THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Thursday, December 9, 2021
The Standing Senate Committee on National Finance met with videoconference this day at 10:02 a.m. [ET] to study Supplementary Estimates (B) for the fiscal year ending March 31, 2022.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, before we begin, I’d like to remind senators and witnesses to please 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.
[Translation]
Honourable senators, the use of online platforms doesn’t guarantee speech privacy or that eavesdropping won’t be conducted.
As such, while conducting committee meetings, all participants should be aware of these limitations and restrict the possible disclosure of sensitive, private and privileged Senate of Canada information.
Participants should know to participate in the meeting in a private area and to be mindful of their surroundings.
[English]
Honourable senators, we will now begin with the official portion of our meeting as per our order of reference received by the Senate of Canada.
My name is Percy Mockler, senator from New Brunswick, and Chair of the Standing Senate Committee on National Finance.
Now I would like to introduce the members of the Standing Senate Committee on National Finance who are participating in this meeting: Senator Boehm, Senator Dagenais, Senator Duncan, Senator Forest, Senator Galvez, Senator Gerba, Senator Gignac, Senator Loffreda, Senator Marshall, Senator Pate and Senator Richards.
We also welcome other senators who are participating in this meeting.
I wish to welcome all of the viewers across the country who may be watching on sencanada.ca.
This morning, we will continue our study of the Supplementary Estimates (B) for the fiscal year ending March 31, 2022, which was referred to this committee on December 2, 2021, by the Senate of Canada.
[Translation]
This morning, we’re pleased to welcome Yves Giroux, Parliamentary Budget Officer.
[English]
He is accompanied by the Director General, Costing and Budgetary Analysis, Jason Jacques, and by analysts Jill Giswold and Kaitlyn Vanderwees. Welcome to all of you.
Thank you for accepting, like always, Mr. Giroux and making yourself available to the Standing Senate Committee on National Finance.
We will hear some opening remarks by Mr. Giroux.
[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’re pleased to discuss our analysis of the government’s Supplementary Estimates (B) for the 2021-22 fiscal year, which were published on December 7, 2021.
As you said, with me today I have Jason Jacques, Director General, Costing and Budgetary Analysis, and the analysts who prepared the Supplementary Estimates (B) report, Jill Giswold and Kaitlyn Vanderwees.
The government’s second supplementary estimates for the 2021-22 fiscal year outline an additional $13.4 billion in budgetary authorities, $8.7 billion of which requires approval by Parliament.
[English]
Including these supplementary estimates, total proposed year-to-date budgetary authorities equal just under $400 billion, which represents an $80.8 billion decrease over the 2020-21 estimates to date. This is generally consistent with the spending plan outlined in Budget 2021. If past years are any indication, departments are expected to lapse significant amounts, suggesting that they could fund from their existing resources at least some of the initiatives for which funding is sought in these supplementary estimates.
I have concerns, however, with the fact that the government is seeking Parliament’s approval of this additional spending without yet revealing what was spent the year prior. More than eight months after the end of the fiscal year, the government has not yet released the Public Accounts of Canada for 2020-21. I see no obvious reason to delay the release of these numbers, as these would certainly be helpful in your scrutiny of the government’s funding request.
There would, however, be one way of avoiding a repeat of this situation in future years and that would mean amending the Financial Administration Act to require the government to table these numbers, the Public Accounts of Canada, a couple of weeks or months before the current legislative time limit of December 31.
That being said, we would be pleased to respond to any questions you may have regarding our analysis of the government’s Supplementary Estimates (B) or other Parliamentary Budget Officer work.
[Translation]
The Chair: Thank you for your comments, Mr. Giroux.
[English]
Honourable senators, I would like to share with you that this morning you will have a maximum of five minutes each for the first round. Therefore, please ask your questions directly to the witnesses and please respond concisely.
The clerk will make a hand signal to show that the time is over. As usual, as chair, I will now recognize Senator Marshall to be followed by Senator Forest.
Senator Marshall: Thank you, Mr. Giroux, for your report and your opening remarks, and thank you to your staff.
My question is on the resolution of contingent liabilities on page 10. You mentioned in your opening remarks about the Public Accounts of Canada. I find that because we don’t have the public accounts for last year, it really inhibits a review of Supplementary Estimates (B).
In addition to not having the public accounts for last year, we don’t have the departmental results report, which is something else that I usually read fairly thoroughly — for some departments anyway. It’s also going to delay receipt of the debt management report because once the public accounts are released, the government has 30 sitting days before they have to table that report.
I just wanted to make those remarks because you had commented on the public accounts.
For the contingent liabilities, I asked Treasury Board about it yesterday. I know it is a technical issue, but I wanted to make sure I understood it properly. I don’t know if you can answer this, because you don’t have the most recent public accounts, but would the $900 million referenced in the report show up in the provision for contingent liability? You show that the amount for 2019-20 is $24.9 billion. If we had the number for 2020-21, would we expect to see that $900 million in that figure?
Mr. Giroux: That’s probably a combination of the contingent liabilities as they would appear in the public accounts. It’s a combination of two factors. The first are the new liabilities that have been assessed or those existing liabilities that have been reassessed. So it would probably push them up — maybe down if fewer people are suing the federal government, which, admittedly, is unlikely. The second is the reduction in the liabilities resulting from the fact that some of these lawsuits may have been settled, either through the courts or through out-of-court settlements.
The $900 million would contribute to reducing the overall contingent liabilities, but because this is a stock at any point in time, the movement up or down depends on both the inflows — the new lawsuits or the revised liabilities — and the outflows — the lawsuits that have been denied, dropped or the claims that have been settled.
Senator Marshall: Okay. I see there’s already funding for that. Now, there’s additional funding being provided and we’re nearing the end of December, so my question would be this: Based on the work that your staff has done, do you think that they’re going to need that money and that it will be paid out by the end of the fiscal year? You mentioned earlier that you’re expecting significant lapses, so I’m wondering if the department really needs that money. I asked Treasury Board yesterday that if it’s budgeted there and they don’t spend it, can they move it somewhere else.
Based on the work of your staff, do you think that money will actually be spent this year or do you think it will lapse or be otherwise disposed of?
Mr. Giroux: It’s very difficult to answer that question, senator, without having the details regarding which settlements this is for and also without looking at the overall budgetary cash situation of the department that is responsible for these settlements. So maybe the department would have enough money to settle these agreements without seeking Supplementary Estimates (B) funding, but maybe not depending on what other type of spending is being advanced or slowed down.
Generally speaking, the Treasury Board of Canada Secretariat or group of ministers can impose restrictions on money that doesn’t get spent when it’s been allocated for specific purposes. But I don’t have access to those specific details because they are generally considered cabinet confidences.
Senator Marshall: Okay.
I have a final question on that section of the report. In the last sentence, you say:
. . . Given the focus on identifying and resolving claims, it is likely that a greater number of contingent liabilities will be recognized on the Government’s balance sheet going forward: consequently, ongoing parliamentary spending requests can be anticipated.
Is your comment restricted to claims or given that we’re in the middle of the pandemic, do you anticipate it would be more than just claims? Might it be with regard to some businesses that the government has issued guarantees and now they’ll be called upon to honour the guarantees?
Mr. Giroux: Thank you for the question. That comment in the report was directed mostly at Indigenous claims, either specific or other claims. It was not meant to be an indication that we expect lawsuits or claims on the Government of Canada for other non-related issues, such as COVID-19 or the programs. But it could attract some additional liabilities and claims.
The purpose of that sentence that you referred to was directed specifically at Indigenous claims given the government’s reconciliation agenda.
Senator Marshall: Okay. Thank you. My time is up, Mr. Chair.
The Chair: On the second round, Senator Marshall?
Senator Marshall: Yes, thank you.
[Translation]
Senator Forest: Thank you for being here. The Parliamentary Budget Officer’s comments are always very enlightening to us on the finance committee. I want to acknowledge your work.
You said that there were significant residual amounts in the existing appropriations that could fund some of the activities identified in Supplementary Estimates (B) as new appropriations. Do you have any idea of the amounts? After all, we’re talking about billions of dollars. This type of management of public funds seems a bit lax. The appropriations aren’t used up before additional appropriations are requested. This type of management seems a bit slack.
Mr. Giroux: Yes, you could add a few adjectives to describe this type of management. That said, it shows risk aversion on the part of most government managers. I’m not talking about ministers, but rather deputy ministers, directors general and assistant deputy ministers. For these people, exceeding budgetary authorities is a major blot on their record. Departments are eager to avoid this. However, there aren’t many consequences for spending less than the appropriations. The watchword of the government system is to proceed cautiously and request additional funding, even if not all the funding is needed. A manager doesn’t face many negative consequences for doing so. In contrast, if at the last minute you need a little bit more money and you might go over budget, because of unforeseen events, for example, even though you’re managing things very well, this leads to very negative consequences. You are then subject to much more scrutiny from central agencies. In some cases, this can even lead to punishments for chief financial officers in departments. There are strong incentives to ask for more money out of an abundance of caution, rather than to manage in a very tight manner to make sure that you get as close to a balanced budget as possible when running a department.
Senator Forest: Are we not creating an environment or culture among managers that encourages them to ask for more money to ensure that they remain within their budgets? We also see the tendency to spend as the fiscal year comes to an end, on March 31. Isn’t this a harmful or ineffective way to manage public funds?
Mr. Giroux: Absolutely, Senator Forest. The potential negative impact has been demonstrated a number of times, because more money is being requested to avoid going over budget. This is a cautious approach, if you look at the incentives in the system. The trade-off is that it may encourage some managers to spend money that isn’t absolutely essential, because the money is in the budget anyway. That’s human nature, unfortunately. However, managing public funds requires a great deal of rigour, which may not always be there. If the management of departments isn’t very rigorous, there may be a certain laxity. You’ll spend those funds rather than let them lapse and lose them, even if the needs don’t require funding or expenditures. This can lead, in some cases, to what has been called “March madness,” where you spend a little more than you should have, simply because money will disappear at the end of the fiscal year if it isn’t used.
Senator Forest: We all know about the madness of Black Friday in November. You could say that the government experiences March madness.
In your report, you noted that in 2024-25, you anticipate another increase in the public service to 393,000 public servants. This would generate $55 billion in salary or benefit expenditures. That’s quite something. How can you explain that the public service will grow again in absolute numbers, especially when we haven’t yet been able, with the benefit of hindsight, to have an impact on COVID? There’s the impact of teleworking and our new ways of doing things, which means more contact through video conferencing and less physical presence. How do you explain the fact that the public service will grow again?
Mr. Giroux: That question can probably be answered by the fact that the government has a more interventionist agenda, with more government programs and involvement in various sectors of the economy. This requires more public servants, either many more or a few more, depending on your perspective.
