Proceedings of the Standing Senate Committee on
National Finance
Issue No. 63 - Evidence - April 18, 2018
OTTAWA, Wednesday, April 18, 2018
The Standing Senate Committee on National Finance met this day at 6:46 p.m. to study on the federal government’s multi-billion dollar infrastructure funding program.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on National Finance. I am Senator Percy Mockler from New Brunswick, chair of the committee.
I wish to welcome all of those who are with us in the room and viewers across the country who may be watching on television or online.
As a reminder to those watching, the committee hearings are open to the public and available online at sencanada.ca.
I would like to ask senators to introduce themselves, starting on my left.
Senator Jaffer: Mobina Jaffer, British Columbia.
[Translation]
Senator Pratte: André Pratte from Quebec.
Senator Moncion: Lucie Moncion from Ontario.
[English]
Senator D. Black: Douglas Black, Alberta.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Toronto.
Senator Neufeld: Richard Neufeld, British Columbia.
The Chair: I also recognize the clerk of the committee Gaëtane Lemay and our two analysts, Sylvain Fleury and Alex Smith, who team up to support the work of this committee. Thank you.
Today we resume the committee’s special study on infrastructure. To put it in context, I remind you that the committee started this study almost two years ago on May 4, 2016.
The Finance Committee wanted to monitor the implementation of the new funding program and learn from the experience of previous programs.
Since then the committee tabled two interim reports. The first report, tabled in February 2017, was entitled Smarter Planning, Smarter Spending: Achieving Infrastructure Success. The second report, tabled in July 2017, was entitled Smarter Planning, Smarter Spending: Ensuring Transparency, Accountability and Predictability in Federal Infrastructure Programs.
This evening and for a couple of meetings next week, we will have hearings on the particular topic of infrastructure.
To discuss his latest report entitled Status Report on phase I of the New Infrastructure Plan, published on March 29, we welcome the Parliamentary Budget Officer.
To Mr. Fréchette, the PBO, we thank you for making yourself and your team available for the Finance Committee of the Senate of Canada.
Accompanying Mr. Fréchette from the Office of the Parliamentary Budget Officer, we have Mostafa Askari, Deputy Parliamentary Budget Officer; Trevor Shaw, Economic Advisor-Analyst; and Negash Haile, Research Assistant.
I have been informed, Mr. Fréchette, that you will make opening remarks, to be followed immediately by questions from the senators.
[Translation]
Mr. Fréchette, thank you again. The floor is yours.
Jean-Denis Fréchette, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Honourable senators, thank you for inviting the Office of the Parliamentary Budget Officer to continue working with your committee on the federal government’s infrastructure program and giving us the opportunity to discuss our latest report, which provides an update on phase 1 of the New Infrastructure Plan.
[English]
As you know, by collecting data from 32 departments, agencies and Crown corporations, we were able to identify over 10,000 projects, of which 8,800 were approved in 2016-2017 and 1,300 were approved in 2017-2018.
No federal contribution was provided to 1,667 projects, representing 17 per cent of approved projects, as of January 31 this year.
Of the total $14.4 billion budget for phase I of the New Infrastructure Plan, we estimated that $7.2 billion, or half of the total budget, has yet to be allocated. We estimate that Budget 2016 infrastructure spending raised the level of real GDP by 0.1 per cent in 2016-17 and 2017-18, increasing the overall level of employment by between 9,600 and 11,000 jobs in 2017-18.
We will, of course, continue our analysis and keep working with the 32 different organizations that make up our database, including Infrastructure Canada, which is responsible for 13 of them. Our coverage of the net funding extends beyond what Infrastructure Canada is responsible for, which caused some interpretation problems.
[Translation]
However, Infrastructure Canada has cooperated fully with the Office of the PBO and reiterated its willingness to provide any information requested. But beyond the number of projects and the interpretation of them, what is most important for us is to monitor them so that parliamentarians can see how the $14.4 billion announced in Budget 2016 is being spent.
[English]
On that point, as your committee has asked us to do in the past, you should soon receive revised data on phase I infrastructure spending to support your own research and analysis.
I would also like to mention that two days ago, Finance Canada provided a new set of data on the full financial plan for infrastructure spending and the $70 billion that we could not identify from Budget 2018.
My colleague Trevor Shaw would be happy to elaborate on this and even share with the committee the table that we recently received.
[Translation]
Thank you, Mr. Chair. We will be happy to answer your questions.
[English]
Senator Marshall: Thank you very much for being here this evening and for your report.
I want to start by referring to your status report on phase I. That’s just one of the three phases of infrastructure, the $14 billion. I noticed in the report that you made some reference to some information not being provided, like start dates and end dates.
I know there’s not a lot of discussion with regard to how much money they’ve spent, so can you talk a bit about the restrictions or the availability of information? We’ve been trying to track the infrastructure spending also, with our own people, and we’re having a bit of a problem.
I am wondering if you’re encountering similar problems because it seems to be hinted at in your report. Could you comment on that?
Mr. Fréchette: Just before I ask Negash Haile to give you the details, welcome to my club because, as I mentioned, it’s exactly the same problems that we’re facing. Since then, we’ve had meetings over and over again with Infrastructure Canada. They’re supposed to provide specific dates, but for the moment we’re still waiting for information.
