Proceedings of the Standing Senate Committee on
National Finance
Issue 1 - Evidence - Meeting of February 11, 2009
OTTAWA, Wednesday, February 11, 2009
The Standing Senate Committee on National Finance met this day at 6:30 p.m., pursuant to rule 88 of the Rules of the Senate, to organize the activities of the committee; and to examine the Supplementary Estimates (B), laid before Parliament for the fiscal year ending March 31, 2009.
[English]
Adam Thompson, Clerk of the Committee: Honourable senators, I see a quorum. As clerk of your committee, it is my duty to preside over the election of a chair. I am prepared to receive nominations to that effect.
Senator De Bané: I have the great pleasure of putting forward the candidacy of my colleague, the Honourable Joseph Day.
Mr. Thompson: Thank you. Are there any other nominations? Seeing none, I will put the question.
It is moved by the Honourable Senator De Bané that the Honourable Senator Day do take the chair of this committee. Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
Mr. Thompson: I declare the motion carried and invite Senator Day to take the chair.
Senator Joseph A. Day (Chairman) in the chair.
The Chair: I want to thank my campaign manager, Senator Di Nino, and all his friends. I thank Senator De Bané, who has been on this committee for a good number of years. I appreciate him moving my nomination. I thank all my honourable colleagues for supporting me. I look forward to working with you as we proceed through important work, which I will talk about later on.
Mr. Clerk, we should proceed with the other items. Does everyone have this working sheet in front of him or her?
[Translation]
Does everyone have the proposed agenda? Please, we are on number 2.
[English]
With your permission, honourable senators, even though I am chairing, I would like to move that Senator Gerstein be chosen as our deputy chair of this committee. He normally would be here, but is at an important meeting he could not leave. He called me and said he would try to join us as soon as he can.
Hon. Senators: Agreed.
The Chair: Are there any other nominations? I will ask three times. Seeing none, I ask the clerk to cast one ballot in favour of Senator Gerstein. I declare him chosen as our deputy chair of this committee.
As an aside, we have a number of new senators on this committee, and Senator Gerstein is one of them. I look forward to working with him and explaining some of the interesting idiosyncrasies of this committee.
Honourable senators, rather than me reading each of these motions, who would like to bring to our attention Item No. 3? Senator Mitchell, would you read that motion for us?
If it is in front of everyone, we can see it. We are addressing agenda and procedure.
Senator Mitchell: I move that the subcommittee on agenda and procedure be composed of the chair, the deputy chair and one other member of the committee to be designated after the usual consultation; and that the subcommittee be empowered to make decisions on behalf of the committee with respect to its agenda, to invite witnesses and to schedule hearings.
The Chair: Are there any questions with respect to that motion? All those in favour?
Hon. Senators: Agreed.
The Chair: Contrary minded, if any? Motion carried.
The usual consultation has taken place, and Senator Ringuette will be the third person on the subcommittee, along with Senator Gerstein and me. The subcommittee on agenda and procedure is sometimes colloquially referred to as the steering committee.
We are now at Item No. 4 on the agenda.
Senator Di Nino: I move that the committee print its proceedings; and that the chair be authorized to set the number.
The Chair: All those in favour?
Hon. Senators: Agreed.
The Chair: Contrary minded? Motion carried.
Item No. 5 involves authorization to hold meetings and to print evidence when quorum is not present.
Senator Eggleton: I move that the chair be authorized to hold meetings, to receive and authorize the printing of evidence when a quorum is not present, provided that a member of the committee from both the government and the opposition be present.
The Chair: Thank you.
Senator Di Nino: For clarification, we moved the same motion in the Standing Senate Committee on Foreign Affairs and International Trade. It was pointed out to us that the last part of that motion — that both government and opposition be present — was a new provision. Is this provision new or was it there all the time? Some committees had it and some did not?
The Chair: It was certainly a practice.
Senator Di Nino: It is a good practice. Quorum is that both parties must be present.
The Chair: If there are two people, one from one party and one from another, we can proceed with the meeting. The indication from our clerk is that the practice has been in writing for some time now. Is there any other discussion on that particular matter? All those in favour of the motion?
Hon. Senators: Agreed.
The Chair: Contrary minded? Motion carried.
The next agenda item is financial report. It is moved by Senator Callbeck, that the committee adopt the draft first report prepared in accordance to rule 104. We should have that report.
While Adam Thompson is getting that report, I want to welcome him to the committee. He has been clerk of a number of Senate committees in the past, but not of this committee in the recent past. We are pleased to have you along, Adam. We look forward to working with you.
That report is being circulated now. Would the clerk like to speak to this first report?
Mr. Thompson: This report is routinely the first report of the committee, pursuant to rule 104(2). It outlines the expenses incurred in what normally would be the previous session. However, due to the short first session of the Fortieth Parliament, this report deals with expenses incurred in the second session of the Thirty-ninth Parliament. We had one budget in that session concerning our examination of estimates and legislation.
As you can see, the committee incurred $5,659 for professional and other services. An additional $6,833 was devoted to witness expenses. As senators know, the committee does not budget for witness expenses. Those expenses are paid out of the budget of a central Committees Directorate. I believe there was an expense incurred of $26 in general postage charges. That is the extent of the expenses in that session.
The Chair: That report was for this time last year, in effect? We did not do anything from June onward, by virtue of elections and prorogations. Are there any other questions in relation to the report and the expenses shown?
Senator Callbeck has moved this motion. All those in favour?
Hon. Senators: Agreed.
The Chair: Are any senators contrary minded? The motion is carried and will be appropriately dated.
The next item is research staff. It has been moved by Senator Neufeld that the committee ask the Library of Parliament to assign analysts to the committee. Senator Neufeld from Charlie Lake, British Columbia, is a new member to our committee and we welcome him. Guy Beaumier, who is back for another term with us, would be included in this motion. We are pleased Guy is here as he understands the process; continuity is helpful.
There are two other clauses to that motion. All senators have had a chance to look at those clauses. They provide that we can obtain special help, if we need it. I cannot imagine why we would need any further special help than we already have. The motion also provides that the steering committee be authorized to obtain the services of experts. In the past, we have had that clause in our budget but have not used it until now.
All those in favour? Senator De Bane has a question.
Senator De Bané: Mr. Chair, regarding the last paragraph of Item No. 7 — "That the chair, on behalf of the committee, direct the research staff in the preparation of studies, analyses, summaries, and draft reports. " — I propose that analyses and summaries prepared by the research staff be distributed to all members, not to give research staff instructions, but only to have copies of those documents.
I want to take this opportunity to thank my colleague, Senator Di Nino, Chair of Standing Senate Committee on Foreign Affairs and International Trade, who accepted my proposal that, whenever the researchers prepare analyses and summaries, to distribute a copy to all committee members, in addition to members of the steering committee. Having copies will help us to make a significant contribution without carrying committee transcripts — Hansard — all the time. When researchers prepare a summary of testimony by a witness who has been with us for two or three sittings, a copy of the summary would help us when the time comes to review what has been prepared by the steering committee.
The Chair: Senator De Bané, thank you for your point. It has been our practice to do that, so it would cause us no difficulty to add after summaries, and draft reports, "prepared by research staff.'' Is that correct?
Senator De Bané: Yes.
The Chair: Does everyone understand the proposed amendment? Let us vote on the amendment adding those words. All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary minded? The motion is carried.
