Senate Committee on National Finance met this day at 8:30 a.m. to study the
Supplementary Estimates (B) for the fiscal year ending March 31, 2020.
Mockler (Chair) in the chair.
Honourable senators, my name is Percy Mockler, a 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. As a reminder to those watching, the
committee hearings are open to the public and also available online at
I would now like
to ask senators to introduce themselves.
Forest: Éric Forest, senator from the Gulf Division in Quebec.
Tannas: Scott Tannas from Alberta.
Stewart Olsen: Carolyn Stewart Olsen, New Brunswick.
M. Deacon: Marty Deacon, Ontario. Good morning.
Peter Boehm, Ontario.
Larry Smith, Quebec.
Duncan: Good morning. Pat Duncan from Yukon.
Loffreda: Good morning. Tony Loffreda from Montreal.
Good morning. Marty Klyne, Saskatchewan.
Marshall: Elizabeth Marshall, Newfoundland and Labrador.
I would also like to introduce Maxime Fortin, the clerk of the committee and
our analysts, Alex Smith and Shaowei Pu, who team up to support the work of the
Standing Senate Committee on National Finance.
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
senators and the viewing public, we begin our consideration of the expenditures
set out in the Supplementary Estimates (B) for the fiscal year ending
March 31, 2020, which were referred to this committee on February 25,
2020, by the Senate of Canada.
For the first
part of the meeting, the Treasury Board of Canada Secretariat will give us an
overview of the entire Supplementary Estimates (B) as well as of their funding
We welcome Karen
Cahill, Assistant Secretary and Chief Financial Officer. She is accompanied by
Glenn Purves, Assistant Secretary, Expenditure Management Sector; and Marcia
Santiago, Executive Director, Expenditure Strategies and Estimates. Welcome to
the three of you, and thank you for accepting our invitation to be here at
I have been informed that the floor is yours for a presentation, to be followed
by questions from the senators.
You have the
Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada
Secretariat: Good morning, senators.
Thank you for
inviting us to appear and talk to you about the business of supply. I will
provide a brief presentation including an overview of the supply cycle and
timelines, a look at these supplementary estimates and the major spending items,
and next steps related to Supplementary Estimates (B) and the Main Estimates.
Once I have completed my presentation, I would be pleased to answer any
questions you may have.
We have a second
slide here. We always provide this slide just as a reminder to senators about
the steps in the supply process.
in estimates, funding requests secure a Treasury Board approval, and estimates
may be tabled in each of three supply periods set out in the House of Commons
standing orders. The estimates are tabled in advance of the related
appropriation bills to allow for study by parliamentarians.
As part of this
study of estimates, the Treasury Board president and TBS officials appear in
front of committees, such as today, to discuss the estimates for the government
as a whole, in addition to TBS’s own spending plans. Other ministers and
departmental officials may appear before committees responsible for the review
of their respective estimates.
On the last
allotted opposition day in the supply period, appropriation bills are introduced
and voted on in the House. The bills are subsequently voted on in the Senate.
Appropriation bills come into force upon Royal Assent. In addition, the Governor
General signs a warrant authorizing expenditures from the Consolidated Revenue
Slide 3 shows the
supply cycle diagram, which illustrates the different steps to be taken in the
supply process in each period of a typical year. Right now, we are in a very
busy period in the supply cycle with the tabling of the last supplementary
estimates for 2019-20 and the tabling of the Main Estimates and departmental
plans for 2020-21. Given the election date and the reduced member of sitting
days in December, the 2018-19 departmental results reports were actually tabled
on February 26, 2020.
Slide 4, giving a
tree-top perspective, shows the $5.6 billion total amount of budgetary estimates
being presented in Supplementary Estimates (B). Of this amount, $3.8 billion for
61 organizations requires approval through an appropriation act. The next slide
will show the largest funding proposals that are part of this $3.8 billion. The
remaining amount, $1.8 billion, relates to forecasts under existing statutory
authorities. You’ll recall a couple of years ago we started showing the
statutory information alongside the voted to provide a complete picture. This
includes $950 million for the Federation of Canadian Municipalities for the
Green Municipal Fund, $345 million for grants under the Dairy Direct Payment
Program, and $110 million for the Climate Action Incentive Fund.
For slide 5,
these estimates highlight eight items that are seeking voted authorities of $125
million or more, and together they account for just under 75% of the funds
you’ll be asked to approve in the appropriation bill. They include $919 million
for forgiveness of comprehensive land claims negotiation loans; $588 million for
First Nations Child and Family Services; $487 million in capital investments to
support Strong, Secure, Engaged forces; $232 million for health and social
education services and support for First Nations children; $180 million for the
annual write-off of unrecoverable debts for the Canadian student loans —
the write-off relates to over 33,000 loans; $150 million to reimburse First
Nations and service providers for on-reserve emergency response and recovery;
$148 million in payments to claimants, reimbursement of legal fees and other
required activities under the Heyder and Beattie class actions
final settlement agreement; and $128 million to support National Defence’s
senators, I’d like to give you a heads-up on oncoming appropriation bills. I’m
on slide 6 here. There will be two tabled in March. One is to approve estimates
expenditures presented in the Supplementary Estimates (B), and the other is to
provide interim supply for the 2021 fiscal year. Departments will request a
portion of the funding shown in the Main Estimates based on their cash
requirements until the end of June. The turnaround time on these bills may be
quite short, as normal and as Royal Assent is needed before the end of the
fiscal year. In June, the full supply bill will be tabled, and this will cover
the remainder of the funds presented in Main Estimates. If there’s a spring
supplementary estimates, an appropriation bill for that 2021 fiscal year,
Supplementary Estimates (A), would be introduced at the same time, in that
perhaps I’ll open the floor to any questions that we can answer on your
Marshall: I have a question on the centralized votes. The PBO had mentioned
in his report that they have increased significantly. I was wondering why. But
before you answer, the impression I got when I read his report — although
he doesn’t say so — is that Treasury Board doesn’t have confidence in the
line departments so the centralized votes are being used more before the money
is sent out to the government departments. Can you briefly explain why the
centralized votes have increased?
Mr. Purves: Sure. If you’re referring to the PBO’s report
on Supplementary Estimates (B) —
Marshall: That’s correct.
Mr. Purves: They were talking about a specific central vote
called vote 10. This is for government-wide initiatives, strategic management
initiatives, that take place. This is a vote and a tool that’s existed for many,
many years for Treasury Board. It’s intended to provide for a situation where
Treasury Board reviews an item and approves an item but the actual distribution
of funds to specific votes has not been established yet, and the time frame
between establishing that and the need for the payments is very tight.
When you look at
what’s been supported through that central vote — things such as the
Indigenous Early Learning and Childcare Framework, things such as funding to
compensate current and former employees in the core public administration for
damages related to the Phoenix pay system, modernization of the program and
administrative services, export diversification strategy —
Marshall: I didn’t need you to list them. I’m just curious, because when you
read that and you see that the usage has increased, you get the impression that
there’s a reluctance to put the money out there in the departments. As a
follow-up question, Treasury Board has an oversight role with regard to the
Mr. Purves: Right.
Marshall: Are the financial systems in the departments robust enough? That’s
the impression I am getting. I’ll give you National Defence as an example. I
think they have about 300 capital projects. Is Treasury Board satisfied that
they have a system robust enough that they are accumulating both the financial
information and progress with regard to the projects? Is there a concern in
Treasury Board with regard to at least some of the departments?