The government may also want to be more diligent in releasing public accounts. Maybe that’s why the government is planning to hire employees: to speed up reporting. I don’t think so. I’m being a bit sarcastic, which maybe I shouldn’t be. It has a great deal to do with the government’s agenda and priorities.
Senator Forest: Of all the things that you listed, did you measure the greatest efficiency?
Mr. Giroux: Unfortunately, Senator Forest, we didn’t measure efficiency. It depends on the areas that you’re looking at. If you ask the people responsible for information management, who are waiting for answers from access to information, they may tell you that efficiency has decreased. I haven’t seen a significant increase in efficiency. I can see that my time is up.
Senator Forest: Mine too. Thank you.
Senator Gignac: Welcome to the committee, Mr. Giroux. I know that you’re a regular here, unlike me. I want to take a moment to acknowledge your fine work. In a previous life, as chief economist, I often had to refer to your work, especially at the start of the pandemic. We were all in a fog. You served as a reference, even with regard to the financial markets, for finding out the deficit without budgets and budget updates. I wanted to acknowledge your work.
I’ll resist the temptation to ask questions about the report that you released this morning, since Senator Galvez requested it. However, I find it very intriguing in terms of the distribution of wealth. It will no doubt be discussed.
Senator Forest referred to my question yesterday. Perhaps we’ll receive a written answer by December 13. I’m talking about the $2.5 billion in non-budgetary expenditures. There’s the large employer emergency financing facility. According to the Department of Finance, on page 90 of the document before us, it’s an emergency funding corporation. I worked in Ottawa during the 2008-09 financial crisis with Minister Flaherty. I was a special advisor to the deputy minister. We had the Canada Account. EDC was managing all this activity when we had to become GM shareholders. This time I’m trying to figure out if it’s a new organization. Is it still the Canada Account? What’s the governance for this? Senator Forest and I were left wanting yesterday.
Mr. Giroux: Thank you, Senator Gignac, for your kind words. Congratulations on your appointment to the upper house. I believe that your presence greatly enhances the knowledge base and the distinction of the house. However, I don’t have many answers regarding the specific issue of emergency appropriations for businesses. I haven’t studied this issue in depth, either in terms of governance or with respect to the motivation for creating a new entity rather than assigning the mandate to one of the multiple government organizations that already exist.
Perhaps my colleagues Jason, Jill and Kaitlyn have more useful information on this matter. Unfortunately, I can’t shed any light on it yet. However, if the committee is interested, some officials at the Privy Council Office, a group called the machinery of government, might be able to shed light on the motivation for assigning all this to a new organization rather than an existing one.
Senator Gignac: No problem. However, I believe you issued a report in August. The Senate and the House of Commons adjourned for the summer and then Parliament was dissolved because of the election, but you released a report on Air Canada. Do you still believe that taxpayers are getting value for money? Your report was quite positive about the government’s response.
Mr. Giroux: We still feel that way. The financing terms and conditions provided by the government were a little better than what the company could have obtained on the markets, but not that good. The financing terms and conditions that the government provided to Air Canada were at a slightly higher rate than what the government must pay when it finances itself. The difference in yield was good for the government.
The fact that Air Canada got out of these obligations fairly quickly suggests that the terms and conditions weren’t that beneficial. Financing in the private markets is beneficial to Air Canada. This confirms our conclusion earlier this year that the terms and conditions provided by the government were not that bad for the government and taxpayers, and not that beneficial to Air Canada. Perhaps it had something to do with the restrictions on executive compensation. That’s a fairly strong incentive for some private companies not to rely on government funding unnecessarily.
Senator Gignac: Thank you. I think that my time is up.
The Chair: Maybe in the second round.
Senator Gignac: Please.
[English]
Senator Pate: Thank you, Mr. Giroux, and to your team for appearing before us. Thank you for all the work you do. I’d like to come back to one of your recommendations, or suggestions, that we look at a legislative amendment. Short of that, and in the short term, if you have other recommendations about how we might obtain some of the information that, obviously, would be helpful for us to have while doing these assessments, I would welcome those.
Second, you have commented on a number of things in terms of the estimates. I’m also interested in the costing you did earlier this year on what the benefits would be, particularly in terms of halving the rate of poverty in this country. If we pivoted from the Canada Recovery Benefit, the emergency benefit, to a guaranteed liveable or basic income. One of the challenges that many people have raised is the fact that there is a costing that would require us to address some other inequities. I’m interested in whether you have looked at how we cost the long-term impact of these ongoing inequities, including what the cost is of court cases that need to eventually be resolved and the cost of fighting those as well as the inequities that they create in terms of long-term economic and, of course, human well-being forecasts.
Mr. Giroux: Thank you, Senator Pate. With respect to the question of whether there are other recommendations to improve the information that both chambers benefit from or receive from the government when it comes to public accounts and estimates in general, I mentioned in my opening remarks that legislation could be amended to advance the latest date at which public accounts can be tabled. Currently, I think it’s section 64 of the Financial Administration Act that requires the government to table the public accounts no later than December 31, following the end of the fiscal year.
Senators and MPs could consider amending that provision of legislation to advance the date by a couple of weeks or even a couple of months — a few months I should say. That would not be unreasonable considering that some jurisdictions, notably some provinces like Ontario, B.C. and Quebec, table their public accounts anywhere between mid-August to October. Advancing that date to October 31 at the latest would not be unreasonable because the government has in the past been able to table its public accounts in September or October. Given the knowledge and the capacity of the public service, it is certainly doable. That’s one way of improving the provision of information to parliamentarians.
There’s also the broader issue of better aligning the estimates with the budget process, which has been the subject of numerous discussions in the previous parliaments, specifically the Forty-second Parliament. That’s something that would probably warrant a discussion of its own and we’d be happy to have that discussion with you, senators, if there is interest in that.
With respect to the work we did on the guaranteed basic income, we did cost the implementation of a guaranteed basic income with the specific parameters given to us by your colleague, Senator Woo. We focused on the net costs and the gross costs of replacing a series of government benefits and tax preferences by replacing them with a guaranteed basic income according to those specific parameters. Unfortunately, we did not consider the cost of the inequalities or societal-social benefits, nor did we consider the quantifiable cost avoidance of a guaranteed basic income.
That would have been very interesting, but it would also have been very challenging to try to estimate these benefits and the cost avoidances related to a guaranteed basic income. It would also have been controversial as anything that touches a guaranteed basic income is. Given the timelines we were working with, we focused our efforts on what was quantifiable within the parameters we were given by the senator.
Senator Pate: Okay, thank you very much.
Senator Boehm: Hello, Mr. Giroux. It’s always a pleasure to have you and your team with us. We always find your comments instructive. To a large degree, my questions have been asked by Senator Forest, but I wanted to explore something else with you.
As we look at other international jurisdictions — and I’m talking about the Organisation for Economic Co-operation and Development, or OECD, countries — there’s been a lot of fiscal stimulus. There have been many programs that have been instituted. I’m thinking in particular of the Europeans — the U.K., Germany and France — with their short-time work programs and the various enhanced employment procedures that have been passed. Again, I’m thinking about Europe and the United States.
A lot of these programs have run their course. However, Australia and New Zealand have put in specific lockdown measures that can be triggered which, of course, benefits Part 2 of Bill C-2, which will be before us very soon, but there has been a stop-start in some cases. Programs have been phased out, and then there’s been a need to go further. Whereas if I look at the Canadian example, there’s a bit more tapering involved in terms of fiscal and stimulus measures, as well as support measures.
In the larger discussion that is going on, which, of course, involves the politics of whether these programs contribute to global inflation, I’m wondering if you can guide us and project what the impact of these fiscal and support measures will be with respect to future inflation possibilities, or if it’s consistent. Tell us how you see it.
Mr. Giroux: With respect to the inflationary pressures and their origins, we can safely assume that there are three main elements behind the inflation pressures that we are seeing.
First, there are clearly supply chain disruptions. We’ve heard about the Port of Vancouver, and we’re hearing about other supply chain disruptions globally. Because some of the goods and services that we buy on a day-to-day basis come from far away or have parts that come from far away, supply chain disruptions have an impact on price. When there is demand but not enough supply to meet that demand, it pushes up the prices and that’s due to, in good part, supply chain disruptions.
Another element that we have seen contributing to inflation is base year impacts. When we talk about base year impacts, we refer mostly to energy prices. In 2020, energy prices were unexpectedly or artificially lower than they would otherwise have been because of lockdowns. If you compare prices in 2021 to depressed prices in 2020, of course, they went up by a significant amount. That’s what we’re referring to when we talk about base prices.
The other element is clearly government stimulus. When the government programs were implemented in 2020, the fear was of deflation, a collapse in demand because of lockdowns and of people losing their jobs, so governments across the world stepped in to inject significant amounts of money into the economy, and that is one of three main factors contributing to inflation. I don’t think it’s the main one, but it is one of the elements.
With respect to what we see going forward, we see the supply chain disruptions most likely easing, as they should, in an economy that is adapting itself to the disruptions brought on by COVID. The base year effects will fade as we move forward in our base year as we compare inflation year over year and as we move from 2020 to 2021, which looks like it will be a more normal year. The base year effects should taper off, as should the government supports. We see inflation returning to the Bank of Canada’s target of 2% with successive interest rates increasing and government support tapering off.
That being said, we don’t know what the Bank of Canada’s mandate will be after December 31, which is the end of the current five-year agreement between the Bank of Canada and the government with respect to the bank’s mandate. A bit like the public accounts being delayed, this is very late for the government to announce what the new mandate will be or if it will be a continuation of the existing mandate. The government is saving it for the very last minute at a time when, presumably, parliamentarians will have taken a holiday break and when there will be fewer people around to address and comment on this issue. Again, it’s another aspect where the government is saving important decisions for, what I consider to be, the last minute.
Senator Duncan: Thank you to Mr. Giroux for your very thorough report. I appreciate it. I’d like to offer a couple of comments.
The public accounts in the territorial government, the Yukon government, must also be tabled by October 31. I appreciate your point on that and look forward to working with the Finance Committee on the suggested changes that you have made and bringing them forward in the Senate.
Regarding the report you mentioned on guaranteed liveable income, I believe the parameters you were given did not mention working with First Nations or First Nation governments. I note in the report you presented that $309 million is going to Indigenous Services Canada, or ISC, for income assistance.
That sort of an element wasn’t included in your study of the guaranteed liveable income.
I’d also like to express my thanks for the new personnel expenditure analysis tool in your report. I’m looking forward to further work on that. Here is my specific question to do with ISC and Crown-Indigenous Relations and Northern Affairs Canada, or CIRNAC. There are $725 million to support infrastructure in Indigenous communities. Innovation, Science and Economic Development Canada, or ISED, who are presenting to us, also have almost a billion dollars for economic development agencies for the regions of northern Quebec, southern Ontario and the Pacific. This funding supports municipalities and Indigenous communities.
