THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, April 17, 2024
The Standing Senate Committee on National Finance met with videoconference this day at 6:45 p.m. [ET] for the consideration of the Main Estimates for the fiscal year ending March 31, 2025, with the exception of Library of Parliament Vote 1.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: I wish to welcome all of the senators as well as the viewers across the country who are watching us on sencanada.ca.
My name is Claude Carignan, senator from Quebec and chair of the Standing Senate Committee on National Finance. Now I would like to ask my colleagues to introduce themselves, starting from my left.
Senator Forest: Good evening. Éric Forest, Quebec Gulf Senate division.
Senator Galvez: Good evening. Rosa Galvez, independent senator, Quebec.
Senator Oudar: Good evening. Manuelle Oudar, LaSalle senatorial division, Quebec.
Senator Loffreda: Good evening. Tony Loffreda from Montreal, Quebec.
[English]
Senator Pate: Senator Kim Pate, Ontario. I live here in the unceded, unsurrendered territory of the Algonquin Anishinaabeg. Nice to have you back.
Senator Kingston: Joan Kingston, New Brunswick.
Senator Ross: Krista Ross, New Brunswick.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Smith: Larry Smith, Quebec.
[Translation]
The Chair: Thank you. Honourable senators, today we will begin our study on the Main Estimates for the fiscal year ending March 31, 2025, which was referred to this committee on March 19, 2024, by the Senate of Canada.
We have the pleasure of welcoming Yves Giroux, Parliamentary Budget Officer. Mr. Giroux is accompanied by Jill Giswold, Senior Analyst.
Welcome, and thank you for accepting our invitation. We will now hear your opening remarks. I know this is a busy day for you, since you appeared before the Standing Senate Committee on Banking, Trade and Commerce earlier. Go ahead.
[English]
Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Honourable senators, thank you for the invitation to appear before you today. Senator Carignan, I would like to congratulate you on your new role as Chair of the Senate Standing Committee on National Finance, which some say is the best committee, but I won’t pronounce on that.
Today I am accompanied by Jill Giswold, our lead analyst on the report. We are pleased to be here to discuss the report on the government’s Expenditure Plan and Main Estimates for 2024-25 which was published on March 7, 2024.
The government’s Main Estimates for 2024-25 outline $449.2 billion in budgetary spending authorities. Parliament’s approval is required for $191.6 billion. Statutory authorities total $257.6 billion.
Consistent with previous estimates, money transferred to other levels of government, individuals and other organizations account for most of the planned spending totalling $283 billion.
Notable areas of planned spending in these Main Estimates include $81.1 billion for elderly benefits, $52.1 billion for the Canada Health Transfer and $46.5 billion for interest payments on the public debt.
[Translation]
The Main Estimates for 2024-25 also show reallocations of close to $2.3 million as part of the Refocusing Government Spending exercise. Further details about these reallocations can be found in the 2024-25 Departmental Plans, which were tabled with the Main Estimates on February 29.
Since the 2024 budget was only tabled yesterday, over a month and a half after the Main Estimates for 2024-25, the estimates obviously do not include the new budgetary measures. As a result, the budget authorities for 2024-25 will increase according to the funding applications that should be presented later in Supplementary Estimates (A), (B) and perhaps even (C).
We will be happy to answer your questions about our analysis of the Main Estimates, or really about any aspect of the work done by the Office of the Parliamentary Budget Officer.
Thank you.
The Chair: Thank you, sir.
[English]
Senator Marshall: Thank you, Mr. Giroux and Ms. Giswold, for being here.
My first question is on your report on the government’s expenditure plan. That’s on page 6, where you’re talking about the $2.3 billion in reallocations. You’re saying it’s $80 million lower than what was in Budget 2023. You’re making the point. Is that something you’re concerned about or is that just a comment? I couldn’t tell if you were saying it in a favourable manner or if there is a problem with it.
Mr. Giroux: It’s not something we have concerns with, because it is a relatively small amount in the grand scheme of things. The Treasury Board of Canada Secretariat, or TBS, said the shortfall will be accounted for through additional reallocations starting next fiscal year. Given the magnitude of overall government spending, it is probably a rounding error.
Senator Marshall: You realize that I’m an auditor by profession. Looking at the budget book, the fiscal update and last year’s budget, I notice the deficit is at $40 billion. In fact, the government is spot-on from what they forecasted in the fiscal update.
There are a lot of ways for the government to come in right on budget. Do you do any work, as the Parliamentary Budget Officer, to look at adjustments that were made by the government so that they come in exactly on budget?
Mr. Giroux: Yes, especially when it’s that close to the target or on target. We are undertaking that as part of our analysis of the budget and we’ll be releasing a report on that in the coming weeks. That will be one of our areas of attention.
Senator Marshall: So you will be reconciling the items.
The interest on the public debt is always an issue of concern. It’s not gone up a significant amount but about $700 million compared to the fiscal update for the year just ended. I would think they should be able to calculate the interest spot-on, but they don’t.
Do you look at that? Why would they think in the fiscal update that it was going to be $46.5 billion last year? Now we get the budget for this year and it’s actually gone up to $47.2 billion.
Mr. Giroux: You’re right. It’s a good question. When the government is spot-on for the deficit, you would think they would be spot-on for interest charges for servicing the debt. However, another series of elements come into play, for example, loans that the government provides to various entities — businesses and so on — for which it needs to pay interest, as well as some revenues — well, not revenues in that case. That’s essentially it, as well as the fluctuation in interest rates because of the rollover in debt — notably, T-bills, which roll over quite frequently.
Senator Marshall: So I should see that in the adjustments.
Mr. Giroux: Yes.
Senator Marshall: In terms of the ceiling under the Borrowing Authority Act, now that we have some new spending numbers, have you done any calculations as to what you think the ceiling will be in the future? I had expected to see something in the budget book on increasing the ceiling on the debt. I was a bit disappointed that it wasn’t there.
Have you done any calculations on the ceiling? They must be getting close to the ceiling. Do you have anything you can add to that?
Mr. Giroux: Of course. You probably fell asleep before you got to that part in the budget, because there is a mention in the budget that there will be amendments to the Borrowing Authority Act to increase the ceiling of the overall debt, as well as changes to remove the Canada Mortgage Bonds from the overall limit. That’s something that caught our attention.
Senator Marshall: After the meeting, I’m going to get that page number from you.
Mr. Giroux: We will be following that up closely.
[Translation]
Senator Forest: Thank you for appearing. As my fellow senator mentioned, interest charges on the debt have gone from $23 billion to $62 billion in the last 10 years. If I understand correctly from your remarks, that does not include pharmacare costs. How do you assess the debt situation in the context of increased revenues? What is your assessment? Is it sustainable over the long term? The pandemic had a major impact, but is the increase in debt servicing sustainable over the long term?
Mr. Giroux: Every year, we analyze the long-term financial viability of the federal government and the provinces. We usually do this over the summer. We plan to do the same this year. Last year, based on a status quo assumption, we deemed the federal government to be sustainable in the long term. However, many things have changed, among them an economic update and a budget. We will repeat our analysis this year. That said, the fact that debt servicing has increased is worrisome, but it is not at the same level, percentage-wise, as it was a few years ago. It could be a concern, since it has almost tripled in less than 10 years, but the debt servicing cost is not in itself a figure that greatly concerns us. What worries us more is the debt-to-GDP ratio and its future trajectory.
Senator Forest: We should invite you back in September to get the answer to your analysis of this summer regarding the long-term concern.
Mr. Giroux: You can invite me back anytime.
Senator Forest: Always a pleasure! According to your 2024-25 budget report, federal spending on seniors’ benefits will increase by $5.6 billion, or more than 7%, to reach $81.1 billion in 2024-25. According to your most recent analyses, they will reach $99.7 billion by 2028-29. How do you assess the sustainability of public finances in the face of these increases? Also, with regard to the aging of the population, are you concerned about the government’s ability to maintain a certain level of service for all its citizens in this context of a significantly aging population?
Mr. Giroux: Old Age Security benefits are indexed to inflation and follow the growth in the population aged 65 and over. That’s why benefits are increasing at a steady pace, but there have also been increases for those aged 75 and over, which has further increased spending on Old Age Security.
As to whether this worries us about the sustainability of public finances, the fact that there’s an aging population is highly predictable, and the fact that these benefits are indexed to inflation, that is also highly predictable; so Old Age Security spending isn’t something we’re concerned about. However, we have to look at this in the context of overall government spending, since Old Age Security is a very important component of public finances. To determine whether it’s viable or not, we have to look at all public spending, which we’ll do over the summer.
Senator Forest: In terms of refocusing spending, we have an extremely ambitious target of $14.1 billion over five years. I find it hard to understand, when you look at the budget, how the government can claim that it’s trying to return to the pace of the magnitude of spending growth, when for the past two years, they’ve been multiplying programs and announcing other costly programs, notably for medication, day care and dental care.
