Proceedings of the Standing Senate Committee on
National Finance
Issue No. 9 - Evidence - May 18, 2016
OTTAWA, Wednesday, May 18, 2016
The Standing Senate Committee on National Finance met this day at 2:09 p.m. to examine the subject matter of all of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016, and other measures.
Senator Larry Smith (Chair) in the chair.
[English]
The Chair: Good afternoon and welcome to the Standing Senate Committee on National Finance, colleagues and members of the viewing public. My name is Larry Smith, senator from Quebec. Let me introduce the other members.
To my right from British Columbia is Senator Richard Neufeld; to his right, the former Auditor General of Newfoundland, Senator Beth Marshall; and to her right is Senator Nicole Eaton from Toronto, Ontario.
This afternoon we continue our consideration of the subject matter of Bill C-15, the proposed budget implementation act 2016, No. 1, also known as the BIA.
[Translation]
We were at Part 4, which includes a number of measures. The Senate has referred certain sections of Part 4 to other committees for further study, which still leaves us with more than half.
[English]
To talk about Division 1, Part 4, of Bill C-15, from the Department of Finance Canada we welcome Brad Recker, Senior Chief, Expenditure Analysis and Forecasting, Economic and Fiscal Policy Branch.
My youngest son's name is Brad. We chose his name because it's a great name, but you have a fantastic title; I've been searching for titles like that all my life.
Would you like to start?
Brad Recker, Senior Chief, Expenditure Analysis and Forecasting, Economic and Fiscal Policy Branch, Department of Finance Canada: Part 4, Division 1, of the BIA repeals the Federal Balanced Budget Act, deeming it to never have come into force. That act was enacted last year in BIA 1 from Budget 2015 under the previous government.
The Chair: Was any analysis done of the act or was this just a straight order?
Mr. Recker: This was part of the Liberal Party's platform, I believe; but there wasn't a lot of analysis.
The Chair: Basically, if I understand correctly, you were given the mandate just to put this forward and here it is. Is that correct?
Mr. Recker: Yes, in part because there are short-term deficits projected in the current budget, and this act is inconsistent with that.
The Chair: It becomes redundant based on the stance that the new government has taken. Are there any questions from colleagues on that statement?
Well, Brad, thank you. Is that it for you?
Mr. Recker: I guess so.
The Chair: That was quick, thank you for your time. In terms of looking at Division 7 of Part 4, we welcome more officials from the Department of Finance Canada: Tom McGirr, Chief, Equalization and TFF Policy, Federal- Provincial Relations Division, Federal-Provincial Relations and Social Policy Branch; and Scott Pesme, Economist, Federal-Provincial Relations Division, Federal-Provincial and Social Policy Branch.
Gentlemen, would you like to start? We're looking at Division 7, if I understand correctly, Federal-Provincial Fiscal Arrangements Act.
Tom McGirr, Chief, Equalization and TFF Policy, Federal-Provincial Relations Division, Federal-Provincial Relations and Social Policy Branch, Department of Finance Canada: As said, I'm here to discuss Division 7 of Part 4, which makes changes to the Territorial Formula Financing program.
In response to territorial concerns, the Minister of Finance announced on February 16 that the government would be introducing legislative amendments to improve the stability and predictability of federal-territorial formula financing payments and to address the impact of a recent data revision on territorial financial planning. This commitment was reiterated in Budget 2016, and the proposed legislative amendments are included in Division 7, Part 4, of the budget implementation act.
Three clauses contain amendments to the Federal-Provincial Fiscal Arrangements Act, which I will briefly describe.
Clause 180(1) establishes, for each territory, a gross expenditure amount for 2015-16 equal to the amount calculated in December 2014 for the Territorial Formula Financing payments made in fiscal 2015-16.
Clause 180(2) allows the Minister of Finance to calculate a new gross expenditure base for 2016-17 based on the amended 2015-16 amounts, taking into account the population adjusted gross expenditure escalator calculated last December for 2016-17 using the most recent data at the time.
By replacing the previous section, this clause will also ensure that future gross expenditure amounts will simply be based on the previous year rather than requiring the calculation of the population-adjusted gross expenditure escalator over multiple years. This will result in greater predictability and stability for territorial fiscal planning purposes.
Clause 181 allows the Minister of Finance to re-determine what the 2016-17 Territorial Formula Financing payment would have been for each territory on the basis of the recalculated gross expenditure base and to make a payment to each territory equal to the difference to the Territorial Formula Financing entitlement calculated last December.
I would be pleased to answer any questions you may have.
The Chair: Any comments from colleagues?
Senator Eaton: They're not changing the territorial governance, per se. They can incur debt and levy taxes as they see fit, pretty much. Will they get federal-provincial transfers in the way that provinces do, based on their population?
Mr. McGirr: Each of the territories has the same ability as the provinces in terms of raising non-resource revenues as they see fit. Territorial Formula Financing payments are made to territories in recognition of their unique circumstances and in recognition of the fact that they're dealing with small populations over disparate areas. It represents a significant share of their budgets. The territories also receive Canada Health Transfer and Canada Social Transfer amounts calculated on the same basis as it is for the provinces.
The amendments here propose to change the legislation governing the calculation of Territorial Formula Financing payments. Nothing will happen in terms of governance arrangements or anything like that.
Senator Eaton: Is there a difference between a province and a territory financially and what they can and cannot do?
Mr. McGirr: There are some differences in terms of natural resources. The federal government has retained, up to a certain point in time, control of natural resources. That is changing through devolution agreements. There is a devolution agreement with Yukon and another one came into effect in 2014 with respect to the Northwest Territories.
No devolution agreement exists currently for Nunavut, but through these devolution agreements it's decided how management of the natural resources is to be handled by the territories. It also sets out implications of how much revenue is being kept. There is also a tie-in with respect to the Territorial Formula Financing calculations.
Senator Neufeld: Does this mean that financing to the territories will decline by $25 million or they're not going to be cut? I want to get that clear. It was set to decline, but there is a change now. Does that mean the change is such that they do not have a reduction?
Mr. McGirr: The way to answer that question is to say that a data revision affected Statistics Canada data on public sector expenditures. That expenditure information gets built into what I refer to as the "population gross expenditure escalator.'' It's simply the growth in provincial and local spending in Canada.
Statistics Canada is in the process of moving from what used to be called the FMS to the GFS. It's part of their revamping of their overall system of statistics and aligning it with international standards, et cetera.
A set of data existed at the end of last summer or early fall. The territories were building their own expectations of what their Territorial Formula Financing payments would be for the upcoming fiscal year. At the time of our calculations, Statistics Canada had just released new information on public sector spending that superseded the values that had been available in early fall. That led to Territorial Formula Financing payments being less than the territorial expectations. The territories talked about an $88 million difference.
These amendments recognize that one of the problems or situations we had in the Territorial Formula Financing calculation was that each and every year that we calculate the payments, we would have to go back to 2013-14 and recalculate the series of growth rates for provincial and local spending. So when Statistics Canada released its new information it met revisions to those growth rates all the way back to 2013-14.
What we're doing now is simply saying that we should only have that growth rate, the new data, affecting the change from 2015-16 to 2016-17. Because of this, we're going to be providing the territories with $67 million more in payments than was calculated last December.
Senator Neufeld: So they'll be receiving more.
Mr. McGirr: Yes.
Senator Neufeld: I had some people from the territories asking me that.
The Chair: What type of feedback have you received with these changes?
Mr. McGirr: Essentially, the feedback we've been getting has been positive. I think the Premier of Yukon seemed to be a little upset the day of the announcement, but since that time we have not heard any sort of grumblings or complaints. I'm taking that to mean that the territories have been positive to the change.
