THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Monday, March 1, 2021
The Standing Senate Committee on National Finance met by videoconference this day at 1 p.m. [ET] to study the Supplementary Estimates (C) for the fiscal year ending March 31, 2021.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, before we begin our meeting, I’d like to remind senators and witnesses to keep your microphones muted at all times, unless recognized by name by the chair.
Should any technical challenges arise, particularly in relation to interpretation, please signal this to the chair or the clerk and we will work to resolve the issue. If you experience other technical challenges, please contact the ISD Service Desk with the technical assistance number provided.
The use of online platforms does not guarantee speech privacy or that eavesdropping will not be conducted. As such, while conducting committee meetings, all participants should be aware of such limitations and restrict the possible disclosure of sensitive, private and privileged Senate information. Participants should know to do so in a private area and to be mindful of their surroundings.
We will now begin with the official portion of our meeting.
My name is Percy Mockler, a senator from New Brunswick and chair of the National Finance Committee. I would like to introduce the members of the committee who are participating in this meeting: Senator Dagenais, Senator M. Deacon, Senator Duncan, Senator Forest, Senator Klyne, Senator Loffreda, Senator Marshall, Senator Moncion, Senator Pate, Senator Richards and Senator Smith. I welcome all of you and viewers across the country who may be watching on sencanada.ca.
Honourable senators, today we continue our study of the expenditures set out in the Supplementary Estimates (C) for the fiscal year ending March 31, 2021, which was referred to this committee from the Senate of Canada on February 16, 2021.
[Translation]
For our first panel, we have Mr. Yves Giroux, Parliamentary Budget Officer. He is accompanied by Ms. Xiaoyi Yan, Director, Budgetary Analysis, Mr. Jason Stanton, Senior Analyst, and Ms. Jill Giswold, Analyst.
[English]
Welcome to all of you, and thank you for accepting our invitation. Like always, Mr. Giroux, thank you for your and your team’s availability.
At this point, I will ask Mr. Giroux to make his statement, and then we will proceed with questions from senators. Mr. Giroux, the floor is yours.
[Translation]
Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Honourable senators, thank you for the invitation to appear before you today. We are pleased to be here today to discuss our analysis of the government’s Supplementary Estimates (C) for the 2020-21 fiscal year, which was published on February 24, 2021.
With me today I have Xiaoyi Yan, Director, Budgetary Analysis, and our lead analysts on the Supplementary Estimates (C) report, Jill Giswold, Analyst, and Jason Stanton, Senior Analyst. The government’s third and final supplementary estimates for the 2020-21 fiscal year outline an additional $8 billion in budgetary authorities. Voted authorities, which require approval by Parliament, total $13.4 billion. Statutory authorities, for which the government already has Parliament’s permission to spend, are reduced by a total of $5.4 billion.
[English]
The 2020-21 fiscal year has seen a substantial increase in the amount of authorities requested by the government in response to the global pandemic. In these supplementary estimates, COVID-19 measures represent $9.9 billion of the $13.4 billion in authorities that require Parliament’s approval.
We have raised several key issues in previous reports to highlight the challenges for parliamentarians in performing their critical role of scrutinizing government spending and ensuring value for money during the pandemic. While the Treasury Board Secretariat has included additional information that addresses some of the issues in these supplementary estimates, there remain certain areas that need to be addressed: The frequency at which the government provides an updated list of COVID-19 measures in one central document outside of the estimates process and the inconsistency with which actual spending data on COVID-19 measures is made publicly available remain areas of concern.
To address these challenges tracking COVID-19 spending measures, we have developed a monitoring framework to assist parliamentarians in keeping track of all the government’s announcements related to COVID-19. I want to underline that this has been achieved by assigning only two analysts to this task, suggesting the government could easily do it if it wanted to.
We would be pleased to respond to any questions you may have regarding our analysis of the government’s Supplementary Estimates (C) or other PBO work.
Thank you, Mr. Chair.
The Chair: Thank you, Mr. Giroux, for your statement and comments. We will now proceed to questions. Senators, for this panel, we will have a maximum of seven minutes per senator. Therefore, please ask your questions directly. To the witnesses, please respond concisely. The clerk will make a hand signal to show that the time is over and to indicate that we will move on to the next senator.
Senator Marshall: Thank you, Mr. Giroux, to you and your officials for being here today.
In your opening remarks, you were speaking about the lack of publicly available information about the COVID programs. I know you’ve been providing information on your website, but could you elaborate as to what exactly is missing publicly? Because that’s the same information senators are trying to access in order to track what government is spending. Some of us are having challenges, so I would like to hear your perspective as to whether you’ve identified issues that are similar to the issues I’ve experienced.
Mr. Giroux: Thank you, senator.
The issues we’re raising with respect to the availability of information relate to the fact that there is no one spot or one document that outlines the spending up to date in quasi-real time. You may remember that throughout the pandemic, up until early August, the government was providing an up-to-date estimate of the spending to date on virtually all of the COVID-19 spending measures. That was provided to the Finance Committee of the House of Commons. With prorogation, this has stopped, and it has not resumed.
While some departments are very good at providing regular updates on spending related to COVID-19 measures — notably, Employment and Social Development Canada with respect to the CERB, for example — others are not providing as regular an update. There is no one-stop shop to see the up-to-date spending, as we would normally expect. That provides a challenge because of the numerous spending programs that have been launched since March of last year.
Senator Marshall: Thank you very much. We’re experiencing problems getting information, but you’re providing information on your website. Are you also experiencing problems or challenges in getting the information you need in order to pass it along to people like us?
Mr. Giroux: Generally speaking, no. It has proven a challenge at times to get information that is of high quality, so this has required discussion with certain departments.
I would note, however, that for some limited number of departments, it has proven a bit more difficult to get up-to-date and regular information. I would point to Indigenous Services Canada. Innovation, Science and Economic Development Canada has also been an area where it has proven a bit more difficult to get information, as well as some very specific areas in the health portfolio. For the health portfolio, I have a bit more sympathy because they’re at the forefront of fighting the pandemic, but for Indigenous Services Canada and Innovation, Science and Economic Development, it’s not as easy to understand.
Senator Marshall: Okay. Thank you. In Supplementary Estimates (C), there is a reconciliation shown between the numbers in Supplementary Estimates (C) and the numbers in the Fall Economic Statement. It’s presented as a reconciliation in the front of the document.
Do you think that presentation is adequate or do you think that Treasury Board could have presented that in a better way? I was thinking myself within the departments affected — within those pages — but I notice you didn’t have any comments on the way they presented it. I think there is $140 billion, or somewhere in that vicinity, that shows up in the reconciliation. Could you speak to whether that was an adequate way of presenting that information?
Mr. Giroux: That’s an interesting point because that’s a sharp improvement compared to what used to be before. Without any such reconciliation, it can be, at times, very daunting for parliamentarians, let alone Canadians, to figure out what’s in the supplementary estimates and how that relates to a budget or a Fall Economic Statement. This is a marked improvement compared to the situation that prevailed prior to this type of reconciliation appearing.
That being said, I’m sure Treasury Board Secretariat would be open to suggestions to make it even more useful now that they’ve made that first step. For sure, providing a bit or a lot more detail would probably be very helpful to those like you, senators, who have to scrutinize this level of spending. I would suggest to the TBS that they undertake that next step and provide a bit more information when they allow you to do that reconciliation.
Senator Marshall: Thank you very much.
I have another question; you may not have time to get the answer in, but I’ll throw it out there.
You issued a separate report on the EI Operating Account, and you indicated in that report that the government usually provides information in their fall update or budget and this time they didn’t, so you went in and extracted some assumptions and came up with two scenarios. Could you outline any concerns you have with regard to the EI Operating Account that seemed to come out in that report?
Mr. Giroux: Yes, senator. The issues we have with the EI Operating Account is that, due to the economic situation and the commitment by the government to freeze the EI premiums at their current level for two years, it suggested that the EI account will be in a deep deficit for the next couple of years. That means that under current legislation, the EI premiums will have to increase sharply by up to the maximum allowed under legislation for the next couple of years. That’s probably why the government was not as forthcoming as it could have been in the Fall Economic Statement with respect to the EI account. In order to cancel that or return to balance, sharp increases to the EI premiums will be required.
Senator Marshall: Thank you.
[Translation]
Senator Forest: Thank you, Mr. Giroux, to you and your entire team for the insight you bring to a very complex financial situation. You show us where there have been notable improvements in terms of accountability for the various special programs put in place as a result of the COVID-19 pandemic. I questioned Minister Morneau and Minister Freeland in the spring and fall about the achievement of the objectives. Each special program had clear objectives to provide assistance, either in the form of CERB, or wage subsidies. I was very concerned about a situation regarding wage subsidies where public companies were receiving very large amounts of assistance, such as wage subsidies, and were increasing dividends to their shareholders. In assessing the absolute numbers, are we able to properly evaluate the efficiency of our programs and whether they have met their objectives? As an example, take grants to help maintain employability: on the one hand, businesses are freeing up net sums and then paying them out as dividends. I don’t think the original target of the program has been met.
Mr. Giroux: That’s an interesting question, Senator. When the government launched the majority of these programs, I believe its objective was not necessarily the effectiveness of each program, but rather to provide immediate assistance to those who needed it, including businesses. The fact that there wasn’t a lot of follow-up was of concern to many people, including me, if you take CERB, for instance — the only requirement to receive CERB was to have a SIN and a bank account number. There were very few checks, as they were to be done afterwards. This led to situations, in the case of CERB, where people who were obviously not entitled to it requested and received it. In the case of the wage subsidies, they were paid to companies that used a large part of the money to continue paying their employees’ salaries and pay dividends. Whether or not the objectives were met is difficult to determine because it depends on who you talk to. Government officials will say that the targets were met because people continued to receive a fairly high level of disposable income. On the other hand, if you talk to people who are a little more concerned about a very rigorous administration of the programs, they might say that it is not good enough, because of events like the ones you mentioned. That said, the Auditor General and her team will be better able to determine whether the programs have been well administered and whether they have met their targets in terms of sound administration and sound management of public funds. I am confident that the Auditor General will spend a great deal of time studying the administration of these programs.
Senator Forest: Indeed, the speed with which these programs were put in place, the overall organization and amounts, as far as Quebec is concerned, and the significant percentage of assistance received directly by Canadians are to be commended. What concerns me is that 10 months have passed since then. Eventually, since we are talking about public funds, and given the responsibility and accountability that we have to provide to Canadians, it seems important to me that we can plug the gaps and ensure that all those who really need it can have access to this money, because it is not unlimited. In the case of those for whom these sums are superfluous, we should be able to readjust the focus. Currently, there does not seem to be this concern about readjusting the focus of some programs such as CERB or the wage subsidy program.
Mr. Giroux: You raise some good points, senator. As a taxpayer, I think this raises questions. In a CBC television report last night, it was reported that former Cinar president Ronald Weinberg collected CERB when he was building a luxury hotel in Panama. This kind of thing raises doubts about the rigour of the administration of certain programs and the potential for clawing back money unduly paid to people who are taking advantage of the pandemic to obtain benefits to which they are not entitled.
This is a matter for the Auditor General and the departments responsible for administering these programs. However, as a taxpayer, I would hope that there will be efforts to recover, audit and collect overpayments resulting from malicious or fraudulent claims.
Senator Forest: Last week, officials from Finance Canada appeared before the committee.
For the Canada Infrastructure Bank, funding is channelled through the Department of Finance, which is not the case for most other such departments and agencies. It has been explained to me that, to date, this has improved the efficiency of the transfer of funds, but that’s something I don’t quite understand.
Have you checked this feature of the Canada Infrastructure Bank, which is that the capitalization of the amounts goes through Finance Canada, as the projects evolve?
Mr. Giroux: We addressed this issue several months ago when we analyzed a series of Crown corporations and their financing arrangements. At that time, the operating costs of the Canada Infrastructure Bank were estimated to be quite high compared to the amounts disbursed.
