an integral part of a modern public service. Innovative organizational solutions, single-window service delivery approaches, partnership arrangements and the application of new information technology are among the tools available for our government to modernize service delivery and provide high quality service.
Beginning in this year, certain taxpayers will be able to file their tax returns from home using a touch tone phone. A national Call Centre for Revenue Canada, handling up to 10,000 calls a day, will ensure that citizens calling their local Revenue Canada offices will no longer receive busy signals. As well, partnerships with other levels of governments and other delivery agents have been introduced in order to provide single-window service delivery. The Canada Business Service Centres that exist in every province provide an excellent example of such one-stop shopping for targeted client groups.
The Government of Canada regards the year 2000 computer challenge as a major national priority. To this end, we have established a year 2000 project office in the Treasury Board secretariat to coordinate and monitor activity across federal government departments and agencies and to expedite solutions to common problems. All government mission-critical systems have been identified and we are striving to ensure that government services remain uninterrupted.
We will continue to make government more efficient, responsive and accountable. Canadians can be confident that we have got government right.
Madam Chairman, I understand that tomorrow you will hear from officials from the Department of Defence and from HRDC. Of course, you can subpoena any experts you require to further your study. We will be as forthcoming as possible with answers. We know that this body is very important. I, for one, as a member of Parliament, have great respect for your collective experience and I think the work you do is very important for Canadians.
Senator Kinsella: Mr. Jackson, you said a few moments ago that you have some plans to support our public service. Will you expand on that?
Mr. Jackson: I believe that to a certain degree the public service is a calling. Sometimes people compare us with the private sector, although we do not necessarily get private sector wages. The President of the Treasury Board is not here, so I can boast on his behalf that he is a good example of what public servants are all about. The ability and experience that he brings, not only to his department as minister but to the entire public service, is very important for us.
We have a number of initiatives. For instance, La Relève is a program to try to modernize the public service.
Senator Kinsella: What do you mean by modernizing the public service? What is the objective?
Mr. Jackson: The objective is getting government right. In order to get government right, we must, as a government, take advantage of all the instruments available to us, including technology. Of course, the most important is human resources.
Senator Kinsella: Do you have any specific plans for addressing the state of morale in the Public Service of Canada?
Mr. Jackson: As of January 6, 1997, the government removed the wage moratorium which was in place for about six years and started negotiations. We have concluded 10 agreements. It is not easy to make up for all the differences we had in the past, but we have taken steps and we are willing to sit at the table, as part of getting government right, to get back on a footing of trust.
As I said before, I can think of no one better than Marcel Massé, who knows the system, to get back some of that trust.
Senator Kinsella: Are you saying that morale is really about issues with which you deal during collective bargaining?
Mr. Jackson: No. From my perspective, morale is a culture that is fostered through a management style. It is fostered through recruiting people who have a certain amount of synergism in the organization. It is a culture that points out the role and objectives in a work plan and achieve it the best way possible. When you work with that kind of synergism and have the players in place for the function you fulfill, the organization will consistently do better.
Senator Kinsella: What role do you see the Canadian Centre for Management Development playing within your ideas of developing our public service?
Mr. Jackson: That organization continues to play the role of training and education. I am not sure whether they help with recruiting as well.
Mr. Mike Joyce, Director of Estimates, Expenditure Management Sector, Secretariat of the Treasury Board: The Canadian Centre for Management Development, as its name suggests, and as perhaps you know, is principally responsible for developing the management cadre of the public service. Their programs are oriented at improving the calibre of management by providing the right training. However, they do more than training. They run fora and discussion groups. The Public Service of Canada has a responsibility more broadly for training and for recruitment.
Senator Kinsella: Have either the Canadian Centre for Management Development or the Public Service Commission any projects planned for this fiscal year? We had PS 2000 a couple of years ago. In his address to us a few moments ago, the Parliamentary Secretary emphasized that the public service would be a major area of concern for the government. I am trying to understand what you will do and how that is reflected in what is before us.
For instance, on page 19-7 I notice that the budget for the Canadian Centre For Management Development is reduced by almost $3 million from the 1997-98 Estimates to the 1998-99 Estimates. If you do not have an initiative of the magnitude of PS 2000, what will you do in terms of development?