The Chair: Thank you.
Next up, we have Division 8 of Part 4, Financial Administration Act, and we have Elisha Ram, Director, Funds Management Division, Financial Sector Policy Branch; and Anne David, Advisor/Economist, Funds Management Division, Financial Sector Policy Branch.
Elisha Ram, Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance Canada: Good afternoon, senators.
The Chair: Good afternoon.
We also have Senator André Pratte, one of our new senators, well known from La Presse from Montreal. He is a journalist of experience.
Go ahead, please.
Mr. Ram: We're here today to speak to you about proposed amendments to the Financial Administration Act, specifically to Part IV of the act, which authorizes the Minister of Finance, with the approval of the Governor-in- Council, to borrow on financial markets, including by issuing securities and undertaking related activities.
Until 2007, the Minister of Finance was required to receive parliamentary authority for borrowing funds in the market. The Financial Administration Act was amended in 2007 to remove the need for the minister to seek parliamentary approval before increasing market borrowings. This division of the budget implementation act proposes to amend the Financial Administration Act to restore the requirement for the Minister of Finance to seek parliamentary approval of government borrowing activities including the borrowing of agent Crown corporations.
I will now provide a brief overview of the specific clauses included in this act.
Clause 182 repeals section 43.1 of the current Financial Administration Act. This is a section that provided authority for the Governor-in-Council to approve all borrowings.
Clause 183 amends the Financial Administration Act by adding a section after section 46 to specify that the Governor-in-Council may authorize the Minister of Finance to borrow money to repay any existing borrowing, to extinguish or reduce any liability of Canada or if the borrowing of money is deemed necessary in extraordinary circumstances, including a natural disaster or to promote or maintain the efficiency of the financial system in Canada.
Clause 184 amends section 49 of the Financial Administration Act in order to delete references to section 43.1, which is being repealed, and to specify that the minister's report on money borrowed in the management of the public debt must include, "the money borrowed under an order made under paragraph 46.1(c). . . .'' which is the extraordinary borrowing authority.
Clause 185 amends the Financial Administration Act by adding a section following section 49 to specify that the minister must table in each house of Parliament a report on the money borrowed or to be borrowed under extraordinary circumstances within the first 30 days on which that house is sitting after the day that authorization was given.
Finally, clause 186 amends the Financial Administration Act by adding a section following section 101 to specify that as part of its responsibilities and duties under subsection 127 of the act, the minister must ensure that the total of all amounts borrowed by an agent Crown corporation is not in excess of any legislative limit.
I would be pleased to take your questions.
The Chair: For our senators, that is in the bill book 152, 153, 154, so we have the exact same clauses.
Senator Marshall: I expect that this amendment that's put forward here is in response to what was in the commitment in the budget book about the government proposing legislative amendments to require parliamentary approval of government borrowing.
Mr. Ram: That is the case.
Senator Marshall: If you compare what's being put forward now with trying to reinstate what the bill said before 2007, the section in there now, the 46.1(c), the payment of any amount in extraordinary circumstances. That has to be tabled separately, does it?
Mr. Ram: In extraordinary circumstances, the minister would be able to approach the Governor-in-Council and ask for extraordinary authority that would not go through Parliament.
Senator Marshall: If that section wasn't in there and there was a natural disaster, what would be the alternative? Would Parliament have to be recalled or would there be an emergency recall if Parliament wasn't sitting?
Mr. Ram: If Parliament were not sitting in that circumstance then, yes, presumably it would have to be recalled.
Senator Marshall: For the general reporting of debt under section 49(1), we're talking about 45 days to present a report but 30 days for this part under extraordinary circumstances. Why the distinction?
Mr. Ram: I think that in a situation where you have a minister taking advantage of the extraordinary power, it's presumably because a very problematic event has taken place. So it's appropriate that the minister would, in an expeditious way, inform Parliament that this authority has been undertaken.
Senator Marshall: For the two reports, where one report is the strategy that's outlined in the budget book and then the report tabled after the actual borrowing, would the content of the reports be the same? I'm not thinking of the strategy so much, but the one that comes after the report on the actual borrowings is quite detailed and there is a lot of useful information in there. Is it your intention that the content would be as good as that, if not enhanced?
Mr. Ram: Absolutely. The intent is to maintain the reporting at the same level as it is now. In addition, the proposal in this act suggests that if the minister were to take advantage of the extraordinary authority power they would have to report separately on those borrowings as part of the reporting at the end of the year.
Senator Marshall: I don't know if you are aware that there is presently a bill before the Senate that does the same thing except for that section about the extraordinary circumstances. You're aware of that bill?
Mr. Ram: You're referring to Bill S-204.
Senator Marshall: Yes.
Mr. Ram: I agree that Bill S-204 is in the same spirit as the proposals in this act. I would note there are three key differences between what's being proposed here and Bill S-204. You referred to one, which is the extraordinary borrowing authority.
The second is that under this bill the minister would have to include the borrowing of agent Crown corporations in what he is seeking parliamentary authority to do, which is not the case under Bill S-204. Finally, there is a small difference in terms of reporting, in the sense that the reporting requirement in this act is slightly broader than what's required under Bill S-204.
Senator Eaton: Just to continue on from my colleague's question, can you give us the parameters of extraordinary circumstances — or the definition?
Mr. Ram: The issue with defining "extraordinary'' is that you don't know what you don't know. What we're looking for here is clearly something that is unique. This is not intended to be a day-to-day thing where the minister would go around Parliament to borrow funding. However, it's important to preserve sufficient flexibility that if something happened that we didn't anticipate the minister would still have the ability to raise the funds the government requires to operate.
So in the act we've noted a couple of examples that intend to suggest the kind of scope we are talking about, including a natural disaster and/or circumstances that affect the stability of the financial markets.
However, we very deliberately did not provide an exhaustive list because of the need for flexibility.
Senator Eaton: Yes, I guess it could work both ways. You're right, you have to be flexible, but then you could define a natural disaster or an emergency, really, as anything that hasn't happened before.
My difficulty with that is that it wouldn't take much for you to call an emergency session of Parliament if an emergency occurred and get permission to go and get money. This seems like a very open-ended way of saying to the government, "Listen, just come up with an emergency situation — something that hasn't been defined; there are no parameters — it hasn't happened before so we can't define it — to borrow money.''
In other words, it seems in contradiction to the paragraph where you say ". . . to restore the requirement for the Minister of Finance to seek parliamentary approval of government borrowing activities. . . .'' Does it not seem that way to you?
Mr. Ram: It's a question of finding the proper balance. I agree with you that it's important to make sure that the spirit of the legislation is respected. The spirit says the minister should go to Parliament and get authority to borrow money. The inclusion of this provision is intended to deal with truly extraordinary circumstances, and it's not necessarily a given that if you had a natural disaster that the minister wouldn't go to Parliament. It simply provides the ability to do that in the situation where, for whatever reason, that was not feasible.
The example I would give would be the 2008 financial crisis. We had just been through an election, Parliament was not sitting and there was a need for the government to inject significant amounts of funding into the financial system in order to ensure that the difficulties being experienced south of the border did not also transmit into our financial system. Had we not had this ability at the time it would have been very difficult, because Parliament itself was not sitting.
Yes, it's true that government could have potentially called a special session of Parliament to find another way. However, I would note that the average time to get borrowing authority bills through Parliament before 2007 was about five weeks, so that's a fairly lengthy process.
Senator Eaton: Yes, but just a minute. I'm sorry to pick fights here with you, but prior to 2007 the Prime Minister did not have to get permission from Parliament to borrow money.
Mr. Ram: Before 2007 the minister did, but after 2007 he did not.
Senator Eaton: He did not.
