Proceedings of the Standing Senate Committee on
National Finance
Issue No. 11 - Evidence - June 8, 2016 (Evening Meeting)
OTTAWA, Wednesday, June 8, 2016
The Standing Senate Committee on National Finance met this day at 6:54 p.m. to examine the subject matter of all of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016, and other measures.
Senator Larry W. Smith (Chair) in the chair.
[English]
The Chair: Good evening, everyone. Welcome to the Standing Senate Committee on National Finance, colleagues and members of the viewing public. The mandate of this committee is to examine matters relating to federal estimates generally as well as government finance. My name is Larry Smith, senator from Quebec, and I chair the committee. Let me briefly introduce the other members of our group.
To my right, is the esteemed judge from Saskatchewan, Senator Raynell Andreychuk; to her right, a man well- known by many people in Eastern, Central and Western Canada, Senator Percy Mockler; to his right, the former Auditor General and champion of the Rock, Senator Beth Marshall — a very competent group that we're proud to have here.
[Translation]
This evening, we will continue our study of the subject matter of Bill C-15, Budget Implementation Act, 2016, No. 1.
[English]
For the first part of the meeting, we will hear from Mr. Aaron Wudrick of Canadian Taxpayers Federation via video conference.
[Translation]
The Parliamentary Budget Officer, Jean-Denis Fréchette, will be with us for the second part of our meeting this evening.
[English]
From the Office of the Parliamentary Budget Officer, we welcome some members of his team: Mostafa Askari, Assistant Parliamentary Budget Officer and star on CBC who has given us some good ink over the last week; Jason Jacques, Director, Finance Analysis; Carleigh Malanik, Financial Analyst; Duncan MacDonald, Financial Analyst; and Chris Matier, Senior Director, Economic Analysis and Forecasting.
Thank you all for being with us tonight. Mr. Wudrick, the floor is yours.
Aaron Wudrick, Federal Director, Canadian Taxpayers Federation: Thank you and good evening. My name is Aaron Wudrick. I'm the Federal Director of the Canadian Taxpayers Federation. I want to thank the committee for the invitation to appear tonight to speak on the subject of certain provisions of Bill C-15, and especially for accommodating my appearance by video conference from Kamloops.
I want to preface my remarks with a general point about the CTF's position on the new government's first budget, which is the reason I find myself in Kamloops today. We at the Canadian Taxpayers Federation are currently driving our large digital clock, which displays the federal debt, across the country from Vancouver to Halifax to raise awareness about its size. It currently stands at $624 billion.
We have been doing this since the 1990s. We did it during the Martin-Chrétien Liberal governments, and we were happy to retire the clock in 1997 when Paul Martin balanced the budget. In fact, balanced budgets became the norm to the point where we actually lost track of the clock and had to track it down in 2009 when the Harper government put us back into deficits. We brought it out in 2011 and toured the country once again. We're pleased to see them finally balance the budget again last year. With this new budget, it's hard to shake a certain sense of déjà vu, only this time there does not seem to be a plan to get us back to balance.
Turning to some of the specific measures in Bill C-15, we want to note our disappointment at the decision to cancel the scheduled reductions in the small business tax rate. As most folks will know, many businesses plan on a forward- looking basis, and in this respect the cancellation of planned tax cuts can effectively amount to a tax hike to those anticipating a cut.
With respect to the cancellation of income splitting, the CTF has long stated its preference for broad-based tax cuts over boutique measures. Income splitting falls somewhere between the two ends of the spectrum — not so broad as to capture everyone but not as niche as many of the litany of tax credits introduced by the previous government. Suffice to say, there are other taxes we would prefer to see cut, but its cancellation will also result in a considerable tax hike for many Canadian families, and that is very unfortunate in our view.
With respect to the replacement of the Universal Child Care Benefit with the Canada child care benefit, we are supportive of this change. This change will make the system simpler, combining several programs into one. It is also tax free, meaning that it's easier for Canadians to understand exactly what they're getting. And it is means tested, meaning the money goes to those who need it the most.
The CTF opposes the imposition of a 33 per cent income tax bracket. We believe this is wrong for a number of reasons, but most importantly it simply doesn't raise much revenue. A generally accepted maxim of taxation is that the more you tax something, the less of it you will have, which includes earning income. The wealthy might not be the most sympathetic demographic to defend, but the fact remains that they pay a disproportionately large share of all tax revenues in Canada. Sending the signal that they will be taxed even further is not likely to incentivize them to earn more.
Finally, I want to talk about OAS. We oppose moving eligibility back to age 65. This, frankly, does not make any sense to us whatsoever. Our retirement security system, including CPP, OAS and GIS, was created in an era when the average lifespan was much shorter than it was, and it has not since been modified to address the new reality that Canadians are happily living much longer.
With an aging population, moving Old Age Security eligibility to age 67 was a small, practical move to help reduce the program's expected spiralling costs. While broader reform of the system is still necessary, this move, in particular, is a step backward.
Those are all my prepared remarks, but I'm happy to take questions.
The Chair: Thank you very much, sir. You're available now for another 20 or 25 minutes.
