Proceedings of the Standing Senate Committee on
National Finance
Issue 27 - Evidence - July 12, 2005 (Morning meeting)
OTTAWA, Tuesday, July 12, 2005
The Standing Senate Committee on National Finance, to which was referred Bill C-48, to authorize the Minister of Finance to make certain payments, met this day at 8:37 a.m. to give consideration to the bill.
Senator Donald H. Oliver (Chairman) in the chair.
[English]
The Chairman: Honourable senators, I call to order the thirty-ninth meeting of the Standing Senate Committee on National Finance.
Senator Tkachuk: Mr. Chairman, I have a question regarding the process that we are following. I notice that we will give clause-by-clause consideration to the bill this afternoon. Perhaps you could explain why we are hearing testimony and giving clause-by-clause consideration in the same day.
The Chairman: The steering committee arranges witnesses and deals with the procedure of the committee and it recommended that after witnesses we move to clause-by-clause consideration.
Senator Tkachuk: Who is on the steering committee?
The Chairman: Senators Downe, Day and I are the three members of the steering committee.
Senator Tkachuk: Mr. Chairman, are you in favour of clause-by-clause consideration of the bill today?
Given Senator Austin's arguments that it a Senate tradition not to have clause-by-clause consideration immediately following witness testimony, I find it unusual that we will proceed in that way.
Our side might prefer to have a minority report, and this arrangement would not allow sufficient time to have another meeting.
We are asking for witnesses and then planning to do clause-by-clause consideration right away. I do not understand why we are doing it this way; it is disrespectful of the witnesses.
Senator Austin: Perhaps I could explain my statement in the Senate. Bill C-43 was a substantial bill. Time and time again, Senator Lynch-Staunton argued that a committee ought not to give clause-by-clause consideration to complex bills immediately following the appearance of a minister or parliamentary secretary.
However, a committee is free to determine how to proceed to clause by clause. As well, where a committee has decided to do clause by clause, it can proceed. When bills are complex, time should be taken for members of the committee to further consider the testimony. The idea that it had to be on a separate day was never a part of my argument. There needs to be a break between testimony and clause-by-clause consideration when a member of a committee wishes to consider the evidence.
Senator Tkachuk: Will we have a break after hearing the testimony of the witnesses?
The Chairman: As you know, the procedure of a committee is determined by the steering committee, which is the master of its agenda. The steering committee makes recommendations to the committee but the full committee takes the decisions.
Senator Tkachuk: Should the steering committee's recommendations be put to a vote?
Senator Harb: I am of the view that we could accommodate Senator Tkachuk and have a one-hour break before going to clause-by-clause consideration. We have a good spirit of cooperation among the members of the committee and I hope that we can accommodate the senator. We are here to deal with this bill and give it the due diligence it deserves.
I looked through the bill and did not see anything earth-shattering and we will have other bills to consider. If colleagues wish to accommodate Senator Tkachuk, I am in favour of doing so.
Senator Tkachuk: I prefer to be accommodated by having clause-by-clause consideration on another day, possibly Monday when we return. Senator Austin argued that C-43 was complex and this is not complex, but the budget was much clearer than this bill because it contained estimates and clarified what the government is trying to do.
Bill C-48, by its very nature, simply allocates money to a fund, therefore making the intentions of the government unclear. That is why this side has made strong arguments about the process. We are not arguing the idea that we would spend money to have housing, for example, but rather the process, which is wrong.
Why is the minister not here?
The Chairman: Senator Eggleton has a point.
Senator Eggleton: Perhaps we should hear from the witnesses and deal with this question of procedure later.
Senator Tkachuk: This is not only procedure; it is truly important.
Senator Eggleton: Let us put it to a vote. Senator Harb suggested an one-hour deferral at the end of the hearings. I was fine with that until I heard Senator Tkachuk mentioned Monday, which I believe to be a stalling tactic. Given the size of this bill, clause-by-clause consideration should not be delayed; we should stick with the current schedule.
Senator Stratton: Senator, are you saying that you will not give us an opportunity to prepare a minority report?
Senator Eggleton: You have had a lot of time to prepare. You have been critical of the bill not having much in it and you know every word in it. I do not think that is a problem at all.
Senator Downe: On Senator Stratton's point, last week, this committee offered to senators the opportunity to meet on Thursday and Friday when we were here for extended hours, and they rejected the offer. I think it strange that they now want more time.
Senator Stratton: If I may, the Standing Senate Committee on Legal and Constitutional Affairs is meeting for three and one-half days this week to hear witnesses on Bill C-38. We are sitting for one day and doing clause-by-clause consideration in that one day. We have a foreshortened list of witnesses. We wanted to hear the testimony of 11 witnesses. How many are we hearing from today?
Do not tell me this is the spirit of cooperation. Do not tell me this is not a ramrod, because it is, and you know that.
Senator Downe: Again, on that point, we offered the opposition additional time last week. Everyone went back to their area and returned at an additional cost to taxpayers. There was extra time last week on Thursday and Friday, yet that time was refused by the opposition.
The Chairman: Senator Harb, you have made a proposal.
Senator Harb: I think colleagues should have the whole week to prepare a companion report to the report that you take to the Senate. Subject to the steering committee meeting next week before the tabling of the report, my colleagues should have the opportunity to prepare such a report.
The Auditor General has slammed the government day in and day out for not doing exactly what the government is doing now. Instead of doing it the other way around, which the Auditor General is opposed to, the government has Parliament's authorization to put the money aside. We should applaud the government.
The Chairman: We will get to that in just a moment. We will get the bill later on.
Senator Harb: Let us figure out a creative way to accommodate my colleagues.
The Chairman: What is your proposal?
Senator Harb: I propose that my colleagues table a companion report at the same time you table your report to the Senate, outlining the members' views, objections or suggestions.
Senator Tkachuk: I think that would be fine. We will do that.
Senator Day: Another creative solution is to hear from our colleagues at third reading. I think we should get on with this hearing now. In effect, the only thing that has not been said is that we have a full day of hearings; this is like three separate days of hearings because we are having a full day as opposed to two-hour time slots as we normally have.
We have lots of opportunity to ask questions and let us get on with this hearing. We are all back here to proceed with this, and then we will get into third reading next week.
Senator Tkachuk: I have one more question, chair, before we go to Mr. McKay, and I thank you for your patience, Mr. McKay.
The Chairman: It reminds him of the House of Commons.
Senator Tkachuk: Exactly. Did the minister give any excuse as to why he is not here? I know that in the committee I am on with Senator Fraser, we do not consider any bills unless the minister attends. In this case, it is a budget bill, and the Minister of Finance is not here. No offence to you, Mr. McKay, but we did ask for the minister.
The Chairman: The clerk of the committee phoned the minister's office and I am instructed by the clerk that the minister is not available to appear before this committee for two weeks.
Senator Tkachuk: Is that a problem? Could we not have met in two weeks?
The Chairman: The steering committee made a determination that witnesses were available to be heard today. Mr. McKay, who was in Vancouver, was available to come back and is back here this morning and is available to speak on behalf of the Minister of Finance and the government.
Senator Austin: There is no rule that requires the minister to appear on a bill; it is the custom to have the minister. In this government, the ministers have been highly cooperative in appearing on their legislation. It is something I recommended to them and they follow it; but there are times when ministers cannot appear. The parliamentary secretary in this chamber and in the House of Commons appears as a matter of routine in the place of the minister, and speaks on behalf of the minister and the department.
