Proceedings of the Standing Senate Committee on
National Finance
Issue 12 - Evidence
OTTAWA, Wednesday, May 30, 2001
The Standing Senate Committee on National Finance met this day at 6:17 p.m. to examine the Main Estimates laid before Parliament for the fiscal year ending March 31, 2002. Senator Lowell Murray (Chairman) in the Chair. [English] The Chairman: We have the pleasure of welcoming the President of the Treasury Board, the Honourable Lucienne Robillard, this evening. On our agenda, of course, are the Main Estimates for the fiscal year 2001-02, which honourable senators also have in their possession. With the minister are our old friends Mr. Richard Neville, the Deputy Comptroller General, and Mr. Andrew Lieff, Senior Director, Expenditure Operations and Estimates Division at the Comptrollership Branch. Members of the committee will recall that we met with officials from the Treasury Board Secretariat on March 13 with respect to the Supplementary Estimates for the fiscal year ending March 31, 2001, and on March 14 with respect to the Main Estimates for the present fiscal year. [Translation] To start off, the Minister has a short statement. After that, I am going to invite members of the Committee to ask questions and make comments. Ms. Lucienne Robillard, Member of Parliament, President of the Treasury Board: It is a pleasure to be with you this afternoon to discuss the government's main estimates. As you are aware, this was the first year in which the tabling of the main estimates has not been closely preceded by a February budget. Instead, my colleague, the Minister of Finance, laid out the government's expenditure plan for 2001-2002 in the October 2000 Economic Statement and Budget Update. The main estimates we are discussing today reflect that plan. All of the spending authorities sought in the main estimates are well within the expenditure framework contained in the October 2000 Economic Statement and Budget Update. On May 17, 2001, the Finance Minister indicated that despite the recent downward revisions to economic forecasts, the budgetary strategy presented in October is still on track. This is the payoff from the government's prudent approach to budget planning. We are continuing to follow the well-reasoned economic path that has led to Canada's recent prosperity: adopting the right balance between social and economic investments, spending, tax cuts and debt repayment. We will continue to invest strategically and responsibly - on health, infrastructure and on programs that will create opportunities, improve our sense of individual and collective security and promote general prosperity. You will see these priorities reflected in the estimates documents. [English] Perhaps I should pause for a moment and look at the Estimates process itself. As you are aware, the Main Estimates consist of several documents. The so-called "blue book" details the voted and statutory items within departments, agencies and Crown corporations. The "Report on Plans and Priorities" provides detailed qualitative information on spending plans and expected results, while the "Departmental Performance Report" focusses on actual achievements against plans. Together, these reports constitute Part III of the Estimates. Thanks to Part III of the Estimates, we now have a more disciplined reporting structure in place that starts from key results commitments. We now have performance reports that link results to resources. We now expect each department to explain to Canadians how they are meeting government objectives, and why they are not, if that is the case. This direct link between overall goals and individual departmental initiatives is crucial if Canadians are to have a clear sense of the government's vision and how their tax dollars are being spent to turn that vision into reality. Let us now turn to the numbers themselves. [Translation] As you are aware, the main estimates represent the bulk of the government's expenditure plan outlined in the October Economic Statement and Budget Update. The 2001-2002 main estimates include $163.3 billion in budgetary spending and $1.9 billion in non-budgetary expenditures for loans and investments for a total of $165.2 billion. You will note that this year's main estimates show a growth in total spending of $9.1 billion, or 5.8% over last year. This does not signal a departure from past practices - we are not entering a period of carefree spending. That would not be prudent and certainly would not serve the public interest. This increase was necessary to meet the public's changing demands and expectations. You will note that 75 per cent of the year over year change in the main estimates relates to changes in the forecast of statutory spending. The bulk of the $1.9 billion in non-budgetary expenditures will be going to direct loans to students disbursed under the new Canada Student Financial Assistance Act that replaces the previous program delivered by the banks. This government has made an unequivocal commitment to the youth of this country to help them get the skills they need to compete in the 21st century knowledge economy. [English] With an aging population, we are seeing an increase in the number of benefit recipients and in the average benefit rate. This is reflected in the increase of $1.4 billion in direct transfers to individuals for Old Age Security, the Guaranteed Income Supplement and Allowance Payments for Employment Insurance. Canadians have told us that good health care and the sustainability of the health care system is their number one priority. That is why we have seen an increase of $3.8 billion for the Canada Health and Social Transfer Payments to the provinces. The remaining year over year change in the Main Estimates relates to increases in direct program spending, the majority of which is appropriated annually. Canadians have told us their priorities and we have listened. As you can see, we are investing appropriately. We are investing in areas like National Defence - an increase of $507 million - as well as innovation and research through investment initiatives like the Canada Research Chairs Program - $120.5 million. We will invest $360 million for the new Infrastructure Canada Program this year on clean water, roads, sewers and cultural and recreational facilities. This program will have a tangible impact on the quality of life in communities across this country. I should point out that, as a result of sound financial management, we are also seeing substantial savings. We have, for example, managed a $300 million reduction in interest and service costs associated with the public debt. [Translation] As you are aware, I tabled the main estimates on behalf of the government. As President of the Treasury Board, however, there are certain expenditures that are particularly relevant to my own area of jurisdiction. The 2001-2002 main estimates for the Treasury Board Secretariat amount to almost $2.1 billion. This is an increase of $344.2 million over last year. It is useful to distinguish between the expenditures on TBS requirements and those requirements related to a series of central votes designed to meet government-wide commitments. These central votes constitute the vast majority of the main estimates for TBS and cover commitments including the current round of collective bargaining, a provision for contingencies and expenditures such as public service insurance. You will have no doubt noticed that there was a $13.2 million increase in operating expenditures at the Treasury Board Secretariat. The Secretariat has been growing, in terms of both the number of employees and the duties we are being called upon to perform. Our role as the management board of government is bringing new demands and pressures that simply cannot be met without additional funding. We are, for example, responsible for