When you compare the scale of new spending with the modesty of the cuts that are being made, it seems to me that this will hardly work. Is it possible for the government to achieve its goal of returning to the scale of pre-pandemic spending growth?
Mr. Giroux: With the objectives, targets or ambitions that the government announces in budgets, off-budget or in economic updates, I don’t believe that the pace of spending will ease. In fact, when you make a graph showing the future profile of spending with each economic update to the budget, you see that there is only one trajectory. The government’s own forecasts are successively revised upwards.
So, while the government mentions that there are spending reduction exercises, they’re not really spending reductions; they’re very targeted reductions in certain programs to better fund certain other spending. So, there are no government-wide spending cuts.
Senator Forest: These are more akin to lateral transfers than spending cuts?
Mr. Giroux: Yes, the same could apply to yesterday’s announcement of 5,000 employee attrition; it’s unlikely to happen.
[English]
Senator Smith: For the first time since the COVID-19 pandemic voted budget authorities are lower compared to the Main Estimates in previous years driven largely by refocusing government spending.
The 2024 federal budget did incur under $40 billion in new net spending measures and voted authorities still remain much higher than pre-COVID levels.
Question: What is your analysis of the lower budgetary authorities being sought? Is it a sign that there is finally a plan in place to control spending or are you not convinced?
Mr. Giroux: I’m not convinced. I think it’s just a timing issue. It’s because the Main Estimates were drafted well before the content of the budget was known. When we tallied the totality of estimates spending, mains and supplementary estimates, we will probably find that the government spending increased at a solid pace.
What matters most for forecasting government spending is the budget rather than the Main Estimates. I have explained to various committees quite often, the Main Estimates paint a very partial picture of overall government spending.
Senator Smith: We talked a little bit through the questions about the elderly benefit set to surpass $80 billion this year with the Old Age Security, or OAS, making up the bulk of federal spending. You note that a growing number of seniors combined with higher rates of inflation is what is driving these costs. Employment and Social Development Canada, or ESDC, is working to modernize the OAS payments through its benefits delivery modernization initiative.
I’m wondering if you have had a chance to review both the OAS system currently and the efforts of the government to modernize it. Do you have any concerns with the modernization efforts? Is the OAS system currently able to handle increases in the number of beneficiaries as it exists today?
Mr. Giroux: That’s a good question. However, I haven’t had the chance or the misfortune of analyzing this massive undertaking. It’s not something that my office has looked at.
Senator Smith: Are there any initial thoughts that you had that you can share with us that will not compromise your analysis inside the office?
Mr. Giroux: I hope it’s something the government learns from past mistakes when it comes to big IT systems. Phoenix was not a success, but it was to cover only 400,000 public servants. Given that OAS is covering millions of seniors, some of whom don’t have the means to wait six months to be paid, I hope that this is done in a very structured and disciplined manner.
Senator Smith: You estimate the total cost of elderly benefits to hit almost $100 billion by 2028-29. In your view, are programs like OAS sustainable in the long run as future governments will have to grapple with balancing budgets?
Mr. Giroux: That’s an interesting question, but generally speaking, Canada is perceived as having a sustainable retirement system because it relies on three pillars, OAS, CPP and QPP and private retirement savings.
It’s true that OAS will increase consistently due to population aging and inflation, but the sustainability of one program has to be looked at in the overall picture. Whether government spends more in another area or not will be the key determining factor in assessing whether or not government finances overall are sustainable over the longer term.
[Translation]
The Chair: You have one minute left, if you wish.
Senator Smith: I yield my remaining speaking time to my colleagues.
Senator Dalphond: Good evening, Mr. Giroux. To continue in the same line of questioning as Senator Smith, the projection you made regarding benefits for seniors is $100 million in 2028-29; is that essentially because of the aging population?
Mr. Giroux: The aging population and inflation, since benefits are fully indexed to inflation. These are the two factors that determine the total cost.
Senator Dalphond: I understand that the Canada Pension Plan is doing the same thing and planning for an aging population so as not to run a deficit. On that front, planning is intended to correspond to inflation and population aging rates — the same thing goes for Quebec.
You mentioned three sources; the others are the old age security pension and the guaranteed income supplement. Is that a problem?
Mr. Giroux: Not particularly. When we talk about the aging population — obviously, we often think of retirement benefits — the highest costs are tied to the health care system. On average, people aged 50 or 55 cost X amount, those aged 65 cost another amount, and so on. The older people get, the higher the costs to the public health care system. So the curve isn’t linear and it quickly gets steeper as people get older.
Therefore, whether someone is 85 or 95, the guaranteed income supplement and old age security pension remain the same; they are simply indexed.
It may seem counter-intuitive, but the aging population is putting a strain on public finances; that can be somewhat attributed to the pension plans, but it’s worse when it comes to health care.
Senator Dalphond: [Technical difficulties] medications, and so on.
Mr. Giroux: Exactly.
Senator Dalphond: You said earlier that there was a short note in the budget speech for accounting purposes. We’ve seen this in other provinces as well, where part of the debt becomes self-sustaining. Can you explain exactly what was done and what amounts would be involved?
Mr. Giroux: What we saw in yesterday’s budget is that the Canada mortgage bonds program — I read it in English, but I haven’t had a chance to read it in French yet. The program finances mortgage purchases at the Canada Mortgage and Housing Corporation, and it’s guaranteed by the Government of Canada.
The government intends to end this program, which is going to be worth $60 billion in total — it may be more, I don’t have the figures. The government will remove it from the Borrowing Authority Act. The government explains in the budget that since these bonds are already secured and controlled by CMHC, which has them in its portfolio, the objective is to avoid counting them twice and to include them in the Government of Canada’s overall borrowing limit. So it’s mentioned in the budget, but we haven’t seen the legislative details. We’ll be following it with interest, since tens of billions of dollars are involved.
Senator Dalphond: Is this under the National Housing Act? I guess CMHC can issue bonds?
Mr. Giroux: Yes, it has the authority to issue bonds to finance its operations.
Senator Dalphond: Its operations and secured mortgages.
Mr. Giroux: Exactly.
Senator Dalphond: And the mortgage portfolio is as good as the value of the buildings.
Mr. Giroux: It’s generally quite solid.
Senator Dalphond: There’s no concern here about some sort of negative liability that might happen one day, should there ever be a housing crisis like the one we saw in the United States a few years ago?
Mr. Giroux: No, it’s not as much of a risk in Canada as it was at that time in the United States. That said, there’s no such thing as zero risk, but systemic risk has been the subject of several audits by the Office of the Superintendent of Financial Institutions and Canada Mortgage and Housing Corporation, and I don’t believe the level of risk has been identified as major.
The Chair: I just want to make it clear that, in principle, the committee is looking at the government’s estimates, not yesterday’s budget. However, people may be tempted to ask you questions about the budget. So please feel free to answer, or remain open to giving more details if we get into the budget a little bit. You know, we’re very interested, and given what took place yesterday, there may certainly be questions.
Senator Loffreda: Thank you, Mr. Chair, and congratulations on your appointment.
[English]
Mr. Giroux, it is a pleasure to see you again after the Banking Committee. We’re becoming intimate friends.
Can you provide insights into potential risks or challenges associated with the projected growth in public debt charges and how these might impact government’s fiscal outlook in the coming years?
You mentioned you had concerns about the debt-to-GDP ratio. Can you further elaborate on that issue, please? You project public debt charges reaching $62 billion by 2028-29 in Figure 2.3 of your very insightful report, which I always enjoy reading. Thank you.
Mr. Giroux: The debt-to-GDP ratio is an important measure because it determines the capacity of a country to ultimately assume the cost of its debt.
The government has made a commitment in the Fall Economic Statement, and previously, that it would maintain a declining debt-to-GDP ratio. It was not able to do that for a few years coming out of the pandemic. It seems to be on a track to gradually lower the debt-to-GDP ratio.
The concern I have is not necessarily with the level of the debt-to-GDP ratio; rather, it’s the tendency of successive budgets and Fall economic statements to postpone a decline. What I mean by that is the government, rather than having a steady decline, seems to be content with having a humble decline year after year, rather than a straight slope. We see that with the government using the room to maneuver that is generated by better-than-expected economic growth; it tends to spend it, rather than use it to reduce the deficit, which is fine. It’s the prerogative of the government.
That leads to debt-servicing costs. These debt-servicing costs are obviously the result of two factors: The stock of debt and interest rates. We have a stock of debt that is higher; interest rates are also higher, but not that high.
The concern with debt-servicing costs is, when you have a stock of debt, we don’t anticipate interest rates to go much higher than they are currently; however, if there were to be economic shocks that push interest rates up in five, six, seven or eight years, then debt charges would go up significantly. That reduces money available to finance other government priorities. That’s the concern that many have expressed with a stock of debt that has grown significantly and the debt-servicing costs that are growing significantly as well.
Senator Loffreda: Thank you.
The legacy of this government will be, among other policies and programs, child care, dental care, pharmacare, disability benefits. We see that that will be the legacy of this government, which are wonderful programs.
