Proceedings of the Standing Senate Committee on
Issue 43 - Evidence - June 12, 2013
OTTAWA, Wednesday, June 12, 2013
The Senate Standing Committee on National Finance met this day, at 6:45
p.m., to examine Bill S-217, an Act to Amend the Financial Administration
Act (borrowing of money).
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, this evening we will begin our
study of Bill S-217, an Act to Amend the Financial Administration Act (borrowing
In the first half hour this evening, we welcome the sponsor of the bill,
Senator Moore. In an unusual place for a senator, he is here to sit at the
end of the table and describe the bill to us. Senator Moore, we thank you
for your initiative. You have the floor to tell us about Bill S-217.
Hon. Wilfred P. Moore, sponsor of the bill: Honourable senators,
good evening. I want to thank the Senate Committee on National Finance for
creating time this evening for the consideration of Bill S-217. It is
important to us as Parliamentarians to consider the issue at hand. I will
discuss briefly the concerns I have with the changes made in Budget 2007 to
the Financial Administration Act; and I would like to discuss briefly the
manner in which these changes were made. Bill S-217 seeks to restore the
status quo prior to 2007.
In 2007, the Government of Canada introduced Bill C-52, an omnibus bill
that sought to amend 25 acts of Parliament, including the Financial
Administration Act. For my part — and this is a mea culpa, the
opposition at the time, myself included, was concerned chiefly with the
proposed changes to equalization of the Atlantic accords. These were the
issues that dominated our time as they affected the Atlantic region and my
province of Nova Scotia. We missed an amendment to the Financial
Administration Act that stated, "The Governor in Council may authorize the
Minister to borrow money on behalf of Her Majesty in right of Canada.''
As my then colleague Senator Lowell Murray said, until that moment,
borrowing by the government had to be expressly authorized by an act of
There was no advertisement of this change. No mention at all was made to
the people of Canada that they were about to be cut out of the loop when it
came to the government borrowing money.
Senator Murray also said this change was "slipped in and slipped by us''
and that that was exactly the tactic the authors intended — slip it in there
when attention is diverted by other important matters.
We learn now that there was a reason for doing this, as the Department of
This important addition provides greater transparency and
accountability than ever before to facilitate more efficient, responsive
and prudent financial management.
I ask you all, what greater transparency and accountability exists than
our Parliament? Since when does cutting Parliament out of the discussion
contribute to greater transparency and accountability? It does no such
thing. In fact, it reverses the role entirely. It leaves the executive and
the bureaucrats with free reign, where before the people of Canada were in
What is not transparent and what is not accountable is the borrowing of
nearly $1.5 trillion since these changes took place without legislation
being placed before Parliament and the people of Canada beforehand. We now
know that what "efficient, responsive and prudent financial management''
means. It means that Parliament is seen as an impediment to the business of
borrowing by the government and that this is now done on a need-to-know
basis; and Canadians do not need to know.
Briefly, colleagues, I have heard the argument from the government
justifying such a move. Now I know that parliamentary oversight does not
prevent the stated goals of the government when the amendments were made in
2007. The desired goal of finding saving and interest rates for Crown
corporations and parliamentary oversight are not mutually exclusive items. I
do not believe that the framework for borrowing authority in many other
countries has a bearing here. We have made it so far without worrying about
how New Zealand and others might handle their borrowing.
Bill S-217 can be amended to require the debt management report to be
tabled within 15 days of the Public Accounts of Canada if the government
would like even greater transparency if speed is the goal. However, that
report is post- borrowing.
The government says that the changes help deal with emergencies. Is there
no better time for Parliament to be recalled? It is clear to me that an
emergency would seem to be an appropriate use of Parliament's time. After
all, is it not our job to guide our country whether in a time of stability
or of emergency? Further, speakers of the House of Commons and the Senate
can recall both houses under standing orders "if it is deemed that public
interest requires it.''
Honourable senators, this nation made it through two world wars, numerous
other conflicts and moments of crisis without needing to change this section
of the Financial Administration Act — without the need to cut Parliament
from its role. I find this attempt at justification for the removal of
parliamentary oversight to be disturbing at best.
In our Canadian democracy, which is based upon the concept of responsible
government, it is utterly astonishing that a government would claim that
"greater transparency and accountability'' have resulted from the removal
of the convention that the Crown must seek parliamentary approval for
borrowing any amount of money from any source at any rate of interest. That
simply is not true.
By the middle of the 19th century, responsible government came to the
British colonies in our part of the world. When Canada was formed,
responsible government was part of the bargain. That concept is the
lifeblood of our democracy. Once established, it meant that the Crown's
ministers could no longer rule by fiat as they once did. They were
subordinate to the elected representatives of the people. They hold office
and do certain things only with the Commons' consent.
For 140 years, from 1867 to 2007, governments and ministers of the Crown
understood and observed the important conventions attendant to the borrowing
and spending of large sums of money. This is the very essence, the sole
point, of what went on at Runnymede in 1215 when the concept of responsible
government first poked its head up. In our Canadian democracy, which is
based upon that single important convention based upon the concept of
responsible government, it is astonishing to hear that the government would
claim that greater transparency and accountability result from the
Parliament of Canada being cut out.
I want to end by saying, on a bit of a personal note, that my office is
in 229 in the East Block. It was formerly occupied by Sir John A. Macdonald
and various other prime ministers, by Sir Charles Tupper who gave us public
education, and by Joseph Howe, who fought and led Nova Scotia into
Confederation and was the father of responsible government. As I was
thinking about coming over here tonight, I wondered what those gentlemen
would be saying. They probably are rolling over in the grave to think that
we are even talking about this, that all that they fought for, that all they
put together, has been taken away in one slippery little line in a budget
omnibus bill in 2007.
I want you senators to think about this. I think it is bad, and I think
we should put this parliamentary oversight, Parliament's role of control of
the purse, back in the hands of the people.
The Chair: Thank you, Senator Moore. Just so I can summarize what
you are proposing, you are proposing to put back into the Financial
Administration Act the two sections that were taken out.
Senator Moore: Yes, Mr. Chair.
The Chair: It is the same words. We do not have to study the
words. They are the same two sections going back in again.
Senator Moore: Yes.
Senator Callbeck: Thank you, senator, for bringing this bill
forward and taking the initiative to do so. As I understand it, with the
changes that came about in 2007, it means there is no parliamentary
oversight of borrowing.
Senator Moore: Correct.
Senator Callbeck: The Governor-in-Council can authorize the
Senator Moore: Minister of Finance, yes.
Senator Callbeck: — to borrow up to a certain amount that the
Governor-in-Council determines. I read somewhere that it was $300 billion
for 2013-14. Can that figure be changed by the Governor-in-Council every
year, or twice a year, or is there any limit?
Senator Moore: There is nothing I am aware of to prevent it.
Senator Callbeck: In other words, the Public Accounts of Canada
will not come out on this borrowing till the fall of 2014.
Senator Moore: After.
Senator Callbeck: That is when we find out about how this money
Senator Moore: Yes. You do not find out in advance how much the
government wants to borrow, what it hopes to spend it on and the terms of
the borrowing and the interest rate and so on. You do not find out any
particulars in regard to the borrowings. After the fact, you do, and there
is a report and so on, but that is all after the fact. That is not our
system of responsible government.
Senator Callbeck: No. I agree with you. We would not know anything
about the borrowing or how that money was used until the fall of 2014 when
the public accounts come out.
Senator Moore: Correct, and you get the debt report.
Senator Callbeck: The Minister of Finance tabled a report in debt
management in the first 45 days. That has been changed.
Senator Moore: Prior to this act in 2007, the debt management
report came out 45 days after the tabling of the public accounts. This bill,
in 2007, moved it to 30 days. That is a bit of a red herring. It does not
matter if it is 10 days or 20 days or 30 days or 40 days. It is all, again,
after the government has had access to funds without sharing that with the
people, and spending it and accounting after the fact.
Senator Callbeck: Yes. I agree. On the reports, just so I am
clear, you are replacing a section here. It requires the minister to table a
report on debt management. It then goes on to talk about — are they two
Senator Moore: Yes.
Senator Callbeck: You want a report on the activities of the
minister regarding the management of public debt, and you also want another
report in relation to management of the public debt for the fiscal year.
Senator Moore: The intent of the bill is to restore to Parliament
the requirement of the government, ministers of the Crown, to come before
the Parliament of Canada, the people of Canada represented by its elective
representatives, to ask for permission to borrow money. That has always been
As a matter of fact, in 1994, then Leader of the Opposition Mr. Harper
had the opportunity to go to the House of Commons and rail against the
government of the day about that. He would not have had the opportunity to
do that if this bill had been in effect then. I find it interesting that his
government would bring it in.
Senator Callbeck: Prior to 2007, Parliament had to grant approval
for borrowings beyond $4 billion?
Senator Moore: That is right.
Senator Callbeck: That is what you are restoring it to.
Senator Moore: Yes.
Senator Buth: Thank you very much, senator, for being here this
evening to explain your bill. I am wondering if you could comment on how you
think the government would have been able to respond to the economic crisis
that we faced in 2008 if we had not had the changes in 2007.
Senator Moore: First of all, in 2007, there was no economic
downturn. It happened in 2008. I can show you speeches from the Minister of
Finance of the day, Mr. Flaherty, and the Prime Minister in January 2009
denying that there was a recession.
I do not know whether there was some kind of crystal ball gazer in the
Department of Finance who came up with this idea, but this was not
necessary. We have been through crises before. All you do is call Parliament
back. That is what should have happened.
Senator Buth: I am not sure about parliamentary rules. Can you
call Parliament back when you are in the middle of an election? Is
Parliament not dissolved?
Senator Moore: Parliament is dissolved. Certainly it is. The
people have not been re-elected. The contest has not happened, so they are
still sitting members. They are still there until they have been returned or
Senator Buth: My impression is that when you dissolve Parliament,
Parliament then does not exist until you actually form the next election.
Senator Hervieux-Payette: No. He is right.
Senator Buth: He is right. Okay.
My other question relates to the consolidated borrowing for Crown
corporations, which you do not address at all in this. I am just wondering,
if this was passed, what would happen to the consolidation of the Crown
corporation borrowing, which we believe saves the government a considerable
amount of money?