It is not a fair comment to raise the absence of the minister. We have the department representative at the political level as well as at the official level; that has been the custom in the House and it is the custom here, when a minister is unavoidably absent.
Senator Tkachuk: I think it is fair to bring it up. You may argue it is not fair, and that is fair enough on his part. This is a budget bill. It is a very unusual budget bill. It caused a lot of controversy, and the minister should be here today.
I would like to make a point on this side that we are very disappointed that the minister did not see fit to defend Bill C-48 here in person, and is doing whatever it is that he is doing. I do not think there is much more important for a Minister of Finance than to appear in front of a parliamentary committee defending a budget bill. That is his job.
Senator Austin: Honourable senators, I would like to point out that in this government, the parliamentary secretary, Mr. McKay, is a member of the Privy Council. He attends meetings of the cabinet and cabinet committees dealing with this type of legislation. That is an advance in terms of the previous role of parliamentary secretaries.
The Chairman: The last word is to Senator Day and then we will start with the proceedings.
Senator Day: This is what Mr. Goodale said when he appeared before us, this committee, on June 22 of this year with respect to Bill C-43, the companion bill to Bill C-48. Mr. Goodale said:
I have relied very heavily on the good work of Mr. McKay. I want to say on this occasion before a parliamentary committee that he has done extraordinarily good work in making sure that the proper parliamentary attention is given to matters that pertain to the Department of Finance.
The Chairman: Thank you, Senator Day. Honourable senators, I earlier called this thirty-ninth meeting of the Standing Senate Committee on National Finance to order. I want to remind honourable senators once again that what we do in this committee — and our field of interest — is government spending, either directly through the estimates or indirectly through bills.
[Translation]
Last week, Bill C-48, to authorize the Minister of Finance to make certain payments, was referred to our committee by the Senate.
To start our meeting this morning, I would like to welcome the Honourable John McKay, Parliamentary Secretary to the Minister of Finance. Mr. McKay was elected to the House of Commons for the first time in 1997.
[English]
Mr. McKay was named parliamentary secretary to the Minister of Finance in July 2004. Peter Devries and Werner Heiss accompany Mr. McKay.
Mr. McKay, you have the floor. Following your presentation, senators will pose a series of questions to you based upon your remarks and the bill.
The Honourable John McKay, P.C., M.P., Parliamentary Secretary to the Minister of Finance: I want to thank the committee for its particularly warm welcome.
I hope this bill emerges a bit better out of this committee than it did out of the last committee. I went in the last House of Commons committee with a full bill and came back with a title. I am hoping to do somewhat better this time around.
Senators have rightly pointed out that this is a unique bill. It deals with unplanned surplus legislation, and in that respect, we are in somewhat unchartered territories.
It provides a framework for further investments. All of you know what the investments are — affordable housing, environment, foreign aid, post-secondary education — so in that respect, I doubt that very many senators would disagree with investments in those particular areas.
I want to come back to the notion that these investments are made out of surplus funds. As all of you know, it is conditional upon at least $2 billion being set aside for debt relief on each of the two years applicable to the legislation, 2005-06.
I want to reference remarks made before the House committee by Charles-Antoine St-Jean, Comptroller General of Canada, which may or may not give some relief to some of the concerns that I anticipate will come from honourable members.
The Chairman: He will be appearing before this committee.
Mr. McKay: I think his remarks bear repeating, because he has set out a framework for thinking as to whether this is or is not an appropriate way to go when you anticipate spending monies out of unplanned surplus.
He indicates that the bill is unique in that it is the first time that spending authority is subject to a minimum fiscal surplus. This represents, in his opinion, “a prudent approach.” He points out that $4.5 billion is a cap. He says that the approval is well in advance of a year end and provides lead time to determine the specific management framework concerning the programs. I anticipate some concerns about the lack of specific details that one would anticipate in a budget.
He says prior to such payments, the specific terms and conditions would require Treasury Board approval. Terms and conditions would detail more specific program parameters, along with the appropriate level of audit, evaluation, reporting and accountability. He indicates his office reviews such proposals prior to their submission for Treasury Board approval and then goes on to talk about a few other things, which I am sure he will raise later on in the day.
His remarks before the House were interesting and gave us some comfort concerning the approach to unplanned surplus legislation. As you know, the government has stated on numerous occasions that we do not intend to go back into deficit. That is something that we simply will not do.
As you know, all of these items are on the government's agenda. This legislation supplements the government's agenda and includes $1.5 billion for post-secondary education. We hope to make education more accessible, particularly for low-income students and Aboriginal Canadians, with this money in the event that it becomes available. We hope it will also supplement labour market agreements such as the Workplace Skills Strategy announced in the 2004 budget. This proposal dovetails nicely with the government's commitment to provide significant new funding in support of post-secondary education by way of intergovernmental transfers.
The second proposal is with respect to the environment. This bill anticipates $900 million for the environment. We hope this will improve public transit systems and a portion will go to energy-efficient improvements in low-income housing.
Budget 2005 proposes more than $3 billion in new investments to access climate change and protect our natural environment. When combined with the $2.2 of existing funding, the resulting package represents a major step in part of a longer-term strategy to obtain these objectives.
Honourable senators will be interested that since 1997, this government has invested over $10 billion in environmental issues.
The third area is the proposed investment in foreign aid of $500 million, which is clearly a goal to increase Canada's influence in the world. Canada as a member of the international community recognizes that it has a responsibility to help other countries.
I probably represent the greatest concentration of Tamil Canadians, Tamils outside of Sri Lanka, and the generous response of Canadians to the tsunami relief was particularly heartening. When you combine that with our assistance in both Haiti and Afghanistan, you will note that the government has made significant responses to issues that have arisen over the course of this past year.
The minister has been very active in debt relief for poor countries, and we have taken a role of leadership in the past while. It is our intention to double international assistance from 2001-10. Budget 2005 provides $3.4 billion in new resources to do that, and Bill C-48 enhances that initiative.
The final initiative is in the area of affordable housing, which is a further $1.6 billion in housing construction, including Aboriginal housing. We made about $3 billion in funding commitments since the year 2000 to help ease the affordability challenges faced by many Canadians.
Again, my riding provides an interesting example of these initiatives. At one point, we provided accommodation for approximately 1400 homeless people on a per night basis. With the initiatives in the area of homelessness and affordable housing, that number is in the order of about 75-150 people per night. I cannot say that the drop in the numbers is entirely due to Government of Canada initiatives, but I do know the government took a significant lead in the area of homelessness and affordable housing. While this issue will always be with us, certainly in the case of my particular riding, this has been a very welcome initiative and we hope that Bill C-48 continues that initiative.
Again, using my riding as an example, federal-provincial cooperation made possible a pilot program for affordable housing ownership to assist low- and middle-income Canadians. I could bore you for several hours with the intricacies of that initiative. It is exciting and I am proud that the Government of Canada has taken some leadership in the initiative. This further supplements the $2 billion that the Government of Canada spends on an annual basis.
In conclusion, we hope that Bill C-48 complements much of what the government has done to date, particularly Bill C-43. We continue to meet our commitment of balanced budgets over the next five years. I note in passing that the street, if you will, big S, seems to have supported this budget, or at least not felt that it affects the fiscal framework of the Government of Canada, and the fundamentals of the economy continue to remain strong notwithstanding some nay-saying by certain members.