Mr. Wudrick: That's right.
The Chair: If it's okay with you folks, we'll ask some questions and then get on to our second panel.
Senator Andreychuk: I would like clarification regarding moving the old age eligibility from 67 back to 65. I have not heard from anyone who thinks that's a good move, and it's certainly going in the opposite direction to other countries. Have you been able to see where there is a benefit other than a political one to the government for making that move? It seems to me that it's counterintuitive.
Mr. Wudrick: This is all politics. It makes no sense. With people living longer, it makes perfect sense to have a system that is designed to ensure retirement security when your lifespan is a certain length if people are working longer. We think a lot more needed to be done, to be honest, than just this one step. It was surprising and, we think, politically opportunistic to move it back to 65.
Senator Andreychuk: My other question is on small businesses. I've heard from more than one government that small and medium businesses are the backbone of Canada, both on an international front and nationally. If these tax benefits are removed, how do you think it's going to impact small businesses?
In particular, I'm thinking of small businesses that many women have started. I'd heard compelling evidence about how working with them on regulations and tax benefits is going to get women into more of the corporate structures in very ingenious ways. We heard, "Well, we shouldn't really be helping those who are taking their yoga classes and making them into a corporate structure.'' I happen to disagree. I think those people are the backbone of many of our communities. If these tax benefits are gone, what will happen? Have you heard from your constituency?
Mr. Wudrick: Yes. In fact, this small business issue is probably one of the largest concerns we heard from our supporters both during the election and after the election. Many of our small business supporters were concerned because they felt they were at risk of being hit with a considerable tax hike.
It also needs to be made clear that when tax hikes are scheduled and if they are slated to come into force, eliminating them is effectively hiking taxes. It is a not a freeze. If people are planning around those reductions as part of their budgets, cancelling them effectively amounts to a tax hike.
Senator Marshall: Mr. Wudrick, when the budget document comes out, does your organization systematically go through and analyze everything that's in the budget, or is it more of a spot check?
Mr. Wudrick: I do go in the media lock-up, so I read as much as of the document that I can on that day. Obviously there are areas of greater importance to our particular advocacy, but we do try to read the full document as much as we can.
Senator Marshall: You talked about the new tax bracket for high income earners. You were saying that you weren't supportive of it, but do you see any reaction to that from high income earners? Do you foresee people leaving the country or anything of that nature? What's your take on that?
Mr. Wudrick: In our organization, our approach towards taxation is generally lower, flatter and simpler. This obviously violates more than one of those tenets that we try to promote. I don't want to be so dramatic as to suggest that a small tax hike will force people to flee the country. I think that might be a little dramatic.
What we do know is that wealthy people have a large number of resources at their disposal. There is evidence to suggest that people with a large ability to structure their affairs in a way to minimize their tax burden are the ones most sensitive to tax changes. They're the ones with the ability to restructure their affairs to avoid taxes. For an individual that doesn't have the means to do it, it's harder to do. If you are wealthy, by definition you have those means. I think we need to be careful. Frankly, I think that is the reason why the original estimates about what this new tax bracket would yield in term of revenues turned out to be much more than the government now expects to get.
Senator Marshall: That's right.
Would you have any reaction to the $444 million that's been pledged to the Canada Revenue Agency over the next five years to beef up their policing or auditing areas?
Mr. Wudrick: Yes. In light of recent events such as the Panama Papers, there is a legitimate concern about individuals who are, if not evading taxes, then certainly avoiding them. I certainly think it's reasonable to empower Canada Revenue Agency to ensure that people are paying their taxes. People should pay their taxes in full and on time.
We've also said that another way to make it easier for CRA to do its job over the longer term is to simplify the system. If you have a very complicated tax code, it makes it hard for people to comply even if they want to, never mind to try to evade paying taxes. It also makes it very hard to enforce. We think by simplifying the system overall, you make it easier to enforce and you make it easier to comply, as well.
Senator Marshall: There are a couple of areas in the budget I did want to ask you about. I've raised this with other witnesses. There is a special bonus or an extra tax deduction for people in the new high tax bracket who make charitable donations. Their tax credit will be higher than if they were in the lower tax bracket. Do you think that will encourage people to make more charitable donations?
Mr. Wudrick: I'm sorry. There is a provision that if you are in a higher bracket —
Senator Marshall: If you're in the 33 per cent tax bracket, you will get an extra tax credit for making charitable donations. The objective, we're told by the Department of Finance, is to encourage people in that higher income bracket to continue to make charitable donations. My reaction is that I think that would discourage them, but Finance thinks that it's going to encourage people. I'm wondering if you have an opinion on that.
Mr. Wudrick: I suppose there are two trains of thought on that. Generally, of course, when something is made cheaper or if you get a benefit, you're more likely to do it. That's often the reason we criticize the fact that the political tax donation credit is 75 per cent, compared to charities only being 50 per cent. We think that's grossly unfair and that the political credit should be harmonized down with the limit for the charitable credit.
I think you may be right. I don't know that it would discourage it, but what it may do is provide a windfall gain to individuals who are going to donate anyway. People who were going to donate will be better off now. It might not change their behaviour; they will just have extra money in their pocket.