Senator Moore: I remember your remarks in the Senate, Senator
Buth, saying that the government was able to borrow at its sovereign rate
and therefore able to lend money to the Crown corporations.
I am saying to you, why could it not have done that anyway?
Senator Buth: But your bill does not address that.
Senator Moore: No.
Senator Buth: Okay.
Senator Moore: This returns everything to —
Senator Buth: 2007.
Senator Moore: Because I think that the government could have
borrowed, as I am sure it did before 2007. It borrowed wherever it borrows
its money — from the various markets — and it would provide those funds to
the Crown corporations, at whatever rate it chose. It could have done that
without having this bill, and savings could have been had the same way.
Senator Buth: Without a lot of parliamentary experience, as a
citizen — a taxpayer — my impression is that things change, procedures
change, governments decide to do different things in terms of administration
and what is needed in terms of changing financial situations, changing
social programs, et cetera. I am having a bit of a hard time with the
premise that, just because this is the way it has always been, this is the
way it always must be.
Senator Moore: This is preposterous.
Senator Buth: That is getting kind of rude.
Senator Moore: This is not some kind of a loose social program.
You are talking about the system of government that we have. We are talking
about the accountability of the people in government to the people of
This is not something like, "Oh, we are going to change this program; we
are going to give you less.'' This is not that kind of thing. This is at the
very core of our Constitution, of our Parliament. It is at the very core of
Senator Buth: I beg to differ. Thank you.
Senator Wells: Thank you, Senator Moore, for your presentation and
your answers thus far.
I will very briefly follow up on Senator Buth's position on the rapid
response requirements of today.
In the past, things were not managed by computer programs, and things did
not move as fast as they do today.
Parliament does not always sit, and Parliament can be recalled with time
and with notice. Can you comment on the necessity, in today's world, of
requiring rapid response and your contention that if Parliament is not
sitting, Parliament should be recalled for decisions of this nature?
Senator Moore: I am sorry; I do not understand your question. I
thought I dealt with that, but —
Senator Wells: Sure; I understand. For instance, during the
summer, when Parliament does not sit, you are suggesting a recall of
Parliament for questions of this financial gravity. Because things happen so
quickly and because decisions have to be made in such a rapid way for the
protection of our economy, how would your bill address that need for rapid
Senator Moore: Well, we have had situations in the recent past
where Parliament had to be recalled. You recall Parliament. I cannot think
of a situation that is such a crisis on such short notice. Usually, when
issues arise, the government and the people in Parliament, in the House of
Commons and in the Senate, usually have some feeling of what is going on in
the country and in the world. It is not a matter of a 24-hour "We have to
do this; everybody come back.'' However, we still have the ability to call
people back, and it has happened. It has happened in the recent past.
Senator Wells: Okay, thank you. I would suggest that crashes
happen quickly, not slowly.
The second question I have for you is this: The voters do not say to us,
as government, "Check with us every time an important decision has to be
made.'' That is what voting is for, every four years or less than that. How
can you square the argument that this is being removed from accountability,
when the voters essentially select who governs and, therefore, who makes
decisions on behalf of the country, including the Minister of Finance?
Senator Moore: Yes, the Minister of Finance and his cabinet
colleagues, but I think the people of Canada think that the all of the
people they send to Ottawa are looking after their tax dollars, not just a
cabinet and one minister. If you went onto the street corner and started
asking people, "Do you think this is right?'' I do not think they would
think that it is right, senator. I think they would expect the people in
Ottawa to be the people who have the final say because those are the people
they get to vote for.
They do not get to vote for a cabinet minister. They are picked. I think
that they expect the people they send to Ottawa to be ultimately responsible
for looking after their interests.
Senator Wells: Are you saying that there should be some sort of
cutoff for being accountable and not being accountable? The voters put these
people in place to make decisions. They do not put them in place to say,
"Check back with us when you have got something important to think about.''
Senator Moore: I agree with that, but they have taken away that
decision part that you are talking about.
Senator Wells: They are elected to make decisions.
Senator Moore: The bill in 2007 took away the opportunity for
those people who come to Ottawa to make that decision with regard to the
public purse. That is the very point I am trying to make here.
Senator Wells: My point is this: How can you square that with the
reality that, every four years, they say, "This is who we would like to
make decisions on our behalf?''
Senator Moore: Yes, they want them to make decisions, but you have
to give them the opportunity to do it. You cannot take it away from them.
That is the whole point.
Senator Wells: Okay, thank you very much.
Senator Hervieux-Payette: I would like to congratulate my
colleague for having had the foresight to do this. First, I have a question.
You said, at the beginning of your exposé, that it was $1.3 trillion
borrowed since then. Since we are collecting — I hope — taxes, and I know
each year, year after year, we spend over $200 billion a year for different
programs and transfers and so on, I tried to make the calculation. Where did
the $1.3 trillion borrowed go? Do you have any idea? Is there a
justification for that? This is a huge amount of money.
Senator Moore: It is a huge amount of money.
Senator Hervieux-Payette: Since we are receiving money from the
taxpayer, this is supposed to help manage the whole apparatus, whether we
are talking about government or the Crown corporations, but where did the
Senator Moore: I expect the only answer I could give you, senator,
is to look at the public accounts.
Senator Hervieux-Payette: Okay.
Senator Moore: I do not know what else to —
The Chair: We have, in our next panel, witnesses from Finance and
the Bank of Canada who might be able to help us with that.
Senator Hervieux-Payette: I thought, when he gave that figure,
that we might know. I was just making a rough estimate. This was, over a
period of six years, a little bit over $200 billion a year, which is a lot
of money on a yearly basis.
As far as I am concerned, I strongly support this bill because we have to
make a difference between the executive, who are there to execute, and
Parliament, who are the ones that they are reporting to.
If I am a corporation and I go to a bank, of course I have to explain why
I need that money and also how I am going to collect it and pay it
In this case, it is the same. When we are, in fact, requesting some extra
money, we have to say what it is going to be used for. We discovered, if you
remember, chair, when we were discussing some expenses that we could not
see, that the money was already spent but not in the budget. It was in the
supplementary estimates we got a few weeks ago. There is a reserve. Okay, so
there is a reserve. Would you agree that they could maybe increase the
reserve but have no need to borrow on demand, without any justification
Senator Moore: Well, I —
Senator Hervieux-Payette: For unexpected expenses.
Senator Moore: There is a reserve of $4 billion that they can
borrow over. I cannot imagine that, as the managers of the economy, somebody
would be in a situation where that would arise. I think that if the
government is going to borrow money, they should be coming to the Parliament
of Canada and asking permission to do it.
Senator Hervieux-Payette: I have been here for quite some time,
and I will tell new colleagues that it takes 24 hours to recall Parliament.
It can happen fast. We are in office in this place until we retire and in
the other place until the new MP is elected, so there is no gap. There is
not a vacuum such that the government suddenly cannot operate. You need to
have special circumstances. I hope that with the kind of management we have,
we do not discover overnight that $20 billion is missing and that we need to
have $20 billion immediately. We are talking about $250 billion. My support
for this is the fact that it is a huge amount of money and the government is
accountable to Parliament, and Parliament is the representative of the
We all bear part of that debt. Do you agree?
Senator Moore: Oh, yes. There is no question about it.
Senator Hervieux-Payette: Try to explain to the Canadian taxpayer
that the government can borrow any amount at will without limit. Let us go
back to where we were before. If government needs extra money over what has
been voted in the estimates, and there is a $4-billion reserve, then they
come back to see us again.
Senator Moore: Exactly. They come back and explain the situation.
There cannot be such unaccountability and lack of transparency. It just does
not make sense.
Senator Hervieux-Payette: I do not buy the argument that things
change. To be serious about this, we are not talking about a small amount of
money. I did not see a justification at the time. I agree with you, and I
was on the committee. We had to dig into these big budget bills, and we did
not see it. I realize now, through your reflection, that we are probably
inspired by the former Prime Minister. We had a good system; why did we
change it? I always say it is better late than never, so I totally support
Senator Moore: Thank you.
Senator Bellemare: Senator Moore, you are aware that every year
Parliament adopts the government's Main Estimates. Parliament adopts the
budget, so revenues and expenditures. These two exercises represent
government accountability to Canadians. As it now stands, Parliament adopts
all expenditures made within the Main Estimates, and Supplementary Estimates
A, B and C, after which the Minister of Finance's budget is adopted. Under
your bill, any transaction related to the management of the debt would also
have to be passed by Parliament. Is that correct?
Senator Moore: My bill proposes to restore to the House of Commons
the oversight of the public purse such that if the Crown, represented by the
cabinet and the Minister of Finance, wants to borrow money, he or she must
come to the people of Canada, to the Parliament of Canada, and explain why
and ask permission to do so. That was taken away in 2007. All this other
stuff that you mention is fine, but most of it happens after the fact. They
are not coming and asking for the money.
Senator Bellemare: Each year, the budget's schedule contains the
government's debt management strategy. In the last budget, the total amount
borrowed on Canadian markets by the federal government was $648 billion
dollars. Certainly, in the course of a year, many changes are made to the
way the debt is managed. Some debts expire, while new borrowing may take
place. There can be exchanges between treasury bills, negotiable bonds and
the foreign debt. Don't you think that, if we had to go before Parliament
for any transaction over $4 billion dollars, this would remove a great deal
of flexibility for the government, and that it would not necessarily
increase transparency because all the information would already be contained
in official documents which are tabled?
Senator Moore: The public debt is an accumulation that is built up
over the years. It was $428 billion in 2006, and now it is $600 billion and
some. That is an accumulation of the performance of the government and how
they operate and manage the accounts. The government has to borrow money to
service that debt, and that is part of the money they have to come ask for
because some of that debt is renewed on a revolving basis, I expect. Some of
it comes up for renewal at certain times, and the debt instruments have to
be refinanced. That is part of the borrowing process. That is part of
getting permission from the people to get the money to do that, as part of
the accountability, I am suggesting to you.
Senator Bellemare: Am I to understand that what you are asking for
is that any transaction over $4 billion dollars related to the management of
the debt be authorized by Parliament? Is that how things were done before
2007? Is that what your bill implies?
Senator Moore: No. It was $4 billion before. There is a cushion or
tranche of money available for the government in the event of emergencies.