The Chairman: Thank you, Mr. McKay. One thing I notice you did not deal with was something that this committee deals with — that is, the estimates process. We are a parliamentary committee, and we are interested in things like parliamentary accountability and transparency and so on.
One of the difficulties with this bill is that we are to vote almost $5 billion for which there are no ready parameters or strategies for payment and no real estimates. I note you quoted with a lot of delight the Comptroller General who, you said, gave you a lot of comfort. We are parliamentarians and need to have some comfort in regular parliamentary oversight.
Where in this bill is there a provision for Parliament to have ongoing oversight into the spending proposed in Bill C- 48?
Mr. McKay: Mr. Chairman, I am sure you will pursue that line of questioning with the Comptroller General, and I would encourage you to do so. He will provide you with a more detailed and impartial perspective.
The Chairman: You are a parliamentarian as well.
Mr. McKay: All of these spending initiatives will be subject to the usual parliamentary oversight. If a budget proposal goes before Parliament, it will come back. It is still reviewed by the supplement process.
Perhaps, Mr. Devries could add to that answer, but it starts out as unique legislation, which is unplanned surplus legislation. The money does not exist unless there is a surplus. The spending initiatives will not exist until there is a surplus. In some respects, it is unfair to anticipate detailed spending plans on particular monies until that contingency arises.
Mr. Peter Devries, General Director, Deputy Minister's Office, Department of Finance Canada: Mr. Chairman, in some ways, the provisions of Bill C-48 are not any different from the provisions in Bill C-43 with the exception of the conditionality that payments cannot be made until we have a surplus of at least $2 billion.
In Bill C-43, the $700 million for early childhood development is in some instances the same as what we are asking for in this bill with respect to the major blocks of spending we have set out.
However, as Mr. McKay noted, the Comptroller General indicated before the committee in the other place that departments and ministers will follow a set of criteria prior to access to these funds.
The Chairman: Did your department draft the criteria?
Mr. Devries: The criteria are the same as any other government spending initiative.
The Chairman: Is the Department of Finance involved?
Mr. Devries: No. That it is the responsibility of the Treasury Board Secretariat and ministers. Prior to any payments, the Treasury Board will have to approve the funding agreements with the eligible recipients. The supplementary estimates, departmental performance reports and reports of plans and priorities will include these payments in their records and the Auditor General will audit them and show them in the Public Accounts of Canada.
The Chairman: Would they come before parliamentary committees?
Mr. Devries: Yes, these are statutory programs and because of the authority set out in the bill, the programs set out become statutory payments.
The Chairman: Oh my goodness. That is even worse.
Honourable senators, I ask Senator Tkachuk to allow Senator Ringuette to precede him with her questions because she has to attend another committee.
Senator Tkachuk: In the spirit of cooperation, I agree.
Senator Ringuette: Mr. McKay, I have listened carefully to your presentation this morning. The housing and education programs would be funded via transfers to the provinces. It seems that these initiatives exist and the bill simply speaks to additions provided the money is available. However, the public transit funding targeted in the bill is new because I do not recall such a program. How will that initiative proceed?
Mr. McKay: I anticipate that it will proceed with negotiations by the relevant minister, presumably Mr. Godfrey, to develop individual agreements with municipalities, as appropriate.
Senator Ringuette: He will negotiate with the municipalities and not with the provincial governments.
Mr. McKay: No. A fairly broad discretion is outlined in clause 3 of the bill where it states:
3. For the purposes of this Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to
(a) develop and implement programs and projects;
(b) enter into an agreement with the government of a province, a municipality or any other organization or person;
(c) make a grant or contribution or any other payment;
(d) subject to the approval of Treasury Board, supplement any appropriation by Parliament;
(e) incorporate a corporation any shares or memberships of which on incorporation, would be held by, on behalf of or in trust for the Crown;
(f) acquire shares or memberships of a corporation that, on acquisition, would be held by, on behalf of or in trust for the Crown.
There are a number of ways that the government could approach the specific item to which you refer.
Senator Ringuette: Depending on where you live in Canada, there is a different definition of public transit. In my province of New Brunswick, support for public transit means support for the passenger trains to link the many small communities throughout the province. Only three cities in New Brunswick have public transportation.
In respect of the gas tax issue, the allotment for provinces was on a per capita basis. Will the allotment for the public transit funds be determined on a per capita base so that there is an equal distribution across the country?
Mr. McKay: I refer to a press release from Minister John Godfrey that says:
The investment of up to $800 million will be allocated to provinces and territories on a per capita basis. Consistent with the intent of this initiative, it is proposed that the agreements stipulate that the funds be distributed within each province and territory to municipalities and transit agencies based largely on transit ridership.
The short answer to the question is overall, it will be a per capita basis but the specific is on a ridership basis.
Senator Ringuette: Thank you.
The Chairman: Mr. Devries, in which clause does it state that the government will make these payments statutory?
Mr. Devries: The very nature of the bill automatically makes the payments statutory. Mr. Heiss will explain further.
Mr. Werner Heiss, Director and General Counsel, General Legal Services, Department of Finance Canada: Clause 1 states:
1. (1) Subject to subsection (3), the Minister of Finance may, in respect of the fiscal year 2005-2006, make payments out of the Consolidated Revenue Fund up to the amount that is the difference between the amount that would, but for those payments, be the annual surplus as prepared in accordance with sections 63 and 64 of the Financial Administration Act and $2 billion.
That authority provides statutory appropriation with one limitation the amount, which is determined based on the surplus. The maximum is $4.5 billion and the individual limits are contained in clause 2(1). This is a statutory authority to make draws on the Consolidated Revenue Fund, CRF, for the appropriation.
The Chairman: In terms of parliamentary scrutiny, what does this language do?
Mr. Heiss: This is an appropriation so Parliament would approve it.
The Chairman: We are voting now for $4.5 billion and thereafter have no other say.
Mr. Heiss: You have further say, as Mr. Devries pointed out because the estimate process of any statutory appropriation, of which there are many, including those provided for in Bill C-43, is such that it is still reported. Hence, committees can still obtain the information and request additional clarification. It is reported through the estimate process and through the public accounts. The reporting on those expenditures affords parliamentary committees an opportunity to scrutinize and review. It is no different from any other statutory appropriations and, I believe, 75 per cent of government expenditures are in that range.
Senator Stratton: We thought we had that when adscam occurred. How much money disappeared into that without parliamentary scrutiny?
Mr. McKay: Only Justice Gomery knows for certain, and he is not saying, yet.
Senator Tkachuk: What was your involvement in this process, Mr. McKay?
Mr. McKay: My involvement was after the fact. The arrangements to enter into the parameters of the bill were negotiated among the House leaders and, once the parameters were set, the drafting of the bill took place. I saw it when it appeared in the Department of Finance where we went through it clause by clause.
Senator Tkachuk: At the committee's meeting on Bill C-43, the Minister of Finance said that he talked on the phone every day about this. Did he not call you concerning this bill?
Mr. McKay: I called him, certainly, but he did not call me.
Senator Tkachuk: You said that you had nothing to do with the drafting of the bill. Did you talk to him about it during the process?
Mr. McKay: Yes, I spoke to him near the end of the process.