My question to you, not an easy one, but do you feel we have built an economy to sustain such programs given those same debt levels we are discussing and talking about, and the projected revenue increases that you explained so insightfully in your report?
Mr. Giroux: Launching government programs or incurring government expenditures always comes with a trade-off. We spend on this; that means we either raise more taxes, or we finance it through a deficit. These all have consequences, as does doing nothing.
Doing nothing also has consequences. It would mean fewer child care spaces, no pharmacare program. That is why governments are elected, to make these trade-offs.
Do I have concerns about the level of spending and the sustainability of the government? The last time we had a look at that and analyzed the long-term sustainability of the federal and provincial governments, there were no obvious concerns. That being said, that was before the Fall Economic Statement and the budget. We’ll do that exercise again. This time around, it may lead us to a slightly different or radically different conclusion. I don’t think it will be significantly different. I’ll wait until we do that analysis to give you a more definitive answer.
Senator Loffreda: Thank you. I am looking forward to it.
Senator MacAdam: There’s been many media reports lately on the presentation and timing of the Main Estimates and budget. I’d like to hear more about your thoughts on this matter, including any improvements that you could suggest to improve transparency and assist users in understanding the government’s financial plans.
Mr. Giroux: The issue we’re faced with today is a good illustration of the problem with the timing of the Main Estimates and the budget. We are here to talk about the Main Estimates and other topics. We also now have the budget that was tabled yesterday.
The Main Estimates we’re looking at only paint a partial picture of government finances and programs. Many of the things that were in the budget are not reflected in the Main Estimates.
As parliamentarians, you’re faced with a conundrum: What to make of the Main Estimates, when the real thing is the budget? It’s not in the Main Estimates. You only have a partial picture of government spending in front of you if you don’t look at the budget. A good way to solve that would be to have budgets tabled much sooner in the cycle, for example, in February; that would allow time for officials who are behind me to include more of the budget items in the Main Estimates.
When you look at the Main Estimates, you would be able to find at least some the budget proposals in the Main Estimates, whereas now the Main Estimates are prior to the budget. In that sense, they’re status quo, autopilot government programming. They don’t reflect anything new that was in the budget.
Senator MacAdam: Do you consider the Main Estimates as like a base budget?
Mr. Giroux: That’s a good way of characterizing them. It is a base budget.
Senator MacAdam: A status quo, prior to all the new initiatives?
Mr. Giroux: Yes, old news, last year’s news.
Senator MacAdam: I’m going to follow up on comments made by Senator Marshall regarding looking closer at the transactions you think could impact the final determination of the deficit. You said you intended to do some work in that area. Can you elaborate what kind of work you would do?
Mr. Giroux: I’m sorry, I didn’t hear the first part of your question.
Senator MacAdam: I’m following up on comments made by Senator Marshall with regard to looking at the transactions that could impact the final calculation of the deficit.
Mr. Giroux: Yes.
Senator MacAdam: You mentioned you were going to do some work in that area. I want to get an indication of what kind of work you might do.
Mr. Giroux: Notably, we’re looking at liabilities on the government’s books. They affect the fiscal bottom line, the deficit, the surplus, if we have a surplus. It’s very difficult to get a firm handle on the overall government liabilities for a variety of reasons. The government, for example, doesn’t want to reveal its hand when negotiating with third parties, notably First Nations, in the cases of settlements. There are also lawsuits that the government doesn’t want to reveal how much it has set aside to settle these lawsuits or in case it loses. That’s one area where we will be looking at government announcement spending.
Defence is another area that we’ll be paying close attention to. There has been a lot of discussion about increasing the share of GDP that goes towards National Defence, so we will be providing you with a report sometime in June, maybe earlier, on the government’s latest announcements and their impact on reaching or not the spending target of 2% of GDP under the NATO commitment. These are two examples.
Senator MacAdam: I’m just looking, what level of materiality would you look at when you look at these transactions, and I’m thinking, again about the Auditor General doing — that would be the audit on the final deficit in the public accounts, so I’m just trying to get at how?
Mr. Giroux: The Auditor General of Canada, or AG, has a materiality threshold because of the accounting guidelines. We are not bound by the same standard, so the materiality threshold depends on the issue at hand. So when we’re doing a costing, we will usually not cost something that’s below $5 or $10 million, depending on the issue. But for something like a budget, usually below half a billion dollars, we will not necessarily consider. But if we’re looking at liabilities, we will go down into the weeds as much as we need to, to get to the bottom of an issue. So it depends on the issue that we’re considering.
Senator Kingston: I want to follow up on a couple of things. When you were answering Senator Loffreda, he had asked regarding the economy and whether it could support, and I thought, in one of the questions before, maybe to Senator Marshall, you had said that the economy was stronger at this point, and that had changed the numbers or made them a bit different than what you had expected. Did I mishear or —
Mr. Giroux: Maybe I misspoke. I think interest rates may have been higher, so we’ll have to go back to Hansard and maybe I’ll have to go back and ask for corrections in Hansard to correct what I hope I had said.
Senator Kingston: What did you hope you had said?
Mr. Giroux: It depends on the question. To the question, can the economy sustain that level of overall government spending, the answer is probably, yes, it can, because the government has a fiscal plan that it laid out yesterday in the budget. It is collecting increased revenues through a few measures and that leads to a deficit that is well within what is internationally available or comparable to many of our international partners. To the question, is the economy able to sustain that? Yes. Is it the mix of tax, spending and deficit that everybody is happy with? The answer is, obviously, no. Different people have different perspectives on that.
Senator Kingston: My next question is a follow-up to Senator MacAdam. I have some experience in a province where we always had the budget before we had the estimates, so when I saw this, I asked Senator MacAdam, yesterday, what this was all about. Is that common practice? Has it always been common practice that these estimates come out before the budget?
Mr. Giroux: No. It’s not uncommon, but it has not always been the case. There was a time when I had hair, where budgets were tabled in February and that was the standard and the expectation. We’ve even seen budgets in December, for after September 11; that was exceptional. We’ve seen budgets in January, after the financial crisis of 2007-08. But typically budgets would be in February. It is over the last I’d say 10, 12 years that they’ve slipped to March and April, and that leads to the Main Estimates being tabled significantly before the budget.
Senator Kingston: I’m wondering about the relationship between something you talked about I think the last time you were here, frozen allotments, and how they interact with this refocusing of government spending that you talk about in what you’ve prepared for us today. It says in the older document, “the majority of these frozen allotments are due to planned reprofiling of funds into future years.” You don’t use that wording again this time in what we received, but I’d like to know the relationship with those things that were never funded in the last fiscal year. What does that mean for this fiscal year and those programs?
Mr. Giroux: I think Ms. Giswold can provide you a better answer than me.
Jill Giswold, Senior Analyst, Office of the Parliamentary Budget Officer: For 2023-24, the refocusing government spending was done through frozen allotments, I believe due to the timing of the exercise. In the future fiscal years, including 2024-25, they were able to do the exercise before the estimates were out, so frozen allotments were not required. The Main Estimates already reflect the refocusing government spending amounts, so the frozen allotments only came into play in 2023-24 for the exercise.
Senator Kingston: What did that affect in what we’re talking about in this Main Estimates for these three months? What has changed? Something is getting funded last. What is that?
Ms. Giswold: It’s a variety of programs across several organizations. There is an online annex that goes through all of the departments with those amounts for the next three fiscal years starting in 2024-25.
Senator Kingston: Where can I find that?
Ms. Giswold: We can provide it. It’s on the Treasury Board’s website.
Senator Kingston: If you could, that would be great, to send a link or something. Thank you.
Senator Ross: I was reading that compared to last year’s Main Estimates, there were nine different departments or agencies that had pretty significant decrease, and there were three that really stood out to me. One was Indigenous Services Canada, so they are looking for a 46.9% decrease. One was the Public Health Agency of Canada, 55.7% decrease, and Infrastructure Canada, down about 14.9%. I wonder, is this something that you’re watching? Is this something that raises a red flag about why these agencies would have such significant changes? It’s unusual to see less.
Mr. Giroux: Yes.
Ms. Giswold: For the case of Indigenous Services Canada, in the previous fiscal year part of that amount was $20 billion for one of the larger settlements. That was a one-time payment that is not something that we’ll see ongoing in future years. So that would explain that one.
Another organization you said Public Health Agency of Canada. For that one, I believe they received a larger amount of funding for COVID-related programming, and now they’re scaling back post-pandemic. I’m less familiar with the one-time decrease for Infrastructure Canada.
Senator Ross: I also noticed that there were a couple that had a big increase. One was the Canadian Air Transport Security Authority, which is seeking $1.2 billion in this year’s Main Estimates, which is more than double what they were looking for last year, and I wonder if you’ve looked into that and studied what that might entail.
Mr. Giroux: I don’t have the details, but I think the next panel should be in a good position to give you that detail.