We’ve also, of course, seen recent disasters with British Columbia’s fires and floods that are going to require the replacement of critical infrastructure. This is going to be yet another separate envelope of funding. It seems we have three different envelopes that might be available to renew critical infrastructure. Is there an oversight process that ensures these similar mandates and the taxpayers receive the maximum benefit and that there is not a duplication?
Is there a risk that money might be moved to replace critical infrastructure that is not necessarily what was originally intended?
Mr. Giroux: Thank you, senator. This question has come up regularly when we looked at infrastructure programs in general and when my office has asked for information from Infrastructure Canada. It has happened in the case of the Investing in Canada Plan — the $180 billion plan over 10 years — where we find that, generally, investments or spending in infrastructure by the federal government tend to be disbursed among several departments with one department that should logically oversee that. However, departments being departments, it seems that it’s difficult for Infrastructure Canada to have a firm grip on the spending, where it’s happening, at what pace and whether there is good value for money.
That being said, that’s just my impression. If you need more information on the spending on infrastructure and Indigenous services, I’ll invite Jill to provide a bit more information.
The Chair: Madam Giswold, please identify yourself to introduce yourself. Also, do you want to add onto that question?
Senator Duncan: I believe that we are receiving Indigenous Services Canada later in our work on this particular supplementary estimate, so I will save my next questions for second round, Mr. Chair.
[Translation]
Senator Loffreda: Thank you, Mr. Giroux, for joining us. It’s always a pleasure to see you and your colleagues. I want you to know that I greatly appreciate your reports and your excellent work.
[English]
My question addresses spending and debt servicing. It’s very relevant to the additional $8.7 billion that needs parliamentary approval here.
I’d like to take advantage of your presence here to talk a little about inflation, which we touched on slightly, and Canada’s projected economic growth.
I think the government did a great job helping Canadians throughout the pandemic with its various emergency support programs and financial assistance — no doubt about that. I appreciate the importance of tracking all this money through the estimates and making sure there is good value for our money, accountability and transparency.
However, let’s try to look ahead at the big picture for a moment. Allow me — in my previous life as a banker, looking ahead was always the most important thing we did.
RBC published a report yesterday on the great Canadian restart, in which it expects a return to a sluggish trend growth of around 1.8% per year beyond 2023 should we carry on our existing course.
This sub-2% growth trend isn’t unique to Canada. We obviously have many economic challenges facing our nation, like everybody else, after months of extraordinary spending. Few are more important than how to turn around our long-run trend growth. This is my question: Does this current spending we’re asking, at this point, modify your outlook and projections, especially given our current inflation concerns? Also, I’m still concerned about inflation — I’ve always said you need two things: excess liquidity and scarce resources, which you outlined what we do have at this point — because when I talk to my colleagues in the banking sector, they tell me that they’ve never seen corporate bank accounts as full or as healthy as they have seen at this point in time.
We look at the Canadian savings rate — same picture. If we look at scarce resources, we have a demographic: an aging population. People can’t find employees. I’m concerned about that.
Given our current inflation concerns and predictions of interest rate increases — we all know we have those predictions — can you elaborate on any major debt servicing concerns, considering our underwhelming growth rate projections going ahead? Also, given the current economic situations and volatility — because of our current environment, pandemics and variants — should we not modify the frequency of the projections and debt servicing reporting? You already did touch on that, and I was in full agreement. I had the question before your presentation because of how urgent it is to amend the Financial Administration Act given all this and the fact that we haven’t yet revealed prior year spending.
It’s a lot of material, but you’re always very insightful on that. Should we worry about our debt servicing? As a banker, that concerns me given the additional spending. Whenever additional spending was presented in my previous life, debt servicing projections always came with it.
Mr. Giroux: Thank you, senator, for that question.
Debt servicing costs are low by historical standards despite the fact that the government has increased its level of debt. That’s obviously due to very low interest rates. We have heard many stakeholders, politicians and commentators rejoice about the fact that interest rates are low and now is the time to spend and borrow.
However, I think this is a short-term view because interest rates are low now, yes, but they may not stay low forever.
That’s a concern that I have. We signalled in a few reports that interest rates are likely to go up — at least more likely to go up than down, clearly. We are hearing more and more about the Bank of Canada tightening its monetary policy stance and increasing interest rates next year. This morning, Reuters is saying they anticipate five rounds of interest rate increases in 2022. That means that interest rates will go up, likely, and that the debt servicing costs that are low by historical standards at the federal level will not stay low forever. They will increase.
So that begs the question: How do we prevent that debt servicing from becoming an undue burden on government finances? Well, one way to do that would be to return to smaller deficits — eventually balanced budgets; it’s up to the government to decide that — but also to work on improving GDP, enhancing its growth so that the GDP itself grows faster than what we collectively anticipate. RBC mentioned a number that you referred to. We anticipate long-term growth to return to its trend of about 1.7% or 1.8% year in, year out, which is consistent with productivity growth as well as demographics.
One way to improve economic prospects and reduce the overall burden of government debt is to have faster GDP growth, which necessarily goes with enhancing productivity. I’m not sure that all government expenditures are moving in that direction.
They are obviously targeting very worthy goals, but in an economic growth perspective, productivity-enhancing measures are what will make us have a bigger pie so that, as we say, “A rising tide lifts all boats.”
Senator Loffreda: Second round if I may later, and I would love to continue this insightful discussion. Thank you, Mr. Giroux.
[Translation]
The Chair: Mr. Giroux, if you want to add to the questions asked by Senator Loffreda, our deadline is December 13. We would appreciate your comments.
Senator Gerba: Thank you, Mr. Chair. Like Senator Gignac, I’m a new senator and new to this committee. I’m pleased to have you here, Mr. Giroux. I would like to join my colleagues in saying that I always appreciate your office’s reports, and I want to congratulate you on them.
Mr. Giroux, I imagine that the supplementary estimates submitted today were prepared before the arrival of the Omicron variant. They didn’t take into account everything currently being prepared. However, I think that many things were taken into account, including economic recovery for small and medium-sized businesses and hard-hit sectors, such as the tourism sector, which was badly affected by COVID-19. In your opinion, will this budget before us be the last one? Or, with this variant and what’s coming down the pike, will there be another budget review? That’s my first question.
My second question is as follows, if I can ask it now, Mr. Chair. We talked about this yesterday, but I don’t know whether we received an answer to the question. Is there a rationale, Mr. Giroux, for having new economic development agencies in Canada? Thank you.
Mr. Giroux: Thank you, Madam Senator; I congratulate you on your appointment. I welcome you to the committee, as this is the first time we have spoken, and I will be happy to answer your questions as best I can. On the fact that a new variant has emerged in the last few weeks, we have seen since the beginning of the pandemic that the first outbreak of the virus caused a big shock, of course; everybody remembers that. The second wave was also a shock, but not as big a shock, and the third wave has had an impact, but not as big as we originally thought. As the successive waves came and went, the Canadian economy adapted; the shock was brutal at first. As other waves came and went, the economy became more and more resilient. By “the economy” I mean “Canadians and businesses.” Unless the variant is much more deadly than we anticipate or are currently seeing, or is really very contagious, or vaccines are totally ineffective against it, we don’t believe that the variant will have a disproportionate impact on the Canadian economy. In fact, as the virus has taken hold, with the different variants, the economy has adapted well and we have developed coping measures, barriers that are relatively effective based on what the health authorities have told us.
I will add that taking into account only the Omicron variant, I don’t think there is a need for another supplementary budget by the end of the year. However, the government may decide, for example in the finance minister’s update next week, to introduce new spending by the end of the year, which may require the tabling and eventual approval of Supplementary Estimates (C). We have had three supplementary estimates in a year. Perhaps Mr. Jacques has more information on whether or not supplementary estimates should be tabled, but before I turn to him, I would like to answer your second question about whether there is a case for more regional development agencies.
Unfortunately, it is not my role to determine whether the creation of a new agency is justified when the aim is to organize public spending differently, especially when it concerns regional economic development. It is a political decision rather than an economic one, in my opinion, because from a purely economic standpoint, the mandate of the existing agencies could have been modified to ensure that all regions of the country were covered. So the creation of new agencies is more of a political decision, and on that I have no comments to make.
The Chair: Mr. Jacques, do you have any comments?
Jason Jacques, Director General, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer: I think it’s almost guaranteed that the Government of Canada will bring forward Supplementary Estimates (C). We anticipate that this will probably happen in February, in order to receive parliamentary approval to spend more money before the end of March.
The Chair: Thank you very much.
Senator Dagenais: I want to thank Mr. Giroux for being here, because it’s always very interesting to have his participation in the committee to benefit from his wise answers. I have two short questions. Statistics Canada has just indicated that the growth index for the third quarter is below zero, at -1.5%, whereas the 2021 budget forecasted growth of 6%. This is a significant difference. What will be the impact of this deficit? How should the government adjust, or rather adjust its figures, in light of such a gap?
Mr. Giroux: Thank you, Senator, that is a good question. On the other hand, the most recent figures showing a slight decline in the economy are not too surprising, given that the previous figures showed fairly strong growth. It is normal from month to month to see variations that are sometimes in slightly negative territory. That does not mean that this jeopardizes the figures for the year as a whole, as these figures which are published fairly soon after the end of a month or quarter are sometimes subject to revision. In my view, it does not necessarily jeopardize the growth forecasts for the year as a whole. We will have to look carefully at the figures for the last quarter, but it is still possible that economic growth for the year as a whole will be in line with expectations.
That said, when economic forecasts have a significant impact on budget growth forecasts, as they always do, it is important for a government to include a cautionary element, which I don’t think is the case in the government’s economic and budget forecasts. With a deficit that is probably over $300 billion for last year and will surely be well over $100 billion, having a contingency or a prudence factor, which we used to see at $3 billion, loses some of its weight.
That said, in future years, it would be desirable to restore a cushion, a prudence factor, to the government’s economic and fiscal forecasts to ensure that the government does indeed meet its targets and that the deficit, or perhaps the surplus, is in line with forecasts, no matter how small the variations in the economic forecasts.
Senator Dagenais: This brings me to my second question. The discrepancies that are apparent in the government’s projected figures are sometimes huge and especially numerous enough that I’ll ask the following question, which you will probably find a bit harsh.
Is this due to incompetence on the part of those who prepare the figures, or a lack of transparency on the part of the government towards taxpayers?
Mr. Giroux: That is a good question, and a legitimate one. I don’t think the discrepancies between forecasts and actual results are due to bad faith. I don’t think that at all. Nor do I believe that the discrepancies are based on incompetence, because the Department of Finance’s economic growth forecasts are generally based on a consensus that takes into account private sector forecasts; this reflects the difficulty of forecasting economic developments in an economy that is so diverse and geographically vast, with different sectors and regions moving at different speeds. It is more a reflection of the inherent difficulty of forecasting, which is always an area of great uncertainty. This brings me back to the point that the government should include a prudence factor in its economic and fiscal forecasts, particularly, to counteract the uncertainty that is inherent in economic forecasting.