We have not specifically looked at the funding mechanism whereby the funds flow through the Department of Finance, but this could be done if the committee wishes.
Senator Forest: It would be interesting to see the effectiveness of this feature. Thank you.
[English]
Senator Klyne: Thank you to our panel here today. I wanted to begin by applauding the PBO’s efforts to provide the invaluable and non-partisan information that parliamentarians need to do their jobs well and keep Canadians informed. Thank you very much for that.
I have two questions, if I have time. My first question is about the PBO’s ongoing reporting on the economic and financial considerations following the purchase of the Trans Mountain pipeline. It was identified that the outlook continues to look profitable, depending on the impact of the utilization rate and the impact of climate change policy. In those regards, could you provide the committee with your perspective on or recommendation as to how the government might minimize the risk of losing ground on what appears to be a profitable position?
Mr. Giroux: Thank you, senator, for the question. My mandate does not include providing recommendations to the government. I provide information to parliamentarians such as yourself. However, the nature of some of our findings is that they can easily be interpreted as the right thing that could be done.
In the context of the Trans Mountain pipeline, we have indicated that the pipeline’s profitability will depend, in large part, not directly on the price of oil but on the contracts that the owner of the pipeline will be able to secure. If the price of oil increases, of course, production is likely to increase. If the price of oil goes down, then production could go down, depending, of course, on other factors in the oil market.
One way of reducing the risk could be, for example, to sell the pipeline if the government thinks it can secure a price that would justify selling it to the private sector. For the government, disposing of the asset would clearly be the best way to minimize risk for taxpayers. That may involve selling at a point where it could mean foregoing some of the profits if the government was to hold it for a longer period of time. There is always the possibility that hindsight is 20/20, but from the perspective of minimizing the risk to the government, selling the asset when there is a buyer from the private sector who shows up and is willing to buy at a price that’s agreeable to the government is one way of minimizing the risk.
Senator Klyne: My other question relates to the work you did around looking at the urban, rural and Northern Indigenous housing needs, and identifying a $636 million annual gap for adequate housing. I have a couple of questions here. I’d like you to define what “adequate housing” would be — I’m sure it’s not opulent, but basic housing in terms of the size that you used or the family size.
Were there any data collected in terms of that category or demographic? Were data collected in terms of economics, household income or education? I’m also wondering, in that same regard, if, in fact, you did disaggregate some of that data.
When you say urban, rural and non-Indigenous housing, does it exclude or identify any First Nations who live off-reserve in urban, rural or in that housing investigation or report?
Mr. Giroux: Thank you, senator. The definition of “adequate” that we use is the one used by the Canada Mortgage and Housing Corporation. “Adequate” is defined as having a sufficient number of rooms for the number of persons in the household, as well as a dwelling that’s not in need of major repairs. It might need minor repairs, but the need for major repairs is sufficient to make a dwelling inadequate.
For example, if there is mould or if there is electricity or plumbing that’s in need of a major upgrade, that’s inadequate. Similarly, if there is an insufficient number of rooms, that makes it an overcrowded dwelling, which is also inadequate.
You also asked if there are indicators by income and other disaggregation. In the report — and I don’t remember off the top of my head — I think we report on income and by the number of persons in the household. I’m not 100% sure what the categories are because there are a couple of different reports that I have to remember. I don’t have all of the details at hand, so we can get back to you on that.
Finally, your last question relates to the off-reserve, on-reserve status. When we looked at Aboriginal or Indigenous housing needs, we excluded people who are on-reserve, but we included those who are off-reserve in urban settings, as well as those who are off-reserve in rural settings. It’s all those who are off-reserve. That’s the scope of the report.
Senator Klyne: A quick question: Was there an overrepresentation of, as you just described, Indigenous people living off-reserve?
Mr. Giroux: Yes. Indigenous people living off-reserve are overrepresented in having housing that’s either inadequate or unaffordable — or, even worse, both — compared to the general population. It’s mostly acute for bigger households, so those with many people — more than four or five people per household. They’re at an even higher risk of being in unaffordable and inadequate housing.
Senator Klyne: Thank you.
Senator Richards: Thank you, Mr. Giroux, for being here. Senator Klyne asked both of my questions and probably better than I could, so I will just ask a very general question that I just jotted down. Maybe you can give me some indication about it.
Does the spending because of the pandemic cut into the work of other major projects that were ongoing before the pandemic, such as shipbuilding, the infrastructure or aircraft purchase? Generally, if that’s the case, how so?
We just learned in the past few days that shipbuilding is way behind schedule and is going to continue to be way behind schedule for years to come. I wonder if you might be able to comment on that.
Mr. Giroux: Thank you, senator. That’s a very interesting question and not a question that I have looked at in detail. However, in the context of preparing for several of our reports, it’s clear that government departments have a reduced capacity to undertake major new projects or to continue with major new projects. That was especially true in March, April and May of 2020. However, I’m not sure the pandemic was the main factor in the delays that are plaguing the Canadian Surface Combatant, or CSC, for example, or if it’s something else that has changed in the specifications for the ships.
So that’s for the CSC. I know that various infrastructure projects across the country have had to be halted for public health reasons, especially, as I said, in the first and second quarters of 2020. However, besides these general statements, I’m not aware of major government procurement projects or other contracts or projects that are experiencing delays, aside from those that would be generated in the general population. For example, housing projects that are undertaken by governments across the country have probably suffered delays in April or May 2020 as public health restrictions came into force. When it comes to government operations per se, I suspect that access to information was put on the back burner for several weeks, if not months, because public servants could not work. The same would probably go for the immigration process and the immigration system at large. Missions abroad were closed or severely restricted, and processing capacity domestically was also restricted, due to public health restrictions.
I know it’s not a very detailed answer, but that’s probably the best answer I can provide at this time, unfortunately.
Senator Richards: Just a quick follow-up, Mr. Giroux. We buy the design for our surface ships, don’t we? We don’t design our own ships. We cut the steel and we make them in our shipyards, but the design comes from other countries. Isn’t that true?
Mr. Giroux: It’s true that we buy the design from other countries or companies that have already built or designed the ships themselves, but we have to adapt that design to the navy’s specifications. It’s not literally “off the shelf” and then we put the name of the new ship on the hull. My understanding, at least, is that there are quite a few specifications and adaptations that need to be made to a ship. Even if we were to buy ships that are already in the water in other navies, they would still need to be amended, to a certain extent, to take into consideration the specific equipment that the Royal Canadian Navy needs. It’s not a “cut and paste.” There need to be adaptations and amendments to the design of the original ships.
Senator Richards: Thank you. That’s good to know.
[Translation]
Senator Loffreda: Thank you for being with us, Mr. Giroux.
[English]
Thank you to all our witnesses for being here. Mr. Giroux, on the economic projections from your Fiscal Sustainability Report 2020, you’re projecting a real GDP growth of 1.7% annually over the long term in Canada. You also mentioned that your long-term assumptions for inflation are unchanged.
Given the current economic trends, the levels of government spending in North America — not only Canada — and the increased household savings in Canada, do you still feel that inflation will remain at these levels, or will we see a further deterioration in the difference between GDP growth and inflation? We usually target GDP growth at 3% and inflation at 2%. I’m concerned that gap will decrease, but more specifically, if inflation does increase, we all know the effect on our interest rates, our debt service costs, our debt servicing charges and capability. Do you feel we should increase our long-term maturities at this point in time?
Mr. Giroux: That’s literally a billion-dollar question. When we published our updated Fiscal Sustainability Report, or FSR, we maintained our assumptions for long-term GDP growth, as you mentioned, at 1.7%, and we also maintained our long-term projections for inflation. When we released the FSR, the concern was not so much about inflation returning; it was about deflation, as we were witnessing some price decreases in some areas of the economy being depressed.
These have not materialized, so there was no widespread deflation, obviously. Even in the last couple of days we are hearing about the potential for inflation to increase again. Should that be the case — should inflation return — we will update our Fiscal Sustainability Report. However, we’re not there yet. Should that happen, it’s clear that interest rates in the short term would increase and that would have an adverse impact on government finances.
With respect to your question as to whether the government should have borrowed more heavily for long-term maturities — I understand your question to be in that direction — I personally think the government should have tried to go as much as possible in long-term maturities. When you have interest rates that are so low, chances are that over a 10-, 20- or 30-year horizon they will go up. It’s much better, generally speaking, to lock in your debt for as long as possible when you are experiencing interest rates that are so low.
However, the issue with that strategy is that there is limited demand for very long-term maturities because economic agents — that is, lenders — know or suspect that interest rates could well rise over a 30-year period if that’s the maturity that we’re looking at.
In my opinion, the government would be much better off borrowing as much as possible into long-term maturities provided that the premium it would then have to pay does not nullify any potential savings in the longer term. That’s a science, but it involves several unknowns — notably the behaviour of interest rates over the long term. If anybody knew for certain what this would look like, they wouldn’t be here. They would be filthy rich and wouldn’t have to work. Nobody can predict that with a high level of accuracy. However, in the current circumstances, certainly the government should do as much as possible on the long-term end.
Senator Loffreda: Thank you for the answer. I have another quick question; I did bring it up previously. Mr. Giroux, I read your budget officer’s report blog posted on January 26, 2021, and I did bring it up in previous committees, but I would like to elaborate on that. I did see that there are more long-term maturities, like I did mention previously. I’ve seen those percentages; you could elaborate on those percentages. I don’t want to take too much time for the question. I think it was a wise decision.
Also, for the predictability of debt-servicing costs — because the more long-term maturities we have, the more predictability there is — there is a lot of concern around the debt levels and a lot of discussion around these debt levels.
The government’s spending at this point in time, this year, is high for the right reasons; I’m not questioning that or going against that. It’s well done but it is high because we have this pandemic. But that being the case, if we look at the debt service costs and the debt-servicing capacity and compare it as a percentage to government spending, taking away these pandemic years, what percentage of government spending historically would this debt-servicing charge be? I do know we are at historical lows with the interest rates, but going into the future, if we look into post-pandemic, bringing spending back to the normal levels of $300 billion or $350 billion a year, what percentage are you forecasting the debt-service coverage or cost to be? Is this debt really sustainable at these levels? I do read everywhere that it is, but I would like you to elaborate on that. Thank you.
Mr. Giroux: Thank you, senator. I probably would need an hour or so to fully address your question. I will try to do that in a very short period of time.
The debt-servicing costs, in and of themselves, are highly dependent on, obviously, two things: the level of debt and interest rates. We are experiencing a very sharp increase in the level of debt at the same time as interest rates have gone down sharply. That’s what makes this debt sustainable or affordable, but should interest rates rise sharply, then it would quickly crowd out other types of government spending. We would have to make very difficult trade-offs when it comes to government spending.
Senator Loffreda: Maybe we can get those numbers later on or in another meeting. Thank you very much and thank you for the time. I feel it’s important.
The Chair: Mr. Giroux, before we move to Senator Smith, could you provide that in writing to complete the answer to Senator Loffreda?
Mr. Giroux: Of course, Mr. Chair.
The Chair: Do you have a time frame? In the next few days, perhaps?
Mr. Giroux: I think we can address that in a couple of days, depending on the extent of the answer that the committee is looking for.
The Chair: Thank you very much, Mr. Giroux.
[Translation]
Senator Smith: Thank you, Mr. Giroux, for participating in our discussions today.
[English]
I’d like to go back to Senator Marshall’s earlier comments and questions. In your report on supplementary estimates, it makes mention of a centralized document or database which would show all public spending measures and include descriptions. That would enhance the transparency of public spending, in your view.
Could you please elaborate on how you envision this public document looking? What sort of information do you think should be contained in this public document?