We will now vote on the overall motion proposed by Senator Neufeld with that amendment. All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary-minded? The motion is carried.
We move to the motion to commit funds and certify accounts. Does anyone want to move this motion? Essentially, this item says it will follow the Senate administrative rules.
Senator Callbeck: I move the motion.
The Chair: Is there any further discussion? All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary-minded? The motion is carried.
We move to Item No. 9, travel. Senator Ringuette, do you have a question?
Senator Ringuette: Is there not a provision about a maximum of eight people in any kind of travel? I do not know where that provision is but maybe Senator Di Nino knows. Is there a rule regarding that maximum somewhere?
The Chair: There can be no travel if we do not have a budget for it and if it has not been approved by the Standing Committee on Internal Economy, Budgets and Administration, and then by the Senate as a whole. We receive a certain amount we can allocate for travel, if it is approved by the Senate. It is then up to the steering committee of this committee to designate any individual who may fit within the parameters of that travel. Are you thinking of something more than that?
Senator Di Nino: I think Senator Ringuette is talking about the authority of the Internal Economy Committee to restrict the number of members that travel. They do that from time to time, individually, based on conditions and so forth.
At the meeting of the Foreign Affairs Committee about an hour ago, this item created some discussion, as well. So that I understand it correctly, we are talking about members of the National Finance Committee that are travelling on official business. It does not impact any other committee. This provision is only for this committee. I say that so we understand that provision.
The Chair: Absolutely: It is only for this committee.
Senator Di Nino: There are other conditions, terms and regulations dealing with travel. However, this provision is only for members of this committee who travel on behalf of the work of this committee.
The Chair: Thank you, Senator Ringuette. All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary-minded? The motion is carried.
The next item is designation of members travelling on committee business.
Senator Chaput: I move this motion.
The Chair: This motion again delegates to the steering committee the necessity to ensure rules are followed in designating someone to travel. Is there any further discussion on that motion? All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary-minded? The motion is carried. The next item is travelling and living expenses of witnesses. Senator De Bané, do you have a comment?
Senator De Bané: I move Item No. 11, as follows:
That, pursuant to the Senate guidelines for witness expenses, the committee may reimburse reasonable travelling and living expenses for one witness from any one organization and payment will take place upon application, but that the chair be authorized to approve expenses for a second witness should there be exceptional circumstances.
The Chair: Thank you, Senator De Bané. Those funds come out of a different account than our budget; a special account is set up for witnesses to committee hearings. All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary-minded? The motion is carried.
Electronic media coverage of public meetings is the next item. This authorizes us to have electronic media coverage. Senator Ringuette moves this item. All those in favour?
Hon. Senators: Agreed.
The Chair: Are any members contrary-minded? The motion is carried.
The next item is the time slot for our regular meetings. These time slots are the same ones we have had in the past — two 2-hour time slots — subject to directions we might receive from time to time from the Senate when dealing with extraordinary matters. I think this matter has been worked out by the leadership.
This item is information. We do not have a choice. All those in favour?
Hon. Senators: Agreed.
The Chair: Is there any other business to bring before this organizational meeting? Seeing none, I will call this part of the meeting to an end.
Now, honourable senators, let us have a discussion on where we are headed between now and the end of March. There are two weeks off in March and one week off in February, next week. I apologize: There is only one week off in March. Thank goodness. There is only one week off in March and that is towards the end of the month.
Between now and the end of March, we need to think about Supplementary Estimates (B). We will have a Supplementary Estimate (C). It is forthcoming. I asked this morning and it may well be filed in the latter part of this week. It will not have been touched. It is in the works.
There are two supplementary estimates. Main Estimates will be filed in March and Interim Supply must be voted on before the end of March for the period April 1 to the end of June. We can talk later about what happens in the rest of that time frame with Interim Supply. We must complete those things in this committee before the end of March; before the next fiscal year.
Have all of that in mind and know that we must have a report with respect to each of those estimates — and the report forms the basis for the debate in the Senate. We tend to debate the report, as opposed to the bill. The bill is basically two clauses saying the government needs the money shown in Schedules A and B attached.
The Schedules A and B are in Supplementary Estimates (B). There will be another supply bill for Supplementary Estimates (C). Therefore, in effect, we prepare a pre-study. We are the only committee that is authorized to prepare a pre-study without the Senate telling us that we can prepare a pre-study, or ordering us to do it. We have the authority and it is our way of operating.
We have to submit the reports before the supply bills come along, or at least before the supply bills reach third reading. Having all that in mind — and I see that Senator Gerstein, our new deputy chair, has arrived — what I ask, honourable senators, is that, with your permission, we call forward the two members of the Treasury Board Secretariat who are here. Due to the fact that the committee was not constituted and I could not give notice on this matter, the two members from the Treasury Board Secretariat will spend the next little while giving us a background of what is in Supplementary Estimates (B). Then we can go away for our break thinking about what is in the estimates, and handle them expeditiously when we return.
Is there agreement that we call our guests from Treasury Board to come forward?
Senator Ringuette: Are you saying that we will receive a briefing on Supplementary Estimates (B) tonight?
The Chair: Yes.
Senator Ringuette: Following that, will we have a witness or will the Treasury Board be back in front of us?
The Chair: It will be up to the steering committee to determine what we will need to do. Typically, we would have a meeting with Treasury Board and then another meeting. We may decide to bring Treasury Board back because we have too many unanswered questions. I am sure we can talk our friends into coming back again on Tuesday.
Senator Ringuette: It arrived only this afternoon.
Senator Di Nino: We had it in November but we did not look at it. We have had it for a long time. I did not look at it, either. I gather you are saying that we will hear the presentation, ask a question or two, but not perform an in-depth analysis. We will have this information so we can prepare ourselves during our break, construct an analysis and ask questions more thoroughly if needed when we come back.
The Chair: We might decide after we hear from Treasury Board that, rather than ask Treasury Board back, one department is so highly critical to these estimates that we will ask that department to come next week.
Senator Di Nino: Or both.
The Chair: Yes: We will ask our Treasury Board colleagues to take their seats at the table.
While they are taking their seats, I will introduce them. We have Alister Smith, Assistant Secretary, Expenditure Management Sector. Who thinks of those names? Then we have Brian Pagan, Executive Director, Expenditure Operations and Estimates Division.
Neither gentleman is new to this committee. We appreciate you coming here on short notice. We found out who was on this committee only yesterday afternoon. Which one of you would like to start? I hope that both of you will participate in providing background.
[Translation]
Alister Smith, Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat: Good evening. Mr. Pagan and I are pleased to be here today. We thank you for inviting us back to your committee.
You have before you a short presentation that we prepared to provide an overview of the Supplementary Estimates. With your permission, I would like to go through the presentation with you and then we will be happy to answer your questions.
[English]
We have distributed a copy, which we hope will be of use to you. If it is not, we will be happy to change this type of presentation in the future.
The second page provides a brief outline of this presentation. It sets the context for the supplementary estimates, underlying their purpose in the expenditure framework, providing an overview of highlights and concluding with a list of the major items over $50 million.
I ask you to turn to page 3 of the deck. I will begin by putting these supplementary estimates into context. As you know, this year has been an unusual one for the supply cycle. We tabled Supplementary Estimates (A) in May, 2008. Those estimates were, by the way, an innovation; it was the first time we had used spring supplementary estimates for some years and we were able to use them for budget items. Supplementary Estimates (A) received Royal Assent on June 18, 2008.