Senator Black: Thank you very much, senator, for your commitment
to this. This is to me very impressive that you hold this view so strongly
that you have come here tonight to propose this.
I would like to understand from you whether you worry that your proposal
might risk politicizing a process that should not be political, that is to
say the issue of borrowing money. I worry about borrowing money in the
situation of a crisis. If that were to become unduly politicized, do you not
worry about the consequences of that?
Senator Moore: I do not worry about that at all, senator. It is an
interesting question, but it did not prevent the proper functioning of the
governing of the country since its beginning.
Senator Black: I am not being at all adversarial because I really
respect your point of view on this. I thought Senator Wells was on to a very
interesting line, which is that the world has changed so dramatically in
terms of how decisions are taken, the time frame in which decisions can be
taken, and the consequences of not acting on a timely basis. Do you not
worry that with this proposal, recalling Parliament and then going into a
political circumstance could disadvantage the country?
Senator Moore: I am not worried about that.
Senator Black: Very well.
Senator Moore: I will tell you why. I have seen it happen in the
Senate in the various committees I am on, particularly the Senate Committee
on Legal and Constitutional Affairs, which I was on for a number of years.
When it comes down to the national good and the welfare of the country, I
would put my trust in the people in the House of Commons because they would
do the right thing. I really believe that, Senator Black.
Senator Black: I want to believe that, too. One last question, if
I may. Do you know what practice is followed by our major trading partners
in this regard?
Senator Moore: I have not made a study of that.
Senator Black: I have not, either. It has been suggested to me
that some of our major trading partners have in place exactly the process
that we currently have for the reasons we are talking about, so that they
can act with expediency. I am not suggesting that. It has been suggested to
me, and I was hoping you might know. Very well. Thank you.
Senator Chaput: I want to make sure that I understand the bill
that we have in front of us, your bill. It outlines and explains the changes
made to the borrowing authority process in 2007, and you want to bring those
changes back with Bill S-217. Is that correct?
Senator Moore: Correct.
Senator Chaput: In 2007, when those changes were made, or slipped
through, as you have said, do you know if there had been discussions with
regard to that? Had there been consultations? Were they recommended? How did
they come about? Do you have any idea?
Senator Moore: No. I was on the Banking Committee at the time, and
it certainly was not something that we saw or that was brought to our
attention by anyone. I do not remember it being brought to the attention of
Finance. I do not remember any department official standing in public or
saying something to the effect that this has to be. It just was not made
known. It was not made known.
Senator Chaput: In those years, before the changes were made in
2007, do you have an idea how often the government had to go ask permission
to borrow more money? Do you have an idea?
Senator Moore: Certainly annually. It was part of the process. It
had to have an act of Parliament to borrow money.
Senator Chaput: In your view, senator, if these changes are not
brought back, when we are looking at this borrowing without justification or
without permission, can we say that it is accountable?
Senator Moore: As I mentioned in my opening remarks, and I seem to
have a difference of philosophy with my colleagues on my left, to me, the
ultimate accountability and transparency is what takes place when matters
are put before the House of Commons. That is where it should be done. That
is where it always was.
What price do you put on your democracy? What price do you put on savings
and interest, which we could have achieved anyway? Is it expediency? I do
not think so. It took a long time for Canada to be built up to get this far,
and that was at the core of our whole system of governing the country and of
financing the country. I just do not think that this was the right thing to
Senator Chaput: Thank you, senator.
The Chair: Colleagues, I have, on round two, Senator Callbeck and
Senator Buth. If your question is exclusively for Senator Moore, I would
like you to ask it. Otherwise, I would ask you to consider holding your
question and I will put you at the top of the list for the expanded panel
that we will bring in, the Bank of Canada and the Department of Finance.
Senator Buth: Specifically, Senator Moore, have you ever reviewed
the debt management strategy and the debt management report?
Senator Moore: Have I read them through?
Senator Buth: Yes.
Senator Moore: No.
Senator Buth: Thank you very much.
Senator Callbeck: I have a question on the proposed new section,
46.1. The Governor-in-Council can authorize the minister to borrow money.
There is (a) and there is (b). I want to ask about (b),
"to extinguish or reduce any liability of Canada that the Minister is of
the opinion should be extinguished or reduced.'' Can you elaborate on that?
What sort of situations do you have in mind here?
Senator Moore: The liability is I guess what Senator Bellemare was
asking about with regard to the debt. That is a liability of the country. We
have to reduce it or extinguish it, and you have to borrow funds. You come
to Parliament, and you ask for permission to borrow those funds for these
Senator Callbeck: That is the debt you are talking about here?
Senator Moore: Yes.
Senator Mockler: We could certainly have a political debate here,
when listening to my colleagues on both sides of the table. I would like to
follow from Senator Buth and Senator Wells. I know that Senator Moore has an
understanding of the three powers of democracy, which are legislative,
executive and the judicial system.
With that said, you are asking us to consider your bill. The people of
Canada were aware, and we were all aware. We voted in 2007 on the changes.
From that point on, the people of Canada gave the present government two
mandates, 2008 and 2011. They will certainly have a chance in 2015 if they
want to make other changes.
For the time being, my question to you is this: Is it possible that the
approval process for borrowing limits will further reduce the federal
government's capacity to borrow? Have you made an analysis of that?
Senator Moore: Could you repeat that, please?
Senator Mockler: Yes. Is it possible, with what I have said about
the three powers of government and what happened in 2008 and the 2011, two
consecutive elections, and 2015, do we agree that the people of Canada will
decide? I say yes. Therefore, is it possible that, in considering your bill,
the approval process for borrowing limits will further reduce the federal
government's capacity to borrow if we consider a bill?
Senator Moore: No. It sounds to me like you are suggesting that
the government can borrow more in secret than it can in public.
Senator Mockler: Absolutely not.
Senator Moore: That is what you are saying, sir.
Senator Mockler: The public knew at all times what we were doing
Senator Moore: We did not know about this bill. You did not know
Senator Mockler: I rest my case, Mr. Chair.
The Chair: Thank you. I always give the witness an opportunity to
reply to any comments you make, and I think he has replied.
I invite Senator Moore to join us on the sidelines when we bring in our
panel comprising representatives of the Bank of Canada and the Department of
Senator Moore: Chair, I want to thank you and the members of the
committee. Senator Buth, if I insulted you, I did not mean to. I believe
very passionately in this. I think I am right. Others have their opinions,
and I respect them. Thank you.
The Chair: Thank you for that.
Colleagues, I am now very pleased to welcome to the Standing Senate
Committee on National Finance, from the Department of Finance, Wayne Foster,
Director, Financial Markets Division, Financial Sector Policy Branch; and
Marie-Josée Lambert, Chief, Domestic Debt Management Policy, Financial
Sector Policy Division. From the Bank of Canada, we welcome Ron Morrow,
Chief, Funds Management and Banking Department.
Do either or both of you have introductory remarks before we get into
questions and answers?
Wayne Foster, Director, Financial Markets Division, Financial Sector
Policy Branch, Department of Finance Canada: I do, and I believe my good
friend Mr. Morrow does. Maybe we will just do them one after the other?
The Chair: We will start with Mr. Foster, and then I will go to
Mr. Morrow. Then we will get into the questions and answers.
Mr. Foster: Good evening, everyone. It is certainly our pleasure
to appear today before the Standing Senate Committee on National Finance, on
behalf of the Department of Finance, at least as regards myself and my
colleague, Ms. Lambert, to assist you in your study of Bill S-217, which, as
we have heard, proposes to amend certain provisions of the Financial
Administration Act regarding the borrowing of money. Currently, Part IV of
the Financial Administration Act sets out the authorities under which the
Minister of Finance can borrow on behalf of her Majesty in right of Canada.
In particular, section 44(2) specifies that "The aggregate principal amount
of money borrowed by the Minister under this section in any fiscal year may
not exceed the amount that is specified by order of the Governor in Council
for that fiscal year.''
The maximum amount requested by the minister from the Governor-in-Council
is based on the projected financial needs of the government, laid out in the
budget, which include both budgetary and non-budgetary requirements, plus a
margin of prudence. It is set out in detail in the debt management strategy,
which is published as part of the annual budget. For the current fiscal
year, again as I think you have heard, this amount is $300 billion, which is
$15 billion lower than last fiscal year.
The current framework in which the Governor-in-Council approves the
borrowing limit for the government has been in place since October 2007,
when it came into force. Prior to that, there was a statutory limit on
borrowing that only Parliament could change.
Under this regime, the government had standing authority to refinance
maturing market debt; plus, there was this $4 billion of what was called
non-lapsing borrowing authority. That was pursuant to the Borrowing
Authority Act of 1996-97.
As presented in the budget on March 19, 2007, a key motivation for
changing the borrowing authority framework at that time was to streamline
and modernize the process and increase flexibility to meet future borrowing
needs, particularly with respect to the consolidation of Crown corporation
In that same budget, the government announced that beginning in 2008 it
would meet all of the borrowing needs of the Business Development Bank of
Canada, the Canada Mortgage and Housing Corporation and Farm Credit Canada
through direct lending to these Crown corporations. They had previously
issued debt under their own name, with the backing of the government.
This meant that financial requirements were about to increase and become
less linked to net budgetary revenues and expenditures or, in other words,
A key benefit of this additional flexibility was demonstrated in November
2008, when, in response to the turmoil in financial markets, the government
was able to act quickly, in the midst of the financial crisis, and seek a
higher borrowing limit. In November 2008, the Governor-in-Council quickly
approved an increase of $90 billion to the original 2008-09 aggregate
borrowing limit of $206 billion.
This increase, as you might recall, enabled the government to commit up
to $75 billion in loans to the Canada Mortgage and Housing Corporation to
fund the Insured Mortgage Purchase Program and to help finance the injection
of over $40 billion in short-term liquidity to financial institutions,
through the Bank of Canada.
Along with the removal of the statutory borrowing limit, the 2007
amendments established enhanced disclosure requirements on anticipated
borrowing and planned uses of funds through the debt management strategy,
which, as I indicated, is now part of the budget. There were enhanced
disclosure requirements on actual borrowing and uses of funds — ex post
— compared to those forecast in the debt management report, which, as we
heard, comes out in the fall, and more detailed general information in the
The 2007 amendments also provided for more timely disclosure of borrowing
activities. We have heard that the debt management report is now tabled
within 30 sitting days of the tabling of the public accounts, rather than
In summary, compared to the previous framework, the borrowing authority
regime has provided for more efficient, responsive and prudent financial
management and greater transparency and accountability with respect to the
government's borrowing activities.
