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Proceedings of the Standing Senate Committee on
National Finance

Issue 27 - Sixteenth Report of the Committee


Monday, July 18, 2005

The Standing Senate Committee on National Finance has the honour to present its

SIXTEENTH REPORT

Your Committee, to which was referred Bill C-48, An Act to authorize the Minister of Finance to make certain payments, has in obedience to the Order of Reference of Wednesday, July 6, 2005, examined the said Bill and now reports the same without amendment, but with observations, which are appended to this report.

Respectfully submitted,

DONALD H. OLIVER

Chair


Appendix to the Sixteenth Report
of the Standing Senate Committee on National Finance on
Bill C-48, An Act to authorize the Minister of Finance to make certain payments

At its meeting of Tuesday, July 12, 2005 the Committee agreed, on division, to adopt Bill C-48 without amendment. The Committee also agreed to allow the observations of a minority on the Committee, namely the Conservative Senators, to be appended to the Committee's report.

The following observations do not reflect the unanimous observations of the Committee.

MINORITY OBSERVATIONS
ON BILL C-48

BACKGROUND

In February of this year the minority Liberal Government tabled its budget. As usual the budget was the product of long working hours by both government officials and bureaucrats from a variety of departments. In an unprecedented move, however, a few months later, Bill C-48 was presented as a result of an agreement between the Liberals and the NDP.

Conservative members of the Senate Committee on National Finance strongly oppose the structure of C-48 as it does not provide the transparency and accountability required from a budget bill. Canadians deserve better financial management from their government.

C-48 spends $4.5 billion on various policy areas, but with little or no detail as to the programs that will be resourced when the money designated actually flows.

NO DETAILS

Bill C-48 authorizes funding in a wide variety of areas — post-secondary education, housing, the environment, public transit, and foreign aid — but with no details on how this spending will be allocated. Government officials questioned during the Committee's hearings on C-48 were also unable to provide details. The Parliamentary Secretary to the Minister of Finance, Mr. John McKay, commented on this lack of detail when he noted in his testimony before us that: ``I anticipate some concerns will be raised about the fact that there is not specific detail that one would anticipate in a budget.''

Lack of specifics in a budget bill is contrary not only to our own parliamentary tradition, but to the traditions both practiced and aspired to by democracies the world over. As one of our witnesses, former Deputy Finance Minister Stanley Hartt noted in his submission to the committee:

...prudence, and Parliamentary practice, should dictate that the House and the Senate appropriate moneys when programs have been thought through and developed, when program parameters exist that can be set before the legislators whose control of the public purse is paramount and who are entitled to know what spending they are actually approving, and not merely be required to rely on a list of fine-sounding objectives.

NO ROLE FOR PARLIAMENT

What the government is asking the Committee to do is to pass a bill that authorizes the spending of billions of dollars of taxpayers money without offering Canadians either details or a plan on how that money will be spent, and without offering Parliament any information through which it can hold the government accountable. Again in the words of Mr. Hartt:

...senators should be alarmed at the precedent that Bill C-48 sets for the manner in which legislators are invited to use or, in this case, I think, fail to use the traditional power of Parliament to control public spending. Those powers were hard- won. We did not shed any blood in this country over them, but our forbears in Britain, whose parliamentary system we inherited did. The supremacy of Parliament on spending matters is a very valuable tradition that we should not be so casual about.

The Comptroller General of Canada, testified that C-48 represents a prudent approach to fiscal management in that the $4.5 billion would be spent out of surplus over a two year period only if there is a $2 billion surplus in each year. However, this leaves those who may be counting on the money in a constant state of uncertainty about whether they will get the money until the surplus is actually announced (sometime in the Fall of 2006 ). As the Chair of the Committee noted, rather than allowing ministers and government officials time to plan their various programs it may instead raise false expectations. Needless to say, that would only have to occur once, before planning for what may never happen would be abandoned by those same officials and ministers.

The view of the Comptroller General was contradicted by the Parliamentary Secretary to the Minister of Finance, who noted in his testimony: I do not want to be too crass about it, but if I was a department anticipating receiving money, I would not be booking this money until I know that [$2 billion] surplus was in place.

Conservative Senators are not impressed by the argument that at least by C-48 Parliament had a say in what areas future surplus monies would be spent. It is argued that this was preferable to a situation where Cabinet may spend the surplus on anything it likes without consulting Parliament. Conservative Senators disagree. Even with the passage of C-48 there is nothing stopping Cabinet from spending money as it sees fit. Bill C-48, requires asking Parliament to approve spending for which there is no oversight and which the government can spend according to its own whims, after which it can argue Parliament approved it, at least in general terms. This does not amount to an improvement in the expenditure process.