We were able to capture about 60 per cent of the budget items in that supplementary estimate. We also tabled Supplementary Estimates (B) in November. That was a bit of a delay in the usual schedule because of the election. Then, of course, due to prorogation, consideration of Supplementary Estimates (B) was postponed. We re-tabled them on January 29, 2009. It was a bit unusual but that is why we are here.
On page 4 of the deck, we want to reiterate that supplementary estimates are a regular and important feature of the government's expenditure management framework. They provide information to Parliament in support of the spending authority required to implement planned spending — planned spending that we were not able to bring before you in Main Estimates or supplementary estimates. They also have other purposes, such as to realign or transfer existing spending authority between voted appropriations — that is a regular feature of supplementary estimates — and to allocate other spending that could not be fully specified, such as compensation adjustments for departments at the time of early estimates.
Supplementary estimates are also an opportunity to provide updated projections of statutory spending which, of course, are not voted on but information important for Parliament to be aware of. We use supplementary estimates to inform you of the changes in statutory spending.
Page 5 of the slide deck is an overview of the scale of these supplementary estimates. They represent $2.8 billion in voted budgetary requirements. Those voted budgetary requirements are shown in the table on the slide. However, there is a net decrease of about $445 million in the statutory forecasts, for total supplementary estimates in net terms of $2.3 billion.
On the next slide, a few key observations may be of interest to you.
They are fully consistent with the Budget 2008 framework. They do not really represent new spending; they represent decisions that have already been taken in that framework. They represent normal end-of-year approvals and adjustments to departmental reference levels to support government programs. They are fully consistent with the overall framework established in the budget fiscally, so no spending here would be beyond that which has already been approved in Budget 2008.
Thirty-two per cent of the total voted budgetary requirements in these supplementary estimates represent three key items. One is funding for Canada's military mission in Afghanistan; the second is funding for the base funding program in Infrastructure Canada under the Building Canada Fund, and the third is a payment to Nova Scotia in respect of the so-called Crown Share Adjustment Payment, which applies to some payments that were required as a result of an independent panel decision. We can explain the payments in more detail.
Page 7 of the deck sets out some of the next steps for the appropriations. As the chair mentioned, we will also come forward with Supplementary Estimates (C). Normally, we would come forward at this time of year with supplementary estimates, but we are compressed because of the delays with Supplementary Estimates (B). It looks like we will bring in two at the same time, but Supplementary Estimates (C) will be tabled, we hope, this week. The Main Estimates will be tabled in late February: February 26 or so is our planning date. Then, in the new fiscal year, we plan again to have spring supplementary estimates, as we did last year, to capture budget items. Those are planned for tabling in the middle of May.
We will use those spring supplementary estimates for budget items.
On page 8 of the deck is a list of the major voted items that are greater than $50 million. First, as mentioned, is funding for National Defence for the military mission in Afghanistan. This funding is to cover additional costs of operations, mission equipment support, ammunition, repair and overhaul, immediate care and engineering support.
Second, funding for the Office of Infrastructure Canada for the Provincial-Territorial Infrastructure Base Funding Program is in the order of $327 million. This item is to allow the provinces and territories to use the program funding for operations and maintenance costs related to public infrastructure.
Third is provision for an increase in pay and allowances to Canadian Forces members of $90 million, consistent with an announcement in June of 2008 for a 2 per cent increase for all non-commissioned members and general service officers of the Canadian Forces.
On page 9 is funding to support the implementation and operations of the Indian Residential Schools Truth and Reconciliation Commission Secretariat and funding for the Office of Infrastructure for the Border Infrastructure Fund related to investments to reduce border congestion.
The major statutory items represent an update of some of the forecasts that we received from the Department of Finance and others. Since these items are statutory, they are not voted. The first is a revised forecast by Finance Canada of transfer payments to provincial and territorial governments. These revised forecasts apply to a whole range of programs such as incentives for provinces to eliminate taxes on capital, public transit capital trust, police officers recruitment fund, Saskatchewan carbon capture, the Canada Social Transfer transition protection payments and payments to Nova Scotia for carbon storage. There are a range of things represented by the first revised forecast.
Second is payments to provinces under the Softwood Lumber Products Export Charge Act. These payments are due to changes in the charges and payments to provinces based on the monies received over the course of the application of the Canada-U.S. softwood lumber agreement.
Finally, there is a revised forecast by the Department of Finance of public debt charges. A significant reduction in forecast interest rates led to a significant decrease in the public interest costs associated with public debt.
That concludes my introductory remarks. I would be happy to address any questions, along with my colleague Mr. Pagan, or to come back to you with answers if we do not have them readily at hand.
The Chair: Thank you, Mr. Smith.
Mr. Pagan, do you have anything to say at this stage, or will you wait for questions?
Brian Pagan, Executive Director, Expenditure Operations and Estimates Division, Department of Finance: I will gladly answer any questions senators may have.
The Chair: I will ask a couple of minor questions to begin.
You indicated that you could give us more information on payments to Nova Scotia in respect of the Crown Share Adjustment Payment regarding amounts related to previous years up to March 31, 2008. This amount was owed under that agreement with Nova Scotia colloquially referred to as offshore. Is it correct that it is only a payment that is due on an adjustment up to March 31, 2008?
Mr. Pagan: That is right. This payment originates from an initiative implemented in 1986 when the Canada-Nova Scotia Offshore Petroleum Resources Accord protocol was signed between governments. The payment of $234.4 million in this fiscal year covers all liability for Crown share adjustments up to and including March 31, 2008. This payment is the result of recommendations that the government is acting on that were proposed by the panel that was struck to examine differences and issues with respect to that accord.
This amount covers the period up to March 31, 2008. Going forward, payments will be made under the Canada- Nova Scotia Offshore Petroleum Resources Accord Implementation Act, so you will see future payments as a statutory item in estimates documents.
The Chair: Will it be a statutory item and not under Main Estimates?
Mr. Pagan: Statutory items are, in fact, presented.
The Chair: They are referred to, but not voted on.
Mr. Smith: That is correct.
Mr. Pagan: I will confirm this information, but I understand it will be a statutory payment.
The Chair: Can you confirm that for us? There will be ongoing payments, but they will be in the form of statutory payments, which means that a bill either has come or will come before the Senate to authorize payments beyond March 31, 2008. Is that correct?
Mr. Smith: That is our understanding. We will confirm that.
The Chair: On page 8 we see funding for Canada's military mission in Afghanistan. This $331 million in supplementary estimates means that the military was not able to estimate the money they would need for this operation at the time that the Main Estimates were done, so it comes in the form of supplementary estimates. Is that $331 million for new equipment that they did not anticipate? Why was there such a large amount unanticipated when the Main Estimates were prepared?
Mr. Smith: Senator, this amount covers incremental costs for operations in Afghanistan. In the fiscal year 2008-09, these costs were for operations, mainly mission equipment support, ammunition repair and overhaul and engineering support. These costs were not anticipated at the time of the Main Estimates; the costs were additional funding requirements since then.
The Chair: That is the information you have?
Mr. Smith: That is the information we have.
The Chair: Maybe we will bring in officials from the Department of National Defence, but that item sounds like operations. Troops have been there for three or four years. Why could the department not anticipate closer than $331 million what their costs would be? We do not want to agree on a cost in the Main Estimates and then a whole lot more cost slipped in under supplementary estimates later on, unless the costs really are extraordinary.