Mr. Giroux: I think that government is already collecting a comprehensive list of all COVID-19-related measures, as well as the source of authorities for spending, whether it be stand-alone legislation, main estimates or the various supplementary estimates. It also includes the total amount, but what it does not include is the amount spent to date. I think that’s the core of the issue here when it comes to information being available to parliamentarians, as well as to Canadians. That’s the amount spent to date.
The government publishes that type of information for some very popular programs, such as the CERB and its successors, but it does not provide that information for all, or at least not the majority, of its programs. There is not a clear sense by Canadians and by parliamentarians as to which of these programs are on track to spend as expected, which ones are way more popular than anyone expected or which ones experience a very low or lower than expected takeup — in which case, we would allow parliamentarians and the government to amend the programs so as to ensure that they meet the needs they were intended to meet and to correct the course if needed.
That’s the type of document and information that I think would be beneficial for parliamentarians as well as for Canadians.
Senator Smith: I guess the question is, Mr. Giroux, how do we influence Parliament and the government to actually take an active participation in this type of set-up that you’ve discussed? Is that realistic to think or is it just the way governments are?
Mr. Giroux: I think it’s totally realistic. As I’ve said in my opening remarks, we can provide you and Canadians in general with information that is relatively comprehensive on government expenditures related to COVID with two analysts. Jill Giswold and Jay Stanton are with us here today; between the two of them, they’re able to provide a comprehensive list, based on government information, of course. They cannot provide regular updates on a weekly basis, for example, because there are only two of them but also because that would require the government departments to provide that information to us on a weekly basis. The government, with hundreds of thousands of public servants, could certainly do that.
Senator Smith: Your report on the supplementary estimates shows that, while frozen allotments have fallen over the last few years, spending lapses have seen a sharp increase. Could you explain to the committee, Mr. Giroux, your findings around spending lapses? Were you able to determine why there are such large increases in approved funding going unspent? Is the government providing transparent information in this regard and should we be concerned?
Mr. Giroux: I’ll ask Mr. Stanton to respond to this question, given that he follows that issue quite closely.
Jason Stanton, Senior Analyst, Office of the Parliamentary Budget Officer: Thank you for the question. For frozen allotments, those are approved authorities which the Treasury Board has frozen as they will not be spent in the current year.
Generally, one can assume that, for those that are frozen and identified as not being spent, you should be able to take that amount and determine some sort of relation in terms of what will actually be lapsing for the current year. We have found, looking back historically over the last five years where the supplementary estimates have identified what is being frozen, that there’s not really a relationship between what’s being frozen and what actually ends up lapsing at the end of the year.
That does provide a bit of a challenge in terms of taking what is actually presented in these supplementary estimates and trying to make some sort of determination on what will actually be lapsing. As you’ve seen, that kind of relationship is not there to say, if frozen allotments have increased, there’s also then going to be the proportionate increase in the lapsing amounts.
Senator Smith: A perfect example of that would be National Defence. Going back in time, I can remember lapsing of projects. We would always ask the question: When is the money going to be spent? We would never get clear answers. I’m trying to understand the idea of the reality between lapsing and making projects come to a conclusion. It sort of talks about transparency but more effective planning. Can you give me some comments? I think National Defence is a perfect example.
Mr. Giroux: Yes, senator. Maybe I can help with that. Lapsing is not necessarily a bad thing. As you pointed out, it can suggest a lack of planning if, for example, the lapses are repeated year after year for the same type of project.
We’ve seen that with respect to infrastructure programs where billions of dollars have to be re-profiled. That suggests that the government was either very ambitious in its spending plans, or the planning did not go as expected.
On the other hand, as a taxpayer, I would rather have departments that lapse rather than undertake “March Madness” because what is worse than lapsing is spending for the sake of spending at the end of the year to ensure that you don’t have a lapse.
So there are pros and cons with lapses, but generally speaking, a good manager would aim to have as small a lapse through good planning as opposed to through “March Madness.”
Senator Smith: Thank you, Mr. Giroux.
[Translation]
Senator Dagenais: Good afternoon, Mr. Giroux. I would like to come back to the answer you gave to Senator Loffreda. What would be the level of inflation that would seriously affect the government’s finances, and what would be the short-term consequences of such inflation for Canadians?
Mr. Giroux: You have some very difficult questions for me, Senators. In terms of the level of inflation that would affect government spending, I cannot answer with a specific number because if the Bank of Canada, which is responsible for the inflation target, determines that, for example, starting tomorrow or a year from now, its inflation target changes, monetary policy and fiscal policy will adjust to that. So what would be difficult is if the inflation target were exceeded.
For example, if the Bank of Canada keeps its inflation target around 2% and we have inflation well above that figure, it will have a negative impact on the government because interest rates will rise and inflation expectations are likely to rise significantly. There is no specific inflation number; it is the divergence between current inflation, or short-term inflation, and the target that matters.
So, if inflation is consistent with the target, there is really no major problem. But if inflation is really different from its target, then it is a problem because it means that the Bank of Canada has to tighten things up to bring inflation back close to its target.
Senator Dagenais: Thank you for that answer. I’d like to return to your report. You look at access to housing for Indigenous people. I would like to go a little further than Senator Klyne. Beyond the quality of housing, how does government assistance compare to what is available to low-income Canadians?
Mr. Giroux: This is also a good question. I will quote numbers from memory. In the report on Indigenous housing, it says that off-reserve Indigenous people are significantly more likely to have housing that is unsuitable for them, and therefore inadequate or unaffordable.
Government assistance for housing in general and for homelessness was also compared, and the proportion of this assistance that is given to Indigenous clients was determined; however, the amounts allocated to Indigenous housing are found to be rather low compared to the needs of these clients.
What the report finds is that there is considerable room for improvement on the part of governments — not just the federal government — to target programs to better meet the needs of Indigenous clients, who are more likely to be in a situation where they have access to housing that is too expensive and still inadequate.
Senator Dagenais: I have a third and final question. It’s about measures taken by the Canada Infrastructure Bank, which you sometimes say are not necessarily related to COVID-19. It has been said that the government is adding $2.3 billion in additional spending on infrastructure. Was that money necessary at this point in time? What follow-up can you do on the projects and disbursements of the Canada Infrastructure Bank?
Mr. Giroux: The appropriateness of investments results from a judgment that is highly subjective. My judgment would probably not be better than someone else’s, unless something terrible is found. The recent investment of the Canada Infrastructure Bank, the $2.3 billion you refer to, is an issue we have not addressed.
So, if the committee wishes, we could certainly consider the recent investments of the Canada Infrastructure Bank and the disbursements, speed of disbursement and partnerships that the Infrastructure Bank has embarked on. This is not something we have considered recently, but as I mentioned, if the committee wishes, we could look at it.
Senator Dagenais: Thank you, Mr. Giroux.
[English]
Senator Pate: Thank you, Mr. Giroux, to you and your team for the wonderful work you do on behalf all of us and all Canadians.
My first question relates to financial support for the oil industry and workers. The supplementary estimates have a payment of $320 million from the Department of Finance to the Province of Newfoundland and Labrador to “. . . support offshore energy sector workers,” and on September 25, the federal government gave the offshore industry the $320 million to support the workers in such activities as safety improvements, maintenance and upgrades of existing facilities, research and development. When this funding was announced, the CEO of the province’s oil and gas industry association said, “. . . we’re pleased to see hundreds of millions of dollars come with virtually no strings attached, that is good news.”
This seems like an awful lot of money, and I’m wondering if your office is aware of any metrics that are being used by the federal government to ensure these funds are delivered as a COVID response in ways that achieve some of the predefined purposes, like greenhouse gas reductions and increased worker safety. When the industry is celebrating this as “no strings attached,” does that mean that these have not been part of the requirements, and if so, what are the metrics that are being followed? If you could provide some of those details that would be very helpful. Thank you very much.
Mr. Giroux: Well, I’m probably going to provide an answer that is unsatisfactory to you, because I don’t have any such details yet. My recollection is that we either have recently sent an information request to the Department of Finance or will soon do so, and I think Jill or Jason can provide information as to the status of that information request. But to the best of my knowledge, I’m not aware that we have received the information.
Senator Pate: It would be very helpful if it’s possible to receive that information so that we can actually have some idea whether this is essentially a corporate welfare initiative or whether some of the pre-existing expectations have been fulfilled as part of those funding agreements.
My second question has to do with comments you made previously to this committee about the need for a guaranteed livable income, and if, in fact, a guaranteed livable income had been in place at the time that the pandemic hit that the costs of CERB would have been far less. Have you looked any further at those cost savings and what kinds of initiatives you could see being put in place to ensure that the kind of automatic assistance that’s required in these kinds of emergencies could be available, and how that could assist in creating more stability for Canadians in the future?
Mr. Giroux: Thank you, senator. We have received a number of questions about a guaranteed basic income —or GBI — sometimes with a different name, notably from your colleague Senator Woo, who asked us to cost a potential GBI around the time the CERB was in place. We found that the cost would vary significantly depending on its parameters, notably its clawback. But it’s quite clear that the cost of such a GBI would have significantly reduced the cost of CERB. By how much depends on its specific parameters, of course, so it’s something that can easily be adjusted, and it depends on the policy programs. That would be a government decision as to whether the cost would be significantly lower for CERB or marginally lower. It depends on how the program is designed. We have received additional questions, notably from MPs, and we will be tabling an updated costing of a new design of GBI in the next couple of weeks. This is work that continues.
With respect to whether or not it’s desirable to have a GBI, that is a policy question, and it’s up to decision makers such as yourselves and members of the House to make that decision and have these debates.
My role is to provide you with information as you see fit and to assist you. I’m very happy to do that. I will leave the discussion as to whether it’s desirable, and its level, to wiser people such as yourselves.
Senator Pate: We know that, depending on the numbers and the low-income cut-off used, 1 in 10 or 1 in 7 Canadians have not been assisted during this period. Do you have a breakdown in terms of how many of those individuals are racialized — and, in particular, Indigenous — as well as what other kinds of supports have been clawed back by provinces as a result of the receipt of CERB? We’re certainly receiving information that, for many people who are on disability or social assistance who accessed CERB, that money has been clawed back by the provinces.
Mr. Giroux: Senator, I’m not aware of any such information having reached my office. In terms of CERB and the impact on people who are racialized or people who would have other benefits, I think the issue is a lack of data for that type of specific information, notably, ethnic background. If Xiaoyi, Jill or Jason have more information on that front, feel free to jump in, but I think the issue is the lack of data by race, for example.
Senator M. Deacon: Thank you for being here today. I always look forward to having you and your office at our committee.
My concern today, like others, is about the transparency of government spending. Your most recent report gives the government a higher grade on spending transparency, though you do note a number of issues that remain, which you chatted about earlier. Right now, I’d say the primary concern is getting funds out the door; however, once this pandemic abates and we can catch our breath somewhat, we will want to take a deeper, longer look at where the money went and how it was spent.
As we move further away from this moment, will it be more difficult to undertake a complete audit on pandemic spending? Is the information on spending waiting to be dug up at some point later? Will we lose the ability to garner this information as time passes, or can we rely on the hard work of your office to keep the paper trail for us to reference later on, when we can conduct this needed and thorough post-mortem on spending?
Mr. Giroux: Thank you, senator. This is a very important question, no doubt, and a question I’ve asked myself quite often: At what point will we have a post-mortem on all this spending?
For people who don’t know the distinction between my role and that of other government institutions, I tend to summarize the mandate of my office in the following manner: My office looks at the cost of proposals or the future cost of existing programs; whereas what happened in the past, whether good or bad, tends to be in the purview of the Auditor General.
When it comes to auditing the programs and what went wrong and whether or not the program money was spent well, that is something the Auditor General would probably be better equipped, having a much bigger team than mine, to look at. I’m sure the Auditor General will start this work on the various programs very soon, if she hasn’t already. The issue for her will be choosing which programs to pay particular attention to.