Senator Tkachuk: Despite the fine words of Senator Day about your running the department, it is not quite the case in respect of this bill.
Mr. McKay: There are days when I think that would be a good idea.
Senator Tkachuk: We do too, I think.
Mr. McKay: I could go to clause by clause on that point alone.
Senator Tkachuk: I want to be clear on this, you spoke to the Minister of Finance, but not about this bill, or you spoke to him but only at the end of the process. When you read the newspaper articles, did you pick up the phone and ask the minister what was happening?
Mr. McKay: I am not far from that.
Senator Tkachuk: Were there discussions about what was taking place? He must have talked to you about what was going on.
Mr. McKay: We spoke several times, but the main concern was to fall within the fiscal framework and maintain the fiscal discipline that the government has fought so hard for over the last number of years.
Senator Tkachuk: You did not care what was in it; you just made sure there was no deficit.
Mr. McKay: Obviously, you care what is in it and the piece about affordable housing is important to me. However, looking at it from a finance perspective, you want to ensure you are not going into deficit, that you stay within the framework and none of your fundamentals are impacted in any way.
Senator Tkachuk: Let us get to that affordable housing. Mr. Fontana said in committee that the government originally committed to spending $1.5 billion over five years, which Minister Goodale reiterated following the tabling of the budget in 2005. Bill C-48 now has accelerated that commitment to two years and increased it to $1.6 billion.
When Senator Carstairs spoke about this particular bill in the Senate, I asked her whether it was new money or old money or accelerated money or compressed money or whatever it is that you people in finance do. She said that it was compressed money, that the $1.5 billion became $1.6 billion; $1.5 billion was previously the amount budgeted and it was compressed in two years rather than being spent in five years. There were comments also that it is new money. Could you clarify that for us?
Mr. McKay: This is all new money.
Senator Tkachuk: Did not the minister of housing know that?
Mr. McKay: I was there for his remarks; however, I do not recollect them precisely so I cannot comment on his remarks.
Senator Tkachuk: He clearly stated that this was not new money. Then Senator Carstairs, in the Senate chamber, stated that it was not new money. She said that the money was compressed from five years to two years, and therefore it was more money per year. That is what she informed us in the Senate chamber so she obviously did not know what she was talking about either.
Mr. McKay: I have no comment.
Senator Tkachuk: Is there confusion in the government as to how much money is spent?
Senator Eggleton: You are taking the comments out of context.
Senator Tkachuk: Would you like to have the whole works?
Senator Eggleton: I have it here.
Senator Tkachuk: So do I, but I am asking Mr. McKay. You can ask your questions on your turn.
Mr. McKay: If we keep this going, something good could happen. This is a $4.5 billion contingent spending, of which $1.6 billion is allocated for affordable housing. I would anticipate all of that to be fresh money.
Senator Tkachuk: It is all contingent on the $2 billion.
Does the money become available when the surplus is at $2 billion in the first year and then $2 billion in the second year? When can the cabinet spend the money?
Mr. McKay: That is entirely within the prerogative of the government. In theory, no money could be spent in the first year — assuming there is a surplus.
Senator Tkachuk: Let us say the surplus is $3 billion.
Mr. McKay: That could be applied entirely to debt relief, for instance, and the entire set of initiatives postponed to the following year, if that was the decision of the government.
Senator Tkachuk: What has to happen in the second year?
Mr. McKay: Presumably in the second year, in order to fulfill the bill, you have to have at least a $2 billion contingency and then you would have to do your $4.5 billion of allocated spending over the course of that year.
Senator Tkachuk: It has to be over $2 billion the first year and $2 billion the second year, although it does not necessarily have to be spent in the first year, the total must be $4 billion or $4.5 billion.
Mr. McKay: It must be $4.5 billion. You have to hit your thresholds first of $2 billion in each year, and the spending after that is entirely contingent on that surplus.
Senator Tkachuk: It is possible that no money will flow at all for two years.
Mr. McKay: That is a possibility.
Senator Tkachuk: There is a possibility that the government will spend the money on something else.
Mr. McKay: That is a possibility.
Senator Tkachuk: We have spent the $2 billion and we have another $2 billion but we have $4.5 billion to spend. How will that work? Now we have $2 billion in the second year but you have $4.5 billion committed to spend with your partners, the NDP.
Mr. McKay: The $2 billion on the first year is mandatory, and the $2 billion on the second year is mandatory. The $4.5 billion is discretionary as to when it is actually spent. It all could be spent in the first year out of surplus or the second year or some combination thereof; or it could not be spent at all in the event that there is no surplus beyond those $2 billion amounts.
Senator Tkachuk: When you have a budget, you have estimates and budget bills; people who receive the money can plan — there is some process to it. Provinces can plan. Here you have money allocated for housing and education, which you say is all new money — there is some confusion so I will leave you within your own group to straighten that out. Who is handling all this? If you do not have to spend it, how will the people plan to deal with this? For example, for education, lowered tuition fees were promised by Mr. Layton. How will people know to have lower tuition fees if this is the way you will do business?
Mr. McKay: We are in the fiscal year 2005-06 and we will not know what the surplus is until September of 2006.
I do not want to be too crass about it, but if I was a department anticipating receiving money, I would not be booking this money until I knew that surplus was in place. Then presumably there would be an allocation, and by then, presumably, the department will have worked up plans as to how to deal with that particular money.
Senator Tkachuk: Will Parliament then be asked how that money will be spent? When you decide to spend the money in the fall of 2006, if you are still the government, will Parliament be asked to allocate the money or will cabinet allocate the money on its own?
Mr. Devries: Bill C-48 gives the government authorization to make the payments to the entities that have been set up in that fiscal year. The government will not be going back to Parliament for authority to spend that money. Bill C-48 gives the authority to the government to spend that money. It has set it out in four main categories. What the responsible ministers will be doing over the course of 2005-06 is setting up funding agreements with the eligible recipients so they are in place prior to the end of this fiscal year, conditional on a surplus of at least $2 billion at the end of this fiscal year and next fiscal year. Once those funding agreements are signed prior to the end of this fiscal year, and once we know what the final surplus will be, then the government can allocate the funds according to Bill C-48 and the agreements that it signed with the eligible recipients.
Senator Eggleton: We thank you, Mr. McKay, for being here today with the Department of Finance officials. I want to go over three areas of concern raised at second reading in the Senate. Senator Tkachuk has touched on the terms of accountability.
Many senators feel that Bill C-48 definitely does not have the kind of detail that Bill C-43 or other budget bills have. Normally, when a bill is debated there is more understanding about where the money is going than there is in this case where there are few if any details about any of the programs. It is left up to the departments, which is understandable considering that you do not know whether all the $4.5 billion or half of it or none of it will be available. It might be some time before that amount is known.
Accountability to Parliament is still important. I have heard two answers that relate to parliamentary accountability. One is that members of Parliament, either in the House or the Senate, would have the opportunity to look at this in detail and question officials when it comes to supplementary estimates. Secondly, we have the annual report on planning and priorities. Are those are the two instruments of parliamentary oversight for the $4.5 billion?
Mr. McKay: The first response has to do with the Comptroller General's remarks, which I quoted in part. These terms and conditions would detail more specific program parameters along with the appropriate level of audit, evaluation, reporting and accountability provisions. My office reviews such proposals prior to their submission for Treasury Board approval. I suppose the first answer is that the Comptroller General is satisfied with the very nature by which the government is going about this process.