Mr. Smith: We understand that, senator, and your point is well taken indeed.
I think it is customary to use supplementary estimates to adjust for some of the costs that are borne in these operations, but that custom goes across all departments. They often cannot have fully developed cost estimates by Main Estimates and so adjustments are required in supplementary estimates. These adjustments would not be unusual for any department. We have a number of good reasons to table supplementary estimates for DND and other departments.
The Chair: Thank you.
Senator Ringuette: With regard to page 8, I want to ask about funding for the "Provincial-Territorial Infrastructure Base Funding Program to provide long-term predictable and flexible funding.'' Then you added verbally, to cover operations and maintenance costs. I thought that the infrastructure program was not to cover operations and maintenance costs of infrastructure but to build infrastructure. What did we fund with $326 million? Do you understand my question?
Mr. Smith: I think I do, senator. This money is really for contribution agreements. The Provincial-Territorial Infrastructure Base Funding Program is for long-term, predictable and flexible funding for provinces and territories.
Senator Ringuette: To do what?
Mr. Smith: It is to provide that base funding level for provinces in particular and territories to undertake infrastructure work in partnership with the federal government.
Senator Ringuette: Can you give us the breakdown of which province received what amount? This is a lot of money.
Mr. Smith: Yes, we can follow up for you, senator; we do not have that breakdown. These infrastructure programs are large programs to begin with.
Senator Ringuette: My understanding is that in the yearly Main Estimates, — we are dealing with the supplementary estimates here — at least $7 billion in infrastructure money is still there.
Do you understand what I am getting at? There is a whole slate of questions. If we have not been able to allocate the money that Parliament has authorized with regard to the construction phase of the infrastructure program, why are we providing money for operations and maintenance? I would like a breakdown of that item.
Mr. Smith: Sure: Under this particular part of the program, the base funding program, each province and territory receives equal-per-jurisdiction funding of $25 million annually over a seven-year period. A base layer of funding is provided under this program.
Senator Ringuette: Each province has $25 million, so that is $225 million. How much for the territories?
Mr. Smith: The territories receive the same amounts, as far as I am aware, but I will come back with specific numbers for each province and territory for you.
Senator Ringuette: Thank you.
The Chair: There may be follow-up questions once you do some investigation. In the previous session, we worked on this issue, so we will have our own background to help us in that regard.
Senator Di Nino: As we indicated at the outset, this opportunity came upon us rather suddenly. Speaking for myself and probably some of my colleagues as well, we are not as prepared as we normally would be, so you may have an easier ride tonight. We reserve the right to come back and ask further questions.
Page 8 is what, I think, everyone is looking at. To go back to the funding for Canada's military mission in Afghanistan, when I listened to you describe these costs, it came to mind that in war theatre it is difficult to predict what expenditures or assets will be in any one day after they engage the enemy. Changes take place in the authority that we give the general there that may increase or decrease the activity as well as taking on additional responsibilities. That is what I saw this expenditure to be, as opposed to the generals not knowing how to project costs. Am I correct? Is it a combination of both things?
Mr. Smith: Senator, I think you are correct. I do not claim to have any expertise in this area, so it may be necessary for you to talk to experts from the DND, but that is my understanding, too. If these costs could have been predictable, they would have been in the Main Estimates. There are always changes in large programs, large departments and certainly, in a military operation, requiring adjustments. These costs reflect, namely, adjustments in the costs that they incur in Afghanistan, and that is the nature of the request.
My point before was that I do not think it is possible to include all these costs in Main Estimates in general for departments. Most budgetary systems around the world that I am familiar with must use supplementary estimates to make these adjustments through the year. Having said that, Senator Day made a good point about trying to minimize supplementary estimates. We want as much predictability as possible in our estimates, and try to do as much as we can through Main Estimates.
You are correct; the mission is inherently complex and difficult. Therefore, it is hard to forecast all these costs in advance.
Senator Di Nino: As an ex-banker, I totally subscribe to Senator Day's wish, but in a war zone, it is a little tougher to predict than it would be in a normal business environment.
My second question deals with the second item that has also attracted questions, and that is the Provincial- Territorial Infrastructure Base Funding Program. The question is probably timely. This money has been transferred. Has it been spent?
Mr. Smith: That is a good question, senator. This does provide a base level of funding. This is a supplementary requirement that you are being asked to approve now. This funding cannot be spent until there is approval of the appropriation. Once appropriation is approved, then the provinces and territories will be free to spend the funds.
Senator Di Nino: The sooner we approve this funding, the sooner the money will be spent to create the economic activity that we are all looking at these days.
Mr. Smith: That is correct.
Senator Di Nino: I have one final question, with the proviso that I would like to come back to it at the next meeting.
How do you forecast debt costs, debt charges? Do you have a formula, or is it generally the rate of the day?
Mr. Smith: The Department of Finance provides a forecast in the budget; an interest rate forecast and debt payment forecast. These supplementary estimates pick up adjustments. If interest rates fall more than expected, there will be savings, essentially, on the statutory expense side, which will be reflected here.
Senator Di Nino: Is that vice versa, if interest rates increase?
Mr. Smith: Yes, or vice versa. The supplementary estimates pick up those adjustments, effectively, from the forecast.
Senator Di Nino: How are they picked up, or is this question more for the department?
Mr. Smith: This question is more for the Department of Finance than for us, because they do that forecast.
Senator Di Nino: That is fair enough. Thank you.
Senator Callbeck: My first question is with regard to page 9, where you discuss "Funding for volume and inflationary pressures and nondiscretionary charges for the Real Property Program;'' $64 million. What are you talking about there?
Mr. Smith: I believe you are referring to the Real Property Program at Public Works and Government Services Canada.
Senator Callbeck: What does that mean?
Mr. Smith: The real property program is a quasi-statutory program. It is not quite statutory, but it is demand driven. If there are changes in the number of offices that federal government employees require or if there are increases in rents, those costs must be captured and paid for. They are often driven by market factors. The increases in operating spending require your approval, essentially because they are not, strictly speaking, statutory, even though they are very much driven by market factors and by events over which the Department of Public Works has no control.
Mr. Pagan: To add to that point, it is my understanding that PWGSC manages some 2,000 different properties across the country on behalf of the federal government. Inflationary pressures that the department encounters in managing those properties include wages for operational and janitorial service staff, utility rates, natural gas heating, and in some cases perhaps, transportation costs for shuttles back and forth. It is considered to be a nondiscretionary charge for the maintenance and operation of those various properties across the country.
Senator Mitchell: I do not understand what inflationary pressures they experience in this kind of market. It is debatable whether we have inflation at all; we might actually be verging on deflation. What are the inflationary pressures, and what percentage of total costs for the real property program do they represent?
Mr. Smith: Maybe Mr. Pagan has an answer to the second question. With regard to the first question, I think this cost is largely volume driven, as opposed to inflationary pressures. We are looking back at 2008-09, as compared to the current situation. Markets may have softened considerably since these initial costs arose.
Perhaps volume and inflationary pressures do not capture the wide range of cost drivers. Our list includes payment in lieu of taxes, costs of fitting federal buildings, rental costs, property management, space costs including for the Senate, the House of Commons and Library of Parliament, and so on.
There is a range of drivers, I think, more on the volume side than on the price side. We can ask the Department of Public Works for a full breakdown and we can provide more detail for you.
Senator Mitchell: Do you mean volume in the sense that they were renting more space?