Mr. Joyce: As the Parliamentary Secretary said, the umbrella initiative which covers that at the moment is La Relève. That is a government-wide initiative. It is of key interest to the Clerk of the Privy Council.
Senator Kinsella: Do we find that reflected in these Estimates?
Mr. Joyce: No, because it is intended to be an initiative which all departments buy into. It is not a project localized in only one department.
Senator Kinsella: Will it come out of the O and M of each line department?
Mr. Joyce: No. As the Parliamentary Secretary said, the initiative is intended, among other things, to change the culture at the management level. Part of the program is focused at the management level to provide the environment, the learning and the professional development required for executives.
Senator Kinsella: Who has responsibility for this? Who will be accountable for it?
Ms Shirley Siegel, Executive director, Senior Level Retention and Compensation Division, Human Resources Branch, Secretariat of the Treasury Board: As Mr. Joyce indicated, each department, under the leadership of the Clerk of the Privy Council and senior deputy ministers of departments, has initiated its own La Relève plans. There are a number of corporate initiatives which also form an umbrella over the whole public service. The intent for La Relève is not a single initiative but a wide initiative which cuts across all departments. It should focus more clearly on the specific needs of human resources within each department and across the government.
Senator Kinsella: How will Parliament, either the House of Commons or the Senate, be able to measure the effects of that? How will we know you are achieving the desired results through that program? Is it measurable? Will it be subject to evaluation? How will parliamentarians provide oversight to what you are doing?
Ms Siegel: It is my understanding that regular progress reports are being provided to the Clerk of the Privy Council. Those results will be rolled into the normal reporting process that takes place for departments.
Mr. Joyce: The initiative really is at its starting point. To my knowledge, we have not developed any specific evaluation plan for the initiative, but it is one in which the Clerk is particularly interested. Accountability lines are set up within the government. The La Relève plans which are being prepared will go to the Privy Council Office. They are also of interest to and being reviewed by the Treasury Board secretariat. The Treasury Board ministers will be taking an interest in that as part of their role as a board of management.
At the moment, I cannot answer your question in terms of how there will be specific reporting externally, but the Clerk of the Privy Council does report annually on the public service and I would expect there would be some indications in that annual report.
Senator Forest: I should like a little elaboration on the universal classification system which you describe as giving public servants greater mobility, reduced costs and so on. How is that working?
Mr. Jackson: Universal classification was developed over quite a long period of time. It created many conflicts and many bargaining units. One way to get government right is to redefine the roles and responsibilities.
Ms Siegel: Basically, the universal classification is being established and implemented to simplify and streamline the whole system of classifying work and evaluating jobs within the public service. It is meant to bring a level of confidence in terms of gender neutrality to the system and, as I said, to simplify, streamline and reduce costs within that area. It is currently in the process of being designed and developed and it will be implemented within the next year or so within departments. As well, it is expected to provide a classification system that reflects more clearly today's values and culture within the public service.
Senator Forest: It is just being designed and developed now?
Ms Siegel: Yes. They are currently completing the design phase and we will be moving very quickly into implementing this within departments.
Senator Forest: Mr. Jackson, you mentioned that seven collective agreements were signed. How many are there yet to go and how is that proceeding?
Mr. Jackson: The officials will have the exact number. On January 6 of 1997, the freeze was removed. We are negotiating as the various contracts come due.
Ms Siegel: Seven collective agreements have been successfully negotiated. Negotiations for the others are currently under way.
Senator Forest: Are those seven agreements with the larger units? I am trying to understand how negotiations are going and whether we are well on the way.
Ms Siegel: The agreements are primarily with smaller unions like the Professional Institute of Public Servants, the key union which represents the professional staff, and the Computer Science group. Some of the smaller unions in particular have been successful at the bargaining table. Discussions with the larger units, PSAC in particular, are continuing.
Mr. Jackson: We could provide a list showing where those units are in terms of the negotiating process.
The Chairman: We would be happy to receive the information. Please forward it to our clerk.
Senator Ghitter: Like Mr. Jackson, I am new to this committee. Perhaps we can learn together from this rather voluminous book which has been presented to us. Where does one find in this book the total of the transfer payments that are made to the provinces and also the amounts of them in comparison to other years?
Mr. Jackson: That is at page 1-36.
Senator Ghitter: Could you explain the transfer payments in comparison to other years?