Mr. Ram: That's right.
Senator Eaton: So in 2008 the Prime Minister could go and borrow money to stabilize the markets.
I guess my confusion is this: You're putting back the necessity to go to Parliament on one hand, and on the other hand you're saying, "But, in extraordinary circumstances, we can go and borrow money.'' Why not just leave it the way it was in 2007? You don't have to go to Parliament. Everybody accepts that.
Mr. Ram: The government made a commitment in its platform that it wanted to restore transparency and accountability through the borrowing process which is why, in most circumstances, it supports having the minister go to Parliament and seek authority.
The extraordinary authority power is intended to be used in unusual circumstances where, for whatever reason, the minister is of the view — and the Governor-in-Council agrees — that this is not feasible.
Because we wanted to make it clear that this is not intended as a way to circumvent the will of Parliament, we included the additional provisions whereby the minister has to inform Parliament within 30 days that the extraordinary authority had been used, so that's very transparent that it has transpired. The minister would have to report separately on that authority so long as the borrowing is outstanding.
Senator Eaton: Thirty days is hardly transparent. He could say "the next time Parliament sits.'' If you really wanted to be transparent, why 30 days? That's like saying the emergency is now, so we'll report to Parliament at the end of June that we borrowed $6 billion to look after Fort McMurray.
Anyway, I'm sorry, I shouldn't pick a fight with you, but I just find this political rather than economical.
Senator Marshall: That section really does give the minister an out by using the term "extraordinary circumstances.'' Where did the wording come from? Is that original, or is that wording used somewhere else? Is it used for special warrants?
Mr. Ram: The wording came out of discussions internal to the government in terms of really wanting to communicate a unique and urgent situation. I'm not necessarily familiar with other uses of the term.
Senator Marshall: Like I said, it gives the minister an out, because it uses a general term "extraordinary circumstances,'' and then the natural disaster and the stability of the financial system are really only examples.
That's the issue I'm having with that.
The Chair: Just maybe a little résumé on that particular issue: Bill S-204 was presented by Senator Moore for years in the Senate because, historically, before 2007-08 when this new method of getting money because of the financial crisis took place by the former government, you had to call Parliament back. Probably, historically, it would have taken so long for people to get here, back in the early 20th century — until modern transportation — there was an issue of speed. So the government at the time made the change so they could go to the Governor-in-Council and get money and did so to make sure they flushed the banks with money so that there wouldn't be a crisis in our country.
Senator Moore saw that, and there was probably some frustration with how that was implemented at the time. Then it came back saying, "You can't get money unless you go to Parliament, no matter what the situation.'' I guess the new government looked at that and said, "That's good, but we want to have the flexibility, if there is an unforeseen situation, to be able to move and move quickly.''
The issue then becomes the reporting of 30 days, which Senator Eaton brought up. Whether it's 30 days, 45 days or whatever the period is, it's a method that gives the government room to manoeuvre. Effectively, it's the combination of before and after. This is before 2007, and this is after 2007. Now the government can do both, which is quite interesting.
Senator Marshall: Yes, but I guess my point is that the commitment made in the budget book — and made in two places with the exact same wording — is quite focused and is only two and a half lines. Really what we have here is stretching it out a bit.
The Chair: Yes.
Senator Marshall: So that subsection (c) does give the minister an out. That would be the biggest issue I would have with this.
The Chair: Yes, and that was the argument that the former government used in defending the concept of being able to make an extraordinary move because of an extraordinary situation. The only difference this makes is that they are highlighting it in a fashion where it sort of says that it really is an exception, so it's kind of interesting to see.
Any other questions on this particular issue? Thank you.
Moving ahead to Division 9, Old Age Security Act. Ms. Nathalie Martel, please go ahead.
Nathalie Martel, Director, Old Age Security Policy, Income Security and Social Development Branch, Employment and Social Development Canada: Division 9 of Part 4 of the Budget Implementation Act proposes to amend the Old Age Security Act in two ways. First, it increases the Guaranteed Income Supplement top-up by $947 per year for the lowest income single pensioners, and for pensioners whose spouses or common-law partners are not eligible for Old Age Security benefits. This increase also applies to the top-up of the allowance for the survivor.
The change will be effective on July 1, 2016. It is estimated that close to 900,000 low-income seniors will benefit from this measure at a cost of $669 million in 2017-18, the first full year of implementation.
[Translation]
The Chair: I'm sorry; I failed to mention that you are a representative of Employment and Social Development Canada.
Ms. Martel: Second, it is proposed that the age of eligibility for the Old Age Security pension and the Guaranteed Income Supplement be restored to 65, and that the age of eligibility for the allowances be restored to 60.
You will remember that the legislation was amended in 2012 to raise the age of eligibility for the Old Age Security pension and the Guaranteed Income Supplement from 65 to 67, and from 60 to 62 for the allowances. The increase was supposed to be implemented gradually from 2023 to 2029. Cancelling the increase in the age of eligibility will have no impact on the costs of the Old Age Security program before 2023.
[English]
Clause 188 of the budget bill repeals the provisions of the act that were going to increase the age of eligibility. Clause 189 increases the Guaranteed Income Supplement top-up by $78.92 per month, which is $947 per year, starting on July 1, 2016. It also ensures that the increased top-up will be indexed in future payment quarters.
For clause 190, it is the same thing but for the survivor allowance. It increases the top-up of the allowance for the survivor by $78.92 per month, or $947 per year, starting on July 1, 2016. It also ensures that the increased top-up will be indexed in future payment quarters. Clause 191 makes these increases come into force on July 1, 2016.
The Chair: Are there questions? We welcome Senator Tannas and Senator Mockler to the meeting.
Senator Eaton: Ms. Martel, the previous government raised the age to 67 for benefit. I remember sitting in this very room listening to several witnesses say that when the age of 65 was established, Canadians lived to the age of about 66. They retired from work and died the following year.
Today, Canadians are living well into their 80s. Several witnesses suggested we should be waiting until the age of 74 to collect our Old Age Security and Guaranteed Income Supplement. I know it was a campaign promise, but why are you going back to 65? Obviously, it's a huge cost to the government. What are you basing your data on to go back?
Ms. Martel: The main concern of this government was the poverty rate of people aged 65 and 66 who would have to wait for another year or two before being able to collect their Old Age Security benefits.
I have some statistics. We estimated that if we increased the age of eligibility to 67, the number of people aged 65 and 66 living in poverty would increase between 80,000 to 100,000, and a poverty rate that would increase —
Senator Eaton: I'm sorry, are those people who are working or presently unemployed?
Ms. Martel: We only look at income. It can be employment income or other types of income. We are not looking at the employment status. We are looking only at the income available to them, regardless if they're working or not.
We estimated that incidents of poverty among people aged 65 and 66, if we increased the age of eligibility, would increase from roughly 5 per cent to about 16 per cent to 17 per cent, and that was the main concern of this government.
Senator Eaton: Even though other OECD and G7 countries, I'm thinking of Germany and England, are raising their eligibility age to 67, we're going against the trend. We're going backwards because of that.
You didn't think that you should collect information to see who's employed with your data?
Ms. Martel: The Old Age Security program is not linked to employment status. You can be working, earning a salary, and still collect Old Age Security benefits. They are simply based on age and residence; and the Guaranteed Income Supplement is based on income.
Senator Eaton: Can you tell me what income? Educate me about what the income level is before GIS kicks in?
Ms. Martel: The Old Age Security pension is universal. Everybody who has full residence in Canada gets the full pension, which is roughly $570 per month. Everybody who has a minimum of 40 years of residence in Canada after the age of 18 gets the full pension. I say it's universal; and is not based on income. However, there is a recovery through the tax system that claws back the pension for people with an income over $77,000. About 6 per cent of OAS pensioners are subject to the OAS recovery tax.