In closing, I would just like to thank the chair and the committee for
inviting us to appear, and we look forward to your questions.
Ron Morrow, Chief, Funds Management and Banking Department, Bank of
Canada: Thank you very much. Good evening. I am pleased to present the
Bank of Canada's views on Bill S-217, An Act to amend the Financial
Administration Act (borrowing of money.)
At the outset, I would like to offer some brief context with regard to
the Bank of Canada's role in debt issuance. As fiscal agent, the Bank of
Canada issues debt on behalf of the Government of Canada and does so in a
manner consistent with the legislative requirements laid out in the
Financial Administration Act.
While the Bank of Canada and the Department of Finance collaborate to
offer debt management advice to the Government of Canada, debt policy
decisions are ultimately the responsibility of the Minister of Finance.
The changes made to Canada's borrowing authority framework in 2007 were
focused on creating a more efficient and flexible process for approving
Canada's annual borrowing plan. The changes also provided for transparency
and accountability by establishing enhanced disclosure requirements on
anticipated borrowing and actual borrowing undertaken in a fiscal year.
During the global financial crisis, and especially in the fall of 2008,
the framework which governed the power to borrow as currently laid out in
the Financial Administration Act served Canadians well. Among other things,
this framework allowed Canadian authorities to react efficiently and quickly
to major shocks which shook the Canadian financial system.
As you know, the world had to deal with an exceptional situation when
Lehman Brothers declared bankruptcy on September 15, 2008. The most striking
aspect of this bankruptcy was an unprecedented increase in the cost of
interbank financing, which then spread to other markets. Global financial
institutions became reluctant to lend to other financial institutions.
Key intermediaries began to accumulate liquid asset reserves, and some of
them even halted their market holding activities. At various moments,
interbank credit markets and other short term loans, including those to
banks, were nearly paralyzed. It is clear that the global financial system
was undergoing a major systemic shock. To deal with the situation, central
banks and governments the world over took unprecedented measures in the
interest of stabilizing the financial system.
Here in Canada, our actions during the crisis were supported by the
current borrowing authority framework. Specifically, the framework allowed
Canadian authorities to respond quickly, with the approval of an increase of
$90 billion to the inter-year borrowing limit. This increase aided the Bank
of Canada by facilitating the rapid deployment of a number of measures that
provided over $40 billion of short-term liquidity to the Canadian financial
These measures, and this additional liquidity, were essential to ensuring
the ongoing functioning of the Canadian financial system.
In summary, as a result of the framework we have, when global headwinds
of the crisis were threatening financial stability, authorities were able to
provide a fast infusion of needed liquidity into financial markets, which,
in turn, helped to maintain the availability of longer-term credit in
The current framework has been tested and has proven its ability to allow
for quick and flexible responses in times of crisis. Although we hope not to
face other crises of similar proportions, and efforts to make the global
financial system more resilient are advancing, we must remain prepared to
respond effectively when required.
Thank you very much. I would be happy to respond to your questions.
The Chair: Thank you very much, Mr. Morrow. I will go to the list.
Honourable senators, I remind you that we have another panel after this one
of two outside witnesses. I have six senators on the list; so try to keep
questions and responses to five minutes in total, please. We will start with
Senator Hervieux-Payette: I would like to begin by thanking you
for lending us your crystal ball, since it seems you are able to predict
crises a year before they happen. However, I would like you to explain
certain terms to us.
You both used the words "efficient,'' "responsive,'' "transparent''
Do you think that Parliament could not provide this possible increase and
be accountable to the Canadian taxpayer because the money was issued by the
Bank of Canada? People were under the impression that our banking system was
in fabulous shape. In fact, it cost us $75 billion at the time, which we
Tell me why this system is superior to the previous system where
government had to come before Parliament and explain why they needed the
money. In this case, I think the amount you gave us was $206 billion. It was
increased by another $90 billion, $75 billion and $40 billion to the Crown
corporations: EDC, BDC, and Farm Credit Canada. These were the three
corporations that got money.
Why do you think Parliament would have refused to get this amount of
money — it would be less accountable, less efficient, less transparent?
We are talking about two philosophies for the role of Parliament. We are
here to serve the Canadian public, so I do not see why we would have refused
these measures when they were needed because the law was passed long before.
You can each give me your definitions of "efficient,'' "responsive,''
"transparent'' and "accountability'' after the fact.
Mr. Foster: I mentioned $75 billion, which was the amount
committed to the Insured Mortgage Purchase Program. When first announced, it
was $25 billion, which went quickly. There was a subsequent announcement.
At the same time, the Bank of Canada was injecting liquidity into the
banking system. They funded some of that from their balance sheet, but a lot
of it had to come from new borrowings from the government. All this happened
during a period when Parliament was not sitting as there was an election. I
cannot opine on whether Parliament could have been reconvened to consider
this and pass it any more quickly than taking it through the
As it turned out, while we are great forecasters, we did not envisage
that the new framework would be tested so soon after it was announced. In
fact, it made things efficient to get the increased borrowing authority and
to commit $75 billion and the $40 billion. There was no specific number
there. The loans to the Crowns were really the motivation that required that
there be an increase in the borrowing limit to begin with. That was one of
the triggers for changing the framework when we looked at that.
We do not know whether Parliament could have been reconvened to consider
and pass this in the time frame required to ensure that markets would be
stable. You remember things moved very quickly.
Senator Hervieux-Payette: What was the cost at the Bank of Canada
at the time? Did you have to issue bonds?
Mr. Morrow: I am not sure I understand the question.
Senator Hervieux-Payette: You had to borrow $100 billion. What was
Mr. Morrow: That debt was raised through our regular process of
issuing treasury bills and bonds at auction. I do not have the exact
prevailing cost of funds at that time, but the cost of funds was consistent
with the prevailing cost of funds in Government of Canada bond markets at
Senator Wells: Thanks for your presentations thus far. I have two
quick questions. The answers will be dependent on you. When one decides that
we have to act quickly, what is the machinery? What happens when we decide
we need to borrow? What is the machinery of that? What is the timing of
Mr. Foster: In this particular situation, obviously, we were
monitoring the financial markets carefully and engaging daily with our
friends at the Bank of Canada who were reaching out to other central banks
to see what the situation was. It was clear during that time that this was
an historic event. Numerous other jurisdictions had already introduced
programs to help support their financial systems. At the time, you will
recall the U.S. debate on the Troubled Asset Relief Program, TARP, and the
volatility surrounding that negotiation.
Leading up to it, we spent a number of weekends talking about what we
might do, if necessary, to ensure that our banks remained liquid and could
obtain funding. We also were cognizant of other countries considering
programs to support their banks that might put our banks, even though they
were solid, at a disadvantage. We wanted to be prepared to roll out a
program that would work that we thought made sense from both a taxpayer
point of view and a financial stability point of view.
The program to buy mortgages was developed over a relatively short time.
Senator Wells: What would that be, days?
Mr. Foster: It was days, but there was some consideration over a
couple of weeks. We had an amount in mind that we knew we would have to
fund. We were cranking up the machine to get the approvals necessary
starting with senior management, the minister and then cabinet. That was how
we came up with a number to go to cabinet with for additional borrowing
We have a bond program and a treasury bill program. We lay out our plans
in detail in the debt management strategy as part of the budget. Every
quarter, we put out a notice through the Bank of Canada as to our schedule
for bond issuance, and we hold auctions for treasury bonds every two weeks —
a few times per quarter. It is pretty predictable, unless there is a major
change in financial requirements.
It is more or less laid out. It is only otherwise in extreme situations,
which have been rare. This was the main example where we had to rethink in
the middle of the year and go back for more authority.
Senator Wells: That was in a dynamically changing situation
In the absence of that ability or that provision to be able to act
rapidly and directly, what position would Canada be in? I know it is hard to
project, but so far you do a good job of projecting. What would Canada have
not been able to do if that provision had not been available?
Mr. Foster: As Senator Moore would know, under the previous regime
there was a provision, I believe section 47.
The Chair: Yes.
Mr. Foster: It provided for emergency funding. You could borrow
for up to a six-month term. We were already leading into the fall of 2008
period and increasing our treasury bill influence fairly significantly to
fund the Bank of Canada's activities.
If we were to rely only on that provision, we could have gone to cabinet
and got that presumably through, right? We would have had to fund all of the
$75 billion I mentioned, all of the $40 billion and other amounts through
the short end of the market. We were already ramping up that short end of
the market. The loans to CMHC are five-year mortgages, essentially. We would
have had to fund them short.
It could have been funded. It would have been interesting to see how the
markets reacted with such a huge ramp-up in short-term funding. I cannot say
it could not have been done. It just would not have been as prudent.
The Chair: Until Parliament was called back in.
Mr. Foster: Called back, and then you would have to bring forward,
yes, legislation and so on.
Senator Buth: Thank you for being here. Can you comment on
transparency and what your opinions would be of transparency pre-2007 and
post-2007 when the legislation was brought in?
Mr. Foster: Sure. I can start, and I do not know if Ms. Lambert
has anything to add. If you look at the debt management strategy now, there
is a detailed table showing the sources and uses of funds, and it lays out
what the financial requirements are, the details of that, the borrowing
requirements, the re-funding requirements, the non- budgetary transactions,
and it adds that all up into a number that throws up a base kind of amount
to be borrowed. That then forms the basis of what the minister takes to the
GIC to ask in terms of the limit.
Most of the borrowing limit finances two things. The first is the
refinancing of existing debt. You need to do that. You cannot default. That
is a given. That is a big part. The second is the deficit, which is part of
the budget. It is what the main part of the budget ask is, right? Here is
the program, here are the revenues and expenditures, and here is the
deficit. That is a given.
The only thing missing is the funding that is used to essentially finance
assets, which are loans to the Crown corporations. It could be the Bank of
Canada. It could be, as well, the Insured Mortgage Purchase Program. That is
specified as well in this table in terms of funding that will be used for
non-budgetary, as we say, requirements. That is more detail than before.