Mr. Purves: This is nothing to do with any confidence in
the systems of other departments and so forth. We actually have amazing
financial systems in various departments to be able to track financial
information. We work collaboratively with the CFOs and so forth.
circumstances where an initiative spans many departments and the initiative is
very important from a strategic management standpoint, but the specific amounts
to be allocated to each vote in each department have not been defined yet
because there are outstanding issues pertaining to identifying how much is
required specifically for each vote. These are items that are taken to Treasury
Board, they get the authority of Treasury Board and they are placed in the
central vote, and then when they’re allocated from the central vote to the
specific departments, that information is revealed through our reporting on
allocations from central votes.
Marshall: Let’s jump to the departmental results reports that were probably
released last week or the week before. Who has responsibility for that? Where
does Treasury Board’s involvement start and stop? I haven’t looked at them all.
I’ve looked at National Defence as an example, or started to, and some of the
performance indicators. For some of the results they’re reporting on, if
somebody was looking at them, they are thinking, “That’s not right.” They’re
reporting 100%, or they are 100% satisfied that they met performance indicators.
When you see what’s out there in the media, you wonder what’s the
responsible for the departmental reports? What is Treasury Board’s
Mr. Purves: Treasury Board is part of the broader estimates
reform. Treasury Board put in place a policy on results in 2017 that set out
departmental results’ frameworks that identified and allowed departments to
actually put in place the core responsibilities that they’re responsible for,
the objectives under these and the indicators that they’re going to map against
these core responsibilities.
As part of that
framework, the government introduced the departmental plans that set out what
are the plans that are going to be undertaken relative to these indicators, and
then the departmental results reports that actually report on those indicators.
The ones that you’re referring to, senator, are the first vintage of
departmental results reports coming under the policy on results.
There’s a whole
host of different indicators that are available to Canadians and
parliamentarians, including on GC InfoBase, where you can get information about
the indicator and the rationale for the indicator and why it’s calibrated the
way it is.
Marshall: But you look at it, you see what’s going on in the media and you
hear all of these military leaders expressing opinions on the security of the
country, and then you pick up the Department of National Defence’s
Departmental Results Report — for example, Canada’s Arctic sovereignty is
preserved and safeguarded. The target is 100%. Their actual result is 100%. But
if you read what our military leaders are saying, you wonder what’s the
connection. It’s not correct.
Who is looking at
the quality of the information?
Mr. Purves: We set out guidance for departments that
complete these departmental plans and the departmental results reports. But a
lot of that is set out in the policy on results.
Marshall: It’s very misleading.
Mr. Purves: Actually, could I just answer a follow-up to
On the initial
part about vote 10, there are circumstances like LGBT and the Phoenix damages
where claims have to be made in order to draw the funds, so there’s not that
line of sight specifically on which departments all those claims are going to be
made from. To allocate prematurely funds from a central vote or just directly
into those departmental votes without having that line of sight would be
premature. That’s what vote 10 was really conceived to do.
In terms of the
amounts and so forth, I should point out that it had gone up, but in the latest
Main Estimates that we’ve tabled, it now sits at about $31 million.
Forest: My first question is about the pilot project, which seems like a
really good idea, and which aims to better coordinate the tabling of the Main
Estimates with the budget. Based on what we see here, do you intend to abandon
this pilot project that has been under way for two years? I’d like to know your
motivation for that, because it seems to me that, in a fiscal year, there is a
logical link, a direct link between the Main Estimates and the budget. I do not
understand why you would want to abandon the pilot project.
Mr. Purves: Thank you for your question, senator. If I may,
I will answer in English.
Forest: No problem.
Mr. Purves: There are many aspects and many parts to the
estimates reform. I think the one you’re talking about pertains to the timing.
You’ll recall a couple of years ago there was an all-party decision taken in the
House to make a temporary change to the standing orders for two years to allow
for the tabling of the Main Estimates to occur not by March 1 but by
April 16. This permitted, once the budget was tabled, the inclusion of the
budget items in the Main Estimates.
There were two
steps done as part of that pilot. The first year we had that central vote in
Treasury Board central votes, vote 40, and it included all the funding for the
budget measures for the next fiscal year. The year after, there was a tabled
report by the House committee that’s charged with reviewing Treasury Board, and
the Main Estimates were adjusted to reflect some of the initiatives and
recommendations from that committee and broke out the budget implementation
votes by specific department so that it allowed for that transparency by
I should point
out that the undertaking was a two-year commitment. It was always a two-year
pilot. It was always expected to sunset. From that vantage point, the
consideration of the timing and whether you go back to that is something that
ultimately is a decision of the House because it would require, again, a change
to the standing orders to help facilitate that. But it is something that the
government did provide a response to, in terms of the House, in June of
2019, I believe, as well as how it actually set out in the Main Estimates.
timing, there are a lot of initiatives that have been done as part of estimates
reform. Recall that there was the reconciliation of the accrual accounting with
the cash accounting that was included in the estimates as well as the budget. We
hope to continue that kind of reconciliation between the budget and the
The policy on
results was part of that estimates reform as well. As I mentioned to Senator
Marshall, the first vintage of that policy in terms of the departmental results
reports have come out.
We have propped
up — and I’ve said this in many committee appearances — GC InfoBase.
It’s a remarkable source of information on spending, FTEs and results that
provides a breakdown right to the indicator — if you’re interested in the
results side — but also down to specific programs on how much is being
spent in the government.
We now publish
information pertaining to frozen allotments to central votes and spending by
purpose online to accompany our supplementary estimates. We’re doing open data
so that if researchers want to take the Main Estimates information and then
Excel format and use it for research, they can do that historically. There’s a
whole host of initiatives that are continuing.
With respect to
the timing question, it is a question of whether parliamentarians want to
continue it because it would take a change to the standing orders.
Forest: Based on my experience as a manager, if we go back to the old
method, we will be considering three supplementary estimates. In terms of
accountability, when managers need to plan their budget year, currently they
need to plan for two of them, that is, the Main Estimates and, a few months
later, Supplementary Estimates (A), Supplementary Estimates (B) in the fall and
Supplementary Estimates (C) in early winter. So, in my view, the latitude
surrounding these supplementary estimates encourages a certain laxity in budget
planning. As I see it, having only two supplementary estimates would improve
transparency and the thought process in assessing our expenditure needs during
the fiscal year.
Mr. Purves: It’s true that under the pilot we only had two
supplementary estimates, so two supply periods that followed the tabling of the
I would say that,
as with any pilots, there are pros and cons, and members in the House have
identified the pros and cons from their vantage point, and certainly, in terms
of consideration of future innovations with respect to estimates and the supply
process, we’re always interested in learning the views from parliamentarians in
both houses to be able to understand how we can better refine the process going
M. Deacon: Thank you for being here today, and, in particular, thanks
for the slide decks. It’s very helpful ahead of time.
My question and
my wonder is with respect to the unrecoverable debts for Canada student loans at
$180.4 million. You did describe that this is approximately 33,000 or 34,000
loans, hence 33,000 or 34,000 potential students. It’s part of a much more
complex issue and challenge right now for our young people.
I’m trying to get
a sense of trends on this. I did try before I came in. Is this number, this
estimate, continuing to rise? Are we finding ways to be able to stabilize it? I
would like to know more about this because it’s something that we continue to
talk and hear about, but we need to do better at. I’m trying to understand the
last three to five years. I did look for those numbers — truly I did —
and I could only find one year back. That’s why I’m trying to get a sense of
Mr. Purves: The amount that is cited, I believe it’s 180
million. If you look historically, it’s kind of in a means. There have been
years where it has been about 160 million; there are years where it has been in
the 200 millions.