Mr. Jackson: There are transfer payments and equalization payments. The CHST was reduced, as you know. These transfer payments accounted for a large chunk of our budget. In getting government right, we had to cut everyone. We had initially said we would take $1.5 billion out of the CHST, but we have replaced it. It is to be legislated so that the floor will be the same as when we took office.
Senator Ghitter: What has been the reduction in this year's Estimates as compared to last year? I would like to get a sense of the reduction in transfer payments and equalization payments to the provinces over the past few years.
Mr. Jackson: You may need a table showing province by province, which may also be available.
Mr. Joyce: We do have some information on major transfers by year which we would be able to provide to you. I can read it out now.
Regarding major transfers to persons, staring in 1993-94, Old Age Security was $19.9 billion. That compares with $22.9 billion in 1998-99.
Mr. Jackson: It is up from last year.
Mr. Joyce: Yes. Unemployment insurance benefits were $17.6 billion in 1993-94, which compares with $12.6 billion in the forthcoming fiscal year.
If you look at major transfers to other levels of governments, the cash portion of the CHST was $18.6 billion in 1993-94 and is $12.5 billion in 1998-99. Equalization payments amounted to $7.8 million in 1993-94 and $8.5 billion in 1998-99. Transfers to territories were $1.1 billion in 1993-94 and $1.1 billion in 1998-99.
Those are the major components.
Senator Ghitter: Do you have totals?
Mr. Joyce: Yes. Under "Total Major Transfers to Persons," it is $37.5 billion in 1993-94 and $35.5 billion in 1998-99. "Total Major Transfers to Provinces" is $26.9 billion in 1993-94 and $19.5 billion in 1998-99.
Under "Transfers to Provinces," the figures I have given you only contain the cash transfers. There are also tax transfer points which would have to be taken into account, but they are not included in this table.
Ms Mary-Jane Jackson, Manager of Expenditure, Management Group, Secretariat of the Treasury Board: If you include the tax points in the figures for major transfers on other levels of government, in 1993-94 it was $37.4 billion and in 1998-99 it was $34.7 billion, a decrease of 7.4 per cent. However, in that same time frame, direct program spending within the federal government went from $55.5 billion to $49.6 billion, a decrease of 10.8 per cent.
Senator Ghitter: I am curious about why you select 1993-94 as your comparison.
Mr. Joyce: That was the first year we did a comparison. We picked that because a similar question was asked last year of Mr. Massé at this committee.
Senator Ghitter: Similar reductions occurred in each fiscal year forward from that date as well?
Mr. Joyce: We would be pleased to provide you with a table that gives you the information for all the years.
Senator Ghitter: I would be very happy to receive that.
The Deputy Chairman: I want to ensure that our staff hears your commitment to provide us with that information.
Senator Ghitter: Mr. Jackson, how do you respond to something I am hearing frequently; namely, that although your government has, rightly or wrongly, patted itself on the back for achieving this balanced budgeted this year, it has really done so on the backs of the provinces from which you have deducted substantial payments over those years; that is to say, you have passed on the problems to them?
Mr. Jackson: Through our good management, interest rates are quite good. The Province of Ontario, for example, has enjoyed substantial savings as a result of that. No government could start with a $46 billion deficit and balance the books without transfer payments and tax points being major components. As the officials said, transfers were cut by 7.4 per cent and we cut ourselves by 10.8 per cent.
It is a balancing act through good management. The provinces enjoyed substantial interest rates savings. In fact, many provinces now have balanced budgets. It has been said that we cut health care by $850 million. That is true, but Mr. Harris cut $1.3 billion from health care. There are probably other areas in health care about which people are not talking where efficiencies are to be had. This health care problem occurred in the United States about 10 years ago and is happening right across Canada now. The provinces are having to come to grips with how they manage it.
Now that the federal government has its fiscal house in order, we will probably address those areas that are of concern to Canadians.
I do not think any government could function properly with a deficit that is growing exponentially. If we can recover that $46 billion and give it back to Canadians, whether as a tax dividend or in some of the programs that we offer, that is what we must do.
Senator Ghitter: The Province of Ontario would argue that they had to cut $1.3 billion because you cut the funding. As a result, they had no choice. Consequently, our health care situation in Canada is in crisis. There is much evidence of that.
My province of Alberta -- and I hear the same in Ontario and Quebec -- points to the federal government's cutbacks for putting them in that position. I do not know that can you get off the hook as easily as taking credit for reduced interest rates. That has international implications.