When it comes to my own mandate, looking at government finances going forward and the forecast, you can be sure that I thoroughly enjoy that part of the job, and I will continue to respond to your needs within the limits of my mandate. If there are any specific areas that the committee and you, as a senator, would like me to look at, my team and I would be very happy to do so.
Senator M. Deacon: Thank you. I learn more each year, each month, about your role and that of the Auditor General. I’m trying to look at that seamless piece of where one stops and the other starts and making sure we can get the best data possible.
My next question concerns the shift that we all recall from CERB to EI and builds on a question Senator Marshall asked earlier this afternoon.
In the fall, the government wound down CERB payments, but loosened restrictions on who could apply for EI to make up for this decision. As your report from the Fall Economic Statement outlines, the EI Operating Account is on track for a shortfall of $52 billion by the end of 2024. You went on to note in that report that under the Employment Insurance Act, the government must set EI premium rates to generate enough revenue to ensure that, at the end of the seven-year period, EI revenues match EI expenses. By law, every dollar paid out by EI must be recouped through premiums within seven years.
Since the government shifted the CERB to the EI program, does that provide at least some kind of limit or parameters from one of the largest stimulus programs in this pandemic that could satisfy our request for some kind of fiscal anchor? I wonder what the strength of moving the CERB to the EI program might have been, and perhaps this seven-year limit at least provides some parameters for one large part of our government’s stimulus program, namely, payments to unemployed Canadians. Could you share your perspective on that?
Mr. Giroux: That’s a very interesting question, senator. The shift from CERB to EI means, as you pointed out, large deficits for the foreseeable future in the EI account. It also means that, under current legislation, a big deficit in the EI account has to be repaid over time through higher EI premiums for both employees and employers. The shift from CERB to EI means that, other things being equal, those of us who pay EI premiums — employees or employers — will have significantly higher EI premiums for years and years to come. For a long time we will have to pay significantly higher EI premiums.
This doesn’t affect the fact that there is no fiscal anchor in the current government fiscal program or its budgeting. One of the benefits of moving from CERB to EI is that under the EI program, there is a tried and tested investigation and fraud-recovery aspect that is established. The EI program has a team of several investigators and there is an investigation program within the EI directorate at ESDC and Service Canada. There is capacity there to investigate claims of fraud, and that’s probably one of the main benefits of shifting from CERB to EI.
Senator M. Deacon: Thank you.
[Translation]
The Chair: Senator Moncion, thank you for agreeing to be with us today.
Senator Moncion: I am pleased to return to the Standing Senate Committee on National Finance, especially to hear from Mr. Giroux. I always find him extremely interesting. I have a remark with respect to the last comment you just made in response to Senator Deacon’s question. I think the federal government has found an intelligent way to replenish the employment insurance account without it being too obvious.
I’d like you to tell us about the process, when you prepare all the documentation and numbers you compile, surrounding the deployment plans that come with the requested amounts. What kind of access do you have to the numbers and timelines that come with the funding requests?
Mr. Giroux: Are you referring to a specific point or is your question general, senator? Thank you for your kind compliments!
Senator Moncion: For example, take the money for Indigenous housing: $636 million, which is allocated to the Indigenous housing sector. You’ve estimated this amount based on the urban plan, the rural plan, the reserves, and so on, but for an amount like $636 million to be submitted to you, it has to be based on something. That’s the information I’d like to get: What numbers do you have access to and are there timelines associated with those amounts?
Mr. Giroux: That is a good question. In general, when we must prepare a report, we request as much relevant information as possible from the responsible department or agency, and if there is more than one, the net will be cast wide open to ask questions and obtain details from the responsible organizations. We try to obtain as much relevant detail as possible regarding expected timelines, disbursement of funds, program objectives, and if this requires the use of partners, inquiries will be made of partners, and about the types of partnerships that have been signed. In the case of Indigenous housing, questions are put to Canada Mortgage and Housing Corporation and Indigenous Services Canada for as much detail as possible.
If not all the details are available, then we’ll make assumptions based on similar programs in other jurisdictions or in other countries. In general, when this happens, we report that the data is based on assumptions or experiences in other jurisdictions. The information isn’t always publicly available, even after we receive it. In some instances, departments ask us to look at the detailed information in confidence. This often happens with National Defence projects, for national security reasons, for commercial competition reasons, or for trade secret reasons, when the matter involves private sector entities and contractual obligations. In these cases, we won’t disclose the information when requested. However, we’ll publish the result of these details or of our calculations. So, in most cases, yes, we have access to details that are much more specific than the details in our reports. Whenever possible, we can make these details available to the people who want them, unless the people or entities that gave us the data impose confidentiality constraints.
Senator Moncion: Thank you. What’s your responsibility in terms of accountability?
Mr. Giroux: In terms of the accountability of these entities, this isn’t our main responsibility. As officers of Parliament, we point out the obvious. We’ve done this with infrastructure, for example, when we’ve shown that the spending profile doesn’t accurately reflect reality. There’s always a change. We’re always hoping that the implementation will be faster in future years. We’ve pointed out several times that the government is always hoping for this, so the government often lives on hope more than on facts. Accountability is more a matter for the Treasury Board or the Auditor General. However, when we see things happening over and over again, we point them out. For example, recently, when we released a report on the surface combatants project, we noted that the costs increase only every time we look at them.
Senator Moncion: You use accountability to determine whether there were surpluses at the end — accountability may not be the right word — but to establish, at the end of the year, whether expenses are being exceeded or whether surpluses are being generated by under-spending. I was expecting an answer along those lines. However, you’ve given me the information that I was looking for.
I want you to tell me about student loans. We’re talking about write-offs, which constitute a significant amount of money. However, you also refer to new programs in your report. Could you talk about the anticipated success of the new programs, because you referred to the interest rates and the likelihood that more money will be paid back than the amount currently being reimbursed, depending on the programs in place?
Mr. Giroux: This is a worthwhile issue, which we’ve been looking at. As a result of the relief measures, the various interest rate relief and repayment relief programs in the wake of the pandemic, we expect to see a decrease in defaults and bad debt write-offs throughout the Canada student grants and loans program. However, the economic situation has become worse for students — perhaps owing to a slight drop in part-time work — and it may be more difficult for new graduates to find employment compared to before the pandemic. These two effects may cancel each other out. We aren’t sure which effect will prevail for the Canada student grants and loans program. Nevertheless, as a result of these relief measures, we could expect to see a decrease in the rate of bankruptcies or outstanding loans. In the forecasts for the Canada student grants and loans program, we don’t see a significant drop in the bad debt write-off rate. My time is up, unfortunately.
Senator Moncion: Thank you.
[English]
Senator Duncan: Thank you very much to the witnesses who are appearing before us today.
As a member of the National Finance Committee and as a Canadian, I truly appreciate the efforts that the Office of the Parliamentary Budget Officer goes through to prepare these reports. They’re very thorough and helpful. They’re very important reports in educating Canadians and for providing Canadians, not only senators and parliamentarians, with information.
I’m concerned that comments in the report can lead to some misunderstandings and that comments can be used, particularly during election times. I believe they need to elaborate a little on the nature of federalism and federal-provincial funding arrangements, specifically.
Reviewing the reports, particularly the Fiscal Sustainability Report 2020, I found them very challenging in linking the three territories. The Territorial Formula Financing arrangements, the fiscal arrangements with the federal government, for example, began in 1985, which was before Nunavut’s existence. The three territories are vastly different; our populations are different. Nunavut is approximately 86% Indigenous while Yukon is only 25%. We are at vastly different stages of the devolution of control over lands, waters and resources from the federal government.
But the report focuses on the fiscal sustainability of the three territories and doesn’t acknowledge that the financing arrangements are also about nation-building. That’s my point in that regard. I would like to draw that to the attention of your office and ask if the three territories could be separated out with that note.
Also, during the pandemic, we’ve undergone a seismic shift in a number of areas. That has opened up opportunities for changes in policy decisions and policy-making that can occur as a result of information that you present. I would like to focus for a moment on health transfers. For example, the Fiscal Sustainability Report 2020 indicates that spending on health care varies across the provinces and territories — 6.7% in Alberta and 13.2% of GDP in the territories. What is not reflected is that, for example, in the territories, there are no privately funded long-term care facilities.
That information about the policy decisions in relation to some of this information should be included or just highlighted as a footnote in the report. The changes, in light of the pandemic — and you’ve noted that in the last report — we assume that Canada’s long-run demographic trends will not be materially affected by the COVID-19 pandemic. Is that still felt to be current, in light of the deaths in long-term care facilities as well as the opioid crisis in our country? Is this still a current sense by the Office of the Parliamentary Budget Officer that Canada’s long-term demographics will remain unchanged?
Mr. Giroux: Thank you, senator. I’m glad you looked at the Fiscal Sustainability Report and I’m very glad you pointed out the issues with respect to the territories.
When we drafted the Fiscal Sustainability Report, or FSR, we wanted to have the three territories individually addressed. However, we found that there was not a sufficient level of detail to allow that to be the case while also doing justice to each of the three territories. So we decided to lump the three territories together, to give a sense of the issues that are faced by each jurisdiction.
As you pointed out, that doesn’t do justice to the different circumstances of each of the three territories. In my previous job, I was in charge of the federal-provincial-territorial relations and I had discussions with representatives from all three territories. I could indeed attest to the fact that they are at very different stages of — I wouldn’t say development, but they have different challenges. It’s true that in the report we say the finances of the three territories are not sustainable, but that could change pretty quickly. Given their small size, in terms of population, it wouldn’t need a lot for that situation to be turned upside down, for example, for the territories to become sustainable all of a sudden. Economic development could happen relatively quickly and very quickly change the assessment that we made of the territories, for one, two or three of the territories.
That’s why, for the territories, our FSR, as we call it, should not be taken literally because it could change quickly given the small size of the economy and the population relative to the rest of the country. That’s what I would say about the territories. Also, territorial formula financing could change, and a relatively small change could have a dramatic impact on the long-term fiscal sustainability of the territories. That’s what I would like to say about the long-term fiscal situation of the territories. As you pointed out, they have different challenges. There is no privately funded long-term care, which is a fact, and there are various other factors that make the territories a case on their own. That’s why comparing their fiscal sustainability to that of larger jurisdictions in the South is unfair.
On the demographic impact of COVID-19 and the opioid crisis, it’s a bit early to tell because we’re not out of COVID-19 yet and the opioid crisis is certainly not over, unfortunately. But that’s one aspect that could impact the long-term demographic situation. The other big unknown is what the long-term impact of the pandemic and its accompanying border restrictions on immigration will be. That, together with the sad toll it’s taken on the lives of mostly elderly people, will also have a big impact on the long-term demographics of Canada. And the opioid crisis, as I said, is far from over.
That being said, we are taking the demographic assumptions from Statistics Canada, so if they change their demographic assumptions, we will also change ours, and that will be reflected in the Fiscal Sustainability Report. The clerk is giving me the hand, which means my time is over, unfortunately, senator.
The Chair: From Senator Duncan to Mr. Giroux, if you want to add additional information following that last question, please do not hesitate.
As we conclude with the time we have left, I’d like to have the indulgence of senators for one question to Mr. Giroux.
Mr. Giroux, I know you’ve touched a bit on this and I’ve read a few articles in the last couple of months. In the Fall Economic Statement issued to parliamentarians, you concluded that based on their labour market projection — this is the Fall Economic Statement 2020 — the size and the timing of the planned fiscal stimulus may be miscalibrated, adding that if the objective is a quick return of the labour market to pre-pandemic levels, therefore, a smaller-scale stimulus plan could be front-loaded over a shorter period of time than the proposed three-year window.
On what basis did you determine that a smaller-scale stimulus plan over a shorter time period would be preferable to the proposed three-year stimulus plan?
Mr. Giroux: Thank you, senator. I thought you were going to ask me what that means, but I’m glad you’re asking me on what basis.