The stock of
student loans is in the 34 billion range. There’s always a provision that’s
taken from a fiscal standpoint and from an accrual standpoint to recognize that
there’s always going to be a bit of a loss in terms of a loans portfolio. When
there are non-performing loans, they shift over to the CRA for about six years.
At the end of six years, where there are efforts to collect and so forth, if
they are non-performing at the end of six years, then we have to take this
through in terms of Main Estimates and recognize it. That is really what that
is. That’s why we do it on an annual basis.
From a policy
standpoint, over the last few years, there have been some changes in terms of
how the loans have been structured as well as moving more toward grants and so
forth. I think it was Budget 2016 that actually cited some changes to the
The only thing I
would table with you is that there’s always a bit of a lag in terms of seeing
trends and movements on that front in terms of the write-offs and so forth. I
would imagine that over time you would see some change due to some of these
M. Deacon: I’m thinking about process at the same time, so the loans,
the grants, some of the changes in structure and reporting, all of those pieces.
When we look at this being 2019-20, where might we start to see this
conversation, the impact of improved process on reduced unpayables, basically?
Do you think it would be by 2023-24? Or we don’t even know that?
Mr. Purves: To be quite frank, I’m not close enough to that
question. I think ESDC would have a better line of sight in terms of being able
to answer that question. We could certainly refer that question to ESDC.
M. Deacon: Thank you. You have talked about $180 million on $34
billion. I haven’t done the percentage on that. I was also looking at the
percentage of that number, which you have explained is fluctuating over time. I
think that’s fine for now. We’ll carry on later.
Stewart Olsen: Thank you very much for being with us today. I’m always
hesitant to put bureaucrats on the spot because I think the process of these
estimates is formulated by a political process, is it not? So each department
politically puts their best wish forward, and then it’s approved.
This is what
Canadians have limited understanding about. We get to you and to the Treasury
Board, but there are all of the steps that people go through to actually get
this money, and supplementary estimates is in addition to the budgeted-for
items. Perhaps the process needs to be more clearly looked at. Perhaps we should
be questioning the ministers of the various departments who have requested these
additional funds. You have to scramble, when it comes to Treasury Board, to
figuring out how to get that money. Each department does their estimates and
says, “Oh, we have this program; let’s move forward with this.”
particularly saying any government, because it could be of any ilk, but I think
we are losing sight of fiduciary responsibility in all of this. It’s not the
fault of the bureaucrats; it’s a fault, I think, of our system that perhaps
needs a review.
I’m sorry to put
you on the spot, but I do want some input from you on how difficult this whole
thing is to manage within your budgetary guidelines or then come forward with
asks for more money where the House of Commons kind of blindly says, “Okay,
we’ll look at this briefly” and then, “Yes, okay.” Can you just elaborate on
that a little bit? This is not an attack on Treasury Board; it’s just a sincere
request for information.
Mr. Purves: Thank you for the question, senator. Maybe I’ll
take a step back on that because there is a conflation between the budget and
the estimates. They do serve separate purposes, in many respects.
When we think of
Main Estimates, that’s the bulk of spending that the government requires in
order to operate. That bulk of spending is on a voted basis. We tabled Main
Estimates last week. The amount of voted spending is about $125 billion. The
amount of statutory spending is $175 billion. Of the $125 billion, there have
been many Treasury Board decisions and trips to Parliament in the past that have
touched on many aspects in that amount. That is a cascading accumulation of
government programming that’s on the basis of Treasury Board decisions in the
past. Parliament, of course, approves this on a year-by-year basis. That’s what
is being presented to you there.
estimates typically bring in new decisions and new initiatives that have come
along, either through the budget or on an off-cycle basis, or in the Fall
Economic Statement, for instance. Once it goes through Treasury Board, it is on
the next boat to Parliament through the supplementary estimates. We provide some
detail in terms of what all those initiatives are within each departmental
sheet, so there is transparency with respect to what parliamentarians are being
asked to approve through that process. That’s the amount that is added to the
Main Estimates and that is established at the beginning of the year.
Stewart Olsen: I understand the process, so could you come back to the
actual oversight question?
Mr. Purves: When we look through the budget, it’s basically
new initiatives that are approved and nominated for approval, either statutory
or future voted items that will be coming to Parliament once they receive the
approvals and they go through Treasury Board now that we are beyond the pilot.
In terms of the
oversight, when you look at it — policy decisions, source of funds,
Treasury Board approval and then parliamentary approval at the end to approve
the funds — what we try to do is provide as much transparency in these
documents as possible so that you are able to see the big picture. In other
words, you can look at a department like ESDC and you can see what was approved
last year, what was approved for Main Estimates and how much up-to authorities
are being asked for in terms of these supplementary estimates. Then it’s up to
the parliamentarians to decide how to approve that.
the end of the day, the actual spending then gets recorded and reported through
the annual financial report and the public accounts, both on an accrual and a
So the systems
are in place to provide that kind of oversight. I think what we want to do is
make sure that parliamentarians have as much transparency and have as much
information as they need in order to make the decisions they need to make.
Stewart Olsen: I have one more follow-up question. You have your budget,
which is your supposed line in the sand. Then you have all departments coming
and saying, “We really need this. We want this new program.” Who then says “yea”
or “nay” to all of this money? Is there no cap to how much the government will
spend above the voted-on budget?
This is where I
think people don’t understand. Who fights that? Does Treasury Board then say,
“Minister, we don’t have this money; we’ll have to go to sups”? And where is the
rational judgment in what the country can spend and what is a nice idea for a
Mr. Purves: Treasury Board will review this spending and
opine on the budget implementation aspects. It will look at it from the
standpoint of the challenges of implementation and so forth. Once there is a
decision through Treasury Board, then it’s put forward for supplementary
estimates or into mains, depending on the time of year. There are natural checks
and balances on the government’s side pertaining to that.
I would point out
that when there are amounts proposed in a budget and there are new initiatives
and so forth, this is above and beyond the Main Estimates. This, of course,
would involve potentially going back for new funding to Parliament, unless a
department can actually identify resources internally to be able to use for that
There are strong
linkages and checks and balances between Department of Finance and us in terms
of looking through and the oversight in terms of the system, and there are the
checks and balances in terms of cabinet committees and so forth that review
policy proposals but also proposals for new funding.
Stewart Olsen: You do understand that Canadians think the budget is what’s
being spent, and then there is all of these other things that come in. The chair
is signalling that my time is up, but that’s what I’m trying to point out to
Mr. Purves: Can I add one last point?
Yes, Mr. Purves.
Mr. Purves: In a way, that’s why there is a budget and a
Fall Economic Statement, because there are so many different things that would
impact the fiscal track on an accrual basis, including the state of the economy,
interest rates, price of oil and all these things. There are a lot of things
that factor into new initiatives and new policy spending and so forth.
Loffreda: Good morning and thank you for your presentation.
International Women’s Day, I want to congratulate the government on the Women
I am just curious
how these amounts are allotted. Is it by population, by province, or by program?