I can understand that a lot of people say that it’s difficult to get projections, and sometimes that may discredit the people who are making those projections; but it’s something that’s quite difficult, because people are trying to make projections to the nearest tenth of a per cent, which is probably very optimistic if you compare this to the inability of economists in general to make forecasts.
Senator Dagenais: So what I take from this is that the government still needs to exercise caution?
Mr. Giroux: That is indeed a good practice when making economic and budgetary forecasts. I see that the chair is signalling that my time is up.
[English]
Senator Galvez: Mr. Giroux, just before starting, I would like to tell the chair that every time the PBO comes to this committee, he gives us very useful information and also very useful advice which will increase the efficiency of us doing this accountability and we should follow his advice. So now he’s saying, very easily, we can ask the government to table its public accounting report before October 31, so we should follow that.
You are an incredible source of information analysis, and I want to thank you because you have been providing me with incredible background information that is not available to all Canadians. Earlier this week, you revealed that the government gave a total average of $1.8 billion per year in tax deductions to oil and gas companies between 2015 and 2019. This data is not easily available, so thank you very much. Today, you updated the database of high-wealth individuals, which is essential for understanding how wealth is concentrated in our country and also relates to how we’re going to pay this debt that my colleagues and I are worried about.
My first question to you is this. You told us that the current fiscal policy at the federal level is sustainable over the long term and that the debt is also sustainable. I’m wondering if you can tell us if this is still the case after the tabling of the 2021 budget and the estimates you’ve studied since your last testimony.
Mr. Giroux: Thank you, senator. I would kindly ask you, when you say that honourable senators should follow my advice, if you could send the same message to my kids. I would greatly appreciate it.
Senator Galvez: Okay.
Mr. Giroux: More seriously, the question on fiscal sustainability, when we did that it was several months ago, so before the last federal campaign was launched and also before the commitments in that campaign were made. After the campaign was over, we looked at the commitments made by the party which has now formed the government. We estimate that, together with the campaign commitments and recent measures, there are about $60 billion of new spending on a net basis. After including potential tax increases for specific sectors, there are about $60 billion in new spending.
That probably changes the 0.8% in fiscal room for manoeuvrability that we estimated at the time of the last fiscal sustainability report. We will update that report in 2022 and I’m sure the number will change. I cannot give you a clear indication whether the federal government spending will still be sustainable or whether it will have crossed the line to unsustainable, but it will be much closer to the line where it’s either sustainable or unsustainable. Before the election, it was sustainable with some room for manoeuvrability. I think the room will have decreased and may have been exhausted.
The important point in fiscal sustainability reports, though, is that we have to look at governments in their entirety. I think a common mistake is to look at one level of government. The feds are sustainable, so maybe some people think it’s good to spend, but it is the same taxpayers who are supporting both provincial and federal governments. We found that, at the aggregate level, provincial governments are not sustainable over the long term. Because of that, if the federal government is to use all of its room for manoeuvrability in spending without relieving some of the pressures on the provincial level, something eventually will have to give. It will be the same taxpayers who will have to shoulder the burden.
Senator Galvez: Very quickly, my second question is with respect to the very destructive, extreme weather events we are seeing every year. In the last 20 years, the frequency of these events has increased, the intensity has increased and the cost of rebuilding has increased. We’re talking about billions of dollars. We don’t have clear numbers because the numbers are coming from the insurance companies. We know that this causes a disruption in the financial stability of the government and it can provoke stranded assets very quickly. It will signify a risk and a danger to our financial stability. I ask this question, but I have to look into each department. This is impossible for me to look into each department. Can you please assist me in determining how much these events are costing Canadians?
The Chair: Mr. Giroux, because of the time we have allocated for our panel, could you please answer that question in writing? Please provide this to us before or, at the latest, by December 13. This would be very satisfactory so that we can allude to the questions asked by Senator Galvez in our report to the Senate of Canada. Thank you.
Now, we will go, honourable senators, for a second round. I see that we have approximately 12 minutes in the second round.
Senator Marshall: Mr. Giroux, I wasn’t going to bring it up, but you mentioned it early on in your testimony. You referred to the reconciliation of the budget to the estimates and what we used to call the estimates reform project, which was very much alive when former minister Scott Brison was the minister. But we did hear from the Minister of Treasury Board of Canada two days ago. I think it’s a dead issue now. I find it’s getting even more difficult to find financial information.
It’s not getting better. It’s getting more challenging.
Could we have your comments on that with regard to where you think we’re at and if it’s getting better or getting worse? Where do you think we’re going with regard to estimates reform, accountability and transparency?
Mr. Giroux: To quickly answer your question, senator, I think COVID-19 and the flurry of government spending has made it much more difficult for parliamentarians like yourself to hold the government to account and to make sense of all the information that you’re getting or sometimes not getting. It’s very difficult for anybody to try to reconcile what’s happening with government expenditures when one looks at the budget — and sometimes there’s no budget — and then parliamentarians like yourselves are asked to vote on bills in an expedited manner for emergency benefits, or then for supplementary estimates and then the Main Estimates.
It is a very difficult task to try to determine how all these appropriation bills and program bills can be reconciled with the budget. At the same time, you don’t yet have public accounts and have an idea of how much ended up being spent on all these programs that you were asked to vote on.
So it’s not going in the right direction. Maybe it’s because of the extraordinary events related to COVID and the spending that was necessary.
I’m hoping that we will revert to something that was before the pandemic, so more normal, but there is still tremendous scope to better align the budget with the estimates to make your life easier.
Senator Marshall: Okay.
Mr. Giroux: I don’t mean easy. I mean easier as in less difficult.
Senator Marshall: Thank you.
[Translation]
Senator Gignac: I asked the minister yesterday about the annual report on departmental performance. Usually, this report is made public each year in the autumn. We learned yesterday that it would be in January, so a bit last minute.
This is an important tool for parliamentarians to learn about the management of departments and agencies through performance indices. I noticed that, for the last fiscal year — we have the information for 2019-20 — out of 2,700 indicators used by the departments and agencies, 24% of these targets were not met.
Is this something you’ve looked at before? If you haven’t, would this be something the Parliamentary Budget Officer would be willing to look at? If the choices of targets for departments and agencies are the right ones, there are still 25% of them that did not meet them.
Mr. Giroux: Thank you for the question, senator.
First, the delay in tabling departmental performance reports is hard to explain, because departments probably provided all this information two months ago to the Treasury Board Secretariat for the year that ended in March. So the fact that the filing is delayed until January is hard to understand, because the many public servants involved are very efficient even when they work from home. So the delay is difficult to explain.
As far as performance indicators are concerned, it is surprising that 24% were not met, because the departments themselves often determine the targets they promise to meet. These deadlines and indicators are often called into question.
I was responsible for writing these reports myself in a federal organization, and I can tell you that they are not always very ambitious targets — and that means what it means. On the other hand, as to studying these indicators, very respectfully, I think that’s probably more within the purview of the Auditor General, because it’s about past performance, so I think that’s more within her bailiwick.
That said, I would be happy to work with the Auditor General to study those indicators for the benefit of senators.
Senator Gignac: Thank you, Mr. Giroux.
[English]
Senator Duncan: Thank you again, Mr. Giroux, for the excellent report that you’ve given to us. I would just like to focus for a moment on the benefits that Canada has extended during the pandemic, and the Canada Recovery Benefit. As you’ve noted in your report, the extension of these benefits is before the House of Commons.
These benefits have been outlined as absolutely critical to the continuation of the tourism industry and the event and cultural industry in our Canadian economy. They are, of course, a significant contributor.
There is an increase of $1.9 billion. You’ve indicated the largest uptake was for the Canada Recovery Benefit. Has there been a study or an examination of the benefits paid in relation to the industries that are associated with those benefits? Has there been any work undertaken on that?
Mr. Giroux: Jason Jacques may be able to clarify that. Personally, I’m not aware that we did that deep dive, but maybe Mr. Jacques will remind me of something that I knew but forgot.
Mr. Jacques: No, I think you’re entirely correct. In terms of the recovery benefits with respect to the support provided to firms, we do have data as part of our detailed modelling on a sector-by-sector basis that up to this point we haven’t published.
Mireille K. Aubé, Clerk of the Committee: I’m sorry, Mr. Jacques. The interpreters cannot hear you because of the quality of your sound. Unfortunately, we’re not able to provide interpretation to the senators.
Senator Duncan: I wonder if we could resolve this by receiving the answer in writing, Mr. Chair.
The Chair: Is there an agreement, Mr. Giroux, that we could have the answer in writing?
Mr. Giroux: Of course, Mr. Chair.
Senator Duncan: Thank you.
Senator Loffreda: Mr. Giroux, we touched on contingent liabilities, but I would like to revisit that given how important the amount is. It’s considerable proposed spending, close to $900 million.
I do realize these contingencies are recorded when there is a 70% likelihood of realization. That is fine, and that is correct according to generally accepted accounting principles, but I want some additional reassurance that the trend that we have seen since 2016-17, and if we look today at the $25 billion, we’ve had a 50% increase. I did raise the question yesterday, but I want reassurance from yourself that this trend will not continue. Just to expand quickly, the 70% likelihood of liability amount, are there any major contingencies at this point in time close to part of that 70% that you could reveal and that is not parliamentary confidentiality? Moving forward, do you have any projections on that? Will that trend continue, or should we be reassured that it’s just been exceptional since 2016-17? Thank you.
Mr. Giroux: I’m not sure, senator, that the trend has stopped. Given the reconciliation agenda, it’s quite possible that more claims are brought forward and so the contingent liabilities could go up further. I cannot provide any guarantee or reasonable expectation that the contingent liabilities so far will stop there and will, as they get settled, go down. Probably quite the opposite.
But on whether these are the accurate amounts, that’s something to be confirmed by the Department of Justice, which does the assessment and which is audited by my colleague Karen Hogan, the Auditor General of Canada.
Senator Loffreda: Maybe you could send us in writing that if this trend continues, is it considered in the budget and the spending? The government is aware of that. I just want to make sure that they do understand there are contingencies going forward and taken into consideration given our current deficit and debt management. That’s what I want to make sure, not just, “Hey, surprise. There’s more.” That’s given the trend. Thank you for the time.
The Chair: There’s no doubt, Senator Loffreda, that you’re touching upon a subject matter that many senators of the committee are concerned with, especially when we look at our model of transparency, accountability, predictability and reliability of the figures.
Senator Loffreda: Thank you.
[Translation]
The Chair: Mr. Giroux, are we still agreed that you will get this response to us in writing by December 13?
Mr. Giroux: Of course, Mr. Chair. You don’t need to ask if we agree. What the committee wants, it will get from me and my office.
