Proceedings of the Standing Senate Committee on
National Finance
Issue 2 - Evidence - Meeting of March 23, 2010 - Afternoon meeting
OTTAWA, Tuesday, March 23, 2010
The Standing Senate Committee on Finance is meeting today at 4:02 p.m. to consider the Estimates laid before Parliament for the fiscal year ending March 31, 2011.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Order, please. This afternoon, we will continue our consideration of the Main Estimates for the 2010- 2011 fiscal year that are before our committee.
[English]
This morning we began consideration of the Main Estimates for fiscal 2010-11, hearing from officials from the Treasury Board Secretariat. This afternoon we are pleased to welcome before the committee the Honourable Stockwell Day, President of the Treasury Board.
Mr. Day has been in his current position since January 19 of this year, and this is our first opportunity to meet with him. First of all, Mr. Minister, congratulations on your appointment. We meet with the representatives of the Treasury Board Secretariat on a regular basis. You have a fine team of people working with you.
Colleagues, we have the President of the Treasury Board for one hour this afternoon, and so I ask you to make your questions or comments crisp and brief so we will all have an opportunity to participate.
Minister, do you have a few introductory words?
Hon. Stockwell Day, P.C., M.P., President of the Treasury Board of Canada Secretariat: Thank you, Mr. Chair, and thank you for your congratulatory comments, I think. It has been a learning curve for me — a very interesting and challenging time.
[Translation]
I agree with your comments on the officials, my colleagues, who work for the Treasury Board. They are very efficient and I know they have very good knowledge of our country's finances.
[English]
I have found that this is a challenging position and it will continue to be challenging. However, just as you and your members find — it is a good thing to be involved and concerned with the finances of the nation. It is good to be able to have some estimation of the state of affairs in which we find ourselves.
Just as a brief overview comment, I can say that as we predicted, this particular budget begins to lay out a roadmap toward what we will see and believe will eventually be a balanced budget by 2014-15 — a task that will be daunting in some ways and yet, I believe, imminently achievable. We have broken it down into three large areas, each of which, again, I believe are achievable.
As you know, to get from deficit to the place where we do not have to continue borrowing annually to meet our needs, it is about $53 billion. If I round off, from time to time, a billion here and there, please do not think that I do not think a billion is a large amount of money. It is a huge amount of money. However, for the sake of rounding purposes, some people might say $53 billion is gigantic. How will we reduce that deficit?
One element of it alone — which is the planned, continued stimulus package of $19 billion — comes right off the top at the end of this year. We have $50 billion up here and 40 per cent is reduced at the end of year, just by eliminating that $19 billion on the stimulus package.
From there we will look to restraining government spending. The year 2010-11 will set the level for departmental spending, and that will be maintained for three years. Just doing that takes away from the increase that had been projected before this particular year. That is about 37 per cent of the program in terms of getting rid of that deficit.
Then the final 23 per cent or so, if I can say ``or so,'' is a mix between some of the expenditure review, which we have been doing and will continue to do, and also what we see as somewhat of an increase in revenues over that period of time.
I close my remarks by saying some people have wondered if we are confident enough that we will see an increase in revenue and if that will mean we will raise taxes. Of course, it does not mean we will raise taxes, but when you have more people working and paying taxes, and more businesses being productive and making profits, that means there will be more revenues coming into the government.
How can we be confident of that increase in revenue? Mr. Chair, you and your members have probably observed, around the world, evaluations of various modern economies. Whether it is the International Monetary Fund, the World Economic Forum, the OECD, or the Economist Intelligence Unit, all of them point to Canada's fiscal plan, which puts us in a low sovereign risk capacity because of the way we are handling taxes and debt. Already we are receiving indicators that it is bringing attention, both domestically and internationally. The head of the largest bond portfolio fund in the world — a $1-trillion fund out of the United States — recently said he is increasingly directing his institutional investors to Canada. We have heard that point of view. Then, from the other end of spectrum, if I can use that analogy, a week ago there was comment by the Russian government that they want to strengthen their own currency reserves by buying the Canadian dollar.
These are signs that people who do these kinds of evaluations — looking for long-term predictability and strength in economies — are continuing to look to Canada because of our fiscal policies. I leave those thoughts with you and look forward to not only your interest, but your suggestions, criticisms and helpful guidance as we move ahead in this process.
Senator Gerstein: Thank you for appearing before us and giving us such an outline to start the discussion.