Negash, do you want to be specific?
Negash Haile, Research Assistant, Office of the Parliamentary Budget Officer: Absolutely. When we contacted the federal departments, we asked them to provide us as much comprehensive information as they had available, and to the best of our knowledge they did; but in our communications with them they indicated that going forward they will make more efforts to provide data in a more timely fashion.
Senator Marshall: Will they be providing spending data? What the report is focusing on is the number of projects approved and what the estimated federal contribution will be, but there are no details with regard to spending. Will you be looking for that kind of information?
Mr. Haile: That’s something we can definitely include in our next report.
Senator Marshall: That would be very helpful.
I was looking at your report in the context of Budget 2018. In another report on Budget 2018, you briefly mentioned infrastructure. For the information that’s in your report on infrastructure, when you look at what’s in Budget 2018 they’ve now reprofiled money and pushed money further into the future. You’ve already looked at some of this.
I looked at the numbers and used some of the percentages you’ve provided. I don’t think they will be able to spend all the money they indicated they’re now going to reallocate in future years. I know they decreased the numbers, but I can’t see realistically how they will spend the money. You say in your infrastructure report they are prone to large lapses.
Did you come to any conclusion? Can you tell me whether what I am thinking is wrong, or have you come to any conclusion with regard to whether or not they’ll spend that money?
Mr. Fréchette: Thank you for the question. Your thinking is certainly not wrong. Trevor will give you the details, including the table I mentioned in my presentation that we recently received.
Senator Marshall: Will we get that table tonight?
Trevor Shaw, Economic Advisor-Analyst, Office of the Parliamentary Budget Officer: Sure. There are various sources of information with respect to the implementation of infrastructure spending. The primary source we’re using for the plans and execution of infrastructure spending is Budget 2018. There were updated tables provided in the budget, as you know.
With the entire envelope of $186.7 billion in planned spending, roughly $115 billion was actually detailed in the budget. We then asked for the remaining segment of funds provided for in that $180 billion infrastructure plan.
We’ve received that data. That being said, there aren’t specific project-by-project details on the implementation in terms of when cash flows will actually be disbursed. These are, to our knowledge, the best estimates of when spending will occur.
That being said, we use other information sources to corroborate that information because it’s difficult to scrutinize at times. We have our survey of federal departments detailed in the phase I report, but we also consult information from Statistics Canada and the provincial budgets.
Provincial governments and municipalities are the entities that are actually implementing a lot of this infrastructure spending. A very small proportion of the overall total federal infrastructure spending envelope is actually spent and owned by the federal government itself.
The provincial governments and the cities are very important partners. Their plans and revisions to their plans, we think, are very helpful tools in assessing whether federal plans are actually flowing down to the lower levels of government.
What we have seen is that in the largest provinces of Ontario, Quebec, Alberta and British Columbia, there are increased plans for capital and infrastructure spending at those governments but not necessarily a one-for-one increase.
If there’s a $1-billion increase in the plans for federal infrastructure spending, we’re not necessarily seeing that full $1 billion reflected in all provincial budgets. Of course the municipalities are important partners as well, so we have to use an amalgamation of many different data sources.
All that being said, Budget 2018 is our best estimate but we’re using other data sources to guide our analysis of whether that a realistic forecast at this time.
Senator Marshall: The government is putting these numbers in the budget and they’re putting these numbers in their infrastructure plans, so they must be basing their numbers on something. Are they giving you the data to support the numbers that they have in these documents?
Mr. Shaw: At this time we don’t have a reconciliation per se between aggregate, accrual-based financial spending plans in Budget 2018 linked fully to all the project plans.
There could be hundreds or thousands of different infrastructure projects. We don’t have that full reconciliation at this time. It’s not to say it doesn’t exist but it’s not something we have accessed.
[Translation]
Senator Pratte: First of all, I have a question of clarification. When I look at the numbers under the planned spending heading for each year, am I to understand that this is when the money is spent?
[English]
That’s when the cash comes out. Is that it?
[Translation]
Mr. Fréchette: Yes, basically.
Senator Pratte: So, when we calculate the economic impact of the infrastructure programs, I have to understand that the money from the federal government is paid out at the end of the project. Is that correct?
Mr. Fréchette: Yes, that’s right.
Senator Pratte: The calculation of the economic impact is not necessarily done at the end of the project, in a way. The construction is spread out over a few years. When calculating the economic impact, how can this be done?
Mr. Fréchette: That plays an important role, which explains the amounts I gave, particularly for 2016-17 and 2017-18, that is, the impact of 0.1 per cent on the GDP. If the money allocated at that time has not been spent, the impact of the economic impact is smaller. It is weaker not only economically, but the economic situation at that time is also weaker, that is, different from what it can be if the money is spent later, when it is really spent. In other words, the 2016 projections were based on an economy that operated at a lower potential in 2016-17 and 2017-18 than the potential for the next few years. If the money is not spent, the impact is different.
The Department of Finance predicted more significant impacts in 2016-17, assuming that all of this money — the $14 billion that was to be spent in the short term — would be spent, while the economy is below its current potential capacity and interest rates are lower, in particular. The impact would have been greater.