several key government-wide initiatives such as Government Online and Infrastructure Canada. In vote 10, we have seen an increase of $29.2 million for many of these government-wide initiatives. The bulk of this, $20 million, will be going to the Government Online project to help us meet our goal of having key government services online by 2004. [English] We are also responsible for working with departments on a variety of other ongoing activities such as modernizing comptrollership practices government-wide and improving the quality of government services delivered to Canadians. The management board is also working on modernizing the way that the public service is run, which is an essential priority now. We continue to move forward with the realization of the commitments we have made in the government's management framework "Results for Canadians." We are becoming more citizen-focussed, values-driven, results-oriented and committed to responsible spending. Mr. Chairman, honourable senators, when you look at the Main Estimates as a whole, and when you look at where the money is being invested, I think that it is clear that we are on the right track. We will continue to invest in the priorities that matter most to Canadians and we will continue to improve the quality of life for everyone. Let me say, again, how pleased I am to be here this afternoon with you. I should point out that the big priority for the secretariat, as we modernize management practices, is to ensure greater transparency to the public and parliamentarians. We are making a conscious effort to improve the information that is available to you. I would now very much welcome any questions that you might have. My colleagues and I will be pleased to answer your questions or listen to your comments. The Chairman: Thank you, Madam Minister. For the record, can you tell us when you expect to bring in the first set of sups? Ms Robillard: We do not have a particular date, but usually it is during the fall. I imagine this year it will be the same. The Chairman: Thank you. Senator Kinsella: I wish to begin by complimenting the minister on the initiative in the area of modernizing management practices in the public service. Not only parliamentarians, but also our excellent public servants who we are fortunate to have in Canada were willing participants in that process. Canadians, by and large, are proud of the professionalism of our very modern public service. Do you have an idea as to how much money will be spent this year on the process of modernizing management practices? Ms Robillard: With all the different activities that we have on the side of controllorship - with financial information strategy, the internal audit operation - I would say approximately $100 million, but that will have to be checked in detail. Senator Kinsella: There are a number of discrete activities already planned for which estimated expenditures have been earmarked in the secretariat? Ms Robillard: Yes. Mr. Richard Neville, Deputy Comptroller, Treasury Board of Canada: Yes, that is correct. Senator Kinsella: I was also pleased that it was mentioned that we are becoming more citizenship-focussed and values-driven. Will one of the pillars of the modernization of management practices be on the exercise of promoting ethics and values in our public service? Ms Robillard: Yes. Senator Kinsella: One dimension of the discussions with members of this committee of the Senate who have been studying the issue of legislation to deal with the problems associated with whistle-blowing. The minister might be aware that this committee received an order of reference from the Senate concerning Bill S-6. This committee studied it in detail and made some technical amendments to it; it is now standing at third reading in the Senate. The reason it is standing at third reading is that it has been moved that the debate does not commence in deference to your excellent initiative, part of which we understand will be giving some focus to the matter of whistle-blowing. Perhaps you could share with this committee where you are with that initiative. Ms Robillard: It is correct to state that in the last year we have put some effort into the values and ethical framework. Some years ago we received a very good report from Mr. John Tait and from there we worked on the framework of values undertaken. We have created an office on values and ethics to help departments have a good framework to appoint some deputy ministers as champions of values and ethics in the system. We have done a great deal. However, it was clear to me to the Auditor General that at we lacked a mechanism for supporting those values and ethics for our employees who were concerned about some wrongdoing in the system and that we should have a very clear mechanism for whistle-blowing. To my surprise, we did not have any policy on that, although we at the secretariat of Treasury Board have a lot of policy for our employees. I am thinking as an example of the harassment policy that we have for our employees. We did not have any specific policy on wrongdoing and whistle-blowing, so we worked on that policy and we are almost at the point of finalizing it. I can imagine that in the near future I will be able to say more about it and to announce it to our employees. Senator Kinsella: We are delighted that the government is developing a policy framework to deal with whistle-blowing. Within that framework do you envisage that your proposal will be consistent with the platform of the government in the first red book where you committed to the people of Canada that, if elected, whistle-blowing legislation would be introduced? Ms Robillard: Right now, we are looking more at the policy than the legislation. It was also clear in the Auditor General's report that we should look at legislation as the last recourse. The Auditor General stated clearly and correctly that we did not have any policy right now in the system. Therefore, the approach that we are envisioning right now is more to implement a policy and to evaluate the policy after a certain time before thinking about the legislation. Senator Kinsella: The government has incorporated the principle of whistle-blowing in certain pieces of legislation that have come before Parliament in the last couple of years, such as the environmental bill and there is also currently another bill before Parliament. If it is government policy to have whistle-blowing provisions in specific statutes, would it not be consistent for the government to have an overarching whistle-blowing act similar to Bill S-6? Ms Robillard: I do not see that as a consistent approach here. The most important thing is to include that whistle-blowing policy in the general framework of values and ethics. For me what is most important is that we promote values and ethics in the system, at the same time giving a clear mechanism to our employees also for whistle-blowing without any negative impact on them and on their career. I think the policy approach within that framework of values and ethics is the best one. Senator Kinsella: How would a policy statement, or policy of the Treasury Board or line agencies or departments be able to provide statutory or legal protection against retaliation taken by the employer against an employee who whistle-blows? Ms Robillard: Perhaps it is premature for me to go into detail, but I can assure you that our employees will have the protection also through the policy and with some legislation that we already have in effect. Senator Kinsella: Finally on this topic, many of us are of the view that ultimate accountability should be to Parliament. This is why the Public Interest Commissioner, who would be the agent to receive the whistle-blower's complaint in Bill S-6 adopted by this committee, at the end of the day does report to Parliament. Will your