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THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE

EVIDENCE


OTTAWA, Monday, December 9, 2019

The Standing Senate Committee on National Finance met this day at 3:30 p.m. to study the Supplementary Estimates (A) for the fiscal year ending March 31, 2020.

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: My name is Percy Mockler, senator from New Brunswick and chair of the committee. I wish to welcome all of those who are with us in the room and viewers across the country who may be watching on television or online.

[Translation]

I would also like to remind our viewers that committee hearings are public and available online on the website at sencanada.ca.

[English]

Now, honourable senators, I would like to ask each senator to introduce themselves.

[Translation]

Senator Forest: Éric Forest, senator representing the Gulf division, in Quebec. Welcome.

[English]

Senator Duncan: Welcome. Pat Duncan from Yukon.

[Translation]

Senator Loffreda: Welcome. Tony Loffreda, from Montreal, Quebec.

[English]

Senator M. Deacon: Hello. Marty Deacon, Ontario.

Senator Duffy: Good afternoon. Mike Duffy, Prince Edward Island.

Senator Tannas: Scott Tannas from Alberta.

Senator Boehm: Peter Boehm, Ontario.

Senator Smith: Larry Smith, Quebec.

Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.

Senator Tkachuk: David Tkachuk, Saskatchewan.

Senator Day: Joseph Day, New Brunswick.

[Translation]

The Chair: I’d now like to point out that with us today are committee clerk Ms. Maxime Fortin and our two analysts, Alex Smith and Shaowei Pu. Together, they support the business of the Standing Senate Committee on National Finance.

[English]

Honourable senators and members of the viewing public, the mandate of this committee is to examine matters relating to federal estimates generally, as well as government finance, keeping in mind the acronym TAP: transparency, accountability and predictability.

Today, we continue our consideration of the expenditures set out in Supplementary Estimates (A) for the fiscal year ending March 31, 2020, which were referred to this committee by the Senate of Canada on December 5.

[Translation]

For the first part of the meeting, we welcome officials from two departments. From Global Affairs Canada, we welcome Mr. Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer. Thank you for accepting our invitation.

[English]

He is accompanied by Shirley Carruthers, Director General, Financial Resource Planning and Management Bureau.

We also welcome, from Veterans Affairs Canada, General (Ret’d) Walter Natynczyk, Deputy Minister. He is accompanied by Sara Lantz, Acting Assistant Deputy Minister, Chief Financial Officer and Corporate Services Branch; and Rick Christopher, Acting Assistant Deputy Minister, Service Delivery.

Welcome to all of you. You will make presentations. We will start by recognizing General Natynczyk, to be followed by Mr. Thangaraj.

[Translation]

General Natynczuk, you have the floor.

General (Ret’d) W. J. Natynczyk, Deputy Minister, Veterans Affairs Canada: Thank you, Mr. Chair.

Honourable senators, it is the role of Veterans Affairs Canada, or VAC, to serve all our veterans. The department supports the well-being of veterans and members of the Canadian Armed Forces and the Royal Canadian Mounted Police, and their families. We also promote recognition and remembrance of the achievements and sacrifices of all those who served Canada.

[English]

Currently, the department provides well-being services and benefits to our 189,000 clients.

To meet the needs of today’s veterans, our programming has evolved. We take a holistic approach to maintaining the health and well-being of veterans over their lifetimes. We define “well-being” as having purpose, financial security, safe housing, good physical and mental health, suitable family support, integration into their communities and ensuring veterans are proud of their identity and legacy.

Since 2015, Veterans Affairs Canada has seen a significant increase. We have seen more than 60 per cent in all of our disability applications, and that includes an increase of more than 90 per cent in first applications. Those applying for benefits could be new to the department or already receiving support for other conditions.

To support veterans’ needs, more than 93 per cent of the department’s overall budget goes directly or indirectly to veteran benefits. These expenditures include core programs such as disability benefits, income replacement, rehabilitation benefits, caregiver recognition benefits, support services and more.

[Translation]

Consequently, a key objective of the department’s Vancouver Principles contribution program is to ensure that there are always sufficient funds in the budget to pay for its benefits and services.

[English]

Veterans Affairs has also responded to the increase in applications by simplifying and consolidating benefits, adding and training staff, integrating functions and digitizing the decision-making process. With a continuing backlog, however, we clearly still have a way to go.

To expand on the notion of digitization, the department offers an easy-to-use web portal, developed with input from veterans, to make it easier for veterans to get information on their own files, benefits, services and all other interactions with the department. It’s called My VAC Account, and we’ve recently surpassed over 100,000 users on the system, including veterans, serving members of the Armed Forces and RCMP, and family members.

To meet the increasing demands for processing applications for benefits and front-line staff, over the past four years the department has hired close to 500 additional social workers, nurses, occupational therapists and administrators to provide services directly to veterans and their families.

To enable enduring financial security for the ill and injured, the government implemented the Pension for Life program on April 1 of this year. These programs recognize and compensate veterans for disabilities resulting from a service-related illness or injury.

[Translation]

Veterans receiving the Income Replacement Benefit while on treatment or vocational rehabilitation training may choose to earn some income. Veterans are encouraged to earn up to $20,000, which they can keep as additional income. Veterans releasing from the Canadian Armed Forces with at least six years of service may also pursue education and training through a new benefit or seek civilian employment leveraging Veterans Affairs Canada’s Career Transition Services program.

[English]

Enhanced family programming provides recognition to the caregivers of the most seriously injured, and enables families of medically released veterans to have access to the Military Family Resource Centres on all the Canadian Armed Forces bases.

Suitable housing is also key to the well-being of veterans. Our view is that one homeless veteran is one too many. The Veterans Emergency Fund was created to assist veterans in dire need. The department works with a number of partners to prevent homelessness and to find, inform and assist veterans towards adequate shelter and treatment, and allow them to find their new normal.

In addition to providing these benefits, we have a duty to honour the service and the sacrifices of the men and women who serve in the Canadian Armed Forces. This is where our commemoration program plays an essential part of our mandate to support veteran identity and well-being.

[Translation]

Over the past year, the department commemorated the seventy-fifth anniversary of D-Day and the Battle of the Scheldt, and the delegation from the seventy-fifth anniversary of the Italian campaign just returned home on Friday. All of these activities serve to strengthen the connection from our distinguished veterans to the youth of Canada, reinforcing the tradition of service in our nation. With that context in mind, I will turn to the supplementary estimates.

[English]

First, it’s important to understand that the department’s budget fluctuates each year due to the demand-driven nature of its programs and services. The client forecast is updated each year to ensure that all veterans who come forward receive the benefits to which they are entitled.

However, expenses are only incurred for veterans who in fact qualify and utilize the programs and services to support their illnesses and injuries. Program budgets may only be used for the purpose for which they are intended and not reallocated.

VAC’s overall total planned spending this fiscal year, including these supplementary estimates, is approximately $5.3 billion. These supplementary estimates have increased our current fiscal year budget by $857.6 million.

The increase in the department’s budget through these supplementary estimates is a direct result of the demand-driven nature of VAC’s programs, which is based on veterans’ needs and entitlements. We have experienced a significant demand for Pension for Life programs, which forms the largest portion of our supplementary estimates submission.

[Translation]

The department has put a great deal of effort into informing veterans of the benefits offered through the initiative My VAC Account. This initiative has been a significant driver for the increase in applications, and we now recognize that veterans are more aware of the benefits they are entitled to receive.

[English]

Mr. Chair, members of the Canadian Armed Forces dedicate themselves to the safety and security of Canada. Our department is committed to honouring their sacrifice, commemorating their service and supporting their well-being throughout their life after service.

We’d be pleased to answer any questions that you may wish. Thank you.

Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer, Global Affairs Canada: Thank you for the invitation to be here. It’s always a pleasure to be before you. I will make a couple of brief opening remarks, after which I’ll be pleased to answer your questions.

Over the past year, Global Affairs Canada has advanced Canada’s foreign policy, trade and development interests internationally to support a peaceful and open international order and to secure for Canadians a strong economic future.

[Translation]

To ensure that financial resources are well managed in the delivery of programs, the department has internal controls and effective oversight mechanisms in place to safeguard resources while maintaining flexibility, managing risk and ensuring resources are allocated to the highest priorities.

Canada has a unique role to play in addressing the most daunting global challenges. The increase in funding requested in Supplementary Estimates (A) will ensure that Canada continues to make a real and valuable contribution to a more peaceful and prosperous world.

The department has requested a funding increase of $566.6 million, bringing total proposed authorities to $7.41 billion to date.

[English]

The main items in these supplementary estimates include $296 million to support initiatives that significantly reduce greenhouse gas emissions in line with developing countries’ needs and plans; their adaptation projects, particularly for the poorest and most vulnerable, including women and girls; and mobilizing new private sector capital for climate action in developing countries.

[Translation]

Nearly $175.6 million will be allocated to our crisis pool resources, to help Canada provide emergency food aid, health care, water supply and sanitation services, shelter and protection to some of the most vulnerable peoples in the world.

[English]

From our crisis pool resources over the past year, the department has been able to respond quickly to provide services to the Rohingya refugee crisis in Myanmar and Bangladesh; to help meet the needs of communities in Yemen; and provide urgent humanitarian and development support to those impacted by the crisis in Venezuela and the surrounding region.

The department responds to these complex emergencies through grants and contributions payments to the United Nations agencies, the Red Cross movement and Canadian and international non-governmental organizations.

[Translation]

The department uses a rigorous risk and threat assessment framework to ensure that new funds are distributed to the missions and regions faced with the greatest and most pressing needs.

[English]

Global Affairs Canada is also requesting funding of $56.9 million to support our Feminist International Assistance agenda through the establishment of innovative financing programs.

The International Assistance Innovation Program will give Global Affairs Canada greater flexibility with its development programming by enabling it to engage with and mobilize the resources of the private sector in support of the Sustainable Development Goals. It will allow the Government of Canada to make investments that seek to expand the reach of markets to benefit the poor and most vulnerable, and that have the potential to reduce inequalities and promote women’s economic empowerment.

The Sovereign Loans Program will, on a bilateral basis, provide loans to governments of countries eligible for official development assistance to spur economic development and improve the lives of the poor.

[Translation]

These initiatives will allow Canada to facilitate greater private and public investment in sustainable development by increasing flexibility for new and existing partnerships.

[English]

These programs will also advance Canada’s Feminist International Assistance Policy by applying a gender lens to all investment decision-making and ensure that Canada remains at the leading edge of development financing.

The department is also requesting funding of $21.3 million to support Canada’s participation at Expo 2020 in Dubai. This event offers an important opportunity to showcase Canada to the world, bringing together 192 countries and international organizations.

Expo 2020 will allow Canada to promote itself as a destination of choice for trade, investment, tourism and culture to millions of international business and leisure visitors. It will serve as a platform to demonstrate Canadian innovation and increase exposure to global markets, as well as establish and build on existing business and cultural relationships, which can, in turn, open doors for Canadian companies of all sizes so they can compete and succeed in thriving markets worldwide.

Global Affairs Canada will continue to deliver integrated foreign affairs, trade and development policy and programs to renew and strengthen the rules-based international order and confront challenges facing our world today in a manner that exemplifies Canadian leadership.

Thank you, Mr. Chair. I look forward to your questions.

Senator Marshall: Thank you. My first question is for Veterans Affairs Canada. In your opening remarks, you talked about the increase in applications. How many of those are successful? When I look at the increase in funding for the grants and contributions, it’s quite a significant increase. How many more veterans would there be on the rolls? Is the increase directly attributable to an increase in the number of veterans? Weren’t the programs changed last year? Is some of the increase attributable to changes in programs?

Gen. Natynczyk: Some of the applications are from folks who have already had a previous claim with the department and some are new claims coming in through the front door. That’s why I mentioned we had a 90 per cent increase in first applications and an overall 60 per cent increase in all applications.

I’ll ask my colleague Rick Christopher to go into detail.

Rick Christopher, Acting Assistant Deputy Minister, Service Delivery, Veterans Affairs Canada: To be clear, the increase in first applications is somebody coming to the department for the first time for that particular condition. It doesn’t necessarily mean they’re not known to the department. It means it’s the first time they’re coming to the department for this particular disability, .