If it is by program, how are the programs determined?
briefly touched on my second question, and maybe you can elaborate. Being a
banker, it’s of interest when I look at figure 3.2 where there is a steep curve
on the loan write-offs year after year. If I do the math, I think we are around
5% on the write-offs, which is in line with the U.S. I think the U.S.
historically is below 9% or 10% of the number of total loans granted. Just
elaborate on that. Why is that curve so steep on the loan write-offs? You did
mention that there is a grant program also. I always used to kid, as a banker,
we would make loans not grants. That is kind of worrisome when I look at that.
Is the percentage steady year after year?
Mr. Purves: Thank you for the question.
Maybe I’ll start
off with the second question. In terms of the loan write-offs, the aggregate
amount of student loans has been about $34 billion, as I mentioned. The amount
of the write-off has been kind of steady between $160 million to $220 million,
in that range, depending on the year and depending on the vintage, so we haven’t
seen that much of a variance there with respect to the amounts of the write-off.
Again, this is something that we bring forward in the last supplementary
estimates of every year for parliamentary consideration. It’s something that
what we could do is we could perhaps next year have a better visual to be able
to walk parliamentarians through the historical trend of this. We could actually
talk to our ESDC partners on that, just to see if there is additional
information that could be provided.
I think ESDC is
here tomorrow, are they not? We could call the CFO and mention you are very
interested in that issue. They would have a better line of sight on that just in
terms of talking about provision rates and so forth. A lot of that is determined
by Department of Finance in consultation with ESDC because it is a fiscal
Loffreda: On the Women Entrepreneurship question.
Mr. Purves: Could you repeat the question, sorry.
Loffreda: Yes. First, congratulations. It’s a great program.
Mr. Purves: Yes, thank you.
Loffreda: How do you determine the amounts? How are they allocated per
province? Is it by population or by programs? How are the programs
Santiago, Executive Director, Expenditure Strategies and Estimates, Treasury
Board of Canada Secretariat: As Mr. Purves said, departments
individually would have a better line of sight on how they make decisions in
terms of the allocation of their programs. The Entrepreneurship Strategy is a
horizontal program, which means that it is administered by several departments,
and they tend not to be very big amounts that are administered in the regional
development agencies. If it would be of interest to the committee, we could get
Loffreda: I think it’s $2 billion and how will it be allocated across
Ms. Santiago: In these supplementary estimates, we are
showing $11 million.
Loffreda: We’re less, yes.
Mr. Purves and Ms. Santiago, can you please provide the
information to the clerk?
Mr. Purves: I’m happy to, yes, absolutely. Thank you.
I have more of a generic question. When was the decision made to revert back
to the old process? How did the Treasury Board arrive at its decision? Going
back to when Senator Marshall asked that question earlier, how did you track the
success and shortcomings of this experiment?
I have to just
revert for two seconds. Scott Brison at the time called this meeting and there
was about 200 to 300 people there: staff, senators, MPs, et cetera. This
new way of doing things was going to be a fantastic opportunity. He didn’t talk
really about the test of two years being as important as the change and changing
the philosophy, becoming more effective, et cetera. Two years in this
business, in this environment, is like a flash in the pan.
Can you give us
two or three points of how the decision was made to just can the program and go
back to the old way? What’s been learned from this about transparency? Really,
what has been learned? Or are you going to study matters at this particular time
and come back to us in another year or two with the results? I’m not trying to
be a smart aleck.
Mr. Purves: No, it’s fine.
I’m trying to understand being accurate and precise and the challenge with
the size of the government.
Mr. Purves: Aas I mentioned to Senator Forest, estimates
reform is a very broad thing, and it included a whole host of transparency.
There is a continuation of that in terms of when we publish online the estimates
document and all of the supplemental information that you receive to be able to
actually go in and see how the central votes are working and what’s being
distributed from it so that you can actually ask the precise questions. I would
note, and I have been in my position for about a year and a half, that the level
of precision that people can ask questions about central votes is far greater
now than in the past. The type of information that we are able to put out
through GC InfoBase is immense. If people actually go on and use it, they could
actually hard code and fine tune and answer precise questions they have about
particular government spending. It is a very useful tool, very much like USA
Spending, to be able to actually breakdown program spending and to provide that
historical perspective and so forth.
terms of that aspect that you are talking about, which is the timing issue and
the movement, suspending the standing orders by two years and moving the date
that we can table Main Estimates, instead of it being tabled in
February and moving it to April, that was an all-party agreement in order
to temporarily do that. It was always stated that it would be for two years.
Ultimately, decisions to proceed and go back are things that are not just a
government decision but an all-party decision that would be required to do
In terms of the
level of transparency, the type of allocations that we were making from the
budget implementation votes and in terms of further innovations and so forth, we
always think through these initiatives. Certainly, as I mentioned, there are
pros and cons to it. To be fair, when you look at the report of the Standing
Committee on Government Operations and Estimates in the House, there were a
number of pros and cons. The government did attempt to respond to many of them
in the Main Estimates for 2019-20. Then, of course, we have the election and we
are where we are. We, as officials and the government, would have to respond to
the Standing Orders as they exist. That requires the tabling of the Main
Estimates by March 1.
If there are two main things that come out of this exercise as
accomplishments, what would they be?
Mr. Purves: As an official, the big one is the level of
transparency we have on the information. In fact, I would say, at this juncture,
we almost have so much information out there that, it’s a question of us needing
to work more with parliamentarians and Canadians to help them navigate through
it. There is a lot of information available. Transparency is a big factor.
The second is, as
with any pilot, it’s always useful to take lessons from the pilot. That’s
something that I think will continue. We did have a different form of including
Main Estimates going forward. We are back to where we were in 2017, before we
embarked, just with respect to the timing aspect and the fact that we have Main
Estimates that are tabled before a budget and supplementary estimates, three
periods. We will continue to ensure that you have all the information that you
need in order to make those decisions.
Thank you to our panel for your presentations and answers and all the hard
My question has
three parts but revolves around the realm of transfers. I’m wondering what the
total budget is for transfers to various organizations for innovative approaches
to reduce greenhouse gas emissions in government operations. Of that, how much
has been spent to date? I see from the Treasury Board Secretariat that
Environment shows $135,000 but, in the Department of National Defence, I see
from Treasury Board Secretariat $2.3 million. I’m assuming there is more and
that there is a total budget. Just in that regard, on the results side, in terms
of value for money, to date, is there any measurable success with this
Mr. Purves: Specifically on that initiative and on the
second initiative pertaining to the results to date, that’s something that I
believe Fisheries and Oceans would have to answer.
question is an intriguing one in the sense that you asked for effectively a
thematic lens of spending. If I can clarify your question, you are asking,
looking at the different programs, how much has been spent?
In that regard, in terms of the transfers to “various organizations for
innovative approaches to reduce greenhouse gas emissions in government”— that’s
how the transfers are described — I’m wondering what that total budget
Assistant Secretary and Chief Financial Officer, Treasury Board of Canada
Secretariat: I’ll take the question. Thank you, senator. We have in TBS,
Supplementary Estimates (B), an amount of $4.8 million to be transferred from
the central greening fund to various departments for innovative projects in
regard to reducing GHGs. There are a number of departments and projects
involved. We have projects under DND. We have projects under PSPC. For example,
in PSPC, they want to have a cooling system for plants in areas that will
produce a lot of CO2. That is one of the projects. Under DND, as you
know, DND has a number of housing projects under their purview. One of those
projects is to make the housing projects more efficient with respect to
greenhouse gas emissions. Those are only two projects, but I could mention many
other projects. Different departments have been submitting projects. Based on
certain criteria, the funding was transferred to them from the central fund.