policy have a provision that, at the end of the day, it is reported to Parliament? We know that there will be a serious debate in the country on the ethics counsellor. Some argue that the ethics counsellor should be reporting to Parliament, and others argue that he can report to a member of the ministry. What will your policy say in that regard? Ms Robillard: The policy will be very clear about the mechanism presented to our employees, first within their own departments. If they are not satisfied there will be a possibility to address the issue with a third party and the policy that we are looking for will ensure that parliamentarians are informed about what is going on here. Senator Kinsella: Perhaps I could ask one short question on a different topic. I am interested in the Canada Student Financial Assistance Act. You did point out in your presentation that the bulk of the $1.9 billion in non-budgetary expenditures will go to direct loans to students disbursed under that act. Will there be costs in this fiscal year associated with the banks leaving? What is happening to the guarantees that were given to the financial institutions? Are there other costs associated with the banks leaving this field? Ms Robillard: My understanding is that those costs are part of the $1.9 million that I pointed out. This is part of the new system because we no longer have agreements with the banks. Mr. Andrew M. Lieff, Senior Director, Expenditure Operations and Estimates Division: The $1.9-billion non-budgetary expenditure represents the value of the loans that we will be writing that are now on our books as opposed to those of the banks. There are also budgetary estimates related to administration and other such costs that are similar to the costs we had in the past. Senator Banks: With respect to whistle-blowing, you said a moment ago that you thought it would be a good idea if policy preceded legislation. Do you mean by that that you will test the policy to see how it works out and that there will then be legislation in which that policy would be cast in stone? Ms Robillard: The tradition in the public service is that when we have a problem in the system we try to use the policy approach. That has worked well. I will again refer to the anti-harassment policy that we have for our employees. You can ask our employees whether they are satisfied with that policy. When we have been concerned about the well-being of our employees, we have tried to find a mechanism in the system to deal with that. This is in line with the tradition of the public service in Canada. Our first reaction is not to think about legislation because there are many issues to be addressed in the workplace with our employees. The policy approach is more in line with what we are doing in the public service. I have looked at what has been done in other countries where they have chosen to proceed with legislation and at why they have chosen to do so. In my opinion, there is not a big crisis in the public service about whistle-blowing or abuse, although it happens. There is wrongdoing some times. In some of the cases that have gone to court, judges have stated very clearly that they find it strange that there is no mechanism or clear policy for our employees in the system. That is why we are of the opinion that we are better to use the policy approach. We revise policies on an ongoing basis to ensure that they are effective. We are currently revising our anti-harassment policy. We are doing that in consultation with all of our partners - including the unions. We will first implement the policy and then evaluate it. I cannot tell you how the policy will be evaluated in a year or two. At that time, we will see whether we need legislation to oblige everyone to comply with the policy. As I have said, we have succeeded in dealing with other matters that are very important to our employees without using legislation. Senator Banks: An uneducated and inexperienced person such as I, looking at this from the outside, would say that it would be easy for a government - and particularly a successive government - to change a policy. It is more difficult - although not impossible - to change legislation. If, after having tried out a policy and worked out the kinks, would it not be a good flag waver, at the very least, to enshrine that in legislation? On the same subject, we have heard in this committee that there are fairly substantial numbers of employees in the public service of Canada who are not covered by the provisions of the Public Service Employment Act. This act governs promotion and protection in some respects of what we used to call civil servants. For example, employees of Parks Canada and of the new revenue agency and the management policies of those agencies are not subject to the provisions of the public service legislation. Would your policy, and any act which might enshrine your policy, apply to all public servants or would there be any exemption from it in the same way that there is from the Public Service Employment Act that governs some government employees? Ms Robillard: There is much interest in this future policy, Mr. Chairman. Perhaps when we announce it you should invite me back to talk about the details of it. It is premature for me to go into details today. You ask a very good question. Many people do not realize that the Treasury Board is not the employer of workers in some agencies. We have some separate employers or "distinct" employers. You mentioned Parks Canada and the revenue agency. Other examples are the Canadian Food Inspection Agency and the Auditor General's office. Many agencies are not part of the public service per se or under the umbrella of the Treasury Board. They are distinct employers. They are responsible for their human resources regimes and management. They can have their own policies and their own rules. The human resources policies that we have at Treasury Board do not apply systematically to the distinct or separate employers. Under a new policy, we usually exchange ideas with these employers. We tell them what we are doing. We encourage them to implement such policies in their organization if they have not already done so. We do that for all matters. Senator Banks: Is it possible that the policy that you will introduce some time in the near future might not apply to large numbers of employees of different kinds of the Government of Canada? Ms Robillard: It could be that they would have to adopt their own policy on the matters. [Translation] Senator Bolduc: My colleague put forward a bill, and based on my experience, it is a good bill. However, I am surprised to see that Treasury Board is reticent about it. The bill provides for remaining within the system. That is very important to understand. We are not in the United States here, this is Canada. The idea was to keep this within the confines of the public administration as such without going through someone independent. All kinds of people made all kinds of offers, and people said they wanted an independent examiner. That was not what we wanted. We want someone inside the system, that is why we were proposing a Public Service commissioner for the role. Otherwise, you cannot judge the conduct of your managers. I have nothing against Treasury Board managers, they are good people - I know, I was one of them - but it is not in their interest to recommend outsiders. I do not blame them. It is for you, as president and minister responsible, to analyze that. It is important to protect government employees who would like to blow the whistle on a manager whose conduct is improper. I am sure that, had we had such legislation, we could have avoided the mistakes, for example, at Human Resources Development Canada. You cannot judge now because this is no longer an issue. Obviously, there is some unacceptable conduct