Based on economic and fiscal projections of our office, as well as those of many other private sector forecasters, it’s anticipated that without any fiscal stimulus, the labour market could return to its pre-pandemic level by sometime in mid-2022. What we’re saying is that the economic stimulus would probably benefit from being sooner and may not need to be for a period of three years if the objective is to return to pre-pandemic levels of employment, unemployment rate or total hours worked, for example.
If, however, the objective is a policy change or making adjustments to the economy, for example, by stimulating a greener economy, that’s a different issue. But if the objective is purely returning to a pre-pandemic labour market indicator, the $70 billion to $100 billion over three years might be too much and might be too late. That’s what we meant in our commentary on the Fall Economic Statement.
The Chair: This prompts me to ask a second question. Would implementing a smaller scale stimulus plan over a shorter period of time reduce the need for a long-term recovery support measure?
Mr. Giroux: That’s very likely, senator. A stimulus that would be launched sooner and for a shorter period of time, and could also be smaller than $70 billion to $100 billion, could be sufficient to return to the pre-pandemic level of employment, hours worked in the economy and unemployment or participation rates, depending on exactly how it unfolds, especially south of the border. But it could well be sufficient. And as I said, if the goal is to do that and make significant structural changes to the economy, that’s a different story. That’s totally within the prerogative of the government to make investments to make structural changes to the economy. But as I said, if the goal is purely to return to pre-pandemic levels of employment, a stimulus that’s smaller in scale and shorter in duration could well be sufficient.
The Chair: With those comments, Mr. Giroux, this concludes the first panel. Thank you very much for your leadership and that of your team. When we do ask to have you at the Senate Finance Committee, you are always available. Thank you. I know we have the same common denominator. It’s all about transparency, accountability, predictability and reliability of the numbers that are submitted to Canadians.
We will now welcome our witnesses for the second panel.
From Indigenous Services Canada, or ISC, we welcome Philippe Thompson, Chief Finances, Results and Delivery Officer.
Mr. Thompson is accompanied by Jennifer Esdaile, Director, Strategic Water Management; Keith Conn, Acting Senior Assistant Deputy Minister; Nelson Barbosa, Senior Director, Regional Operations Sector, Housing and Infrastructure Services Reform Directorate; James Sutherland, Acting Assistant Deputy Minister, Child and Family Services Reform Branch; David Peckham, Acting Assistant Deputy Minister, Education and Social Development Programs Sector and Partnerships Sector; and Jessica Sultan, Director General, Economic and Business Opportunities Branch, Lands and Economic Development.
Welcome to all of you and thank you for accepting our invitation.
Mr. Thompson, the floor is yours.
[Translation]
Philippe Thompson, Chief Finances, Results and Delivery Officer, Indigenous Services Canada: Mr. Chair, honourable senators, thank you for inviting me to discuss the Supplementary Estimates (C) 2020-21 for Indigenous Services Canada. I also want to note that the Parliament of Canada is located on the traditional unceded territory of the Algonquin people.
[English]
With me today are Keith Conn, Acting Senior Assistant Deputy Minister of the First Nations and Inuit Health Branch; James Sutherland, Acting Assistant Deputy Minister, Child and Family Services Reform Branch; David Peckham, Acting Assistant Deputy Minister, Education and Social Development Programs Sector and Partnerships Sector; Jessica Sultan, Director General, Economic and Business Opportunities Branch, Lands and Economic Development; Nelson Barbosa, Senior Director, Regional Operations Sector, Housing and Infrastructure Services Reform Directorate; and Jennifer Esdaile, Director, Strategic Water Management.
I would like to take a brief moment to provide you with an update on the status of COVID-19 pandemic activity across Indigenous communities.
As of February 26, we are aware of 1,523 active cases of COVID-19 in on-reserve First Nations communities, for a total of 21,405 confirmed cases. There have been 19,656 recoveries and, sadly, 226 deaths.
In Nunavut, there are 26 active cases, and 329 have recovered. At the same time, there are more than 480 First Nations and Inuit communities in Canada with vaccinations under way, resulting in more than 113,179 doses having been administered, reaching 30 doses per 100 adults.
Vaccination is key to stopping the spread of COVID-19 and helping us return to a normal life.
[Translation]
The department is working closely with the Public Health Agency of Canada, other Government of Canada departments, provincial and territorial governments, and Indigenous partners to protect the health and safety of Indigenous peoples. This includes helping Indigenous partners respond to public health threats.
I’ll now move on to the topic of today’s meeting: the presentation of the Supplementary Estimates (C) for 2020-21 for Indigenous Services Canada. To ensure that the department can continue to respond to the pandemic and support the work under way, the Supplementary Estimates (C) for 2020-21 provide for a net increase of $1.5 billion. This brings the total authorities for 2020-21 to over $17.8 billion.
[English]
The $1.5 billion is composed of $65.3 million in vote 1 operating expenditures, $16.6 million in vote 5 capital, and $1.5 billion in vote 10 grants and contributions.
Following the repeal of the Public Health Events of National Concern Payments Act, ISC is requesting the unspent amount as at December 31, 2020, as voted appropriations through the Supplementary Estimates (C) to continue these initiatives with a corresponding negative adjustment in the statutory funding.
Of the total amount, $1.1 billion is dedicated to various COVID-19 initiatives, and $400 million is for other key initiatives such as improving access to safe, clean drinking water in First Nation communities.
The supplementary estimates include the following COVID-19 initiatives: $528.9 million to support surge health infrastructure, primary care nursing surge capacity, and public health responses in Indigenous communities; $380 million in additional funding for the Indigenous Community Support Fund; $63.9 million for supportive care in Indigenous communities; and $58 million to Indigenous community businesses.
Additionally, ISC is also requesting the following major items: $151.5 million to improve access to safe, clean drinking water in First Nations communities; $74 million to support the implementation of An Act respecting First Nations, Inuit and Métis children, youth and families, and the ongoing reform of the First Nations Child and Family Services program; $67 million to reimburse First Nations emergency management service providers for on-reserve response and recovery activities; $47.2 million to strengthen governance capacity and advance fiscal relationship reform; and $29.7 million to end violence against Indigenous women and girls, as well as to provide mental health services.
[Translation]
The supplementary estimates reflect a number of transfers between Indigenous Services Canada and other departments, the largest being $30 million from Agriculture and Agri-Food Canada to help improve access to food and increase food supply for Indigenous peoples.
Mr. Chair, in these difficult times, the department is more committed than ever to ensuring the needs of Indigenous peoples are heard and met.
I look forward to discussing all aspects of the supplementary estimates with you and would be happy to answer any questions you have regarding my presentation.
Thank you.
The Chair: Thank you, Mr. Thompson, for your presentation and your opening statement.
[English]
Honourable senators, I would like to inform you again that we have a maximum number of seven minutes per senator. Therefore, ask your question directly to the witnesses, and witnesses, please respond concisely. At this time, the clerk will continue to show a hand signal for the seven minutes.
Senator Marshall: Thank you very much to all the witnesses for being here today.
The amount of funding that you’re requesting, $1.5 billion, is spread over several pages, so there are quite a few areas where increased funding is being requested. But I went back to look at your departmental results report that was released just this past December, and when I compare them to other organizations and departments, it looks like your department performance reports indicate that you’re at the lower end. For example, you have 61 targets established, and you’ve indicated that 6 of the 61, or about 10%, have been met, whereas the organizational average is 48%. I could go down through the four categories and come to the same conclusion.
Can you tell me, just generally, why your departmental performance reports indicate you’re at the lower end? It seems that you’re having some challenges there, so I’d like you to start with that question.
Mr. Thompson: Thank you very much, senator, for the question. As you know, we have the policy on results from the Government of Canada that asks every department to develop a departmental results framework. As the department was recently created in 2017, the department had to create a completely new departmental results framework. And in the spirit of reconciliation, we are also co-developing the performance measures with our Indigenous partners. That work requires time.
When we created the new departmental results framework, we used some of the performance information metrics that were available, but we had to set new targets. So you will notice through the departmental report that a lot of those targets are either in negotiation right now or in co-development with Indigenous communities, or we have established targets that are also looking at a future date in terms of measurement, and that explains why we have a lot of performance measures right now that are to be determined, or we are still waiting to get the appropriate measurement.
Senator Marshall: As you’re talking, I’m looking at my numbers, and I see that just with what you’ve indicated, like “to be achieved,” and you need to get the data, half of the 61 are in the category “to be achieved,” and just looking at the details, some of the indicators of the target years are like 2023, 2025, 2028, and 2030. And then for some, there are no targets for 5 of the 30.
To look at the expenditures of the department, we’re talking about almost $18 billion, and for some of those indicators — you only have 61 for a big department — you’re saying the target years are 2030. It just seems that, as parliamentarians, we’re trying to figure out where the money is being spent and what you’re achieving with the money. If you’re not going to tell us until 2030, then we will be challenged along with you.
Mr. Thompson: Thank you very much for the question. We are still reporting on the departmental report on the results that we are achieving. We are using a number of metrics. But as per the department metrics that are identified through the policy on results, we are one of the very few departments that have that commitment for co-development with Indigenous partners. It requires each of the programs to work with Indigenous partners to agree on what is the appropriate performance measure and what should be the target, too. We also need to make sure we have the right baseline data to establish the target. Those are the kinds of challenges that this new —
Senator Marshall: We’ve lost the connection. I can just carry on with my next question, Mr. Chair.
I notice that there’s $5.5 million there. It might be statutory, but it’s for information gathering and sharing of Indigenous data. Is that one of the issues? So far we’ve been told about the difficulty with getting the data, and you need the data over a long term. Is that what that money is going to be used for?
Keith Conn, Acting Senior Assistant Deputy Minister, Indigenous Services Canada: Yes. I’ll take a crack at it. Thank you for the question, senator. That is my understanding of the $5.5 million. We have a lot of data deficits and data challenges. We have a lot of work to do with partners, provinces and territories to do some exploration around data-sharing agreements. In my world of health, we know that the provinces and territories collect a lot of data on Indigenous populations, but we need to map it out in terms of how we can look at potential opportunities for data-sharing agreements. That’s just one aspect of information gathering and sharing and developing a sort of baseline across the nation.
Senator Marshall: So when I look at 30 of the 61, there’s one there with no target year or target month or anything. It says the percentage of children in care who are placed with a family member; I would think that is not complicated data. Why would that data not be available?
Mr. Conn: I’ll defer to my colleague Mr. Sutherland. I have an answer, but that’s not my lane.
The Chair: Mr. Sutherland, we do not hear you.
Mr. Conn, you said that you had a comment?
Mr. Conn: I have a comment, and James Sutherland can correct me as a follow-up.
I understand it’s a difficult question, for sure. It’s a struggle we have. When we look at children in care with family members, we have two different deliveries. We have the provincial government in some instances, depending on the jurisdiction, delivering child and family services. In other instances, we have Indigenous and First Nations-led child and family services organizations. We have a lot of challenges around tracking that particular data piece. That’s one of the opportunities we want to explore with partners. That’s a complex myriad of sources, but we also have different tracking systems across jurisdictions, as I said. It’s about trying to find a middle ground around those particular services for children.
James is nodding his head, kind of.
Senator Marshall: There are only 61 performance indicators. I would really think that the department should put more effort into it. Thank you.
Mr. Conn: We would agree.
Senator Marshall: I’ve been told.
Senator Pate: The additional $1.5 billion that ISC has requested includes about $525 million, or more than that, for the continuation of public health responses in Indigenous communities. One of the realities, as we’ve seen throughout the pandemic, is that poor and racialized communities have been disproportionately affected by COVID-19. In Ontario, for instance, they face four times the risk of hospitalization, and a risk of death that is two times higher.
I’m curious about two things. Have you monitored and do you have data speaking to the effects that the direct income supports like CERB and CRB have had for Indigenous peoples on- and off-reserve? Who has been able to access them?