[English]
The Chair: Thank you very much, Mr. Giroux, to you and your team for accepting our invitation. Also, every time we do ask you to come to the committee, you are always available and that shows great leadership from you and your team. On behalf of our Finance Committee, our hats are off to you for a job well done.
Senator Richards: Mr. Chair, I just want to apologize for being late. I thought our first panel was at 11:45, so I missed the first panel. I do apologize.
The Chair: We’ll give you time, senator, to ask questions to the second panel. Thank you.
Honourable senators, with our second panel we are continuing our study of the Supplementary Estimates (B) for the fiscal year ending March 31, 2022, which was referred to this committee on December 2, 2021, by the Senate of Canada.
[Translation]
Honourable senators, we are pleased to welcome representatives from Innovation, Science and Economic Development Canada. We have with us Douglas McConnachie, Assistant Deputy Minister and Chief Financial Officer, Corporate Management Sector; Andrea Johnston, Assistant Deputy Minister, Innovation Canada; Étienne-René Massie, Director General, Small Business Branch; and Nipun Vats, Assistant Deputy Minister, Science and Research Sector.
[English]
On this, I have been informed that Mr. McConnachie will make a statement, share some remarks with the committee and then we will proceed to questions.
[Translation]
Douglas McConnachie, Assistant Deputy Minister and Chief Financial Officer, Corporate Management Sector, Innovation, Science and Economic Development Canada: Good day, honourable senators and members of the committee.
[English]
Since you have kindly introduced all of the members, I will defer the opening introductions and jump into the substance of my remarks.
[Translation]
This year’s Supplementary Estimates (B) are a dedicated exercise. As such, only urgent funding requirements are considered and all other requests are deferred to the final Supplementary Estimates (C).
In this context, it is important to note that the authorities requested in Supplementary Estimates (B) this year are much smaller than for a normal cycle. As a result, ISED is requesting $20.3 million in total authorities in these Supplementary Estimates (B), primarily to launch the new Canada Digital Adoption Program, or CDAP.
[English]
Our requirements are comprised of three items, namely $21.9 million to launch the new Canada Digital Adoption Program, or CDAP, in English; $12.3 million for the Post-Secondary Institutions Strategic Investment Fund; and a transfer of $15.4 million to Western Economic Diversification Canada for the Vaccine and Infectious Disease Organization, or VIDO. I will now provide a brief overview of each item.
[Translation]
Canadians have changed the way they do business. Businesses, employees and clients are increasingly shopping online, which is why the Government of Canada is committed to helping businesses adopt new digital technologies to help them stay competitive and meet their clients’ needs.
In Budget 2021, the Government of Canada announced the creation of the CDAP to support Canadian small and medium-sized enterprises. CDAP will help SMEs strengthen their presence in e-commerce and digitize the way they run their businesses behind the scenes.
The program provides funding and expertise to businesses as well as training and work opportunities for young Canadians. The 2021 budget announced up to $1.4 billion in funding over four years to launch this program. To achieve its mission, CDAP has two components.
[English]
The Grow Your Business Online stream will help up to 90,000 smaller businesses, including restaurants, tourism and recreation-based businesses, which have not yet adopted digital technologies to take advantage of e-commerce opportunities. Eligible businesses will receive micro-grants of up to $2,400 to help with the costs related to adopting digital technologies. It will also support a network of more than 11,000 youth digital advisers who will provide advice to and help the small businesses adopt e-commerce.
The Boost Your Business Technology stream will offer support to small and medium Canadian-owned businesses, such as small manufacturing and food-processing operations, to adopt new technologies. Support for these businesses will be in the form of grants to offset the costs of retaining digital advisers who will develop digital adoption plans tailored to the business. The grant will cover 90% of the costs to develop the digital plan, up to $15,000.
[Translation]
Mr. Chair, the $21.9 million in funding requested this year includes operational requirements to establish the program, including a new IT system, an advertising campaign and funding to staff the program.
It also includes subsidies to compensate SMEs participating in the program, and contributions for internships offered to students enrolled in the program.
[English]
The Post-Secondary Institutions Strategic Investment Fund was introduced in Budget 2016 to support large infrastructure projects at post-secondary institutions to enhance and modernize research and commercialization facilities, as well as industry-relevant training at colleges and polytechnic institutions in Canada.
Mr. Chair, Innovation, Science and Economic Development Canada, or ISED, is requesting access to $12.3 million in lapsed funding from 2020-21 in order to allow the program to complete its final project in December 2021.
[Translation]
To strengthen Canada’s role in responding to infectious diseases, the University of Saskatchewan’s Vaccine and Infectious Disease Organization program, or VIDO, is working with international partners to study human and animal pathogens and develop solutions.
As ISED continues to play an instrumental role in the government’s response to the mitigation of COVID-19 in Canada, we have agreed to transfer $15.4 million from the Western Economic Development Agency to VIDO to support clinical trials and capital upgrades.
[English]
In closing, I would like to reaffirm the department’s commitment to the stewardship of public money. The resources being sought through the 2021-22 Supplementary Estimates (B) represent the necessary funding in order to deliver programs that are beneficial for the Canadian economy. ISED will also continue its mission to work with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment, enhance Canada’s innovative performance, increase Canada’s share of global trade and build a fair, efficient and competitive marketplace.
Mr. Chair, I would like to thank the committee for giving us an opportunity to discuss these requests with you today. My colleagues and I would be very pleased to answer any questions you may have at this time.
The Chair: Thank you, Mr. McConnachie.
Honourable senators, we will proceed to questions. I remind you, five minutes per senator.
Senator Marshall: My questions are specific to the Atlantic Canada Opportunities Agency, or ACOA, because I represent Newfoundland and Labrador. I’m interested in that part of the country, so I’m hoping you will be able to answer my questions.
My first question is very general. You’re providing assistance to small- and medium-sized businesses. Can you give us some insight into what is happening with regard to those businesses? You’re providing a lot of funding, but do you know now whether that funding has helped businesses survive? Have you seen a significant number of businesses fold during the pandemic? I just want to get a feel for what’s happening with the results of the money because we haven’t seen your performance reports yet for last year.
Mr. McConnachie: Thank you very much for the question, senator. As you’re likely aware, there have been a large range of measures implemented by the government, many of which have flowed through the regional development agencies, or RDAs. While I can’t speak authoritatively for ACOA as they are a separate agency with their own minister, I would ask my colleague Mr. Massie, who has a coordination function for the small-business community, to provide a bit of a listing for some of the programming that has been run through the RDAs which explicitly target small businesses and perhaps a sampling of some of the results achieved.
Senator Marshall: Yes, it’s the results that I’m interested in. I can remember once, in my previous career, doing an audit of funding provided to businesses, and a substantial number of businesses had folded. I am interested in whether the businesses are surviving. I know they’re facing challenging times. I’ll just let the witnesses carry on.
Étienne-René Massie, Director General, Small Business Branch, Innovation, Science and Economic Development Canada: Thank you, senator, for the question. The RDAs have been an integral part of the government’s response. They have delivered a number of programs on behalf of the government to small- and medium-sized businesses in their respective jurisdictions.
On the results of the RDA-specific programming, I don’t have that information because they are all separate agencies. That will be difficult for me to comment on, but I do know that a lot of Canadian small businesses have struggled. It has been a very trying time over the past almost two years now.
The RDA measures — combined with the government emergency support measures via the Canada Emergency Business Account, the wage subsidy and the rent subsidy — have definitely helped with cash flow and some of the sort of immediate concerns to allow these businesses to continue.
I think we are all committed to look at the results of our programming as we get through this exercise, and we’ll probably be looking at all of the results of the programming in light of the pandemic.
Senator Marshall: Would there be any information in your results report — because we’re waiting for them, and we’ve heard that they’re going to be released shortly after Christmas. Would there be anything in your departmental results report that would give us some insight into success and failures?
Mr. McConnachie: Thank you for the question, senator. I certainly would agree that the departmental results report for the regional development agencies will provide the more detailed breakdown by region and by program that you’re seeking. The understanding that I’ve received from officials at the Treasury Board Secretariat is that those reports will be tabled in Parliament at the end of January, so I believe they’re actually proceeding quite quickly.
Senator Marshall: My next question, I know we’ve heard from some of the COVID-related programs a significant amount of discussion on fraud or possible fraud. Have you seen signs of that with regard to the programs that you administer? Also, what is your process for detecting improprieties or fraud?
Mr. McConnachie: Thank you for the question, senator. One of the advantages of the programming that’s administered by ISED and the RDAs in particular is that we’re dealing with businesses, small and large sizes, as opposed to retail programs with individuals, which had a more widespread and probably more heavily publicized exposure to fraud methodologies. That said, no departments are immune and it’s a challenge for program areas and chief financial officers to ensure that internal controls are robust and are not able to be bypassed.
There have been some incidents of fraud in one of the regional development agencies, which is currently being investigated by officials. It was identified quite early in the attack, if you will, so the exposure was not highly significant.
It certainly did raise awareness, coupled with some of the more highly publicized frauds that have been experienced in retail programs.
To amplify our fraud-detection routines at ISED, we’re developing a very specific fraud risk management framework that will cover all our G and C programs and will be an enhancement to our current fraud methodologies.
I would like to note that the Canada Digital Adoption Program, or CDAP, which we’re currently rolling out, is one that takes us into an area of greater exposure, and as such, we’ve built much stronger internal controls and fraud-detection frameworks into that program specifically.
[Translation]
Senator Forest: Thank you for coming. We senators all come from the regions, provinces and territories of Canada. Innovation, Science and Economic Development Canada is very important to us.
With respect to Quebec, you are asking for additional funding in the amount of $52.8 million. I would like to know this: In the context of evaluating this amount, are there any industrial or commercial sectors that you particularly want to stimulate by using these funds to finance projects in these sectors?
Mr. McConnachie: Thank you for the question, senator.
There certainly are several sectors of interest for ISED in the province of Quebec, notably the aerospace and biological sectors. There are already very strong industries in this area and we have announced several investments targeting the biomanufacturing industry, particularly in Montreal. So those are our targets for the future.
There is a detailed list that would be a bit too long to go into today, but if you want an overview, I’ll be happy to give you one.
Senator Forest: Do you take niche sectors of excellence into account? I’m thinking particularly of a region like Rimouski, where marine biotechnology has an international reputation. One of the major elements is the transference of the world-class exceptional knowledge capital to the industries.
In the analysis and criteria of your projects, is there a willingness to support the development of these products, these new niches of excellence, the new economy? Is your organization sensitive to all of this, and does it encourage this economic transfer?
Mr. McConnachie: Thank you for the question, senator.
That’s a great question, and we have some really focused programming in terms of niche industry growth. You may be familiar with the Innovation Superclusters Initiative; that’s one of our key initiatives in this area.
Maybe I could turn to Ms. Johnston to give you an overview of what we are doing specifically in Quebec.