Mr. Jackson: Sure we can, because the provinces have choices. In this case, there is $4.8 billion to give back in the tax break. That is where the rub is. In order to give a 30 per cent tax decrease to Ontarians, the province of Ontario had to find $4.8 billion.
Senator Ghitter: Let us consider the provinces of Alberta and Quebec, where there were no tax reductions and where the level of health care is currently in severe difficulty. They would say it is because of what the federal government did. Would you say that is not valid?
Mr. Jackson: If we cut some money, obviously it will create hardships. Provincial governments have choices. We must look at their books and see what choices they made. In each case, we will then be able to verify who was the bad guy and who was good guy.
Senator Ghitter: We will let the electorate decide that in due course.
According to the numbers this year in this book, as compared to last year, how much have your reductions been? Is there a number in that document, Mr. Joyce, to give me an indication of that?
Mr. Joyce: Yes, I can give you the number. First, there is Old Age Security 1997-98.
Senator Ghitter: I just want a total of the difference between this year and last year.
Mr. Joyce: "Major Transfers to Persons" is increasing this year compared to last year. It was $34.2 million in fiscal year 1997-98. In 1998-99, it is $35.5 million. Last year, "Total Major Transfers to Provinces" was $19.9 million, compared to $19.5 million this year.
I do not have a number for 1997-98 with tax points included. I would have to get that for you. I will ensure that that is included in the table we have agreed to give to the clerk.
Senator Eyton: It is extremely difficult for anyone to look at a book this thick and this extensive with any understanding of it. I like things in simple terms which, although they may be a little misleading, allow people to understand trends.
Has anyone ever prepared a chart for the last 10 years which shows federal sources of revenue? There are five or six major components involved in that type of chart, and it shows the trend over the years. In the private sector, we often do that relative to our own businesses, but on the expense side. In an overlay, you can see that the differences will represent the running deficit.
Has anyone ever done that type of chart?
A chart like that showing sources of revenue, expenditure program spending, government expenditures, interest costs and transfers as a composite picture, would be much more useful for me than leafing through these detailed documents. I am not faulting the information; I am just saying that it is too much for me. When I get a book this thick, I immediately go to the summary and try to understand it through the summary.
Has anyone prepared such a chart for a more simple, better understanding of the situation?
Mr. Jackson: You would like to see it in graphic form?
Senator Eyton: Has that been done?
Mr. Joyce: We do not have a chart in the Estimates that goes back that far. Until recently, the Estimates have focused solely on the current year.
The Parliamentary Secretary made reference to the Improved Reporting to Parliament Project. The Part III documents are the more understandable companion to this rather thick book, which can be a little opaque to people who are not used to it. By splitting the Part IIIs, we split the information we present to Parliament into two: A report prepared in the fall by departments, which looks retrospectively at their performance; and a report on plans and priorities tabled now that looks three years into the future -- at the upcoming fiscal year and two more.
You make a good point that we do not anywhere in our Estimates documents have any overview that goes back that far.
Senator Eyton: Those two things provide a better understanding of trend lines, which are very important in knowing where you are headed. Mr. Jackson was talking about and applauding his department and others for the right kind of trend line. That seems to be so, and I applaud it as well.
I was also looking for something that would show relativity between the kinds of spending. People from Ontario say that the numbers in health care are down 50 per cent to 15 per cent of program spending. That does not seem to accord with your number of $800 million for relative reductions. I do not know where it goes.
I would like to have something that shows that very simply. I am trying to understand government spending and revenues by important segments. Such a chart with an overlay would give me a good understanding of what is happening.
Mr. Jackson: I have seen such a chart for deficit and debt. However, I have not seen one which shows trend lines.
Senator Eyton: It would not be that hard to prepare.
Mr. Joyce: A document which contains information for the previous 10-year period is shown on the public accounts page. In Volume I of the Public Accounts of Canada for 1997, there is a table on page 2-3 which details statements of revenue transactions.
Senator Eyton: I was looking for something simpler and grander than that.
Mr. Joyce: I understand what you are saying. This would go part way to answering the question, but it does not do it in a single, convenient lay out. That is true.
Senator Eyton: Can someone try to make the chart I have described?