As well, given the Calls for Justice of the National Inquiry into Missing and Murdered Indigenous Women and Girls to establish a guaranteed livable income, have you looked, in particular during this time, at how that could have alleviated the economic harm caused by COVID-19 for Indigenous people in particular?
The Chair: Mr. Conn, can you direct us with the other witnesses, or can you answer?
Mr. Conn: I don’t have an immediate response on the CERB impacts in terms of the benefits created for both on- and off-reserve, but I know it’s been actively accessed, from my general readings. I will have to come back to you on that, senator, on the detailed impacts of how CERB has helped or hindered the populations being served.
The Chair: Mr. Conn, if you could provide us with that at the earliest opportunity from your side, we would appreciate it.
Mr. Conn: Indeed.
Senator Pate: I’m also curious if you have access to the numbers of individuals who are Indigenous, who are living on- and off-reserve and who fall below the poverty line — both the low-income cut-off, as well as the various poverty lines developed in the provinces and territories.
Mr. Thompson: Thank you very much. I am very sorry for the technical issue.
With regard to income support, this is a question on which I believe my colleague David Peckham from the Education and Social Development Programs Sector would have additional information. I would turn to Mr. Peckham to see if he has more information to provide on that subject.
David Peckham, Acting Assistant Deputy Minister, Education and Social Development Programs Sector and Partnerships Sector, Indigenous Services Canada: In response to the question, one of the supports we’ve been providing is additional income assistance support on-reserve. Additional payments have gone to income assistance claimants.
Ms. Fortin: I’m sorry to interrupt, Mr. Peckham. The audio quality is not good enough for interpretation. I think it’s the internet connection.
The Chair: If that’s the case, Mr. Thompson, could you answer that question or take it under advisement and come back to us?
Mr. Thompson: I can say, with regard to the income assistance program, additional funding was provided for the program for COVID. The amount was $262.8 million under the Public Health Events of National Concern Payments Act. That brings the total budget this year to $1.1 billion for income assistance.
I don’t have specific measures with regard to the number of people who are living in poverty. That is something on which my colleague from the program would be able to provide additional information. But, for sure, investments were made. It was recognized that people at the poverty level were mostly impacted by the pandemic, and that’s why additional funding was provided — to make sure they were supported during the pandemic.
Senator Pate: What steps have the department taken to consider implementing a guaranteed livable income in line with the recommendation of the National Inquiry into Missing and Murdered Indigenous Women and Girls?
Mr. Thompson: Again, this is a question that the program would be in a better position to answer. There was no funding to the supplementary estimates that was provided per se for that initiative. This is, of course, something that is always taken into consideration by my colleagues working in the program, but I cannot talk about any investments that were specifically made for this initiative.
Senator Pate: Just to be clear: None in particular were looked at in light of the economic harm caused by COVID-19 in Indigenous communities?
Mr. Thompson: Currently, with regard to COVID, we were reacting to the pandemic with the current programs that are in place. Of course, there are discussions moving forward, but we had to react with the current authorities that we had and the current programs in place, and that was the best way for us to support communities.
The Chair: Thank you, Mr. Thompson.
Senator Klyne: Welcome to our panel of guests. I want to thank you for your opening remarks, especially with identifying the priorities in response to COVID-19.
The federal government, through ISC, is investing large amounts to close the gap on boil-water advisories, the housing crisis and low education attainment, and there is evidence of these gaps being closed. However, we need to accelerate the process and eliminate these gaps altogether, which would assist in addressing issues associated with gangs and drugs, which often lead to domestic and generational violence, and over-representation in correctional institutes.
Large amounts are also contemplated for community infrastructure development providing adequate or at least the basics regarding effluent-treatment plans, sewage-treatment plans, more schools and classrooms, adequate health care, long-term care and senior care facilities, and cultural and recreational facilities. Intuitively, a significant amount of these large amounts will involve residential building, institutional and commercial building, specialized industrial construction, infrastructure and heavy construction.
It seems to me that there is a socio-economic opportunity here, and my question is this: Among all of those line items that Senator Marshall identified, do your estimates and budget give consideration to investing in human capital, providing people with trade skills and on-the-job training leading to meaningful and above-average earning potential?
Mr. Thompson: With regard to skills development, we are working very closely with ESDC, so there are initiatives that are at play. We are also supporting, through economic development activities, communities to build their capacity to make sure that they are in a position to compete in the labour market.
So I don’t know if my colleague from Lands and Economic Development is now connected and can contribute to the conversation. I would turn to Ms. Sultan; if not, David Peckham can also provide more information with regard to education.
Mr. Peckham: Thank you.
One of the pieces of the income assistance program is also supports that are provided to get those claiming income assistance into employment and training. So in addition to what Mr. Thompson mentioned, which is ESDC’s work on Indigenous skills, we also provide that service to those on income assistance support.
Senator Klyne: There is obviously a lot of construction going on: industrial, commercial and residential. Who’s letting those contracts out? Are they going to intermediaries or third parties? Are they getting bid or quoted on? Are there any jobs skills training opportunities in all of that?
Mr. Thompson: With regard to the large investments the department has made with regard to water facilities, my colleague in Strategic Water Management, Jennifer Esdaile, should be in a position to provide you more information on how those contracts are being managed.
Jennifer Esdaile, Director, Strategic Water Management, Indigenous Services Canada: Thank you for the question. I can respond in terms of the tendering policy we have in place for infrastructure on-reserve.
First Nations are the owners of their infrastructure. For my responsibilities, this includes water and waste water systems. They are responsible for the planning, design, procurement, construction, operation and maintenance of their on-reserve infrastructure. Indigenous Services Canada provides the funding and advice to First Nations in the planning, procurement, design, construction, operation, maintenance and commissioning of those systems or any infrastructure on-reserve.
The tendering policy on federally funded capital projects for First Nations on-reserve is a policy that took effect in 1998. It states that for capital projects with construction costs of over $500,000 that are funded in whole or in part by the federal government contributions, open tenders must be called and publicly advertised to allow interested contractors an opportunity to bid on the project. Within the policy, the value-for-money criteria is defined as the lowest valid bid price, which, in addition to the bid price, can also incorporate specified provision for local content committed to by the contractor or supplier in carrying out the project and any other provisions the First Nations deem necessary for carrying out the work.
I would not be able to speak to any of the skills development that is in place in association with carrying out the tendering process.
Senator Klyne: That’s fine. Maybe I’ll touch base with the department later and ask questions about housing crisis developments — the plans around that — and other residential opportunities. Thank you.
Senator Richards: I sent a message to Senator Duncan asking if she wanted to take my time. Since she is next, I will yield my time and maybe come back at the end of the session. Thank you.
Senator Duncan: Thank you very much, Senator Richards. I’m sorry I missed your message. Thank you for the opportunity to ask a question.
Under the Constitution, if you will, Canada has the responsibility for First Nations health; it’s been said by some that Canada is the 14th province at the table with respect to Indigenous health. Different provinces and territories have different methods for dealing with Indigenous health and the costs for providing services. For example, travel for medical treatment is often a requirement throughout the North. So the Yukon government would bill Canada for the travel associated with First Nations health. We’ve heard Senator Anderson reference non-insured health benefits.
In wading through all of the Crown-Indigenous Relations and Northern Affairs Canada and Indigenous Services Canada, I’m seeking consolidation of all of the health care funding. Does such a consolidation exist? If not, could I ask that the departments provide, in their budgeting and the amounts they’ve selected, a breakdown by province and territory of the expenditures of those funds? For example, a number of times, we’ve seen references to Nunavut facilities and different amounts in different First Nations without an indication of where those First Nations are located.
So I have two questions: Are we consolidating the health expenditure information, and are we able to provide a breakdown at Indigenous Services Canada and the other departments of where this requested funding is being spent?
Mr. Thompson: Thank you very much, senator, for the question. With the accountability regime in the Government of Canada, we are in a position to provide that kind of information in a transparent manner. Also, through the departmental system, we are tracking financial information by province and in different ways. That information should be available.
I will defer to my colleague Keith Conn to provide additional information on your question.
Mr. Conn: Thanks, senator, for the question. We have clarity within Indigenous Services Canada of what the expenditures are for the Indigenous populations that we serve — primarily, of course, First Nations and Inuit across the nation.
What’s difficult to understand is what the provinces and territories spend on the Indigenous populations, because most jurisdictions don’t track those expenditures with an ethnic identifier within their health system.
I would also beg the senator’s indulgence; we always position ourselves that health is a shared responsibility. Certainly the First Nations and Inuit Health Branch of ISC provides primary health care in about 51 remote and isolated communities across the nation. Of course, the provinces run the health system. That’s under the provinces’ mandate for hospitals and physician services. We do our best to coordinate those services, including mental health services and access to specialized health services, for the remote and fly-in communities. It would be an interesting exercise to uncover what the actual expenditures are by province and territory.
We can get back to you with very detailed reports on what our expenditures are, federally, in terms of First Nations and Inuit health. We’ll come back with that, if we can.
Senator Duncan: If I can just follow up on that, the witness identified that information could be provided. Could it be provided in writing to the committee as soon as possible?
The witness mentioned that, certainly, they are able to determine the amounts spent throughout our country for First Nations and Indigenous health. I’m going to use the term Indigenous. Could that be identified as on-reserve and off-reserve, also separated out? There are statistics collected within Statistics Canada of the First Nations, Indigenous and Inuit population throughout the country, so if it could be overlaid with that information, that would help us in determining whether or not the monies are being spent in a transparent manner and where they are most needed.
For example, I’m concerned about the Indigenous population living in urban centres and their access to health care. Could we have the information? Thank you.
The Chair: Mr. Thompson, can you follow up on the request of the senator, please?
Mr. Thompson: Absolutely, Mr. Chair. We will be providing the information that we have available for the federal spending. I understand that it may be a little more challenging for urban populations, as I believe that most of that population is served by the provincial system. With what we can provide, we will be making sure we are clear on what the data includes, what is excluded from the data and what is available.
The Chair: And with your extrapolation and graphs, can you do it across Canada on-reserve and off-reserve?
Mr. Thompson: We will do our best with the information available in our financial systems, and we will make sure to make it clear what is included and excluded from the data.
The Chair: As you know, we’re moving to table our report in March. When can we expect to receive that information?
Mr. Thompson: It shouldn’t be too long. It’s a matter of days to put the information together and make sure we have the proper qualifications for the information.
The Chair: Thank you.
Senator Loffreda: Thank you to our panel of witnesses for being here today.
We have all heard and we all know of the importance and acceleration of our digital economy due to this pandemic. We also know that access to broadband, high-speed internet in remote, rural and northern communities is a major issue.
Has this challenge been an impediment for Indigenous-led businesses to shift their businesses online? If so, how much?
Also, in order to share some best practices, can you give us some examples of businesses that joined the digital marketplace during the pandemic and have been successful in their transition to the online economy? Are there any solutions to this going forward?
Mr. Thompson: Thank you very much for the question, senator. We are working very closely with our colleagues at Innovation, Science and Economic Development Canada with regard to the rollout of broadband all across the country. They have very ambitious targets to make sure all Canadians are connected to the network. This is really a partnership.
With regard to information on business challenges related to the business community, I would ask Jessica Sultan if she would have additional information to provide in that respect.
Jessica Sultan, Director General, Economic and Business Opportunities Branch, Lands and Economic Development, Indigenous Services Canada: Thank you very much. My name is Jessica Sultan. I’m the Director General responsible for the Economic and Business Opportunities Branch within the Lands and Economic Development sector of Indigenous Services Canada.
Thank you very much for the question. We are in the process over the past months — almost the entire year, to be honest — of working with two main corporate organizations, the Canadian Council for Aboriginal Business and the National Aboriginal Capital Corporations Association, or NACCA, to put together surveys. We have been doing this with Indigenous businesses to determine exactly the kind of information that has been asked in the question.
For example, a survey has been completed on businesses that were able to provide PPE, but the other surveys are not yet complete and ready to be released. I would expect that, in coming months, that information will be available to us, but I’m not able to offer it at this time.