You in part answered your own question in that this is unplanned surplus legislation. These initiatives will not happen unless there is a surplus. We are in uncharted territory. Parliamentary oversight is there almost by definition. Parliament has, in effect, no limitations on what questions it can ask about any spending initiatives, let alone spending initiatives in Bill C-48.
Senator Eggleton: I am trying to establish the instruments of that parliamentary oversight.
Mr. Devries: There are a number of instruments and the first one is going through Bill C-48 and the broad parameters of what the government is requesting. Then, as Mr. McKay indicated, prior to the departments signing agreements with any of the eligible recipients, they will have to go to the Treasury Board and have the board review those agreements. The Comptroller General will have to be satisfied that those agreements follow the conditions set out by the Treasury Board Secretariat in signing such agreements.
Once these agreements are in place and the payments are made, they will show up in supplementary estimates as a statutory program for information purposes, but of course, the committees involved in reviewing those supplementary estimates can then ask any questions of the minister or officials involved with respect to more details on those programs. The Auditor General audits the flow of monies. The Public Accounts of Canada publish the final results and the individual departments put out the details of these programs as well as their results in their departmental performance reports and in the reports on plans and priorities. Those too are subject to review by Parliament.
Senator Eggleton: Education is an issue with respect to the provincial responsibility in this regard. The provinces do not have to tie in matching funds and presumably, they will not be stuck holding a bill at the end when the $4.5 billion runs out.
Since education is a provincial matter, how will this money be related to that responsibility? Will the funding take the form of previous government programs such as the millennium scholarship fund? Will there be provincial consultations? How do you see this dovetailing with the provincial responsibility?
Mr. McKay: The bill itself simply refers to supporting training programs and enhancing access to post-secondary education. There is a certain element of open-endedness to that and necessarily so. Access could mean dealing directly with students, possibly enhancing the Canada student loans, but the greater likelihood would mean dealing directly with provinces in their areas and in some manner sending that money over to provinces. It also dovetails nicely with the government's anticipated initiatives with respect to Aboriginal students. It may actually take some direction in that respect as well.
Senator Eggleton: Anything that would involve tuition fees, for example, would result in a consultation with the provincial government?
Mr. McKay: It would pretty well have to, I would think.
Senator Eggleton: The details of the programs are not here, as we know, because they are to be worked out. You talked about that. However, there is a lot of information given as to existing government programs in the areas of housing, environment, post-secondary education, et cetera. I take it that the spending of this $4.5 billion is not necessarily tied to those specific programs. The transit program is a new program, I would think. Is it fair to say that most of the money is likely to go to existing programs or that it is a framework or guideline for how this money is likely to be spent?
Mr. McKay: Subclause 2(d) refers to foreign aid not exceeding $500 million, and I cannot imagine setting up a specific program for $500 million. I would think that becomes part of CIDA's operating budget. That would seem to me the straightforward answer with respect to that.
With respect to $1.6 billion for affordable housing, including housing for Aboriginal Canadians, I think the minister, in his remarks to the House committee, talked about a number of initiatives on which he would like to proceed.
With respect to the $900 million on public transit and energy-efficient retrofit program for low-income housing, I responded to Senator Ringuette and talked about initiatives for public transit. Those may well be new initiatives entered into by Minister Godfrey for specific issues.
Senator Stratton: I would like to go back to the question of process raised by Senator Tkachuk. In any fiscal year, you have two sets of estimates, one in November and another one just before the end of the fiscal year.
If you cannot make a determination on your balance sheet until after you close the books on the year, how do you deal with the $4.6 billion? Do you deal with that money in the following fiscal year?
Mr. Devries: As we mentioned before, these are statutory programs and they are included in the supplementary estimates and the Main Estimates but for information purposes only.
What will happen in this case is that with respect to fiscal year 2005-06, we determine what final surplus in September of 2006. It is determined that the surplus is greater than $2 billion. Just for the sake of argument, we assume that half of the $4.5 billion asked for in Bill C-48 gets allocated at that point in time.
Senator Stratton: Will we find the details in the supplementary estimates?
Mr. Devries: At some time in September or October of 2006, the government would issue the cheques.
Senator Stratton: When does Parliament get a chance to examine the details?
Mr. Devries: They would examine the details in the first supplementary estimates of 2006-07, in around November, as per tradition.
At that point, under the various departments you would know who would receive monies under Bill C-48 and how that money was allocated and to whom, all post facto.
Senator Stratton: There is no ongoing control whatsoever.
Mr. Devries: Let us go back to Bill C-43, which provided $700 million for early childhood development. That money went into a trust to be paid to the provinces subject to the passage of Bill C-43. The details of the payments to the provinces will be found in the supplementary estimates tabled this fall, post facto.
Senator Stratton: Part of my concern with respect to the main budget bill, not the NDP budget bill, is that the government determined a significant sum of money for daycare, and the provinces are negotiating those payments.
The Minister of Finance appeared before this committee on the main budget bill and said that there is nothing in the bill, whatsoever, for rural Canada, people from small villages or farm families. He admitted that fact and that he could not find a way of including something for that group.
With respect to daycare, this funding is for towns and cities of a size that can afford to have daycare centres. The parents of children in rural Canada are completely left out, as are the children.
Perhaps the Honourable Mr. McKay could tell the committee what is in the bill for farmers and others in rural Canada?
I understand the inclusion of Aboriginal housing in the bill because I have been on many reserves over the years and the housing has been deplorable for a very long time. However, what is in the bill for farmers? What is in the bill for rural Canada? What is in the bill for fisheries?
The bill includes $1.6 billion for affordable housing, $1.5 billion for post-secondary education, $900 million for the environment, $500 million for foreign aid, and $100 million for protection of workers' earnings.
What is in the bill for farmers who are in desperate straits?
Mr. McKay: The superficial answer is nothing. You might say that about pretty well anything. This bill is of limited scope in that it contains only four items. It does not cover the waterfront. However, when I break it down a little more carefully, I do not see any paragraph or reference in the bill that excludes a farmer or anyone else from accessing money for energy-efficient retrofits. I do not see any reason why a farmer or his family would not be able to access post-secondary education, similarly with amounts for affordable housing and even with foreign aid.
There is no reference to the word “farmer” or “fisher” or “person in transportation” because the bill is a general benefit to all Canadians.
Senator Stratton: Farmers are going through a particular crisis because of low commodity prices coupled with the strain of BSE. They are trying to survive economically and avoid bankruptcy but I do not see anything in the bill for them.
Mr. McKay: On that point, I want to ensure that you understand the government announced a $1.1 billion program for farmers last March, a significant amount of money for a particular industry.
Senator Stratton: Yes, the government announced $1.1 billion while the farmers need $5 billion to $7 billion. It smacks of tokenism because farmers are still going bankrupt and committing suicide. That is the real concern when $500 million is provided for foreign aid. I quote from the NDP website:
Five-hundred million in foreign aid, which, in the first year, puts Canada on the path to honour our long- broken promise to the world.
When the Prime Minister earlier committed to the 0.7 per cent of GDP to foreign aid, how much closer does this $500 million take us to the 0.7? Currently, we are at just under 0.3 per cent. How much more do you need to reach 0.7 per cent?