Senator Eaton: Anybody above an income of $77,000 gets clawed back.
Ms. Martel: Exactly. The pension is completely clawed back at an income of roughly $120,000; and 2 per cent of pensioners are fully clawed back.
Senator Eaton: Would you consider all people below $77,000 under the poverty line?
Ms. Martel: No. They are the highest-income seniors. People who are subject to the OAS recovery tax are the wealthiest seniors of the country. That's the pension, which, we could say, is quasi-universal.
The Guaranteed Income Supplement, which is the supplement given to low-income seniors, is based on income.
Senator Eaton: Yes.
Ms. Martel: Single seniors need to have an income, excluding the OAS pension, below $22,000 to receive the Guaranteed Income Supplement. They get the full supplement, which is roughly $750 per month, if you have no income at all outside the OAS pension. If you have some income, then your Guaranteed Income Supplement is reduced. It's really targeted to the lowest-income seniors.
Senator Eaton: Thank you.
The Chair: So the Guaranteed Income Supplement wouldn't have been given to 65-year-olds if the retirement age were 67? That's what you're saying, correct?
Ms. Martel: That's correct. It's all Old Age Security benefits, including the pension and the Guaranteed Income Supplement.
The Chair: So the mean income in Canada is $32,000, and 50 per cent of Canadians earn more than that and 50 per cent of Canadians earn less. I'm just trying to understand the calculation that would have taken place in terms of the cost.
Ms. Martel: I have statistics that might interest you. If we look at 65- and 66-year-old individuals, because that's the population that would have been affected by the age increase, 20 per cent of them rely on Old Age Security benefits, the OAS pension and the Guaranteed Income Supplement, for more than half of their income. So 20 per cent of this population relies heavily on these benefits.
If we increase the age of eligibility to 65, these people would have to resort to provincial social assistance.
[Translation]
Senator Pratte: You said in your presentation that there would be no impact before 2023, but that's because the initial measure was not supposed to come into effect until 2023.
Ms. Martel: Exactly.
Senator Pratte: What do the actuarial or other studies you conducted show about the more long-term impact of overturning the measure after 2023?
Ms. Martel: The financial impact on the program's costs? For the measure to increase the age of eligibility, the chief actuary estimates that the total cost of the program, in 2029-30 — because the increase was going to be implemented gradually from 2023 to 2029, meaning that the total cost would be reached in the 2029-30 fiscal year, the year in which the cost would be highest — would be about $92 billion, which represents 2.7 per cent of GDP.
With the cancellation of the increase in the age of eligibility, the chief actuary estimates that the costs of the program will be about $104 billion, or a little over 3 per cent of GDP. Therefore, the difference, the cost of cancelling the increase in the age of eligibility, is $11.5 billion, namely, 0.34 per cent of GDP. These are the costs for the Old Age Security program.
In order to find out the overall extent of the net cost to the government, it's important to keep in mind that the Old Age Security pension is taxable. Therefore, additional tax revenues will be collected, because people aged 65 and 66 will be receiving their pension. The finance minister estimates that additional tax revenues in 2029-30 will be approximately $1.6 billion. Thus, the net cost adds up to about $9.9 billion.
Senator Pratte: It's logical to assume that if successive governments of Canada keep the same policy, from 2029-30 until the year 2100 or 2150, the aging population will continue to increase and people will live to be older and older. So, if the age of retirement remains at 65 indefinitely, it will cost more and more.
Ms. Martel: This is true.
[English]
Senator Marshall: My question was similar — it was on the cost. Just to clarify, did you say it was around $11 billion annually? Is that the number you gave?
Ms. Martel: The cost is full in 2029-30, when the age increase was going to be fully implemented. In that year, the cost of reverting back to 65 is estimated to be $11.5 billion for 2029-30, representing 0.34 per cent of GDP.
That said, this is the pure cost on the OAS program, and if we take the additional tax revenues arising from the fact that people will receive their pension earlier, and this pension is taxable, it is estimated that the additional tax revenues will be $1.6 billion for 2029-30. It will be a net cost for the government of about $9.9 billion.
Senator Marshall: Thank you.
The Chair: Colleagues, any other questions for Ms. Martel? Thank you.
Ms. Martel: Thank you.
The Chair: Next for review we have Division 11 of Part 4. Again from the Department of Finance, we welcome Lisa Pezzack, Director, Financial Systems Division, Financial Sector Policy Branch; Lynn Hemmings, Senior Chief, Pensions, Financial Systems Division, Financial Sector Policy Branch; and Kathleen Wrye, Senior Economist, Financial Systems Division.
Please go ahead, Ms. Hemmings.
Lynn Hemmings, Senior Chief, Pensions, Financial Systems Division, Financial Sector Policy Branch, Department of Finance Canada: Thank you very much.
These amendments will improve the ability of federal and provincial governments to work together on the supervision of certain pension plans. In particular, the amendments expand the scope of the government's ability to enter into bilateral agreements with provinces by combining them with the existing broader authorities for multilateral agreements and renaming them as federal-provincial agreements.
These amendments also clarify that the government can enter into an agreement that can permit the pension law of a province to apply with respect to a pension plan that would otherwise be subject to federal pension law.
The two main changes to the Pension Benefits Standards Act are covered in clauses 202, 203 and 204. The amendments to combine the authority for bilateral and multilateral agreements are in clauses 202 and 203. Clause 202 also repeals section 6 on bilateral agreements, and clause 203 amends section 6.1(1), the existing section on multilateral agreements, to add that "The Minister may, with the approval of the Governor in Council, enter into an agreement with one or more designated provinces'' instead of "two or more'' designated provinces.
Clause 204 amends subsection 6.1(2), which sets out the elements of a federal-provincial agreement which may include, for example, an agreement that may exempt a plan from the Pension Benefits Standards Act or from provincial pension legislation. The amendment clarifies that a federal-provincial agreement may permit the pension law of a province to apply with respect to a pension plan.
The remaining changes are consequential. The definition of "multilateral agreement'' is repealed and replaced in clause 202, and it's replaced with a new definition for "federal-provincial agreement.'' Clauses 202, 204, 205 and 206 replace the term "multilateral agreement'' with "federal-provincial agreement'' in all the places where "multilateral agreement'' is mentioned in the act.
Lastly, clause 205 clarifies that a federal-provincial agreement entered under section 6.4, which relates to pension supervisory authorities, also includes an agreement with one or more designated provinces.
I'd be happy to take any questions you may have.
The Chair: Would you be able to give us the rationale behind the changes? You've rattled them off very clearly and succinctly, but could you give us the background as to how this happened, the evolution of the changes and how it fell into place?
Ms. Hemmings: There are pension plans under federal jurisdiction that are restricted to the banking sector, the telecommunications sector, the interprovincial transportation sector, navigation and all employment in the North. The rest is left to the provinces. We only have about 6 per cent of the whole pension sector, private pensions.
These plans have evolved over time to become multi-employer plans: they have provincial and federal employment in them. This is a way to streamline supervision to provide more flexible arrangements so that, where you have a pension plan with provincial and federal employment, it's not being supervised by two regulators it's being supervised by one.
The Chair: Will the regulator be the feds or the provinces?
Ms. Hemmings: It could be either one. It would be up to the parties to agree.
The Chair: You suggest there are X number of pensions supervised by the federal government at this time?
Ms. Hemmings: By the federal pension supervisor, the Office of the Superintendent of Financial Institutions.
The Chair: Could you give us the names of those organizations covered by the federal jurisdiction?