at the senior level of the Public Service. There are 2,000 people in the Public Service, some of whom are currently not talking because they do not feel protected. My comments are based on my many years of experience. Think twice before you reject it. The attitude of your staff disappointed us. We are not blaming them, they are entitled to express their opinion, but this type of issue should not be taken lightly. That is my opinion. Ms Robillard: Quite honestly, when I first heard about this legislation, I was very surprised. I could hardly believe that the Public Service of Canada had come to this, to the point that we needed legislation so honest employees with knowledge of improprieties in the system would be protected when the blew the whistle. I was bowled over the first time I heard about this legislation. I cannot believe that we are unable, within the system itself, to solve this problem with remedial mechanisms not just in the department where the problems occur, but outside too. Senator Bolduc: That is what was being proposed, an internal government mechanism, inside government generally, but not in the actual department. I was a Public Service commissioner for a number of years and heard many cases involving abusive conduct by management. Government employees were not protected in those situations. When they have a union, that is not too bad, but when there is no union, it is serious. I am not criticizing the federal Public Service; I consider it one of the best in the world. I would point out that your policy consists of ethical rules. We are all in favour of ethical rules, but eventually someone's conduct breaks the rules, and you have to find a way to deal with that. It is important for employees to be protected; otherwise, they will not talk. Ms Robillard: I do hear what you are saying. I would add that I do not completely agree with you that we would have avoided the problem at Human Resources Development Canada with such a policy. The problem at that department was of a different nature. The Chair: We can come back to this when we know what your policy is. [English] Senator Banks: It is a question of arithmetic, minister. In the October update, we were told that the reduction in the cost of servicing the public debt would be $41.7 billion. In the May update, we were told that, by virtue of prudence, the reduction in the cost of that debt servicing would be $800 million. Do we subtract the one from the other? Do we now think that in the coming year will we have debt service costs of $40.9 billion? Is it $41.7 billion less $800 million? Mr. Neville: At this point, the payment to the public debt will be $41,700,000,000. 00. Senator Banks: I thought that was debt service costs. Mr. Neville: That is public debt charges. Senator Banks: Plus interest? Mr. Neville: That is what it is. Senator Banks: We heard in May that we had, by means of prudence, reduced the cost of paying interest by $800 million. Do we subtract the $800 million we heard about in May from $41.7 billion? Did we know about the $800 million before the figure of $41.7 billion was given? Mr. Lieff: The Minister of Finance in his recent economic update has portrayed the impact of a number of different economic assumptions on both expenditures and revenues in terms of what would happen under different scenarios. For example, on the GDP growth rate, there is a change of approximately 1 per cent from what was originally forecast and overall that would have about a $500-million impact on expenditures. Those were included in the update as examples of what was happening. The Minister of Finance intends to come out in the fall, as usual, with an economic statement and update that will re-base program spending based on whatever is happening. Right now, economic assumptions are in a state of flux. The Main Estimates are portraying that the cost of that statutory financing is $41.7 billion. There are factors in the economy that are working to affect that estimate. We will be reporting back on that. The minister indicated in the statement that if this kind of interest rate change happened, here is what the impact would be on those debt financing costs. Senator Banks: That is what he was referring to? Mr. Lieff: Yes. Senator Banks: In terms of the projected payment, which is still $41.7 billion, we are dealing with numbers we heard about in October? Mr. Neville: That is right. The Chairman: While I do not have his text in front of me, I had thought that the minister said that the net impact of the interest rate changes since would be to shave $800 million off of the debt service costs. If that is the case, the number that we should be assuming now is $41.7 billion minus $800 million, I think. Senator Banks: If you happen to have the printed version of the update, it is on page 56. You might tell us what the minister said. Mr. Lieff: I am trying to explain that the current average forecast would see an $800 million reduction in that cost if that is what eventually happens, but things are changing. There will be a full update on all of the expenditure programs affected by economic assumptions, including the debt. The minister has talked about changes in GDP growth, and that would have a change and he has given examples. He has talked about changes for interest rates, which would see a reduction of $800 million in debt financing costs. If the assumptions hold, then by the time of the fall update, we will be showing the impact of those changes in the Supplementary Estimates. Senator Banks: Generally then, despite whatever might have happened between October and May, we will now talk about Estimates based on what the wisdom was in October? Mr. Lieff: For the Main Estimates, which were tabled in February, yes. Senator Banks: Thank you. The Chairman: I am slightly incredulous. What is the significance of the economic update brought down in May by the Minister of Finance? You are telling us these numbers mean that if the projections are borne out, yes, that is the number. Meanwhile, the number, as far as you are concerned, is still $41.7 billion. Therefore, you do not take the $800 million seriously at all, and I suppose we ought not. Mr. Neville: Mr. Chairman, if we can put in perspective, the May 2001 economic update did not have an impact on the 2001-02 Main Estimates themselves, or the supply bill before the House. It also did not imply any revisions to planned budgetary spending at this time. There were some impacts proposed in terms of what could happen, and those would be reflected depending on the results in the fall. For purposes of the Main Estimates as tabled, there is no impact at this time. The Chairman: I will not press the point. Others may wish to, but the table I am looking at talks about impact of changes in economic assumptions on budgetary surplus, and its impact from changes in real output, GDP price, interest rates and then net impact. There is nothing hypothetical in the wording that is used to describe these projections. Mr. Lieff: Mr. Chairman, perhaps I can back up a bit and point out that in the Main Estimates, and in the Estimates as a whole, there are two types of approvals or authorities at which Parliament is looking. One is the authorities that Parliament has previously passed in legislation for the major transfers and financing debt, and the other is the formula for financing those programs, which was approved by Parliament in separate legislation. At the point of tabling, or in fact before that since we must get them prepared and get them to print, we will provide Estimates based on the economic context that exists at that time. We are also providing the appropriations that we are asking Parliament to vote in the supply bill. The appropriations that we are asking Parliament to vote in the supply bill are unchanged. What is happening in a dynamic