You said the total was $4.8 million?
Ms. Cahill: Yes.
To date, are there any measurable successes?
Ms. Cahill: I would need to follow up on that. Those are
new initiatives, of course. At this moment, it’s very difficult to measure
success, but I’m committing to following up on this question.
Marshall: This is a general question. It’s March 10. We are looking at
the funding for the rest of the fiscal year, so three weeks. The government is
going to spend $3.8 billion in the next three weeks. Has any of that money been
Mr. Purves: It would depend on a department-by-department
basis as to whether they have decided to advance funding from their own funding.
You have to keep in mind that these authorities that are being sought are “up
to” amounts. They get an authority up to $3.8 billion.
Marshall: The money hasn’t received parliamentary approval yet. It’s not a
forgone conclusion that parliamentary approval will be received. None of that
money should have been spent.
Mr. Purves: Again, a lot of this has to do with “up to”
amounts. For a department, if it’s a top-up to an existing program, they have
authority to be able to spend for that program. There is an expectation that
they are going to need an extra amount, and it may be that they expect to
receive the amount and they are able to make payments at the end of
March in order to facilitate that. Often grants and contributions are
disbursed once there is Royal Assent for this type of spending.
Marshall: To go back to my original question, have any cheques gone out
relating to this $3.8 billion?
Mr. Purves: Again, you would have to identify whether there
is a portion of that spending that the department has been able to fund
internally to deal with existing programs.
Marshall: I must say I find that a problem, but thank you for your
Could you provide, Mr. Purves, a graph?
Mr. Purves: I can provide just a response to the committee
on that, if that’s helpful.
Yes, please do, through the clerk. Thank you.
Forest: My question is along the same lines as my colleague’s.
Look, there are
21 days left in this fiscal year. If we did not approve the additional funding
in Supplementary Estimates (B), and possibly (C) as well, are there any
expenditures related to tenders or suppliers? What would happen? Something about
this issue seems wrong.
We have 21 days
and we have to approve this additional funding, but have the funds already been
allocated and spent? If we decided not to approve the funding, what would
happen? Would the government fall? Something in this budget process, in terms of
the logical sequence, is hard for the average person to understand.
Mr. Purves: If I can just clarify, this system of approving
the last supplementary estimates at the end of March has been going on for
a long time. A department might be able to enter into a commitment under
section 32 for something, but the actual payment could not be made until
Parliament approves and provides Royal Assent. A lot of spending is done at the
very end of the year, and transfers made and so forth, on the basis of that
final Royal Assent of supplementary estimates. If you’re a CFO, you’re always
managing on that basis and you’re not managing ahead of parliamentary authority.
They would be risk-managing without parliamentary authority if they did that.
There’s a distinction between a commitment and the actual payment.
Can you provide the information, Mr. Purves?
Mr. Purves: Sure, I’m happy to.
Loffreda: Just to clarify on the student loans: Like I said, the concern was
the graph, the steep curve. The write-off is 0.6% of the nominal dollar amount
of the total loan balances granted. To calculate exactly the 180 million on 34
billion is 0.6%, which is a little higher than regular bank loans. I want
clarification, and maybe you can answer me in the future. Why the steep curve,
and how is it being managed? What measures are we taking to keep the write-offs
in line with where they should be? And 0.6 is fine. In banking, we would say
between 30 and 50 basis points is where we want it to be. They are students, but
just to make sure it’s being managed properly and how we’re taking a look at it
going forward. Because taking a look at figure 3.2, that steep curve is a
Mr. Purves: Again, a lot of that has to do with the policy
calibration of the program itself. ESDC, I believe, is testifying tomorrow.
We’ll refer the question to them so they’re prepared to answer your
Honourable senators, thank you very much.
To TBS, thank you
for providing sincere answers. We will be watching very closely the additional
information you will provide to the clerk. We appreciate that.
senators, we will move to the second part of the meeting as we continue our
study of Supplementary Estimates (B).
We now welcome
the Parliamentary Budget Officer, Mr. Yves Giroux.
He is accompanied
by the Director General, Costing and Budgetary Analysis, Jason Jacques. Thank
you very much for accepting our invitation to answer questions from the
As you know, we
have a common denominator for the Canadian taxpayer, and that is transparency,
accountability and predictability.
you have the floor for a short presentation.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer:
Honourable senators, thank you for inviting us to appear before you today.
It is an invitation I would be hard pressed to decline, as it would be highly
inappropriate. I am very pleased to be here, and I would never dare decline such
Thank you for
giving us the opportunity to meet with your committee for the first time in this
Parliament. We look forward to continuing to work closely with your committee
during the Forty-third Parliament.
We are pleased to
be here today to discuss our report on the Supplementary Estimates (B) 2019-20,
which was published at the end of February. With me today I have Jason Jacques,
Director General of Costing and Budget Analysis in my office. He is the
éminence grise behind the supplementary estimates and Main Estimates in
estimates tabled on February 18 in the House of Commons outline an
additional $5.6 billion in budgetary authorities: $3.8 billion in spending which
requires Parliament’s approval and $1.8 billion for which legislative permission
proposed year-to-date budgetary authorities, including these supplementary
estimates, are $312 billion, which represents a $21.8 billion, or 7.5%, increase
over the 2018-19 estimates to date.
items in these estimates include $919 million to the Department of
Crown-Indigenous Relations and Northern Affairs for loan forgiveness and
reimbursement for comprehensive land claim negotiations; $487 million to the
Department of National Defence for funding capital investment as part of the
department’s policy, Strong, Secure, Engaged; $180 million to ESDC to write off
unrecoverable debts for Canada student loans, which you questioned Treasury
Board Secretariat sector officials about; and $950 million in statutory
authorities to the Department of Natural Resources for the Green Municipal
These will be the
last under the temporary change to Standing Order 81, which took effect in
2018-19 and aimed to better align the estimates process with the budget. As of
the next fiscal year that will start on April 1, the original process will
be reintroduced, meaning that the Main Estimates will be tabled prior to the
budget. This will also likely bring back the need for three supplementary
estimates — in the spring, fall and winter.
As a result of
these changes, all budget items will be required to go through — hopefully
all of them — detailed scrutiny by the Treasury Board committee of
ministers, chaired by the President of the Treasury Board, prior to the funding
being sought from Parliament. At the same time, this may mean a longer delay
between the announcement of new initiatives and their implementation, as the
earliest opportunity to receive approval for the funds will be in the spring
Supplementary Estimates (A).
report notes that the 2018-19 departmental results reports had not yet been
presented to Parliament prior to the tabling of the supplementary estimates, the
President of the Treasury Board tabled the departmental results reports in the
House of Commons on February 26, 2020 — which I’m sure is pure
coincidence — the day we released our report.
with the PBO’s legislative mandate to provide impartial, independent analysis to
help parliamentarians fulfill their constitutional role, which consists of
holding government accountable, my office will continue to prepare reports and
analyses of the estimates of the government and of the budget, in addition to
other pertinent federal government documents relating to the nation’s finances
recently released our annual assessment of Canada’s long-term fiscal
sustainability at the national and provincial levels. We plan to publish a
report on the 2020-21 Main Estimates in the coming days.
With that, I will
leave you plenty of time to ask questions. Jason and I will be pleased to answer
any of the questions you may have at this time.
Thank you very much, Mr. Giroux.