Afterwards, in terms of ex post, there is the debt management
report that puts out the same table. It shows what was in the debt
management strategy as projected against what was actually used, so it
provides a reconciliation. Here is what we said we would do, here is what we
projected, here is what was actually done, and here is the difference.
That would probably be the most important example of the increased level
of detail and scrutiny on the particulars of what makes up the borrowing
Senator L. Smith: For Mr. Morrow or Mr. Foster, a couple of words:
"systemic shock.'' Walk us through what happens in a situation like this
and the concept of systemic shock and what it is. I would also like to know,
as you looked at the world unfolding in front of you, your sense of what
happened in the U.S. and the rapidity of the Dow Jones. Could you just give
us feedback on that?
Mr. Morrow: Certainly. In terms of a systemic shock, a systemic
shock to the financial system is a shock to a single financial institution
or a single part of the financial system that then has ripple effects that
spread outward through the financial systems, which can lead to a domino
effect. The failure of one single institution in turn reduces confidence in
the financial system, causes financial losses on other participants and
cascades into the other elements of the financial system, leading to a much
broader collapse or set of losses within the financial system.
In the throes of the crisis in 2008, there were great concerns, real
concerns. We saw the bankruptcy of Lehman Brothers subsequently erode trust
in the financial system and trust in the banking system. We were in a world
where people were no longer willing to make loans against good, high-quality
collateral. The fully collateralized loans, no one wanted to lend to anybody
else, and the financial system itself was seizing up.
Many of the actions that the Bank of Canada undertook in terms of its
provision of liquidity to the financial system here in Canada were geared
towards ensuring that we provided sufficient liquidity to financial
institutions to keep them in the business of providing credit to Canadians
and Canadian businesses to keep the financial system running at a time when
that level of trust and confidence in the financial system was severely
Senator L. Smith: Was Lehman's downfall caused by the subprime
lending with mortgages?
Mr. Morrow: That was certainly a significant contributing factor
to the problems of Lehman Brothers.
Senator L. Smith: When the alarm bell went off for Lehman
Brothers, how fast was this implosion? Try to jog my memory. How fast did it
Mr. Morrow: The transmission of that shock to the broader global
financial system happened virtually instantaneously. The Lehman bankruptcy
was over a weekend, and that Monday morning there was a very severe
dislocation in financial markets.
That concern around the erosion of confidence and the worry about what
shoe would drop next — that extreme level of uncertainty in the financial
system — really cascaded broadly out.
Senator L. Smith: From an execution perspective, you and Mr.
Foster have explained how you went through this process, but having the
speed of action of rapidity because of the rules that you were working
under, what is your assessment of the position that you were in in terms of
Mr. Morrow: The flexibility accorded to us through the current
framework certainly did give us a good margining manoeuvre to do what was
necessary to provide the necessary liquidity through the Insured Mortgage
Purchase Program and through the actions undertaken by the Bank of Canada to
ensure that the financial system remained functioning in Canada.
As Mr. Foster alluded to, I cannot really say what would have happened
under a different framework. What I can say is that under the current
framework, we were able to respond with —
Senator L. Smith: I think Mr. Foster alluded to the fact that
maybe under the old framework, with potentially a bit slower manoeuvring
time, you might have had to go short more than you did, and the balance of
how you adjusted yourselves between short and long might have been displaced
and therefore might have cost us more money to even borrow what we did to
inject in the market. Is that correct, if I understand what you are saying?
Mr. Foster: It certainly would not have been the ideal structure
of debt issuance that —
Senator L. Smith: You could have done it, obviously.
Mr. Foster: It would have all been short end and unprecedented
levels of treasury bill issues.
Senator L. Smith: Through the process, did you ever have a chance
to do a post-mortem and look back? Obviously you must have looked at what
you did right and what you did wrong. Did you ever look at what would have
been the implications if the system had been the old system? It would have
been interesting to see that.
Mr. Foster: We have not done that. Of course, we have looked back
at the things we did in terms of the programs, their structure and their
detail. We continually look at them as part of normal, ongoing contingency
planning. We are always looking to learn from the past and understanding
that the next crisis — maybe there will not be one, but if there is, it
probably will not look the same. You need to be flexible.
Senator Callbeck: Thank you for coming this evening. I wanted to
go back to this greater transparency and accountability. It has been
mentioned by a couple of senators, and both of you mentioned it in your
presentation. From what I understand, it seems to me that the changes in
2007 would do the opposite. Before 2007, the government had to get the
approval of Parliament if they wanted to borrow over $4 billion. With the
changes in 2007, the Governor-in-Council could authorize the minister to
borrow money, and the amount would be determined by the Governor-in-Council.
The taxpayer really did not know how those dollars were spent until the next
fall, in 2014.
Mr. Foster, you talked about a table that laid out the funds and I do not
know what else. When is that presented to the taxpayer?
Mr. Foster: That is part of the budget and the debt management
strategy. It presents all of the details that add up to the amount of money
that is required to be borrowed to finance all of those activities. They
include funding the deficit and refinancing the debt that is maturing, which
are givens, and then some other elements, which would include the loans to
Crown corporations and so on. It lays all that out ex ante. It is
part of the budget.
Senator Moore: What is ex ante exactly?
Mr. Foster: Ex ante — ahead of the fact. It lays it all
out. The limit that the minister will take to cabinet is presented. That is
all in the budget. That limit itself gets put to the Governor-in-Council and
is approved, but it is actually written in the budget as well. That is the
ex ante, and then the ex post is the debt management report. It
is the same table. I think it is identical. It shows the actual against the
past. In the interim, there are all kinds of information that flow out on
the terms of our borrowing, as I say, the results of every auction and,
every month, on the Bank of Canada's financial statistics. There is the
Fiscal Monitor, which is monthly and which has all kinds of data on
revenues, expenditures, borrowing, debt and so on. All of that happens, and
then there is the fall update and the like. We are into the next budget
before you know it.
Senator Callbeck: Where does the Fiscal Monitor appear?
Mr. Foster: You can get that on our website. It is not a document
that we prepare. It is by our Fiscal Policy Division, but it provides
monthly information on all of the revenues, expenditures, borrowing, debt
levels and a number of other things. It is pretty detailed. You can find it
on the website.
Senator Callbeck: It is up-to-date?
Mr. Foster: Yes. Your next witness, Mr. Devries, used to be the
fiscal policy director, and he will know all about that.
Senator Black: My questions have been answered by this excellent
The Chair: Good. Thank you.
The Chair: Senator Chaput from Manitoba.
Senator Chaput: My first question is for the representative from
the Department of Finance.
It is a very short question. In 2007, when the changes were made, do you
believe that Canadians at large were aware of those changes?
Mr. Foster: The changes were in the budget. There was about a page
written on it, and it appeared in three different places. Page 287 is the
one that comes to mind, but you can check that out. Do Canadians read the
budget? Not every detail probably, but I cannot speak to whether they read
Then, it was, of course, debated in Parliament, and whether that
particular element was discussed or not, I do not know. Then the budget bill
was brought forward, and it would have been a measure there that could have
been discussed in committee.
Senator Chaput: Thank you.
Senator Chaput: My next question is for Mr. Morrow, the
representative from the Bank of Canada. It is about the daily life of
When a client shows up at their financial institution, the institution
has already set a ceiling for how much money it is willing to loan a client,
and this amount has already been preapproved by the board. So there are
restrictions in place. Lending officers from the institution meet with the
client and determine whether he or she can borrow money or not, and if so,
how much. These officers, in turn, must receive final approval before
signing off on the loan.
Why should Canadians be treated differently from the government they
Mr. Morrow: Thank you very much, senator, for your question. The
framework that is in place for the Government of Canada to borrow — the
current borrowing authority framework — was changed in 2007, as you are
aware, to vest that authority in the Governor-in-Council, changing it from
the Parliament of Canada. They approve a ceiling on the amount of borrowing.
There is, I would offer, a further check on that borrowing, through
financial markets. As Mr. Foster alluded to, every two weeks we have a
treasury bill auction, where we issue $15 billion to $20 billion worth of
treasury bills. On an almost weekly basis, we have a bond auction. Just
today, we issued $3.3 billion worth of two-year bonds. It is the confidence
that markets show in our ability to borrow and the judgment they pass on the
rates. Because we are auctioning, the market determines the rates at which
the government borrows. That provides a further check on the level of
confidence in borrowing. If there was a sense that there was a limit being
approached and too much money was being borrowed, participants in financial
markets are a pretty savvy bunch, and you would see that reflected in
borrowing costs and in the terms under which the Government of Canada
Senator Chaput: In your opinion, isn't this a double standard: one
for Canadians in their daily lives and one for the government?
Mr. Morrow: I believe that, just as Canadians, in their daily
lives, have external limits placed on their ability to borrow, so too are
there external limits placed on the government's ability to borrow.
Senator Chaput: Thank you.
The Chair: Senator Moore, I want you to get your questions in. You
know we have two other witnesses waiting to come. We are over our time, but
this is your bill. You have the floor, sir.
Senator Moore: Thank you, chair, and thank you, witnesses, for
being here. Mr. Foster, I would like to know from you, where did the idea
come from for the bill in 2007 to remove Parliament from the oversight of
the purse and the spending?
Mr. Foster: The measure was included in the budget, which means it
was the Government of Canada's initiative.
Senator Moore: Was it initiated in your department?
Mr. Foster: Obviously, our department is important in terms of the
formation of the budget. As I explained, we had gone a decade or so without
the need for a borrowing authority bill because of the budget being balanced
and in surplus.
Senator Moore: Yes, I know.
Mr. Foster: We decided to, for good reason, consolidate the
borrowing of three Crown corporations to save taxpayer money. That was
pursuant to an external evaluation that occurred a year or two before that.
As a result of that decision, we were going to have to borrow more than the
prevailing authority would have allowed, so we were going to have to bring
forward a bill of some sort to increase our borrowing authority. We looked
at that issue and determined that, as part of the parliamentary ask for more
borrowing authority, the government would put forward a new proposal, a new
framework that would allow for the financing of those Crowns to be done, as
well as for the new accountability and transparency measures around that
It was due to that decision that there needed to be an increased limit,
and that was brought forward in the budget by the government, as part of a
revamped proposal for the borrowing regime.