I have seen people analyze the deficit and/or its impending absence by saying, "That reduction is caused blank per cent by transfers, reductions in transfers, blank per cent by interest savings," and then show the make-up of it. It comes back to the federal government and its spending. However, it is said, "The contribution to that deficit reduction comes from two things: Higher revenue and lower costs."
I want to be able to follow that process in relative terms with a historic pattern. That would be very informative.
Mr. Jackson: Senator, if you have copies of model documents, please send them to my office. That might be helpful. However, I will not promise you anything.
Senator Eyton: I will give you better details of what I am looking for.
The Chairman: In your opening statement, you referred to the national Call Centre for Revenue Canada which you say handles up to 10,000 calls a day, which allows taxpayers to file their tax returns from home using a touch-tone phone. That sounds to me to be such an extraordinary and difficult measure.
Perhaps you could tell us how it is working so far. My understanding is that it began in January.
Mr. Jackson: You would probably have to obtain that information from Revenue Canada. However, I can tell you that in the 1960s, when I went to teachers college, we learned about Alvin Toffler, and today we can file electronically.
Some people have difficulty with phones. They do not like voice mail, for example. Some people say bureaucrats use it to screen people out. However, some people like it. It is not a bad way of dealing with nuisance phone calls or people who likes to speak for a long time on the phone.
Revenue Canada is trying to reach all their clients. If you wish to have some information on how Revenue Canada is dealing with the new technology, we could ask them to provide that information.
Mr. Joyce: I am sure we can get some information from Revenue Canada to tell you about the current experience with those initiatives.
The Chairman: What is the projected cost of this new element of Revenue Canada? It seems to me to be an enormous task. The people who set up these technical systems can probably manage it, but to me it seems enormously difficult.
Mr. Jackson: Technology has saved the government money. With the 2000 problem approaching, we want to ensure that the systems are functioning properly. We have saved substantial amounts of money by using technology. Not everyone is a technocrat. However, we are moving more and more in that direction.
The Chairman: Mr. Jackson, in your statement you made reference to the year 2000 computer challenge. I believe your exact words were: The Government of Canada regards the year 2000 computer challenge as a major national priority. To this end, we have established a year 2000 project office in the Treasury Board Secretariat to coordinate and monitor activity across federal government departments and agencies to expedite solutions to common problems. Could you tell us about that?
Mr. Jackson: We have had a number of studies for mission-critical systems. Each department has coordinating people in place to look after that. I understand that in a global way with respect to total preparedness, we are at level 44. Each department is looking at their particular structure and how the technology will impact on them. They are finding solutions.
We think it will cost us $1 billion. We think we can find $500 million from within department budgets. They have been asked to pay particular attention to these information systems. They should know their problems and test their systems. Department officials may wish to add to that.
I have to leave now as the bells are ringing for a vote in the House of Commons.
The Deputy Chairman: I am sure the officials will be quite happy to answer questions in your absence.
Senator Forest: Madam Chairman, have we a particular plan for going through this hefty document in an organized fashion so that we hit on the main points?
The Deputy Chairman: We do not have a plan, but I am quite happy to work one out as time goes by.
This is the first meeting we have had on the Main Estimates, and they can remain before us for quite some time. This evening was our opportunity to hear from the Parliamentary Secretary.
Senator Forest: I rather expected to have an overview first.
The Deputy Chairman: That is a matter we should take up in our caucuses.
Senator Forest: My first question has to do with the Canada Student Loans Program. I have been very much involved in some of that. We have a high default rate on student loans and the government is paying quite a bit of interest on them. I would be interested in knowing what the current situation is with student loans and what we anticipate happening. I noticed that under Human Resources Development on page 11-7 of the Main Estimates.
In 1996-97, some $619 million was set aside for loan payments and liabilities. Last year, it was $616 million, a little less, but the present estimate is up around $800 million. In three years, over $2 billion has been paid out to private lenders.
Do you have any information on that? Again, I am looking at a trend.
Mr. Joyce: It is true that the average debt load of a Canada student loan recipient has increased from about $9,000 in 1990 to $13,000 in 1997. The Canada Student Loans Program is only one component of the loans provided to students because the program is run jointly by the provinces and the Government Canada.
The 1998 federal budget announced a number of measures intended to help reduce that problem. Changes will be made to the Canada Student Loans Program itself, which are intended to enhance interest relief and to allow for a debt reduction in repayment for students who have particularly high debt loads and low incomes.