The government is committed to achieving that figure but it would not commit to the year 2015, as most countries have committed to the number agreed. What does will this $500 million in foreign aid accomplish?
Mr. McKay: My recollection of the numbers is that to achieve that figure, it would be something in the order of about $41 billion over ten years — a significant sum of money. Prime Minister Martin's commitment, as I recall, was that the government would go to 0.7 per cent only on the basis of available resources. He was not prepared to make commitments that he was not able to complete.
I point out too that in order to be “ODAable,” as they say, many things are included and many are not included. Canada's assistance in Haiti and Afghanistan and anticipated assistance in Darfur are not included in the ODA figures.
The Chairman: Why is ODA?
Mr. McKay: The amounts are not considered Official Development Assistance. The Government of Canada has many initiatives for significant sums of money that do not count towards the 0.7 per cent target.
Canada has been a world leader in debt relief for low-income countries, but none of that counts for the purposes of achieving the 0.7 per cent commitment. Prime Minister Martin phrased his response to your inquiry quite well when he said that Canada will make specific commitments to 0.7 per cent, will set meaningful targets that can be achieved and will move towards that goal.
Senator Stratton: He has backed off a previous commitment.
Mr. McKay: I do not think so.
Senator Stratton: You did not answer the one fundamental question: What will the $500 million in foreign aid do? The NDP website said that in the first year the amount will “put Canada on a path to honour our long-broken promise to the world.”
Senator Murray: Are we talking about ODA figures?
Mr. McKay: Not necessarily.
Senator Murray: There you go, senator.
Mr. McKay: Generally speaking, we do not take our policy instructions from NDP websites.
Mr. McKay: I can say to you only that for foreign aid, it is an amount not exceeding $500 million, even though it might be “ODAable.”
Senator Stratton: My point is that there are no details of the spending of $500 million. At least in respect of the $1.6 billion for housing and the $1.5 billion for post-secondary education, there is a bit of detail in the bill. Yet, you cannot tell me what one cent of $500 million will be used for.
Mr. McKay: I do not know that it will be realized because it is unplanned surplus legislation.
Senator Harb: I have a few questions to ask about the method of delivery. I understand this will allow the government to allocate $4.5 billion in the event there is a surplus over $2 billion.
Many of those programs that the government will be spending on will involve provincial governments. If there were a discussion now with the provincial governments on the methods of transferring these funds to the provinces, would there be any say for Parliament in terms of how this money is distributed?
Do a preset number of provinces have to come on board before we can fulfill this commitment, or will we give the funds to whoever comes along?
Mr. McKay: Each of the four separate initiatives is unique. We just talked about the foreign affairs money. There is no specific issue that needs to be realized with respect to whether you enter into negotiations with provinces or anyone else. It is simply a departmental transfer on the face of it; and whether it is applied to matters with respect to ODA or other matters is entirely within the prerogative of the government.
With respect to affordable housing, you have a variety of alternatives, some of which the minister has outlined at the House committee that he would like to see go forward. If you look at clause 3 of the bill, you can see a variety of ways in which the government could enter into various funding agreements with various entities, be it a province, municipality or another entity. That would be a response on affordable housing.
With respect to post-secondary education, I think that the greater likelihood is entering into an arrangement directly with the provinces. I think that would be the greater likelihood; but, again, that may unfold in a way we cannot quite anticipate at this point.
Senator Harb: Really, nothing will prevent the government from setting up a corporation of sorts in order to dispose of some of these funds through whatever arrangement they want. For example, a board of trustees or a board of directors of that corporation will say, okay, the money is here but this is how we will spend that money. Through that, we can deal with some of the concerns some of my colleagues have raised, and that is the accountability to Parliament. In essence, the government for example, could fulfil its commitment in saying that the money for housing will have CMHC as a delivery mechanism. The same applies for education where the millennium scholarship fund could be the delivery mechanism. Nothing would prevent the government from doing that and then, at a later date, coming back to Parliament and saying the money is there, this is how we will spend it, and report on an annual basis to Parliament in terms of how the money is spent.
Also, I do not see anything in the bill that says every penny of that money would have to be spent in 2006 or 2007 or 2008. It is just that the money will have to be allocated for that year. Am I correct or am I missing something?
Mr. McKay: Let me respond to the first part of your question. Going from allocation to spending is another issue.
If you look at subclause 3(e), it says:
(e) incorporate a corporation any shares or memberships of which, on incorporation, would be held by, on behalf of or in trust for the Crown.
Mr. Devries has made the analogy to the monies allocated for child care, and this is a parallel concept.
In theory, if we realize the surplus and there is in excess of $2 billion, the monies could be allocated to an entity contemplated in 3(e). Then monies would be distributed according to various agreements as that entity entered into, and that would still require parliamentary scrutiny, which Mr. Devries is quite prepared to explain more thoroughly.
Senator Harb: Mr. Devries would it then allow Parliament to ask the organizations about how they are spending the funds?
Mr. Devries: Yes, Parliament could come back to those organizations and ask them how they allocated those funds, and the results they achieved with that money.
Senator Harb: Would that be subject to the Auditor General's ability to audit these organizations?
Mr. Devries: The Auditor General has the ability to go into these organizations to do that, depending upon the amount of money they have, as we saw through Bill C-43.
Senator Harb: Do they have to spend the money in the year that they receive the money or can they spend it over a longer period?
Mr. Devries: With regard to the funds allocated under Bill C-48, they are conditional on there being a surplus of at least $2 billion in each of the two fiscal years in question. That can only be determined when we have the final results.
What Bill C-48 does is establish a liability with respect to either of those two fiscal years, so that the reserve surplus is charged against the surplus in those two fiscal years.
The organizations that are eligible to receive the money might receive the funds in one cheque or allocated over time. It depends on their funding requirements.
Senator Harb: When you give them the cheque, do they have to spend it?
Mr. Devries: They do not have to spend it all at once. They would spend it in accordance with the agreements they have set up with others.
Senator Harb: This is a tricky question for you. Is there anything in the bill that prevents the government from giving tax reductions to low- and middle-income earners?
Second, if you have $500 million to spend on top of the base of $2 billion, how do you allocate it? Is there a formula that says because I only have $300 million or $500 million to pass on under this agreement, I will put a certain percentage in foreign aid, another percentage in housing, and so on?
Is there a constructive type of formula in terms of how to divvy it up?
It looks rigid to me. You are pretty sure you will get the $4.5 billion and you are saying how much you will spend in each area. However, if you do not get that much, is there a formula for how you will spend that money?
Mr. McKay: Let me go at the first part of your question with respect to how this money will be spent. As we have repeated, it is $2 billion spent first and then you are into contingency money. If revenues tank, the money will not be spent.
The revenues may tank for a variety of reasons. Primarily, I suppose, the economy would not do so well and the government revenues would not meet budget projections. The first response to your question is that this is within the fiscal framework and this is based upon our projections going forward over the next two years. Some pretty bad things have to happen to the economy before we would not anticipate spending this money.
The second part of your question was could we avoid the spending by passing on tax relief, thereby intentionally reducing revenues to the Government of Canada?
That would take a far bit of manipulation, one of which would be that the next budget bill would have to anticipate substantially reducing government revenues. Frankly, I do not see that as being in the works, but you could intentionally manipulate your revenues so that they are so impoverished to avoid spending money in the Bill C-48 area. I cannot imagine that, but I guess in the realm of theoretical possibility that is true.