The other thing I should point out is that the disability program, or the Pain and Suffering Compensation program, is the gateway to other programs. It’s the main gateway to treatment. Once somebody receives a positive decision for a particular condition, they’re eligible to receive treatment for that particular condition. Not only is it the pain and suffering compensation that’s the cost, but also the associated treatment for that condition.

Senator Marshall: If we’re looking at that $676 million, are you able to tell us how many additional veterans are receiving assistance? It’s possible those veterans are already in the system and they’re accessing additional programs or funding.

I’m just trying to get a handle on this. I know you’ve said the applications have increased.

Gen. Natynczyk: More veterans are coming forward, and we actually know how many new applicants there have been in the current year. Veterans are asking for more services. But there is a new dimension. This Pension for Life, which we started on April 1, allows the veteran the option between a monthly payment for the rest of his or her life, or the lump sum.

When the costers and the people from Finance did their estimates, they believed that, based on the financial information — the financial benefit — most would choose the monthly benefit; below 50 per cent would go for the lump sum.

We only have six months’ of experience right now, and this last month we’re showing that 56 per cent are actually choosing the lump sum. So, again, a lot more money is required up front as opposed to being profiled over the rest of their life. This is a bit of learning with this new dimension. The costers believe that folks would make the most rational financial decisions, but people want to pay mortgages; they want to pay off whatever, and so they are asking for more lump sums.

Senator Marshall: In terms of the request for additional funding, for the Toth class action settlement agreement, there is $100 million. Was funding asked in a previous year or will there be additional funding requested in a future year? Or is this one shot and that’s it?

Gen. Natynczyk: I’ll ask my colleague, Sara, to answer that.

Sara Lantz, Acting Assistant Deputy Minister, Chief Financial Officer and Corporate Services Branch, Veterans Affairs Canada: It’s my understanding that this is the one year for the $100 million settlement.

Senator Marshall: How many veterans would have been impacted by that?

Mr. Christopher: I don’t have a number. We can provide that. It’s a fairly large number of veterans. This was the class action that was related to pension income being offset against other benefits, so there would be a fairly large class there.

Senator Marshall: Could you get us that number and provide it to the clerk?

Mr. Christopher: Absolutely.

Senator Marshall: The funding to correct the indexation of the disability pension, is that the issue that was in the news last year about veterans who were incorrectly paid and the minister said these individuals would have to wait until, I think, 2020 for the funding? Has everybody been paid? That’s it, $65 million? Or is there more to come?

Gen. Natynczyk: The total amount to correct the indexing error is $165 million. So the $65 million is in-year, and payments have already started to roll out in this regard. To remind folks, in about 2001 the tax act changed, and the pension indexation is based upon the better of either the Consumer Price Index or a calculation involving workers’ income in the country. The tax act changed in 2001, and that change was not applied for the pension indexation between 2003 and 2010. Sara, do you want to add anything there?

Senator Marshall: When will the other $100 million be paid out? I think there was an issue about the veterans having to wait. Some have been paid, but some are still waiting.

Ms. Lantz: This year we are tackling the living, and that is about 88,000 of the 270,000 clients impacted; and 60,000 to date have been paid automatically through the system. The other 28,000 will probably need some manual intervention because of the complexity of their calculations. We’re reserving $100 million next year for the estates, so estates will have to come forward to apply.

Senator Marshall: When do you think they’ll all be paid out?

Ms. Lantz: At this point we’re predicting March 31, 2021, but most of the living should be paid this year.

Senator Marshall: So it’s a little over a year. Can you talk about the backlog? That’s been a recurring issue. Are you making any progress with it? I notice you said more staff have been hired, but what’s the progress on the backlog?

Gen. Natynczyk: We are pulling out the stops to deal with the backlog. I’ll ask Rick Christopher to talk to it in a moment, but basically we’re changing the way we’re making decisions, trying to streamline it by integrating functions; our digital reach into the Canadian Armed Forces for medical records; working with Library and Archives to expedite access to medical and service files that are in their records; trying to decentralize and create additional capability in Montreal. I’ll turn it over to Rick to fill in the blanks.

Senator Marshall: I’d be interested to know the average wait time for an applicant before a decision is made.

Mr. Christopher: The average wait time currently stands at 39 weeks.

Senator Marshall: Thirty-nine weeks? That’s high.

Mr. Christopher: As the deputy said, we’re pulling out all the stops, attacking this from a number of fronts. We brought on a lot of additional staff to deal with these files and we got a lot of additional applications.

My VAC Account, which the deputy mentioned in his opening remarks, is a way we can ensure that the applications that come in are complete. One of the challenges we have is we are happy to accept applications that don’t have all the information we need to make the decision, so then we have to go back to the applicant and touch base again with several calls to make sure we get what we need.

The other thing is around integrating the teams and reducing the number of hand-offs. A lot of expertise is required to adjudicate some of these applications. We found that time is being wasted in hand-offs. We’re getting people together and making sure we have the right amount of expertise on the team to make the decision then and there.

We’ve seen that if we have a completed application that goes to one of these teams, the average wait time is about 15 weeks, so it’s a significant gain. We’re moving that model out across the country. We have five teams in place now and we’re reorganizing the rest of the decision makers into that type of structure.

There is also a lot we can do, and are doing, around the type of decision-making and the type of evidence we require, so streamlining that whole process.

Senator Boehm: Thank you. Since General Natynczyk has heard enough from me over the years, I’ll focus my questions on Global Affairs exclusively, and specifically the top three items in terms of the number of requirements.

I attended the Pacific Islands Forum in Tuvalu in the South Pacific in August. This was a meeting of leaders of 18 governments, and Canada is a member of the partner dialogue there. A lot of appreciation was expressed for our commitments to the Global Environment Facility, to the Green Fund and the like. I’m assuming that the $296 million is in fact another instalment in the $2.65 billion that was announced in 2015 out of the Paris Agreement.

I’d be interested — and maybe the question is more in this area — in the burn rate, how much of this is actually being used and whether we see the results being taken up in both adaptation and mitigation measures on climate change. That’s one. I know it’s a hefty commitment.

Secondly, on the Crisis Pool Quick Release Mechanism, I think the past year, as you indicated in your remarks, was difficult because of the Rohingya pressure as well; the displaced people out of Venezuela, too; and, of course, the unpredictability of natural disasters when the appeal comes from the UN and the other agencies.

I’d like to know whether more is coming in terms of match funding. I know this has been tried in the past to set up a goal and have Canadians match that, because all across the country there are people who are very generous, from church basements to unions to everyone.

My last point is on the increased amount for the Feminist International Assistance Policy and programming there, and whether more is going, as was the original intention, to the bilateral and grassroots areas; and, as we look at sovereign loans and the multiplier effect that development finance institutions can bring, including our own, whether that in fact is coming into practice.

Mr. Thangaraj: Thank you, senator, for those questions. For the first one on climate financing, this requested increase is indeed part of our commitment against the $2.65 billion that was announced in Paris. That commitment ends next year and we are well on the way to disbursing almost all of that. I think there is a small amount left next fiscal year for that disbursement.

Making the investment or working with our partners in development banks is the first element of this. We want to make sure that funding is actually deployed. We are seeing initiatives being deployed, for example, to the fast-start program for climate change for Asia; that is the second tranche of funding we did with the Asian Development Bank. They have funded, for example, a floating solar panel project in Vietnam. We are seeing climate adaptation projects in Indonesia and other countries, so we are starting to see those things deployed.

What we are also seeing with this specific tranche of funding is, as you said, the Small Island Developing States for agriculture and sustainable forestry, so the $2.65 is covering the elements of that initial commitment, and we are starting to see results come in.

The investment horizon tends to be about seven years. We are in year two or three of those investments, and we are starting to see those come in.

With the Crisis Pool Quick Release Mechanism, as you said, there has been a steady uptake or demand for humanitarian resources. If I recall my figures correctly, last year we spent $897 million of our overall budget on humanitarian, and we’re on track to do the same this year.

A component of that is, again, working through UN organizations. There are often appeals for some of the protracted crises like we have in the Middle East and Yemen. Venezuela is one that is emerging.

With respect to the matching fund, the decision to use that instrument where we, as a government, will match funds depends on the nature of the event or the crisis. For example, the one in the Philippines for Typhoon Haiyan was the last one I believe we did use, and it was successful. The decision to use that mechanism is dependent on the circumstance, usually for natural disasters.

With respect to the move to more grassroots or non-governmental organizations, the percentage of our aid disbursement through those partners is holding steady around 20 to 21 per cent, depending on the year.

We have made targeted investments, for example, for small- and medium-sized organizations, or the $100 million initiative specifically for small- and medium-sized Canadian organizations working in international development. As well, there was an initiative of $150 million for women’s voice and leadership to support grassroots women’s organizations in developing countries.

On top of that, we are looking at our programming reflexes, so that the decision is not just the usual suspects, but also whether we can use local non-governmental organizations in-country, again, given the local knowledge of that. We do track and monitor the percentage that we disbursed through various channels, including non-governmental organizations. Part of the increase announced in Budget 2018 was to increase that percentage.

Senator Tkachuk: I have two questions. One is on an existing program, and one is on what I think is a new program, but I’m not sure. It’s just a follow-up on what I asked the Treasury Board people on the $2.6 billion.

This is for Global Affairs in developing countries tackling climate change over five years. What have the results been of that initiative? Can you give me an example of what initiatives are undertaken and how effective they have been in addressing climate change?

Mr. Thangaraj: Thank you very much, senator, for the question. I’ll refer you to a couple of specific examples. The results for the $2.65 billion commitment are reported on Environment and Climate Change Canada’s website and published annually. As part of every investment that we make, we have a results framework that goes into the agreement, and we require our partners to report on that.

For example, if we look at just phase one of our climate financing and the tracking that we have done, we have abated about 138,000 tonnes of carbon dioxide through our efforts.

Senator Tkachuk: Give me an example. I’m sure when you send a cheque it doesn’t abate the emissions. You must give it for something.

Mr. Thangaraj: Absolutely. There is the example I used previously with Senator Boehm of a floating solar panel farm in Vietnam. We are doing, for example, a project in Sri Lanka. It is rooftop solar panels to enable a supply chain within the agricultural supply chain, as well as supermarkets, to reduce greenhouse gases.

We do a lot of work with the agricultural sector in Indonesia. There is a hazelnut plant that uses climate adaptation techniques to minimize the use of water. I have a couple others, but I can provide you more specific examples with the equivalent greenhouse gas reductions for those.

Senator Tkachuk: These programs seem so nebulous. Where do they come from? How do you find out about a grocery store in Indonesia, or whatever? Does someone make an application? Do you get a sound alert? Gee whiz, you’re giving off too many GHG emissions, so let’s jump in like Superman and solve their problem with a solar panel, or what?

Mr. Thangaraj: We work through multilateral development banks. We provide them a concessional financing facility for projects that would be in Indonesia or Vietnam or any of those countries where a private sector organization can come forward and secure funding for these initiatives. When the multilateral development bank screens those initiatives, they look at whether this project will actually spur climate change results that are measurable. They’re loan programs or incentive-based financing programs. Will the partner that they are working with be able to repay the loan or the financing that they receive?

Senator Tkachuk: I’m not happy with what was asked and answered, but I’m going to try another one. I’m asking about the $175.6 million in the Department of Foreign Affairs, and I already got an answer to that about why it’s called that rather than Global Affairs Canada. I don’t know why it’s identified to address political upheaval. It’s $175.6 million in the estimates. I’m not sure if that’s to instigate it or placate it. What does that do? What is that about? What do you mean by “political upheaval”?

Mr. Thangaraj: Many humanitarian crises are triggered by natural disasters; for example, a typhoon or an earthquake where a humanitarian response would be warranted.

There are others that are triggered by political instability. For example, in Venezuela, there is a significant refugee crisis in the surrounding region for which humanitarian assistance is required, but the trigger of that was political instability. These funds are to respond to events in a quick manner, and one of the triggers is political instability.

Senator Tkachuk: Is any of that targeted towards Hong Kong?

Mr. Thangaraj: No. These funds are for official development assistance eligible countries, so it would not be for that crisis.