Senator Marshall: My final question relates to an amendment that is going to tax "a service rendered to an individual for the purpose of enhancing or otherwise altering the individual's physical appearance.'' I was thinking that's going to be a nice tax windfall for the government, but a lot of people don't agree with me. Would you have any opinion on that amendment?
Mr. Wudrick: Sorry, is it a tax or a credit?
Senator Marshall: It's going to be a tax on "a service rendered to an individual for the purpose of enhancing or otherwise altering the individual's physical appearance.''
Mr. Wudrick: I suppose we wouldn't be doing a good job at the Canadian Taxpayers Federation if we didn't oppose a tax hike. I would have to say, on that front, we would probably not like it very much.
The Chair: We had witnesses in about the small business tax rate, which wasn't reduced, and we had a mixed response. We had people saying that it should be higher; we had people saying it should be lower. Did you have a cross-section of feedback, or was it consistent from all of your members that they were upset that the tax hadn't continued to be reduced? What was the feedback?
Mr. Wudrick: In terms of the small business tax rate?
The Chair: You bet. Were 100 per cent of your people saying that they wanted it to go down and that they were really upset? We had witnesses coming in saying that they think it's a good move not to reduce the tax rate, that the government is losing money and that some people in these tax brackets are manipulating them so that they can earn more money. We heard all sorts of different things. I'm just wondering what type of feedback you received.
Mr. Wudrick: I think for those who had counted on the cut, it was probably more disappointing. There are others who perhaps don't plan that closely around it.
There was also a lot of focus placed on a fear that they were going to change the definition of a small business. A lot of individuals who are practitioners in certain fields structure their affairs in a way so that they operate as a small business. If they were going to be moved so that they would have to pay a personal income tax rate, they would be facing a substantial tax burden. I would say that and the cancellation of the rate were the two biggest issues.
The Chair: In talking about moving retirement back from 67 to 65, you said you were other areas. Were you looking at suggesting that it be extended to a later date or age bracket? What were you looking at?
Mr. Wudrick: The entire income retirement system, even looking at CPP as well, not just OAS.
I would say this: We increasingly have a number of supporters who are younger. We have a growing youth presence in our movement, and there are people who are very concerned that the system is tilted right now toward older Canadians for political reasons, because they are a very powerful political constituency. So many younger Canadians — students at universities, for example, and there are a lot of them — have expressed to us that they don't know that there is going to be a system in place for them by the time they retire because the system is so generous right now and because the demographic shift is such that they are going to carrying a very heavy burden going forward over the next several decades.
The Chair: Did you get any feedback on TFSAs in terms of the cutback that occurred from $11,000 back to $5,500?
Mr. Wudrick: Yes, we did. We often send out surveys and I get responses by email. But, for some reason, on the TFSA I received a lot of phone calls from individuals. I remember one in particular who was an immigrant individual in the Toronto area who told me that that was their primary savings vehicle, their TFSA, and this was going to put a major dent in their retirement savings plans because they were plowing everything they could into them. They were people of very modest means, but they were using TFSAs as their primary way to save for retirement. So they were very disappointed by that. It was something that was also disconcerting.
We think that finding ways to help Canadians save for their own futures in ways that are best for them is something that should be encouraged, not taken away. So we were disappointed to see the rollback to $5,500.
Senator Mockler: There seems to be a lack of definition in the context of who is in the middle class. Do you have a definition of what we would call people in the middle class across Canada? We talked, yesterday, to the Minister of Finance, and he had a comment. We have talked to other people, and they have other comments. Could you share your thoughts with us?
Mr. Wudrick: I think the reason that "the middle class'' is such a powerful political phrase is that it is whatever you want it to mean. It is something that most Canadians consider themselves or aspire to be.
I do note that what constitutes middle class in terms of income can vary dramatically depending on where you live. A family making $60,000 a year may be middle class in Moose Jaw or in Chicoutimi, but in Vancouver or Toronto, a family making $150,000 or 200,000 may have essentially the same lifestyle just because of the cost of living. That is where I caution. When we talk about helping the middle class but then start talking about increasing taxes and costs on a household that makes $150,000, that may sound wealthy to people living in Medicine Hat or in Barrie, but, if you live in downtown Vancouver or Toronto, you may very well just be middle class even at that income level.
Senator Mockler: In your context and with your experience, what would be middle class if we look at the five regions of Canada? In Atlantic Canada, what would be the middle class, or in Quebec, Ontario, Western Canada and B.C.?
Mr. Wudrick: I don't have the numbers in front of me, but if you divide the average income into quintiles, I would say that anything between the thirtieth and seventieth percentile would be considered middle class or maybe even broader than that, 20 to 80.
Senator Mockler: As you said a few minutes ago, depending on where you live, the definition of "middle class'' could be different, right?
Mr. Wudrick: Correct.
Senator Mockler: Because it is based on income. Therefore, with the tax measures being undertaken by the government of the day, which region or regions of Canada would benefit the most from those tax initiatives or tax cuts they've redistributed for education and whatnot?