As all this is carried forward, we look at the budgeted amounts and not the amounts spent. When they are spent, the impact is felt at that time. The impact will be weaker over time if the economy has changed, and if the amounts are different as well. If you look at the 2016 numbers and the numbers we have calculated, you come to a totally different amount on the significance of the economic impact.
Senator Pratte: This isn’t the first time we’ve seen this. We have seen it in other infrastructure programs. Is what you are showing basically not calling into question the value of infrastructure programs in stimulating the economy in the short term?
Mr. Fréchette: Absolutely, that’s exactly what we see, meaning that there are expectations that are high in the short term, but the impacts will be felt in the medium and longer term. It doesn’t cause a problem, but in the short term, you are absolutely right that we can’t have the same expectations as in the longer term.
Senator Pratte: When these investments are made in an economy that isn’t operating at full capacity, but almost, as is the case now, where the unemployment rate is at its lowest in 40 years, it certainly, as you said, doesn’t have as stimulating an effect. Does that have negative effects or is it just that it doesn’t stimulate the economy as much as we’d like?
Mr. Fréchette: It has negative effects, in the sense that it can delay certain things. Interest rates, which are another factor, tend to increase these days, which means that if you are at a high potential capacity, that is, a capacity that is probably stronger than in 2016, it can delay some projects because of a lack of capacity and human resources. So, yes, indeed, it can cause even more delays. Is it negative? In the short term, yes; in the longer term, we have to see if the amounts can be spent.
[English]
Senator Eaton: Mr. Fréchette, just to follow on what my colleague Senator Pratte was asking you, it was explained to us that provinces do something like 40 per cent of the infrastructure, cities do something like over 50 per cent, and the federal government does 2 per cent or 3 per cent.
To give out infrastructure money, does the government not have to get provincial agreement if they are to do transportation, green, or whatever projects with the provinces or with the cities? They have to come to agreement, do they not?
Mr. Fréchette: Yes.
Senator Eaton: Would this be a reason why they’re not getting the money out the door faster, because they don’t have the provincial or municipal agreements?
Mr. Fréchette: It’s certainly one of the reasons. There are many other reasons, including the timing of approval at the federal level of all these projects. It is not only the agreement but some provinces are not ready to launch some of the objectives the federal government imposed in terms of their investment in the infrastructure plan.
Mostafa Askari, Deputy Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Certainly, when there are other partners in any kind of activity and plan, there could be delays. This is one of the reasons. Obviously they have to get agreement and then the provinces will have to actually initiate the projects and send the receipts to the federal government to get the money.
Senator Eaton: It’s stunning when you think they’ve been in power now for two years. Don’t provinces already have priorities with the cities in terms of transportation and subways? Anyway, I take what you say. They haven’t been able to get it out the door.
As you said to Senator Pratte, the money always comes at the end. It’s not when you start a project. You start doling out the money as the project develops.
Mr. Askari: As far as we know, the way they work is that as they receive a bill from the province they pay the money. It could be in stages of projects that the provinces or the municipalities send their bills and then the federal government will pay.
The way we calculate the economic impact is the amount of cash that has been spent. Whether it is by the province or by the federal government really doesn’t matter in a sense because it’s money that goes into the economy. Once the money goes into the economy, the impact will be apparent.
We’re showing that about $7.2 billion of the $14.4 billion has been or will be spent by March 31 of this year, which has already passed. That’s the way we have calculated the economic impact.
Senator Eaton: Also, I think you say in your report that if federal spending on infrastructure occurs more slowly than anticipated this will have important implications for the budgetary balance as well as the strength of the Canadian economy.
We saw Stephen Poloz this morning being almost negative by not raising the rates. I take it you mean that the deficit will be bigger than anticipated later on.
Mr. Askari: No, actually.
Senator Eaton: It won’t. The deficit will not be bigger.
Mr. Askari: There are two issues here. If you delay the spending, the current deficit will actually improve because you’re not spending as much money. That will be transferred into the future, so the government will spend that money.
The numbers will change. The profiles of these numbers will change, but currently we will have a lower deficit and then probably a higher deficit in the future.
Senator Jaffer: Your report has been very useful. I have some questions first on the stimulus and then on gathering information. Your report, as far as I am concerned, can only be as good as the information you get.
To start off with the infrastructure stimulus, as a student, I understood when there are no jobs or fewer jobs the government invests in infrastructure. What confuses me a bit is when there is the lowest level of unemployment and yet we are dealing with stimulus of jobs. Can you balance that for me, or have I not learned my lessons as a student well?
Mr. Askari: You’re right in the sense that the stimulus part of the infrastructure probably is not necessary right now because the economy is actually operating very close to its capacity.
When the program started in 2016, at the time we had what we call an output gap, which means the economy needed some stimulus. That was phase I of the infrastructure program, and the specific objective of phase I was to stimulate the economy.
The rest of the infrastructure program is the strategic infrastructure investment. The main objective, first of all, is to renew the infrastructure. If there is an infrastructure gap, we need to spend money to do that and to help improve productivity and potential output in Canada.
Those are the strategic objectives. We can still continue doing that even though the economy is actually reaching capacity because if you succeed in increasing the productivity and potential level of output, then that will not create any kind of problem and excess demand in the economy.
When we show the economic impact in this report, we are providing two different scenarios. Because the economy is reaching capacity, we believe that further investment of stimulus will actually lead to higher interest rates and higher interest rates will reduce the impact of the stimulus.