Senator Tkachuk: Thank you.

[Translation]

Senator Forest: Thank you for the information. I have a question about Global Affairs and the envelope for the crisis pool quick-release mechanism. First, how were budgets and votes evaluated? Was it based on previous years? Also, this amount is distributed almost at random. What criteria do you use to determine where and the extent to which you intervene?

[English]

Mr. Thangaraj: The funds that are requested in these supplementary estimates are allocated to Global Affairs to enable it to respond. In our overall budget, we spend, on average, $800 million to $900 million per year for humanitarian assistance and, again, on some of those crises that I spoke of earlier.

What this amount allows us to do is, in the event our resources are insufficient to respond, to have access to these funds; we have requested an additional $176 million to respond to those. The decision on allocation is based on humanitarian principles: where the need is greatest and where we can respond. Those are internationally agreed-upon standards. So our response is based — again, we work through the United Nations system. They have a consolidated appeals process where humanitarian needs are amalgamated and there is burden-sharing amongst the international community.

There are initiatives for which the government has placed a priority for humanitarian responses. For example, in the Middle East, the government in the last budget committed funding for the next two years to respond to that protracted crisis in that region, as well as the three-year commitment for the Rohingya.

By its nature, humanitarian assistance is responsive, in contrast to regular long-term development programming where you can plan for the next three to five years in advance; whereas with this, this is largely a responsive mechanism.

[Translation]

Senator Forest: As I understand it, there are two decision-making levels. There is one decision founded on universally recognized criteria Canada uses to decide whether or not to participate, but what was not clear to me was the extent to which Canada participates. Is our participation tied to the security of NGOs on site, or to the participation of other states in the crisis? Are there any more specific factors against which you measure Canada’s degree of involvement?

[English]

Mr. Thangaraj: It is a mix of both. There is a burden share where Canada will contribute its share based on the location of that crisis and our ability to effectively respond. We do, in fact, look to see which of our partners are on the ground, whom we can work through to ensure that aid is delivered effectively. It is a combination of both of those factors.

Senator Day: Global Affairs, also known as the Department of Foreign Affairs, Trade and Development, I wanted to ask you for a clarification of this Crisis Pool Quick Release Mechanism that my colleague was asking you about. Have you already spent the $175.6 million, and you’re asking to top up your special fund that you have for that?

Mr. Thangaraj: It has not been spent. It is an amount that we can access so that in the event, for example, we don’t have enough funds in our regular budget to respond to a humanitarian crisis, these are funds that we will have access to in the event we don’t have enough resources on our own.

Senator Day: It’s not just $175 million; it’s more than that, that you have.

Mr. Thangaraj: Again, in our regular humanitarian spending, we spend from our regular budget anywhere around $700 million. In our reference level, we have an amount that is set aside that we do not use unless our regular budget is insufficient. This $176 million is a component of what is set aside and reserved in the event we do not have —

Senator Day: It’s the component aspect I’m looking for. How much is it in total?

Mr. Thangaraj: How much total is set aside?

Senator Day: How much is set aside for quick release in a crisis?

Mr. Thangaraj: $375 million.

Senator Day: Thank you. We and Parliament have been involved in this in the past where we have helped you develop rules as to when you can use and access those funds without coming to Parliament first, and then you come. That’s what I was getting to with respect to these particular funds.

Mr. Thangaraj: That’s exactly what these funds are. Instead of using the supplementary estimates process, for example, if there is a crisis when supply isn’t available, these funds are set aside in our reference levels precisely for that purpose.

Senator Day: Okay. My other question goes to General Natynczyk and his team. First, to set the stage for this, can you refresh our memories on the Toth class action that has been settled for $100 million?

Gen. Natynczyk: Yes, sir, this is the settlement of the class action approved by the Federal Court earlier this year. The class made the case that their pension amounts should not have been offset by income provided from the department for either the Earnings Loss Benefit or the Canadian Armed Forces SISIP Long Term Disability.

For a period of time that actually dates back to 1983, there were certain portions in the past where this was a gap where the funds had not been provided before. This class came back and said that they were due that amount of money in terms of the offsets. Rather than going through the full case, the government settled to the tune of $100 million. But the bottom line is these were offsets from pension benefits of Earnings Loss Benefit and Long Term Disability funds.

Senator Day: Thank you. We’re running down the time, but I did want to make this one comment. I think your colleague mentioned $100 million with respect to the application to Pension for Life.

Gen. Natynczyk: The Pension for Life program?

Senator Day: Yes. Let me congratulate you, first of all, for introducing the program. If we had done that back when we brought in the Veterans Charter and gave them the option, especially when you tell us over 60 per cent are opting for the lump sum, it was just the fact that veterans didn’t have the option that caused a lot of problems.

Gen. Natynczyk: It’s 56 per cent now, and we anticipate that it will creep up to 60 per cent who will opt for the lump sum this year. Again, the average age of release from the Canadian Armed Forces is about 37, but the average age for people making an application to Veterans Affairs for benefits is 60. So it is, again, that demographic and people doing their numbers.

Senator Day: Thank you.

The Chair: Senator Tannas, did you have a supplementary question for Global Affairs?

Senator Tannas: Quickly, yes. Senator Day was asking about this number, and what I’m hearing is that this number doesn’t really relate to anything yet, so how did you come to $175,590,000? Did you pick it out of the air? How did you arrive at that number? If you don’t know what you’re going to spend it on, how did you come up with it?

Mr. Thangaraj: So the crisis pool has an up-to amount of $400 million.

Senator Tannas: Right.

Mr. Thangaraj: $200 million sits in Global Affairs reference levels and we can access up to $400 million.

What happens is that any unused portion in the previous year gets added, so the $175.6 million was unused last year and is added to our reference level so that we can access it this year. So, a maximum amount of $200 million — if it’s unused — can be carried forward or re-profiled into future fiscal years, which is what you see here.

Senator Tannas: It is refilling a pool, which is I think what Senator Day was asking. Okay, thank you.

Mr. Thangaraj: Yes.

The Chair: Thank you, Senator Tannas.

Senator Day: Thank you for that clarification.

Senator Duncan: I will forego my question and submit it in writing, Mr. Chair, in the interest of time.

The Chair: Thank you. We’ll send it to the officials in writing and you will respond before Christmas. On this, we will conclude with Senator Duffy.

Senator Duffy: For Foreign Affairs, my follows up on Senator Tkachuk’s earlier question about funding to help developing countries address the impact of climate change. We’re talking about serious money here: $296 million. Does any of that money go to China?

Mr. Thangaraj: Not directly. We don’t provide official development assistance directly to China. They may be eligible to apply to certain of these funding windows — for example, the Green Climate Fund — but funding does not go directly to China.

Senator Tkachuk: Does it go indirectly? You made a point.

Mr. Thangaraj: They are eligible to apply to programs — for example, the Global Environmental Facility or the Green Climate Fund — but whether they have access to either of those two, I do not have that information.

The Chair: Can you provide us with that information, please?

Mr. Thangaraj: Yes.

Senator Day: Ms. Lantz, you were saying there is $100 million next year that’s set aside, or will be asked for, to look after the estates of veterans. I just want to make the point with you that, in a lot of cases, the estates of veterans will be aging women. You indicated that you will wait for them to make the application.

May I suggest that you make best efforts to try to find them? This will not be something that the surviving spouse of a veteran will have on the front of her list of things to do.

Mr. Christopher: Thank you for that point. When we talked about the 88,000, which includes the surviving spouses who are living, both male and female, of this veteran group, we’re contacting them directly.

The estates that Sara Lantz was referencing would be where there is no dependent who is currently being paid by Veterans Affairs or should have been entitled to some of that additional money. This might be a situation where you’d have three children, for instance, who would be heirs to the estate.

Senator Day: Thank you.

The Chair: Honourable senators, we must bring this to an end, but before I do, the chair will be tolerant and ask Senator Loffreda to have the last question since he’s brand new on the committee.

Senator Loffreda: I don’t want to delay everybody.

First of all, thank you for your presentation.

Veterans’ health is very important to Canadians. You made the point that 56 per cent are choosing a lump sum payment over the Pension for Life, which was started in April, and there is an increasing demand for services.

What are the increasing demands and what services are they for? More importantly, is one of those services financial education for some of those veterans to give them support? I’ve met a few over the years, and sometimes they don’t access that. I’m wondering to what extent they are being educated financially to make sure they’re making the right decisions so they won’t come back years later and say, “Hey, nobody advised me on choosing a lump sum payment,” and paying for their mortgages and then realizing 10 years later it was the wrong choice.

Gen. Natynczyk: Those are great questions. The first part is we provide funding for financial counselling for veterans. It’s their option, but we provide funding for financial counselling before they have to make their decision. We want them to have ongoing, lifelong financial security.

One of the challenges is that from our data, 80 per cent of the disability claims are for conditions of 30 per cent or less disability. In fact, the biggest cause for a disability claim is for hearing and tinnitus. Over 37 per cent is for hearing and tinnitus, which is generally in that 10 or 11 per cent.

People are doing the math and saying, as opposed to having a monthly payment of $50, they would rather go for a lump sum.

Maybe I’ll ask Rick to flesh that out.

Mr. Christopher: As an example, if I have a low level of hearing loss and I’m a veteran, the way that the monthly amount works out is around $57 as it currently stands — it is escalated every year — or $18,000 as a lump sum. The decision is usually towards the lump sum in those types of cases.

You did ask about other programs. There is an increased demand for other programs. We do things like vocational rehabilitation. If someone is leaving the service and they have some challenges reintegrating, we do vocational rehab and a number of other programs, not just necessarily health-related, but to get them established and working.

The Chair: National Defence and Global Affairs, thank you very much for sharing information and answering questions.

[Translation]

Honourable senators, we now welcome, from Canadian Heritage, Mr. Jean-Stéphen Piché, Senior Assistant Deputy Minister, Cultural Affairs Sector. Joining him is Mr. Éric Doiron, Chief Financial Officer and Director General, Financial Management Branch. Thank you for accepting our invitation.

[English]

From Shared Services Canada we welcome Denis Bombardier, Senior Assistant Deputy Minister, Chief Financial Officer.

[Translation]

With him is Mr. Louis-Paul Normand, Senior Assistant Deputy Minister, Project Management and Delivery —

[English]

— and Director General, Cloud Services, Chief Technology Officer Branch, Mr. Dinesh Mohan. I have been informed by the clerk that —

[Translation]

Mr. Bombardier will make his presentation —

[English]

— to be followed by Mr. Piché and questions from the senators.

[Translation]

Mr. Bombardier, the floor is yours.

[English]

Denis Bombardier, Senior Assistant Deputy Minister, Chief Financial Officer, Shared Services Canada: Thank you, Mr. Chair. I am pleased to appear before this committee to discuss Shared Services Canada’s 2019-20 Supplementary Estimates (A). As you mentioned, joining me is Louis-Paul Normand, Senior Assistant Deputy Minister of Project Management and Delivery, and Dinesh Mohan, Director General of Cloud Services.

As members of this committee know, Shared Services Canada delivers a range of IT services to departments that support the delivery of government programs and services, including email services, network services and call centres. This in turn supports the delivery of programs and services to Canadians.

[Translation]

I’m pleased to say that Shared Services Canada has made important progress. Over the last number of years, we have closed over 230 outdated legacy data centres and opened four state-of-the-art enterprise data centres that are more efficient, reliable and secure. These enterprise data centres provide our partners with modern IT infrastructure that improves the services and programs they deliver to Canadians.

[English]

We were also excited to announce a renewed agreement with Microsoft Canada earlier this year. This agreement will provide 410,000 users in over 100 departments with a suite of Office 365 tools that will enable them to deliver services to Canadians that are timely and citizen-centred.

Additionally, cloud brokering services have become a central part of the department’s work. It has evaluated more than 200 cloud service requests from more than 50 departments. Cloud computing is a proven option for hosting data and applications, offering greater flexibility, mobility and efficiency.

[Translation]

Turning to the supplementary estimates, I would point out that Shared Services Canada is seeking a total of $197.8 million for the Workload Migration Program and the Cloud Architecture Program. These programs support digital service delivery to Canadians, help modernize the government’s IT infrastructure, and aid in moving applications from at-risk data centres to modern hosting solutions.