Budget 2010 describes a number of processes aimed at reducing costs in government and improving efficiency. As I recall, first there were the strategic reviews and, as I gather from the budget, the departments have been instructed — in order to maximize savings — that they are not to look to see how to reinvest this in other places but rather to save the money. Second, the government announced the comprehensive review of government administration and overhead. Third, there is something called the corporate asset management review, which I gather is run by the Minister of Finance. These reviews are to ensure the effectiveness of government spending, and I applaud you for these initiatives.
Having said, that it would be unfortunate if the review processes themselves became a stumbling block — the three of them coming together. How are you handling these reviews so they complement each other, as distinct from causing a problem?
Mr. Day: That is a fair question, Senator Gerstein. Let me indicate that the government has been involved in strategic reviews of a variety of departments. What we have been doing is roughly, each year, taking one third of departments — that actually includes boards and agencies — and asking them to review their expenditure profile and identify for them and us 5 per cent of their lowest priority items. These would have to be items that do not interfere with services to people and essential services. We have looked at that 5 per cent, captured it and applied it to our overall spending profile. Two years ago, that exercise yielded about $287 million. This year, with what happened then and this past year, it is about $1.3 billion. As we move into the year ahead, we think it will approach even more than that amount.
We have not yet publicized the names, but we will be forwarding to you the names of those departments and agencies whose turn it will be to go through that particular process. The process involves incisive analysis by our public service administrators and employees in terms of the programs and the services they provide. So far, we find it has been productive and, at the same time, has saved real dollars. That process will continue, and we will forward to you the names of the departments and agencies involved. I am sure it will be of interest to you and, as it moves through the year, you may have some commentary that will be helpful.
In terms of corporate asset management, we believe there may be assets out there for which it would be timely to review their ongoing efficiency and their ongoing need. I preface that reflection by saying there are times in any operation, be it public or private, where it is proper to look at the physical assets and ask, is this still necessary, could it be disbursed some way, or is it still needed? There are some limitations to what you can sell off in terms of assets, whether you are talking about your own personal assets or a particular business, but it is incumbent upon governments and any managerial operation to review whether that particular asset is better in some other form. That will be moving along also.
We also want to have an ongoing administrative review of the operations of government. This is a constant process of efficiency. We hear a constant refrain from members of the public, members of the business community and members of the non-profit community. It sometimes rises in crescendo and other times it dies down, as we are more efficient. People constantly raise issues of redundancy, overlap and duplication. In some areas, overlap might be good and necessary; however, in a large operation such as ours you can have situations where there is overlap and redundancy and where it is possible to achieve savings by being more efficient. This year, we employed 414,000 public servants, including military and RCMP. Everyone is doing a good job, all under different departments.
Your point, senator, is valid. In looking at how to do things better, maybe we can stumble over each other a little bit the odd time. It is part of Treasury Board's responsibility to have a coordinating effect. Individual departments or the Department of Finance will pursue some of the savings, but hopefully, as air traffic controllers, to use an analogy, we can keep that duplication to a minimum and maintain maximum efficiency.
Citizens understand that taxes are necessary. People understand that regulation is necessary. However, taxes at too high a level and an overly regulated situation can be suffocating and a disincentive. We want to send the signal to hard- working people that we are looking carefully at how their dollars are spent. We want to ensure that their dollars are being put to their maximum use.
Senator Callbeck: Welcome, minister. You referred to the strategic review of departments and agencies. I believe that started in 2007. You said that you get through roughly one third of the departments and agencies each year. At that rate, we would be through them completely.
Which departments and agencies had the review and what savings were identified. In this committee, it has come up in the budgets from time to time where a certain amount is earmarked, and it says it is from savings as identified by this review. However, the witnesses are never able to tell us exactly where those savings came from or what programs were affected.
I know you cannot do all that today, but are you able to give us a list of the various departments that have come under this review of programs where savings have been found?
Mr. Day: Mr. Chair, I am able to do that, although I do not have the exhaustive list with me or, in fact, in my head. I can certainly do what we can to get all those to you so you can have a sense of where savings were found. That will be helpful to you, and I commit to get that list to you as soon as we can.
The Chair: It would be helpful if that could be given to the clerk to be circulated in both official languages to all our members.
Senator Callbeck: Thank you very much.