In one scenario, we show with that increase in the interest rate the reaction from the Bank of Canada. The other one is that we assume that there is no reaction from the Bank of Canada and then we show the stimulus.
The difference between the two in this case is very small because the overall impact of the stimulus package is very small. It’s 0.1 per cent of GDP. The difference is: With the monetary policy reaction, that increase in output will actually disappear over time because as interest rates go up it will offset the impact of that.
Senator Jaffer: Then 0.1 per cent leads to a maximum of 11,000 jobs.
Mr. Askari: That’s correct.
Senator Jaffer: It’s not that many jobs.
Further to what Senator Eaton was saying, I hear from speaking to some municipalities, not every municipality, that there is infrastructure money. However, the municipalities don’t have the ability to identify the projects and to get the projects out as fast as we would like.
Should the federal government be playing a role in helping municipalities, from your experience?
Mr. Askari: I don’t know whether the federal government has the capacity to help them in those terms, but I think one thing is very clear. It’s not only recent infrastructure. We have seen this over the past 10, 15 or 20 years. Any infrastructure program leads to some delay. It’s nothing new. It has always happened.
Sometimes it’s worse than others, but in all cases of the government involvement in spending money for infrastructure there are delays. Part of it is because there are other players involved. Another part of it is because the idea is that you are going to invest, but by the time you make the plan, get the approval and everything is done, it takes time.
Maybe the governments are overpromising in terms of how much they can spend, but certainly the plan is there to spend that money, whether or not they will actually be able to do it.
Senator Jaffer: As I said earlier, your report can only be as good as the information you can gather or you are able to get. I heard Minister Sohi speaking about not being forthcoming in giving the information. It is not that he was holding back but for other reasons.
Has that situation improved? Are you getting the information faster? I have all kinds of questions on the department not giving the information. I am not trying to make anyone look bad. Everyone has their challenges. For me, reports are only as good as the information you get.
Mr. Fréchette: As I mentioned in my presentation, the only important thing for us is to provide that kind of information to this Senate committee and other parliamentarians.
Very quickly, we send over 2,000 emails between January and March to various departments and two extensions are provided. On requests for meetings, we never get a reply from some departments.
The minister’s office asked for the purpose of the data. This is the kind of weekly requests we had, until Minister Sohi, when we published the report, made a personal call to me and said, “We understand that we had some problems in terms of communications.” I respect that. I understand that.
Under the new legislation, as the PBO I have to follow the legislation. I have to send a written request to the minister. It is no longer to the deputy minister; it is to the minister. Even though I cc’d the deputy minister and a bunch of other people, apparently this creates a problem. I will not argue about that, but apparently sometimes it goes to the Parliament Hill office and so on. I don’t buy that, but I can play the game as well.
This is really the story. It went on and on for three months. Minister Sohi made a commitment. It was public. He put out a tweet. It was also in the newspaper. We now have a relationship with the department.
I met with the deputy minister, and I am sure that now everybody will be cc’d to reply immediately. If they don’t reply, if you remember in the new legislation, there is a parliamentary remedy. If the Office of the Parliamentary Budget Officer doesn’t get the information, I can complain to the two Speakers, the Senate Speaker and the House of Commons Speaker. I will not hesitate to do that. Now I think people are beginning to understand that.
Senator Jaffer: Mr. Fréchette, the last thing I want to say to you is that I was involved when the first PBO came on board and the challenges we had. Now we are where we are, and I commend you on this.
You do a lot of work with the public as well. Please do more because it helps. I am always listening to you when you speak publicly because we all get educated and it’s very helpful. Thank you.
Mr. Fréchette: Thank you.
Senator Andreychuk: I apologize that I was a little late, but my other committee meeting was running late. Senator Cools and I had to attend it.
I am reading the press release that you put out where you said:
. . . beyond the number of projects and interpretation of them, what is most important to us is to monitor them so that parliamentarians can see how the $14.4 billion announced in Budget 2016 is being spent.
You enumerated some of the difficulties and problems with that.
I remember when this infrastructure program was rolled out. It was to be an impetus to get jobs going and to kickstart the economy in a different way. Now it’s delay, delay, delay. We’re into another phase and it’s long term now.
Do you analyze at all, or do we as parliamentarians have to do that, whether the policy that was put out to match the figures is being met?
Is it really the one that we should be doing long term for our economy, for innovation and for competitiveness? Or, should I be asking the ministers only that question?
Mr. Askari: I think in general there is a view that if there is an infrastructure gap, it is the government’s responsibility to invest in that. The payoff from investment infrastructure is probably higher than any other kind of government spending because of an investment in the capacity of the economy to produce.
For example, if you invest in infrastructure at the border, that will facilitate the flow of goods across the border. That certainly has a positive impact on the economy. That’s the principle, and that’s why most governments engage in infrastructure investment. They believe it has some positive impacts on their economy.
Again, the intention of this program was the same as was the intention of the legacy program from the previous government. Some of that money is still flowing and will have to flow over the next 10 years.
I don’t think I can say the policy is wrong. The intention is there to invest in infrastructure and to fill the gap that exists. I guess implementation is an issue here. There are delays and these delays will obviously have some consequences for the economy and some consequences for the profile of the government’s budget balance.