Mr. Smith: Yes.
Senator Mitchell: Again, is the public service growing?
Mr. Smith: The public service has been growing, and that has been a factor. Mr. Pagan may have something to add.
Mr. Pagan: In the current economic climate, markets are changing, and changing quickly. We began to prepare these supplementary estimates in June, and they were locked down and approved by ministers in late October. They account for factors across the country, including markets that were hot, such as Vancouver, Calgary and Toronto. Any number of variables go into the different pressures that Public Works has, but we will ask for more detail in terms of specific drivers.
Senator Day: Senator Callbeck still has the floor.
Senator Callbeck: That is all right. I answered my own question.
The Chair: These supplementary estimates were being prepared only after we were reviewing Supplementary Estimates (A). The interesting estimates, the ones that are really topical, will be Supplementary Estimates (C), which we will see soon, I suppose.
Mr. Smith: Yes.
[Translation]
The Chair: We have Senators Chaput, Mitchell and Gerstein. Senator Chaput is from Manitoba.
Senator Chaput: Thank you, Mr. Chair. My first question deals with the infrastructure funding program. If I understand this item correctly, the amounts have already been approved, but they have not been spent.
Does the federal government see any flexibility in provincial participation? Is it 50/50? 60/40? Would the government consider becoming involved in projects that are already underway in provinces, but have not been completed?
[English]
Mr. Smith: Those questions are complex ones to answer, senator. There is a range of different elements to the infrastructure programs. Some of those elements are cost shared and some are base funding, in this case. There is also the Gas Tax Fund, which provides support for municipal infrastructure. A wide range of different arrangements come under this category of infrastructure spending.
These requirements here refer to only one element of that large universe of infrastructure spending. It may be necessary for us to come back with some more detail for you to answer those questions, because they are complex.
For instance, in addition to the Provincial-Territorial Base Funding Program, there is also funding for the Border Infrastructure Fund. That fund is a contribution agreement with the provinces. There is funding for the former Canada Strategic Infrastructure Fund. There is also funding for the Gas Tax Fund Transfer Payment Program.
There is a range of different mechanisms, all with different parameters. It is hard to generalize about how much is spent, whether the provinces are spending at the rate they should or whether we are spending at the rate we should. More attention to that question may be required by our colleagues at Infrastructure Canada.
Senator Chaput: Are the provinces aware of all those different mechanisms?
Mr. Smith: They certainly are, senator. They have entered into contribution agreements with the federal government and they operate according to the terms and conditions of those contribution agreements.
Senator Chaput: Do you know if there is a possibility to help an infrastructure program that has already begun?
Mr. Smith: I would not be able to provide a good answer on whether a program that has already had funding allocated from the federal government and the province receives a top-up. That information would depend on the nature of the program we are referring to, that is, whether it is the border infrastructure program or another one. I would have to ask our colleagues at Infrastructure Canada.
However, there are top-ups to certain projects. They can be considered under the existing arrangements and there is funding for new projects. I suspect it would be a mixture of the two.
[Translation]
My second question deals with the Treasury Board Secretariat. The Public Service Human Resources Management Agency has been merged with the Treasury Board. On page 8 of your document, we see that costs for the agency have gone up. Could you tell me what justifies this increase? Normally, when two agencies are merged, it is done to cut costs. In this case, the costs go up.
[English]
Mr. Smith: These Supplementary Estimates (B) were prior to this recent announcement that the agency would be folded back into the Treasury Board. There are certain requirements that reflect their costs prior to that decision, which was a machinery decision taken by the Prime Minister. A number of elements are in that supplementary estimate requirement, such as funding for program integrity, the classification reform program, support for pay equity litigation and support for government advertising — a range of requirements they had prior to the merger of the Canada Public Service Agency and Treasury Board.
[Translation]
Mr. Pagan: Are you talking about the $170 million on page 8 of our presentation?
Senator Chaput: Yes, I am.
Mr. Pagan: That amount is the total cost of collective agreements with the Unions. It is not a cost for the agency.
[English]
Senator Chaput: That is a new contract?
Mr. Pagan: They are contracts signed — I do not have the exact date — between April 1 and July 31, 2008.
Senator Mitchell: Please clarify this item for me: Is this $2.3 billion net new money or is some of the money shifted from places where it is known that it will not be used and some of it new? Is the amount an increase over what was originally budgeted?
Mr. Smith: It is net on the reductions on the statutory side. There are changes due to transfers where money may be moved from one vote to another. However, this is not net new money beyond what was in Budget 2008. There is no new spending beyond that allocation.
Senator Mitchell: Was it in the wrong places, then?
Mr. Smith: No, when a budget is tabled, Main Estimates come out virtually at the same time. There is no time to reflect on the budgets in Main Estimates. We tend to play catch-up with the budget. We tried to shorten that time frame by bringing in Supplementary Estimates (A) in the spring to capture as many of the budget items as possible.
In previous years, we had to wait until Supplementary Estimates (B) and most of the budget items would appear there. This is playing catch-up to the budget in many respects.
Senator Mitchell: Given the $331-million marginal increase on the Afghanistan mission, can you tell me what that increase brings the total to? What percentage of the original estimate is that?
Mr. Pagan: If memory serves me correctly — and I will check this information quickly — the Department of National Defence included in their Main Estimates for 2008-09 a figure of approximately $517 million for Afghanistan.
Senator Mitchell: This is a huge increase?
Mr. Pagan: It is, but as Mr. Smith said earlier, there is a constant tension between forecasting and appropriations. All departments prepare forecasting or long-term plans. They have sophisticated costing processes. I can assure you that DND is advanced in their ability to cost requirements.
It is a principle of the government that it only asks Parliament for an appropriation if it has a specific purpose and an approved program. In a large department like the Department of National Defence, there can be sequencing of contracting approvals and different requirements, where they and every other department are not always able to appropriate all the money they need at the beginning of the fiscal year. They simply have not been through the policy and approval process to satisfy ministers that there are clear terms and conditions.
Senator Mitchell: You cannot comment on this item because it is slightly partisan. May it is that you are out 60 per cent going into the election and you wanted to budget slightly lower?
The Chair: That is a comment.
Senator Mitchell: Okay.
If the government is on the ground right now and has the proverbial shovels in it, are we presuming there will be some stimulus expense made between now and March 31? If so, is any of it in here, or do you anticipate that it will it be in Supplementary Estimates (C)?
Mr. Smith: We should not try to anticipate Supplementary Estimates (C). These estimates refer to 2008-09 as opposed to 2009-10. As you know, the focus of the budget and the plan in the budget is for the new fiscal year.
There is certainly stimulus on an ongoing basis in these estimates, for example, on the infrastructure side. That is part of the ongoing spending in 2008-09. These estimates do not anticipate or look forward to additional funding coming from, for example, Supplementary Estimates (A) in the new fiscal year where we see more of the budget measures.
Senator Mitchell: To follow up on Senator Chaput's question regarding matching, your answer was that there is some matching, but it is complex. Does the department responsible for those projects and developing these estimates make any assessment of whether municipalities will have the money to match? Can we make some reasoned assumption that there will not be take-up or that there will be a certain percentage of take-up?
This question becomes important when one considers the record of the government when it makes announcement after announcement but never spends the money. It is particularly important when we consider what will happen in the stimulus package if the money is never spent because the municipalities do not have the money to match it.