Senator Ross: I had another question, and this might not be the right place to ask this question but it is something I’m interested in. In the budget, there’s $19.4 billion estimated as new revenue from increasing the capital gains from 50% to tax on two thirds of any capital gains of over $250,000.
How do you think that will impact succession and transition of business and just changes in the economy? Will people end up hanging onto things and the government won’t get that money anyway?
Mr. Giroux: That’s something that will certainly have a behavioural impact. Given that the change was announced more than two months before its coming into effect, there are very likely to be sales and transfers before.
The first year of the measure is likely to see a big increase in capital gains. I expect the government will claim victory in raising that much more money through its budget measure, which will be, in good part, anticipated sales, triggering capital gains.
The real test will be the second year of the measure. I think there will be significant tax planning going on to avoid paying the increased capital gains tax.
However, it also comes with an exemption of $250,000 per year at the current rate, an additional lifetime capital gains exemption for some types of business, as well as the current capital gains exception for small businesses.
The overall net impact may be difficult to assess. It may be beneficial for lower capital gains — and by “lower,” I mean a million or two — but there will probably be a bigger behavioural impact on the big capital gains, those above $3 million and $4 million.
Senator Ross: It would be difficult, I would think, to get those transactions on the move before June.
Mr. Giroux: Yes, and also difficult to follow the type of transactions because there are relatively few. For confidentiality reasons, I don’t think my office will have access to that level of tax data to be able to determine the real behavioural impact of that tax change.
Senator Pate: I know you’re here for the Main Estimates, but you recently did a costing report on the Canada Disability Benefit, or CDB. Yesterday in the budget, the government allocated $6.1 billion over six years for the Canada Disability Benefit. I’ve been hearing — as I’m sure many of my colleagues have — from people with disabilities and their advocates about their concerns. Instead of being modelled on the Guaranteed Income Supplement for seniors, as was suggested previously, this will result in only $200 extra per month for an estimated 600,000 people, when there are at least 1.6 million people with disabilities below the poverty line, most by far more than just $200 a month.
Last year, you completed the costing of the Canada Disability Benefit. I’m hoping you’ll comment on now your costing compares with the funding and design of the model that the government has announced.
Mr. Giroux: We didn’t cost the Canada Disability Benefit because, when we released our model, there were no parameters known. We developed a model where people can go on our website and play with some key parameters. Our lowest cost estimate was $2 billion or so per year.
When I saw the budget number, which is about $1 billion per year, I was a bit surprised, to say the least. When we released our own modelling, the lower end of the spectrum, the $2 billion, was criticized quite heavily by some as totally unrealistic and way too cheap. I can only imagine the criticism that the government is receiving and will get if, at $2 billion, I was criticized for putting out something that was unrealistically cheap and low in terms of per-month benefits. It says a lot about how well received or not well received the CDB at $200 per month will be.
Senator Pate: Your report on the Main Estimates highlights the federal spending on seniors’ benefits, including the Guaranteed Income Supplement for seniors living in poverty, as a major expenditure. The Guaranteed Income Supplement is a limited form of basic income and, though not sufficient to lift all out of poverty, for many people, it’s the first time in years — sometimes even in their lives — when they feel some sense of economic stability. We know that having to wait until a person is a senior before they receive relief from poverty carries significant human, social and health costs.
I’m hoping you’ll feel comfortable commenting on the potential financial cost for Canada of this current approach — in particular, as it would compare to options where younger adults could also claim a similar sort of benefit if that were available. I know you’ve costed — at my and others’ requests — guaranteed livable income, but also looking at the benefits of providing something like a Guaranteed Income Supplement for younger ages. Have you looked at any of that costing, or do you feel comfortable commenting on the potential benefits?
Mr. Giroux: We haven’t looked at the potential benefits of providing a guaranteed basic income or livable income. When you say that for many seniors it’s the first time in their lives they have a reliable, solid income, that speaks to me because it’s the case for many members of my extended family. I know what you mean by that.
Unfortunately, we have not costed the benefit of providing a guaranteed basic income to younger adults.
[Translation]
Senator Galvez: Congratulations on becoming chair, Senator Carignan.
[English]
Mr. Giroux, I’m always trying to assess the cost of these disasters and the destruction of infrastructure. One thing is to look at what is reported in terms of losses by the Insurance Bureau of Canada. That’s one way of looking at it, but we know that is not the whole picture.
I look at the Main Estimates and see how much Infrastructure Canada and the Department of Public Safety and Emergency Preparedness are asking for. As my colleague mentioned, they are now seeking 4.9% less. The same thing for the Department of Public Safety. They have reduced it to 3.4%.
I was wondering whether, in terms of this refocusing or reallocating exercise that the government is doing, we will finally, at the end, see some numbers on the Disaster Financial Assistance Arrangements, which is an agreement between provinces and the federal government.
At some point, are we going to know how much these disasters cost, how much we are paying?
Mr. Giroux: The short answer is probably no. It will be very difficult to assess the cost of natural disasters, at least for the federal government. One would have to look at Parks Canada, for example, Infrastructure Canada, PSPC, Fisheries and Oceans, and National Defence — all departments that have a substantial portfolio of assets that are potentially affected — or, indeed, affected — by natural disasters, in addition to the Disaster Financial Assistance Arrangements, as you mentioned, which is a copayment. The federal government provides money to provinces when they incur extraordinary expenditures above a certain threshold.
The short answer is that it’s very difficult to get that number unless one were to ask every single individual department how much they spent on disaster mitigation and disaster recovery.
Senator Galvez: Will you at some point be doing something about it and costing this in order to know the trend?
Mr. Giroux: That is something that is not currently on our work plan. If the committee asked us to do that through a motion, we would consider doing it.
Senator Galvez: One thing is about the destruction of infrastructure, but another thing is about the loss of income or the loss of crops in agriculture. We see that there is an increase in payments for the AgriInsurance Program. When we look at what this insurance program means, we see that the eligible perils are extreme weather events — droughts, floods, wind, frost, excessive rain, disease, wildfire. Again, we are in this situation where we have to increase this AgriInsurance. I don’t know by how much. I would appreciate if you would tell us. But all of this is increasing the cost, the expenses that the government does on extreme weather events and global warming.
At the same time, it’s refusing to increase the taxes to the fossil fuel or to reduce the subsidies to fossil fuels which last year meant $18.8 billion, just only last year.
When you talk about restructuring the debt and increasing revenues, what are your suggestions for the government?
Mr. Giroux: With respect to —
Senator Galvez: Get the balance, make a soft landing.
Mr. Giroux: It’s difficult to come up with suggestions in my current role as to what the government should do in specific policy areas. It’s something that’s often asked, but I try to refrain from making recommendations as to what the government should invest in, spend on, or which types of taxes should be levied or not. That’s a minefield for me. Whenever I try not to answer these questions, it’s very delicate for me to even venture in the area.
Senator Galvez: Thank you.
[Translation]
The Chair: I have two quick questions. I was talking to some tax people this morning. Everyone is wondering why the government decided to implement the capital gains tax on June 25. So they are announcing it two months in advance and on June 25, people will ask the minister.
Can you comment on the advantage or disadvantage of the government giving two months’ notice?
Mr. Giroux: I was wondering that myself, and I don’t see any clear benefit, other than it helps people avoid this added taxation. It gives them a good two months to complete transactions and avoid the higher inclusion rate. It’s unusual for a tax change of this nature. Normally, it’s like the cigarette tax that was announced in the budget and came into effect a few hours later.
The Chair: Perfect. My second question is about revenue. I see it in your report and in the budget. Revenue from individuals in 2022 and 2023 went from $207 billion to $273 billion. The figures are more or less the same in the budget. GST revenue also grew in the same period, by 30% to 35%. However, revenue from businesses has been stable over seven years or thereabouts. Therefore, the proportion of taxes coming from individuals is much higher in the future than it is now. We’re definitely seeing an increase in taxes coming from individuals as opposed to businesses.
Can you explain why? Apart from the capital gains tax rate, the brackets remain untouched. It’s probably because of inflation, but I’d like to hear from you on this.
Mr. Giroux: Yes, it’s inflation and economic growth that increase the tax base. It may not be very intuitive, but the fact is, in general, people’s earnings slightly outpace inflation. Even if all or most of the parameters of the tax system are indexed to inflation, people are earning more and more income, and their earnings are growing a little faster than inflation. This means that a fairly predictable portion of the population moves from one tax bracket to another. This increases revenue a little more than economic growth. Inflation and the apparent shift or imbalance between personal income tax, GST and corporate income tax stem in part from the fact that we’ve had several years in a row of pleasant surprises when it comes to corporate income tax. Corporate tax revenues were much higher than expected at the federal level, but also in the provinces.
When I spoke to senior ministry of finance officials in Ontario, British Columbia and Quebec, the surprises were hard to explain in terms of corporate tax revenue, and stagnation is down to a number of business tax credits that were announced and introduced in recent years, including for the energy transition and accelerated deductions for certain types of investments to support certain sectors of the economy. These tax credits reduce corporate tax revenues.