economy is that the assumptions regarding the economic variables are changing all the time. Many of those economic variables drive the major programs such as Old Aage Security, equalization payments and that kind of thing. Much has happened in the economy since the Main Estimates, which were based on the framework of the October economic statement, were presented. I think the Minister of Finance is saying that the fiscal plan that was provided in October still holds. As well, the commitment to tax relief and the tax plan that was set out, the overall investment in the social infrastructure and the fact that there will be balanced budgets also hold. The changes in economic assumptions can be managed within the budgetary balances that are being forecast in this statement. We will come back in due course, when we present the next set of Estimates in the fall and when there has been an economic statement, to show you how all that fits together in the Estimates document. In a dynamic situation it is difficult for us, in the printed documents, to keep up with all of the changes that are happening at that point. We can tell you that this is serious, this is what the impact would be, but it has absolutely no impact on the voted appropriations. The Chairman: What do you mean by the "next set of Estimates in the fall"? Mr. Lieff: The Supplementary Estimates. Senator Stratton: I would like to go back to Senator Kinsella's question on a supplemental with respect to the whistle-blowing legislation. He pointed out to me that in your Red Book of promises you had promised whistle-blowing legislation at that time, yet you were surprised to see that the Senate had come up with a whistle-blowing bill. What is the difference between the time you made your promises in the Red Book and your surprise expressed now in the fact that we have brought forward a whistle-blowing bill? Ms Robillard: That is a very good question. Again, I can only repeat myself. I would claim that as privileged on behalf of the government. It is still not finalized, it is being discussed right now, but we are seeking an approach for the protection of our employees. Senator Stratton: I am concerned that you would have such a sea change in your attitudes from the time of your Red Book promise to now, and there must be substantive reasons for that. I can understand them, but I would like them explained as to why there has been such a sea change and why you feel so strongly? It would appear you feel so strongly that you are almost hands off with the legislation because you feel you can deal with it through policy. Whereas we have experienced in this committee and in the agriculture committee, witnesses - civil servants - who were indeed threatened. That made us feel strongly that we need such legislation. I would like to have an explanation. I can understand if you changed your mind and accept that change. However, I am concerned as to why you feel you can do it through policy that may or may not be adopted by agencies now outside of your control, because if the policy is not brought down, those people outside of your control are not protected. Ergo why would we not have whistle-blowing legislation? Ms Robillard: I respect the fact that you have worked a great deal on that legislation. I do not share your approach, but I think it is your right to vote on the legislation and we will see what the House of Commons will do about it also. The House of Commons does not have the legislation at present. We worked on that policy after the tabling of the John Tait report on the values and ethics framework that was needed in the public service. It is more logical to see that inside of that framework and to have a policy. The problem was that we did not have any policy, any mechanism for our employees. Now for the separate employers, it is not only for the whistle-blowing; it is the same for the entire human resources management regime. Perhaps it was not realized that those people are not under the responsibility of the Treasury Board as an employer. This has applied to some of them for many years, some more recently. For years, some distinct employers were not under the decisions made by the Treasury Board secretariat or Treasury Board in itself by the ministers for the employees of the public service. It is not different for me in that matter. Because I cannot reveal all the details of the policy, I suggest for today we can discuss it in general principle. However, when we have the policy we can discuss it in more detail. In the meantime, you go on your own with your legislation. Senator Stratton: We look forward to the day we see the policy. Good luck. I would like to go to the economic statement of October 2000, page 31, and it shows in table 1.4 the revenues projected for this year as 174.5, and for 2002-03 as 178.4. Then it stops. This is a bugaboo for me and I have talked to Mr. Neville and Mr. Lieff about this in previous years. Why is the policy of the government such that you only do two-year forecasts? Why not do five-year forecasts, as many other countries in the world do? It is a healthy exercise and I am sure it has been done. You have massive computers that you can punch numbers in and assumptions must be made because if you are good managers, as you say you are, then why would you not choose to publicize that data that I feel you already have in your data bank? Mr. Neville: Mr. Chairman, it has been made public on a number of occasions that the Minister of Finance prefers two-year rolling budgets. That is being done in consultation with the private sector and I believe agreement was reached with those who were consulted that it is the best approach at this point. For planning purposes, it is also fair to say that we try to get forecasts as far out into the future as we can. In terms of publishing some numbers, the Minister of Finance has decided on a two-year rolling budget. Senator Stratton: It would be simple enough to say that anything beyond that could be grossly inaccurate. Is there a statement such that I can hang my hat on and go away comfortable? If we can forecast out for two years, why can we not forecast out three years with reasonable accuracy? Mr. Neville: Speaking as a professional accountant, every year forecast out past the current year is that much more susceptible to change. It is an instance of being prudent; of trying to put forward numbers in which you feel confident. We can be more certain with the two-year rolling average, which is also the norm in many countries. As can be appreciated, in the private sector those numbers would not be put forward and in that sense governments go further than the private sector. Senator Stratton: In that same table there is program spending and if you go back to 1997-98 and up to 1999-2000, it grew from 108.8 to 111.8, which is fairly prudent, fairly flat, then it jumped last year from 111.8 to 119.7. The forecast for this year is 124.6 and the forecast for 2002-03 is 129.6. One becomes a little nervous when looking at $5-billion jumps, whereas before it was quite flat. Is that likely to continue? If there is an expectation of a 5.8 per cent growth year over year, that is significantly above inflation. If you say you are good fiscal managers, surely you would not want to allow that to continue year after year but that would appear that is indeed to be the case. Ms Robillard: As we stated, the Estimates include not only the direct program spending but also the transfer payment. I would argue that for this year the increase is on the side of transfer payments, only 3.8 per cent is for the CHST, and almost one per cent is for the equalization payments. When we look at income security for our senior people, it could be said that is almost one there too. The Chairman: Each of those three that you mentioned are subject to some of the