Ms. Hemmings: There are roughly 1,250 pension plans regulated by the federal pension supervisor. There are Crowns, for example. VIA Rail and Canada Post are caught by our statute. Some of the large firms like Bell Canada, TELUS, CN, CP Rail, MTS Allstream and all the banks are caught, but there are many other small plans in those employment sectors that I mentioned earlier.
The Chair: These people would have had, until the rule change, some implication from federal-provincial regulators.
Ms. Hemmings: There is an association of pension supervisors currently working out a multilateral agreement. They have been working on it for a number of years to help streamline the supervision of multilateral plans.
The Chair: Is it just streamlining so that it will be one group overseeing it as opposed to two?
Ms. Hemmings: That is right.
The Chair: Do you have examples of any historical confusion caused by having two groups involved in this process that you can share with us?
Ms. Hemmings: I imagine it complicates the supervision of that plan when you have two people knocking on your door asking to look at the books.
The Chair: Okay. Colleagues, any questions? Thank you very much.
We're moving on to Division 13, Canada Marine Act. From Heritage Canada, Michel Ruest, Director, Celebration and Commemoration Program; and from Transport Canada, Joyce Henry, Director General, Marine Policy.
Michel Ruest, Director, Celebration and Commemoration Program, Heritage Canada: Good afternoon, Division 13 of the BIA provides for the Canada Marine Act to be amended to allow the Minister of Canadian Heritage to make payments to Canada Place Corporation in Vancouver for Canada Day celebrations and for celebrations marking the one hundred fiftieth anniversary of Confederation.
Canada Day public celebrations have been held at Canada Place in Vancouver for 28 years. This is an event that attracts approximately 950,000 participants every year. This is the largest outside the National Capital Region.
The Canada Place Corporation, as a wholly owned subsidiary of the Vancouver Fraser Port Authority, is not eligible to receive funding from a federal department for celebrations, as any contribution would contravene the Canada Marine Act.
This amendment to the Canada Marine Act will increase transparency and reduce third party costs to deliver the Canada 150 celebrations and Canada Day celebrations. The Department of Canadian Heritage has requested this amendment at this time as a result of activities planned for the 150 in the 2017.
There are great opportunities coming.
Senator Eaton: Is this just a one-off for the celebration of the one hundred fiftieth anniversary, or is this a permanent change?
Mr. Ruest: It is for the one hundred fiftieth anniversary of Confederation, a one-off for Canada Day celebrations. Those celebrations happen every year.
[Translation]
Senator Eaton: So, at the end of the year, we revert back to the previous regime.
Mr. Ruest: Not for Canada Day celebrations.
Senator Eaton: No, but at the end of that year, the program reverts back to what it was prior to the bill's passage.
Mr. Ruest: I will try to clarify. What we are doing here is amending the Canada Marine Act, because it's a good opportunity for the 150th anniversary.
Senator Eaton: I understand, but once the celebrations are over. . . .
Mr. Ruest: The act will allow the Minister of Canadian Heritage to continue to deal directly with Canada Place Corporation, just for Canada Day.
Senator Eaton: Afterward, the program returns to the way it was.
Mr. Ruest: Every year.
Senator Eaton: Every year?
Mr. Ruest: Yes.
Senator Eaton: This will happen every year.
Senator Pratte: I have a follow-up question, simply to gain a better understanding. For 28 years, Canada Day celebrations were not funded by the Department of Canadian Heritage, is that so?
Mr. Ruest: They were, but a third-party model had to be used to organize those festivities. This comes with a cost attached to it and additional planning, which is not the greatest deal for taxpayers.
Senator Pratte: Thus, the legislative amendment will allow you to do directly what you were doing indirectly until now.
Mr. Ruest: More or less, yes, but at a lower cost.
Senator Pratte: A lower cost?
Mr. Ruest: Yes.
Senator Pratte: With substantial savings?
Mr. Ruest: In any project involving a third party, a percentage is paid to the third party that could have gone towards meeting the program's objectives.
Senator Pratte: After the celebrations for the 150th, which is a one-off event, the Department of Canadian Heritage will make a financial contribution to Canada Day celebrations, but, unlike what was done in the past, this contribution will be made directly each following year.
Mr. Ruest: Naturally, everything will be done according to the usual processes. You need to submit an application, have a good idea, a good initiative.
Senator Pratte: There are no guarantees, but there are possibilities.
Mr. Ruest: There are no guarantees, but there are possibilities.
[English]
Senator Neufeld: Coming from the West Coast, I can tell you this is a good deal. We should actually say yes and carry on to the next section.
The Chair: So you're happy?
Senator Neufeld: I'm happy.
The Chair: We're very happy that you're happy.
Senator Neufeld: I had to say it because everyone else around the table is east of Ontario.
The Chair: It's nice to see you're the favoured province again.
Senator Marshall: I want to know the cost of the good deal.
Mr. Ruest: There is no cost to this. Canada Place Corporation will be able to apply to our program and be able to deal directly with Canada Place, so there is no cost.
Senator Marshall: You mean there will never be a cost or there is no cost yet?
Mr. Ruest: There is a cost when the program is financing or making a contribution for initiatives, but there is no cost to the change, to the amendment.
Senator Marshall: How much money will be provided?
Mr. Ruest: It depends on the ask. Every year Canada Place celebrations are between $400,000 and $500,000 from my program. There may be other contributors.
Senator Marshall: Our briefing note says they've already submitted an application. Are they looking for approximately the same as what was received in previous years?
Mr. Ruest: For the Canada Day celebration, yes. For the one hundred fiftieth celebrations there are still projects coming, so I am unable to provide a number today.
Senator Marshall: I would expect that 2017 celebrations will be more expensive than the pre-2017, so I would expect that 2018 and on would revert to the previous level?
Mr. Ruest: Pretty much. The difference with 2017, there is a possibility of having projects and initiatives all year long. That is different from what we do at Canada Place, especially for the Canada Day celebrations.
Senator Marshall: You don't know the amount, but the money must be in this year's budget. The fiscal year end is next March, and they would need the money before next March.
Mr. Ruest: I'm not part of the 150 team, but I believe the money for the 2017 celebrations are over a two-year period.
The Chair: I think, senator, we may have another case of "horizontalism,'' that Heritage is looking at that particular ask at this particular time.
Senator Marshall: I think so. Thank you.
Senator Tannas: Could you help me, and you may have mentioned it; why is Canada Place Corporation excluded when you can pay other contractors?
Mr. Ruest: That is a question for my colleague.
Joyce Henry, Director General, Marine Policy, Transport Canada: Under the Canada Marine Act that sets up port authorities, and there are 18 across the country, there are only specific times they can receive funding, for example for infrastructure under the Emergencies Act for environmental reasons. In all other areas they're excluded, and because Canada Place Corporation is a wholly owned subsidiary grandfathered into the Port of Vancouver, they can't currently receive funding under the Heritage program.
[Translation]
Senator Mockler: My question is for to Mr. Ruest. I'd like to follow up on Senator Pratte's question. You say there will be savings. Could you give us an idea of the percentage of these savings?
Mr. Ruest: Not specifically for the projects in place, but in general, 10 per cent to 15 per cent of administrative fees can be paid to a third party who will then take care of coordinating and managing the event, and Canada Place is very well equipped. Its very mandate is to put on public events on its grounds and in its buildings. These people are very well positioned to do this. The costs would therefore be lower.
Senator Mockler: Would you be able to put a dollar figure on it?
Mr. Ruest: It would be difficult right now, because I don't have all of the applications for the 150th. For Canada Place, it would be about 10 per cent to 15 per cent of an envelope of $400,000 to $500 000, so $40,000 to $50,000.
Senator Mockler: When we talk about the 150th anniversary of Confederation, the volume of applications that you currently have would represent how much in terms of dollars? I'm referring to applications that you've already reviewed.