[English]

The workload migration program in particular brings a strategic and standardized approach to workload migration with federal partners. It is a critical process for our partners. We work with them to prioritize their applications, ascertain their readiness to migrate their applications and determine the best hosting solutions, whether those are cloud or enterprise data centres or a combination of the two.

Mr. Chair, the department is also looking to reprofile a total of $38 million: first, $30 million to continue to refresh and sustain existing IT infrastructure managed by SSC, and $8 million to support the implementation of security solutions to achieve cybersecurity objectives.

[Translation]

In the coming year, we are putting a renewed focus on strengthening our IT infrastructure to ensure it is secure and reliable, and responds to the needs of Canadians. These investments and our ongoing initiatives will help improve the services Shared Services Canada provides to departments and to Canadians. They will also support the next phase of our department: SSC 3.0.

With SSC 3.0, the department is focusing on an enterprise-wide approach for all of government to build a modern, reliable and secure digital platform that meets the needs of today and tomorrow.

[English]

SSC is making important progress as it continues to evolve a modern and secure digital government service delivery model in an ever-changing IT landscape.

This completes my opening statement, Mr. Chair. My colleagues and I will be happy to answer questions.

The Chair: Thank you.

[Translation]

Jean-Stéphen Piché, Senior Assistant Deputy Minister, Cultural Affairs, Heritage Canada: Honourable senators, good morning and thank you for inviting us to speak to you today. We are pleased to provide you with more information on the additional resources requested through the 2019-2020 supplementary estimates. For Canadian Heritage, this represents an increase of $68 million.

Please let me review the main items in this budget. The government announced additional funding of $60 million over four years, with $15 million starting in 2019-2020, to improve its support for education in the minority language by further supporting the provinces and territories.

Following Budget 2018, the government announced funding of $50 million over five years, with $10 million starting in 2019-2020, to support the production of original civic journalism materials for underserved communities.

[English]

Following Budget 2018, the government announced funding of $47.5 million over five years, starting in fiscal year 2018-19, and $9.5 million per year ongoing to expand the use of sport for social development in more than 300 Indigenous communities.

Following Budget 2018, the government announced funding of $19 million over three years, starting in fiscal year 2018-19, to address the challenges faced by black Canadians, with $5.1 million planned for 2019-20.

Further, a reprofile of funds of $2.5 million from 2018-19, resulting from changes to the terms of the community support, multiculturalism and anti-racism initiatives program, is included in the amounts mentioned. Both elements represent a total of $7,582,952.

Additional funding of $7.5 million is for the Harbourfront Centre to realize significant improvements to its infrastructure and to its operations.

[Translation]

There is also $6,383,746 in funding resulting from a carry-over of funds, as a result of changes to the scope and timeline of the Grants and Contributions Modernization Project. Following the 2018 fall economic update, the Government of Canada announced that it would invest $14.6 million over five years, starting in 2019-2020, to support the creation, development and launch of a French-language digital platform with TV5MONDE public broadcasters.

An amount of $6,115,214 is included in these supplementary estimates. Funding of $1,762,625 is included in 2019-2020 to cover the additional costs of our partners, the City of Ottawa and the Parliamentary Protective Service, for the safety and security of Canada Day celebrations in 2019 on Parliament Hill.

Funding of $250,000 will support an awareness initiative piloted by Pride Toronto as part of the fiftieth anniversary of the decriminalization of homosexuality. Funding of $3,970,465 is linked to the modernized Youth Employment Strategy and strengthening support for learning, as announced by the government to implement the modernized Youth Employment and Skills Strategy as a horizontal initiative.

[English]

Finally, I will conclude with these two organizations of the Canadian Heritage portfolio. Library and Archives Canada will receive $3,380,002 due to a reprofile of funds from 2018-19 to administer the class action settlement agreement on the LGBT Purge. LAC is extending these funds to complete the work of retrieving the personnel files and administering the protection of personal information.

Also of note is that LAC is transferring a total of $5.1 million from its capital vote to its operating vote. The transfer is a technical adjustment required to finance the preparation and move of LAC’s collections, an activity that falls under its operating vote.

Telefilm Canada will receive $7.5 million in increased support for French-language feature film productions. This one-time increase in funding will address the challenges the organization faced after a key component of the Telefilm production fund was oversubscribed in 2019-20.

[Translation]

Mr. Chairman, honourable senators, thank you for your attention. My colleague and I are now ready to answer your questions.

The Chair: Thank you very much.

[English]

Senator Marshall: I only have one question for Canadian Heritage because I think my colleagues will ask some other questions. Is the $10 million in funding to support local journalism in addition to the $595 million that was approved in the budget?

Mr. Piché: Let me clarify. In Budget 2019, three tax measures were identified for a value of $595,000. This is an announcement that was made as part of Budget 2018, the $50 million —

Senator Marshall: So it’s in addition.

Mr. Piché:  — to support local journalism, and that’s $10 million per year for five years.

Senator Marshall: Now I’ve got to find Shared Services. Can you talk about the programs like the one for $197 million in funding for the Workload Migration and Cloud Architecture Programs? is that a multi-year program? It’s a lot of money. Did it start last year, or is this the first year? And where is it going?

Mr. Bombardier: It is a multi-year program.

Senator Marshall: It is?

Mr. Bombardier: Yes.

Senator Marshall: When did it start?

Mr. Bombardier: It starts this year, 2019-20.

Senator Marshall: So the $197 million is the first instalment?

Mr. Bombardier: Yes, it is.

Senator Marshall: And how much into the future? Can you give me an idea as to the total dollar amount and the number of years it’s going to take?

Mr. Bombardier: The total over three years is $331 million.

Senator Marshall: Who decides on the projects in Shared Services? You’ve got this project, and then you’ve got investments to replace aging IT infrastructure, which I think would be multiple items, right?

Mr. Bombardier: Yes.

Senator Marshall: Who decides what has to be replaced and things you will not do this year but will wait until next year?

Mr. Bombardier: In terms of the workload migration, as I mentioned earlier in my opening remarks, it’s actually working with our partners to determine where they’re most at risk and moving that workload to an enterprise data centre, the cloud, or a combination of the two. I can turn to my colleague Louis-Paul.

Senator Marshall: I’d like to know about the partners too.

Louis-Paul Normand, Senior Assistant Deputy Minister, Project Management and Delivery, Shared Services Canada: In terms of workload migration, we have criteria. By the way, the governance was concluded in the Treasury Board submission, so we are governed by the Treasury Board OCIO and Shared Services. We decide based on the applications that are at risk and on where they’re hosted right now, whether they’re hosted in a legacy data centre that’s about to close.

Senator Marshall: You decide that yourselves in Shared Services?

Mr. Normand: With the Treasury Board federal CIO. so it’s governance with the partners. As part of our governance, there is an architecture board and then there are two levels of partner governance committees with partners at the ADM and deputy levels.

Senator Marshall: Okay. For this one, you’re saying this is the first year and it’s going to take three years. Why wouldn’t that have been identified in the budget process? Is this something you didn’t know about before?

Mr. Bombardier: Those funds were all identified in the budget; it’s just that this year we had to access those funds through supplementary estimates. In future years it will be included in our Main Estimates.

Senator Marshall: What about the $30 million for the aging IT infrastructure? Who decides where that money is going to be spent? Is that in consultation with OCIO?

Mr. Bombardier: The $30 million is actually a reprofile of funds we had from last year to this year. Yes, there is a prioritization exercise that occurs through the governance that Louis-Paul described in order for us to make sure we spend those —

Senator Marshall: Not just with Shared Services but with OCIO?

Mr. Normand: In the case of IT refresh, the big priority for this investment was that Microsoft Windows 2008 is no longer going to be supported past the end of this year. As an enterprise, we requested the funds to bring all the Windows platforms to the Windows 2016 version that is supported. We went on behalf of all our partners, and we have over 21,000 servers that all our partners identified across government that we’re bringing up to the right version.

Senator Marshall: Thank you.

[Translation]

Senator Forest: We have the same concerns. With regard to the transfer of your existing data centres to integrated data centres, this initiative involves 12 centres, is that correct? How does all this work? Given what happened with Desjardins, Equifax and Phoenix, we are a little afraid. What are the transfer protocols? Do you deal mainly with the private sector? Are these centres really under government management?

Mr. Normand: We are talking, among others, about enterprise data centres. There are four of them ready to receive applications that are currently in former centres.

To maintain ventilation and electrical systems in these older centres, these applications sometimes have to be taken offline for a full weekend. In new data centres, we can perform these upgrades without causing a failure. This improves application reliability.

For example, we have already moved the Phoenix application as part of this year’s program. Phoenix was previously located in a data centre in Ottawa and is now located in an enterprise data centre in Barrie and another in Gatineau. This is the kind of improvement that is undertaken to avoid unexpected failures.

Senator Forest: Let us now talk about the development of Canada’s regions. There used to be a very important Telus data centre in Rimouski. Do you make sure you don’t concentrate all of them in the same radius? Yes, they can be in Barrie, but they could also be in Saskatchewan or the Gaspé Peninsula.

Mr. Normand: We have five enterprise data centres, in Montreal, Gatineau, Barrie, Borden and Vancouver. We distribute workloads.

Geographical distribution must be taken into account, which can lead to performance difficulties. On the other hand, it gives us protection in the event of a potential disaster. In most cases, these decisions are made in accordance with the needs of the application itself rather than with a high level principle. There are options.

Senator Forest: Is the agreement you signed with Microsoft a long-term agreement?

Mr. Normand: Yes.

Senator Forest: Who, ultimately, is generating savings over what existed before, or is it, rather, a modernization of Microsoft 2012 technology?

Mr. Normand: We are going in the direction of cloud technology, to Microsoft Office 365, which is a service offered in the cloud. This changes the service model that the government offers. We are moving in this direction in general and it is the main application that allows us to complete the ETI project, or Email Transformation Initiative. These applications will all be in the cloud within two to three years.

Senator Forest: Thank you. I have one last quick question about the program to help local newspapers that was announced in the February 2018 budget. I’m having trouble understanding, as expert committees normally file their reports in June of this year.

Usually, are there local social media? We asked Treasury Board officials the question earlier, but we did not get an answer. Are there, to date, any local media that have really received money or a contribution to help them with their operations?

Mr. Normand: The work of the expert panel was to implement three tax measures that were announced; the first concerns donee status for journalistic organizations, the second concerns a labour tax credit and the third concerns digital subscriptions. The expert panel helped to finalize the whole process and make the definitions clearer. That is the work they did. The local journalism program is outside of that framework.

Just to clarify two things, the program is delivered by third-party organizations to ensure the complete independence of the press. These third-party organizations are in the process of issuing calls for proposals for journalistic organizations, so that news can be created in media desert areas. These are places where there is no information available, or where, if there is coverage, it does not include local journalism.

Senator Forest: In short, no one has received a penny so far?

Mr. Piché: Not yet.

Senator Forest: In your opinion, who are these people who qualify for financial assistance?

Mr. Piché: We are working on it. It was necessary to create a model that was independent of government. These organizations must have contribution agreements with organizations that will deliver the program, and then there will be calls for tenders. This will allow journalistic organizations to hire freelance journalists to cover the news. We are confident that during the year these funds will be available for distribution.

Senator Forest: Why ask for $10 million in supplementary estimates (A) when there is little hope that the money will be paid before the end of the fiscal year on March 31, and this amount is not included in the main estimates that will be tabled?

Mr. Piché: We hope to do so before March 31.

Senator Forest: History often tends to repeat itself, you know.

Mr. Piché: I can give you some context for this. You know the data on this issue. The state of newspapers in Canada is such that between 2008 and 2018, there was a decline of about 40 per cent in our daily newspapers.

[English]

There was a 40 per cent reduction in the number of newspapers in Canada. We have also lost 50 per cent of professional journalists. They have not been replaced in other modes, et cetera; that’s not what they do.

Advertising revenues have declined by over $2 billion.