economic changes in the economy that Mr. Lieff was talking about. Last month the latest numbers for the CPI were 3.6 per cent. How will that affect the index transfers to individuals? We all now know that economic growth will be rather lower than what was projected. How will that affect equalization payments? Do you have answers for those questions? Ms Robillard: Yes, surely. However, let us make a difference with CHST here. As you remember, it was an agreement with all the provinces that we will increase the number in CHST. In old-age security, one has to also look also at the demography. The Chairman: I appreciate that. Will these numbers change under the economic factors that Mr. Lieff was talking about? Will they change between now and next fall? Have they changed already, that is the question? Mr. Lieff: It is a dynamic situation. They are definitely changing. The Chairman: The earth is moving under our feet. Mr. Lieff: They change every year like this. In the statutory forecast we make sure we give an overall context around the appropriations so the overall plan can be seen. The Chairman: Other years we have a better idea because in other years we have had a budget in February. Mr. Lieff: The budget in the economic statement in October is our anchor in terms of the overall plan. What the minister did was give a mid-term report on what has changed since then. The economy has changed more dramatically during the course of the year than in other recent years. We would report that back to you in the Supplementary Estimates. Perhaps page 54 of the economic update will give you a sense of the changes. There is a table. I can give you highlights. A 1 per cent decline in GDP will have an expenditure impact of $500 million. That is the case for all the programs driven by economic variables such as Employment Insurance. The Chairman: Are these rules of thumb? Mr. Lieff: Exactly. Similarly, a 1 per cent decline in inflation will have an expenditure decrease. A number of things in this dynamic situation are affecting expenditures up and down. All of the expenditures impacted are statutory expenditures for which Parliament has approved the formula in law. We are reporting on the situation as we go. The Minister of Finance has said that notwithstanding these changes, the impact of the economic variables - as we understand them to be now and as they will be by the end of the year - will be well within the budgetary balance to manage. [Translation] Senator Bolduc: Do you have the data for fiscal year 2000-2001? Since the end of the fiscal year, do you have any data on what you have spent? Mr. Neville: Yes, right up to today. Senator Bolduc: Your planned program spending was $119 billion? Ms Robillard: Yes. Mr. Neville: We are currently finalizing the public accounts for fiscal year 2000-2001. It is a bit soon to release the figures, but in any event, we still want to wait for the Auditor General's review. It is a bit soon. We have to table the financial statements for the public accounts in September or October of this year. [English] Mr. Lieff: I would add that in the course of tabling the reports on plans and priorities, departments gave their latest forecast of expenditures for the year just finished. Based on that, as Mr. Neville has stated, all the accounting has not been done, but we were on track for total program spending within the $119.7 billion in the October update. Senator Bolduc: For this year, it is 125. Mr. Lieff: It is 124.6, and we are within that. The Chairman: What is the percentage increase in program spending for the present fiscal year? Mr. Lieff: Program spending includes transfers, and program spending year over year is 4 per cent. The Chairman: That is for the present fiscal year. Mr. Lieff: For the year we are in relative to the year just past. Mr. Neville: It is 4.9, to be more precise. Sorry, it is 4 per cent. That is our final answer. Senator Bolduc: I read somewhere that you had a $15 billion surplus for the last year and that you allocated that for the payment of the debt. Is that true? [Translation] Mr. Neville: First, we are in the process of finalizing the surplus for fiscal year 2000-2001, which is in the order of about $15 billion. There are certain transactions we want to record. Once again, they will be subject to review by the Auditor General. Roughly speaking, the amount is somewhere around 15 billion. [English] Senator Bolduc: Plus the decreasing of the interest rates. That means that you will save quite a lot on service charges for next year. In your proposition here, you probably have $1.5 billion higher than it should be. Is that true? Mr. Neville: When we were doing the calculations to finalize the Main Estimates, we did factor in our most recent information. Based on that, we are still looking at a cost in 2001-02 to service the debt at $41.7 billion. Senator Bolduc: Perhaps I am wrong, but the new expenditures of the government look like a state secret. I know it is difficult for you because your system is based on data from last October. It is hard to say what the reality is today. It is a bit embarrassing for us. Do you not feel uncomfortable? Ms Robillard: No, Senator Bolduc. Senator Bolduc: Well, it is disarming for me. I would like to come back to the rate of increase of expenditure for this year, or what you forecast. You said we have priorities, students, the elderly, health programs with the provinces, infrastructure and innovation. Those are your basic major expenditures. That means that if you do that with the inflation rate of today, normally you should cut somewhere else. Are you telling me that you have plenty of money? If that is so, you tax the people too much. I am not talking about the details of the estimate, but the general fiscal framework itself. Mr. Lieff: There is a constant process in the government that has been revitalized. Perhaps I should back up to a few years ago when the government embarked on its program review. The theme was to take a fundamental look at government programs, look at programs that perhaps had outlived their effectiveness, look at jurisdictional issues, efficiency, and effectiveness. That was essentially the engine that the government used to reduce expenditures and balance its budget. Consequently, there has been a need to reinvest in a number of areas, particularly in the social fabric such as health care, but also in defence and other areas as well. Since then, after having dealt with that adjustment process and continuing to try to do that, the Treasury Board and the Minister of Finance and the government in fact are encouraging departments to manage the pressures from inflation and that kind of thing within their existing portfolios. We only come to you with additional requests for spending authority when those avenues have been exhausted. There is a constant process. Senator Bolduc: I get the feeling that, as you are less squeezed, you have a tendency to look at it differently. I recently received a flurry of grants from various departments: From Justice, from Health, from small programs - but $100 million there, $5 million there, $10 million there - from Fisheries, from Industry. I could name all of them, including pleasure boats, and all the small ports that are being repaired. It is like the old game of the 1950s. I remember that well. Each election, we had a new little public works everywhere. I get the feeling that we are coming back to that, and, for me, that is not the way to do it. [Translation] Ms Robillard: I do not really understand what you are getting at. You say you see a lot of grants and different programs. [English] Senator Bolduc: By the way, The deputies now give them. Usually it is the minister, but now it is the deputy. Ms Robillard: We have many members of Parliament now, as you know. The Chairman: Do the opposition members