Mr. Ruest: I cannot answer that question, because my team does not look after those applications. That is far above what the budget sets out in allocations for the 150th celebrations. Choices will have to be made. We are looking at hundreds of millions of dollars.
Senator Mockler: What kind of budget are we talking about?
Mr. Ruest: It's a fund of $200 million.
Senator Mockler: I am not doubting the professionalism of Canadian Heritage — I have had excellent dealings with the department in another existence — but I would like to know whether the breakdown of this budget will take into account the makeup of our population, as every federal program does in taking into account federal-provincial agreements.
Mr. Ruest: There is a federal secretariat within Canadian Heritage that looks after government-wide coordination and initiatives, and that makes sure that all initiatives are promoted and spread out across Canada. So, yes.
Senator Mockler: Are you telling me — I don't want to put words in your mouth — that the percentage of the population by region will be used in the selection of projects, or will the selection of projects be based on the best ones?
Mr. Ruest: I cannot tell you that the planning is based on the number of people, but care is certainly taken to ensure an equitable distribution so that Canadians in all parts of Canada have access to a variety of choice initiatives to celebrate their country.
Senator Mockler: That's incredible. That's the answer I wanted to hear.
Mr. Ruest: I am happy that I ended up finding it!
[English]
The Chair: Are there any other questions for our guests? Thank you.
We will now consider Division 14 of Part 4 with the help from the Privy Council Office: Heather Sheehy, Director of Operations, PCO Machinery of Government; and Greg Smith, Vice President, Risk, Administration and CFO; Vice- President, Strategy and Organizational Development from PPP Canada. Welcome.
Heather Sheehy, Director of Operations, PCO Machinery of Government, Privy Council Office: In the budget the government committed to ensuring that government institutions are aligned to best support infrastructure innovation by transferring responsibility for PPP Canada, or P3 Canada, to the Minister of Infrastructure and Communities. Currently P3 Canada is a subsidiary of the Canada Development Investment Corporation, which is a parent Crown in the finance portfolio.
Created in 2008 by an order-in-council and incorporated under the Canada Business Corporations Act, P3 Canada is a small organization of about 60 to 65 people whose mandate relates to two things: one, providing advice on P3 opportunities to the federal government and to others; and two, managing the P3 Canada Fund on behalf of the federal government.
Division 14 of the budget implementation act provides for two things to affect the transfer of P3 Canada from the Minister of Finance to the Minister of Infrastructure and Communities. First, as required under the FAA, it allows the shares of P3 Canada to be transferred to the Minister of Infrastructure. Second, as is currently the case, the legislation preserves the government's oversight of P3 by authorizing the Governor-in-Council to amend key business characteristics such as mandate and business restructuring, the selling and disposal of shares or assets, amalgamation or dissolution of the corporation, as well as its agency's status in the future.
As a parent Crown, there must be an act of Parliament to do this. As a subsidiary this can be done by OIC.
In terms of clause by clause, clause 233 amends the Jobs, Growth and Long-Term Prosperity Act by adding a section that authorizes the Minister of Infrastructure, Communities and Intergovernmental Affairs to acquire the shares of P3. It sets out that the appropriate minister as defined by the FAA holds those shares. It authorizes the appropriate minister to conduct certain transactions related to P3 Canada and authorizes P3 Canada and its wholly owned subsidiaries to sell their assets in certain circumstances with the Governor-in-Council's approval.
Clauses 234 and 235 amend the Jobs, Growth and Long-Term Prosperity Act to provide that P3 Canada is an agent of the Crown in relation to new activities specified by the Governor-in-Council in an order. And clause 236 repeals section 213 of the Jobs, Growth and Long-Term Prosperity Act. Section 213 ensures government oversight of changes to P3 Canada's business activities as a subsidiary of Canada Development Investment Corporation. When P3 Canada becomes a parent Crown under its own right this clause will no longer will required and will be overtaken by clause 233.
Senator Eaton: Are you up to something? Is this the preliminary because they've been talking about an infrastructure bank? Is this a preliminary move to creating PPP, a bank?
Ms. Sheehy: This move literally takes P3 Canada as a subsidiary under the Minister of Finance, under CDEV, and puts it as a parent Crown under the Minister of Infrastructure and Communities. It transfers it with the same ability for the government to make changes that it currently has as a subsidiary and transfers it and allows the government to make the same changes through Governor-in-Council when it becomes a parent Crown. It does nothing more than that. It simply preserves the same ability for the government to make changes as it currently has as a subsidiary, in the same way as it would as a parent Crown. It makes no changes.
Senator Eaton: Why the move then from the Minister of Finance to the Minister of Infrastructure?
Ms. Sheehy: The move will straighten alignment of the Crown corporation's activities and expertise with the activities and expertise of the office of Infrastructure Canada under Minister Sohi, under the Minister of Infrastructure and Communities. Currently it's under the Minister of Finance, so it will allow for alignment of the activities of P3 Canada with the activities that would be conducted under the office of Infrastructure.
Senator Eaton: Will it have it its own capital? Will they set it up as something the minister can just draw on if he goes into negotiations with party X and X to build a 3P infrastructure project?
Greg Smith, Vice President, Risk, Administration and CFO; Vice-President, Strategy and Organizational Development, PPP Canada: Currently we administer the P3 Canada Fund in accordance with terms and conditions provided by Treasury Board. They rest with the corporation and those will continue.
The P3 Canada Fund is a transfer payment program to other levels of government, and we continue to administer that program.
Senator Eaton: I see. Will you be able to reprofile funds when infrastructure projects don't come on line or money transfers aren't quite due? Will you just keep the money in the bank? Is that what it is?
Mr. Smith: To date, the government has advanced the funds to us so we can make financial commitments and execute contractual arrangements with other levels of government in support of their projects.
The nature of a P3 transaction and the transfer of risk to the private sector is those payments usually do not happen until the asset is completed. So we hold that cash in support of our commitment in our executed contracts and we pay that out when the asset is substantially completed and that construction risk is extinguished.
Senator Eaton: If the money is allocated in this year's budget but construction is not completed to, say, 2019, you would get that money from Finance and you would hold it in the bank until the project was complete?
Mr. Smith: That has been the historical pattern.
If this all happens with full supply, I imagine we would be asking the Minister of Infrastructure for those funds, where in the past we've asked the Minister of Finance for those funds.
Senator Marshall: My reaction was the same as Senator Eaton's. I was wondering what you were setting the stage for and why you were doing this at this time. I appreciate the answer that you gave her, but I realize there is going to be a lot of money spent on infrastructure over the next 10 years. It sounds like you're preparing for something by this change.
Where the shares are moving from Finance over to the Minister of Infrastructure, the term in our notes says it's going to "acquire.'' Is there a cost or are the shares just being transferred?
Ms. Sheehy: There is no cost. The shares just get transferred.
Senator Marshall: Is cash being exchanged, for some reason, between the two departments?
Ms. Sheehy: This is the way it is affected through legislation, the transfer from the CDEV over to the Minister of Infrastructure.
Senator Marshall: Our briefing notes also say that the change is going to authorize PPP Canada and its wholly owned subsidiaries to sell their assets in certain circumstances. What assets does PPP Canada have now and what are its subsidiaries?
Mr. Smith: We have no subsidiaries. The asset we hold is the cash we receive in advance in support of the projects. That cash can only be used to invest in the projects that are approved for federal government support. Otherwise, all we have is some working capital cash to exist. Our balance sheet is very simple. We are effectively appropriation dependent to operate.
Senator Tannas: If I heard correctly, PPP Canada today is a subsidiary and it is now going to be a parent Crown.