The Chair: So there are fewer revenue sources coming from corporations and more from individuals.
Mr. Giroux: Exactly.
The Chair: Perfect. Can we keep you for another three or four minutes so colleagues with quick questions can have another go?
Thank you very much, Mr. Giroux and Ms. Giswold, for your usual collaboration on short notice, because you accommodated us.
We now have some senior officials with Treasury Board Secretariat. Thank you for being with us this evening. We have quite a few of you here, so I’ll introduce the person giving the opening remarks, and the rest of you can introduce yourselves if you’re called upon to answer more specific questions.
Let’s welcome Rod Greenough, Acting Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat.
Mr. Greenough, you have the floor.
[English]
Rod Greenough, Acting Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. First, I’d like to acknowledge that the territory on which we are gathered is the unceded traditional territory of the Algonquin Anishinaabe people.
I have with me today Mike MacDonald, Senior Assistant Deputy Minister, Security Policy and Modernization; Jean-François Fleury, Senior Assistant Deputy Minister, Strategic Directions and Digital Solutions; Heidi Kutz, Associate Assistant Deputy Minister, People and Culture; Karen Cahill, Assistant Secretary and Chief Financial Officer; Emilio Franco, Executive Director, Procurement, Materiel, and Communities Directorate; Jacinthe Laporte, Senior Director, Expenditure Strategies and Estimates.
On February 29, the government tabled the 2024-25 Main Estimates and the 2024-25 Departmental Plans. The Main Estimates present information on $449.2 billion in planned budgetary spending for 129 organizations for the 2024-25 fiscal year. This includes $191.6 billion in voted expenditures and $257.6 billion in statutory spending. Such funding allows the government to provide a wide variety of programs and services and to support other levels of government, organizations and individuals through transfer payments.
The majority of expenditures in the 2024-25 Main Estimates are, in fact, transfer payments — payments made to other levels of government, other organizations and individuals. Transfer payments make up approximately 63% of expenditures or $283 billion. Operating and capital expenditures account for approximately 26.6% of expenditures or $119.7 billion, while public debt charges are approximately 10.4% of expenditures or $46.5 billion.
[Translation]
The Main Estimates group planned expenditures by type of authority. These are either voted or statutory authorities. Voted expenditures in the Main Estimates are authorized by two supply bills. The first, an interim supply bill, received Royal Assent in March. It authorized approximately $74 billion in funding for the first three months of the fiscal year. The second, the full supply bill, will be tabled in June to authorize the remainder of the funding set out in the Main Estimates.
Statutory expenditures are authorized by statutes other than supply acts. Statutory expenditures presented in the Main Estimates have already been authorized, and the estimates contain forecasts to provide additional information on total estimated departmental spending. The Main Estimates present information on budgeted statutory expenditures of $257.6 billion. You can view details of these statutory expenditures by department in the Main Estimates document. They’re all in the online appendix.
[English]
As the members of this committee are aware, the Main Estimates do not include every expenditure that will take place over the fiscal year. The Main Estimates do not include expenditures made from outside the Consolidated Revenue Fund, notably Employment Insurance payments or expenditures authorized by the Income Tax Act. In addition, due to the need to table the Main Estimates on or by March 1, emerging priorities and Budget 2024 initiatives will be included in future estimates documents.
The Main Estimates also reports on the first phase of the Refocusing Government Spending initiative, which was introduced in Budget 2023. About $10.5 billion over the next three years from departmental budgets is being refocused towards top priorities like health care and housing. This is in addition to the $500 million in travel and professional services reported in Supplementary Estimates (B) 2023-24.
Finally, I’d like to mention other valuable sources of information on planned spending. The departmental plans give insight into how departments are achieving the government’s goals. They also provide more detail about departmental reductions that are allowing the government to reallocate funds to the priorities that matter most to Canadians. Additional detail and context — beyond what is contained in the tabled documents — is available online. Online reporting tools, such as GC InfoBase and the Open Government Portal, allow users to easily see the authorities approved by Parliament and indicate how public funds are being used.
Mr. Chair, that concludes my overview. I thank the committee for inviting us here today to discuss the 2024-25 Main Estimates. We look forward to your questions.
[Translation]
The Chair: Thank you. We’ll go to questions. I would remind my colleagues that we’re aiming for a total of five minutes each, one at a time.
[English]
Senator Marshall: Thank you for being here tonight. I just want some clarification on the terminology. What is budgetary? What is non-budgetary? What is voted and what is statutory?
I was looking at the provision for contingent liabilities. In the public accounts, it increased about $22.5 billion from 2022-23. Is that budgetary or non-budgetary?
Mr. Greenough: Contingent liabilities recorded in the public accounts are on an accrual basis. When it comes through the estimates, it comes through when payments are actually being made to settle these claimants, and it would be voted budgetary amounts at that time generally.
Just to back up, budgetary is generally something that will have a fiscal impact. Non-budgetary has to be loans — which are also classified as an “L vote.” It’s a loan, so it’s not going to have a fiscal impact. Budgetary will have an impact; it’s actual spending.
Senator Marshall: Wouldn’t that roll into the deficit? I’m just trying to figure out what impact it has on the bottom line.
Mr. Greenough: Questions about the deficit are best posed to the Department of Finance Canada, but, in general, yes, an accrual liability would have an impact on the deficit. But it would only come through the estimates when departments are actually ready to settle and make a payment.
Senator Marshall: So it would be budgetary. Do you need an appropriation, or is it statutory?
Mr. Greenough: Generally, they’re paid through appropriations. We’ll see that a lot for the Indigenous organizations. There is funding to settle claims. Those are voted, and they go through those organizations.
Senator Marshall: If I wanted to see where that $22.5 billion got charged, how do I find it?
Mr. Greenough: The issue is the $22.5 billion is a liability that’s accumulated over time. It gets paid at different points in the future. There will be some in reference levels now. There will be some in the supplementary estimates when departments come. The payments aren’t made until they’ve reached an agreement or settled exactly.
Senator Marshall: But if I were looking through the public accounts, would I be able to find it? You’re talking about the two Indigenous departments. Would I be able to find those accruals in either of those departments? The information is provided by the departments. I’m just trying to track the money through because the public accounts do not compare to the budget, and the budget does not compare to the estimates. I’m just trying to match up the different financial documents.
Mr. Greenough: I don’t think we have anyone here who can speak to the public accounts, but we can respond with a written response to that.
Senator Marshall: Somebody can get back to us and tell us where the $22.5 billion got charged in the public accounts and in the specific departments? Because I’ve been looking for a long time, and I can’t find it.
Mr. Greenough: I’m unsure. As I say, we can get back with a response. It is beyond the expertise of the panel we have here today.
Senator Marshall: I would appreciate it. It is $22.5 billion. I have a similar question for loans and investments, but I won’t go there until I get an answer to that.
I notice in the Main Estimates there is $5.1 billion for spending oversight. What is that?
Karen Cahill, Assistant Secretary and Chief Financial Officer, Treasury Board of Canada Secretariat: The $1 million for spending oversight pertains to an increase in our public accounts. It’s a number of items, not one single item in the Main Estimates. I’m sorry.
Senator Marshall: The number that’s on page 193 is $4.4 billion for operating and $750 million for capital. What is the $4.4 billion for? What’s that being spent on?
Mr. Greenough: Sorry, which page?
Senator Marshall: Page 3, Treasury Board Secretariat.
Ms. Cahill: The $4.4 billion for spending oversight is part of our operating budget. This is for a number of items, as I mentioned. Not one specific item can be targeted. It’s different items that would come to that amount.
Senator Marshall: Can you tell me what you mean by “spending oversight” and what $750 million in capital represents?
Ms. Cahill: That’s under the central votes. “Spending oversight” pertains to the oversight of the spending of the Government of Canada. That’s one of our lines in the Main Estimates. Essentially, this is the work that my colleagues in EMS do. Under the spending oversight, we have a number of central votes that are accounted for under that line of business. I’ll turn this over to Mr. Greenough.
Senator Marshall: Could you send us something in writing? It’s capital. It looks like maybe a new computer system or something.
Ms. Cahill: No, no.
[Translation]
Senator Forest: Thank you for being here. I have a question about the $22 billion we keep hearing about, which my colleague is very keen on tracking down and which you say will be repaid. Do I have that right? How will it be repaid, and over what period of time? Is there an amortization period? How does that work when there’s a $22-billion liability that’s going to be paid off eventually? What’s the repayment schedule and what’s involved in the decision about how to pay back the $22 billion in question?
[English]
Mr. Greenough: Thank you for the question. In terms of legal liabilities, I can’t give a forecast on when they’ll be settled but when they are settled, they do come through the Estimates as line items, looking for additional funding for the settlements. That is, the liabilities recorded in the Public Accounts of Canada. I have no forecast when they come. They come when they’re settled and when the department is ready to seek funding to settle them.
[Translation]
Senator Forest: Who decides? Will it be spread out over a particular period of time or paid back in full?