have a chance to announce these programs? Ms Robillard: Looking at the numbers for 1992-93, it was around 120, for the direct spending of the different departments. I am not certain of the exact figure. Looking at the numbers for last year, as an example, or the projection that we have for this year, it is 124. Where do you see the increase? I will encourage you to speak with some cabinet ministers who feel frustrated because the President of the Treasury Board and the Finance Minister say, "No, if you want new programs look at reallocation within your own department." That is why we have succeeded in maintaining control over the year. That is a big sign that we still have control of the system. Senator Bolduc: I agree that you have cut a bit in 1994-95 and in 1996, but now you are in "cruise mode." The system moves along pretty well. Ms Robillard: This is the fact. Then, seven years later, $5 million more for the direct spending. Senator Bolduc: It is more than that. Look at it carefully. Ms Robillard: What kind of numbers are they, senator? Senator Bolduc: Those are not forecasts, they are real expenses - $108 billion and now you are at $120 billion and probably a bit more. I would not be surprised, because you do not want to give us the real numbers. [Translation] Ms Robillard: In 1992-1993, it was $122.6 billion. Senator Bolduc: Yes, that is right. Ms Robillard: in 2001-2002 - almost ten years later - the amount will be $124.6 billion. [English] Senator Bolduc: I see the number for 1997 at $108 billion. Ms Robillard: Yes. Senator Bolduc: Today's figure is $120 billion and then you will up that to $125 billion. It is a rate of increase that indicates that since 1998 you have spent a great deal of money. Senator Banks: It was all those interest payments. [Translation] Senator Bolduc: Many small pleasure craft. Ms Robillard: Unless you disagree with the investments we have made, but Canadians have quite clearly said they wanted us to reinvest in health. I think we had to listen. Senator Bolduc: There are some things I agree with. [English] Senator Bolduc: Could you give us a few words about your - [Translation] - financial information strategies. Ms Robillard: Yes. [English] Senator Bolduc: I have become more amenable now. Ms Robillard: I am quite sure that the members of your committee were following that closely - the financial information strategy - because we had a commitment, by April 1, 2001, to be on the accrual accounting method in the government. That was a big challenge for us. I am happy to tell you that we have achieved our goal. Next year, when we review the numbers - in each department - we will see more transparency and the results of the numbers that we will achieve, accrual accounting will help us to understand better the finances of each department. We have accomplished that with the help of the other departments and the comptrollership branch, who pushed a little bit, and we are quite happy about it, Senator Bolduc: One thing would interest me a great deal. You do a good job in the total programming. Then we have the estimates, then we have the plans and priorities, and then we have the performance report. Would it be possible, when we look at the estimates, to have at the same time the performance report of the previous year? Otherwise, it is difficult for us to compare the numbers and the requirements of the planning and what the real results will be. Is it possible to have that? I would not wish to have a complicated report, but just the basic figures at least for the major programs, what was planned and what has been achieved. Is it possible to do that? Actually, the plans and priorities are documents that are for the departments. Such documents are unmanageable for us, because many of us have small staffs. Is it possible to have the basic information? We will have a more interesting conversation. [Translation] Ms Robillard: You tell me that it is too complicated to study. [English] Senator Bolduc: The performance reports will be tabled in October or November, I suppose. [Translation] Ms Robillard: You think they are too late in the process. [English] Senator Bolduc: It is not possible with your system. Otherwise, the only solution is to review the performance reports, which you must ask for. [Translation] Mr. Neville: You must not forget that when departments submit their performance reports for the fiscal year that has ended, they include many columns in the main estimates, in other words, planned spending, and then actual spending. The information is broken down by program within each department. If I understood correctly, the fact that there are 83 volumes makes life difficult for you. [English] Senator Bolduc: If it is possible, that is all I ask. Mr. Lieff: I had the occasion to read your committee's work with the Auditor General. At that time, the questions were about the relevance of the reports, the committees, and the estimates documents. The Auditor General urged - as the president has spearheaded in the House and other areas - the parliamentary committees to embrace these documents and to prepare a report on them. They do not necessarily have to be done at the time of voting on the estimates, but, in fact, parliamentary committees could have more influence on the reports and on the government's agenda by issuing a report that made recommendations for future change, much as the Auditor General mentioned. I had the experience of being involved in your report on disaster preparedness that fed back to the government's decision-making consideration. The reports, plans and priorities that are tabled in the fall do, indeed, contain the original plan. I suggest that if the committee were interested in an in-depth review of one of those areas it would help to advance our agenda. Senator Bolduc: I made that remark, Mr. Chairman, because when the Auditor General made his report on the Parliamentary Committee Review Revised Estimates Documents, he mentioned, on page 15, the type of questions that we should ask of the government. I have been looking for that for years. I am interested in that field and it would be a great improvement, as much for the administration as it would be for the parliamentarians. Senator Kinsella: It is a good idea. Senator Banks: I want to point out, Mr. Chairman, that the minister is being generous with her time. Senator Bolduc's last three questions excepted, some of our questions here have been technical as opposed to policy related. Could we direct our policy questions to the minister and then perhaps the officials would be kind enough to allow us some technical questions? The Chairman: That is a good point. Senator Tunney: Minister, on page 3, you say that we have managed a $300 million reduction in interest and service costs. Does that cost go up and down with the rate of interest? Mr. Neville: Yes. Senator Tunney: I understand it goes up so I understand it must go down. Mr. Neville: The calculation is derived from the total amount owing. That number decreases as payments are made. The second component is the actual interest rate. If the interest rate goes down, obviously the amount decreases significantly. If the rate goes up, then there is an offset. It is a two-part calculation giving a net result for 2001-02 of $300 million less than last year. Senator Tunney: This interests me because, as a farmer, I will not use short-term loans for fear interest rates may go up as they did back in the 1980s. Some farmers were paying 18 to 22 per cent on short-term borrowings or bank loans. Are we not protected from that on some of our federal debt? Mr. Neville: That is more the area of responsibility of the Minister of Finance. Debt servicing is in that department's mandate. Generally, we have long-term debt commitments, which are fixed with some small possibility of change. We are generally