Senator Moore: It seems to me — and I might be wrong on this —
that prior to 2007 the government could have borrowed, at its own sovereign
rate of borrowing interest charges, and lent the money at whatever rate it
wanted to its Crowns, could it not?
Mr. Foster: It could have, but it would have had to borrow within
the limit, so the limit had to be increased.
Senator Moore: They could have come to Parliament and asked for
that increased limit.
Mr. Foster: They did. Budget 2007, in fact, did that, yes.
Senator Moore: They could have done that. You talked about
increased parliamentary ask. There is no parliamentary ask because you took
that away. The government does not come to Parliament now and ask; they come
with a projection and they come after the fact with a report, but they do
I really do not understand. If this is now deemed, after the experience
of the downturn — and I do not think you anticipated this, but if you did, I
will give you the benefit of the doubt — to be such a fundamental part of
the functioning and the financing of the country, why would you not have
brought that forward in a separate bill standing on its own, not hidden in
an omnibus bill?
Mr. Foster: As a bureaucrat, I do not determine what form any
bills take, omnibus or otherwise, so I cannot comment on that. In terms of
Parliament opining on this 2007 budget, that indeed was presented to
Parliament and debated in Parliament, as was the subsequent bill, which you
describe as an omnibus bill.
Senator Moore: No one saw this in either house. We were all
focused on equalization, the heavy program with regard to the provinces and
the feds. The Atlantic accords, which my Atlantic colleagues can testify to,
were all- consuming and totally preoccupied us. I just wonder about that.
The whole tactic of how that was done was mischievous at best. I do not see
how you can say now that we have better transparency and accountability when
you do not go to the people in advance. Explain to me how taking Parliament
out of the approval process in advance and taking Parliament out of the
control of the public purse achieves greater transparency and
accountability. I just do not understand that, I am sorry.
Mr. Foster: As I say, all of the details of the elements of the
borrowing limit, including the limit, are presented in the budget in the
debt management strategy; so it is there. The only difference is that the
actual limit gets approved by order-in-council.
Senator Moore: You do not ask. You do not ask.
Mr. Foster: Therefore, it is transparent in that regard.
Senator Moore: Mr. Morrow, when you were worrying about the status
of the Canadian banks and keeping them liquid, did you know about the
billions of dollars they got in TARP monies?
Mr. Morrow: I can only speak for myself. I was aware at the time
of the need for Canadian dollar liquidity for Canadian operations of
Canadian banks. That was the motivation for the liquidity that was provided
through the Bank of Canada.
Senator Moore: You were not aware of the billions of dollars they
got from the TARP monies in the United States of America?
Mr. Morrow: I was not aware.
Senator Moore: No. That was not factored in. If you did not know,
you could not factor it into the funds you were giving them. I do not know
if I have anything else, chair.
The Chair: You undoubtedly do, but Mr. Devries could probably help
you with those.
Senator Moore: No, that is good. Thank you very much. Thank you,
The Chair: To finish up on the U.S. situation running parallel to
Canada, did they have to go to Congress to get approval or was that all done
by executive order like we were able to do here in Canada?
Mr. Foster: I remember watching it on TV and watching the Dow go
up and down and up and down as they debated TARP. It was voted down, and
they had to come back. TARP was a program of an expenditure of money — an
injection of money. They have in the U.S., separate from their budget
process, a debt ceiling, which gets its own discussion and debate. You may
recall that from 2011 and more recently actually.
The Chair: It is an interesting situation. We have to be careful
when we try to draw parallels. Thank you to the Department of Finance, Mr.
Foster and Ms. Lambert. We did not ask you too many questions, Ms. Lambert.
Thank you, Mr. Morrow, from the Bank of Canada. You were here earlier and
heard some of the questions. You are welcome to stay and hear Mr. Devries
tell us what a good job you are doing.
I am pleased to welcome Ms. Lori Turnbull, Assistant Professor, Dalhousie
University in Halifax, Nova Scotia; and Mr. Peter Devries, Consultant on
I would ask each of you to provide us with any brief comments you have. I
will start with Ms. Turnbull and then go to Mr. Devries.
Lori Turnbull, Assistant Professor, Dalhousie University, as an
individual: Thank you. I am going to be general in my comments at first
rather than address the specific financial side as I think Mr. Devries is
much better to do that. I will talk about the more general issue of
parliamentary scrutiny and approval.
The bill is about restoring Parliament's ability to approve expenditure.
For a lot of people who study Parliament and for people who do this kind of
stuff like I do, this is sort of the primary reason why Parliament exists,
especially from an historical context. We have Parliament because first and
foremost we want Parliament to approve the expenditure of money and the
raising of money. That is why historically Parliament exists. Expenditure
without parliamentary approval seems to be at odds with responsible
government — "responsible government'' meaning the government needs the
support of the house in order to be able to do what it wants to do. Anything
failing that means the government cannot act legitimately. If you see a
government doing something without legislative approval, especially when it
comes to money, it sort of seems to be at odds with what we expect in a
Even in the context of responsible government as it exists every day, we
give what some people call money bills a sort of enhanced status. We always
treat a money bill as a confidence measure, whereas other things are not
necessarily treated as confidence measures. When we talk about what we do
with taxpayers' money and the government spending it and the raising of
taxpayers' money, it is dealt with in the parliamentary context in a very
special way. That is first and foremost.
The justification for bypassing parliamentary approval or parliamentary
scrutiny of the raising and spending of money is often efficiency. It will
be quicker. It makes more sense to do it this way. If we do not have to go
through that extra step, it means that government can be more responsive and
efficient. It can handle things better and respond to crises better.
We have a kind of tension between democracy on the one hand and
efficiency on the other hand. For the most part, you want to have that
tension there all the time. You always want to have a healthy back and forth
between democracy and efficiency. Otherwise, you kind of have a mess if you
go in either direction too far. If you have too much democracy and too many
supposed checks and balances and too many institutional things in the way,
then they become just things in the way and you lose sight of what you are
doing. On the other hand, if you go too far towards the efficiency model and
put the focus on that, then democracy becomes the thing that is in the way
and Parliament becomes in the way, and you do not want that. You do not want
to be in a situation where there is not the proper value given to
parliamentary scrutiny and approval. The question seems to me, how do you
maintain that healthy tension between democracy and efficiency without the
pendulum swinging too far in one direction?
For a lot of people who work in this area, the pendulum is already
swinging too far in the direction of efficiency if you consider what we are
talking about today in the context of some other things that we see on a
pretty regular basis and perhaps on an increasing basis. For instance, if
you look at government's willingness to use closure to shut down debate, and
governments of all partisan stripes, I am not talking about any government
in particular, and if you look at a prime minister's willingness to prorogue
Parliament if things get messy and difficult and scrutiny becomes too much
for a government to bear, and prime ministers do have the ability to shut
down Parliament for a period of time, and if you look at it in the context
of using omnibus bills to push things through budgets, which makes it
difficult for Parliament to perform its scrutiny function efficiently — if
you take all of those things at the same time, I think a case can be made
that we are becoming perhaps too efficient at the expense of democracy, and
we are losing the healthy tension that is supposed be there all the time,
and we all benefit if it is there all the time.
By way of opening comments, I will leave it at that.
Peter Devries, Consultant on Fiscal Affairs, as an individual: I
have brief opening remarks. Prior to the Budget Implementation Act of 2007,
the Financial Administration Act did require that the government seek
parliamentary authority every time it required funds over and above existing
funding requirements and the non-lapsing $4 billion statutory limit.
The importance of having the borrowing authority act I believe was
twofold. One, it provided Parliament with increased financial oversight and
scrutiny. As it was considered a money bill, as Ms. Turnbull just said, a
vote on a borrowing authority bill was a vote of confidence in the
government. The borrowing authority act, the budget and the related budget
bills were all considered important instruments for accountability and
transparency purposes for Parliament. With the new bill, one of these
instruments is gone. The borrowing authority act requirement is no longer
The second point I would mention is that the borrowing authority act
required an economic and fiscal context. This meant that the budget would
have to be tabled with or before the borrowing authority act. For effective
borrowing management purposes, as you may have heard before, it was
preferable to have the borrowing authority act tabled in Parliament before
the end of the current fiscal year so it could be effective for the next
fiscal year, once it received parliamentary approval. This meant that the
budget had to be tabled before the end of the current fiscal year as well,
either at the same time as the borrowing authority bill or in advance of the
borrowing authority bill.
This committee, back in 1985-86, actually held up the borrowing authority
bill because there was no budget as a context for that bill. I spent many
long hours in the Senate and in committee trying to defend why we had a
borrowing authority bill with no budget to provide the context for that
bill. It was this committee that felt it was very important that there be a
budget linked to the borrowing authority bill to give it a context.
What we see now, over time, without having to table a borrowing authority
bill because there was no requirement to issue new borrowings, as well as
since 2007, is that the budget has been tabled later and later all the time.
It is now being tabled either in late March or early April/May, after a
borrowing authority bill would have been tabled.
More importantly, it is now being tabled after the Main Estimates are
being tabled. Now the Main Estimates, which also require an economic and
fiscal context, do not have the budget to be that context. The Main
Estimates have to be tabled on or before March 1 in order to follow normal
supply procedures at this time. What you have now are Main Estimates that
are completely disconnected from the budget. We saw this in the last few
budgets where the government announced very major initiatives in the budget
that were not reflected in the Main Estimates. They came out later in
supplementary estimates, or, if there were reductions in spending, they were
not shown at all to Parliament. We miss a link here now. The borrowing
authority forced the government to table a budget in early or mid-February.
With that requirement gone, for those years in which the government had to
require a borrowing authority act, now you do not even have to link with the
Main Estimates any more. There is a complete disconnect between those two,
and I think this committee has brought that up in the past.
In the 2007 Budget, the government argued that the changes were primarily
made for transparency and accountability purposes. I do not think it did
either. It also argued that the changes were necessary to meet future
borrowings with respect to the consolidation of these three Crown
corporations. This it did do, because it made it very easy to do that.
However, in the end, I believe it removed an obstacle to the government in
the event of new borrowing requirements and an instrument by which
Parliament could hold the government accountable. In addition, the vagueness
of the proposal in the budget is also of concern. The wording outlining the
changes to the FAA highlighted this.
At the time of the 2007 Budget, this proposal went virtually unnoticed.