Marshall: Thank you very much for being here today. My questions relate to
section 3.2 of your report on Supplementary Estimates (B) about National
Defence. My first question is, when you did your review, were you able to get a
listing of the projects that comprise the $487 million? Do you know exactly what
projects that money is going to be spent on?
Director General, Costing and Budgetary Analysis, Office of the Parliamentary
Budget Officer: Yes, we do. As you may recall, approximately two years ago
you asked a very similar question at this committee. Very shortly after that,
National Defence invited us over for a meeting, and they agreed to fulfill our
long outstanding information request to give us a detailed breakdown of all of
the projects that comprised the June 2017 announcement with respect to
Strong, Secure, Engaged.
There’s a lot of
water under the bridge. We’re now almost three years into it. We have filed an
updated information request to ask for an update with respect to where the
spending stands because, of course, there have been many and significant policy
changes. For instance, as part of Strong, Secure, Engaged, there was never
anticipation to buy the used Australian jets. We anticipate that we should be
receiving updated information likely within the next two months and preparing a
report hopefully very quickly after that.
Marshall: I can remember it was two years ago that you were looking for
something similar. I didn’t get what I was looking for, so I’m glad you received
what you were looking for.
indicated they’re going to give you the information within the next couple of
months. I would think that the department would have a system over there whereby
they list off all of their capital projects and that they would have all the
financial information in there, like costs to date and how much is budgeted for
this year and information on the schedules, but you’re saying you have to wait a
couple of months?
Mr. Jacques: That’s correct. As a former auditor general,
you would think that. As a chief financial officer, I would think that. The
information certainly exists within National Defence. It’s simply going to take
them some time to collate it for us.
Marshall: It’s somewhere in the department, so they have to gather it and
collate it. Okay.
In your report,
you indicated you’re going to issue a report when you get the information from
the Department of National Defence, and you’re going to issue a report on the
capital projects, which I’m very much looking forward to. Is there any time
frame there? Can you give us any indication as to a time frame?
Mr. Giroux: As Jason mentioned, we are waiting for
information from the Department of National Defence. Once we get that, it’s
highly dependent on the quality of the information we get. If we get an Excel
spreadsheet that’s very complicated, it will take us more time, but if we get
nice, neat, complete set of data that is easy to understand, then it will be
easier for us to draft a report. If I were a betting man, I’d say it will take
us some time to go through the data we’ll get.
Marshall: And analyze it, okay.
My last question
on National Defence is this: The departmental results were released last week or
the week before. I’m just starting to go through them now. Do you look at those
results? Do you do any work with them?
Mr. Giroux: We use these to a certain extent to inform our
fiscal forecasts, but we don’t look at them with the same lens that an auditor
would, for example, so this is looking back at past performances.
To be very frank,
these are results that have been imposed by officials on officials, so they’re
not super useful, the reach or the attainments of the targets that the
departments have imposed on themselves. A bit more work needs to be done to
determine whether a department has really achieved the results that it was
aiming to achieve.
The example you
gave in the earlier session about defending Canada’s Arctic sovereignty is
highly subjective, relying on the Departmental Results Report to determine
whether Canada is really asserting its sovereignty in the Arctic. The DRR is
probably not the best way to find that information.
Marshall: So you don’t look at the quality of the results?
Mr. Giroux: No, we don’t. The financial information is
useful for us, but the results themselves are not that useful for us.
Marshall: Thank you.
Forest: Thank you for being with us. I would like to come back to the
budget cycle. Given the pilot project two years ago, I don’t understand the
motivation for going back to three supplementary estimates. When we look at what
is happening, based on your analysis, there is an increase of $21.8 billion, for
a total of $312 billion, so that’s a 7.5% increase over 2018-19. Given the
current deficit, were any targets set in the budget cycle for drawing up the
For example, can
we assume that, in this budget, regardless of department, the target this year
is a 2% increase for cost of living? Are the results compared to the budget
year? It seems too easy to me to say that we prepare a budget, but we then have
three opportunities to get additional funding. Our accountability as managers
seems very watered down to me because we have three opportunities to do that.
Last year, one department forgot to include $658 million. Let me tell you, if I
had managed my municipality that way, I wouldn’t have been mayor for long.
Are there clear
objectives given to managers for this fiscal year? Is there any follow-up? For
the everyday Canadian, it looks like, at some point, money is no object; if
we’re short of money, we will go get more.
Mr. Giroux: I admit, that is a huge question. In my
opinion, the directive comes from the top. So, regardless of whether there are
two or three main and supplementary estimates, if the tone set by cabinet is
that it’s most important to achieve certain public policy objectives with little
attention paid to the impact on the deficit, public servants will respond to
those incentives and behaviours by trying to achieve the policy objectives, and
they will ask for as much money as that takes. If, on the other hand, the
objective coming from the top is that the public purse needs to be managed very
tightly and there is a surplus target to meet, public servants will behave in a
way that meets those objectives.
It’s important to
remember that, contrary to popular belief and based on my experience, public
servants are rarely autonomous entities acting independently of political power,
except where there is an obvious separation of powers. In general, however,
public servants respond to the objectives and instructions of their political
whether Supplementary Estimates (B) and (C) exist or not, public servants will
do the bidding of the department they serve.
Forest: It’s a fine balance between sound management of public funds and
Mr. Giroux: Exactly. However, if there are additional
supplementary estimates, meaning Supplementary Estimates (C), that’s one more
opportunity to ask for funding at the last minute to achieve objectives or fund
programs that cost more than expected. But if there are none, the result is much
tighter management, because there will be no other opportunity to request
Forest: Do you think we should maintain the pilot project rather than going
back to the old method, which gives us three supplementary estimates?
Mr. Giroux: I think the pilot project was good, but it
wasn’t all good. It made sense in that it forced better alignment between the
supplementary estimates and the Main Estimates, while giving the government the
flexibility to table a late budget. The window of opportunity to include many
budget items in the Main Estimates closes. With a budget at the end of
March and Main Estimates in April, it’s not possible to include all these
items in the Main Estimates. So we end up with the same issue, that is, we could
not include the majority of budget items in the Main Estimates, and
parliamentarians are again being asked to vote on something without seeing the
budget initiatives in the Main Estimates.
The pilot project
is good, and it would be desirable to renew it if the government could commit to
an early budget so that most if not all of the items in the budget would be
included in the Main Estimates; it would therefore be much easier for
parliamentarians, members of Parliament and senators, to see that they are
voting on a proposal that encompasses all, or almost all, government
initiatives. There would be a very close match between the government’s budget,
which is essentially a statement of good intentions, and the expenditures voted
on in the Main Estimates.
On the other
hand, if a late budget is tabled and it closely resembles the Main Estimates,
essentially the Main Estimates status quo is maintained, and budget initiatives
are presented in Supplementary Estimates (A), (B) or (C). Parliamentarians can
go to the Main Estimates to find such and such initiative put forward in the
budget, but it will be in Supplementary Estimates (A) or (B), for example, which
makes it very difficult for you to reconcile, and for us as well.
Forest: My last question is about infrastructure. It’s tempting to ignore
the rehabilitation and maintenance of our infrastructure. I am just looking at
federally owned ports and wharves, many of which are in disastrous condition.