Ms. Sheehy: That's correct.
Senator Tannas: In my mind, parent Crowns come with expensive boards and a different governance structure than a subsidiary would. I shouldn't have said "expensive,'' because I'm sure boards earn their money. Is that envisioned? Will there be a governance structure similar to Canada Post or the Export Development Corporation, et cetera, at the top of PPP?
Mr. Smith: We have that now. Nothing is to change. The existing board would continue to exist with the corporation. This is just the shareholder changing.
Senator Tannas: One was a subsidiary and one is now a parent Crown corporation as opposed to the other.
Mr. Smith: We were the subsidiary of a parent Crown.
Senator Tannas: So will everyone get a raise in pay now that they're at the top of the heap?
Mr. Smith: I haven't heard that, no.
Ms. Sheehy: The board is transferred over as well. So the board goes from being the board of the subsidiary to being the board of the parent.
Mr. Smith: PPP Canada as an entity does not change. Our board exists, we exist under the Canada Business Corporations Act and continue to exist as a corporate entity. Nothing changes for us.
Senator Tannas: In terms of Senator Marshall's question, the element here that allows you to do what you will with your assets, sell them, et cetera, as you have said you only have cash. This amendment must be setting the stage for something else.
Do you think that P3, in its new capacity, will be directly participating as an owner in projects? Is that kind of why you anticipate or did you ask why this particular change was important?
Ms. Sheehy: Again, this legislation does nothing other than just move it from the Finance portfolio over to the Infrastructure portfolio.
Senator Tannas: You had this before?
Ms. Sheehy: This just allows for the same things that could happen as a subsidiary, in association with the FAA, to happen in the same way.
Senator Tannas: In the subsidiary you had this power already, even though you didn't have those kinds of assets that the clause refers to?
Ms. Sheehy: Under the FAA it says:
No parent Crown corporation shall, unless authorized by an Act of Parliament, sell or otherwise dispose of all or substantially all of the assets of the corporation.
This allows for that to be replicated in this act.
Senator Tannas: I see. Thank you very much.
Senator Pratte: Would you care to elaborate on the new section 211.1:
The Governor in Council may, by order, specify any activity in relation to which PPP Canada Inc. is an agent of Her Majesty in right of Canada.
What does that mean exactly?
Ms. Sheehy: Currently, P3 Canada is a non-agent Crown corporation, except for its role to provide advice to the federal government. For that particular aspect, it is an agent of the Crown.
Again, this section simply allows for the government, if in the future they wanted to change agent status, to do that through order-in-council. That is what that allows for.
Senator Pratte: I'm not sure I get this. I'm sorry.
Ms. Sheehy: I don't know if there is an easier way to say it.
Currently, a Crown corporation can have either agent or non-agent status. Currently, P3 Canada is a non-agent Crown corporation. That was done because of some of the work it was doing in an innovative area. It was made a non- agent for all of its business.
There was a change made in 2012 that allowed that, for the purpose of providing advice to the federal government, it is a non-agent. It's allowed to provide advice to the federal government without competition, essentially. They can work with P3 Canada and get advice. The non-agent status of P3 Canada allows for that.
If in the future, for whatever reason, the government made a decision that there were other lines of business that would benefit from a change in agent status that could be done by order-in-council. No changes are proposed in this legislation.
The Chair: Mr. Smith or Ms. Sheehy, with Infrastructure taking ownership of shares, it has been mandated to oversee the implementation of the $120 billion, 10-year infrastructure plan.
What interaction, if any, will take place between Infrastructure and the PPP group in terms of day-to-day management? If they suddenly have share ownership and they're overseeing that money organized for the strategic plan moving forward, I would assume that Infrastructure is going to have some interaction with PPP in terms of decision making.
Maybe I'm wrong, but I'm just trying to understand what your projected shift or adjustment in management is going to be, if any. I think if you suddenly have someone who is a shareholder over you and your specific focus is for, I would understand, joint types of projects with private investment and/or projects within the government, when you suddenly bring in other players and there's another person or party that has ownership in the organization, usually people with ownership want to have some form of say. Could you give us some feedback on that?
Mr. Smith: Sure. Right now any project that comes in through a round of applications, we work on those projects. Our board reviews those projects and makes a recommendation to the appropriate minister. To date it has been the Minister of Finance; in the future it will be the Minister of Infrastructure. Only the minister, if it exceeds his or her authority, would have to go to Treasury Board, but it does require a minister or Treasury Board approval. That delegated authority rests with the government on all of the projects that we invest in.
The Chair: So you would practically have another party involved, with the Minister of Infrastructure wanting to make sure they understood exactly what the project consisted of. You would do your evaluation and then you would send your evaluation to Infrastructure so they would be able to go through it? And if they had to go to Treasury Board or whatever the process is or the direction —
Mr. Smith: It's all embedded in the terms and conditions, the delegated authority, and nothing changes. All that changes is instead of the Minister of Finance it would be the Minister of Infrastructure.
The Chair: Any other questions?
Senator Mockler: Mr. Smith and Ms. Sheehy, with the changes we're making to PPP and what you're asking us to consider, will this facilitate over and above the process that we have now? If so, give me some examples.
Ms. Sheehy: Facilitate the. . .
Senator Mockler: The process of accepting a project if it's in PPP. The public-private partnership is usually one third, one third and one third. Will the federal government increase its share in a project that is deemed to be necessary, even if the province doesn't have the budget to contribute its percentage?
Mr. Smith: There were a number of things in your statement.
Senator Mockler: Yes.
Mr. Smith: First of all, we have a transfer payment program, similar to the Building Canada Fund that Infrastructure Canada administers now. We have to do that in accordance with the terms and conditions provided by Treasury Board, and it has funding limits for us.
The third, third, third is sort of the general funding of infrastructure programming at large with provinces, municipalities and territories. I can't speak to that. That would be the prerogative of Infrastructure Canada, but we have to abide by our terms and conditions and our funding percentages, and those terms and conditions do not change. They belong with the corporation. Control over the corporation is changing, but how our corporation operates remains the same.
Senator Mockler: What are the terms and conditions right now?
Mr. Smith: Of our programming?
Senator Mockler: For a PPP project.
Mr. Smith: We have eligible categories. We have eligible recipients. We have funding percentages. There are many details that Treasury Board provides to us, and we have to adhere to those.
Senator Mockler: For my benefit and that of the committee, could you give us an example?
Mr. Smith: For example, we can only contribute up to 25 per cent of the capital cost, as one example.
Senator Mockler: The present government has said that in some projects they could go up to 50 per cent. Will this have an impact on PPP?
Mr. Smith: I can't answer that. I think Minister Sohi has said that with respect to the Infrastructure Canada programming under the Building Canada Fund. Nothing has been mentioned of our programming, so I can't speak to that.
Senator Mockler: With the structure you have under Finance, being transferred, what percentage of PPP would be default projects or money that we have lost?
Mr. Smith: Zero.
Senator Mockler: Zero.
Mr. Smith: We haven't had a P3 failure in Canada to date.
Senator Mockler: Thank you. I remember that one of the first P3s, Mr. Chair, was a TransCanada in New Brunswick in the early 1990s and then it followed. It was well-administered. Thank you very much.
The Chair: Mr. Smith, could you give the committee in the last, say, three-year period the number of projects you've been able to initiate and complete? I'm not sure if that is a realistic question but give us, if you could, some slight operational update of where you've been and what you've accomplished, what results you've achieved.
Mr. Smith: Sure. We got going around the winter of 2009. We've received about $1.4 billion in support of project commitments and we've committed over $1.3 billion into 24 projects. We've estimated that those projects will deliver around $2 billion in savings in value for money for taxpayers.