Mr. Wudrick: I see what you're saying.
With the new tax measures, areas that had higher overall incomes would be losing out, and areas that had lower average incomes would be better off.
Senator Mockler: Who could provide us with a graph on the answer you have just given me?
Mr. Wudrick: I'm just stating a mathematical fact. You're asking about who is going to be impacted by increases on higher income brackets, it's going to be people who earn higher incomes.
Senator Mockler: Okay.
We had a witness this afternoon talking to us about sharing or distributing wealth. He said the way to do it is through taxes, the number one factor. That is one way to distribute wealth across Canada. What is your opinion on that?
Mr. Wudrick: I think that is something that governments need to do. The question is: What is the best way, the best tax system, to generate the best revenues in a way that does the least damage to the overall economy or distorts the economy the least?
We are not an organization that is against spending on people who need help. What we're against is giving money to people who, in some cases, may not need it and giving it out in ways that we view as being inefficient or not the best way to achieve the policy objective.
Senator Mockler: Can you share your ideas with us if we were to look at a guaranteed income for families?
Mr. Wudrick: That is something that we find philosophically appealing. I think it's well known that this idea has support on all ends of the political spectrum. We very much like the idea in theory. Some of the empirical studies that I have seen make me a little more hesitant. I know, for example, that Kevin Milligan, at UBC, has done some research that suggests that implementing a guaranteed minimum income or family income of any significant amount would end up costing something like twice or three times all current federal revenues. Even if you eliminated all existing support programs and replaced it with this, it would still be very expensive.
Philosophically, I think it is appealing. It is simple, fair and easy to implement, but in terms of the actual cost, it may, from a practical standpoint, just end up being prohibitive.
The Chair: Any there other questions from the committee?
Mr. Wudrick, thank you very much for your time. We really appreciate it, and we hope that you have a good time out in Kamloops and that the weather is nice for you.
[Translation]
Mr. Fréchette, would you like to say a few words to open the discussion? How do you wish to proceed?
[English]
Jean-Denis Fréchette, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Thank you, Mr. Chair and honourable senators, for the invitation to appear this evening and the opportunity to discuss some of our recent reports pertaining to Budget 2016, such as our report entitled Financial Impacts of Budget 2016 Measures on Selected Families with Children.
[Translation]
Or our analysis of the expected economic and financial impact of the cancellation of the small business deduction.
[English]
I suspect, based on the first round of questions, that small businesses also will be another source of questions on the second round. That is up to my colleagues who are really looking forward to answering some of these questions.
As per the Notice of Meeting, we are also available to discuss our Economic and Fiscal Outlook - April 2016.
Our current legislative mandate is to provide independent analysis to the Senate and House of Commons about the state of this nation's finances, the estimates of the government and trends in the national economy, as well as to estimate the cost of financial proposals over which Parliament has jurisdiction.
By the way, there was a question about charitable gifts. Last week, the PBO did a report on Bill C-239, which is a slight variation of what is proposed in Bill C-2.
As you are aware, the government indicated that it would also like to include in the future the costing of party election platforms.
[Translation]
Our eyes are wide open to that.
[English]
It is always a pleasure to appear before parliamentary standing committees; however, three committees are specifically mentioned in the PBO's legislation, one of which is your committee, Mr. Chair, while the other two are from the other place. Appearing before one of these three committees is certainly, I dare say, a must.
[Translation]
And we are quite pleased to be here.
[English]
Finally, Mr. Chair, I would like to thank you for your request to conduct a fiscal analysis of a targeted tax credit for taxpayers in the second bracket, which we released two weeks ago. It is precisely the type of analysis that fits with our legislation and, we hope, contributes to support parliamentary debate. Although our limited resources sometimes force us to select or postpone some of those requests, members of the PBO team always appreciate the occasion to discuss topics of interest with parliamentarians.
Thank you. We are able to answer your questions.
The Chair: Thank you very much.
Before going to Senator Marshall, with the new Universal Child Care Benefit for families, what is the cost of that program per year? How does that affect any potential deficit that the government could run?
Mr. Fréchette: I will ask Carleigh to answer that question. She would be pleased to give you the cost of that measure.
Carleigh Malanik, Financial Analyst, Office of the Parliamentary Budget Officer: Thank you for the question. What we've seen is that when it's fully implemented, relative to the cost of the existing children benefits, it will cost roughly an additional $3.8 billion. However, because this new benefit is not indexed as it's currently proposed in legislation, we'll see the additional cost decline over the coming years.
The Chair: So if I understand correctly, you're talking about a year-one deficit creation of $3.8 billion to support this program?
Ms. Malanik: Relative to the existing child benefits, yes.
The Chair: How much does the existing program cost per year?
Ms. Malanik: It would be roughly $18 billion per year. I'm sorry. I don't have the exact number offhand.
The Chair: We're talking about a $14 billion cost to the country. Is that what we're saying?
Ms. Malanik: No. The total cost is forecasted to be almost $22 billion once fully implemented.
The Chair: If it's $4 billion less, you're talking $18 billion?
Ms. Malanik: Yes.