Mr. Smith: Again, I should not try to speak for Infrastructure Canada, who is responsible for this program. These questions are probably better directed to them. I am sure they are only too cognizant of the capacity of the provinces and municipalities to partner with them. Indeed, I cannot see that provinces and municipalities would be willing to sign on to contribution agreements if there was not a willingness to spend and match in accordance with the agreements.
It is a partnership when it comes to those cost-sharing arrangements. Infrastructure Canada and provinces would go into the arrangement with eyes open in terms of the requirements on both sides.
Senator Gerstein: May I assume that the numbers tabled here, which were tabled on January 29, are the same numbers that usually would have been tabled at the end of October?
Mr. Smith: Yes, they are the same numbers.
Senator Gerstein: They have not changed?
Mr. Smith: No.
Senator Gerstein: Does that situation suggest that each of the recipients has been anticipating receipt of this money for close to four months?
Mr. Smith: That is correct.
Senator Gerstein: Did I hear you say the recipients cannot, or do not, spend the money until they receive it?
Mr. Smith: That would require parliamentary authorization and approval of appropriations.
Senator Gerstein: This situation leads into what Senator Di Nino was saying, that the sooner they receive the money the sooner they can spend it.
Mr. Smith: That is correct.
Senator Ringuette: On Senator Gerstein's question and Senator Di Nino's prior one, this Supplementary Estimates (B) usually would have been tabled, you said earlier in your display here —
Mr. Smith: In October.
Senator Ringuette: — in October. Someone called an election before this money could be allotted by Parliament to be sent to those provinces. Then someone prorogued Parliament so that there would be a further two-month or three- month delay in the delivery of this base funding. Am I correct?
Right now, we are dealing with Supplementary Estimates (B) and we are in the month of February. This committee should have dealt with this document last October. Am I correct?
I know the issue is politically sensitive and you want to be politically correct, but timing wise — this is not my first year on this committee — these requests should have been dealt with by Parliament last October.
Mr. Smith: In a typical regular political cycle, we normally table in October; that is correct.
Senator Ringuette: This money would have been delivered had we not had an election or prorogation of Parliament.
My second question —
The Chair: That question is fine as a supplementary one. Is your next question a supplementary question?
Senator Ringuette: No, it is a new one.
The Chair: I will put you on round two because it is not fair to the senators who have not had a chance to ask questions yet.
Senator Neufeld: I am new, so you will pardon me here. It is amazing what democracy does when an election is called. Sometimes some things must stop for a while. It is interesting.
First, I want to understand; all the money has been voted on by Parliament to be spent. What happens now is that the estimates come in as they go along with the Afghan war. This is what you are talking about; you cannot estimate from last June what you will spend later on. Is that correct?
Mr. Smith: Not quite, I think. We are coming now to ask you to vote this funding. In essence, it is not that it has already been voted and we are coming back. We are asking now for your approval on these new requirements.
Senator Neufeld: When I see, on page 170, a total of approximately $518.9 million, that is inclusive of the $331 million for funding for Canada's mission in Afghanistan as part of that, is it not? The frigate is in there. I will be honest; I find it listed quite well in the book. I find it in your presentation — I am not trying to be critical — to be spattered all over. Some is on page 8, some is on page 9 and it is all in different places.
When we look at the total appropriation of $519 million, to round it out, that amount is all inclusive. That would have been nice to see but I find it in binder. Would you like to respond to that?
Mr. Smith: You are right. It is clear when you look under the Department of National Defence. What we do here may not be the right format. We simply pick out for you the large items and say you should be aware that a large chunk of these requirements are in these items.
It does not give you the whole story, I agree. It gives you only a list of the larger items. You are right, there is more context — if you look at page 170 in the blue book on National Defence, it puts context around it.
Senator Neufeld: The second question I have is on page 199 in the blue book. Maybe I did not understand you correctly, but it relates to the $326.7 million for the Provincial-Territorial Infrastructure Base Funding Program.
Did I understand you to say the gas tax was included in that number? In the blue book, it shows it as a separate item. Am I confused there?
Mr. Smith: I mentioned that there are a number of items under a number of different programs in the broad infrastructure sphere here. One of them, a separate one, is the gas tax fund. It was not the same; it was separate.
The Chair: Thank you, Senator Neufeld. The book and the pages you referred to are found in the blue book, being Supplementary Estimates (B), which is the basis of our study at this time.
Senator Greene: For my own clarity, on pages 8 and 9, payments have been made on some of those items, right?
Mr. Smith: Are these the items for the major voted budgetary initiatives?
Senator Greene: Yes.
Mr. Smith: There are continuing programs in many of these areas. For example, on real property, there is a continuing program. Funding is still flowing through these programs. These are the incremental requirements for a number of these initiatives.
Senator Greene: The requirement of the $234 million on the Crown Share Adjustment Payment has indeed been paid.
Mr. Smith: Are you referring to page 70 in the blue book?
Senator Greene: I refer to page 8 and 9.
The Chair: That is, the pages in the presentation here today, the list of major voted items.
Mr. Smith: We can go through them one by one. Is there any particular one?
Senator Greene: No.
Mr. Smith: In general?
Senator Greene: Yes, sure.
Mr. Smith: The difference here is between an existing program under which funding may be occurring and where there is cash flow and something that is new and has a new requirement.
For instance, if you look at the Crown Share Adjustment Payment to Nova Scotia, that is new as a result of the decision of the independent panel, and the funding is being provided. That funding is absolutely new. I do not think any funding, as far as I know, has gone out before on that item.
Senator Greene: This amount has gone out.
Mr. Pagan: At the risk of confusing the situation, the total supplementary requirement for the Crown share payment is $234 million. It is my understanding that $125 million of that amount has been paid. There is a mechanism we would be glad to inform the committee on called vote 5 for true government contingencies whereby Parliament authorizes Treasury Board ministers to make immediate payments in advance of parliamentary approval of the estimates. In this case, there is a listing on page 70 of the Supplementary Estimates (B) of payments made based on immediate need or urgency.
Mr. Smith: If I may add, I stand corrected in that money did flow for that particular one. That is the kind of exception that proves the rule, in essence. There is a particular contingency fund whereby the payment had to be made at a certain time and, therefore, that payment came through a special contingency vote. In general, you are voting on items for which money will flow later.
Senator Greene: That is great.
The Chair: I am still looking for the TB contingency vote.
Senator Di Nino: It is at page 70. In effect, some of the money contained in Supplementary Estimates (B) has already been transferred to its destination. Some of it has been and some has not been. Is that right?
Mr. Smith: That is right in this instance. Only when there is a requirement to use the contingency fund — Treasury Board vote 5 where the money has been appropriated and payment has flowed for one unforeseen reason or another — would money flow before you see the actual transaction.
Senator Di Nino: That falls under TB vote 5.
Mr. Smith: Yes.
Senator Di Nino: Under National Defence at page 170, TB vote 5, you will see a variety of items.
Mr. Smith: That is a different Vote. Treasury Board vote 5 is a central vote that we use to cover any unforeseen requirements, emergencies and so on.
Senator Di Nino: That is good.
Mr. Smith: A vote 5 in DND is not the same thing.
The Chair: Thank you for that clarification. Honourable senators should recall that we have completed some research on Treasury Board vote 5. We felt it was used too loosely by Treasury Board to make payments out of a contingency fund before Parliament had appropriated and approved the expenditures. Therefore, we recommended guidelines on how Treasury Board vote 5 could be used and the guidelines were accepted by the government two or three years ago.