As to whether there is a preset formula, if $4.5 billion is something less than $4.5 billion, do we do a percentage of this and that, no, there is not, as far as I know.
The Chairman: Senator Harb asked a series of excellent questions, and I have a question for Mr. Heiss following up on what Senator Harb asked. Two people turned to subclause 3 (e) as an example, which says:
incorporate a corporation any shares or memberships of which, on incorporation, would be held by, on behalf of or in trust for the Crown;
This committee knows that in the case of endowments and foundations and so on, the Department of Finance has drafted agreements with these foundations that exclude parliamentary scrutiny.
How will the Auditor General or Parliament have the right to scrutinize these funds held in trust for the Crown unless there is a clause indicating that there will be parliamentary scrutiny?
Are you suggesting that you will draft it so that there will be a clause saying that Parliament shall have the right to scrutinize? As you well know, a number of foundations and endowments you have set up exclude that scrutiny.
Mr. Heiss: That will be up to Treasury Board policy in terms of approving the terms and conditions of the particular agreements that will be presumably concluded with a particular corporation. You will have to ask Treasury Board that more specifically when they come, but I believe the current policy is that, in fact, that type of scrutiny would be available under the terms provided.
The Chairman: As a matter of course and as a matter of practice from now on? Is that what you are saying?
Mr. Heiss: You will have to address it more specifically to Treasury Board, who in fact sets those terms and conditions of entering into those agreements. It is certainly something they can determine.
Mr. Devries: Bill C-43 gives the Auditor General the authority now to go in and do performance and compliance audits in those foundations that receive at least $100 million over the five years.
The Chairman: Anything under that, we still cannot get the scrutiny of the Auditor General.
Mr. Devries: Under the specific acts, no. However, if the Auditor General wanted to look into that, I am sure the government would accommodate her in those cases.
The Chairman: That is the Auditor General, what about Parliament?
Mr. Devries: There again, Parliament can call these organizations before it, as have you done in the past, and ask various questions of interest to this committee.
Mr. Heiss: Traditionally, in the context of entering into these agreements, Treasury Board requires that the corporations make available and table their financial statements. Hence, Parliament has an opportunity to raise questions and invite the corporations to participate.
The Chairman: That is good to know.
Senator Trenholme Counsell: This is the first time I have had a chance to be in the finance committee. It gives me an opportunity to look at a finance bill very closely, for which I am appreciative.
Most of the things that were on my mind have been addressed. I have heard, although I do not know exactly who said them, words such as “reckless,” “unplanned,” “scary,” and “wasteful.”
It seems to me this is a very cautious bill, given the commitment to the deficit. I do not see anything new in this bill. It is just making a greater commitment, if possible, than we have been able to make before. Is that correct?
Mr. McKay: You are correct. This is unique in that it is unplanned surplus legislation. My colleagues to my left and right could correct me, but I do not recollect a bill such as this ever having gone before Parliament, effectively saying, “In the event that we have money, these are the areas in which we would like to spend the money.” It is unique in that respect, and therefore cautious and prudent.
I referenced my remarks to the Comptroller General, and I am sure you will ask those questions of him later in the day. He used the phrase “a prudent approach to fiscal management.” I believe this bill represents that approach.
With respect to many of the media stories that the government was shaking on its commitment to fiscal discipline, I think the average person has effectively dismissed that speculation.
If you can determine what has happened to the dollar based upon Bill C-48, you are a far wiser person than I am. I cannot see any impact on the interest rates or on inflation or on any economic activity. We are running at significantly low unemployment rates and particularly high employment participation rates. I believe 6.7 per cent is the last unemployment figure, and the year 2000 was the last time we had that kind of rate. The employment participation rate fell off slightly but it was replaced by many full-time jobs.
The economy is doing reasonably well. Canadians realize that the government should initiate some spending, and the bill has been reasonably well-received. People and, indeed, economic commentators have spoken, and I think we are enjoying the benefits.
Senator Trenholme Counsell: The uniqueness of the bill is of interest to me. All during the 1990s, we tackled the huge deficit, but the wording in the budget did not state that if we met out commitment to the deficit such and such would happen.
Mr. McKay: When you are digging yourself out of a $42 billion hole, you do not think about what you will do once the hole is filled in.
Senator Trenholme Counsell: Philosophically, we were doing that, but it was never written just like this.
Mr. McKay: When you have a deficit that is accumulating into a very significant debt, you cannot think about what you might do in the event that you have extra.
This is the eighth surplus in a row, and we were receiving criticism that, at least in the last two or three surpluses, the government was, in effect, spending the surplus without authorization. This bill actually addresses that specific criticism. It is quite a step forward for the Government of Canada to say, “Okay, in the event that we do have an unplanned surplus, which is what it is known as, excess revenues over what we anticipate spending, then we would like to spend it in these areas. Here, Parliament, what do you think?” That is what we are here for. “Here, Parliament, what do you think? These are the four areas in which we would spend monies.”
Senator Trenholme Counsell: Again, I find Bill C-48 a very cautious yet visionary budget bill. I am interested that in regards to post-secondary education that Aboriginal students are included because I believe that is the only, true long- term answer to their health and social problems.
Is there any indication from your position as to how much of this $1.5 billion would go to Aboriginal Canadians?
Mr. McKay: I do not recollect any specific allocation. That is still a matter of some negotiation.
Senator Trenholme Counsell: I have heard someone mention the fact that decreasing tuition is a priority. Is that correct, or is that just speculation?
Mr. McKay: The phrasing of the bill is “increasing accessibility,” so it could be tuition or something else.
Senator Trenholme Counsell: Have other budgets included energy-efficient improvements in low-income housing?
I think I need to have a lot of money before I can even think of accessing the budgetary provisions for energy- efficiency changes to my own home.
Mr. McKay: I think the anticipation is that it builds on previous initiatives. I do not know that this will be a stand- alone program. I am not in any position to answer that question specifically. We would have to get you an answer on that, other than what I have just said.
Senator Trenholme Counsell: Public transit is not within your department, but I wonder if there has been any continuation of the talks done by the former Minister of Transportation with regard to things like the new types of train service in the Windsor-Montreal corridor, and also from downtown Toronto to the airport.
Mr. McKay: I know that Minister Godfrey has talked to some mayors about what they would do with the public transit money. I do not recollect any conversation about the Quebec-Windsor corridor as to whether that might include something to do with Pearson airport to downtown Toronto. I am in no position to answer that question, it would fall within the prerogative of Minister Godfrey and the negotiators.
Senator Trenholme Counsell: Do you know the figures for international assistance for 2001, and what those figures will be in 2010?
Mr. McKay: The ODA, as rightly said by Senator Stratton, is just under 0.3 per cent and the base is $3 billion. It grows at 8 per cent annually and is generally set at twice the anticipated GDP rate. If the average GDP rate is anticipated to be 4 per cent over the years going forward, the increase to that particular budget is at twice the GDP rate, which is 8 per cent.
Senator Trenholme Counsell: I have heard that there is a backlog in processing the funds for social housing. Do you know anything about that in terms of the budgetary process?
Perhaps we should hear about your success so we can take the news home.