More broadly, a number of the budget measures, particularly those under the heading of the Canadian Opportunities Strategy, will enhance access to post-secondary education. The key ones there are the Canada study grants and the millennium scholarships. The government has put in place a number of measures that will help alleviate that.
A number of things were done with regard to some targeted programs under major reforms to the Canada Student Loans Program which took place in the 1990s. There are three new grant programs, for instance, targeted at students with permanent disabilities, high-need and part-time students, and women in certain doctoral studies. An array of programs are intended to recognize the issue you raise.
The basic federal government program is a loans program, and the students are required to pay back those loans. As I am sure you are aware, the students get an interest holiday, so to speak, while they are in full-time study. It is only once they come out of full-time study that the interest on the loans is charged to the students. While they are in full-time study, the interest is paid for them by the federal government, and that is part of what you see in the Estimates.
Senator Forest: Are the changes to the programs which have just been announced in the budget included in this increase we see in the Estimates?
Ms Jackson: The budget measures are not reflected in the Estimates currently, so the student loans expenditure or forecast requirements in 1998-99 are before the 1998 budget initiatives are implemented.
Senator Forest: Could you run that by me again.
Ms Jackson: What you see for the Canada Student Loans Program in the current Estimates documentation does not include the budget 1998 initiatives announced by the government.
Senator Forest: Is that why there was such an increase this year in the Estimates?
Ms Jackson: That is not related to the increase at all.In the departmental RPP tabled today, you should be able to find additional information on that subject matter for Human Resources Development.
Mr. Joyce: The Parliamentary Secretary made reference to that, partly because of the indication we received from the researchers that it may be an area of interest. We have departmental officials on standby to come to the session tomorrow morning at eleven o'clock, if the committee wishes. One of the departments we have on standby is Human Resources Development. If you wish to pursue that in more detail, we will ensure that those officials are here.
Senator Forest: I will see if other members of the committee share this particular interest of mine.
The Deputy Chairman: How does the cost of these programs compare to the cutbacks in post-secondary transfers to the provinces?
Mr. Joyce: There is not really a one-on-one relationship. It is a difficult comparison to do because the payments are under the control of the provinces in terms of how they apply them. This program is targeted specifically to students and is run jointly with most of the provinces. Under the program, some provinces have the option of opting out. I believe the territorial governments and Quebec have done that.
In terms of trying to make a direct tie between any cash flow changes or changes in the cost of pick-up of this program and the overall transfers from the federal government to the provinces, it would be difficult to analyze and find any particular relationship. I am certainly not aware myself of any study that has been done to try to do that.
Senator Forest: I would also like to look at the Department of National Defence. I note that the budget for 1998-99 is $9.4 billion, which is about half a billion less than last year. It says that some of the decrease is on capital projects and so on. We were talking last year and are still hearing about helicopters. Is that in that budget?
Mr. Joyce: The helicopter project spans nine years. Of the total amount estimated for the Canadian search and rescue helicopter replacement project, which is about $788 million, $53.8 million is scheduled for 1998-99.
Senator Ghitter: I would like to, for my own understanding, look in the Employment Insurance area. On page 1.36, I see expenditures of $12.56 million.
Mr. Joyce: Yes.
Senator Ghitter: What are the revenues received under that plan?
Mr. Joyce: I am not sure I have that. If you give us a minute, it is possible we may have the revenue component of it. If I do not have it with me, it is something I can provide to the committee. Because this document deals with the expenditures, we do have that side of the equation.
Senator Ghitter: I was just wondering if you happen to have the number.
Ms Jackson: On page 57 of the Minister of Finance's 1998 budget is a table which highlights Employment Insurance premium revenue. In 1998-99, it is forecast as $18.6 billion. In 1999-2000, it is forecast at $19 billion.
Senator Ghitter: Are we dealing with $18.6 billion by way of revenues, if I might call it that, and $12.5 billion on the expenditure side?
Ms Jackson: The $12.5 billion shown here is for Employment Insurance benefits and/or training. The actual unemployed would be receiving that payment or that benefit. That does not include the Employment Insurance administration cost, which is approximately $1.126 billion.
Senator Ghitter: We can add to the $12.5 billion another billion on administration.
Ms Jackson: Approximately another billion.