[Translation]

There is an urgent need for action. We are very aware of this situation. This $50-million measure will not save journalism, but it will at least allow us, as a first step, to provide journalistic coverage in places where there is no longer any local journalism. We believe that this is important for democracy and for ensuring a rich citizen life.

Senator Forest: We are exactly on the same page; I was talking strictly about the budget process, but let us hope that this money will be paid before March 31.

[English]

Senator Smith: I have two questions. The first question is for Shared Services Canada. Over the last number of years, we have closed over 230 outdated legacy data centres and opened four large, state-of-the-art enterprise data centres that are more efficient, reliable and secure. Where are you with this massive change? Obviously, it affects the whole culture of how government departments are run. How would you evaluate your progress and your success rate to this point?

Mr. Normand: At the end of this investment cycle, we forecast that we will be over 40 per cent of the mission-critical applications to government: border or security applications that will be hosted in a quality data centre space, whether it be in the cloud and managed by the private sector in the public cloud context, or within our own enterprise data centre or as legacy. We have a lot of mainframe applications, the big machines running a lot of mission-critical applications, that will still be housed in our enterprise data centre. Over 40 per cent of our mission-critical applications at the end of this investment cycle is not a bad estimate.

It’s a long-term journey. We will not have 100 per cent of our applications in the cloud or an enterprise data centre at the end of three years, but it’s a very credible penetration in that direction.

Senator Smith: Is this being driven by existing workers in the departments, or is this through consultants?

Mr. Normand: It’s a mix. We need the increased capacity from the private sector, but a lot of it is driven from inside. Actually, I would say most of it is driven from inside.

[Translation]

Senator Smith: Mr. Piché, I read your report. Are these things you are going to do by the end of the fiscal year? If so, is all this related to the objectives you have stated?

[English]

It looks like a shopping list. I’m trying to understand where this shopping list came from.

[Translation]

Mr. Piché: To understand how the supplementary estimates (A) work for us, there are funds carried forward from the 2018-2019 budgets, so supplementary estimates include several. There are also investments that took place during the year. I will give you the example of the digital platform. New funding has been announced as part of the economic update, and this is an investment in the French-language digital platform related to TV5MONDE. The objective is to make Canadian content available, and we favour the digital platforms of the francophonie.

For example, the funds for Telefilm Canada are also additional funds that were approved during the year. That is why they are part of the supplementary estimates (A).

Of course, we have key objectives. There have been major investments, if we think of official languages in the 2018 budget, and there are very significant adjustments to the budgets for official languages, due to agreements with the provinces on second language education. For us, it is really the financial cycle that dictates how all this fits into supplementary estimates (A).

That said, we have basic objectives such as indigenous languages, for example, which were really added as part of the 2019 budget. There is also support for the creative economy and culture. We are thinking in particular of music and festivals, because there has really been an enrichment in this area.

I would simply say that this contributes to the results, and I invite you to examine the Statistics Canada data.

[English]

I’m encouraging you to look at Statistics Canada data on the GDP for culture. We’ve had the Cultural Satellite Account since 2012, which shows us that what we call culture or creative industries in Newspeak constitute $50 billion in value. It’s 600,000 jobs. It’s very important.

[Translation]

The department has a very broad scope and the support it provides to various audiovisual, music, film, cinema and television industries is an important economic lever. So our strategy focuses on both economic and identity objectives to bring Canadians together and to encourage social cohesion, for example.

We do not lose sight of our overall objectives. During a fiscal year, with supplementary estimates (A), we often determine when funds were approved, whether they are part of the framework in the Budget Implementation Act or whether there is a delay. At that time, there are the supplementary estimates (A). For us, the logic lies more in the direction of our department and the strategic objectives we have set for ourselves than in simply listing the elements in supplementary estimates (A).

[English]

Senator M. Deacon: This question is for the Department of Canadian Heritage. On that last comment, I’m going to be coming from the angle of how sport is an economic lever in uniting Canadians to encourage social cohesion, so it’s a good next step.

I see that $9.4 million has been dedicated to the Indigenous Sport Initiative. We’re all aware, I think, that Heritage provides funding to Indigenous sport organizations, and governments, et cetera. I’m trying to get a better sense of how much of this money will be dedicated to building sports infrastructure, specific sporting activities or events, or other things. First, could you perhaps help us with that?

Mr. Piché: Yes. The funds that are identified in the Supplementary Estimates (A) are for sports initiatives in the context of social development. It’s a specific component, as you know. The sports program in Budget 2018-19 has seen key initiatives developed: for example, gender equity and ethics in sport, as we know and as we hear in the news about what is going on in the world today, it’s very important that these investments have taken place.

In this context, it’s really to use sport not so much for performance, but it’s very much the social benefits of sports for Aboriginal people. The program is designed to really help communities engage in sport and use sport as a means to encourage health —

[Translation]

— promote pride, and so forth. So, it is really a special fund that is not necessarily based on sporting performance.

[English]

It’s sports as a social benefit, if you like. That’s really in that part.

In terms of specific infrastructure, I can’t answer that question today — I don’t have that information — but in terms of what was in the supplementary estimates, it’s really around sports for social development for Indigenous communities.

Senator M. Deacon: I did wonder about the event coming up next year around the Arctic games. I wondered if, event-wise, there might be some going in that direction.

With respect to sport for development, just some thoughts, perhaps. I understand the difference between a development and a performance piece, both being very important. Right now in Canada we have 60 or 61 sports organizations, 20 multiple sports organizations and we have seven sports institutes.

When asked in September about the number one thing you would like to be focusing on with funding, it would be how to increase our program to support sports development. The first thing that comes across is Indigenous communities, minorities, new Canadians and girls. So in the absence of a dedicated minister of sport, but with respect to the Minister of Heritage, I would urge you, please, to use those existing structures to help you, because the time is right. This is a sweet spot right now for every single sport in the country and in redefining Canada.

Mr. Piché: Absolutely.

The Chair: Good statement. On the question asked by Senator Deacon, you did not have all the information, Mr. Piché. Can you provide that to the clerk?

Mr. Piché: I don’t have the specific information around infrastructure with me right now. I will have to get that to you. It would be a pleasure to send you that.

Senator Duncan: Thank you for your presentations.

My question is directed to Shared Services Canada. There are references in your presentation to enterprise data centres, modern IT infrastructure and agreements with Microsoft. I note that Canada is spending a significant amount of money in Budget 2019 with respect to increasing the connectivity of Canadians with respect to infrastructure and supplying broadband Internet connections to rural and Northern Canada.

My question, though, has to do with us technical Luddites who still pick up and use the phone. The Auditor General’s report in the spring of 2019 concluded that Shared Services Canada did not provide support to modernize federal government call centre systems, and said that although Shared Services Canada was rolling out a new system for eight call centres, the initiative was taking longer than expected and the department had yet to finalize a plan to modernize the remaining 213 call centres. This is from the Auditor General of Canada’s report to Parliament in the spring of 2019.

I didn’t hear any mention, and I don’t have any sense, of where the modernization of call centres fits in with the presentation today. Have I missed it? Could you elaborate, please?

Mr. Bombardier: You did not miss it. Today we’re focusing on Supplementary Estimates (A), and there was nothing per se for call centres in Supplementary Estimates (A). We certainly have active funding to address the call centre issue. I believe Louis-Paul will be in a very good position to answer that.

Mr. Normand: That’s on the way. We have delivered the enterprise solution; now it’s a matter of on-boarding call centre after call centre. We are open for business. Now the call centre is no longer a matter of a project or new investment. It is a matter of replacing the old call centre with the new service that we deployed a year ago.

Senator Duncan: Could I perhaps, then, ask if you could just address the Auditor General’s comments more comprehensively, if they are not in this presentation?

Mr. Normand: The Auditor General’s report is actually dating back from 2017, if you look back. At that time that statement was true. We deployed seven of the eight. There is one more being deployed in March. That happened after the Auditor General’s report.

Since then, in the engagement, we needed to go back to our governance and make sure that the next wave of call centres to be on-boarded was prioritized and we now have a road map of scheduled on-boarding for call centres.

The 213 refers to the whole population of call centres. The enterprise call centre solution is probably overkill for a lot of those, and so only a subset of the 213 will go to the enterprise service. The other ones will be provided out of services that we have currently available with the telephone companies.

Senator Duncan: What are the numbers we’re looking at in both situations?

Mr. Normand: Of the 213, there are about 53 call centres that we know for sure are of the size that would benefit from all of the features of the enterprise call centres. There are about 138, I think, if my math is right, that will make a call based on — sometimes it’s a smaller call centre within the department that is on an enterprise solution already. It wouldn’t make sense to on-board that call centre there.

Sometimes it’s just too small to have all of the overhead of the enterprise service. Sometimes some call centres are two three agents answering the call on the eight-hour basis. Those don’t require the full-blown enterprise service that we have, which is highly secure, highly available and bilingual. That determination happens downstream on a call-centre-per-call-centre basis.

Senator Duncan: Are you confident that the services are being improved to Canadians as per the recommendations from the Auditor General?

Mr. Normand: We provided the full call centre to the CRA during the last tax season without any downtime or any disruption of service, so we’re quite confident that the service is full-grade now and ready for on-boarding the balance of whatever makes sense to on-board.

Senator Duncan: Thank you.

[Translation]

Senator Bellemare: Thank you for coming. I have a question for Canadian Heritage about the transfer of funds from the Department of Employment and Social Development for the Youth Employment Strategy. I understand that there is a transfer of funds of $3.8 million for subsidies, and also $209,000 for operating expenses. Which groups of young people do you target through this transfer? Does this include young people who are neither working nor studying, known as NEET in English? What percentage of the total Youth Employment Strategy does this amount represent? And why transfer these amounts to Canadian Heritage?

Mr. Piché: The transfer is to Canadian Heritage employment programs. We are talking about a transfer from the Department of Social Development to specific Canadian Heritage programs for one year. These programs include jobs for young people in official language communities; it is an already defined and established program. The other specific program targeted by this activity is in the heritage sector: these are museum and artistic jobs. These are the two programs that already exist, and Social Development Canada is contributing to some of these programs directly through a one-year transfer.

Senator Bellemare: Are these full-time jobs or summer jobs?

Mr. Piché: I think they are mostly part-time jobs.

Senator Bellemare: It is to gain experience?

Mr. Piché: Yes, and to expose young Canadians to the creative industries, official languages, and so on.

Senator Bellemare: Thank you.

[English]

Senator Duffy: Thank you all for being here today. There is a lot of interesting information.

I’ve been trying to find the cloud on my machine here, under the CIO mandate. The cloud isn’t in the cloud. The cloud is a server farm somewhere. Are there rules to ensure that Canadians’ data that is in the cloud is stored on servers physically located in Canada?

Dinesh Mohan, Director General, Cloud Services, Chief Technology Officer Branch, Shared Services Canada: Thank you for the question. Essentially for the CIOs, the first requirement is really guided from the policy of management of the information technology, where they are mandated to take a look at cloud first. In terms of ensuring that those data centres or those server farms are actually located in Canada, it is not for all data classification but for Protected B, which is basically sensitive information. It is required through the direction on the data residency that the contracts for which Shared Services has been working on and has been letting out have to reside in Canada.

We have let out now, to date, three different contracts for up to Protected B, and those require that those data centres or those cloud providers need to have their data centres in Canada. So for Protected B sensitivity, those data centres or services have to be offered through data centres in Canada.

Senator Duffy: Is Protected B something where you would have your income tax returns, passport applications or anything with identifying data?

Mr. Mohan: And social insurance; that’s right.

Senator Duffy: On call centres, do we have a requirement that the call centres employ Canadians? Are they located in Canada?

Mr. Normand: Again, the enterprise data centre requirement was to be Protected B as well, so it had to be in Canada. The hub for the call centre is, in fact, in Toronto and Montreal.

The call centres are owned by the departments. CRA, for example, has one in Shawinigan, and all over the country. So they are in Canada, but the systems running those call centres are in Toronto and Montreal. They had to be.

Senator Duffy: Are the employees in Canada?

Mr. Normand: Yes. It’s the department’s employees. We don’t run the call centre. We provide the call centre service to the departments and they have the agents who pick up the phone. They’re departmental agents, not SSC, but they are all in Canada.

Mr. Bombardier: They’re departmental employees.