According to National Defence’s financial data, 1.4% should be set aside right
now for infrastructure upgrades. Does the actual deficit take into account the
challenge we face with respect to the federally owned infrastructure
Mr. Giroux: Deficit and debt include an accounting
provision for the presence of assets. Therefore, assets are considered,
especially when considering net debt, which is reduced by the value of the
government’s assets. The depreciation in value of those assets is also taken
into account. Ports, for example, depreciate year after year, unless a
significant investment is made to maintain them. As far as I know, the debt and
the deficit do not really account for the actual condition of the assets, for
their real value, as much as accounting methods will allow. I will let
Mr. Jacques add something.
Mr. Jacques: No.
Mr. Giroux: He is an accountant and I am just an economist,
that is my perspective. So the actual condition of the government’s assets is
not necessarily reflected in the deficit and debt.
My concerns today are information that may be missing for parliamentarians
when we consider the financial expenditures of the government. I have two
questions. My first question is on write-offs as a general category. My second
question will be on collection.
I was reading the
public accounts 2018-19, and ministers under the Financial Administration Act
have authority under section 25 and 155 through Treasury Board regulations
to write off large sums of money, and other acts of parliamentary, such as
bankruptcy, give individual ministers the right.
When I was going
through public accounts, I was struck by the fact that the Minister of National
Revenue wrote off, forgave or waived interest or administration charges in over
1.5 million cases for a total of over $4 billion. The four general categories
I’m interested in — bankruptcy I think speaks it for itself — but the
Financial Administration Act was a large sum, Excise Tax Act and the Income Tax
Act. I’m just wondering who follows up on these write-offs, the waiving of debt
obligation, to make sure that they are actually legit and that there are not
opportunities to actually collect some of this money. It’s a significant amount
of money for one minister. Granted, it’s a large department that deals with a
lot of money, but it is over $4 billion. Are you following up on that? Is anyone
following up on that?
Mr. Giroux: Based on my experience, there are follow-ups
internally at the CRA. Having worked there, I also have qualities, I assure you.
I not only worked at the CRA. So there are internal controls within the CRA as
well as internal audits and evaluations. That may not reassure you as much as it
should or could, but the Auditor General also spends quite a lot of time in the
CRA. I think it’s their most important client, so much so that they know each
other on a first-name basis. The AG spends so much time at the CRA. But we don’t
follow that. That’s exposed. That’s write-offs. We don’t follow the level of
write-offs or the individual transactions. It’s not directly part of our
To the preamble
to your question and the fact that ministers have the power to write off debts,
it is indeed the case and it has led to some significant write-offs, especially
when it came to assistance to the automobile sector where write-offs were in the
hundreds of millions for individual companies. That’s an area where ministers
can enter into loan agreements with companies. One minister can authorize a
write-off, which can seem a bit inconsistent with the fact that a minister may
need to seek parliamentary approval to spend a million or a million and a half
but can on his or her own device write off a billion dollars. It’s a bit of a
My second question is about collection. We met a couple of weeks ago to talk
about progress or lack thereof on the tax gap analysis, which is what the Canada
Revenue Agency should be doing. A host of other countries around the world do it
currently: United Kingdom, United States, Turkey, and the list goes on and on.
Agency has refused to do an overall tax gap analysis for years. As we all know,
the tax gap analysis does two things. It tells you how much the agency is
collecting and how much it should be collecting, and the difference Canadians
should know. Second, it measures how efficient your agency is, which is another
reason the CRA may not want to do it, in my opinion.
We have been
working on this for a number of years. Canada Revenue Agency has refused to give
the information required by the PBO to track that tax gap for Canadians even
though it’s in your mandate to get this information. In my opinion, they should
be either taken to court or forced to do this by the government.
Could you give my
colleagues an update on this issue and, through them, the Canadian public on
where we are on this important matter?
Mr. Giroux: The issue of the tax gap is, as you mentioned,
an important issue to ensure that Canadians and parliamentarians have an idea as
to the efficiency of the tax collector, whether they are going after all the
individuals and corporations that should be paying tax, whether they are
efficient at collecting taxes and where they should be directing their efforts.
prohibits the sharing of individual taxpayer information from CRA to my office.
It’s something that is quite clear in legislation. We have done some workarounds
around that. We have discussed with CRA the provision of anonymized tax
information. There still remain some concerns on the part of CRA with respect to
anonymized data or tax records that could lead to the identification of specific
taxpayers, notably corporations, which would, in CRA’s opinion, lead to a breach
of confidentiality provisions.
To avoid these
issues or to get the data we need for the assessment of the tax gap, we went
through Statistics Canada. They have access to all the tax records. We have some
of our employees go to StatsCan and access records without identifiers. Due to
data manipulation, they need to be able to assess, to the best of our capacity,
the tax gap. That’s how we were able to issue a report last June. The work
continues, because that was the first kick at that huge can. We are continuing
to go through StatsCan to get access to tax data.
That being said,
it would probably be much easier if we had access to individual, not
identifiable, tax data, and if we have access to tax records without CRA fearing
they were breaching legislation or without us fearing that we would go to jail
because we accidentally could identify that a certain corporation is engaged in
whatever tax behaviour, legal or not. That’s why, as part of our report on the
election proposals costing — how it went, we published a report — we
recommended a couple of legislative amendments, one of which would allow us to
have access to tax data.
That being said,
we don’t need to have individual tax records with identifiers such as dates of
birth, social insurance numbers. But when it comes to corporations notably, it’s
very useful to know whether it’s one, two, three, five or ten corporations that
are engaged in certain types of behaviour. But CRA, in all its desire to protect
confidentiality of taxpayer information, will not disclose anything to us if
there are fewer than a certain number of tax records that fall in a category by
fear that we would indirectly be able to identify them.
So the proposal
is there to grant us access to anonymized tax data. It’s up to parliamentarians
to decide whether they want to bring this forward and allow us to have access to
that type of information.
Thank you for that detailed answer. Obviously it’s complex, and no one is
suggesting an individual taxpayer’s information be disclosed. However, it’s
complex in other countries as well, all of which do it. It seems to me that CRA
is putting up roadblocks to that end.
concerned, when we look at all these spending commitments and priorities, that
the government is running a massive deficit because it is not collecting taxes
that are simply hidden overseas by Canadians, an amount that I don’t know, the
Canadian public doesn’t know, and you don’t know because of the CRA?
We have an
illustration of the degree of the problem with the Canada Revenue Agency, I
would argue, on the Panama Papers. This April will be the fourth
anniversary of the Panama Papers disclosure. There were at least 600 Canadians
disclosed in the Panama Papers.
Chair, as you
know, it’s not illegal to have an account overseas. It is, however, illegal not
to declare the proceeds from those accounts.
the world that also had citizens disclosed in the Panama Papers have been able
to recover $1.2 billion. The Canada Revenue Agency talks about identifying
money. They may have identified millions of dollars, but they haven’t collected
a cent four years later this April. We have all these countries that have put an
effort into collecting. Iceland, which has a population of 350,000, collected
$25 million; Canada has collected zero. Is that not an indication of a major
problem? Are you looking at that in any of your reports or studies?
Mr. Giroux: I am convinced, senator, having worked both at
the CRA and been PBO for a year and a half now, that there are hundreds of
millions, if not billions, of dollars in taxes that go undeclared, unreported
and that escape Canadian tax authorities, probably on an annual basis due to the
international transactions that take place.
We are an open
economy with lots of trading partners, which is a good thing, but it also means
that we have to have an open banking system and financial transactions have to
be easy with countries abroad. The flip side of that is that some people take
advantage of the openness of the Canadian economy and financial system to hide
money abroad, and it makes it difficult to track all of that money.
governments have developed tools to track transfers of money abroad, but I’m
sure there are still significant amounts that are escaping the Canadian
Duncan: Thank you for your presentation and for your work.