On page 5 of the Main Estimates, we see the figures regarding transfer payments. Then I look at a press release from the Department of Finance. It says that the Government of Canada's support to provinces and territories is at an all-time high. It gives the figures for the Canada Health Transfer for this year and last year exactly as on page 5, and for the Canada Social Transfer. When it comes to equalization, it says equalization payments to provinces for 2010-11 will total $14.4 billion, an increase of $187 million. According to the figures, there is a decrease in equalization. I wonder where that $187 million would have come from.
Mr. Day: Which line are you on?
Senator Callbeck: I am on page 5 you have the Canada Health Transfer, and the figures are correct in the press release. I am looking at the fiscal equalization. According to the figures on page 5, last year it was $16.1 billion, but there is a decrease of $1.7 billion. The press release says, ``Equalization payments to provinces for 2010-11 will total $14.4 billion, an increase of $187 million.''
Mr. Day: At the risk of getting into some arcane detail, by which I do not mean is unnecessary, as it is important, legislative changes as a result of the Budget Implementation Act basically list those funds a different way.
If you are up for it, I would be happy to get for you from our Finance officials a detailed explanation of why certain numbers appear in certain columns. The equalization program is designed for provinces having difficulty maintaining the ability to deliver certain services at a certain average capability on their tax side. It varies from year to year and there are anywhere from 28 to 33 different elements that go into that complex formula. Overall, we have seen the increase there.
We also point out, on the health side, for instance, a 6 per cent increase, which we have committed to. We are not going through our own process of getting to a zero deficit by decreasing transfers to provinces. We have talked enough about that and another government has done that; we will not.
We will forward some of the accounting to you to show you how the Budget Implementation Act deals with some of the accounting. It is a formula-based approach, and I would be happy to send it to you. Once you have read through it, if you totally understand it, give me a call and explain it to me. I say that somewhat facetiously. Where there is a change, we try to note that. As you are probably aware, there is a note here on page 5. I can give you some details.
The Chair: I think what Senator Callbeck is looking for is some way to understand the difference between the government news release which says there was an increase, and page 5 of the Main Estimates, which says there is a 10.7 per cent decrease.
We understand that you may not have all the material here, but if we could have your undertaking that it will come from the department, that will help us.
Mr. Day: This is pointing out in the actual Main Estimates; there are also supplementary estimates, and there is a different cataloguing of how some of these payments transfer.
I would be happy to get that to you to show that, although this may sound at odds with each other, both presentations are correct. There is an increase overall; and in the Main Estimates, you will see we have noted this $1.7 billion in terms of notation.
Senator Ringuette: Welcome minister. I want to follow up on Senator Callbeck's question.
If you read the press release to which Senator Callbeck referred, and then you look at Minister Flaherty's budget speech, on page 15 it says, ``We will not balance the budget by cutting transfer payments for health care and education. . .'' Health care and education were not cut but the equalization program that is for the poorest of our provinces has been cut by $1.7 billion. It is 10.7 per cent in this fiscal year.
Mr. Day: You are referring to —
Senator Ringuette: I am referring to the fiscal equalization program. The health care program is an automatic increase of 6 per cent per year for a period of 10 years. That is a contractual agreement with all the provinces. You cannot reduce that; it is contractual.
However, for the fiscal equalization program, as was referred to earlier this morning in our meeting, there has been some tweaking. Therefore the poorest of our provinces, in a period of economic crisis, have been cut by $1.7 billion or 10.7 per cent of the total equalization transfer.
Mr. Day: I do not know if you have it before you, under major transfers to provinces and territories — on page 1 of 1 here — but we are being clear here about other payments, including the 2010-11 total transfer protection payment. That particular program is a one-time protection program to ensure that no province will receive less in 2010-11 than in 2009-10 through that combination of equalization, Canada Health Transfer and Canada Social Transfer. That includes a transitional 2009-10 equalization protection, including separate payments to Ontario.
I can give the assurance, and we have put in writing here, that no province receives less in 2010-11 than they did in 2009-10.
Senator Ringuette: Yes, because you are counting all the transfer programs, health is a 6 per cent increase from last year in itself alone. There is a question of political spinning here, minister, that I, as a New Brunswicker, do not enjoy.
Mr. Day: If I could just comment on your comment, these are straight, hard, statistical, fiscal facts. There is no spin. It is very clear when we say what has gone where and how it has happened.
The formula itself is very complicated. I think you will be aware — and as we meet regularly with the other provinces — no premier has come forward and said my province received less, you did some spin on me. None has said that. I want to make that clear.