Was this payment of $125 million to Nova Scotia made according to those guidelines that we recommended?
Mr. Smith: Yes, it is consistent with the wording in TB vote 5 and with the terms under which we use that Contingency Vote.
The Chair: Do you recall the guidelines recommended for the use of Treasury Board vote 5? Can you check to see if they are still followed? We recommended them and were assured, following that report by this committee, that you were following those guidelines.
Mr. Pagan: I will provide you with a listing of all vote 5 approvals this year. There are two in the Supplementary Estimates (B) and, as I recall, there were one or two in Supplementary Estimates (A) as well.
The committee members might be interested in seeing the criteria that we use and to which the chair refers. Those criteria are listed on page 21. They have been communicated to departments and must be adhered to for any request by departments to access Treasury Board vote 5 government contingencies. When departments come forward with their requests, there is an internal process to review the requirement and satisfy ourselves that each of the criteria is being respected or adhered to. That process is followed by our recommendation to the ministers based on the required adherence to those criteria.
The Chair: Thank you. I do not mean to take up your time but you are bringing back many memories of meetings gone by. Senator Greene, are you finished?
Senator Greene: That is fine, thank you.
The Chair: Senator Callbeck, Senator Ringuette and Senator Mitchell are on the second round, when we go into the short snappy question-and-answer phase.
Senator Callbeck: You list Major Statutory Items on the back page. You show a decrease — $445 million — because interest rates have come down. Some expenses are listed but I am wondering about the $83 million. Of all the statutory items, what are the major items?
Mr. Smith: That list would be fairly long.
Senator Callbeck: Are there any major items? The amounts seem to be only smaller ones.
Mr. Smith: I believe there are some but we will double-check to ensure that we have the breakdown for you.
Mr. Pagan: Most, but certainly not all, statutory payments are made by either the Department of Finance or Human Resources and Skills Development Canada. Usually the big drivers in terms of statutory payments are benefits under the Canada Pension Plan and Old Age Security; the debt; equalization payments to the provinces; and health and social transfers. Those items are the larger drivers in terms of transfer payments. Sorry, debt is a statutory payment but not a transfer payment.
Senator Callbeck: Transfer payments are already there and they include equalization and health as well as social and pension.
Mr. Smith: We can try to provide you with a breakdown of the $83.7 million and identify the individual items.
Senator Callbeck: At page 156, under the Canada Small Business Financing Act, the amount goes from $81 million to $105 million, which is an increase of more than 25 per cent. Is that the amount you estimate will be needed by March 31 or does that amount represent the claims to date?
Mr. Smith: I believe it represents the needs to date for Industry Canada, which runs the program. I will double- check.
Senator Callbeck: That does not take you through to the end of March, then? That is not up to date. It is not a forecast.
Mr. Smith: This would likely be their forecast for the rest of the current fiscal year. I doubt they would come back.
Senator Callbeck: Pardon me?
Mr. Smith: Your question was: Will this be enough for the rest of the fiscal year?
Senator Callbeck: That is right.
Mr. Smith: I believe that would be the case. We can double-check for you but it should cover the costs for the year.
The Chair: Do you know that having looked at Supplementary Estimates (C)? I am teasing you.
Mr. Smith: I am easily teased. My guess would be they would not table another supplementary estimate for the same item in Supplementary Estimates (C).
Mr. Pagan: May I provide a supplementary response to the supplementary question, Senator Callbeck is asking about the statutory items. A summary table on page 59 of the estimates document lists all the statutory items I believe in their entirety. What we have presented to the committee is a summary of the summary, but I believe this table provides information on all the statutory items in these estimates.
Again, these are payments that have already been approved by Parliament through various enabling legislation. They are presented in the estimates for information purposes. In many cases, they form a significant part of a department's mandate or operations. They are not voted on through the estimates appropriation bill. It is simply to complete a picture of what is happening in individual departments.
What we might see as the miscellaneous items that accounted for the $83 million and all other statutory likely would be industry, the liabilities under the Canada Small Business Financing Act, some $23 million; HRSD, the Wage Earner Protection Program, $31.2; and the House of Commons members' staff salary, $1.4 million. I think that accounts for the bulk of it.
Senator Ringuette: My question is with regard to the $75 billion that the government has used to buy back insured mortgages, $75 billion that I do not think we have in reserve. Therefore, we had to go to the market issuing bonds or treasury bills. How was the amount of $75 billion recruited financially; that is, fund wise on the money market? If they are treasury bills and bonds, for how long and at what interest rate? What will that cost Canadians over the duration of the issue? What percentage increase to the public debt does that $75 billion cause?
Mr. Smith: Those are good questions, which we would be happy to relate to our colleagues at the Department of Finance to try to answer for you.
Senator Ringuette: Will that be through the clerk?
Mr. Smith: Yes; we would be happy to respond to those questions.
Senator Di Nino: When you do that, can you also provide the other side of the equation? I believe these instruments are assets in the balance sheet of financial institutions that are probably all mortgages — I do not know that; you may be able to tell us that — that have an interest rate payable. We need to balance that and give the other side of the story so that it is a full picture rather than only one side of the equation.
Mr. Smith: Yes, senator.
The Chair: Whatever number of sides there are to this story, we want to know them all.
Senator Ringuette: Do you have a third side to it?
The Chair: Do you have a supplementary question to Senator Di Nino's question?
Senator Ringuette: Yes; to complete a certain picture, can we know, what was the average risk of default on those mortgages that were bought out?
Senator Di Nino: I think that would be nearly impossible to give.
Senator Ringuette: No, there is a risk factor.
Senator Mitchell: How are they rated? You can rate them?
Senator Ringuette: Yes, rate them.
Senator Mitchell: You referred in an earlier answer to pay equity litigation costs that were in one of these categories. This question is specific but maybe you can come back to us with the answer. How much were those costs? What was the nature of the litigation, that is, what were the two sides? Was this litigation under a collective bargaining agreement? If so, how long after the collective bargaining agreement had been signed did it occur? Do you know the outcome?
Mr. Smith: I can offer some answers there and can fill in later with more detail.
We were referring to the supplementary estimates for the Canada Public Service Agency, CPSA, and the funding they requested for support for pay equity litigation support. An agreement was reached between the government and PSAC on this complaint recently. That had been a complaint before the Canadian Human Rights Tribunal for some years. It was settled. I do not have the exact figures on the amounts here that it was settled for but we can provide those figures.
Senator Mitchell: When you say it was funding in support of the litigation, which side was it supporting; was it the side of the group that was petitioning for pay equity or the government side? Who was against whom?
Mr. Smith: The government, as employer, was being sued essentially by the union. It is essentially in support of the litigation costs of the employer.
Senator Mitchell: They could not do the right thing and settle it?
Senator Di Nino: They did the right thing.
Mr. Smith: They did settle it. It was settled.
Senator Mitchell: You will provide me with the figures on that litigation?
Mr. Smith: It was settled only recently and I believe the payment was something like $4,000 per employee but I could be wrong. It was $4,000 per employee in the bargaining units.
Senator Mitchell: This settlement would apply only to employees under collective bargaining agreements. Now that the Canadian Human Rights Commission appeal process will be prohibited for these groups, if they are not in a union will they have recourse?
Mr. Smith: This settlement applied only to the PSAC complaint as far as I am aware.