Andrea Johnston, Assistant Deputy Minister, Innovation Canada: Thank you.
In terms of superclusters, there are five in Canada. In Quebec, there is Scale AI, which focuses on the use of artificial intelligence in supply chains. It’s a way to ensure that students who are in schools, universities or CEGEPs, and who understand artificial intelligence can apply that knowledge in a business environment. Through partnerships, we can transfer that knowledge, as you said, into a knowledge economy. That is an example of what we are doing.
Senator Forest: I think the supercluster initiatives are good initiatives, and there are five in Canada.
When I look at economic development in the East, some clusters do not qualify as superclusters. You have to understand that five superclusters in total in Canada, in all provinces and territories, is not a lot. Take, for example, marine biotechnology in Rimouski, which is world-class; it is not a supercluster, but it is a cluster. I could also use as examples the mines near Rouyn-Noranda or the aluminum smelter in the Saguenay—Lac-Saint-Jean region. Is your organization willing to support world-class clusters, similar to the example of the superclusters, but which are perhaps more modest and located in the regions? This seems to me to be fundamental to the role of the Canada Economic Development for Quebec Regions (CED), which should be able to support economies in all parts of Canada.
Mr. McConnachie: Thank you for the question, senator.
As you can see, it is more the mandate of the regional development agencies to develop niches of regional expertise. We cannot really answer for CED, but I would be pleased to come back to you with a written answer on the sectors you mentioned and on the initiatives that CED is working on.
Senator Forest: I would like that.
Senator Gignac: I would like to greet the witnesses, the deputy ministers and the senior officials from Innovation, Science and Economic Development Canada.
As I had the privilege of serving as Minister of Innovation and Economic Development in Quebec in a previous life, I can attest to my appreciation of the fine cooperation we established with the federal government and Canada Economic Development for Quebec Regions, and we also worked together with Investissement Québec. I personally attach great importance to your department. We have just heard from the Parliamentary Budget Officer, and we talked about growth that might become a little more anemic, according to the Royal Bank report. If we want to accelerate the creation of wealth, it should be through innovation and well-conceived programs. So we are counting on you and the expertise of the senior officials to guide us in this.
My question is this: I understand that we are talking about the supplementary estimates, but I noticed that, in the funding to support small and medium-sized businesses, we are talking about an additional $35 million. I actually see nothing for Quebec. The funding, as I said, is intended to help SMEs scale up and reach new markets. Am I to conclude that Quebec companies have been less dynamic than those in other provinces, or that the initial allocation in the estimates means that there is still a lot of room for other projects?
Mr. McConnachie: Thank you for the questions, senator.
No, clearly, the investments we have made in our ISED portfolio in recent years and for the current year are much higher than those in the Supplementary Estimates (B).
As my colleague Mr. Massie said, a lot of federal government programs, such as the Canada Emergency Rent Subsidy (CERS), the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Business Account (CEBA), the Canada Emergency Response Benefit (CERB), and the Regional Relief and Recovery Fund (RRRF), were delivered by regional development agencies.
In total, I believe those programs amount to more than $7 billion given to small and medium-sized businesses. I don’t have the data with me on the breakdown by region, but Mr. Massie may have that information. If not, I would be happy to get back to you with a written response.
Mr. Massie: I can tell you that, with some of our programs, we absolutely ensure that funds are distributed across Canada, regardless of the province or territory.
I can give Senator Gignac an example: the Canada Digital Adoption Program, the first component of which is geared towards small businesses. When we issued our call for proposals, so that intermediaries could deliver the program to all the provinces and territories, we distributed our additional funding for the program according to the population of small businesses in each of the provinces and territories, in order to ensure that there were funds for Quebec. Even when we issued our call for proposals earlier this summer, we wanted to distribute some amounts, up to $45 million in grants for small businesses in Quebec, under the first stream of the program.
There is also a substantial component for students. There was $17 million for youth grants and student placements in Quebec. That’s an example of the programs that were set up. For this one, we were really determined in our call for proposals, because we wanted to make sure that the funds were distributed proportionally across the country.
Senator Gignac: Thank you. Perhaps I will come back in the second round of questions so that my colleagues have some time.
[English]
Senator Richards: Thank you to the witnesses. Similar to Senator Forest’s question, do you know the results of the monies given to our technological self-sufficiency goals? How much do we rely on technological expertise from other countries? How much have we forged ourselves in the last year and a half in technology and going forward?
Maybe Mr. McConnachie could answer that.
Mr. McConnachie: Thank you for the question, senator. It’s a broad question. I’ll do my best to answer it.
There are some excellent examples of where technology transfer from the international space has benefited Canadian industries. The most notable one that comes to mind for me is in the biomanufacturing area.
As honourable senators are well aware, Canada’s biomanufacturing capability has suffered significantly in recent years and the pandemic has brought about an imperative to rebuild that. Many of the investments that we’ve made through the Strategic Innovation Fund and investments that have been made by one of our portfolio organizations, the National Research Council, have focused on creating new biomanufacturing facilities.
A critical step in that process is the technology transfer from companies that have developed patented therapeutics and vaccines. As we obtain those and add to our industrial capabilities, I think it’s a perfect example of how we’re not only innovating but building capacity that’s going to sustain Canada in the long term. Thank you.
Senator Richards: Just a follow-up. I’m thinking of Huawei and other things. Are we ever in danger of losing our self-sufficiency to international expertise? If we do, is that a danger to our own sovereignty? Do you have any comment on that?
Mr. McConnachie: I certainly can’t comment on the specific case that you mentioned, but I can comment more generally on the legislation and process that we have in place to protect intellectual property and Canadian interests. Of course, the Investment Canada Act is the primary tool that we have at our disposal that has not only a net benefit test for foreign direct investments into Canada, but also has a national security component that is recommended by the Minister of Public Safety. Those lenses are certainly applied to any investments that perhaps are deemed not in the Canadian interest, and there have been a number of cases that have been publicized recently where investments have been denied or, in some cases, firms have been asked to divest because of either economic or national security considerations.
I think we do have very strong controls in that regard, and it’s one of the key manners in which we keep Canadians and Canadian businesses safe on the international scene. Thank you.
Senator Richards: I know these are broad questions, but they are the ones that interest me so they are the ones I have to ask.
Do you think overall the money is being well spent in this regard if it’s proportional across the regions instead of centred where the most expertise is?
Mr. McConnachie: Thank you for the question. It’s probably one that’s better positioned for the ministers.
There has been a long-standing Canadian tradition of ensuring that economic vitality is not something that’s limited to certain parts of Canada. I would certainly agree with that as a principle, although to the point that was previously raised by one of your colleagues, it’s interesting to see how economic capabilities develop on a differential basis.
For that reason, I think taking a targeted approach to developing provincial, regional and local clusters of expertise is a sound economic development strategy as well. Thank you.
Senator Richards: Thank you.
Senator Boehm: Thank you to you, Mr. McConnachie, and your colleagues for being with us and for the comprehensive answers that you’ve given.
I want to focus on the Tourism Relief Fund. ISED provides support to the seven regional development agencies in the portfolio, and there are four agencies listed in the estimates here. As stated, the money is to support tourism businesses — and we all know that tourism has taken a real hit during the pandemic — and non-profit organizations as they adapt their operations to meet public health requirements and create, of course, new tourism experiences and products.
My understanding is the Tourism Relief Fund will be delivered by the RDAs. Are there certain criteria set by ISED as it relates to the eligibility for tourism businesses and non-profit organizations to receive money from the Tourism Relief Fund? Would that be determined by the particular agency or are there guidelines that you have set out, specifically monies that might be earmarked for women-owned and Indigenous-owned tourism businesses? With regard to Indigenous businesses, I’m thinking particularly about the Indigenous Tourism Association of Canada.
Related to my first question is whether this consideration is up to ISED in setting out parameters or indeed the individual RDAs.
Perhaps a last point is that I know the Pacific Economic Development Canada agency is new. There seems to be a much higher amount dedicated to this RDA as opposed to the others with respect to the Tourism Relief Fund.
I’m wondering if you could comment on those points. Thank you.
Mr. McConnachie: Thank you, senator. It’s a mouthful. I’ll try and get through all of them.
On your first point on the Tourism Relief Fund, you are correct that it is administered through the regional development agencies and $500 million was announced through Budget 2021 to do that. There is a carve out of $15 million that was identified to explicitly address national tourism priorities. ISED, as the department, is playing a leading role in identifying those pieces, whereas the RDAs are delivering on their territories the remaining portion.
In terms of how targets are set, it’s very much designed through the program design process when the programs go to the Treasury Board for approval. There are specific terms and conditions of the program that apply equally to all of the RDAs. That ensures equitable access to the program, as well as transparency and ensuring that targets are made clear and are reported on in an equal way.
In that regard, it’s not a differential approach. What I would say is because the RDAs have the specific knowledge and relationships with local businesses, they are very well positioned to ensure that the funds go to the areas of greatest needs. Again, provided that the businesses meet the eligibility.
I hope that answers that portion of the question. Perhaps I’ll pause there before going to the second part of your question. Was that sufficient?
Senator Boehm: That was good, but on the second part, this is more the focus on women-owned businesses and Indigenous businesses.
Mr. McConnachie: Certainly. Perhaps while I still have the floor, I’ll address the second portion of your question and turn that one to my colleague Mr. Massie, who is very much involved in those initiatives.
I can give a very brief answer on the additional funding for Pacific Economic Development Canada. As you’re aware, it was spun out of, so to speak, Western Economic Diversification Canada and so there was additional authority that was required for the organization to stand up its own apparatus, which would include having its own deputy minister, its internal services, an office in the Lower Mainland region and the support services that are required.
I would just like to clarify that it doesn’t reflect a favouritism approach of making additional investments in one RDA over another. It’s really just the initial start-up costs and ongoing A-base to ensure the operation has appropriate integrity. Thank you.
The Chair: Mr. McConnachie, you mentioned Mr. Massie could do a follow-up. Because of the time frame that we have for our agenda, could we agree that you would provide a written answer to Senator Boehm’s last question?
We would expect to get that answer in writing before Monday, December 13, so that we can be sure to report to the Senate of Canada in the time frame that we have.
Mr. McConnachie: Certainly, Mr. Chair. Thank you for clarifying the time frames. We’ll ensure that the response is provided in an expedited manner.
The Chair: Thank you.
Senator Duncan: Thank you to the witnesses for appearing before us today. We appreciate your fulsome answers. The existing economic development agencies all received additional funding. I appreciate that, for Pacific Economic Development Canada, this is A-based funding and that it’s new. I am deeply concerned that the Pacific regional development agency is not even mentioned in the listing of this new funding.
I appreciate that the Western Economic Diversification Canada likely had some funding left, although they are mentioned with a transfer of funds. The message that is sent that no funding is allocated for three provinces is deeply troubling. I wonder if you could address that.