Senator Ringuette: I want to make clear the facts we are reading here in this parliamentary budget; it is on page 5. It says that you have decreased the equalization transfer to the provinces, which are the poorest provinces of Canada, by $1.7 billion, 10.7 per cent. These are the facts.
Mr. Day: As I indicated to you, you are also dealing with supplementary estimates here. We are dealing with Main Estimates and you are aware there are supplementary estimates that flow in a year because of the voting procedures, because a certain amount of money like the Main Estimates cannot get through entirely. Therefore, some elements that may have appeared in the Main Estimates are put in supplementary estimates to move through quickly. You have to look at the whole picture.
I cannot emphasize strongly enough that no province this year has received less than they did last year, and we have no premier saying or indicating that in any way, shape or form. Maybe all premiers would like more, and they make presentations to that effect, but no premier and no provincial government, including New Brunswick, has come forward and said you did something nasty and we have less money. That has not happened because it is not the case.
The Chair: I think we are getting into a debate on one issue. There has been an undertaking to clarify this point. It is clear here that it is a 10.7 per cent reduction, and the minister has undertaken to clarify it for us. That is all we can do at this stage. I do not believe we want to get into debate between you and the minister on one issue. Did you have another point?
Senator Ringuette: Yes, I have another point concerning the public service. Please refer to page 25-5 of the Main Estimates and the heading Program by Activity. Please note that concerning Treasury Board Secretariat, government wide funds and public service employer payments, there is a reduction of $2.8 billion, a 36 per cent cut. Could you explain the cuts that you are presenting to us in these estimates?
Mr. Day: I am trying to find the line you are referring to.
Senator Ringuette: Page 25-5; the first item is government wide funds and public service employer payments through your department. There is a reduction of $2.8 billion there, which is a 36 per cent decrease. That is quite a number, 36 per cent. Could you tell us where these cuts will occur?
Mr. Day: First, let me be very clear on something. There has been, as I am sure you know, a significant increase in the size of the public service. If we look at a 10-year span and look at the time in which we have been in government, the public service has increased in size from 1999 to 2009 by a little over 34 per cent. That is just a hard reality.
We have implemented an increase in the size of the public service specifically intentioned to increase the number of regular service personnel in our Armed Forces and also the RCMP. These were both policy elements. Therefore, the size of the public service has increased quite significantly in that period of time.
In your reference, in terms of operating, I will ask officials to bring forward the actual elements. However, I can assure you the overall cost — not just the size but the overall cost — of the public service continues to go up, as you would expect when you see increases in the number of personnel.
Each year, approximately 13,000 people leave the public service; most retire and some go to other careers. That is balanced by rehiring. There is always a change and flux in terms of payments and various benefits.
We do not think there can be a net of zero in terms of 13,000 people leaving and none being replaced. I do not know that it will happen. We have left that up to departments to decide, and we have done so because, as you know, in the year 2010-11, there will be a lid on all spending in terms of the operations side. That will continue for the next two years.
We are asking for and we think there will be some creativity in terms of how that is handled. If you are concerned about employment benefits or benefits to employees going down, I can assure you that will not go down. Salaries have increased. We support the overall benefit package, and we do not plan any reductions in terms of benefits.
Senator Ringuette: Minister, I am aware that, in the last three years, there has been an increase in the public service. I am also aware there has been a tremendous increase in the contracting out of public service positions, which is a reduction in cost of supplying services. However, maybe you have further information from your official regarding this 36 per cent cut.
Mr. Day: It is like the previous question. When you have certain changes from year to year in terms of the reporting of budgets and expenditures, things can move from one vote to another. It can appear as if there has been a reduction. However, the moving of an item or an element from one vote to another does not always mean there is a reduction.
If you look under the Main Estimates that you have raised and compare them to 2009-10 Main Estimates, which is what you are referring to, I think, the Treasury Board Secretariat will be looking at a reduction to its total authorities totalling $2.8 billion. A lot of that was related to ending the implementation of Canada's Economic Action Plan. I do not have the page here, but if you look to vote 35, you will see that elements from this vote were transferred from vote 35.
These were transferred to the various departments that were approving the projects. Here you had Treasury Board responsibility for the economic action plan in certain areas that was reflected in the previous budget, so there was an element showing how much that was. That vote was then moved out of the overall vote for 35 and those expenses were apportioned to each department, showing the responsibility they had.
It would show a reduction in one department, but it is all been apportioned out, and the aggregate is gained by looking at each department and see which one they are taking responsibility for.