It was this committee that first raised it when it was studying the budget
implementation bill, not the budget but the budget implementation bill, well
after the fact. Now one has to wait, I would argue, because the budget is
really the budget omnibus bill, not the budget. The details are presented in
the budget omnibus bill; they are not clarified in the budget per se. That
is another thing we saw for the first time in the 2007 Budget. With the
elimination of the borrowing authority act, we saw the vagueness in budget
language in order to be able to justify the initiatives they were putting
into the budget or the omnibus bill. This undermines the credibility of both
the budget and requires much more due diligence in assessing the budget
proposals. Thank you.
The Chair: Thank you very much, Mr. Devries. You are quite right
that it was this committee that first raised the issue. It passed through
the House of Commons without any debate and, in fact, there was virtually no
debate in the Senate either because we noticed it late in the process, so we
did not have it in committee. We did see it and we did raise it, and that
was thanks to Senator Lowell Murray, one of the senators involved, and
Senator Tommy Banks, who first focused on that. Senator Moore and I had the
pleasure of sitting next to Senator Banks, so we learned about this through
that process at the very last minute. It is good that our committee was
doing its job, and now Senator Moore is back asking us to think about this
again and give it the debate it deserves.
Senator Moore: Thank you, witnesses, for being here. Dr. Turnbull,
I know that you write. Have you written a book with regard to democracy,
responsibility and so on? Did you deal with this issue in that book? What is
the name of the book, and how did you deal with it?
Ms. Turnbull: The book is Democratizing the Constitution:
Reforming Responsible Government. The book is about Parliament in
general as opposed to anything in particular like a particular bill or
What we wanted to explore in the book was the idea of constitutional
conventions. When you have a system like ours where some things are written
down and some things are not written down, the things that are written down
are clear, and we can point to them and argue about them, but we can
understand what they mean. The unwritten things are far more open to
interpretation. We derive our constitution from the U.K. and the U.S. We
have the American tradition of writing everything down, and then we have the
British tradition of not writing things down.
The problem is that, from our perspective, the parts of our Constitution
that make it democratic are the ones that are not written down. For
instance, the fact that the Prime Minister and cabinet need the confidence
of the house to govern is not written in the Constitution anywhere. The
trouble is, when you try to apply a convention like that, especially in a
situation of political crisis, which we see a lot now, there is a lot of
disagreement about what it means. What does it mean to have confidence? Does
it mean you have to have it every day or every minute? The fact that money
bills are treated as confidence bills is a convention because it is not
written down anywhere. The fact that a prime minister must resign or
dissolve the House of Commons if he loses confidence is not written down
When you start to look at the unwritten constitutional conventions, you
see how much we rely on some kind of understanding of how things work. We do
not really have an understanding of it because as soon as you start to pick
it apart, it unravels. People like me write letters to the editor 15 times a
day when someone prorogues Parliament and someone thought the Governor
General should have said no; and it all blows up. It is good for people like
me. It is great. The last thing I would want from my own perspective is to
resolve all this stuff.
Generally speaking, we need answers to these questions. That is what the
book is about.
Senator Moore: At the outset, I should have congratulated you and
Patrick on the birth two weeks ago of Mercedes. For you to come here at this
time is important; and I thank you. How did your book do? Was it received
Ms. Turnbull: Some people hate it; but some people really like it.
Senator Moore: Did you win any prizes?
Ms. Turnbull: We won two prizes: the Donald Smiley Prize from the
Canadian Political Science Association and the Donner Prize.
Senator Moore: You won the Donner.
Ms. Turnbull: We did.
Senator Moore: Congratulations. In the context of what we are
talking about here and what this bill focuses on, you mentioned about the
pendulum swinging too far and democracy getting in the way.
I do not know if you were here earlier, but for me, the main thrust of
this bill is to return the necessity for government — the Crown — to seek
the approval of Parliament for borrowing. To me, that is the greatest
opportunity for and the greatest provider of accountability and
transparency. What do you have to say about that as it applies to this bill
and what I am trying to achieve here?
Mr. Devries, if you want to chime in on that when Ms. Turnbull is
finished, please go right ahead.
Ms. Turnbull: People want to know how their money is being spent.
People want to know that they can have access to that information. People
expect these things to go before Parliament. One thing we learned when we
were working on the book was that a lot of people sort of assume that
processes are in place and that of course the government cannot spend money
without asking Parliament first. You say, "Well, actually, here is how they
can do it''; and they say, "Oh.''
Part of it is not just people like us having arguments over how things
work, but also Canadians being not totally sure all the time about how
things work and assuming that the right checks and balances are there when
they actually are not. Not only that, but if we expect voters to have the
right information at election time, we need parliamentarians to be involved
in these things. That is how voters know what is going on. Parliamentarians
know what is going on.
When we have the upshot of two institutions, the House of Commons and the
Senate, to scrutinize from different perspectives, take different
approaches, have different partisan mixtures at whatever time, that is what
voters are supposed to expect.
Senator Moore: Thank you.
Mr. Devries: I would agree with Ms. Turnbull. One of the first
things she said in her opening remarks was that the borrowing authority bill
is a money bill. Money bills should be approved by Parliament.
The other thing is that most Canadians get their information about the
government's financial situation from the media or from financial advisers.
At the time of the budget, no one picked this up. There was not a soul in
the print media or in the financial markets that picked this up, unless they
were told beforehand that this was coming. I did note it when I was
reviewing the budget. I did raise it with some people, but there were other
issues that were more important at that time that they focused on.
It was not until the budget implementation bill came in and the second
round of the scrutiny by Parliament, the Senate, that it was actually
discovered. The House of Commons missed it altogether on two occasions.
Canadians had no idea what was going on with their finances — that all of a
sudden an extra $40 billion was being borrowed on behalf of Crown
corporations. Why should Parliament not approve that borrowing for Crown
On top of that, of course, shortly after we had the 2008 and 2009
recession. All of a sudden the surplus went to a $55 billion deficit. Yet
Parliament had no say as to how that money was being raised or what the
money was being used for, which they would have had through a borrowing
Senator Buth: Thank you very much for being here today. Ms.
Turnbull, where is that fulcrum point between democracy and efficiency? You
talked about a variety of different things that move towards efficiency
versus democracy. Where is the fulcrum? How do you decide that perhaps one
thing is too much or where the focus should be?
Ms. Turnbull: I do not know how you decide that once and for all.
It is probably different for different people. To take it a step further, we
have a lot of media coverage because we have things like Facebook and
Twitter and the 24- hour news cycle. There is constant commentary. We have
people talking about what the Harper government has done to erode democracy,
and there will be a big list of things. As well, somebody will come and say,
well, if the Liberals were in power, they would do the same thing. If you
look back to previous, you see that they all did the same things.
On the one hand, we have a consensus building toward the sense that
democracy is getting sidelined, because it is possible for governments to do
these things to get around the democratic checks and balances that we think
are there. On the other hand, if you ask somebody whether there was a golden
age of democracy with the pendulum there, no one can think of that time
either, no matter who you ask.
At the same time as we can see governments becoming more creative and
cleverer at getting around some of the democratic checks and balance that
are there, we also see a far more sophisticated media. For those citizens
who want to get involved and want to be informed, we have far more
information available to them should they choose to use it; but most
citizens do not. The ones who do are able to be more attentive than they
have ever been before. You can make the argument that there is movement on
either side of the pendulum.
If we were to look for indicators, how do we know if the balance is on
efficiency rather than democracy? Voter turnout is miserable. That could be
one indicator. People are less likely to get involved in pressure groups,
political parties and social networks that are not based online. People are
more likely these days than they were decades ago to give to charities, but
not as likely to participate in a charitable event in a community. The
social capital and social policy are shifting. It is that sort of thing.
You can find those indicators that people are stepping away from
traditional politics and younger generations are not taking up the interest.
People who are becoming old enough to vote are not replacing the older
generations who are dying.
Senator Buth: How do you determine whether that is due to apathy
or confidence in the system?
Ms. Turnbull: Most of the time you do not. You have some
indicators of people who are protestors, who do not get involved and it is a
conscious decision not to get involved. They are informed about the system.
They know everything about what is going on. They do not vote or participate
because they are taking a principled stand. They do not want to get involved
Most people are not that. They are just not into it altogether as opposed
to knowing about it and not participating.
There is an argument to be made that if there is a sophisticated
democracy with a healthy middle class in a reasonably well-functioning
economy, if you do not have everybody participating in politics, then who
cares; it is probably better that way. There are actually several studies to
show you do not want everybody participating in democracy. You do not want
democracy to get too healthy because then it becomes too hard to control and
then too hard to govern.
Again, we have this sort of unknowable happy place where — what is that
saying? Everybody is equally displeased. I do not know. Yes, somewhere in
the middle, but I do not know how you get there.
Senator Buth: I find your comments about there is no golden age in
politics interesting because my experience has been that if you look at
comments about how bad things are in the house, or in my personal
experience, how bad farming is, and then you go back and look at the media
of the day or what is actually happening, things are no better or no worse,
essentially, but we all think it is the very worst of times or it is the
very best of times.
I want to ask, too, about this business of something being buried in a
budget. Whose responsibility is it when a budget comes forward to look at it
and to determine whether or not something needs to be pulled out or debated?
Where does criticism come from in Parliament?
Ms. Turnbull: We generally expect it to come from the opposition.
Government backbench MPs are also part of that. Anyone who is not in cabinet
is supposed to be performing that scrutiny function.
Senator Buth: Would you say essentially that missing something in
a budget bill was the responsibility of the opposition, and if they missed
it, then they missed it? The bill was debated in Parliament. The budget
implementation bill was presented. If something was not highlighted, there
was no criticism of it and Parliament clearly voted for it. People elect
Parliament essentially to do that, to approve budgets.
Ms. Turnbull: They elect them to approve or to reject. You can
make that argument up to a point. If there is a bill that is designed in
such a way that there is not a reasonable expectation that the scrutiny
function can be performed because the bill is just too big, because the bill
has too many purposes and there is no rhyme or reason to it, we tend to
associate these things more with American politics where you see these giant
pieces of legislation that come flying through and they have no narrative
sense whatsoever. They have a million different things in them, and it is
all because different Congress people have said, "I will do this if you do
that'' and they shove it all in one bill and it gets passed. We generally do
not see that as much in Canada, but we are starting to see it more.