The Chair: So $1.4 billion was given in 2009 —
Mr. Smith: No, since 2009.
The Chair: — of which $1.3 billion has been committed to 24 projects, and you expect to get back some form of a return, which is?
Mr. Smith: There's no return. When you go into procurement and you're bundling design, the build, the financing, the operations and/or the maintenance of the entire life cycle of a project, when you compare the P3 model to how the public sector would otherwise procure for that asset and provide those services, when you do that analytical review using discounted cash flow techniques, that investment analysis shows us that the comparison of the models is driving value for taxpayers over our portfolio to the tune of $2 billion.
The Chair: What would the average size of those 24 projects be?
Mr. Smith: What I can say is there's over $6 billion in capital for those projects.
The Chair: So $6 billion is being put into the 24 projects?
Mr. Smith: Yes.
The Chair: Okay. From an employment perspective, how many jobs will be created through the construction of these projects? When will they be completed?
Mr. Smith: Some of the projects are complete now. Some will be completed out into 2021. I don't have the estimated jobs at my fingertips. Remember, we're giving money to other levels of government. They're their projects. I don't have what those projects are estimated to provide in jobs.
The Chair: I'm just trying to understand. What measurements would you folks have? Do you have performance measurements that you use?
Mr. Smith: Yes.
The Chair: I'm just trying to understand where you've been, what you've done and what you've accomplished, so it's sort of normal to ask the question of what type of measurements you have.
Mr. Smith: Yes. Well, certainly value for money is the big measure. On-time and on-budget delivery would be the next two measures that we look for in delivering the assets that are going to provide services to the public.
The Chair: Is there any way that we could find out what type of employment was created by those jobs?
Mr. Smith: We'll work up those numbers.
The Chair: Could we get that information from you, Mr. Smith?
Mr. Smith: Sure.
The Chair: Our clerk will follow up with you. We would ask that you get it back to us on a timely basis, because one of the other things we're doing besides looking at the budget is a review of infrastructure and what's gone on historically and moving forward to try to make some recommendations. Hopefully the government would receive it in a positive way to help maximize the efficiency of implementing this massive undertaking and ensuring that we get results.
If you were able to get us the number of jobs created, it could be considered a measurement of success, I guess.
Mr. Smith: They would be jobs created or estimated jobs because some of the projects are just starting construction; or they could be still in procurement. They are at various stages.
The Chair: Perfect. All you have to do is tell us whatever your measurement is and give us the numbers with it. It would be very helpful.
Senator Marshall: Would the 24 projects you spoke about be listed on your website if we were interested in looking at them? Are they disclosed?
Mr. Smith: Yes. In fact, for a number of them one thing we require is for the procuring jurisdiction to publish a value-for-money report and make it public and transparent. For projects that have actually gone through their procurement and reached financial close with the private sector, you'll find links to them showing the independent value-for-money reports.
Senator Mockler: Mr. Smith, you have those criteria. The PPP project comes in. You don't put it on the web when you receive it. You do the analysis of it, right?
Mr. Smith: Correct.
Senator Mockler: Then after you do the analysis, I'm sure a priority formula is used. After you receive those PPP projects, you decide which project will be considered or which project will be a priority. Can you tell us the three priorities?
Mr. Smith: We call them the merits, as it's a merit-based program. First, we look at the readiness of the project and how ready it is to get into the procurement process. We also look at the capacity of the organization to deal with these are complicated transactions. We look at the financial structure, the funding of the project and whether it's viable. Those would be the top three.
The Chair: Any other questions for the witnesses? Thank you very much. Ms. Sheehy, you're going to stay with us for Division 15 of Part 4?
Ms. Sheehy: Indeed.
The Chair: Thank you very much, Mr. Smith.
Mr. Smith: You're welcome.
The Chair: We look forward to getting that information from you.
Ms. Sheehy: Division 15 of Part 4 is about Sustainable Development Technology Canada. On November 4, 2015, responsibility for the Canada Foundation for Sustainable Development Technology Act was transferred to Minister Bains, Minister of Innovation, Science and Economic Development from the Minister of Natural Resources. Minister Bains was made responsible for SDTC, which is an independent, not-for-profit organization whose mandate is to fund the development of new technologies, especially with respect to climate change, air, soil and water.
The activities of SDTC are compatible with the Minister of Industry's mandate over the Department of Industry Act for science technology and encouraging sustainable development, as well as its expertise with respect to ongoing relationships and funding agreements with other non-government innovation agents.
However, there continue to be references in legislation to the Minister of Natural Resources, Minister Carr, and to the Minister of the Environment and Climate Change, Minister McKenna. So clause 237 replaces paragraph 9(2)(a) and (b) of the Canada Foundation for Sustainable Development Technology Act to reduce to one from three the number of ministers involved in recommending to the Governor-in-Council appointments to the board of the Canada Foundation for Sustainable Development Technology. Previously, it was the Minister of Natural Resources and the Minister of Environment in consultation with the Minister of Industry. Now it will just be the Minister of Industry.
Clause 238 replaces section 143 of the Budget Implementation Act, 2007, and transfers to the Minister of Innovation, Science and Economic Development the remaining statutory funding authority that had been provided to the Minister of Natural Resources and the Minister of the Environment in 2007 when those ministers were responsible for overseeing funding of SDTC.
The Chair: Any questions from colleagues?
Senator Marshall: Is that a new corporation?
Ms. Sheehy: No, it's not new at all. Currently the legislation refers to three ministers. Minister Bains was given responsibility in November for the Canada Foundation for Sustainable Development Technology Act; and that was done by order-in-council. However, these changes require legislation, and so this bill will align that change with legislation.
Senator Marshall: Our notes say that it's going to fund clean technology. Funding will be provided to the corporation, and the corporation will disperse those funds?
Ms. Sheehy: I'm not an expert on SDTC, on the actual corporation but, as I understand it, SDTC has two funds that it manages: The SDTC Fund and the Biofuels Fund.
Senator Marshall: How much money are we talking about?
Ms. Sheehy: I do not have that information with me. I'm sorry.
Senator Marshall: Can you get it for us?
Ms. Sheehy: I'm sure we can ask the responsible department to get it to you.
Senator Marshall: I want to know how much funding the corporation receives. It will be dispersing funding, and I'm curious as to the magnitude of the funding.
The Chair: Will that funding be in the form of venture capital? Do you know, Ms. Sheehy?
Ms. Sheehy: Again, I'm sorry that I'm not able to speak to the specifics of the funding that SDTC manages.
The Chair: Would you have access to some of the charter or some plan that they have that we could get an executive summary, a one-pager, that would sort of explain what their mandate is? Is it in the form of venture capital or what kind of funding is it?
Senator Marshall: I was thinking of contributions or grants, but you may be correct.
Ms. Sheehy: We can certainly get you that information.
The Chair: Could you?
Ms. Sheehy: Yes.
The Chair: Would that be good for you, Senator Marshall?
Senator Marshall: Yes, that would be great.
The Chair: Any other questions? Ms. Sheehy, thank you very much.
The Chair: Colleagues, it's been a very interesting day.
Does this take us to the end of what we're looking at reviewing? That was a rapid-fire three or four days, wasn't it?
I have a couple of notes. Tomorrow at noon we have our first meeting on Supplementary Estimates (A) with officials from the Treasury Board. That should be for about an hour, so we will not have multiple witnesses. It will give us insight into the As, which we need to get on relatively quickly in terms of understanding. We'll take it from there. Afterwards we'll be able to organize the subsequent weeks in terms of where we go with the budget and with the supplementary estimates. We have Bill C-2, so we have a busy schedule in front of us.
I thank you all for your participation.
(The committee adjourned.)