Senator Marshall: This is something we had some discussions with between our respective officials. I was looking at your publication entitled Budget 2016: Key Issues for Parliamentarians. There is a table there dealing with "Revised status quo budgetary balance.'' I'm just looking at the 2016 to current fiscal year. It starts off with a deficit of 16.1 and then it works its way down. We end up with a budgetary deficit of 29.4.
When you look at all the different things leading up to the 29.4, help for the middle class is in there and the growth for the middle class. My recollection is that the child care benefit is also in there.
Because that's increasing our deficit and we have to borrow hat money, I'm looking at that and thinking that we're borrowing the money to give to families for their children. As a result, we have to incur debt, and it's those children and their children who are going to have to pay off that debt. Am I looking at that correctly?
Mr. Fréchette: That's a difficult answer to give you because there is a political aspect to it.
Senator Marshall: I didn't know if you would answer it.
Mr. Fréchette: I will ask Chris or Mostafa to clarify the number.
Mostafa Askari, Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: The numbers you quoted are correct. In general, any time there is a deficit, along with that comes a debt because the government has to borrow money to finance the deficit. How that's going to be paid over time all depends on what will happen over time.
Senator Marshall: It would be in the future.
Mr. Askari: In the future.
There are times that there will be surpluses and that debt will go down. It's hard to say who will pay for it if it's a debt that's owed by the government — a lot of it is owned by the Canadian people.
Whether the children will pay for it or not, that's a different question. I don't know how to answer that.
Senator Marshall: I think you firmed it up in my mind by your response. Thank you very much for that.
You did the report on the child care benefit for a Mrs. Karen Vecchio. It appears to me after reading that report that the government had an objective in putting in the new child care benefit in that it was trying to shift money towards people who need the money. Based on the information you provided in your report, it seems to have had the desired effect; is that correct?
Mr. Fréchette: That's basically correct. Families with lower disposable income and younger children will get more benefit for the simple reason that the benefit decreases with the income of the families. It is in that context —
Senator Marshall: — that they're meeting their objectives.
Mr. Fréchette: Based on the report we provided; not based on anything else.
Senator Marshall: The last question I have for now relates to your document called Economic and Fiscal Outlook - April 2016. On page 2 you say:
Budget 2016 highlights the Government's commitment to returning to balanced budgets and to reducing the federal debt-to-GDP ratio to a lower level by 2020-21.
I'm just wondering how you can say that when we don't know when they're going to return to a balanced budget. We haven't seen anything. You say, "Budget 2016 highlights the Government's commitment to returning to balanced budgets,'' but there is no commitment from the government; they haven't said they're going to. They said in their platform they were going to balance it by 2019-20, but that's off the table now and they haven't given us a new date. I was just wondering how you could say that.
Chris Matier, Senior Director, Economic Analysis and Forecasting, Office of the Parliamentary Budget Officer: A date was not provided in the budget in terms of when there would be a balanced budget. The language is taken from the budget in several places to say that the government remains committed to returning to a balanced budget. You are correct in that a date is not provided. There is a commitment, but it's a question of time.
Senator Marshall: Even when the minister speaks, he doesn't give any indication that that's his objective. It's absent.
The other part talks about reducing the federal debt-to-GDP ratio by 2020-21. In the Liberal platform, which I know is a political document, they had indicated that it was going to be reduced to a certain level by 2019-20, and that's off the table now. They talk about reducing the federal debt-to-GDP ratio to a lower level by 2021, but when you look at the budget book, it's only 0.1. So for 2016-17 it's 32.5 and will go down to 30.9 by 2020-21. I could probably defer that one, but the first one I sort of had an issue with.
Okay, thank you very much.
The Chair: We've really been looking at the question of trying to define the middle class. The request was made, Mr. Fréchette, to you and your office to try to understand the tax increase for people earning over $200,000. My understanding was that about $1.8 billion coming from that group can be redistributed to people between $40,000 and, I believe, around $92,000 to $95,000. Effectively in the initial plan, it would go to people earning just under $200,000. We've asked to understand, by building a model, whether we could redistribute that money to people between $45,000 and $92,000 or $95,000? What would the amount be?
Mr. Wudrick said in his comments, when we asked him the same question about the middle class, that people earning $150,000 think they're in the middle class and people earning $50,000 think they're in the middle class. Should we be trying to formulate some form of definition of "middle class'' so we can manage our money more effectively in terms of the funds we have? Forget about the political issue. Let's talk about economics and talk about really trying to help to build a middle class. How do we create that definition of a middle class?
Mr. Fréchette: The middle class is like a wide receiver. It's a mobile target, Mr. Chair.
The Chair: It's a moving target.
Mr. Fréchette: Yes. That's why at PBO we never use "middle class.'' As the previous witness mentioned, we target categories of income.
I don't know if Mr. Jacques wants to add something. It's certainly a discussion that will occur in the future, particularly if there are some discussions about a guaranteed minimum income and who will get that kind of money. As I said, nobody can really get a grip on "middle class'' right now.