If a bill is designed in such a way that the government is — and I am not
saying this with any particular government; it could be any government — if
they are packing a ton of things into one bill hoping no one sees that thing
on the second-to-last page, that is not a good-faith exercise. On the other
hand, is it part of the opposition scrutiny function to pick things up?
Well, of course it is.
I think because that scrutiny function is so important, then we have to
be reasonable and get to a point where we have the same expectations about
what is going to be in a bill and whether we are going to allow it. If
omnibus politics is what we are going to do, I think we need to be more open
Senator Buth: I am a year-and-a-half into a Senate appointment. I
came last year, and I had carriage of the budget bill last year. I looked at
the budget bill — the first bill last year, which was considerable — as a
major cleanup of things that had been waiting for a long time, years and
decades, to get cleaned up, whether it was legislation or agencies that had
not been cleared off the books or Supreme Court decisions that had not been
dealt with, et cetera.
How would you know that a bill had been designed to deceive versus a bill
that was really looking at trying to move things through that really needed
cleanup? Your comments lead me to believe that you think there was
deception, that this was purposeful deception. I am wondering where you
would get that opinion from.
Ms. Turnbull: It is not about purposeful deception; it is about
knowing how much time and how many resources MPs and senators have to review
legislation and for everybody to have the same assumptions about how broad a
scope a piece of legislation is going to take.
Senator Buth: That is helpful. Thank you very much.
Senator Hervieux-Payette: When you talk about the media, I just
have a comment about the media. They are supposed to inform the population.
They are probably doing their best, but if you were ever to take a poll and
ask how many people in Canada knew that $75 billion went to the bank, the
most informed people around me, who are astute businesspeople, were not
aware of it, so I wonder how the ordinary person working at Tim Hortons
would know about it. That is just a comment.
I would like you to elaborate on the convention. People think the
constitutional convention is something you can get around very easily. My
legal background leads me to think that the convention, when it comes to
constitutional matters in common law, has the same force as law. There is no
escape from it. You have to apply the convention; otherwise, you are, in
fact, breaking the law. Do you agree with me? Thank you.
Mr. Devries, with respect to restoring the process, if we were restoring
the process that would allow us to do our work with regard to all financial
matters relating to budgets, first, would you clean up the budget and just
leave budget matters in a budget bill? As you said, it is non-confidence.
What would be the different steps in order to get the information out and
then have the approval done in due time with due process? What would be your
time frame so that Parliament would function properly?
Mr. Devries: My first wish would be that the budget would be more
transparent in what it actually wants to deliver on. We have seen in the
past a lot of initiatives where vague references were made in the budget,
but the real details of them were not found until you saw the budget
As I said before, the real budget seems to be the budget implementation
bill, not the budget per se. There are a lot of words in the budget — in
fact, it is 400-plus pages — but a lot of it talks about what has happened
in the past and what they have done in the past. Very little of it then goes
on to say, "We are now going to do this and here are the details of how we
are going to do it.'' That I would like to see restored in a budget.
With that said, I was as guilty as the current people are in finance of
trying to hide stuff in a budget when I was in that area, but maybe I found
religion in the last few years.
Senator Hervieux-Payette: We know why.
Mr. Devries: I also think that the budget implementation bill
should be restricted to tax measures. It has gotten to the stage where there
are so many things now in that budget implementation bill that no one
committee can do what it has to do in order to be accountable to themselves
in accurately approving or not approving the various measures in the bill.
Many of the initiatives on the spending side, which were announced in
previous budgets, go back not only in the last six to seven years, but even
before that. These budgets should have come either in separate legislation
and gone to their respective committees for review, which then would have
had the time to do those reviews, or they should have gone through the Main
As far as the spending side of things, there are two options that one
could choose. One is through the Main Estimates, and the other is through
separate legislation. Unless something really needs to be passed in a hurry
because of the consequences of its not getting passed, such as you are not
able to deliver support to a certain region because of a natural disaster
and you need the money to get out there right away, but you need
parliamentary approval for it, then maybe you could put it into an omnibus
budget bill. However, for most of the spending initiatives, I believe they
should go on their own separate track and not be buried in a budget bill.
Now you are spreading the work of Parliament among many more committees
than just having it at a Finance Committee stage. You are bringing in the
proper experts in order to debate the issues that should be debated at that
Senator Hervieux-Payette: I totally agree with you. We just went
through Bill C-48, which is 900 pages and 500 clauses. Even the people who
are experts said that nobody can go through it. It took a long time to go
The Chair: Dr. Turnbull, did you have a comment on the earlier
question being asked?
Ms. Turnbull: Thank you. I wanted to say that the difference, or
the tension, between law and convention is that perhaps convention should be
enforceable by law, but it is not, and that is the problem because
conventions are not written down in law or in the Constitution; or in some
cases you could make the argument that certain laws could be convention if
certain conditions are met, but that is not the way they are framed.
Conventions are enforceable in a political context, not in a legal
context. A Supreme Court might acknowledge there is a convention that
exists. They will not enforce it or make sure it actually goes ahead.
I could go on at length about Trudeau's "This is legal but not
constitutional'' result. If you read that reference question that is
probably more information than you want about what is the difference between
law and constitutional convention.
Some people like constitutional conventions because they are not written
down. They think that there should be certain rules that are enforceable in
a political context. It means that you need to have the political will and
the information among the relevant actors to have them enforced. Otherwise,
they do not work; they do not do anything.
The Chair: Thank you.
Senator Hervieux-Payette: If we were going to spend the billions
of dollars, you say you would want to have the budget implemented as the
only bill dealing with money and tax issues. Secondly, what about the
borrowing authorities? Where would you put that?
Mr. Devries: I would go back to having a borrowing authority bill,
a separate bill.
Senator Hervieux-Payette: Where?
Mr. Devries: A separate bill in Parliament. It would come with the
budget. It needs an economic and fiscal context.
Why does the government want to borrow X number of more dollars than what
it said it originally was going to borrow? That should be in the budget.
That should be explained in the budget, that it is either because of
economic conditions or because of some extra factors that have happened
outside the government's control. That is why they want this extra money.
That should be detailed in the budget. There are tables which show here
is the deficit, here is the amount of money, here are the non-financial
requirements, here is the amount of money that we require in order to
finance our ongoing activities, and here is the amount of money that we have
to refinance on bills that are coming due. The total is how much money they
require for that current year.
The incremental part, which is part of a borrowing authority bill, would
be determined by the deficit and the non- budgetary requirements.
That would all be spelled out in the budget and would form the context
for the budget authority or borrowing bill.
Senator Hervieux-Payette: Thank you.
The Chair: Senator Mockler.
Senator Mockler: Thank you very much. I know time is of the
The Chair: You have four minutes.
Senator Mockler: I have not read your book, doctor. I am reading
one now titled Whatever Happened to the Music Teacher, by Donald
The book's central purpose is to show how policy and budgetary decisions
are made in today's public sector, being mindful that what has an impact on
the decision process of any government — local, provincial, municipal,
provincial, federal, and international — is what we call social media.
Mr. Chair, I also go to Tim Hortons, as a matter of fact, last Saturday
morning. The people at Tim Hortons tell me that we have elected MPs to make
a decision, and if we do not like those decisions, we will take care of them
at the next election. That is what they call democracy.
Thank you both for coming. We can look at what has happened in Europe and
south of the border — and I live in a border town, and I know what the
Americans tell me — had the government not moved or gotten involved when we
had the biggest meltdown of all the countries, what would have happened to
Mr. Devries: I will take a first crack at it.
What happened following the 2008 recession was not unlike what happened
in the mid-1990s. The circumstances were a little bit different, but the
financial situation was not.
At that time, we had a severe fiscal crisis. The deficit was considered
to be out of control. There was talk about the IMF coming in here. New York
would downgrade us. We were paying a premium on our interest rates. There
were people in the government who thought that we were up against the debt
wall, and that we were not going to be able to borrow any more. At the same
time, we had a referendum. We were involved in that era as well as to what
would happen to our country.
Here was a situation which I say was just as extreme as the one we just
faced; yet we got through it with the borrowing authority act. We were able
to put a borrowing authority act in Parliament. We were able to manage our
affairs during a most tense period of time.
There were a lot of people in Wayne Foster's old shop who were up all
night long monitoring and trying to make sure that they had some money lined
up so we could pay our bills on time and would not go into default. We were
able to get through that issue with full transparency and everything else
associated with it.
We are now in a situation where we still could have put a budget or a
borrowing authority bill with the 2009 Budget. There is no reason why we
The budget was tabled in January of that time. You remember that an
economic outlook was put out in the fall of 2008, and the government said
everything was fine; there is nothing to worry about. Two months later, they
came back and said, "The sky is falling, and we need $55 billion for new
That should have had more Parliamentary scrutiny than it did. It would
have had more if there was a borrowing authority act.
I submit that that borrowing authority act would have passed within a
time period sufficient enough to provide the government with flexibility to
meet its requirements.
The Chair: Dr. Turnbull.
Ms. Turnbull: Mr. Devries is far more qualified to answer that
question, so I will second what he said.
Senator Mockler: With all due respect, you did not answer my
Regardless of political parties, what would have happened to our economy?
I see what has happened in the U.S. and what has happened in Europe.
Mr. Devries: What would have happened to our economy? I do not
think it would have been any different than what did happen.
The 2009 Budget came out in January. It detailed what the borrowing
requirements for the government were going to be for that upcoming year. The
government had separated out into two parts. This was economic; this was
policy. There is no reason why, in my view, the government could not have
put out a borrowing authority bill at the same time it was asking for
incremental borrowing authority. It would have been debated in Parliament,
it would have been passed before the end of the fiscal year, and it would
have had the same impact as what the current system would have had. Except
it would have given Parliament much more scrutiny over what the government
actually required. As far as the economy, I do not see any difference.
The Chair: Thank you very much, Senator Mockler.
On behalf of the Senate Standing Committee on National Finance, I would
like to thank Peter Devries and Dr. Lori Turnbull for being here. You have
given us a lot of interesting matters to think about over the next while.
We will adjourn now. Steering will consider the next steps in this
particular matter, and we will give you an opportunity to think about the
evidence that we have heard this evening.
This meeting is now concluded.
(The committee adjourned.)