It would take a little time, but we can get information to you regarding where each of those items were apportioned to. You could then see that it is not an overall reduction to the budget but, in fact, it is different responsibilities that were pushed out to different departments.
Senator Gerstein: I certainly read the same number that you are reading, Senator Ringuette, but I am also reading the detailed breakdown of the transfers from the Department of Finance. I am interested about the three biggest: The Canada Health Transfer at 25 —
Senator Ringuette: I am sorry, we are talking about the —
Senator Gerstein: I understand that, but my point is that, in the detailed breakdown here, the number for equalization in 2009-10 is $14,000,000,185, which is not the $16.1 number that is here, and $14.372 for 2010-11.
Since the even larger numbers are the same, I would like clarification that perhaps they might like to check why the number is different here than it is from the detailed breakdown.
The Chair: The minister has undertaken to clarify that for us. Now, we are into another issue with respect to Treasury Board expenditures.
Mr. Day: These are accounting items that we will get from the accountants in order to give you the minutiae on these.
However, I want to make a point on the last item raised in that it is not an overall reduction. It is a placing of the various responsibilities on the various departments, but the dollars are there and we will get you the breakdown.
Senator Ringuette: I appreciate that because, in the last two years of the economic plan and looking at Main Estimates, Supplementary Estimates (B), Supplementary Estimates (C), and the budgets, I have not noticed $2.8 billion coming from different departments going to Treasury Board to accommodate the research and funding of economic stimulus projects.
Mr. Day: We will break that out and show you how it flows forward.
Senator Ringuette: I would appreciate that information.
Senator Marshall: Thank you. Welcome, minister. I want to speak about salaries. Please indicate what impact the budget and the restraint will have on the salary dollars. Also, are there implications for collective bargaining and, if so, what are they?
Mr. Day: That is a key question. We have indicated that departmental spending will be frozen at the 2010-11 levels for the next two years following this year. Basically, it will be at the same level for three years.
We do not want to interfere in the collective bargaining process. We have said these issues have to be managed by the public service. If there is an increase in one area within their operations, — salaries, or it might be some other area — then they will have to look to how they will balance that out with the overall envelope they receive.
As you know, the Expenditure Restraint Act is and has been in place. This year, they will continue to receive the 1.5 per cent increase. However, in the following years, it will be up to people in their discussion processes to look at issues of salary increases and what can be accommodated within the overall level they are given.
You know that we looked at ourselves, as members of Parliament, ministers, the Prime Minister, et cetera, and have taken the step of freezing our own salaries as we go through what we think is sort of the end of this downturn of economic activity. We do believe that we are in a period of recovery. In five of the last seven months, job numbers were increasing. However, we also say this is a fragile time, not just in our economy, but in the worldwide economy. Therefore, to show some responsibility, we have imposed upon ourselves a freeze in salary. We have not imposed that on others. We have imposed that on our salaries.
As we go through the next two and three years ahead, we are asking all departments to hold the line on their spending. Within the overall envelope they are given, they can make decisions. However, this is all that will be given out for the next two years following this budget.
Senator Marshall: Would you expect hiring to slow down or would you expect that the retirements and attrition in the public service will play a factor? What impact do you think that will have on new people coming into the public service?
Mr. Day: The overall size of the public service has increased significantly. I commented earlier that, since we have been in government, it is one of the key areas where we have seen an increase which is running ahead of population growth. When you have such a situation where personnel is increasing ahead of population growth, when there is an increase despite the fact that there are new technologies available all the time for administrative processes and other operations, we have to ask if the ongoing increase is necessary outside of a clear, stated policy position. As an example of stated policy position, I point to National Defence and the RCMP. The RCMP has increased from 19,000 to 23,000 with approximately 3,000 public servants who are increased on the other side.
We are asking departments to take all that into consideration. We are asking them to reflect on the fact that there has been a significant growth in the public service. We want to get to a balanced budget now that we are in this time of restraint. We are asking for creativity; we are asking for the administrative reviews that we are doing. From experience with public servants with whom I have worked since being at the ministerial level in the federal government, I have a great deal of confidence in their creativity and their ability to be resourceful. They take their task seriously to deliver service to Canadians and to always look for ways to be efficient.
Your concern is well founded in terms of what it will mean in overall numbers and salaries, but these are things I believe they have the capacity to work on and develop to help us through this particular time.
[Translation]
Senator Poulin: Thank you for being with us today, minister. We are all aware of your full schedule. I would like to step back and get an overview of budget 2010-2011.