Some Senators argued that that there would be ample time for Parliamentary committees to scrutinize the spending in the five months between the time the fiscal year ends on March 31 and the time in which the actual amount of surplus is determined in the Fall. But clearly this would be scrutiny after the fact, as it would take place during the review of supplementary estimates. As Mr. Peter Devries from the Department of Finance told us:

Once these agreements are in place and the payments are made, they will show up in supplementary estimates as a statutory program for information purposes, but of course the committees involved in reviewing those supplementary estimates can then ask any question of the minister or officials involved with respect to more details on those programs

The November 2006-2007 Supplementary Estimates will be tabled more than six months after the end of the fiscal year, and two months after the books have been closed and the surplus will have been known with certainty. The money designated under Bill C-48 will have been spent — Mr. Devries told us that the government would be issuing cheques sometime in September or October of 2006. As Mr. Hartt described the process in his testimony: ``In other words the money is blown; now we are going to be told, because people are nice and they will show up and sit in this chair, how it was blown.''

WHERE WAS THE FINANCE MINISTER?

Because of its brevity, and due to its lack of detail, we are of the opinion that this so-called budget bill is little more than hastily prepared legislation designed to do little else than prop up a minority government, as even the Minister of Finance has implied. We are convinced that government protestations otherwise, are merely an attempt, in the words of one of our witnesses to make a silk purse out of a sow's ear.

Conservative Senators are concerned that this Bill was developed without the Finance Minister — the Chief Financial Officer of Canada — directly involved in the negotiations that led to it being drafted and tabled in the Other Place. As well, he failed to appear before this Committee to defend the legislation.

In fact, the Finance Minister criticized aspects of the deal on the morning of the day it was announced by the Prime Minister. The Minister of Finance was quoted in the press that day as criticizing the removal of corporate tax cuts, only to tell this Committee during its hearings on C-43 that he had a hand in the deal, in that he was in close consultation with the Prime Minister and the Government House Leader on a day-to-day basis leading up to the agreement with the NDP. Yet, according to his Parliamentary Secretary the Finance Minister never discussed the substance of the NDP-Liberal agreement with him in those crucial days. Conservative members were disappointed that the Minister did not appear before the Committee on C-48 to clarify his role in this budget bill.

We are also concerned that the genesis of Bill C-48 sets a dangerous precedent as it means budget bills can be developed without direct involvement of the Finance Minister. Even the Parliamentary Secretary of the Minister of Finance acknowledged that ``My involvement was after the fact.''

HOW WILL THE MONEY BE SPENT?

The bill asks for $1.6 billion for affordable housing including housing for Aboriginal Canadians. Yet there is nothing in the bill that identifies how this money will be spent to benefit Aboriginal Canadians. Money is directed at a problem area without identifying how it can be spent more effectively.

The same is true in the area of foreign aid, a term which may mean development assistance, but that, at the same time, is so wide open that it could refer to military support for foreign powers. Bill C-48 designates half a billion dollars to foreign aid, with absolutely no information as to how it is to be delivered, to whom it is to be delivered, who will manage the funds once they are delivered, and to what positive end. As David Stewart Patterson, of the Canadian Council of Chief Executives testified:

...it is also important to recognize that the best way to achieve some of these goals does not necessarily involve public spending....there is broad consensus, and you heard it in some of the G8 discussions over the past week, that the most effective thing Canada and other industrialized countries can do to help the poorest farmers in the least developed countries is to free up agricultural trade through the WTO. None of that kind of looking at alternatives in terms of the best way to meet these policy goals is addressed in the rather brief text of this bill.

Much the same could be said about the money designated for the environment, for housing and for education (the latter two of which happen to be largely a provincial jurisdiction).

WHERE IS THE ACCOUNABILITY?

Government officials who appeared before the Committee explained that the expenditures in the bill will be statutory. However, most statutory spending is carried out based on strict guidelines already set out in law. For example the Employment Insurance Act sets out specific rules for benefit levels and eligibility, while transfers to provinces and territories are made based on a set formula. There are no specific guidelines to govern any payments made pursuant to C-48. Parliament will have no say, as these guidelines will be set away from the gaze of Parliamentarians. This is not, as Mr. Patterson told us, sound public policy.

The bill allows the government to create or acquire unspecified corporations while providing no legislative guidance as to the accountability and governance of those corporations. This is an invitation to the kind of misuse and abuse of funds that led to Adscam, only Bill C-48 involves much more money.

CONCLUSION

We oppose this bill for many reasons. But ultimately we oppose it because in exercising one Parliamentary prerogative — to vote for a bill — the effect is to remove from our hands another Parliamentary prerogative, the ability to effectively scrutinize government spending. This we cannot support. If it is irresponsible for the government to introduce legislation of this nature, we feel that it would be just as irresponsible to support such legislation.