Jason Jacques, Director, Financial Analysis, Office of the Parliamentary Budget Officer: The only thing I would add, consistent with what your previous witness mentioned and as highlighted in the report we prepared for Ms. Vecchio, if you're earning $100,000 or $150,000 in Vancouver, it's different than earning $150,000 in Moose Jaw or potentially in Truro. Within the Vecchio report, we focused more on the concept of disposable income, with both the taxes being taken off the top and the transfer benefits that those individuals are receiving.
Senator Andreychuk: Moose Jaw has come up twice. I know Moose Jaw very well. I also know Vancouver very well. How can we determine where it's more expensive to live? You have more access in larger centres. In rural areas you sometimes have to go farther to get to resources and needs. We know the North is more expensive. Why are we saying large urban centres are the most expensive to live in? They are that in housing. What else do you put in? Is it food costs? More variety is available in urban centres. If you live in Moose Jaw, it will be less and if you live here it will be more. How do you come at that definition?
I say that prefaced by many years in the 1960s and 1970s trying to equalize all Canadians. We spent a lot of time talking about how to bring services not to Moose Jaw but to Shaunavon, Saskatchewan, with a population of a couple of thousand. I couldn't say how many today. How do you equalize benefits to people? You're talking about costs, I guess, so how do you define it?
Who will answer? Nobody. It's a rhetorical question. I think I've had my supplementary, sir.
Mr. Fréchette: It is difficult. As I said, "middle class'' is a definition used by politicians. All politicians seem to know what the middle class is. Nobody really knows where that group is when it comes to developing public policy about them. It's like the old story about farmers. Everybody is a farmer when they want to receive subsidies. Often, that's basically the bottom line. It is difficult.
Senator Marshall: We're talking about the middle class and we've had a lot of discussions on it. We have the budget document that talks about growing the middle class. Of course, the government is saying now that they're going to evidence-based decision making. For example, as I said in my first comment, the study that you had done seemed to indicate that this new child care benefit was having the impact that the government wanted it to have.
The next question that came to mind was they wanted to grow the middle class. We have all these tax changes happening. We have the new 33 per cent rate and then we have a reduced rate for another group of taxpayers. At the end of the day, if the objective is to grow the middle class, how will we know this time next year that we've actually grown the middle class?
Mr. Askari: We won't.
Senator Marshall: We won't know. There, that puts that to bed.
Mr. Fréchette: It's also what the minister, I think, gave you as an answer yesterday. Only the Auditor General in five years or so, when they audit the program, might be able to say.
Senator Andreychuk: You gave me the answer before I gave you the question. You're just looking at figures and not at the efficiency of the program and the delivery systems. Is that for the auditors? We're getting raw data from you; is that what you're saying?
Mr. Fréchette: Raw data with analysis. We use the analysis and the model. For example, going back to children, we can say families with lower disposable income and younger children. It's not really an audit; it's an analysis of the categories of families who will receive more money.
Is it efficient? Everybody looks at me with smiles.
Senator Andreychuk: You should be able to say that if you're making $50,000, based on what the government has done, you'll be better or worse off; and if you're making $80,000 you're better or worse off. But you're not. You should be able to project those.
I saw Mr. Askari many evenings in Saskatchewan very eloquently making the case that you needed the information and that you weren't getting it at the start from the government. After some of your conversations, you received more information. Are you now getting the kind of information you need so that you can at least make those projections for us?
Mr. Askari: We are certainly seeing improvements in terms of our access to information. There are still areas where we have to work on it with different departments, but we have seen some openings, definitely, in terms of access.
Senator Andreychuk: What is the resistance?
Mr. Askari: That's a good question. We have always wondered exactly what the reason for the resistance was. Sometimes it's that some of the information we are seeking may not actually exist in the way that we are asking for it. Sometimes it's there, but they may have some issues in sharing that information because they may be afraid that we will use it and provide something publicly that may not be favourable to the government of the day.
There are many reasons. We don't really know. Nobody has ever explained to us exactly why we have had so many problems in accessing information in the past. Different excuses were used, like cabinet confidence and those kinds of things, but it has never been really convincing.
Senator Andreychuk: In another committee, we received evidence from witnesses who said that some of the government's data collection is outdated, and that in the trade area we're too heavily biased toward goods, imports and exports, when, in fact, services aren't properly documented and the global value chains aren't properly done. Is that part of your problem, or is it simply access to the information?
Mr. Askari: It is mainly access to information. Things like the general statistics and information in Canada on various issues or national accounts are of relatively good quality. We probably have among the best in the world in terms of the quality of our national statistics. But there are always issues in some areas, and those are difficulties that all statistical agencies face.
Mr. Fréchette: If I may, Mr. Chair, there's also the matter of culture within some departments. DND, for example — I often mention them — has this culture that everything is secret. We don't know why. I'm just telling you. It's just a matter of culture, I guess, as I said.
The reason I mentioned the three committees that are mentioned specifically in the PBO's legislation is that we now have a parliamentary remedy. I used it once. Basically it involves my receiving letters from both the Senate Speaker — the previous speaker — and the House of Commons Speaker. The letters stated that they have three committees under their legislation, and those committees have powers to call people and papers, which is the wording that you use.