Mr. Fréchette: If I may add something, what Mostafa said is right. Policy is not the business of the PBO, but a plan is important for Parliament. A plan behind the policy is certainly important, but having results are also important and reporting on those results for the PBO are very important.
This is the sentence I used: “to report back to parliamentarians so that they better understand.” Within the office we often have this conversation: “Why don’t we have $14 billion on a dashboard on an almost monthly basis?” You know what a dashboard is, with all these lights and so on. Basically, you put that in front of parliamentarians on a monthly basis.
That would probably be the perfect way to report back because a plan, results and reporting are what we’re looking for.
Senator Andreychuk: And that has been your struggle.
Mr. Fréchette: It has been for a long, long time.
Senator Andreychuk: When this first started, there was a lot of talk of big infrastructure. That would be the way to really push the economy.
I know the pushback from my province was: “Where do we buy into this?” Slowly, they found ways. It’s an amorphous mass. It’s very hard to find out what is actually happening to be able to tell people how we’re benefiting from this investment.
As you said, Mr. Fréchette, if we could get these timelines and information on your dashboard, that would go a long way to get us to understand what is actually happening.
Mr. Fréchette: When it comes to large infrastructure and long-term infrastructure, if you’re a person who got one of the 11,000 jobs created, certainly you appreciate this investment. Is it enough? Certainly not. That’s what I mean by the results.
In the long term you have to maintain your infrastructure. A plan is something that comes in an electoral platform or something like that, but the other thing is having a vision of what you want to implement in the long term. Either broadband in your area or better infrastructure for roads and so on are really the plan, but does it match or harmonize with the provincial vision, which is the other aspect of the infrastructure program?
Trevor, I know you have something to say about it because we argue regularly.
Senator Andreychuk: Go for it, argue.
Mr. Shaw: I’ll just add one thing to something you mentioned. The implementing partners, be it the provincial governments, municipalities or the territories, will have capital budget frameworks in place, usually over one, two or maybe up to five years.
It’s not necessarily a straightforward process to identify infrastructure and capital spending projects that have a positive economic benefit. The larger the project, the more difficult it might be to identify, do the analysis and the due diligence required to decide if it is in fact good public policy to invest in the infrastructure project.
We’ve identified as a potential source of delay the fact that the implementing partners, the other levels of governments, have their capital spending frameworks and infrastructure plans in place. Adding on new projects in light of changing federal objectives might take time. That’s the only thing I’ll add to that discussion.
Senator Andreychuk: That adds delay.
Mr. Shaw: Potentially.
Senator D. Black: It seems like such an odd problem that you’re confronted with. There are commitments being made to put funds out to assist in the development of infrastructure in Canada, yet funds aren’t flowing out.
I am wondering whether you believe that the government has elected not to get the funds out, for whatever reason.
Mr. Askari: I can’t really say that because I don’t really have that information. They have a plan, and we assume the plan is there for them to spend the money. If the money doesn’t go out, I can’t really say that their intention, to begin with, was not to spend the money. I have no way of saying that.
Senator D. Black: Circumstances change. To me, it just seems so unusual.
Mr. Fréchette, have you anything you could add to that?
Mr. Fréchette: I mentioned before that expectations are everything in terms of infrastructure and federal money, expectations in terms of what you expect from your partners. We mentioned that municipalities, provinces and some national governments are partners.
If Senator Forest were here, he would say yes because he understands that. He worked at the municipal level, as did some of you. This is exactly the kind of partnership you need for this kind of federal investment, but perhaps you don’t have a partnership that works perfectly.
The federal government had the expectation of spending $14 billion in two years. It did not happen because some of what we mentioned before did not happen. I don’t see any evidence showing that they don’t want to. I think they tried a lot. In my own personal contacts with deputy ministers, they try a lot.
Senator D. Black: Very well, that’s great.
Are you saying that you do not have the data because of a lack of cooperation or people are busy? Are you being put in the position that you cannot report on a regular basis to parliamentarians because, for whatever reason, you cannot gather the data? Is that what you’re telling us?
Mr. Fréchette: We’re saying it takes time to get the data. As I mentioned, it took three months of exchanges and so on. Eventually, we get some on time and with extensions in other cases.
It seems like the communication is not always there. We don’t know. Is it because they don’t have what we ask for exactly, or is it a matter of semantics? We mentioned the difference between what we see in the budget, what is allocated and what is spent. Is it a matter of these kinds of semantics?
I don’t know. It is probably a mix of all of that.
Senator D. Black: Do you feel you’re getting as high a level of cooperation as possible to perform your job?
Mr. Fréchette: It’s improving right now.
Senator D. Black: I have a technical question, but I don’t know whether or not you can answer this one.
On Sunday past, the Prime Minister indicated that the government would be offering some kind of support for the Trans Mountain project. Would you think those funds could potentially come from this infrastructure money?
Mr. Askari: I don’t believe that would be the case, but I am just guessing because that’s not going to be a direct investment by the government, from what I understand.
Senator D. Black: If it were to be, it could be spent, couldn’t it?
Mr. Askari: If it were to be, it could be.
Senator Neufeld: Mr. Fréchette spoke about the minister meeting with you a number of times to actually get the information to you that you folks are requesting, and that you now have the ability to go to both Speakers of the Senate and the House of Commons if you’re not getting the information.