What percentage of the budget is spent on culture in Canada?
Mr. Day: We can examine the figures. Give me a moment.
Senator Poulin: I was looking at the percentage.
Mr. Day: If we examine the figures, we can see that there are increases. You can add numbers, but we want $15 million for Canadian publications; $11 million for funding for the Own the Podium program, which I believe has been very successful; $10.3 million for collective bargaining; $8 million for support programs for sports; nearly $7 million for the official languages map; $6 million to build communities through the arts; another $5 million for TVA, a network that has a lot of influence in the francophone community.
If we make a quick calculation, that is approximately $61 million. There are increases and there are cuts. It is important to recognize that.
For example, there is a $50-million cut because there will be no Olympic Games next year. That is why it is necessary to add one line and to delete another. That is a net reduction of $108 million compared to 2009-2010.
Senator Poulin: I was able to obtain a comparison from the Library of Parliament of the dedicated percentage in Canada compared to 26 countries. It is a document published by the OECD. Canada ranks second last out of 26 countries.
Mr. Day: Compared to what?
Senator Poulin: I am talking about the percentage here.
[English]
Senator Poulin: I refer to government expenditure on recreation and culture as a percentage of the GDP in 2006. They make a comparison with 1997. That is the last year available from the OECD to ensure we are comparing apples to apples.
We are seventh from the bottom for 26 —
[Translation]
Mr. Day: How many countries?
[English]
Senator Poulin: It includes 26 countries. Why is Canada so low? Why do we pay such little attention to the one thing that remains after all of our cultural institutions are gone, mainly CBC and Radio-Canada?
[Translation]
Mr. Day: I am sure you noticed that the CBC has received an increase, not a cut. I have not seen the comparison by the OECD. I can say that our artists received an increase this year and I have explained the reasons for the differences from one year to the next. It is interesting to see that they put only 26 countries on the list.
Senator Poulin: Twenty-six countries.
Mr. Day: I wonder why that list does not consist of 50 or 100 countries. I do not understand. I have not seen the list.
Senator Poulin: Mr. Day, in recent months, Radio-Canada has been forced to close its only French-language radio station in Windsor. That decision, which is a reflection of the budget cuts, is extremely disturbing when you consider the crucial role Radio-Canada plays in the country. It is the only thread linking Canadians on a daily basis.
So if you, as President of the Treasury Board, were to change the percentage dedicated to culture by increasing it, where would you start? What would be the decision-making process? What would you be able to do?
Mr. Day: As I indicated, there are reasons in the cases where cuts have been made. Radio-Canada has received more than $1 billion. I think that is a lot of money. Private sector revenues were a little low. We have observed this economic problem around the world. There is less entertainment. The point is to determine whether the funding is sufficient or not. That is a question we will continue to consider. We gave the CBC an increase. Some people believe we should give more, others less. It is hard to decide. That is the decision of the government, which must juggle a deficit, a debt. The government wants to maintain a lower sovereign risk than the countries on the list. If you look at our economic situation on the list of the 26 countries, we may be ranked first, second or third based on debt and GDP. So the decision is an important one.
Senator Poulin: What would be the decision-making process for changing a percentage?
Let us take, for example, the program for Defence, the program for Immigration and International; the percentages are $11.2 billion and $26 billion a year.
You say the CBC's $1 billion a year program is a lot. I think Canadian unity is worth much more than that, but I will give you that argument at the appropriate time. For the moment, I would like you to remind us of the decision- making process used to decide on these percentage changes.
Mr. Day: It is a process that is considered together with the citizens and individuals concerned by the increase or cut. Our process around the table is to consider the needs, to understand the pressures, for example.
The process is not perfect, but we assess all the needs and all the pressures. We have to decide, for the year and the level of funding for such and such a department. It is a long process because we want to examine all the concerns. As I said, it is not a perfect process, but is very important and detailed.
Senator Poulin: Could we have your answer in writing? I am trying not to encroach on my colleagues' time.
Mr. Day: I do not understand.
[English]
Senator Poulin: Could you forward your response in writing on the decision-making process?
Mr. Day: Although I gave it to you, we would be happy to print it for you.
The Chair: Have you provided us with a complete answer?
Mr. Day: Yes.
Senator Poulin: You did not talk about the role of cabinet and cabinet committees.
Mr. Day: When I say ``all around the table,'' that means not just cabinet committees but also caucus committees and input from the opposition. Sometimes the latter is limited and sometimes it is helpful. That is what I referred to when I talked about the large table. Everybody has an opportunity to input to that process.