I was about to send a letter to the chairs of the committees and it worked, because I gave a heads-up to the department, which I will not name. Immediately, some people contacted me. Whether or not we're going to get exactly the information we want remains to be seen, but at least we have this kind of remedy available. I'm not saying it's a strong stick, but at least it's there and it's better than nothing.
If there is an amendment to the legislation to include, as I mentioned, a provision to be truly independent, with more resources, and to do the costing of election party platforms, of course we're going to need that kind of access to information. So we're working on that.
The Chair: As you look forward over the next year, do you have all of your mandates planned? How much of your business is planned by yourself and how much is planned by people making requests? Is there a balance?
Mr. Fréchette: I can tell you that in the past six months we have been getting a lot of requests from parliamentarians; more than before. It is clear that there's a trend now, because this government said they want to cost everything. We do have a lot of these kinds of costing requests.
Of course, we do work on some of our own projects. The EFO, the Economic and Fiscal Outlook, is what I call a permanent collection of publications that we do on a regular basis, twice a year, and it is the same thing for the fiscal sustainability report. But increasingly, we are getting more requests from parliamentarians.
The Chair: Fantastic.
Are there any other questions?
Senator Marshall: We meet with a lot of departments. Officials come in to testify when we studying the Main Estimates and also the supplementary supply. One of the areas that we've had a lot of discussion on is infrastructure spending. One of the things we've noticed is that infrastructure spending is not all in one department. It's not all in Infrastructure Canada; it's spread around. It's in Health Canada, Aboriginal Affairs, and all over the place.
Would you be doing anything to track that? Recently we have seen articles in the paper from municipal leaders concerned that the infrastructure money is not going to get out the door during this fiscal year. Do you do any work tracking that?
Mr. Askari: We have a project. It hasn't really progressed a lot recently, but we have a project in our work plan to look at infrastructure spending and how it is going to be delivered, at what rate and whether there are any issues in terms of delays and whether the money will lapse. We are planning to look at that, but as I said, it hasn't progressed that much. It is still in our work plan.
Senator Marshall: That would be an interesting project, because it sounds like it would address some of the issues we've noticed, like talking to departmental officials.
The Chair: That, Senator Marshall, as you know, is one of the studies that we are undertaking. We passed that ask through the Senate and we have until the end of the calendar year. We've had witnesses in so far in terms of infrastructure and we'll probably speak to you folks because the challenge of horizontal management of infrastructure is that when you ask the question, "Who is in charge?'' you might have four, five, six or seven departments that are interlocked with a project.
That's one of the issues we're trying to hone in on. Everything we do is to help get answers so we can be more effective. Understand that we're not out to criticize people.
But with Indigenous Affairs, we get three or four departments in and we talk about each person's responsibility. Health Canada is going to build 43 clinics in 43 nations, and there are 643 nations. So we ask the questions, "How many have you got?'' and "What's the status and who is in charge of the actual execution?'' And then you have the people from CMHC say that they are going to build X number of houses, and we ask who will give them the guarantee on the mortgages. We get different answers in terms of who has jurisdictional authority.
Then we have the Infrastructure group or Natural Resources saying they have 120 sites that are contaminated and we have infrastructure money to clean up the sites and bill for things.
The issue, then, is that we're trying to understand who is in charge and how it works in terms of the control mechanism. It would probably be fantastic if we were able to hook up with this group and get some assistance in terms of the analytics, because we need to make sure that we can do a couple of things. We want to see what the results will be; we want to understand what the multiplier effect will be; and we want to understand the difference of multiplier effects between major projections like bridges and roads versus social development projects like social housing. There are different projects that will deliver different results.
We need to really understand what they are and what it means in terms of quantification and the calculation so that we can have real numbers to determine the multiplier, how many jobs are created and the economic benefit. We're facing challenges just trying to understand the lay of the land. Maybe you folks, with your experience with other departments, could be of assistance to us.
Mr. Fréchette: Thank you for the question and the suggestion.
I'm tempted to ask Jason or Duncan to talk a little bit about their expenditure monitor, because what you're talking about is an enhanced type of this document.
Do you want to mention what you do with the expenditure monitor and whether or not it will be easily possible to enhance that document?
Mr. Jacques: Yes. Thank you, Mr. Fréchette.
As part of one of our ongoing products, we do publish, on a quarterly basis, something called the Expenditure Monitor, which attempts to track government spending. We do have direct access to the government's accounting system, the CFMRS, monthly trial balance data that the government then rolls up and puts into the Fiscal Monitor. As part of that, it's sufficiently granular so that you can actually track capital spending and program-level spending going through individual departments.
In the past, with some horizontal measures we have made an effort and actually aggregated similar types of spending from previous budgets across various types of departments to track the spending. At the very least, I think it would answer part of your question with respect to the in-year rollout of spending. So, where the government has actually put a marker on the table indicating that in 2016-17 a certain amount of cash will be spent on infrastructure across a myriad of departments and agencies, that's a way we can actually get at that question.
With respect to the other aspects of infrastructure spending, they're very good questions with respect to the multiplier effects and looking at the actual results overall and the differentials across projects. As Dr. Askari mentioned, it's something we have framed out as a project that we are slowly making progress on.