Senator Duffy: That’s good to know. Regarding the battle between Microsoft and Google — I’m sorry, Amazon, did we have a competitive process there? We have seen controversy in the United States.

Mr. Mohan: We have been using a competitive process. For the most recent round, we have actually done that in three waves. In the first wave, we were able to award two contracts.

The reason there are different waves for these procurements is to make sure that there is a security program offered by the Canadian Centre for Cyber Security, which vets the industry certifications and some of the supply chain integrity aspects of these providers before they are able to get the contracts. We have been doing that in a phased manner because they need to go through that program.

In the first round, we were able to issue two contracts. Wave two also has some of the prequalified vendors putting in their submissions. Out of that, one of the contracts was actually announced today. In fact, that is the first Canadian provider that we were able to announce. We are expecting some more awards of contracts through that process.

Wave three actually closed on Friday last week, and we had one of the prequalified vendors come through that. It is a competitive process.

Senator Duffy: So contracts will not go to people who don’t have equipment, routers, et cetera, that meet CSE standards.

Mr. Mohan: That is correct.

Senator Duffy: We won’t mention any company.

[Translation]

Senator Loffreda: Thank you for your presentation. Breaches of confidentiality and security remain topical issues. You are asking for an additional $197 million to migrate to new architecture programs, and $38 million to replace existing technology and infrastructure which is outdated.

Is some of our equipment still obsolete? Does this cover 100 per cent of the costs? How is the confidentiality of government information ensured in this new structure? Has the investment in staff been made? Why ask for additional funds, and why was this not included in the initial budget?

Mr. Bombardier: With respect to the amount of $37 million, it is important to understand that this is an amount that was carried forward from last year to this year. The program as a whole is much more important because the infrastructure, as you say, is outdated and more funding is needed to replace it over the years. We were granted a certain amount in the first few years, and we must return to the Treasury Board with a statement of our achievements to access the amount that had been granted to us on an ongoing basis.

More funding is indeed needed. These amounts had already been planned, but it is a project in itself, and often, in projects, there are delays. As a result, $30 million had to be carried forward from last year to this year.

Mr. Normand: In terms of investment, this was part of an envelope that had been allocated from the 2018 budget. There was funding in the 2016 budget, and we are continuing in that direction.

A complete inventory of the components of everything we have in government is currently being compiled. This will provide a better overview of what needs to be replaced in the coming years. The subject will be raised again here or in different committees. This is one of the Treasury Board conditions for the 2018 budget.

Mr. Bombardier: As I was saying, we must go back to Treasury Board with the results obtained in order to access the funds that were already earmarked. In addition, in making the inventory, it is necessary to arrive at an adequate amount of recapitalization to be able to finalize all these changes.

Senator Loffreda: In terms of investment, who follows all this with regard to personnel? Do you get the necessary expertise from outside? Is that part of the budget you’re presenting to us?

Mr. Bombardier: Yes, indeed, it is. Shared Services Canada had been funded to stabilize the base, if you will, but within each of the programs, these specific funds will only be used to replace the equipment with the staff we have in place.

Senator Day: Mr. Piché, from Canadian Heritage, I would like an explanation regarding TV5. The government had already approved $2.9 million. You are now requesting an additional $6 million, which is double the amount already approved.

Mr. Piché: The budget announced in the November 2018 economic update identified $14.6 million over a five-year period. We are in the first year and the breakdown of funds for the first five years will be $6 million in the first year and $2 million in subsequent years. The amount in supplementary estimates (A) is the first $6 million. It’s as simple as that. There are no additional amounts or amounts that have been withdrawn. These are amounts that have been specifically identified to create a francophone digital platform and enhance Canadian content.

Senator Day: Do the other countries also contribute to TV5?

Mr. Piché: Yes, they do. There is an annual contribution of $9 million to the TV5MONDE program, which includes in part a contribution to TV5MONDE in Europe, which is the international organization, and also an amount resulting from the Canadian regulatory framework for TV5 Québec Canada. So, once a year, there is a program that provides specific funding for the Canadian contribution, at the initiative of TV5MONDE, with Belgium, Switzerland, Canada, France and Quebec.

Senator Day: Thank you very much for that explanation.

My next question is for Mr. Bombardier.

[English]

Who are CIO?

Mr. Bombardier: OCIO is the Office of the Chief Information Officer, who is actually at the Treasury Board Secretariat. They’re the policy arm in the IT domain.

Senator Day: I’m fascinated by the governance of this with quite a few of these CIOs in all the different departments. Is one person identified?

Mr. Bombardier: In each of the departments, yes, there is a CIO, a Chief Information Officer.

Senator Day: And does that person work for Shared Services —

Mr. Bombardier: No, they don’t.

Senator Day: — or does that person report to the deputy minister of the department?

Mr. Bombardier: They report to their own deputy minister.

Senator Day: So if they were advocating for and wanting to lobby with you for cloud facilities, would they have to go through their deputy minister and get that in the information that comes before us through that department or would they come through you?

Mr. Bombardier: It’s actually a combination of both. Each department has to come up with their own IT plan. They submit those IT plans to the OCIO at Treasury Board Secretariat and they actually prioritize those projects. There is a priority exercise that occurs. The OCIO shares that information with us so we can actually determine what projects we will actually do through the governance that we explained earlier.

Senator Day: Representative from the House of Commons Murray has just been appointed to something that didn’t exist before, I guess in name only; she’s the Minister of Digital Government. Can you tell me how her group and her department will fit into what you’re doing now at Shared Services? Will you be part of her organization?

Mr. Bombardier: I cannot actually answer the question in terms of how she will deliver on their mandate, but I can certainly say that, yes, our minister is now Ms. Murray.

Senator Day: And as far as mandate is concerned, I’m not sure a mandate has been made available yet.

Mr. Bombardier: Not to my knowledge, no.

Senator Day: This committee typically looks at mandates to help us understand, but we don’t have a mandate yet.

Mr. Bombardier: Not to my knowledge.

Senator Day: Do you anticipate you will be part of her group?

Mr. Bombardier: Yes.

Senator Day: Will all of the applications, then, continue to go department-to-department through the Treasury Board process to get approval?

Mr. Bombardier: Yes, that’s the prioritization that needs to happen at the government level to make sure we’re spending those funds appropriately.

Senator Day: Thank you.

[Translation]

The Chair: Before concluding our question period with officials, I have a question for Mr. Piché.

The government mentioned that, during the 2019-2020 period, it would modernize the Official Languages Act. You don’t need to answer my question immediately. You can provide the response in writing with the required document so that we can refer to it when writing our report to the Senate. When we ask for a memorandum of understanding with the provinces and territories to support official language minority and second language education, whether for anglophones in Quebec or francophones in Newfoundland, New Brunswick, St. Boniface or Vancouver, which provinces and territories will receive the funds you are asking for? Is this really in the spirit of modernizing the Official Languages Act?

My second question is this: How do you monitor how provinces and territories use these funds to ensure that they accurately target the program objective?

Mr. Piché: This is an excellent question. We can send you the answer in writing. However, I can tell you at the outset that the new process of memoranda of understanding between the provinces and the federal government for all matters related to education is also associated with an accountability mechanism that ensures that funds are used for the purposes for which they were established.

Then, as far as who receives what, I will come back to you on this subject to be absolutely certain, but I can tell you that agreements have been reached with all the provinces and territories. The agreement with Quebec is worded differently, but there is also one. I will come back to you on this subject, simply because I don’t want to make a mistake by telling you who gets the money.

With respect to the modernization of the Official Languages Act, consultations were held during the summer and fall on this subject. Specific themes that will have an impact have been identified; it has been several years since the law was improved. These points will be very important, including the powers of the Commissioner, and language of service; these are elements that were raised during the consultations. We can therefore certainly send you a more complete answer in writing.

The Chair: Thank you very much, Mr. Piché.

Senator Forest: This is not really a question, but rather a request that concerns the crucial question of the shift that has been made with regard to cloud computing and our choices. Would it be possible to have a one-page summary of the efficiency and savings benefits of these choices as regards the decision to go in that direction? Given everything that is currently happening at various companies such as Desjardins — which is not a casual little business — and Equifax Canada, we would appreciate it if you could send us a one-page summary of the reasons for these choices. I am sure you made the right choices, but I would like them to be on file so that we can refer to them and then better understand these strategic choices. That is my request.

The Chair: Could you provide us with this information?

Mr. Bombardier: I would just like to clarify the Senator’s request. You asked us for details on the reasons that motivated our decision to move to cloud computing with regard to data centres; is that right?

Senator Forest: In fact, your strategic choices are based on reflection and analyses you have carried out; I would like to know the key points of that analysis.

Mr. Bombardier: Very well.

The Chair: Thank you very much. As always, you answered our questions in a very professional manner and we will wait for the information we have asked you to provide.

[English]

For this last portion of our meeting on the study of Supplementary Estimates (A), we have before us Travis Allan, Chair, National Government Relations Committee, Electric Mobility Canada. Mr. Allan, thank you for accepting our invitation.

After you have made your comments, questions will be directed to you by the senators.

[Translation]

Mr. Allan, the floor is yours.

Travis Allan, Chair, National Government Relations Committee, Electric Mobility Canada: Mr. Chairman, members of the Standing Senate Committee on National Finance, thank you for welcoming me today and giving me the opportunity to speak to you.

I am Travis Allan. I chair the National Government Relations Committee of Electric Mobility Canada. We are very grateful for the opportunity to share our views today on measures to encourage the purchase of zero-emission vehicles.

[English]

Committee members, I have the advantage of having some PowerPoint slides in front of me that I don’t think are ready to be shared with you because they need to be translated into French. So I will try not to describe graphs too much. I understand that once they are translated, we’ll be able to share them with you later, should you have any questions.

The Chair: Before you continue, Mr. Allan, if I have a consensus around the table, as chair, I will accept that they be distributed to all senators in one official language, English. We have English copies. Do we have consensus around the table?

Hon. Senators: Agreed.

The Chair: Yes? Okay.

Mr. Allan: While those are being handed out, I will tell you a little bit about Electric Mobility Canada. We are a non-profit with a mission to strategically accelerate the transition to electric mobility across Canada. Our members are electric vehicle manufacturers, charging networks, electric vehicle charging station manufacturers, industry suppliers, energy providers, government agencies, fleet managers and not-for-profit organizations and academics, and we have over 190 members from coast to coast.

We are here today to testify in support of the proposed supplementary estimate because it is important to the achievement of Canada’s climate and environmental objectives; because electrifying transportation reduces greenhouse gas emissions and improves air quality for our communities; and because purchase incentives have a strong positive impact for Canadian companies and Canadians, and they are working.

As the senators are no doubt aware, Canada has made important commitments to reduce its greenhouse gas emissions by 2030. Despite important progress that is already being made, there is a gap, projected to be approximately 79 megatonnes, towards achievement of the 2030 target.

One thing that makes a lot of sense is to look at our sectoral emissions and try to figure out where the biggest sources of greenhouse gas emissions are. We find that the transportation sector provides 24 per cent of Canada’s greenhouse gas emissions, which means it makes sense to look there for opportunities to reduce our footprint even further.

If we break down those transportation emissions, we see that light-duty vehicles, both pickups and cars, are major contributors to those transportation emissions. Converting to an electric vehicle can have a very beneficial effect on greenhouse gas emissions.

A recent study found that 45 per cent of emissions can be reduced by a driver in Alberta who converts, compared to a traditional internal combustion engine, and that number can go as high as 98 per cent in British Columbia or Quebec, provinces with very clean hydroelectric or nuclear power. That, of course, is why Canada has set important targets for the promotion and adoption of ZEVs, or zero-emission vehicles, as a percentage of new sales. The important ones to note are 30 per cent by 2030 and 100 per cent by 2040.

The benefits are also for local air quality. By converting to an electric vehicle, we can reduce tailpipe emissions of particulate matter and other pollutants that can make poor air quality for our communities.

But the arguments in favour of converting to electric vehicles are not just environmental. Recent analysis conducted by the economic firm Navius for Electric Mobility Canada found that if we are to achieve those federal 2030 ZEV targets, we could add an incremental $16.8 billion to Canada’s 2030 GDP and over 165,000 jobs for Canadians.