Mr. McConnachie: Thank you for the question, honourable senator. If I may, the issue is caused by an artifact of how the estimate documents are presented and the legal structures and entities that are being newly created.
The Supplementary Estimates (B) do list authorities for the Pacific regional development agency, as well as the Federal Economic Development Agency for Northern Ontario, or FedNor. They are partial authorities because it reflects what they are receiving for the remainder of the fiscal year, not their full budgets. I would say those organizations should be fully listed under their legal entity name in the Main Estimates with their full legal authorities.
As you are aware, senators, those Main Estimates are presented to Parliament in early March. There will be fulsome reporting at that point.
I would also indicate another area of confusion potentially, and one that caught me off guard as well, is that organizations are not always reported under their styling in the estimates document but under their legal names. ISED is a perfect example of that; that is the styling of this department, however, our legal entity is Department of Industry. So if you didn’t know that, you might have trouble finding our department as well.
It’s a bit unfortunate, but that’s about all I could really say on the matter.
Senator Duncan: If I could follow up, sir, I appreciate your point. I did see in the Department of Industry, Western Economic Diversification, with a net reduction of $15.425 million for the vaccine. You mentioned that in your introductory remarks.
My point is that the information that is provided to us by the Library of Parliament reviewing these supplementary estimates shows the funding that’s delivered through regional development agencies. Every regional development agency is listed, and we’ve already noted the lack of listing for the agency for Quebec in the small-business tourism. My colleague has mentioned that, in the small-business funds.
My point is that while we might understand that the Pacific Economic Development Canada funding is a new agency, and that’s the reason they have funding in the supplementary estimate, there’s no mention of additional funding for the Prairies Economic Development Canada agency under this additional funding. There may be a logical explanation in terms of legal names, but the public reaction to information such as this is deeply troubling.
Mr. McConnachie: Thank you, senator. I agree that it is confusing. It’s not an area that I or the department or the minister are able to influence. The estimates documents are produced on the behalf of government by the Treasury Board of Canada Secretariat. I’d certainly be happy to refer the concern to them, and perhaps they may be willing to elucidate the issue.
Senator Duncan: Perhaps we could receive a written response to that point from even the agencies themselves as to why there’s no funding for the Prairie provinces under any of these programs?
Mr. McConnachie: Certainly. I’d be pleased to bring that back.
Senator Duncan: Thank you.
Senator Loffreda: Thank you, Mr. McConnachie and to your colleagues, for being here today.
Youth empowerment, we all know, is key in many areas, including economic growth. I would like to learn more about the Post-Secondary Institutions Strategic Investment Fund. As I understand it, this fund was created in 2016 with a budgetary envelope of up to $2 billion over three years for infrastructure projects at post-secondary institutions to enhance and modernize research and commercialization facilities.
About $12 million is being requested in these estimates for this fund. I have a few questions. How much of the $2 billion has been spent so far? I understand the one-time call for applications ended in May 2016. According to your website, the fund supports projects that were expected to be substantially completed by November 30, 2018.
That was three years ago, so I’m wondering how many projects had been approved, how many are completed and how many are still in development or under construction. I imagine the pandemic may have delayed the completion of some of these projects. I understand all that, but it would be nice to have a breakdown. They have a breakdown by province and territory of where the government allocated this funding.
Finally, what will the $12 million in these estimates be used for? Is the program not on the verge of wrapping up given all these dates at this point? Thank you.
Mr. McConnachie: Thank you very much for the question, senator. As you’ve indicated, the program is substantively concluded. The amount that we’ve requested in these supplementary estimates is to re-profile funding that could not be applied last year to basically complete the program.
Certainly, all of the funds that have been allocated have been proactively disclosed, but it would be our pleasure to provide a more detailed breakdown to the committee on how the funds have been allocated throughout its history.
With regard to the final outstanding project, I would turn to my colleague Mr. Vats who could speak to the details.
Nipun Vats, Assistant Deputy Minister, Science and Research Sector, Innovation, Science and Economic Development Canada: Thank you, Doug, and thank you, senator. You are correct that the program is in a wind-down stage. Actually, there’s been an evaluation, which is available online, of the program as well. I can’t say that every single project is completed because I don’t have the data available, but virtually all the projects that were approved for the program had been completed.
The $12 million for which we’re seeking a re-profile for relates to a project in Winnipeg that had some substantial construction delays. It’s basically an innovation centre at a college in Winnipeg that needed a little additional time in light of the delays caused by the pandemic and construction in general to complete the project. It’s expected to hit its substantial completion date at the end of this calendar year. That will be the last of the projects to be completed under the program.
Senator Loffreda: Thank you for that response. I understand this fund is a cost-sharing program between the Government of Canada and the provincial and territorial governments, and that consultations were held with provinces throughout the program development phases and during the project-approval process. I understand that.
I’d like to know more about this process. In other words, how many projects were approved and identified by provinces or territories as a priority for their government? And how many priority proposals from provinces were rejected? And who has the final say on the project’s approval? Was it the innovation minister? I mean, these were substantial funds.
I just would like to have some clarification on that.
Mr. Vats: The way it worked varied somewhat by province, but in general the way it was done was that provinces would identify a list of projects. Then there was a discussion with the department to identify projects that aligned, first of all, with the parameters of the program which were focused on projects that supported innovation, as you suggested, rather than projects that would, for example, create new classrooms at institutions or new HVAC systems or something of that sort. There was a broad range of projects, and in some cases the discussion was about whether these projects actually fit the parameters of the program. Then if there was still a surplus of projects relative to the envelope that was allocated by province, there was a discussion about the projects that best aligned with both governments’ priorities. There was typically a bit of a negotiation with the province to make sure there was, to the extent possible, very strong alignment with what the federal government was trying to achieve with the funding and the list of projects that had been brought forward by the province.
Ultimately, for the federal contribution, it was the minister’s decision, but it was a result of a fairly in-depth discussion with provincial officials and relevant provincial ministers.
Senator Loffreda: If there is a second round, Mr. Chair, I would like that.
Thank you for your time.
[Translation]
Senator Gerba: My thanks to the witnesses for being here. I am delighted to meet you for the first time, since I am new to this committee and to the Senate.
According to the Quebec entrepreneurial index, immigrant entrepreneurs are a major source of innovation and actively contribute to the country’s economic growth. One reason for this is that the rate of immigrants with a university degree is almost twice that of native-born Canadians. This indicates a greater tolerance for risk. In addition, immigrants are more likely to start a business than people born in Quebec: 28% versus 14.7% in 2020. However, this higher entrepreneurial intent is unfortunately not reflected in the rate of business ownership, as Black entrepreneurs face multiple barriers.
In the estimates before us, $3.4 million in funding is for the Black Entrepreneurship Program. However, this funding is only for economic development agencies in northern and southern Ontario. Why is Quebec not included in the funding when it is intended to support and provide services to Black entrepreneurs across the country?
Mr. McConnachie: Thank you for the question, senator. Welcome and congratulations on your appointment.
In the program you’re talking about, there is a regional component and a departmentally managed component. I would like to ask Mr. Massie to answer your question. He is responsible for the program and he will be able to give you more details.
Senator Gerba: Thank you.
Mr. Massie: Canada’s Black Entrepreneurship Program is an important program. We are very proud of it and we are working very hard with the Black entrepreneurship community in Canada to ensure the program is implemented.
As my colleague mentioned, the program has three components.
The first component, the National Ecosystem Fund, is a $100-million investment to assist businesses in the Black community by providing services to Black entrepreneurs across the country. An amount is also provided to each of the regional development agencies. So the Canada Economic Development has already received funding and has funded projects. Minister Ng announced the first round of projects in August of this year.
The second component of the program, the Black Entrepreneurship Loan Fund, is led by the Federation of African Canadian Economics (FACE), which is headquartered in Montreal.
The final component of the program is the Black Entrepreneurship Knowledge Hub. The government will soon announce the name of the organization that will receive the $5‑million fund for entrepreneurship research across the country in the Black community.
Senator Gerba: In the supplementary estimates, Quebec is not mentioned. Correct me if I’m wrong, but is it not included in that funding?
Mr. McConnachie: Perhaps I could answer that question. Your comment is valid, but perhaps it’s the way the department distributes the funds.
This program was announced earlier in the supplementary estimates and we have already received the first portion of the funds. That’s why you don’t see it in the transfers or the new funds in the supplementary estimates. They are really built into the total allocations for the year.
Senator Gerba: Okay. Thank you.
Senator Dagenais: My first question is for Mr. McConnachie. I would like to talk to you about Canada’s economic development. In all honesty, we can say that many workers took advantage of government assistance programs to avoid being in the job market during the pandemic. I won’t debate that fact, but I will point it out, as many have already done.
To what extent do you find that the labour shortage had an impact on the negative growth of -1.5% in the third quarter, according to the data released by Statistics Canada?
Mr. McConnachie: Thank you for your question, senator.
I really do not have an answer to your question. This is an issue for Employment and Social Development Canada and the provincial ministries of labour. Certainly, the labour market is quite a significant input in Canadian business. The programs announced in budget 2020-21 are making improvements to the labour market. Because the market has changed so much, industries have different needs and the entire market has a major challenge in acquiring the skills and competencies required by the industries of the future. Our department is working to address the issue you just mentioned.
Senator Dagenais: If I may, Mr. McConnachie, it is essential to have a growth strategy to come out of the pandemic, to find our economic balance again, and to start paying down our huge current debt; we cannot ignore that.
Of the $20-billion budget, what is the amount earmarked for economic growth in this country, and I mean growth, not just maintaining the economy?
Mr. McConnachie: Thank you for the question. If I understand correctly, you want to know what is being done in this budget to let the economy recover, is that correct?
Senator Dagenais: Actually, I am talking about growing the economy, not just maintaining the economy.
Mr. McConnachie: I am not in a position to answer that question at this time; I could reach out to my department and respond in writing. I do not have the information available to me to answer it today, I am sorry.
The Chair: Senator Dagenais, can we agree with Mr. McConnachie to have the written response sent to us before Monday, December 13?
Senator Dagenais: That is what I was going to suggest, Mr. Chair.
Mr. McConnachie: Yes, I will do that.
The Chair: Senator Dagenais, do you have any further questions?
Senator Dagenais: I will wait for the second round of questions.
[English]
Senator Galvez: Thank you very much to the witnesses for their presence today and for their answers. It is very much appreciated.
I just want to express a request because following the supplementary estimates is very difficult. They evolve over time and there are several. We would all appreciate if they were to be presented in a different manner in time and that more disaggregated data were presented for us to be able to better understand. This is the first request.
My preoccupation is concerning the innovation and development in the public health area. At the beginning of COVID, I rose in the Senate to say COVID-19 was going to turn from pandemic to epidemic to endemic. We are there in an endemic situation, and now we are talking about a Canadian vaccine. Hopefully, we will have one. Smaller waves will come.