protected. Senator Tunney: On page 2, you mention $1.9 billion under the Canada Student Financial Assistance Act. Is there a net cost between the money loaned out and the amount of money paid in by students who gain employment and start repaying their loans? Is the $1.9 billion a gross amount or a net statement of the operation? Mr. Lieff: The $1.9 billion non-budgetary expenditure is the annual value of the loans on the books that we are writing. There are other costs associated with the administration and the valuation of that asset. If some of the loans are repaid, there would be a declining balance. If some loans are bad and are written down, there would also be a declining balance. Senator Tunney: We are saying that $1.9 billion is really a net amount, the cost of administration plus the amount loaned out, minus the amount recovered. Is that right? Mr. Neville: That is correct. Senator Kinsella: Have you yet established any of the planned Centres of Excellence for internal audit and evaluation. If so, where are they located? Ms Robillard: They are in the secretariat in Ottawa, in the comptrollership branch. We have completely separated the two activities, internal audit on one side and evaluation on the other. When we revised the two policies, the departments said that they would need a lot of support to integrate those policies. They needed a centre of excellence or expertise to help them to achieve their goals. That is why we decided to put those centres in the secretariat. Senator Kinsella: Are you finished? Will there be more? Ms Robillard: There is one for internal audit and one for evaluation. Senator Kinsella: Notwithstanding the admonition of Senator Banks, I have a technical question from pages 23 and 24, Part II of the Mains, under Treasury Board and Grants. I do not know the answer; therefore, I am asking the question. With reference to the Public Service Pension Adjustment Act, why the reduction in the estimated $50 million in 2001-2002 down to $40 million? Is there a quick explanation? Mr. Lieff: I do not have that answer. We will follow up and get the answer to you. Senator Banks: I will say that this is a policy question and I hope Senator Kinsella will believe me. You may have already heard of this question. I know that the officials have heard this because we have discussed it with them already, in part. This question falls under things that have already happened in the last year's supplementaries. One hundred million dollars has been placed by the government into a private independent foundation, which is being legitimized after the fact, for the purposes of sustainable development. I am assuming that the $100 million somehow had the approval Treasury Board when it went out. Undoubtedly, the concern of this committee about that impropriety is well known. We have made it known to the minister involved, and I suspect that we will be talking about it in our report. I am wondering what sort of approval it had. What kind of instrument was it by means of which that $100 million got put into the private sector? It is not a question of the intent or the reliability of the persons into whose charge it was put. However, they were not public servants, it was public money that got put there, and it was not wise. I wonder what the form was; was it a warrant, a ministerial favour? Ms Robillard: Do we have the right answer on that? Mr. Lieff: We have a partial answer. The organization was created under the Canada Business Corporations Act. The announcement was made to pursue this in the October update. The government felt that it was such an important initiative on which to get started and that it would advance some of the funds at the same time as seeking parliamentary approval. Senator Banks: Can we assume that the $100 million will show up in the accounting for the previous fiscal year? Mr. Lieff: It will show up in terms of the accounting for the previous fiscal year in terms of financial statements, but when the legislation is approved, we will also show you that in the supplementary estimates. Senator Kenny: I do not think anyone is suggesting anything illegal happened here, but would you say this was best practices? Mr. Neville: Let us not forget that legislation was introduced in October of 2000. However, died on the Order Paper when the election was called. When Parliament reopened, it was reintroduced for factual purposes on February 2, 2001. That being said, there was a willingness on the part of the government to move this forward. A two-track approach ensued; one taking the corporation, since it was in fact incorporated, and moving some funds to keep it going, and at the same time allowing for the legislation, which is proceeding. It is a question of circumstances with the election having been called. It changed the approach. Now it is back on track. Senator Kenny: Bluntly put, do you not think this tends to make Parliament a bit irrelevant? Ms Robillard: Why are you saying that? Senator Kenny: The law is not passed, Minister. Surely, we pass the laws first and then we spend the money after? Ms Robillard: I would say that we can use other legitimate tools. Sometimes we use the legislation; sometimes we do not. Senator Kenny: You feel this is best practices, Minister? Ms Robillard: That was a cabinet decision. Senator Banks: Might that happen again? Senator Bolduc: I do not think that Mr. Neville wants to answer that. Mr. Neville: Mr. Chairman, I am quite comfortable in saying that there was a corporation. It was incorporated, and therefore it was a legal entity and payments can flow. The government wishes to enshrine this in legislation and make it a permanent entity in that sense. I do not see a problem in terms of what has been done. Your question was "was it best practices?" One might question that. Senator Bolduc: I have seen a report here "Measuring Progress: The State of Federal Government Finances." It comes from the Canadian Institute of Chartered Accountants - your brotherhood - and I cite here the Vice-Chair: While the country's financial condition has clearly improved, there is still cause for concern. The federal debt stands at $565 billion, and only 3.2% of the debt has been paid off over the past three years, despite the impressive surpluses that have been generated. What do you think of that, Madam Minister? [Translation] Ms Robillard: I think the Liberal government chose a very balanced approach in terms of needs, the size of our collective debt as Canadian taxpayers and also the fact that Canadians wanted personal income tax lowered, and rightly so. At the same time, there were still strategic investments to be made in our society, in health at the very least, as you know. The approach we have taken is very balanced in order to meet the different needs in our society, and as evidence in support, we are in a surplus situation. Our management for the past seven or eight years has shown that our prudent and balanced approach has had positive results. [English] Senator Bolduc: With the reserve of expenditures and what is forecast for the next few years, would you put your hand on the Bible and swear that in 2004 we will not be near a deficit? [Translation] Ms Robillard: It is quite clear from the budget estimates of the Finance Minister, who always considers the next two years, that despite what is currently going on in the economy and the economic downturn, which has caused us to revise our projections, we will be able to maintain our spending without slipping into another deficit. [English] The Chairman: Honourable senators, Bill C-17 has been referred to this committee, the federal-provincial fiscal arrangements, the Budget Implementation Act, 1997, financial administration. Assuming we can get the right witnesses, I will convene this committee for Tuesday morning at 9:30. The committee adjourned.