In my other hat, I work for a company that runs one of Canada’s largest EV charging networks and manufactures charging stations in this country. I can tell you that we believe this number is accurate and we and other members of Electric Mobility Canada are here to win this transition. We want to make sure Canada is at the table in the economics of reduced carbon transportation.

You can also see that this policy and other complementary policies, including charging infrastructure, investments, education and private sector activities, are working. We are seeing an increase in the purchase of zero-emission vehicles year over year. From May to September, we had a 3.5 per cent market share and 25 per cent year-over-year ZEV sales growth versus the third quarter of 2018. Those are significant improvements, and we believe they are largely attributable to the purchase incentive and other complementary policies.

But even with this progress, there is still a gap. Projections that Navius conducted on current policies announced by the federal government suggests we will have a 10 per cent gap against the 2030 target of 30 per cent ZEV sales.

Then the question arises: What is the best way to try to fill this gap? How do we get those economic benefits and also the environmental benefits? Our organization feels that probably some of the most important points are to make sure that the purchase incentive is predictable and consistent.

I turn here to a graph in my presentation that I think tells us a lot about how these purchase incentives can work. We see two numbers in green and blue that are British Columbia and Quebec. These provinces have fairly comprehensive policies to support electrification of transportation. They have purchase incentive add-ons, they have electric vehicle charging infrastructure programs and they also have great education. We’ve seen a dramatic rise in ZEV sales in those provinces. In fact, British Columbia actually exceeded 10 per cent, which makes it a leader in North America, and Quebec has sustained excellent growth in that area.

You’ll see one line, though, that was starting to show an upward trend and then fell precipitously, and that is the province of Ontario. That fall occurred because there was a cancellation of the provincial purchase incentive. After that point, it hasn’t really recovered, although we’re encouraged to see some growth recently, in the last quarter shown here.

This obviously impacts adoption and awareness. We believe supporting the supplementary estimate in this case will help avoid an Ontario-like situation and keep us moving in the right direction on ZEV purchases.

One question that members of our organization are often asked — and it certainly comes up with any kind of purchase incentive — is why do we need to do this and how long do we need to do this for? Is it a permanent type of incentive?

The answer for why we need to do this is twofold. One is that it helps create attention and awareness about the opportunities to drive electric, which can end up saving Canadians money over the lifetime of their vehicle. The other reason is because a zero-emission vehicle tends to cost more than a comparable internal combustion engine vehicle at this time. There is a purchase price differential, but that purchase price differential is expected to decline over time, particularly as battery prices drop as innovation in the manufacture of these vehicles increases, and also as we get efficiencies of scale.

So market watchers — here I’ve included graphs from McKinsey and Bloomberg New Energy Finance — predict there will be an inversion probably around the year 2025 or 2026, at which point the sticker price for a new ZEV is likely to be equal to or even less than a comparable internal combustion engine vehicle. Of course, our organization isn’t saying that the subsidies should be suspended at that point, but it could certainly be evaluated to see if it needs to remain so high or if there is a better level.

To wrap up, our recommendation is to approve the current estimate because of how important it is to the climate targets and ZEV adoption targets. We would, of course, love to see it increased for provinces that don’t have provincial top-ups because we’re seeing such great performance in Quebec and B.C.

We would like the Government of Canada to consider a different cap. There is currently an MSRP limit of $45,000 or $55,000, depending on how many seats the vehicle may have. Unfortunately, that might not be high enough for SUVs and pickup trucks. Many Canadians, of course, choose to use non-car alternatives, so we would like to see a way for all Canadians to participate in this program. Our members would love to see it expanded to medium- and heavy-duty vehicles, because they are also important contributors to transportation emissions, and we would love to see multi-year funding for this in the complementary policies I mentioned. Thank you.

The Chair: Thank you, Mr. Allan.

Senator Day: Mr. Allan, you’re asking us to consider continuing the funding. Is that the $165 million that appears as a line item in the Department of Transport?

Mr. Allan: Yes, senator.

Senator Day: Are there any other line items in any other departments that also support zero-emission vehicle proliferation?

Mr. Allan: Yes. I’m sorry, senator, I should have clarified at the beginning. I’m speaking about the request for the $165 million supplementary estimate. That’s all I’m speaking to today.

Senator Day: Thank you.

Senator Duncan: Thank you, Mr. Allan. It’s nice to have you back. I appreciate the information that you have brought back to us in the committee.

I would like to emphasize for my colleagues the point, again, regarding the purchase in Western and rural Canada of larger vehicles. In vehicle registration, my little Honda is classified as a truck, so I understand why it’s so important. I think part of the reluctance of the Prairie provinces — Alberta and Saskatchewan — to adopt an incentive is that people just don’t have the product that they need.

There was earlier mention of the Tesla truck. There is also the — I’m not going to get the name correct.

Mr. Allan: Rivian.

Senator Duncan: That’s it. I don’t want to belabour this point. I would just ask that we have an update from the manufacturers as well. It would be useful in terms of the continuation of this policy, which I do support and believe is very important to our climate change initiatives.

I also would ask if we could have an update. In our last round of discussions, Mr. Allan spoke — from, I believe, your organization — about the charging stations that are — and I don’t know what we are going to call them other than that widget you plug your vehicle into — manufactured in Quebec with tremendous sales to the United States. Could we have an update on how they are doing, as well? Thank you.

Mr. Allan: Would you like me to respond now?

The Chair: Yes, please.

Mr. Allan: There is one exciting update, which is that Ford has now announced plans to release an electric pickup. I think that is positive. We also have a Toyota vehicle that is a plug-in hybrid, which is being manufactured currently in Canada. It’s the Toyota RAV4 Prime.

I’m hopeful. The automakers are projected to be announcing a fourfold increase in electric or plug-in hybrid models in the next coming years, and so we expect that there will be more model supply.

I can also update you on the Quebec company because that’s actually my day job. We have expanded to the United States and just announced 75 charging stations in the city of Los Angeles using some technology that is modified from something we developed in Montreal, which has an excellent deployment of curbside stations. We were able to mount stations on light poles and use energy that the city of Los Angeles saved from upgrading its street lights to help charge electric vehicles. Those are all manufactured in Canada.

Senator Duncan: Thank you.

[Translation]

Senator Forest: In fact, we talked about rebates the last time you appeared before the committee. It is a movement that is unavoidable.

When I look at countries that are successful, such as Finland, there are advantages other than purchase rebates. There, with an electric vehicle, I don’t pay registration fees, I park for free and I drive on reserved lanes. There are a number of important advantages.

For example, if Montreal offers reserved lanes for electric vehicles, given the traffic problems in that city, this is a real advantage that would encourage people, beyond the financial aspect, to buy an electric vehicle.

Canada is a vast country, with the Gaspé Peninsula, Newfoundland, New Brunswick or the western provinces, where many users drive pick-up type vehicles, or pickup trucks. Have you thought that, between 2020 and 2030, there could be a transition during which rebates would be less important, but applicable to hybrid vehicles? Here in Ottawa, we have an impressive fleet of hybrid taxi vehicles. Travelling in an electric vehicle already means fewer emissions. Have you thought about a transition period between now and the time when battery technology will be more advanced?

Not forgetting the network of charging stations which represents a challenge, another element seems to me to be crucial in urban areas. At the risk of repeating myself, I would say that, in addition to purchase rebates, in countries that have been very successful, there are many advantages, including dedicated lanes, no registration fees, and so on.

Did your organization hold discussions or reflect along those lines?

[English]

Mr. Allan: Thank you for those questions. I should note that one of the features we support of both the federal purchase incentive and the provincial adders is that they have varying rates for vehicles depending on battery size. This is designed, I believe, to recognize that many Canadians may, as you say, adopt a plug-in hybrid for a period of time to help them if they live rurally or expect to be driving longer. I fully agree, and we support that aspect of the policy.

The other issue, which is about what I would call complementary policies or the other types of policies and regulatory changes that need to be in place to really allow for this transition to work for Canadians, is very germane and certainly something that a lot of people here in Ottawa and across Canada are working on.

Different provinces have adopted different strategies. Some provide special licence plates. We have seen very strong and sustained funding from this federal government for public charging station deployment, typically through NRCan, which has been running various programs for corridors and also now is funding more charging station deployment in the cities and curbsides and has plans to do more on workplaces.

I would say that those aspects are ongoing, but we certainly have more to do. We need to make sure that Canadians feel comfortable adopting electric vehicles that they will be able to charge. So there is a lot more work, both federally and also provincially, because some of these matters are under provincial jurisdiction.

Senator Forest: Thank you.

Senator Marshall: I am just looking at the document that you provided. You’re saying transportation is Canada’s second-highest greenhouse gas-emitting sector.

Is it decreasing? We have electric vehicles on the road. Who is monitoring to see that greenhouse gases are really decreasing as a result of moving to electric vehicles?

Mr. Allan: I have two points to answer your question, senator.

Unfortunately, transportation emissions have actually been increasing since the 2005 base year when Canada’s target was set. That is one of the things that has challenged many advanced economies because we have seen increases in freight transportation, package delivery and sprawl that leads to traffic jams. This is probably one of the most challenging sectors to deal with.

Senator Marshall: We’re going in the wrong direction.

Mr. Allan: Unfortunately. We have started seeing stabilization over the last couple of years, which is encouraging, but we need to actually get reductions, I think, in order to support the broader target.

Now your second question is: Who is in charge of making sure the reductions actually occur? The federal government collects greenhouse gas emissions data and provides it to its international partners in support of its global climate commitments. I believe that ECCC collects this data, possibly with other ministerial support, so the document that I sourced the graph from on slide 6 is from our national inventory report from 1990 to 2017, and that is a very helpful summary of our emissions.

Senator Marshall: But it’s not very encouraging. Thank you.

Mr. Allan: We have work to do.

Senator Day: Just for the record, you were talking about what vehicles will be covered by the existing plan, and which vehicles you would like to see covered, keeping in mind different parts of Canada have different preferences and different needs.

Mr. Allan: Certainly. Currently, the federal purchase incentive has two elements. One element is the amount of the purchase incentive, which is based on battery size. I just want to make sure I get you the exact right numbers here.

Senator Day: What page are you on?

Mr. Allan: Unfortunately, I’m looking at my scrawled hand-written notes.

Senator Day: No wonder I couldn’t see it.

Mr. Allan: I will include the Transport Canada overview. The current federal program is a maximum of $5,000 for a battery electric vehicle with a larger battery that you hopefully would be able to drive on all the time if you don’t have a very long commute.

A shorter-range plug-in hybrid will get a subsidy of $2,500, and that’s for a smaller battery.

But there is also what we call an “MSRP cap,” or a minimum suggested retail price cap. If there are six seats or fewer, then the MSRP cap is $45,000; the base model price is $45,000. If there are seven seats, then the base MSRP is $55,000, so this would allow you to have a higher cap if it’s a van, for example.

There are also permissions for certain trims that can be added to the vehicle, so the cap for six seats or fewer can go up to $55,000 with accepted trims, and that for seven seats or greater can go up to $60,000 with suggested certain approved trims.

The commentary from our organization is we completely understand that the government is seeking to target the incentives on Canadians for whom this will matter most financially, and we support and understand that, but we are concerned it will leave out a number of vehicle classes in pickup trucks and SUVs.

Senator Day: Shouldn’t the public concern be not the type of trim on the vehicle but for some efficiency that we’re achieving something by having these programs in place?

Mr. Allan: We would certainly believe that this program could be more efficient if it included more vehicles, senator. I think I would agree with you.

Senator Day: Are two-wheeled vehicles or three-wheeled vehicles included?

Mr. Allan: I’m not sure, so rather than giving you an answer that could be wrong, I’ll get back to you in writing. I haven’t heard of that.

Senator Day: If they are not, presumably you would be happy to see that happen too.

Mr. Allan: Yes, we support all forms of electrification.

Senator Day: A lot of us have had the opportunity to travel to other countries, particularly in Asia. The number of electric vehicles that you see there now that you didn’t see even five years ago is incredible. We haven’t recently done a comparative, but it would be interesting to see why that has happened.