Senator Ghitter: How is the difference handled? We have a difference of $5 billion or whatever. How is that handled in the accounting stream?
Ms Jackson: The fees collected for Employment Insurance would be reflected in the revenues of the government, and the expenditures associated with operating the Employment Insurance account would be reflected in the expenditures of the government.
The Employment Insurance account is consolidated pursuant to a recommendation by the Auditor General a number of years ago. It was recognized that the Employment Insurance account is actually similar to a program of government, unlike the Canada Pension Plan. You contribute toward the Canada Pension Plan and you have a right to receive a benefit. Because you are contributing to it, you will receive a pension at a certain age. As such, the liability is recognized with that account. The Canada Pension Plan is similar to any pension account to which you contribute. The liability is recognized, and the fees contributing towards that plan are also recognized. We do not consolidate that account because it is not viewed to be an ongoing program of government, as opposed to the Employment Insurance account.
Senator Ghitter: Is that on the recommendation of the Auditor General?
Ms Jackson: Yes.
Senator Ghitter: Basically, the surplus of $5 billion, or whatever the number is, just goes into the general revenues of the government?
Ms Jackson: It goes into the general revenues of the government in the year it is generated, but in the subsequent years you could draw down against that surplus because we do report separately on the Employment Insurance account itself. In the documents that were tabled today in the House, the Reports on Plans and Priorities, you would be able to find within the Department of Human Resources Development a separate section dealing specifically with the Employment Insurance account and the status of it. We also report in the Public Accounts on that account as well and monitor the status of it.
Senator Ghitter: I take it the surplus position of that account which, as you mentioned, was tabled today, would be in excess of the $5 billion? If it is $5 billion this year, leading up to other years that amount would be substantially more than the $5 billion. Would that be a correct assumption?
Ms Jackson: I do not know the status of the account currently, but if you had a surplus in one year, you could conceivably draw that surplus down in a subsequent year.
Senator Ghitter: Do we know what that surplus is now?
Ms Jackson: I do not have that information before me. That would be within the document that was tabled by the minister today. We could bring that information tomorrow.
Senator Ghitter: Would you do that?
Ms Jackson: Yes.
Senator Ghitter: Is that looked upon as a contingent liability of the government? How do you record that?
Ms Jackson: Given that it is considered to be a general program of the government, the revenues are realized as the fees are collected, and the expenditures are realized as the payments are made to the eligible recipients. In a subsequent year, if the fees are not sufficient to cover off the payments made out of the account, that would also be covered under the general programming of the government.
Senator Ghitter: However, from the point of view of the Canadian public, those who are paying this money in, the moneys are not set aside in a separate account?
Ms Jackson: No, they are not.
Senator Ghitter: They are just in general revenue, so theoretically there is no accounting back to the people who are paying for those benefits.
Ms Jackson: I would say there is an accounting back to the people paying those premiums because we do account for it within the Public Accounts. We highlight that account specifically. We also report on it in the Reports on Plans and Priorities that was tabled today, as to what we expect the premiums to be and what we expect the expenditure outcomes to be as well.
Senator Ghitter: But these people have overpaid on the premiums.
Ms Jackson: That depends on whether the employment picture is rosier than was forecast. It is difficult to set a premium rate that will ensure you are matching the premiums and expenditures in every year.
Senator Ghitter: If people make premium payments and claims against those payments are $5 billion less than anticipated, it would seem to me that they have overpaid.
Ms Jackson: But if I am contributing to the EI account and I am fortunate enough to be still working, I am not going to be making a claim against that account. However, the forecast of how many claimants there will be in any given year is just that, a forecast. At some time, the premium charged will be reviewed and re-addressed to take into account more recent economic situations and assumptions in order to decide whether that premium should be reduced or increased to cover off whatever claimants are expected to materialize.
Senator Ghitter: I appreciate your explanation and thank you for it. I have a lot of trouble with the way it is dealt with but I appreciate your explanation.
Senator Eyton: My question follows up on that of Senator Ghitter. There has been some discussion about the required surplus in the Employment Insurance fund, although I cannot recall the number. A justification for the current surplus is that we must put it away for a rainy day. That rainy day amount, from my recollection, was something like $5 billion. The argument is that that is a good amount to have available for the kind of unhappy circumstance you just described; that is, a higher level of claims.