Have you had to do that?
Mr. Fréchette: Not yet. I will not hesitate to do it. That’s what I told one specific deputy minister. I said to be careful when you reply that you did not provide the information to the Office of the PBO. I specifically explained the legislation.
I think some departments still haven’t understood what the implications of the new legislation mean.
Senator Neufeld: Can you tell me what you think going to the Speakers and not taking anything away from the Speakers will accomplish?
Let’s remember that the Senate Speaker is appointed by the Liberals and is a Liberal. The House Speaker is a Liberal. What authority would a Speaker have? Maybe I don’t understand some of what the deal is, and maybe you could explain it to me.
What authority does the Speaker have to bring government departments to heel, to provide the information? What authority do they have?
Mr. Fréchette: Thank you for the question, which is a great question in terms of procedure. Number one, there’s a matter of perception, I think. I don’t think there are any departments or ministers who wish to be on the news about PBO making a complaint.
As you know, the standing committees have the power to call for people and papers, which is what you do on a regular basis. I would not say that you can go way beyond that, but it’s certainly a tool.
The Speakers can say to a committee, “Could you call for people and papers and help the PBO to get the information?” That is the normal procedure. This is the parliamentary way to get the information. The clerk can explain it better than I can but that is the way you can call for witnesses and documents and so on.
Senator Neufeld: Thank you for that; I appreciate it.
Senator Black asked a question that I was wanting to ask too. Some $7.2 billion has yet to be allocated out of the $14.4 billion on phase I, which was the 2016 allocation. The question has already been asked about what happens to that money. You’re right that the deficit is that much lower because it didn’t get spent.
We’re coming to a time when there will be another election and we may see out of phase II not very much money spent. All of a sudden, the government can look very good because we didn’t have as big a deficit as what was anticipated, and yet we’ve done all of these wonderful things about building Canada.
Am I too cynical, I guess you could say, or am I a bit more in line with what really takes place? Maybe you could help me with that.
Mr. Fréchette: You’re not the most cynical person around here.
Mr. Askari: That’s a purely political question, senator. I don’t know the answer.
Senator Neufeld: At least it’s on the record. That’s what I intended to do.
The federal government has lots of responsibilities all of its own across Canada on a whole bunch of things. I understand fully because I’ve been through the process of how you get together with provinces and municipalities. You’ve explained that very well.
It’s not easy because the federal government comes in with a plan that says, “This is what we want to do here in your province,” and the province says, “No, we want to do this.” It takes a long time to argue that through and figure it all out.
I’ll use the North, for example. The federal government owns a highway called the Alaska Highway. It’s from Fort St. John, all the way to the Alaska border. It’s 1,202 miles. They don’t have to converse with the province. They don’t have to talk to the Yukon government. They could just go in and start doing some work to it quite easily.
That’s just one example. There are all kinds of things. How about the Trans-Canada? The federal government doesn’t have to talk to anybody, I don’t think. Maybe I am wrong, but I don’t think it has to talk to anybody about going in and actually fixing the Trans-Canada. I drove on that highway through Saskatchewan, and it’s a back-breaker.
Those are just two examples. I could list you tons of them that the federal government could go out and do. How do we get that happening? The federal government is saying, on one hand, that they’re having trouble negotiating with provinces and communities. They don’t have to negotiate with anybody on those projects. They can just go in and do it.
Help me a bit. Why don’t they do some of that? I mean, with $7.2 billion left on the table, just think what you could actually do for the benefit of Canadians on just those two things. There are tons of other stuff. There are military hospitals. You name it. There are all kinds of things that they could do. Do you agree with me or not?
Mr. Askari: You’re asking whether a different allocation of the fund would be better than what they are doing right now.
Senator Neufeld: It’s infrastructure. A highway is infrastructure.
Mr. Askari: I know. A better allocation of the infrastructure money is not something that we can comment on because it is purely a policy question that the federal government and the elected representatives really have to debate and decide, not the PBO. No, we cannot really comment on the policy.
Senator Neufeld: Okay, you can’t comment on it. Can the PBO actually investigate some of those things that the federal government could do on their own? You don’t have to tell them, but you could make those suggestions. Maybe when those suggestions come out from the PBO, it might help them and jar them a little bit to look at some of these things and spend it, instead of trying to keep it on the books until it’s convenient to actually say, “Hey, we don’t have as big a deficit as we said we were going to have,” and “We’re good people. We’re moving forward and building all of these things.”
Mr. Fréchette: Thank you for the question. I’ll try my best to stay really neutral. I have spent 32 years of my life on the Hill. I learned something about federation. It’s a great thing, but it’s a complex issue when it comes to federal-provincial.
I’ll use one of the examples everybody is talking about. Senator Pratte is certainly aware of the Champlain Bridge in Montreal, which is federal infrastructure.
Senator Neufeld: I was actually looking at western Canada.
Mr. Fréchette: Yes, I know, or the Windsor Bridge. I am just using it as an example. You know what happened with that bridge. Originally there was supposed to be a toll. Then there was negotiation with the province and the mayor of Montreal said no toll. Then the government changed and said there would be no toll.
This is a really good example of how a federal infrastructure program works. Even if you’re in western Canada at the border with Alaska, you will still have the province saying no, we want this or we want a concrete road instead of asphalt, or something like that. That will happen.