Senator Mitchell: Anyone outside the union will not have recourse because they will not be able to go to the Canadian Human Rights Commission.
Mr. Smith: I cannot comment on that.
Senator Mitchell: We will find out. Thank you.
The Chair: The reference under Treasury Board Secretariat at page 202, is that the discussion you have had with Senator Mitchell? The amount you are requesting under the supplementary estimates is $6.572-million funding to support pay equity litigation? Is that the item you were discussing?
Mr. Smith: I was referring to the one for CPSA, which came up earlier. However, there is a requirement under Treasury Board as well, a similar type of requirement for litigation support.
The Chair: That is a pay equity issue?
Mr. Smith: That is right.
Senator Mitchell: Could there be this kind of expenditure in a variety of places?
Mr. Smith: In this case, it only really applied to Treasury Board, CPSA and the work on classification reform that is associated with it as well.
The Chair: Do you have a horizontal listing since there is more than one place where that appears?
Mr. Smith: I do not think we have a horizontal listing for that one because I think it is only the two departments as far as I am aware.
Senator Mitchell: Can you confirm that?
The Chair: I have a question with respect to the Privy Council. I want to ensure that I understand this item. The ministry summary that I am looking at is at page 179 of this Supplementary Estimates (B).
This question is probably one that I should ask when we are doing the Main Estimates, and maybe I will, but I will have a better understanding when I ask it next time. I have been looking for the breakout for the Prime Minister's Office under the Privy Council. Am I looking in the right place?
Mr. Smith: Well, there would not be anything here under the supplementary estimates, if that is where you are looking. Are you looking for the ongoing costs?
The Chair: I want to be able to go to the estimates and determine the costs anticipated for the running of the Prime Minister's Office. My understanding has been that I find it under the heading, "Privy Council.'' Perhaps that should have been my first question. Where do I go to find the costs in the estimates for the Prime Minister's Office? The PMO is that big building down the street called the Langevin Building.
Mr. Smith: There is more information available on that through the Main Estimates than supplementary estimates.
Mr. Pagan: I have two supplementary responses dealing with the most recent question on the Prime Minister's Office.
I refer to the 2008-09 Main Estimates. For the purposes of the new committee members, it may be helpful to understand that we present Main Estimates, Parliament votes funds to departments vertically by vote, and then within those departments there is something called a program activity architecture that allows you to understand where the money is going within a department. In the supplementary estimates, we detail the supplemental requirements by line item. As Senator Neufeld pointed out, if you go to DND, you will see a precise listing of each and every requirement they have. In the Main Estimates, because it is an aggregation of all the requirements by the government to start the year, we present that information by program activity at an aggregate level.
You do not have it in front of you, unfortunately, but the Main Estimates for 2008-09 outline what I believe are four program activities for Privy Council, including providing professional, non-partisan policy advice and support to the Prime Minister and portfolio ministers. I expect that a good portion of the costs of PMO are within that program activity, but the department itself can identify more precisely the program activity structure of the department.
The Chair: You break out the Library of Parliament, the House of Commons and the Senate. Why is the Prime Minister's Office not broken out as a separate cost item so that we can track that?
Mr. Pagan: It is a machinery-of-government decision. There has been a decision by the government to have the Library of Parliament as a distinct reporting entity. Those decisions are the prerogative of the Prime Minister to structure his ministry as he or she sees fit.
The Chair: At page 179 of the Supplementary Estimates (B), I can see the Prime Minister's salary and motor car allowance, but I cannot see the cost of the office.
Mr. Pagan: That is right.
Mr. Smith: That is simply because, in the supplementary estimates, we are only dealing with the incremental requirements.
The Chair: I understand.
Mr. Smith: The detail is in the Main Estimates. It is broken down there.
The Chair: Is the Prime Minister's Office shown as a separate line item in the Main Estimates?
Mr. Pagan: There is a program activity structure for each department, and the program activity structure for PCO is where you would capture PMO.
The Chair: So it is mixed. PCO and PMO are mixed together or combined?
Mr. Pagan: The Privy Council, PCO, is the department of government.
The Chair: Yes.
Mr. Pagan: PMO is an office within a department of government.
The Chair: About 100 people work there. If I could look it up, I could tell you how much they spend each year.
Mr. Pagan: That is right.
Senator Ringuette: Why do you not ask him for that information?
Mr. Pagan: I had an additional response to Senator Mitchell's question on pay equities and whether this item was a horizontal item.
Again, for new members, a series of tables in the front end of any estimates document identifies how Treasury Board uses central votes, how we track statutory spending, horizontal spending and changes to machinery of government, et cetera. In Supplementary Estimates (B), beginning on page 76, there is a listing of the various horizontal items. For the purposes of ensuring that you understand, a horizontal item is defined by Treasury Board as an initiative or a program where two or more departments come to Treasury Board ministers at the same time with a combined Treasury Board submission so that they can do something jointly.
In the case of pay equity, this is an instance where two departments are undertaking what might be similar work but, according to their own mandates, they had separate needs and approvals from Treasury Board to do their work. It is similar work, but it is not a horizontal item.
Senator Neufeld: There have been questions around the Privy Council Office, reporting and trying to determine where money is spent. Is this changed yearly, or has this way of reporting been consistent for the last 10 years or maybe longer? Is there a different way of doing it every year?
Mr. Smith: There is great consistency in general in the way we report. In the last five years, we have refined this program activity architecture, to use the full terminology, and been able to push consistently the level of detail down to program level. We have a good inventory of programs across government, all treated in the same consistent fashion. We follow the money according to that consistent fashion. The program activity architecture for every department is an important matter that cannot be changed at the highest levels without Treasury Board approval.
Senator Neufeld: Thank you. I think you answered my question. It has been consistent that way for a long time.
The Chair: If only the Prime Minister's Office was the same size it has been for a long time.
The difficulty, honourable senators, is that some of our questions might have appeared to have been critical of Treasury Board secretariat but certainly should not have been. For many items here, such as horizontal reporting and Treasury Board vote 5, Treasury Board has been responsive to this committee's request, and we thank you for that.
This discussion has been helpful as an initial meeting. It has given us a lot of food for thought. We will be back to you. We have a week break. If we can have those answers toward the latter part of next week, it will help us to determine where we go from here. On your behalf, honourable senators, I thank Mr. Smith and Mr. Pagan for coming here on short notice to help us through this.
Mr. Smith: Thank you very much, senators.
The Chair: Before I conclude this meeting, if, as a result of what has transpired today, senators, you would like to have Treasury Board back, or if you feel that you would like to follow up with officials from the Department of Finance or if there is some other avenue that you would like to explore, please let our clerk, Mr. Thompson, know as soon as you can. The steering committee will try to meet, probably by phone, and we will try to determine our program for February 24 and 25, which is the Tuesday and Wednesday when we are back.
We want to submit a report as a result of this as quickly as we can, but we cannot finish the report until after we have finished our deliberations. It will take a short while to complete deliberations, then we will go over them, and then all the other ones will be coming along.
Senator Di Nino: Are you suggesting that we should try to have this completed by February 25?
The Chair: It is a committee decision.
Senator Di Nino: Yes, but is that what you are suggesting, namely, that we should be able to report this either the week we come back after the break or the week following?
The Chair: I am hopeful.
Senator Di Nino: That is good.
Senator Neufeld: Yes.
The Chair: We will then be into Supplementary Estimate (C).
The committee adjourned.