So what is in this budget to ensure resilience for future pandemics is there and that we are not going to suffer the same situations that we did in the past? Thank you.
Mr. McConnachie: Thank you for the question, honourable senator.
To your first point, again, I think it speaks to the basis of presentation of the estimates documents, which is not really within the purview or the remit of my minister. But I would be happy to relay that feedback to my colleagues at the Treasury Board of Canada Secretariat and the Office of the Comptroller General.
With regard to your second very important question, the investments that were made by the government for biomanufacturing were announced in Budget 2021, with over $2.2 billion over a seven-year period toward growing the biomanufacturing and life sciences sectors. Many of those investments have been made through ISED and its portfolio agencies with a focus on building domestic production capacity in vaccines and therapeutics in particular.
The mechanisms that we’ve used to do that are the Strategic Innovation Fund, which you know quite well; the Next Generation Advanced Manufacturing Supercluster that my colleague Ms. Johnston referred to; and the National Research Council and the RDAs, as well.
I will talk about a few of the highlights because I think it is quite important. The National Research Council has invested over $126 million to establish a new biologics manufacturing centre in Montreal. There has also been a significant investment in Medicago in Quebec City to develop a plant-based, virus-like particle. AbCelera is another of the major announcements announced quite early for antibody discovery for clinical testing. They’re producing a GMP antibody production facility right now. There have been a number of others. And Sanofi Pasteur in Toronto was a $450 million investment, and is an influenza vaccine manufacturing facility that will have broader capability. You’re probably aware from the media that there is ongoing work with Novavax to transfer technology to the NRC’s facility for an mRNA-type vaccine production.
I hope that answers the question sufficiently.
Senator Galvez: Thank you.
Senator Pate: Thank you to the witnesses for your presentations and answers to my colleagues.
My question follows up on those of Senators Boehm and Gerba. I have two questions. First, of the grants that have been provided for the various sectors that you discussed, how many have been allocated to women, to Indigenous groups and to those of African descent?
In addition, given the government’s commitment to see greater economic development within these areas particularly providing incentives, what are the actual policy and financial incentives that would create an affirmative action-type of approach to encourage more of these individuals and groups to actually participate in the business sector?
Mr. McConnachie: Thank you for the excellent question.
There have been significant investments made by the government in diversity communities. I’ll run through a high-level listing of them because I think it’s instructive. We had spoken previously of the Black Entrepreneurship Program, which is allocated approximately $52 million over four years; and the Women Entrepreneurship Strategy, to which Budget 2021 allocated an additional $147 million over four years.
The Strategic Innovation Fund is a significant industrial development machine that we have in place. We actually have filters within it to favour gender and diversity plans in the investments that are being made by companies.
Another leading initiative that ISED has put forward is the 50 — 30 Challenge, which visibly encourages private- and public-sector organizations to voluntarily take steps to increase gender parity and diversity in their organizations, specifically 50% of board members and senior management being gender-balanced and 30% of boards and senior management having diverse candidates.
There are other opportunities that we’re currently working on as well, including one at Statistics Canada, which is within our portfolio, to develop a disaggregated data plan to better take an evidence-based approach to understanding issues of systemic discrimination and inequities by investing in data and data infrastructure policies and initiatives.
That’s a high-level look. There is certainly a lot more, but those are some of the marquee programs that are working toward the objectives raised by the honourable senator. I hope that’s helpful.
Senator Pate: It’s very helpful, thank you. Is there also a breakdown in terms of numbers that you could provide to us?
Mr. McConnachie: Thank you for the question. I’m not aware of whether we have an aggregated reporting at that level. Certainly, on a program-by-program basis, it is something that we track, and it is an item that the Treasury Board is quite seized with as well. In fact, all of the approvals that we have brought forward to the Treasury Board in recent years have required us to indicate the manner in which we are not only supporting regional economic development but also diversity and inclusion in our outward-facing programming.
So I’m not sure if I have it, but if there is interest in a specific program or a set of programs, we would be happy to come back to the committee with some of that information.
Senator Pate: Perhaps we could have it, at the very least, for the CDAP program.
Mr. McConnachie: We can certainly speak to the CDAP objectives, if you wish. The program is at the early stages of launching. As such, it doesn’t have a significant track record of expenditures against it at this point, but I think we could easily speak to the methodology for how we plan to ensure equity and diversity in that programming if that is helpful.
Senator Pate: Thank you.
The Chair: Honourable senators, we will now move to the second round.
Senator Marshall: Mr. Vats — and I hope I’ve pronounced your name correctly — when you were responding to a question by Senator Loffreda, you mentioned an evaluation of one of the programs. Could you send the clerk the link to that evaluation?
That leads to my question.
The internal audit function, is it in the department or does each regional agency have their own internal audit function?
Mr. McConnachie: Thank you for the question, honourable senator. It is a policy requirement for organizations of a certain size to maintain their own internal audit capacity. I don’t recall the exact size. It’s based on a number of individuals, as I recall, but the internal audit function within ISED, for example, would have no oversight over any organization within our portfolio. They have their own respective functions.
Senator Marshall: Okay. Are you able to provide a list of the agencies that do have internal audit functions? I would be interested in following up with those organizations to look for the internal audit reports.
Mr. McConnachie: Certainly. We could provide that list. I could also just indicate that any organization with those requirements post their audits and their evaluations on their websites.
Senator Marshall: Yes, that’s what I’m looking for. Thank you.
The Chair: You will provide that, again, Mr. McConnachie, on or before December 13?
Mr. McConnachie: Absolutely.
Senator Marshall: Thank you.
[Translation]
Senator Gignac: Climate change is certainly part of the very important challenge facing Canada in the next decade. Our colleague Senator Galvez is very involved in the issue.
Canada has a carbon tax and a timeline to increase it considerably. However, our neighbours to the south are not going in the same direction. In addition, since we know that 80% of our trade is with the United States, our main trading partner, this could lead to issues of competitiveness.
Given that your department is the point of reference for competitiveness in Canada, how is it involved in setting up programs for businesses to succeed in the energy transition? Is everything already in place?
Are you working with the Department of Finance to ensure that our businesses will remain competitive and not be at a disadvantage with the U.S. competition?
Mr. McConnachie: The department involved with climate change is Environment and Climate Change Canada, which has already announced a number of programs on that front.
Of course, we are working closely with that department. We have announced a number of investment programs under the Strategic Innovation Fund, which promotes decarbonization and new energy industries. Budget 2021 announced the establishment of the Net Zero Accelerator Initiative, a component of the Strategic Innovation Fund, which will encourage companies to invest in new technologies and help Canada reach its net zero emissions target in the future.
If you want more details, I can pass your question along to Ms. Johnston, who has much more experience with the program.
Senator Gignac: Thank you.
Ms. Johnston: One of the examples of funding through the Strategic Innovation Fund is the funding for Lion Electric to build a plant assembling electric vehicle batteries in close collaboration with the province of Quebec.
Senator Gignac: I understand that you are working with the Department of Environment. Thank you.
[English]
Senator Duncan: I appreciate the opportunity to follow up on my questions about the regional development agencies, and I note that your role is to provide support to these agencies.
My colleague, Senator Gerba, mentioned funding for I believe it was Black and immigrant programs and additional funding not being listed in the agency for Quebec. I’m wondering why in the funding for tourism relief, the additional supplementary funding, Canadian Northern Economic Development Agency, or CanNor, is listed under funding for tourism relief, but not for small- and medium-sized businesses, and how it might fit.
You’ve mentioned that you had a regional breakdown and an assessment of these funding programs. Could we receive in writing by December 13 a breakdown of the funding that has been allocated by region and by stakeholders?
As a final question, has the department given any thought or have they reviewed the Senate Prosperity Action Group report? If you could provide that answer in writing as well, please. Thank you.
Mr. McConnachie: Certainly. We can address both of those questions offline by the date requested by the chair. Thank you.
Senator Duncan: Thank you.
Senator Loffreda: I would like to revisit and address once again the $53 million that the Economic Development Agency of Canada for the Regions of Quebec is receiving through these estimates as part of the $500 million in the Canada Community Revitalization Fund announced in Budget 2021. This reason is important. The money allocated through this fund provides support to adapt community spaces and assets so they may be used safely in accordance with local public health guidelines and also to build or improve community infrastructure to encourage Canadians to re-engage in and explore their communities and regions.
The reason it is important is because, as a senator from Quebec — and we talked a lot about which provinces received more or less — I’m delighted to see we are receiving $53 million out of the $100 million from Supplementary Estimates (B). However, I have a concern. Is it because we were behind on some of these health guidelines or facilities and our infrastructure is behind? Should there be much more invested? Can you explain to us why? Don’t get me wrong, I’m certainly not complaining. But is it because Quebec submitted more proposals or our economy restarted more quickly than others? I know the program is in its infancy. Any update would be appreciated. I do know the program started in July. Thank you.
Mr. McConnachie: Thank you, honourable senator. Unfortunately, I don’t have the information to respond to the question as the Economic Development Agency of Canada for the Regions of Quebec is not within the remit of the department, but I think we could very easily take it back and get a firm answer to that question before the date. Thank you.
Senator Loffreda: Thank you.
[Translation]
Senator Dagenais: My next question is for Mr. Massie. The availability of programs put in place by the government has always been a challenge for many small entrepreneurs. I say a challenge, but I could also say that some businesses feel discouraged. The challenge is basically the paperwork, the delays and the professional costs involved.
Can you describe the problems that have been identified and the solutions that are being considered to simplify the task of new entrepreneurs?
Mr. Massie: Certainly. Thank you for that question, which we often hear from small businesses who want to take part in our programs.
When we develop our programs, we look at the needs of the target groups. For example, for the Black Entrepreneurship Program, we held consultations in October and November 2020 to understand the challenges that these communities were facing so that we could develop the program.
During those consultations, we were told that the loan program should be run by a Black-led organization, for the Black community. The decision was to do that. In terms of the funding requests from community organizations, we worked on various metrics that allowed us to recognize that some organizations had never received funding from the federal government.
Instead of asking organizations to provide us with a full proposal, we asked them to provide us with a concept, an idea, that our colleagues from the regional development agencies could work with to develop the project. We also have another example related to the Women Entrepreneurship Strategy. When the fund was created, we analyzed the possibility that barriers were standing in the way of entrepreneurs who wanted to take part and we removed certain items from this plan. I have to say that the demand is often greater than the funding we have and there will always be people who are disappointed that they can’t access funding.
The Chair: Thank you very much, Mr. McConnachie, and thank you to your entire team for participating. You have provided us with a lot of information. We look forward to the follow-ups by Monday, December 13.
[English]
Honourable senators, this concludes our agenda for this panel. Just a reminder that our next meeting is at 2 p.m. EST today. Please try to link in 15 minutes beforehand for sound checks and testing of our systems.
(The committee adjourned.)