The Chair: Thank you.
Mr. Day: If I may, Mr. Chair, the process begins with input from citizens. We want to hear from people who will be affected. Will it be a service? Will it be an amount of resources? We take it all in. I can tell you something that I have learned in government: Every program, the instant it is announced, is immediately oversubscribed. That is true at the provincial and municipal level too. As soon as you announce a program, it is instantly oversubscribed, and then the decision-making starts.
The Chair: We will have a transcript of everything that has been said. If you determine that something should be added that you have overlooked, then you will able to do that.
Mr. Day: I tried to give a comprehensive view of a very elongated process that takes a great deal of time and energy. A decision just has to be made on individual items.
Senator Murray: I have no brief for the cultural policies of the present government, heaven knows, but it has to be said that a fair comparison between Canada and other countries on cultural policy, broadcasting aside, which is a federal responsibility, would have to include both federal and provincial expenditures. The provinces have primary responsibility, and in at least one case that we know claim exclusive responsibility, in that area.
Minister, one of the problems we have, which Senator Gerstein alluded to, is that the story is told in different ways and different categories from year to year, and sometimes from document to document. When you talked about savings, your economic and fiscal statement in November 2008 projected that we would be saving this year, which is drawing to an end, $2 billion from ``stronger departmental management,'' whatever that is. They then lump what you call strategic review together with the corporate asset review — selling off or disposing of Crown assets — and come up with a number of $2.3 billion for a total expected savings of $4.3 billion for the year now drawing to a close. As well, on the year about to begin, ``stronger departmental management'' will net us $1.5 billion dollars and departmental and corporate asset reviews, will net us $1.1 billion for a total of $2.6 billion. Are those numbers still operative? Are we aiming for those figures? Have we achieved those or are we on the road to achieving them?
Mr. Day: I cannot say that we have it down to the final dime on those, but it is still the target. As the year progresses, some unexpected things might come up. For instance, if we had been looking a year ago at certain expenses related to —
Senator Murray: There are nine days left in the fiscal year.
Mr. Day: I am just saying that if we had been looking at projections a year ago in our International Assistance Envelope, no one could have anticipated Haiti and what was going to happen. Things can happen to change that but it is our goal.
Sometimes we look at suggestions made by departments for savings in specific areas. I made a commitment to Senator Callbeck to get such a list. We might not go ahead with all of the suggestions that come forward but it is part of the process.
Senator Murray: We will do some kind of review of the list when you are finished.
Mr. Day: Absolutely.
Senator Murray: At the end of this fiscal year, we will be able to tell the extent to which you have been able to achieve those savings.
Mr. Day: We will have the target and how we achieved it.
The Chair: For clarification of the record, were you referring to the economic and fiscal update of the fall of 2009?
Senator Murray: I refer to the update of November 27, 2008.
The Chair: That is more than one year ago?
Senator Murray: Yes. We senators think in the long term.
The Chair: I wanted the record to be clear.
Senator Murray: Minister, help me to parse this paragraph in Budget 2010. I want to be sure that I understand the message. It states:
For 2011—12 and 2012—13, operating budgets of departments, as appropriated by Parliament, will be frozen at 2010—11 levels.
A little bit later, it states:
However, the Estimates do not take into account measures announced in Budget 2010 or expected adjustments to fund cost pressures related to essential services, payments that arise from liabilities and other contingencies. An allowance for these adjustments is included in the fiscal framework.
If I were to finish that sentence, would I say, ``. . . and will be reported to you in supplementary estimates.''?
Mr. Day: Yes.
Senator Murray: You will freeze it at 2010-11 levels, as in those estimates, plus expected adjustments. Is that right?
Mr. Day: It is the overall envelope of what will be frozen, if you add up operations.
Senator Murray: It is a kind of movable feast, is it not?
Mr. Day: The overall operations level of all departments is about $54 billion. In any government operation, as you know, there also has to be a set-aside amount for contingencies. There is an estimate but you try to make it a fairly healthy cushion if possible. In this year's budget, it is approximately $450 million. I say, ``give or take'' carefully.
In general terms, the spending envelope that will be frozen is about $54 billion on the operational side for all departments.
Senator Murray: Does that include amounts that we will see in the supplementaries?
Mr. Day: Yes.
Senator Murray: Okay.