The largest item
you have highlighted, of course, is Crown-Indigenous Relations and Northern
Affairs Canada’s forgiveness of outstanding land claim negotiation loans. I will
be asking for more detail from the Crown-Indigenous Relations folks who are
presenting to us, but I would also like to ask you, as you have highlighted it,
if you have done an in-depth analysis of the $919 million.
For example, when
the Government of Canada loaned Yukon First Nations monies to negotiate land
claims, they also charged interest on those loans. Is there a separation of the
$919 million between principal and interest, and is there a breakdown by region
of the loan forgiveness?
Mr. Giroux: I haven’t done an in-depth study of these
loans; maybe Jason, in all his wisdom and appetite for details, has.
Mr. Jacques: No, we have not. What we are left to work with
is the data and the information in Budget 2019 on page 129. They do mention
approximately 200 First Nations across the country that will benefit from this,
but there is no delineation with respect to the repayment of principal versus
Duncan: In your wisdom and the wisdom of Senator Downe in terms of the
Financial Administration Act, would that interest be buried in another
department, or do we know?
Mr. Giroux: Normally it would be part of that overall
amount. It would be debt and principal. Departmental officials will be in a much
better position to know. Given the amounts at stake, they will probably know off
the top of their heads.
Duncan: Thank you very much. I look forward to asking them those questions.
I also would note
that there are financial arrangements between settled First Nations and their
provincial-territorial governments and this loan repayment. There are also
specific questions around considering that as own-source revenue and separate
from their settlement arrangements. Would that also form part of your analysis
when you take a closer look at this expenditure?
Mr. Giroux: That is probably a bit too detailed for us. The
short answer is no, but if there is an interest from the committee, we could
certainly look at that.
Duncan: Thank you. I’ll direct my questions this afternoon.
M. Deacon: I think Senator Forest did highlight most of what I was
going to ask. Senator Smith touched on it earlier, and maybe it’s one final look
or exploration. You talked about going back to the way we’re doing business, and
we did have an opportunity for a few years to try a process. It was well-advised
but not perfect, I think were your terms. I’m constantly thinking about how we
better align our budget, Main Estimates, learn, do better.
My question does
come again to things that you step back from. You say it wasn’t perfect, but
this was a key piece that helped us: the way we think, the way we report, the
way we act, the way we collaborate. Was there some gain or some lessons learned
from it with particular focus on how we can accelerate the implementation of
government and government expenditures? Just a last chance.
Mr. Giroux: The issue of speeding up the implementation of
budget initiatives was something we looked at under the pilot project. We found
no strong evidence that it did speed up the implementation of budget items.
Despite the fact that there was a central vote for budget items or separate
votes in each department, items still needed to go through TB after
appropriations were granted by Parliament. In fact, it didn’t speed up the
implementation. For that part of the pilot project, we didn’t find strong
evidence that it did indeed improve the speed at which budget initiatives were
M. Deacon: Just before you go on, what can, should or will?
Mr. Giroux: I think honestly fixed-date budgets or budgets
within fairly clear, delineated windows so that departments would know, if their
initiatives make it into the budget, when to get ready. Under the current regime
that give the government a lot of flexibility with respect to the budget date,
departments cannot enter into agreements and cannot prepare for budget
implementation because they don’t know until the day of the budget. If they are
lucky, the deputy minister will find out the day before or two days before, but
that’s it. Departments don’t know if their items are in the budget until the
For example, if
we were to have a budget on March 24 — I have no idea, and I’m
probably the last person the government will tell the budget date. Assume
March 24. Departments will find out probably late in the day that they have
something in the budget, and then they can start preparing for that. Whereas, if
we had a budget of, say, early February, then they would be able to prepare much
sooner and hit the ground running on April 1, which is usually the way
budgets work, starting in the next fiscal year. The departments would be in a
much better position to have initiatives ready and implementable sooner if we
had earlier budgets. That’s one way.
better and more efficient is also something that would improve budget
implementation or the speed at which budget initiatives get implemented. By
saying that, I’m not making a lot of friends in the public sector, but it’s not
part of the job description, and I have worked long enough in the public service
to know this is true. Departments and public servants could be much faster at
implementing budget initiatives.
Welcome, and thank you for your presentations.
My question is
kind of general, but it’s around your 2020 Fiscal Sustainability Report. I’m
sure a lot of front-end work went into that. Of late, we have a lot of shifting
sands and slippery slopes that are right in front of us. I’m just wondering, are
you doing any analysis right now about sustainability? I’m thinking about the
Prairies, Alberta and Saskatchewan particularly. Their fiscal policy manœuvres
are limited in terms of adjusting taxes and spending. You can get into a real
dichotomy if you get into increasing taxes, which is one part of the equation,
not good in an environment like that right now. If you start reducing spending,
it’s probably going to get cut at the services level, and again, that’s not a
Much of your
report suggests that the subnationals, or the provinces, under the cloudy days,
if you will, should be looking to fiscal policy. I’m wondering what the federal
government is looking to with regard to fiscal policy, because we have some
problems out in western Canada right now. If I understand correctly, the
equalization formula is in place until 2024. Is that under review yet again, or
is that where it’s going to lay? I don’t see Saskatchewan and Alberta in the
have-not categories over the last few years, so I’m just wondering what the
quick analysis of the day is in these fronts.
Mr. Giroux: To your point about tax issues out West, I met
with finance officials from Alberta in December. We discussed the challenges of
the province. They suggested that if you want to propose tax increases, they
dare you to go on the street corner in Calgary and mention that and see how long
you will survive. I said, okay, point taken. We moved on.
When we did the
Fiscal Sustainability Report, the federal government has some room for manœuvre,
but that’s looking at a 75-year period, over a very long-term horizon. The
Fiscal Sustainability Report is not meant to be a prediction in any way, shape
or form. It’s meant to be an indication of the health of public finances of
jurisdictions in the country. We find that because over the long term the
federal government’s expenditures are constrained — equalization transfers
to provinces and so on, main expenditure items are constrained in legislation,
as well as old age security, main transfer to persons, constrained by
inflation — its finances are expected, all other things being equal,
expected to be relatively healthy. Provinces’ expenditures are demand-driven,
health care being the main one, with an aging population. Older people on
average require more health care, so health care expenditures will be the main
driver behind provinces’ misfortunes. Add to that the interplay of transfers
with population growth, and relative GDP will make it so that, all other things
being equal, B.C., should start receiving equalization around 2040, Manitoba
will receive a declining share of equalization and so on.
We have done some
sensitivity analysis in our Fiscal Sustainability Report to see what would
improved productivity do or decreased productivity do, aging population even
faster, younger population, and it doesn’t dramatically change the picture
qualitatively. It changes the quantums of adjustments needed, but it doesn’t
change the picture dramatically.
To your question
on equalization, that’s a question that the Minister of Finance would be in a
much better position to answer as to his intention and the government’s
intentions regarding equalization after the current five-year program parameters
expire. Who knows? I don’t know.
Thank you. Honourable senators, any other questioners? If not, to the PBO,
thank you very much for providing and giving us clarity. On this, we will
certainly be calling you in the future again.
senators, please be reminded that our next meeting is at 2 p.m. this
afternoon in room B45 of the Senate of Canada Building. I now declare the