There is a surplus today and it will be added to in 1998-99. What will that surplus amount to at the end of 1998-99?
Ms Jackson: I do not have the information in front of me right now, but the document that was tabled in the house today by the minister, specifically addressing the Department of Human Resources Development, has a section in it on Employment Insurance, and in that section you would be able to see the surplus within the account.
Senator Eyton: Is there any report which suggests a desired level of surplus in the fund?
Ms Jackson: I am not sure if there is such a report. I can find out whether there is some evaluation of what is a reasonable surplus to maintain in the account. I presume they have studied that, because their forecasts are only as good as the assumptions behind them. If the economy is operating better than was anticipated, the surplus evidently will be more than would have been planned at a given time.
Senator Eyton: Another way of asking the question is: What is too much?
Ms Jackson: The premiums have been set and they would be subject to review. Within the budget, there was only a mention of what the EI premiums would be for the upcoming year. I believe that they would be making an assessment of what those premiums should be adjusted to, given the state of the economy and the surplus within the account. I do not know when that will be determined.
Senator Forest: Senator Eyton is trying to learn what the accumulated surplus in the account is. I know that the premiums were reduced last year. Were they reduced enough to maintain a reasonable amount to cover the liabilities? It is like a pension fund, I would think.
Senator Eyton: Or what is the target?
Senator Forest: Yes. That is what we are trying to get at.
Ms Jackson: I can follow up on that question for you for tomorrow's session.
Senator Forest: That would be helpful.
Senator Moore: If the surplus in this fund will be $5 billion at the end of the 1998-99 fiscal year, what was the net in the past fiscal year? Was it a surplus or deficit, and how much was it?
Ms Jackson: Again, I will be in a better position to answer that question when we return tomorrow.
Senator Moore: I would be interested to know what those numbers were for the last five years so that we can see what the trend is, where it has been going, and how much is involved. We are talking about receipts of about $18 billion and a surplus of $5 billion. It is a 33 per cent variance or error.
Senator Ghitter: It looks good in a budget, but it is not our money.
Senator Moore: Yes. Has this trend been going on for a while? It is a pretty substantial piece of business.
Senator Forest: There was a time when the fund was practically broke, and the premiums were raised. Now we are seeing the other trend. We are wondering how much is enough. What kind of a cushion do we need? Again, that depends on the assumptions of what will happen in the employment picture.
Mr. Joyce: As Ms Jackson has said, we will have some better information with us tomorrow. Again, we could bring some officials from the department if you wanted to go into this in more detail. These are questions regarding basic policy and we do not have answers to them right now. We would have to get them for you.
As you point out, senator, at times in the past the situation has been the reverse and the fund was in deficit, I believe. When you look at just one year, the figures are as Ms Jackson has said, but it might be useful to have a historical context on this.
Senator Ghitter: That would be very useful information. I would like to see it. It is very relevant.
The Deputy Chairman: That would be excellent and very welcome information.
[Translation]
Senator Ferretti Barth: I get lost in all of these figures. The Income Security Program interests me a great deal. In 1997, an additional $567 million was allocated to the program and in 1998-1999, a further $453 million. Have you taken into account demographic changes and the aging population? What explanation can you give for the fact that in 1997, you allocated an additional $567 million to the Income Security Program, whereas in 1998-1999, we have less money to work with in the Supplementary Estimates? Is it that people are no longer aging or dying before they collect their pension? What explains the $1 million difference from one year to the next?
Mr. Joyce: Regrettably, I do not have the details.
Senator Ferretti Barth: You will find them on page 11-2. Details of the Income Security Program are provided, along with the department's total program budgets.
Ms Jackson: These are estimates for population segments by thousands. No program cuts have been made. These are projections, taking into account certain population groups.
Senator Ferretti Barth: Will you continue to take into consideration the aging population?
Ms Jackson: I could ask the department for additional details on how it arrived at these estimates.
Senator Ferretti Barth: This morning, the Minister of Finance, Paul Martin, announced that the old age pension was set to increase by $10 per month. How will this benefit old age pension recipients?
Ms Jackson: I will be in a better position to answer that question tomorrow.
[English]
The Deputy Chairman: Honourable senators, perhaps we should excuse the witnesses and then spend a few moments discussing where we will go from here.
Thank you very much. We shall be in touch with you as required.
The committee continued in camera.