[English]
Mr. Greenough: That’s a function of the decision and the agreement that’s reached in settling the claims or the agreements. In any case, it’s different, depending on what the parties agree to.
[Translation]
Senator Forest: Regarding modernization of the regulatory system, the Treasury Board of Canada Secretariat’s 2024-25 Departmental Plan states the following:
To stimulate economic recovery and growth, TBS will continue to build a modern regulatory system that helps businesses be more competitive and eases the time and financial burden for Canadians.
Can you tell us what that will include and give us an overview of the main programs Treasury Board will implement to stimulate economic recovery?
Ms. Cahill: Thank you for your question. Our sector deals with regulations. Different regulations are put in place to stimulate certain sectors of the economy. For example, consider different Fisheries and Oceans Canada laws governing the use of transboundary waters. Certain economic sectors that are more regulated will benefit. I can get back to you with more details about this, but there will certainly be... It’s all about stimulating economic exchange and projects.
Senator Forest: Does that mean that, in Treasury Board’s mandate, for example, you review sectoral departments’ regulations comprehensively with a view to suggesting certain changes?
Ms. Cahill: That’s right.
Senator Forest: That’s in Treasury Board’s mandate?
Ms. Cahill: Yes, we have a branch that handles those kinds of rules and regulations.
Senator Forest: Do you consult... Do you go through that huge process only on the Hill, or do you consult, say...
Ms. Cahill: A lot of stakeholders are consulted during these discussions, including all levels of government administration and businesses. There are lots and lots of stakeholders. I’m not an expert in that sector, but I can send you more information in writing, if you want.
Senator Forest: Yes. You provide significant leadership. We’re over-regulated, so there are a lot of projects that could help lighten and facilitate economic activity.
Ms. Cahill: There are activities like those, as I understand, that will do just that to ease the burden of regulations and steps to follow. That’s why this group of individuals exists.
Senator Forest: Is this a new action from the Treasury Board?
Ms. Cahill: No, it has been going on for a few years, as far as I know. We often come up with estimates to bring money into our budget to develop these regulations.
Senator Forest: Thank you; I’m out of time.
[English]
Senator Smith: I would like to start with a general question on the financial cycle. We’ve heard many times that it’s broken and unnecessarily complex. Before your panel, the Parliamentary Budget Officer indicated again that tabling the Main Estimates before the budget limits the ability of Parliament to scrutinize spending and complicates the process.
Is work being done to align the budget with the Main Estimates? What are the obstacles that prevent this from happening? If you could help me out on that, I would appreciate it.
Mr. Greenough: Thank you for the question. I’m happy to follow up on the PBO’s remarks.
In general, the Main Estimates have to be tabled on or before March 1 as per Standing Orders of the House of Commons. There’s no flexibility within the Main Estimates. It’s on or before the March 1 date. Obviously, the budget doesn’t have a fixed date. It’s in the purview of the Minister of Finance.
In terms of work being done, there was the pilot that we’ve spoken to you about before. That moved the Main Estimates later in the cycle and the budget before and used budget implementation votes to capture the budget in the Main Estimates. The pilot was done for two years but wasn’t continued. The chief obstacle is that everything that goes into the Main Estimates is approved by the Treasury Board, in general. That takes time. The budget announces some things that are for consultation and only developed over six or eight months. Some things are simple and ready to go. For example, even with the March budget, when we get to Supplementary Estimates (A), which is tabled in May, there might be 20% or 30% of the budget in a given year in there. It takes time for departments to work through and seek the necessary Treasury Board approval. That pilot tried to do it without Treasury Board approval; that is, to come to Parliament first, with the budget implementation votes, and then seek approval, but it wasn’t viewed as an improvement. After the two-year pilot, it was taken back.
In terms of the timing, it’s the prerogative of the Minister of Finance when the budget is tabled. The main obstacle is trying to get items ready for Treasury Board in time for inclusion in estimates.
Senator Smith: I think it was 2017 when this came in for two years. Things progressed and suddenly it fell off the side of the earth.
As a supplementary, when we talk about misalignment, we have to wait until the Supplementary Estimates to see budget items. Oftentimes, departments will have begun implementing a program. In such cases, we would be already approving funding that is spent or already spent or in the process of being spent. Do you think this is a normal standard practice? Can you see how this could be perceived as not being transparent? Where is this going to go? A test was done in 2017. It kind of failed or was judged as being failed, and then we went back to the old system. But where do we go to improve the execution?
Mr. Greenough: It’s a good question on next steps. I wouldn’t want to speculate too far on those.
In terms of departments launching initiatives before they come to supplementary estimate, departments can take initiatives within their mandate. If they are expanding a certain program that they already have a mandate to do, they can do that, but they are risk managing within their own authorities that they already had approved. They’re using money that had been approved in Main Estimates. They still need the supplementary approval to continue the initiative. The department is doing it as a way to speed the implementation within their existing authorities.
Certain payments, like grant payments, departments can’t make until they have the approval of Parliament. There are two pieces of the money that departments use. It’s a fashion of using their existing resource that’s already approved within their mandate to do some of the front work, so when they reach parliamentary approval and receive the rest of the money or the bulk of the money, they can be ready to go, as opposed to starting the work of hiring people and starting the process. At that point, it would delay the implementation.
Senator Smith: I’m sure all of you are so experienced within the department, and having lived through the past, going forward into the future, what are the steps that can be taken to at least improve the system that you have in place right now?
Mr. Greenough: I can speak to the steps that have been taken, and a lot of that is in terms of information. We now list and tag all the budget measures that go through, so they’re clearly identified. At certain times, like during COVID, we’ve used online reporting to give measures and the spending against them to allow better information on what is being shared.
Another initiative mainly aims to provide information. I don’t think it’s to change the whole system. That is a broader discussion that would require input from more, but in terms of providing more information, making documents clearer, that’s where we continue to look to find ways to deal with the revamped Departmental Plans and changing the format to make them easier to access. Other things to make the information more accessible and more usable is where we’ve put our focus.
Senator Smith: Is it safe to say you’ve pivoted and made some moves, you’re doing the best with what you have and going forward in time?
Mr. Greenough: We’re always open to new ideas. Last year we launched a new online annex of opening balance of central votes. There are always new ways to put information out. We continue to take feedback and are open to new approaches. In terms of moving the budget date, it is not within TBS’s priority, and bigger issues like that require bigger solutions, I guess.
Senator Smith: Thank you so much.
Senator Loffreda: What measures are being taken to address potential fiscal risks and uncertainties, including economic downturns, demographic shifts, external shocks, while maintaining fiscal sustainability and stability?
I’m looking into areas such as is there regular fiscal stress testing conducted on the fiscal framework identifying vulnerabilities? Do you do any contingency planning with fiscal buffers to cushion against revenue shortfalls or debt management strategies? There’s more and more concern about the public debt levels. How are you implementing effective debt management going forward, helping to mitigate those risks associated with the high levels of debt, and the risk assessment and contingency budgeting?
What measures are being taken? Can you elaborate in the short five minutes that we have on that? As a banker, it would take me hours and hours to take notes on that.
Mr. Greenough: I can’t elaborate too much at the macro level, because the Department of Finance does the majority of the work on debt management, fiscal strain and those types of questions.
At the Treasury Board, the focus would be on individual submissions as departments come forward, how departments put the proper contingencies in place for their plans, and the aggregate detailed implementation, whereas Finance would look more at the aggregate impacts globally of these changes.
Senator Loffreda: That’s strictly with the Department of Finance that takes care of those levels.
Okay, I’ll ask you a more micro question on the estimates. Regarding the development of surplus federal properties into housing units by Canada Lands Company. What criteria are considered when selecting which surplus federal properties to develop into housing units? Is that your area?
Emilio Franco, Executive Director, Procurement, Materiel, and Communities Directorate, Treasury Board of Canada Secretariat: Not the area of Treasury Board, but I can say that the organization responsible for the office portfolio of government is Public Services and Procurement Canada, and they would be positioned to answer that question best.
Senator Loffreda: Regarding your plan to achieve spending reductions outlined in the departmental plan, I gather that’s your responsibility. How does the TBS prioritize which areas of spending to reduce in order to meet the overall reduction targets? Could you elaborate on the strategies you will implement to leverage in-house resources and administrative efficiencies to achieve the targeted savings?
Mr. Greenough: I can speak to the overall process, especially that was done for the first phase of the refocusing government spending, that was reported in the Main Estimates.
In that process, there was work done to identify what the eligible spending base was because there were some areas that the government decided were not eligible, such as spending on the Canadian Armed Forces, transfers to provinces. We did work to establish what was eligible to be spent or considered free allocation.
Departments were then required to submit proposals signed by their minister to Treasury Board. They were reviewed by the Treasury Board Secretariat to make sure they were sustainable, wouldn’t create program delivery problems and wouldn’t create long-run fiscal problems in the department.