The budget also states:
Treasury Board will set departmental operating spending levels for 2011-12 and 2012-13 at 2010-11 amounts, adjusted to reflect the expiration of operating budget authorities to deliver the Economic Action Plan.
The first category we were talking about will add to the ceiling. I presume this will subtract from it, will it?
Mr. Day: Yes, if you have expenditure regarded as one-time — it may last for two years as our stimulus package did — but when you have money going to a specific task or function and that ceases to exist, we are saying to departments that money does not continue to flow.
Senator Murray: Will the two categories cancel each other out?
Mr. Day: We will use the larger amount in terms of what we had set aside in relation to the Olympics. Clearly that money will not be needed at the end of this year. There are costs related to winding down. However, because a department on a specific item was able to get a certain amount out of their budget, that will not be extended to them. Moving forward is net of those types of one-time — if we can call them one-time — expenses.
Senator Murray: Finally, a word about lapsing. The officials were here a year ago and I asked about lapsing and the stimulus program or the economic action plan. I think the answer was it does not really lapse. If it did we re-profile it or it goes on; it is not lost.
Mr. Day: Lapsed goes back into general revenue. Even my own ministerial spending, even though we have a certain amount granted to spend, we take the approach that just because we have that money does not mean, as we approach year end, we have to spend it. I get kind of excited when we have money that we can — not to use the phrase ``give back'' because it is not ours in the first place, lapsing is not a bad thing.
Senator Murray: I have been speculating in my own mind, reading the different numbers about how you will get to a balanced budget over a certain number of years, on the extent to which Mr. Flaherty's problem will be solved by a big lapse on the economic action plan or the stimulus program.
Mr. Day: In terms of a lapse, we expect to use up that entire amount.
Senator Murray: Sorry, in the next fiscal year?
Mr. Day: The amount that is set aside, approximately $19 billion for this year's stimulus package, we well expect that that will all be used up. I stand to be corrected, but I think from last year to this year it was all but about $16 million was effectively used because we have put certain requirements on, for instance, projects going ahead. They have to be developed and done by a certain period of time. You can largely count on the fact that the $19-plus-change billion dollars — again my remark about programs oversubscribed — those dollars will be expended. I guarantee that municipalities and provinces are aggressive in making sure their requests come in. There may be some not expended because a project could not be done on time or did not meet a certain requirement.
Senator Murray: The statistics on some of those infrastructure programs in recent years indicated that there was a lot of lapsing. I do not have them in front of me.
Mr. Day: I can assure you that the uptake was aggressive and significant. We expect that, for the remainder of this year, if any is not expended it will be a minimal amount. Also, it is not all hard infrastructure. There are a number of programs that go under the economic stimulus program that are not hard infrastructure.
Senator Murray: I will have to look elsewhere for an explanation for Mr. Flaherty's optimism.
Senator Runciman: I will respect the minister's schedule and simply say how pleased I am with his commitment, the government's commitment, with respect to not achieving a balanced budget on the backs of the provinces. Both he and I went through this when the previous government made a decision to cut transfers dramatically to the provinces, and the challenges that provinces across this country had to face as a result.
I compliment you and certainly I have thoughts, ideas and suggestions, but I will forward them to you at a later date.
Mr. Day: I appreciate that Senator Runciman. The questions around the budget and budgetary process are often difficult and challenging, as well as supplementary and Main Estimates. I look forward to the input.
I will get back to the committee on the specific items. A senator had mentioned looking to Mr. Flaherty for the optimism. Of course we are optimistic, but we are basing our numbers on realistic forecasts.
I want to assure you that the operational amount that is being frozen is $54 billion. That is the overall envelope. The supplementary estimates are not included in the $54 billion. They come to you as supplementary estimates.
We think the goals are imminently achievable. When we look at the forecasts of revenue, I want to assure you that we go to a number of sources, the so-called experts in the field, and you get a broad range. You get a range of assumptions on what they think oil or gas prices will be and where the Canadian dollar will be. We take a middle-of- the-road approach. We do not go to the extreme of the most optimistic or pessimistic. We take a conservative approach. That is why we are optimistic, because we believe we are being realistic.
Thank you for your input. I will forward these other numbers and answers that came forward. Thank you for a good session today and the instruction you have given me.
The Chair: Minister, thank you. On behalf of the Senate Standing Committee on National Finance we thank you very much for making yourself available and giving us this overview. I personally thank you for keeping the family name in such high regard. We look forward to seeing you again.
(The committee continued in camera.)