Even in the federal system this is the kind of discussion you will have whether or not the PBO can investigate. You’re asking PBO to investigate federal-provincial jurisdiction which is beyond our mandate, really.
Senator Neufeld: I appreciate that, so I’ll just end quickly. The Alaska Highway, I can tell you, they own lock, stock and barrel. They maintain it and they have since the war. They built it along with the U.S. They could go in and do that work without talking to anybody.
Do you know what? There might be a few but hardly anybody will complain about it, guaranteed. There will be no complaints if they go in and fix the highway so that it’s a decent highway to drive on, none whatsoever.
[Translation]
Senator Moncion: On page 9 of your report, you have a table that shows the distribution of phase 1 projects by region and presents the various projects. For example, if we look at Ontario, we see that there are 2,884 projects that represent 32 per cent of the total funds, and so on. I’m wondering what the point is of calculating the per capita investment in infrastructure. What additional information does this column give the reader about the projects?
Mr. Fréchette: I had this discussion with Mr. Haile. We received several requests from the provinces to explain the percentage of the investment share and where we were. Investment in infrastructure per capita makes one thing possible — and I will let Mr. Haile round out the answer. Ontario is a good example. There are many projects. A per capita rate of 32 per cent is a relatively small amount. It should also be understood that all these projects are explained by the population of one province compared to another. The number of projects in some provinces may be small compared to other provinces, where the number is much higher. We talked about the Yukon, where it is only 1 per cent, or 131 projects, for an average of more than $1,800 per capita. This figure is likely to give an idea of the importance of each of the projects, rather than a series of small projects, which is probably the case in Ontario.
[English]
Mr. Haile: I would add one more point. If you look at the number of projects in terms of the provinces they’re distributed over, you have a province like Ontario that has a greater number of projects, and then you have a province like Quebec which has a smaller number of projects. We wanted to give a general idea of the regional distribution of the projects and of the infrastructure spending.
[Translation]
Senator Moncion: Reading this information, I see that in Ontario the population is 14 or 15 million, while in other provinces it is about 300,000. It seems to me that the calculations presented are disproportionate to the population and the money invested, but I understand.
My second question concerns the matching between the federal budget and the provincial or municipal projects. If some form of matching is done, there will be an amount, say, $14 billion. But will that $14 billion be invested based on known projects that will be carried out in different places, or is it an amount that is randomly determined to invest in projects that will eventually come to fruition? Is there a correlation or a form of matching that is done between these two or three levels of government?
[English]
Mr. Shaw: Unfortunately, there’s not a clear formula or blueprint that allows one to go from the budgeted funds, federally, to see project by project and dollar for dollar how it’s being spent by the lower levels of government. We’re doing our best to use public information and information we request from federal departments and Crown corporations to try to do this mapping.
So far, what we’re seeing is that the budget envelopes at the federal level exceed the amounts in terms of incremental spending by the provinces. It is a very difficult exercise to track this increment because the federal budget doesn’t necessarily have tables that then link to provincial budgets or territorial budgets. It’s something we’re certainly aware of. We’re trying to use information in all data sources, be it provincial budgets or territorial budgets, to try to see where outflows from the federal government actually then link up to revenue inflows and increased spending at the provincial and territorial levels.
[Translation]
Mr. Fréchette: If I understand correctly, your question is a priori or at the beginning. Initially, it’s extremely difficult. There are two ways in which federal money is transferred to the provinces. The gas tax is a tax transfer that is done directly. This is what many provinces prefer because they have the choice of deciding what they want to do with the amount.
The second way is distribution and negotiations between the federal and provincial governments. This process is more complex and causes delays.
The gas tax is the quickest way. The provinces and municipalities use this process, and it works relatively well. As a result, they can realize the projects of their choice at the local level. When it comes to federal contributions under the major infrastructure program, negotiations and matching are necessary, as you mentioned. This method doesn’t always work, because the immediate priority may not be the same at the provincial and municipal levels when the federal government is ready to pay.
I don’t know many provinces or municipalities that are willing to refuse the money they are given. They still need to have the time to think about it and have the necessary resources, which can lead to delays of one year to match that amount to that of the federal government.
Senator Moncion: Earlier, you mentioned your economic analysis with respect to interest rates and investments in infrastructure.
For example, the municipality where I live has difficulty funding projects because of the economic downturn that has occurred in recent years. Gradually, we are starting to have a little more money to invest. To what extent can this factor have an impact? All municipalities in Canada are starting to regain the upper hand. To what extent would this factor affect the implementation of all these projects to provide the remaining $14 billion or $7 billion?
Mr. Fréchette: The impact is significant. It’s one of the four or five factors that have been mentioned. Some municipalities need one year to build a road or bike path.
Senator Moncion: To make things right.
Mr. Fréchette: Since provincial and regional roads fall under municipal jurisdiction, the municipalities must wait one year in their own budget cycle before adding $100,000 to their budget based on the $100,000 from the federal government. Sometimes, the line of credit explains the delay, because this is often how municipalities finance their infrastructure. They will create a line of credit to have funds the following year that will be replenished by the federal or provincial governments, according to the agreement. Keep in mind that between the federal government and the municipalities is the provincial government.