The Chair: Can you provide us with that information, Mr. Allan?

Mr. Allan: Certainly.

The Chair: To the clerk, please. Thank you.

Senator M. Deacon: As our time unfolds, I’m not sure if this is a question or a thought, but I’m going to try. We talk about incentives. We saw what happened with the chart last spring — decline. We talk about a sweet spot, about 2025 or 2026, when costs might come down.

I’m kind of going after behaviour change here, and I don’t know if there is insight or research from your perspective on this, but where is it? When is it? How is it that we have people in our society, which I think we have seen in other parts of the world, as Senator Day is alluding to, whether it’s to see to believe or believe to see, for whom the change in behaviour is becoming a bigger driver than the incentive?

That’s my wonder, my want, my wish. How far do we have to go in the incentive land to be able to get or see the behaviour of what is the right thing to do?

Senator Day: What should we be doing to change that behaviour?

Senator M. Deacon: To me, that’s the critical piece, and I know we may have to incentivize to a certain point, but that’s what you need to go after.

Mr. Allan: I think that’s right, and there is so much work to do to make Canadians feel comfortable to do this.

We are really encouraged by looking at Quebec and British Columbia and starting to see jurisdictions that are getting closer. B.C. kind of rocketed up to 10 per cent new vehicle sales, which is pretty unheard of in North America, to be honest. We look to Norway. Norway is a place that has exceeded 50 per cent. California is getting pretty close. I think they are around 7.5 per cent last time I looked.

There is an aspect of seeing your neighbours or someone on your block driving an EV that can make a difference. Visible charging stations matter, because that’s one of the things, and education.

But the purchase incentives have a role. I was speaking with someone about this testimony yesterday, and he said: You know, my brother doesn’t care at all about climate change, but he bought an electric vehicle, and it was partially because of the purchase incentive. He thought that was a great deal. He looked at the ownership costs and the lower maintenance costs and that made sense to him. That is impactful.

Senator Duffy: Thank you, Mr. Allan, for coming and for your fascinating testimony. This is very important to our future.

The fact of the matter is, for some people, the incentive and the idea of getting a great deal is a great motivator, even if it’s only a small deal.

I’ve been a proponent of this for a long time, but I live in rural Prince Edward Island, so my question is: Until we get all of the infrastructure in place, isn’t hybrid the middle step or the transitional way? Why are there no incentives for hybrids? You look across the manufacturers and they have large SUVs that are hybrids. For people, as we heard earlier from Senator Duncan and others, hybrids provide that kind of option as a middle step. Why wouldn’t we be incentivizing people to buy hybrids until the industry is more mature and all-electric is more easily possible, especially in rural Canada?

Mr. Allan: I think that hybrid vehicles have made a very important contribution to slowing that decline in greenhouse gas emissions from the transportation sector that I mentioned previously.

Senator Duffy: Slowing the decline?

Mr. Allan: Slowing the increase, sorry, thank you. We want to encourage the decline. That’s right. They have made an important contribution, but at this point hybrid technology is pretty advanced. It’s there. It already leads to fuel cost savings. It’s widely commercially available, and I think it stands on its own as a way of getting a more efficient vehicle.

Our organization’s perspective is that we’re ready as Canadians for the next step, which is to say, plug-in hybrids, which you can still drive with gas in the tank, and certainly on longer trips that might be convenient for many Canadians. And battery electrics are commercially available. They are great to drive. They save money. And frankly, in most places in Canada, they are a suitable alternative if you drive a car that there is an equivalent model for.

One of the things you might be interested to hear is that we did a study on our users, and we asked where they charge. It turns out that most of them charge 80 to 90 per cent of the time at home and at work. So on P.E.I. or where I’m from, Pender Island on the West Coast, we’re certainly ready to drive plug-in hybrids and even battery electrics. I think the focus is to try to get us on that next step to reduce emissions.

Senator Duffy: Did you happen to see the CBC national news last night? They had David Common comparing a previous iteration. I know only a quarter of a million Canadians watch that anymore, which is sad, but the message there was about going from Toronto to Windsor — hardly rural, underdeveloped Canada — but the whole thing was about planning your next charging stop.

Senator M. Deacon: Supplementary?

The Chair: We’ll accept your supplementary.

Senator M. Deacon: Just on that question, and that is looking at stations, who is determining where these stations are put? Is it local? Is it national? Is it strategic? Is it voice? What is it?

Mr. Allan: It depends on who is installing the station. So, there have been some very important programs run by NRCan to try to get a cross-national, trans-Canadian network of EV charging stations. Some have been installed. Some are still in process. In that case, NRCan reviewed competitive applications and made decisions based on various factors about driving distance.

In the province of Quebec, much of the public infrastructure has been installed by the Circuit électrique, or the electric circuit, which is owned by Hydro-Québec. So it really depends. There are also many private stations owned by our company, and Tesla. Electrify Canada is starting to come in now, which is owned by the Volkswagen Group. I would say there is a mix.

The Chair: Thank you.

Senator Loffreda: First of all, thank you for being here. I’m replacing Senator Forest-Niesing, so we may have covered this previously in this committee, but with respect to the incentives, who is your target market? Is the middle class the majority of your customers? There is a lot of talk in the media — and I don’t know if you have those statistics — that most of the people buying the electric vehicles are those who could afford expensive vehicles. Therefore, it’s great to have that incentive; I’m not contesting the incentive should be there, because it is a matter of setting up a culture and a DNA of wanting to do something in the country. But would you have a statistic for curiosity purposes as to who is benefiting from that incentive? And how do we make it more accessible to the middle class?

Mr. Allan: First, I would like to thank you, because your question made me realize that I forgot to say one very important thing, which is in the last federal Liberal election platform, there was a mention of an incentive for used electric vehicles, and our organization strongly supports that policy.

We have seen a used EV purchase incentive in Ontario run by a group called Plug’n Drive, which started Canada’s first EV Discovery Centre, where you can try an electric vehicle, and that seems to be working very well. What is so exciting about that is we have had enough years now where there are EVs on the market that are ready for resale, and so we believe that that policy will, at relatively low cost, make EVs accessible to more Canadians.

I believe that the MSRP purchase cap that I mentioned was intended specifically to get at concerns over who is receiving the subsidy, so it was deliberately targeted at the lower range of vehicles. I don’t have the income statistics on who received the purchase incentives because, as a non-government organization, we unfortunately don’t have that data, but I do think that was why the MSRP cap was set in the first place.

The Chair: Thank you.

Senator Marshall: Just listening to the discussion, the entire objective is to reduce greenhouse gas emissions from the transportation sector, right? And you said it’s actually going in the opposite direction. The government seems to get into and develops a program and puts it in place and then just keeps going with that same program. So it would seem to me if we’re not achieving what we had hoped to achieve, shouldn’t we do a rethink of the program? Especially now, when I hear the higher-income people are the ones taking advantage of the rebate. So why does the government keep doing the same thing when they are not getting the results that they want? In fact, they are getting the opposite results.

Mr. Allan: Thank you for that question and for the opportunity to clarify. When I said that the emissions from transportation are increasing, I was referring to — the 2030 target is set based on a 2005 base year. So when I said they were increasing, I meant from that base year. The federal purchase incentive was implemented starting in May of 2019, so it’s relatively recent. And since it’s been implemented, there has been a very satisfyingly large uptick in the sale of ZEVs, so it seems to be working fairly well, and that’s why we are so hopeful that it will be continued.

Senator Marshall: But the objective is not to sell the cars. The objective is to decrease greenhouse gas emissions, right?

Mr. Allan: That’s absolutely correct, although each electric vehicle can lead to a very significant savings compared to an internal combustion engine vehicle.

Senator Marshall: Thank you.

The Chair: Thank you, honourable senators. Mr. Allan, we can entertain you if you have ending comments.

Mr. Allan: I would just like to thank you so much for your interest. I think many Canadians have exactly the questions that you have asked me here today. Senator Duncan, I wanted to let you know that we have now initialized stations in the Yukon, funded by NRCan, and they are being used and we’re very excited about that.

The Chair: As we conclude, I would like to bring to the attention of senators and Mr. Allan that New Brunswick is covered on the Trans-Canada Highway with Tesla and the Irving corporation from the border of Quebec to the border of Nova Scotia with electric chargers.

And on this, we received a brief, honourable senators, from the Canadian Vehicle Manufacturers’ Association this afternoon, and it will be translated and sent to you ASAP, so this will also cover part of the mandate we got from the Senate of Canada.

Honourable senators, thank you very much for your participation. To Senator Loffreda, this is your first meeting. I hope there will be many more meetings, too. And I wish to remind senators that the next meeting of the committee will take place on Wednesday morning at 11:30. We will be looking at the draft report for this study to be tabled in the afternoon in the Senate of Canada.

Senator Marshall, do you have a question?

Senator Marshall: We would usually get a copy of the transcript of our meeting today fairly quickly, so when will we be getting a copy of that?

The Chair: That’s a very good question; Mr. Smith, please?

Alex Smith, Analyst, Library of Parliament: Very quickly. The transcript from the earlier part of the meeting is already available.

Senator Marshall: Good start.

The Chair: So to adopt the report will be Wednesday morning at 11:30.

[Translation]

Senator Bellemare: I would just like to ask you if the report could be ready earlier. Many of us have meetings at that time on Wednesday.

[English]

The Chair: Okay, if it can be made available earlier we will. Perhaps we can meet later on Wednesday.

[Translation]

Senator Bellemare: Or we could meet later. That would be ideal.

The Chair: That’s a good observation.

[English]

Senator M. Deacon: On that line, my question is: What is the latest we could meet? For example, do we want this in the Senate on Wednesday or Thursday? Wednesday, right?

The Chair: The preference is Wednesday.

Senator M. Deacon: Right, so how much time do you need after we meet for it to be ready to go into the Senate?

The Chair: According to the analyst, the report could be ready for Wednesday afternoon.

Mr. Smith: Just to add to that, it depends on how many changes are made to the report. If the changes to the report are relatively simple and minor changes, it would be very quick to do. If there are some substantive changes, extra sections or new phrasing, then it would take longer and it would be challenging to turn over because there have to be changes made, translated, then printed out and prepared; there is a bunch of steps that have to take place.

Senator M. Deacon: With that in mind, with total respect of the workload — I don’t know yet, I’m trying to figure it out; I respect it but I don’t know it — is there any way we can meet tomorrow or is that hard from your perspective?

I’m just throwing it out there, folks.

Mr. Smith: The report has to be written and then translated, so there is no way you’re going to get it tomorrow.

Senator M. Deacon: That’s fine.

Mr. Smith: If all went well, you would get it tomorrow evening but I don’t think that’s going to happen. It will probably be distributed to you on Wednesday morning.

[Translation]

Senator Bellemare: What if we didn’t meet at 11:30 a.m., but rather at 9 a.m. Wednesday?

[English]

The Chair: If we could accommodate that.

[Translation]

Senator Forest: But on Friday, there is the ISG meeting. It ends at 11:30 a.m.

The Chair: We are talking about Wednesday.

Senator Bellemare: It’s not Friday.

Senator Forest: I meant Wednesday. Our meeting takes place Wednesday.

Senator Bellemare: It is at 11 a.m.

Senator Forest: No, the ISG meeting is in the morning. It starts at 9 a.m. and ends at 11:30 a.m.

[English]

The Chair: So that’s why we were looking at 11:30 because there are other caucuses or other groups.

Senator Day: Or if we can get it late tomorrow.

The Chair: We’ll bring to the attention of the clerk. The clerk has heard the comments. If we can accommodate for tomorrow night, then this will precipitate, and if not, the latest will be at 11:30 Wednesday morning.

Senator Day: Keep in mind that this report has to get into the Senate and be adopted before the supply bill, and the supply bill is the whole reason we’re here. They’re all tied together here.

Senator Marshall: When will we do second reading of the supply bill? Wednesday? And third reading Thursday?

The Chair: With unanimous consent, with leave it could be Wednesday.

Senator Marshall: We could do it all in one day.

Senator Day: Once the report is adopted then we could get it done.

Senator Marshall: With unanimous consent, though.

The Chair: So honourable senators, thank you very much for the information.

(The committee adjourned.)