Treasury Board then reviewed the proposals, and I guess approved those that met the standard of planning administrative efficiencies, and not creating long-term challenges, so it was very much a proposal-based approach, similar to a budget, but in the other direction. Departments were proposing areas where it could be reallocated and reviewed by Treasury Board to make sure there were no unintended consequences of these reallocations.
Senator Loffreda: Any main areas of concern?
Mr. Greenough: No, the initial phase has been completed, and it’s in Departmental Plans. It has been generally under way and has not been identified as having any areas of concern until now. Still the additional phase 2, that was reiterated in the budget yesterday that’s still to be done, so there are still evaluations to be done and additional work, but to date, the process has identified effective operational savings or programs that were just not performing or meeting objectives that could be reduced or more targeted.
Senator Loffreda: Thank you.
Senator MacAdam: I note that on March 8, 2024, the Financial Post wrote that the federal public service has grown by 38% since 2015 according to MEI, a Montréal-based think tank, and that employment gains in the public sector more than offset losses among Canadian businesses recently. I’m wondering if you’re aware of any analyses or review under consideration aimed at evaluating the financial impact of this public sector growth?
Jean-François Fleury, Senior Assistant Deputy Minister, Strategic Directions and Digital Solutions, Office of the Chief Human Resources Officer, Treasury Board of Canada Secretariat: I can talk and describe the growth. The second part of your question, I don’t have an answer.
In terms of growth, we have seen the public service grow in the last five years. When you actually dissect the growth, the growth has happened in organizations that are mostly directly linked to priorities, and/or COVID management.
Also, when you look at the growth in the public service, it has not happened everywhere, not in all organizations and not in all functions, mostly in the program design and delivery area, which is a direct link to the initiatives that were put in place in the previous years.
When we project out, when we look at the Departmental Plans, because it’s our best way to project out based on what we know today, many of the organizations that grew significantly are showing a decrease in their growth. But when you look at that particular analysis, it’s like a moment in time. If renewed programs continue to get renewed, or if new programs are added, it fluctuates. Based on the picture that we see now, based on the planned spending of the departments in their departmental plans, the organizations that had the most significant amount of growth, we’re actually seeing a downturn there.
Senator MacAdam: As far as the Treasury Board Secretariat, it’s requesting an increase of 4.6% over last year in the Main Estimates.
I’m wondering, given government is committed to refocus billions of dollars, how does the Treasury Board Secretariat aim to achieve its savings from 2024-25 to 2026-27?
Ms. Cahill: Thank you, Mr. Chair.
The savings are already accounted for in our Main Estimates for 2024-25, and that will be the same thing for future years.
The growth that you are seeing is essentially in the TBS Main Estimates, attributable to operating budget expenditure which pertains to items that were approved in previous budgets. You’ve seen in 2023-24 estimates, they are multi-year initiatives; the funding is reflected in our 2024-25 Main Estimates.
Another element of our growth is under vote 20. We have over $430 million related to the pension and benefit plan. This is an increase in our budget. This is to sustain the growth in price and volume of the plan. Again, this was approved in previous budgets and is being reconfirmed in our Main Estimates. This is essentially what you’re seeing with respect to the growth.
As we are indicating in our departmental plan, we plan to achieve our savings through a reduction in the use of professional services and leveraging our employees more to do the work, also in administrative services, stemming from the hybrid work model that we have embarked on since the pandemic. These are key elements.
Also, I must say that TBS will achieve some of the savings during 2023-24. We have consolidated our buildings under one single building. The fact that we do not have to support two buildings is also part of those savings under the administrative savings that we are indicating in our departmental plan.
Senator MacAdam: Thank you.
Senator Kingston: My question is for Mr. Greenough.
We have documents in front of us that, of 129 organizations presenting funding requirements in these estimates, 11 are seeking more than $5 billion. Do you have any details on these increases? I’m thinking specifically of Indigenous Services Canada, which is $20.9 billion; Employment and Social Development, $11.5 billion; Health Canada, $8.4 billion, and the Office of Infrastructure of Canada, $5.8 billion. Are there any specifics on any of those?
Mr. Greenough: In general, the specifics of all the details will be in their departmental plans.
Returning to your questions from the first round, in terms of the office of Infrastructure Canada, they do have the amount you indicated, which is a decrease from the previous year. The decrease is primarily due to a decrease in contributions under the Investing in Canada Infrastructure Program, but also the winding down of the Investing in Canada Infrastructure Program: COVID-19 Resilience stream. Some of that is a wind down of COVID-19, which is why they’re lower than the previous year.
As noted previously, Indigenous Services Canada is lower than the previous year because they have lower amounts for out-of-court settlements. Their base program continues, but they have lower amounts for out-of-court settlements. They’ve returned to a more normal level. Last year, they were elevated due to increased out-of-court settlements. This is more normal for them.
In terms of Employment and Social Development, it is largely driven by their revised forecast of elderly benefits spoken to in the preceding round. The elderly benefits are under ESDC. That contributes significantly to their total in the Main Estimates.
For Health, the increase in the totals includes the Canadian Dental Care Plan, which is being rolled out in phased approach. That’s why Health is significantly higher; it’s including the dental plan in Health.
Senator Kingston: Help me to understand. You have a decrease in Indigenous Services overall, yet this is the money required to run for the first three months. Is that correct?
Mr. Greenough: This is our request for the full year based on what’s been approved at Treasury Board to date. It is sought through two separate pieces of legislation. There’s one piece of legislation for the first three months and a second piece that will follow for the remainder of the year. That will come through in June.
The Main Estimates present the whole total, but it’s split into two pieces of legislation so that departments have a chance to operate while the bill is being studied. Then the remainder of the funds can come once the Main Estimates have been studied.
Senator Kingston: Thank you.
Senator Ross: In your departmental plan for 2024-25, it says that you’re going to continue to provide guidance and support to departments on results-based management by reviewing government-wide programs for effectiveness. I’m interested in hearing about the indicators, targets and reporting mechanisms. How are you going to do that?
Mr. Greenough: Thank you for the question.
As has been noted during a previous appearance, there is an ongoing review of the policy on results. That’s been under way for most of the year and has involved consultations with departments and stakeholders to refine the policy to make changes to improve it going forward. That is one aspect where work is being done.
A second piece launched this year was a revised template for the departmental plans and departmental results reports to make them more user-friendly and standardized. There is a bigger at-a-glance section now, like an executive summary, to capture more of the key information up front, including how departments are implementing the refocusing in government spending.
Then there is the day-to-day review of departmental TB submissions that’s done with a results lens to make sure that new submissions coming forward have good results indicators; they don’t have too many, then they’re targeted and have data that can be available and realized.
There’s an ongoing effort to make sure that new proposals and new programs have good indicators built in from the start, rather than having to go back and catch them after the fact or deal with legacy problems. Those are four of the ways that work is being done this year in that area.
Senator Ross: I noticed that your departmental plan goes from a result of 49% in 2022-23 to a projection of getting to around 80%. That’s the percentage of high-volume Government of Canada services that meets service standards. It only rose about 3% the previous year. Do you think that’s a realistic expectation of a jump?
Ms. Cahill: As my colleague indicated last week at this committee, there is a lot of work being done in the service to Canadians’ domain. It’s not a large jump. We are aiming at increasing the results for service to Canadians, and more accessible services to Canadians.
There’s a lot of work being done in different aspects of the service to Canadians. We have the Benefits Delivery Modernization programme, different programs that are being modernized. We are aiming to see an improvement of the result. We had this discussion last week at this committee.
Senator Pate: In a written question that I asked last fall regarding the Auditor General’s recommendations in 2022 that the Treasury Board:
. . . provide timely and documented feedback to departments and agencies on the application of GBA Plus in their . . . Treasury Board submissions . . . .
The Treasury Board indicated that you’ve carried out this function on all submissions related to poverty reduction or the Calls for Justice of the National Inquiry into Missing and Murdered Indigenous Women and Girls that were considered by the Treasury Board. For the most recent year for which you have this data, could you please clarify roughly how many submissions the Treasury Board, one, has considered, and two, has provided feedback on that relate to poverty reduction or to the implementation of the Calls for Justice of the National Inquiry into Missing and Murdered Indigenous Women and Girls? Could you also provide examples of that feedback and what kind of feedback has been offered to the departments regarding accounting for poverty reduction and the implementation of the MMIWG Calls for Justice as part of GBA Plus, as well as the steps the department has taken to address feedback provided by — that the various departments have provided to you — that you’ve provided and they have then responded to?
Mr. Greenough: That’s what I’m about to take back and, again, respond to you in the written response. The work is ongoing, and the review and challenge function is ongoing. It is part of the day-to-day work, but in terms of the numbers and the specifics, it would be better to respond in writing with the experts.
Senator Pate: That would be great. Because it was a very general response last time, it would be great to get those kinds of specifics. Thank you.
Senator Galvez: Thank you very much for being here. In your Departmental Plan, you came out with amounts that you aim to reduce per year, very specific amounts, from 2024-25 and even after 2027. My first question is, what was the criteria that you used in order to determine these amounts? For example, for next year you’re saying you’re going to reduce $9.585 million. My second question is, given that you are not planning to reduce personnel, how are you going to reduce spending on operations?