Senator Moncion: My last question has to do with science and technology infrastructure. The federal government talked about investing $4.4 billion in this area. Yesterday, $1.7 billion was mentioned in research infrastructure. Is this amount included in the $187 billion infrastructure program that has been announced?
[English]
Mr. Shaw: I believe so.
The Chair: Before we go to the second round, I have a question, please, for the PBO.
You talked about tangible, predictable measurements. Then we can look at questions that were asked about how you are provided with that data or that information. To some extent you’re getting better information that seems to be to the point.
Will you make all the data you have received from those departments since 2016 available publicly on your site?
Mr. Fréchette: All the data that the departments provided to us so far that are not confidential are on our site or provided to this committee since you asked us to do that.
We do receive some information that the departments ask to be confidential, which we will not release. By legislation, I cannot release confidential data. Everything the departments do not identify as being confidential is publicly released.
The Chair: What percentage would be earmarked in a vote as being confidential versus public? Do you know?
Mr. Haile: I don’t know off the top of my head, but we could definitely provide that on an aggregate level.
The Chair: Could you provide that?
Mr. Haile: Absolutely.
Mr. Fréchette: Trevor, do you know how much is confidential and how much is not?
Mr. Shaw: I don’t know.
The Chair: Could you provide that to us through the clerk?
Mr. Fréchette: Do you mean the ratio?
The Chair: Yes, the ratio.
Mr. Fréchette: Yes, we can.
The Chair: According to the latest information I have received, the government can account for 80 to 90 per cent in phase I and they are looking at phase 2. Is that satisfactory? Is that similar to the data you’re providing us?
Mr. Shaw: Could you repeat the question?
The Chair: In phase I, I have been told, the government is saying that they can account for 80 to 90 per cent and that it’s measurable. That’s why I asked in the previous question what percentage would be confidential versus public.
My question then to you is: With the data you have now from phase I, is that the same figure or percentage you are providing to this committee?
Mr. Askari: The data in the report, and even from Budget 2018, shows that they have put in place about 50 per cent of the projects for those two years, so I am not sure where the 80 per cent is coming from.
That’s what we are showing there. Our own data, from looking at the departments bottom up, shows a little less than what the government put in the budget. We have 7.2 and they have 7.8.
The Chair: I will conclude with a comment, and then I will ask a question.
Have approximately 11,000 jobs been created?
Mr. Fréchette: That’s our estimate, yes.
The Chair: That’s your estimate, so at $7 billion the cost, in my books, would be approximately $650,000 per job created. Is that fair to say? I would say it is, exactly.
Mr. Fréchette: We never look at job creation in that way. This is a project that has a lot of different impacts on the economy. Jobs is one part of it. Impact on GDP is another part of it. Many different things come from these kinds of investments.
If you want to divide the amount by the number of people or the number of jobs, yes, that number mathematically is correct; but that is not the way we normally look at the impacts of different programs.
The Chair: Can you provide the committee, through the clerk, with how you analyze it?
Mr. Fréchette: In terms of what?
The Chair: In terms of cost per job.
Mr. Fréchette: With the cost per job, as I said, if you divide the two numbers that’s what you get. Mathematically that’s correct.
The Chair: In my other life as a former minister of intergovernmental affairs sitting at tables with other ministers, that’s how we always divided it at our FPT meetings. I stand to be corrected. Please advise me.
Senator Marshall: I want to talk about the Main Estimates because they were tabled on Monday. Treasury Board held a briefing for parliamentarians on Monday evening, and they have incorporated the new budget initiatives in a vote 40.
Would you be able to undertake a study on the Mains Estimates with particular emphasis on the vote 40 and the implications of that vote? You do studies on the estimates anyway every year, so I would be particularly interested. Is that something you could undertake for the committee?
Mr. Fréchette: We already have analysts working seriously on that, not only for the committee but for the entire Parliament. They also flagged Mostafa and me that we have work to do over the weekend reviewing their documents. We have committed to reviewing that. We expect to have something in two weeks, or a bit less than two weeks.
You’re raising an interesting point. It is the first time we saw the so-called alignment between the budget and the Main Estimates. You mentioned vote 40. We’re supposed to meet some people to discuss how it will happen in the House of Commons. Now only one amount of $7 billion will be referred to one committee or to the Committee of the Whole of the house. How they will proceed will be interesting.
You still have all these line items. It’s not necessarily just a bulk. You still have some of the details. You saw the table, I am pretty sure.
Senator Marshall: In Budget 2018.
Mr. Fréchette: In Budget 2018. It’s not just a bulk of money that is there. You see the details by department. That doesn’t give you more information because you don’t know. The vote will be some kind of, I call it, blank cheque to the Treasury Board. They will then make the allocation. We don’t know if it will be full allocation for each department. We still don’t know that.
Senator Marshall: Even when Treasury Board was explaining how it would be allocated out to the departments, I think there was some confusion with regard to that; but you will be looking at that also.
Mr. Fréchette: We will be looking at that. We already are in contact with the Treasury Board to have a better explanation. We will provide the details to Parliament, as I said, hopefully in the next two weeks.
Senator Marshall: Thank you very much. That would be very good.
[Translation]
The Chair: Thank you, Mr. Fréchette, for your presentation and your answers to our questions.
Mr. Fréchette: Thank you.
(The committee continued in camera.)