Senator Loffreda: Thank you. There is $58 million at Indigenous Services Canada to alleviate the economic impacts to the Indigenous businesses that are ineligible for mainstream support measures through COVID. We all know the importance of the timing in receiving benefits. Sometimes it’s the difference between staying open or being closed. My question revolves around what gaps have been there and that we could fill in the future. The first question that comes to mind is: Why would the mainstream support measures not include these businesses? Why were they ineligible in the first place? What can be done to fill these gaps in the future? Thank you for your answer.
Ms. Sultan: Thank you, I’ll answer again.
ISC does absolutely recognize that there are a number of unique challenges for Indigenous businesses and that they may be disproportionately affected by the pandemic. In response to that, significant funding has been rolled out.
In April 2020, there were funds in the total of $306.8 million that were announced to help Indigenous businesses to work through the challenges of the pandemic. In addition, on June 11, there was another $117 million provided to help Indigenous communities better support local businesses and economies as well as $16 million of stimulus development funding specifically to support the Indigenous tourism industry.
ISC remains very committed to helping businesses through the pandemic and into recovery. The funds are being rolled out as expected, on time and anticipated to be well disbursed by the end of the fiscal year.
Senator Loffreda: In general, what is the effect of this pandemic on Indigenous-led businesses? Have they been able to survive during the pandemic? Did many have to close permanently? Do we have preliminary results? Which businesses have been hit the hardest? Going forward, is there anything we can suggest or advise the government to do in terms of keeping these businesses viable?
Mr. Thompson: Again, Ms. Sultan will be in a position to provide more information.
Ms. Sultan: As with the surveys that I had noted that we are working to complete with various Indigenous partner organizations, the questions you’ve raised are also of much interest and are currently being studied.
From my experience in working with broad sectors across Indigenous businesses, I would expect Indigenous tourism to be one of the hardest-hit industries. I expect that in the coming months we’ll have more concrete information across Indigenous businesses as a whole that we will be able to share.
Senator Loffreda: Thank you. If you could provide that in writing in the future, it would be appreciated.
Senator Smith: Recently the Auditor General said that the federal government will not meet its commitment to eliminate all boil-water advisories this month. The Auditor General herself said she was disheartened and concerned and that this is something that should not be acceptable in 2021.
I have a simple question. Why, after many years of promises and all the promised funding, are we still falling short in terms of providing this basic human need to our Indigenous peoples? What issues are preventing your department from eliminating these boil-water advisories?
If I could qualify that, when I was chair of the Finance Committee four or five years ago, we had the same discussion. What it comes down to is getting an understanding of why we are not able to execute effectively. Can somebody help me?
Mr. Thompson: Thank you very much, senator, for the question. This is a very ambitious plan we have with regard to water in communities. It requires heavy coordination all across the country, and, of course, the pandemic had a big impact on the capacity of the department to meet its target.
Additional investments for water are made through the supplementary estimates. An additional $151.5 million is being injected into the program to make sure we are accelerating the outcomes that we’re hoping to achieve. To provide you with a more detailed answer, I will turn to my colleague Jennifer Esdaile, from the water program.
Ms. Esdaile: Thank you for the question. First, I would like to point out the good work and achievements we have been able to make over the past number of years. We have invested funds to support 657 water and waste water projects. This includes 98 new water and waste water treatment plants and lagoons, and 418 projects to renovate or upgrade existing infrastructure. We’ve lifted 99 long-term drinking water advisories on reserves and prevented another 175 from becoming long term.
Addressing long-term drinking water advisories is complex. The solutions to address drinking water on First Nations communities are unique to each situation, and we work closely with each community to find the most appropriate solution. The decision to put in place a particular solution is made, rightfully so, by the First Nations leadership. It’s complex, and projects to address the advisories can take many years to complete. These include feasibility studies, new system design work, construction of new infrastructure, and improved training and monitoring.
Infrastructure projects face delays for a number of reasons. For instance, projects to repair a water treatment facility in a remote community that is dependent on winter roads to transport construction materials may face up to a year’s delay if the winter road season is shortened due to climate change impacts. In other cases, projects are delayed due to impacts resulting from market conditions.
Senator Smith: I don’t want to interrupt, but we’ve heard these same answers for years. It sounds like you’re reading off a script. I have no problem with that.
The issue here is that there is a coordination issue with the various communities. We recognize they’re scattered all over the country, but you’re talking about a department that has up to $18 billion invested each year by the federal government. I have difficulty understanding the same stereotypical answers we’re getting, from a script, for years and years.
Do we have the management infrastructure in place between the department and the various communities? I recognize this is a huge and serious problem because of the scattered set-up that exists throughout our country. Do we have the capability to address this issue, as opposed to saying, “Oh, yes, we have 100 that have been solved, but 50 new ones have just come in?”
We empathize with the problems you face, but how are we going to manage this and get results so that Indigenous people won’t have to, in 5 or 10 years, say they have the same problem, but it is just going to different places? How do we get the problem solved?
Ms. Esdaile: Thank you again for that clarification. I will say that work is under way in every single community with a long-term drinking water advisory. There is an action plan to resolve it. We have projects under way in each of the 39 communities to resolve the remaining advisories that are in effect, and we are committed to completing those long-term solutions where we have interim solutions in place, in order to provide clean water to communities sooner.
Work is under way. I will restate that there is a plan in place to address each of the long-term drinking water advisories that are currently in effect.
The Chair: Ms. Esdaile, as chair of the committee, there is no doubt that there is a time every year, as per the budgets we have been looking at, as Senator Smith said, for the last 5, 10 or 20 years — there is no doubt that you table a report in which the time frame of the infrastructure is addressed and whether it meets its budget.
Could you supply to our committee, through our clerk, the following information: For the year in question, 2021, do we have a report such that we, as parliamentarians, can see that we had X number of projects on the go during that year? We could back this up, because we are the same parliamentarians who tabled reports on Budgets 2019 and 2020.
Senator Smith: Mr. Chair, could I add to what you’re saying? I’m not trying to interrupt, but we’ve heard the same feedback. My only point is this: I don’t think it’s good for us, as an institution, in terms of a department saying, “Look at all the good things we’ve done.” That’s not the point. We recognize you’ve done good stuff, but the fact of the matter is that there remains a major problem that has not been solved. How are we going to solve this problem?
Each year, Mr. Chair, we get the list of all the projects that have been accomplished. But that’s not good enough, because there are so many more out there.
The Chair: Thank you, Senator Smith. To Mr. Thompson and Ms. Esdaile, you are professionals. We are just asking for some documents that can enable parliamentarians to cross-section the infrastructure, boil water or whatnot. I believe you can see that Senator Smith is so passionate about it. Mr. Thompson, if you could provide a snapshot of what we have completed with the budget in question — 2021 — and that now we’re considering Supplementary Estimates (C) in the budget year 2021. We have also not received it in Budget 2019 or 2020.
We are just asking for additional information that will enable us as parliamentarians, as the Finance Committee in the Senate, to make additional recommendations. We do that with all the departments. We are not targeting you. Please, I don’t want a debate with senators. There was a question asked. We’re asking to have an answer. Is that fair to you, Mr. Thompson?
Mr. Thompson: Absolutely, Mr. Chair. Thank you very much for the question. I also want to thank Senator Smith for his question because this is something that is critically important for the department. This is a top priority for the organization. We are putting more and more information online, as well as available to all Canadians, to track progress. But this is something that is going to be an ongoing priority for the department. With drinking water, as you know, you have to operate and maintain the facility. It’s not only about lifting the drinking water advisory, it’s also making sure that they don’t come back. That will require ongoing training, maintenance and investments. We will be providing you with the information that you are requesting to make sure we provide you with the most complete picture of the situation for the organization.
The Chair: Feel free, if you want, to ask the Senate Finance Committee to sit with your people for a longer time period to be debriefed on it. I can tell you as chair that we will certainly acknowledge such a request.
[Translation]
Senator Dagenais: My question is for Mr. Thompson.
My question underscores the challenge around tracking the money provided to Indigenous peoples to respond to the pandemic.
In the supplementary estimates, $900 million is allocated to two items: the continuation of public health responses and the Indigenous Community Support Fund. Further down, I see $63 million for supportive care, $58 million for mental wellness, another $58 million for increased health care costs and $1 million to improve health measures.
Why has so much funding been allocated to items that are so similar? How are department staff and Indigenous peoples supposed to know which budget item an expense falls under? They all seem to overlap.
Mr. Thompson: Thank you, Senator Dagenais, for that excellent question. As Chief of Finances, I pay special attention to this type of thing.
Tracking financial information throughout the usual government spending cycle is challenging, and, of course, the pandemic has not followed the usual budget cycle.
The department needed to have swift access to funding at the beginning of the year in order to address the range of needs. As you may recall, when the pandemic began a year ago — for some, it may seem even longer than that — we didn’t necessarily know how long it would last or what scale of a response would be required.
The department managed the funding requirements on a period basis. Investments were made at the beginning of the fiscal year, and the government set up statutory authorities that opened the door to a central vote at the Treasury Board of Canada Secretariat. This way, we were able to access the funding we needed to address both the public health needs and the economic development needs, including the Indigenous Community Support Fund.
Additional needs emerged as the year went on. The pandemic was continuing, and we had to deal with additional challenges. We submitted additional funding requests, and those amounts appeared either in the statutory authorities or the supplementary estimates. The statutory authorities ended on December 31, but funding was still available under the statutory authorities. To avoid losing the funding, the department deducted what remained in the statutory authorities, and that’s what you see today in Supplementary Estimates (C).
That is the challenge before us.
We have the information. I can provide the committee with a full list of investments by item for each area of activity. You would then have a lot more detail on which funding amounts were allocated this year and to which budget items. That would probably give you the clarity you’re looking for, but I completely agree with you that the budget cycle is difficult to follow.
Senator Dagenais: At some point, the pandemic will ease. Going forward, can we expect budget items to be more clearly defined or less similar?
Mr. Thompson: Personally, I can tell you exactly how much went towards health, income assistance and economic development. The item that isn’t quite as straightforward is the Indigenous Community Support Fund, under which, $1.06 billion was allocated to communities across the country. It will take longer to describe exactly how that funding was spent because communities were given more latitude with it. The department has learned from experience that, when Indigenous communities are allowed to make their own decisions, it produces better results than when federal public servants dictate to them what to do.
Communities were given greater flexibility under the Indigenous Community Support Fund, and that led to the results we are seeing now. When it came to COVID cases and COVID-related deaths, Indigenous communities were under-represented, contrary to the H1N1 pandemic, when we saw an overrepresentation of Indigenous communities. This approach has been shown to work. I can tell you that $1.065 billion was allocated to the Indigenous Community Support Fund and the eligible expenditures by communities under the funding. I also have the details relating to health, economic development and all the various items, so we can provide that information to the committee.
Senator Dagenais: When you say the results are clearer when Indigenous communities make the decisions, I gather that, in exchange, they report back on how the money was spent. Is that correct?
Mr. Thompson: The funding amounts were allocated through existing mechanisms for contribution payments and the existing terms and conditions for program funding. An accountability mechanism is also in place, but the burden was reduced this year to give communities greater flexibility. Nevertheless, an accountability requirement clearly exists, so it is possible see how the money was spent.
Senator Dagenais: Thank you, Mr. Thompson.
The Chair: Before we go to Senator Forest, I have a follow-up comment. Mr. Thompson, the Parliamentary Budget Officer appeared as part of the previous panel. I wouldn’t want to interpret his comments, but I would encourage you to listen to what he said about your department. It’s about helping us dot the i’s and cross the t’s, so to speak. It’s important for all departments and parliamentarians to keep in mind that, when it comes to the estimates, we all have the same goals: transparency, accountability, responsibility, predictability and reliability.