As to the preliminary results, just from looking at the literature and looking at what other jurisdictions have done with respect to studies, it's challenging to do. At the same time, it's not impossible to do. In conversations we've had with other stakeholders, municipalities and not-for-profit organizations, everyone has a very similar type of question. If you're planning on dropping $6 billion, $7 billion or $8 billion on infrastructure spending, how do you actually know what the effects are? What are the most efficient projects? Is it better to spread the money out across the country like smooth peanut butter, or is it more beneficial to have a chunkier peanut butter, where you're targeting certain types of projects?
That said, it's something that we are working on.
The Chair: Just so you folks understand, what we'd like is the concept of a war room so that we could understand things from the start of the phase one program, with the Conservatives announcing $33 billion in, say, 2006, to 2014 when they put in $53 billion. That was phase one and phase two of the past government.
I don't know whether there has been a reconciliation of the following: Has the money been spent? How many projects have been completed? What is the return? We need to know what those base numbers are because $120 billion is now going to be injected. We have phase one and phase two. We had $3.9 billion for supposed shovel-ready projects, but here we are: It's June and we're not sure where the money is.
We've heard from Quebec MPs who are saying that many of the infrastructure projects for municipalities were never registered because people didn't understand how to apply the rules and regulations of red tape, et cetera, and there seems to be a vacuum. When we hear these pieces of information, we say, "Okay, how can we monitor this so that we can find out the answers that are going to help us to make recommendations that people will gladly accept so that we can be more productive and can get the returns and the multiplier effects and the successes?'' because the government is saying this $120 billion is going to be the economic engine.
Then people mix in things with environmental and green projects. We hear that hockey rinks and parks and stuff that was not allowed to be done in the past can now be built. There's been a shift. There seems to be a fluid, moving situation with some of the base rules that they're establishing for new programs. If we had a history of what was done up to this point of the new group — and we're creating history moving forward — and analytics on that, we could see some results. Moving forward, we could then see where the opportunities are and how it's being managed with all of the horizontal integration.
One of the things we'd like to focus on is indigenous peoples because of the focus on helping this historic group with a reconciliation agreement. We could really use your help in terms of doing some of the analytics. We're not necessarily the most analytical people, although we have colleagues who are tremendously financially competent, such as Senator Marshall. We want to look at it as a business. We want to look at it with people who have the experience to be able to crunch the numbers.
Senator Marshall: Did you say that it's notated? You have access to the accounting information of the government. You're saying it's notated where the infrastructure spending is coming from? You know the accounts?
Mr. Jacques: What's notated within the government's chart of accounts is whether it's capital spending or not, and we can also cross-reference that by the individual programs or the departments themselves. But, again, it's primarily on the spending side. It will give you the monthly cash flow. So against what has been appropriated within the Main Estimates or supplementary estimates bills, you'll be able to track, on a monthly basis, how much capital spending is going out the door and across which departments and agencies.
In some situations, given your background, you'll realize that not everything is perfectly captured within the system. But the Government of Canada, when it comes to data in general and accounting and cash flow data, does a very good job keeping track of it. It is a very robust system.
Senator Marshall: That's good.
The Chair: I think we're coming to an end. This is the first real meeting that we've had together.
As a closing statement, Mr. Fréchette, what do you expect from us in terms of what you would like our working relationship to be? I think we should have asked you that question at the beginning of the discussion. I apologize for that. Could you maybe give us your thoughts on what you expect from us in terms of developing an evolving relationship that allows you to do what you're doing and gives us information that we need to have to move forward?
Mr. Fréchette: As I said, these three committees and all of the parliamentary committees are part of the legislation. It is up to you to ask us if you have projects or ideas or concepts that you would like us to develop.
As I said also, because of our limited resources, sometimes we can have discussions, but it's more difficult to do the project in a timely fashion. Sometimes we have to postpone.
We have 16 analysts, total, in the PBO, with two administrative assistants. That is the team. Dr. Askari, Mostafa, and all of the management team are really good at managing the time and trying to establish priorities. But it's really up to you. You can contact us any time, as you know now.
The analysts are there. They know us as well. They are kind of colleagues within the Library of Parliament, but we do two different types of work. We are in contact with them.
It's really up to you to say, "Okay, we would like to do something.'' We can prepare for you some kind of work plan and see if it's feasible, when it's feasible, and so on.
The Chair: So we should have realistic expectations and make sure we understand what your physical capabilities are and your timing.
Mr. Fréchette: I can give you an example. A year ago, I had a discussion in another context with a former member of this committee — maybe she's still a member — Senator Bellemare. She really appreciated our report, but she said, "I would like to have a blog or a one-pager of all of your reports.'' Now we have that. It is directly from a discussion with a member of this committee that we eventually developed that blog and that one-pager for all of our reports.
The Chair: Any other questions before we go?
Senator Marshall: I'd just like to say thank you. We do use your office, and we've had great service and great information. Thank you very much.
The Chair: On that note, we thank you very much.
(The committee adjourned.)