Mr. Greenough: I can start if you want. Just in general, on the criteria that were used for the review, as I mentioned at the outset, senator, the criterion is that it wouldn’t impact services to Canadians, it wouldn’t impact transfers to provinces and the aim was very much at finding efficiencies within. Each department then had the opportunity to develop proposals based on those criteria, and the proposals included all the lenses — the horizontal lenses, GBA Plus and quality of life analysis — to ensure that decisions could be made by Treasury Board to get the whole impact. If I can pass to my colleague, Ms. Cahill, to talk specifically about the TBS proposals.
Ms. Cahill: As I mentioned, those amounts have been reduced from our current appropriation. So we do not have this money to spend in our budget. From an operations standpoint, we will take a different approach to achieve our target. One of those approaches is by changing the way we work with respect — and this is mainly due to the new model that we now have in place, the hybrid work model. That allowed us to consolidate two buildings into one building. Since November 2023, TBS is located under one single building. We could do this because people are working in a hybrid model. No one, except certain positions, have assigned offices. This allowed us to book savings from our operations budget, reduce cost of our security system in one building, reduce costs for cleaning in that building that we’re no longer occupying, reduce costs of commissionaire services for us. Those are just some examples of how our costs have been reduced with respect to the operating budget.
Senator Galvez: Well, it looks like a fantastic exercise, and very efficient, because in the next year, you’re even reducing more and more, and you’re saying that you’re going to do it after 2027.
Ms. Cahill: This is in light of the commitment that the government has made in Budget 2023 to refocus government expenditures. Those numbers were provided to us as a target to achieve, and we’re executing in a way that we will achieve those targets.
Senator Galvez: Can you please list this information, this detail on how the hybrid model is reducing costs? I sit in a committee here in the Senate where we’re trying to do the same. Maybe we can be inspired by what you have done.
Ms. Cahill: Well, because people are no longer coming to the workplace five days a week, they can share offices. So we have taken this approach by doing an unassigned sitting model where people, when they come to the office, have to book their office prior to coming in. This is one example. But also reducing to one building has allowed us to reduce the number of printers, and since we’re working more in a paperless environment, less printing, less usage of supplies, et cetera. We’ve made great progress in that sense.
Senator Galvez: Thank you.
[Translation]
Senator Dalphond: I understand that the Treasury Board of Canada Secretariat is responsible for collective bargaining; that’s your responsibility. Negotiations are coming up and are actually under way, and they may not be working perfectly with the customs unions. I read in the papers that they just held a vote on strike action on April 15. I don’t know what the results are — I assume they are not known yet. Does the secretariat have a contingency plan in case of a strike? 9,000 customs officers would be affected. Customs is about transport, international trade, the United States in particular.
Mr. Fleury: I can give you the broad outlines, and if you need more detail, I can ask my colleagues to give you some. The aim is to avoid a strike at all costs and to have successful negotiations for the employees and for the tax authorities. I can’t go into the details of these negotiations, as they are ongoing. There’s always work to be done in anticipation of the various results that might emerge. Here again, I can’t go into detail because the primary objective is to have successful negotiations and avoid a strike situation. Of course, this is part of the talks with the sector that is negotiating with those unions.
Senator Dalphond: My question will be more theoretical in that case: Do you have a plan with a capacity to manage the borders in the event of a strike?
Mr. Fleury: Again, that would be a question that border services could answer. If there are strikes or whatever, all employees are deemed to be essential or non-essential. It’s part of departments’ contingency plans to manage situations like that. There are always services that are deemed essential or non-essential. I’m giving you a theoretical answer myself, as the department in question would be in a better position to answer that question.
Senator Dalphond: I understand, but I assume that the negotiations will follow the normal rules for now and that you will appear before a public interest commission if necessary?
Mr. Fleury: That’s right. That is the stage we’re at.
Senator Dalphond: That stage has already begun and will continue until the end of April, right?
Mr. Fleury: Exactly. The process is taking its course. Then there’s the public interest commission stage. That’s fairly typical. A report will be made by that commission, which will have an impact on the next stages of the negotiations.
Senator Dalphond: Very well, thank you.
[English]
Senator Marshall: I’ve reflected on your response to my earlier question, and I’ll just read my question into the record, and you can get back to us because I don’t think you’ll have the answer there.
There is $22.5 billion credited to the provision for contingent liabilities in the public accounts. I want to know where the debits went. I know where the credit went, but I would like to know what departments and which main objects — was it program expenditures, government contingencies or which account? That’s what I’m looking for. I’m looking for the debits.
Mr. Greenough: I’ll seek a response for you in writing. I can’t prejudge what the response will be. To follow up on your earlier question about the $750 million that was in Treasury Board under our spending oversight, that’s the capital budget carry forward for departments. When departments have a capital budget carry forward, they have to come to Treasury Board to justify the money spent. We do the allocations. That’s what that $750 million is.
Ms. Cahill: I may follow up with the rest of that question with respect to the $4.4 billion. The $4.4 billion under spending oversight relates to the operating budget carry forward of $3 billion. The pay list requirement of $600 million. As my colleague said, the capital budget carry forward is under capital of $750 million. Those are central votes, and the money will be used to transfer to departments after the year has ended.
Senator Marshall: Those are the proposals that you go through. Thank you.
[Translation]
Senator Forest: Quickly, the Treasury Board still has quite an impressive leadership role to play in lessening the regulatory burden, but also in coordinating the implementation of the Greening Government Strategy. Can you give us a few examples of success indicators that will make it possible to see progress toward this objective to have a government that is more respectful of the environment and is moving toward increasingly green management?
Ms. Cahill: Thank you very much for your question. One of the indicators we monitor very closely is the greenhouse gas emissions indicator, which is included in our departmental plan. As part of the Greening Government Strategy, there are a number of projects in several departments that we monitor very closely, to which we allocate funds, but which also have to report on their progress and achievements. These are concrete projects, and I can give you a few examples. There are projects to support different departments, such as National Defence, to adopt hybrid and electric solutions in different buildings across the country. That’s one of the projects, and the group responsible for greening government, together with the selection committee for these projects — because there are established selection criteria — is monitoring the outcomes achieved by these various projects. The list of projects can be found on the greening government website. So you can follow them, as well.
[English]
Senator Smith: You may come back to us in writing. The question is: I’m interested in the Government of Canada Digital Talent Strategy, for which your department is responsible. Your departmental plan has identified several ways in which you hope to implement the strategy, including helping government departments improve hiring processes and creating digital skills development for existing employees. Could you give us an update of where you are with the Government of Canada Digital Talent Strategy? More specifically, I’m wondering if you have been able to identify a labour gap across the government with respect to digital talent, and if there is a measurement system, could you give us an update whether you’re achieving your intended goals? If you could put that on a one-page document with bullet points, that would be great.
Mike MacDonald, Senior Assistant Deputy Minister, Security Policy and Modernization, Treasury Board of Canada Secretariat: We can provide you with documentation. They are simple one-page documents, but you will see two components to that. One is that we have created dashboards for departments in the IT space for hiring IT professionals where there is a significant gap — as most of you know — in the public and private sectors. The dashboard looks at departments’ needs, their approaches, at what levels and what IT requirements. It puts that all in one place so that the departments can actually see the ultimate question, which is: What is the problem? Do you really understand your problem that you’re trying to fix?
Then there is another product that we can send to you, which addresses not just the health of your HR system and IT professionals, but also some of the strategies.
Another area that we are moving forward at the Office of the Chief Information Officer on digital talent is running very comprehensive boards. You know how departments would typically go out and hire their own IT professionals, and they’d run a competition? We’re actually creating a talent pool, and the whole enterprise of the Government of Canada can go in and access that talent pool and identify the talent. We have regular talent meetings where senior executives sit down and talk about talent needs and talented people, and those people are then brought to the attention of everyone who sits on these boards. We can provide that.
The Chair: But you want something in writing.
Mr. MacDonald: We have that.
Senator Smith: It can be one or two pages. It doesn’t have to be a brick, but something with pictures and results that you’re trying to achieve and what you have achieved. That would be great.
Mr. MacDonald: We’ll do that, senator.
Senator Loffreda: On the spending reductions, given that there are no planned personnel reductions, where will the cuts come from? If you have details of where those cuts will come from, and how efficient the timing on it will be, we’d appreciate it.
Ms. Cahill: For the Treasury Board Secretariat?
Senator Loffreda: Yes.
[Translation]
The Chair: Thank you for your work and participation. It’s always important. I’d like to remind you that, when requests are made in writing, you must send us the answers before Wednesday, May 1, 2024 — this year. That would be important for us. Before I conclude, I would like to remind honourable senators that the next meeting will be on April 30, at 9 a.m., to resume our study on the main estimates. I thank the entire support team — translators, stenographers, analysts and pages — for their work; it is always much appreciated.
(Meeting adjourned)