As chair of the Standing Senate Committee on National Finance, I encourage you to listen to what the previous panel of witnesses said, especially Mr. Giroux.
Senator Forest: I have a general comment. I’m not sure whether there is any symbolic meaning behind the technical issues we are having in our discussion with the Indigenous Services Canada officials.
On February 22, Le Devoir published a fascinating article on the important issue of drinking water in Indigenous communities. The article revealed that 20% of water treatment plants would not serve out their full life cycles because Indigenous populations did not have the resources to carry out the proper maintenance so that the plants could operate effectively and efficiently.
Some modern water treatment plants are operating without filtration, so they aren’t treating the water.
Last week, the Auditor General noted that Indigenous Services Canada had not amended the funding formula for the operation and maintenance of First Nations water systems since it was first developed 30 years ago.
Currently, the funding formula is based on salaries that are ridiculously low, which contribute to the problem of retaining qualified water system operators.
In response to the Auditor General’s report, Indigenous Services Canada said it wanted to continue working with First Nations partners to ensure that sufficient water and wastewater operations and maintenance funding is provided and to amend associated policies.
Practically speaking, how far has that cooperation come? Given the tremendous human resources challenge — a 30-year-old pay structure and pay rates — it’s clear to see that retaining qualified personnel is an important issue, on top of the funding for technical maintenance and upgrades.
I’d like to know where the talks are with those partners. What is the plan to address the technical maintenance issues and the challenge of retaining qualified personnel to operate these facilities, which are so vital to Indigenous communities?
Mr. Thompson: Thank you for your question, senator. As mentioned earlier, this year’s Supplementary Estimates (C) include $151.5 million to specifically address the operation and maintenance issues.
Funding for these issues has also been approved for next year. The government is working on a longer-term strategy, but the current estimates include funding precisely to address the issues related to the operation and maintenance of drinking water systems.
Ms. Esdaile can speak to the water program in greater detail.
Senator Forest: How is the $151 million broken down? How much is allocated to operations and maintenance for human resources requirements?
Mr. Thompson: My understanding is that the funding included in this year’s Supplementary Estimates (C) is dedicated exclusively to operations and maintenance. Perhaps Ms. Esdaile can provide more information.
[English]
Ms. Esdaile: Thank you very much for the question. As mentioned, the new funding means that 100% of the water and waste water operations and maintenance costs will be covered based on the current funding formula. This is up from the typical 80% that we have been funding in the past. We expect that this funding is going to enable First Nations to better sustain, over the longer term, the approximately 1,200 water and waste water systems that are on reserves.
Specifically, we expect that the funding will allow First Nations to improve water operator salaries and better retain qualified operators in their communities, train new operators to build water maintenance capacity, improve or maintain asset condition ratings and ensure longer life cycles for water assets.
Alongside the implementation of new investments in operations and maintenance, we are working with the Assembly of First Nations on co-developing a new operations and maintenance policy framework. Initial work has determined that operations and maintenance should not be looked at in isolation and needs to form part of asset-management planning in addition to determining the actual costs of operating and maintaining systems.
First Nations have shown support towards asset-management planning that better reflects operations and maintenance funding requirements and that allows for strategic planning and decision-making regarding funding needs.
We expect that this approach will enable the sustainability of systems over the longer term and will also account for operators’ salaries, which is a piece we continue to work on in partnership with First Nations.
[Translation]
The Chair: Do you have any other questions?
Senator Forest: In short, the funding allocated in Supplementary Estimates (C) will help improve pay scales and cover 100% of operations and maintenance costs, up from 80%. Is that correct?
Mr. Thompson: That’s correct, senator.
The Chair: Thank you very much, Mr. Thompson.
[English]
Senator M. Deacon: Thank you for the entire team being here today. One of my questions was intended to be in an area I think we’ve gone pretty hard on this afternoon: safe drinking water and water advisories. I am not going to repeat, of course, the questions I have on that topic. I just want to mention it, because I think it is something that, from National Finance, clearly, the message that it’s something we’re looking to be able to respond to is loud and clear. My question was touched on, and on the $151 million, I was trying to understand more deeply what that money was going towards. You talked about operations and maintenance issues, and I look forward to hearing a little bit more on the topic specifically in your report. Thank you for that.
I’m going to go to something different, and this is the question that concerns $31 million earmarked to end violence against women and girls, as well as to provide mental health services. Over the course of this pandemic, one of the lesser talked about consequences has been the surge of domestic violence across the entire country. For our purpose today, I’d like to know if there’s been a similar uptick in this disturbing trend in our Indigenous communities, if there are any data there, and what you think the long-term effects might be. More importantly, I’d like you to expand on how this money will be spent not only providing safe shelter for those in the short term but what we can plan to do to abate, minimize and get rid of this in the long term. Thank you.
Mr. Thompson: Thank you, senator, for the question. The amount of $29.7 million that is included in those estimates is to address the recommendations from the final report by the National Inquiry into Missing and Murdered Indigenous Women and Girls, Reclaiming Power and Place, and the funds will support community-based cultural and emotional support services, as well as access to mental health counselling for those impacted by missing and murdered Indigenous women and girls, as well as the Federal Indian Day School settlement agreement.
I will turn to my colleague Keith Conn to provide you more information on the detailed programming that will be put forward with this funding.
Mr. Conn: We did have surge capacity funding of $82 million that went out to organizations and communities to support the surge capacity on mental wellness and supports. With respect to the gender violence initiative, I think I would defer to David Peckham, my colleague who has more intimate knowledge of that particular file in terms of the current investment and potential future investments.
Mr. Peckham: Thank you. Hopefully you can hear me a little better now.
The Chair: We are still having difficulties, Mr. Peckham. Mr. Thompson, maybe you could take it under advisement and we could have the answer in writing, please.
Mr. Thompson: Absolutely.
The Chair: Thank you.
Senator M. Deacon: Thank you. I look forward to that. I have another question with respect to the vaccine. You noted earlier in your presentation that you have made some progress on getting our on-reserve Indigenous communities vaccinated. I can’t remember the exact numbers, but I think it’s significantly higher than the national average. Many of our First Nations communities are hard-to-access rural areas, which, I would imagine, made the cold chain needed for the Moderna and Pfizer vaccines quite a challenge.
With the standard refrigeration required for the AstraZeneca vaccine, will this help your communities speed up the pace of vaccinations even more so?
Mr. Thompson: Thank you very much, senator, for the question. Again, I will turn to Mr. Keith Conn to give you more information on the vaccine rollout.
Mr. Conn: Thank you for the question, senator. According to our public health experts, we should see a significant increase in the vaccination rates across the country with the approvals of the new vaccines in the system.
We were able to deliver the vaccine through the provincial and territorial authorities in terms of Moderna but not Pfizer. Pfizer would be in a very stable urban environment, but certainly Moderna was effectively deployed in Indigenous communities across the nation. We expect to see quite a significant ramping up of the vaccine doses that will be available in the coming weeks and months, and we should see a significant jump in the vaccination rates across the nation — not just in terms of rural, remote and fly-in communities but also in the urban context across the nation. So there is more news to come on that.
Senator M. Deacon: Thank you.
[Translation]
Senator Moncion: Can you talk to us about the plans that go along with the funding requests? I’m interested in hearing about the type of strategic planning and deployment plans associated with the various programs. I’m also curious about how you track the funding to ensure accountability, from the time you determine the amounts to the time you identify the results of project funding.
Mr. Thompson: Thank you for your question. Naturally, the various divisions within the organization conduct comprehensive needs analyses in relation to existing programs and the level of understanding around them; those needs analyses also take into account the work we do in cooperation with Indigenous communities. As you know, we have a significant presence in the regions and a long history of working with communities, so numerous commitments were made vis-à-vis Indigenous communities to ascertain their needs.
The formulas behind some of our programs make it easier to assess results and performance. As far as current programs are concerned, benchmarks tied to announcements made by the federal government have been built in. On our end, we conduct an analysis to determine what the impact on Indigenous communities will be and whether there are any gaps. We talked about economic development earlier. We knew, for instance, that tax reductions or credits did not apply to certain businesses, so an additional measure had to be introduced. When other departments announce programs, a comparative analysis is performed, so there is a strong level of cooperation between federal departments, as well as with provinces around health care and with Indigenous communities to very clearly identify what their contributions will be.
We use current program terms and conditions to deliver programming. The terms and conditions are very specific about what counts as an eligible expense and what does not. With respect to accountability, we monitor the actions that are taken, relying on the usual departmental accountability mechanisms to track, and report on, payments and results.
This year, some of our actions were more responsive than proactive. We weren’t able to spend too much time planning. In a typical year, we plan months ahead of time. In this case, we had to be somewhat responsive, but the funding oversight mechanisms were still in place to ensure proper follow-up and performance reporting for each program.
As I said in response to a previous question, we didn’t engage in much long-term planning this year. Throughout the organization, we were extremely nimble in releasing funding, monitoring the impact and moving quickly to obtain additional funding. We had obtained $280 million for health care; we were able to track performance during the first six months of the year, and the current estimates include $528.9 million in additional funding. We were able to make forecasts on the basis of the results achieved with the $280.5 million. We did the same thing with the Indigenous Community Support Fund: We had three waves of $300 million and a fourth wave of $380 million because we tracked each stage or instalment and we used the spending cycle to respond and allocate proper funding.
Senator Moncion: Thank you. My second question is more general.
In Canada, some 655 band councils represent 1.4 million Indigenous people, and we know that not all reserves are dysfunctional. Many of them are highly functional, self-governing, and less reliant on Indigenous Services Canada.
Is it possible to get the statistical breakdown between less well-functioning reserves and highly functional ones, so we can see how funding is distributed among reserves in Canada?
I know, for example, that reserves up north have far greater requirements than reserves located closer to urban areas. What’s more, reserves located near urban areas have access to services that are already available in communities.
It would be very helpful to compare and see how funding is distributed among reserves and what share each receives. Could you provide that information to the committee?
Mr. Thompson: Thank you for your question. I mentioned the Indigenous Community Support Fund. For that initiative, we took remoteness factors into account and we used a rating to determine communities’ capacity. Those criteria were also used to determine how funding was distributed. A good many of our programs are based on similar formulas. We can therefore provide you with information on community capacity, remoteness factors and departmental spending by community.
[English]
Senator Richards: Thank you to the panel for being here. My question is a follow-up to Senator Moncion’s question. I want to know about the reserves themselves and how much money is allotted for housing not only in Supplementary Estimates (C) but also in the Main Estimates in a year for housing on reserves across Canada. I remember seeing just a couple of weeks ago a young woman putting a blanket over a cracked window on a reserve to protect her children from a snowstorm. Now, that’s no way to live. I grew up in an area with a lot of poverty, both First Nations and White, and that is no way for anyone to live.
With the idea that money is allotted to reserves, I would like to know the accountability of this and if you could give me some indication about that. Perhaps Mr. Thompson could answer this very quickly. Thank you.
Mr. Thompson: Thank you for the question, senator. The example that you are providing is, of course, unacceptable for any person living in Canada. As you know, the needs are way greater than the budget that is available. There are great needs in terms of housing in the Indigenous communities, and the department needs to continue to invest in housing.
If I understand your question correctly, you’re asking me to provide information through the Main Estimates about where the money is allocated. If I understood correctly, this is something that we can most definitely provide to the committee.
The Chair: As we move on to adjourn, Mr. Thompson, just a quick reminder that there was another senator — I believe it was Senator Duncan — who asked for a breakdown on the same type of question posed by Senator Richards; that is, a breakdown of on-reserve and off-reserve throughout Canada. Is that possible?
Mr. Thompson: Yes. Absolutely.
The Chair: Mr. Thompson, I thank you and your team very much for your availability. We will certainly await your answers through the clerk.
Honourable senators, and to all those watching, before I adjourn the meeting, I want to remind you that our next meeting will be Friday, March 5, at 10 a.m. EST.
(The committee adjourned.)