Mr. McKay: Senator, your question is quite ironic because one of the postal codes in my area has been designated as one of the poorest areas in Canada — Scarborough. We have off-loaded poverty from downtown Toronto to some of the suburbs. I will be keenly interested to see how this rolls out but I cannot give you a specific answer to that question.
Senator Trenholme Counsell: Perhaps we could ask the minister that question later today.
Senator Murray: I have one question for clarification concerning the $2 billion surplus each year. This bill would authorize the spending of anything over and above that amount up to $4.5 billion. If the surplus is greater than that figure the government could spend, as it has before, on new foundations, for example.
Mr. McKay: There is no formal restriction in the bill. As senators are aware, this is enabling legislation and the government may spend the money.
Senator Murray: It is able to spend more than the $4.5 billion proposed in the bill.
Mr. McKay: There is no argument on this point.
Senator Murray: It does not offend me that the government made a deal with the New Democrats, or with the idea of putting more money into these general fields. I cannot argue with that, especially when there is so little detail about how it will be spent.
We are talking past each other to some extent. Most committee members are concerned about parliamentary control of the public purse, and officials are telling us about various internal checks, balances and processes. When we talk about parliamentary control, officials tell us that this is statutory authority, like any other. We know what statutory programs such as old age security, equalization and employment insurance.
This bill compares to those statutory programs in the most narrow, legal sense because it is enabling legislation. Mr. McKay is correct in that it is unique. There has never been a bill like this one before Parliament. It is an unprecedented assault on parliamentary control of the public purse, of which the foreign aid issue that arose between Mr. McKay and Senator Stratton is a good example. It is foreign aid, not Official Development Assistance. I believe that we now have an idea what constitutes Official Development Assistance. Foreign aid; this could be a plaque in Italy or Scotland.
I did not watch much of the Gomery inquiry but one day when I did watch, there was a learned discussion between senior public servants about whether the sponsorship program was truly a program. I believe that the consensus of the public servants was that it was not a program in the sense that there were no parameters.
A program, as understood in public administration, is something quite different from an initiative. We are getting into just such a process with this bill. This is almost a blank cheque to the government for spending in these various undefined areas.
It provides the authority for government to set up public, quasi-Crown corporations and to enter into agreements with various public or private bodies; and that is it. When will we learn the details?
There will be supplementary estimates somewhere down the road, reporting in the public accounts and the report of the Auditor General. This makes a mockery of parliamentary control of the public purse. I do not have anything more to say about it, unless I am provoked.
Mr. McKay: We discussed foreign aid so I will use those figures. Bill C-43 allocates $500 million and Bill C-48 allocates $500 million. What is the difference in respect of parliamentary oversight between those two allocations? The only essential difference that I can see is that one is committed spending and the other is not.
Once the $500 million allocation goes to foreign aid there is nothing to prevent Senator Stratton, Senator Murray and Senator Tkachuk from asking the minister or other authority to appear to answer why they spent the money on things that are ODAable, post facto.
Senator Murray: It is not the nature of the business, with respect. This is not the way, as you have observed, that Parliament controls the expenditure of money.
Mr. McKay: In effect, government is inviting Parliament to have a say on monies that might materialize. I would deem that parliamentary enhancement rather than parliamentary derogation.
Senator Murray: What is our say? Should we put more money into these general fields? Parliament traditionally has insisted on a great deal more information than is contained in this bill as to where the money is going and for what purposes.
Even if you had said “official development assistance,” I would have had an idea of what that meant. However, the expression “foreign aid” is there for a reason. Somebody has an idea of how they will spend that money outside what is traditionally and generally understood to be official development assistance. I would love to know who that somebody is, or what that idea is, but we will never know until much later.
Mr. McKay: I suppose the other response is would you prefer a situation that currently exists, which is that unplanned surpluses are allocated according to the priorities of cabinet?
Senator Murray: That is exactly what we are doing with this bill.
Mr. McKay: No, you are not. You are directing the government into four specific spending areas.
Senator Murray: They are not very specific areas.
The Chairman: Once you reach your $2 billion threshold, and if you had a $5 billion surplus, you can still use that $5 billion for other than the four items in this bill.
Mr. McKay: It is not binding, but no budget bill is ever binding. It reads as “may spend”; there is no “shall” or “must” — we “may” spend. That is the exact same phrasing as all budget bills.
The Chairman: As your lawyer said, the word “may” under the ministerial section is what gives you the statutory power.
Mr. McKay: Which is parallel wording to Bill C-43 or any other budget bill that appears before this committee.
The Chairman: I will not put words into Senator Murray's mouth, but one of the evils he is pointing to is what if you decide to come in with another two-page bill asking Parliament to vote $15 billion for six categories of spending. Is that the precedent and is that the way we want to go in Canada?
That is what I think is at the root of what Senator Murray is really asking you. How much further will this go? Should we bring in a three-page bill this fall asking Parliament to vote another $15 billion? Is that the way we want to proceed?
Mr. McKay: In the event that we anticipate unplanned surpluses going forward, it may be that this will be the way that the government will proceed. It may well be that this is a precedent. It may also be that it is not a precedent. I do not know.
On your hypothetical example of $15 billion, the threshold question is do you want to enter into the intellectual parliamentary concept of unplanned surplus legislation? If that is not a good idea, if you prefer to leave the discretion in cabinet, that is a decision that Parliament is able to make.
If this bill represents an initiative that Parliament thinks is a good idea, namely having some say at least — maybe not as fulsome as Senator Murray and others would like to have — perhaps this is precedent-setting legislation.
Senator Murray: The purposes of this act, in a very general way, are the environment, training programs, post- secondary education, affordable housing and foreign aid.
3. For the purposes of the Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to...
That is a big spending power authority right there — projects.
The rest of the subclauses state:
(b) enter into an agreement with government of a province, a municipality or any other organization or any person;
(c) make a grant or contribution or any other payment;
(d) subject to the approval of Treasury Board, supplement any appropriation by Parliament;
(e) incorporate a corporation any shares or memberships of which, on incorporation, would be held by, on behalf of or in trust for the Crown; or
(f) acquire shares or memberships of a corporation that, on acquisition, would be held by, on behalf of or in trust for the Crown.
It is not unusual to see this authority given to the Governor-in-Council in a specific statute for a specific purpose. We are saying for the purpose of this act, for anything to do with environment, post-secondary education, affordable housing and foreign aid, the cabinet can authorize a minister to do any of these things.
We are handing ourselves over bound hand and foot to the cabinet. Parliament will get a look at it perhaps in due course when there is a supplementary estimate, or when the public accounts come in or the Auditor General has something to say about it.
One hopes that people learn from their mistakes but you are letting yourself in for the kind of abuses that took place in the sponsorship area.
Mr. McKay: With the greatest of respect, I disagree profoundly. We are putting before Parliament, if you will, something of a fettering of the Governor-in-Council. If this bill does not exist, then presumably $4.5 billion can be spent in ways and means that are entirely the prerogative of cabinet and you have no say.
Senator Murray: That is not true.
The Chairman: Even if you reach your $2 billion threshold and you have an additional surplus of $4.5 billion, you do not have to spend it on Bill C-48.
Mr. McKay: Exactly; but at least Parliament has some opportunity to pronounce itself on this amount of spending in these four areas. Otherwise, it has nothing to say.
Senator Tkachuk: Could you then have a bill that would just allow spending for all government departments?
If you accept this in principle, it does not have to be limited to four. It can be limited to 15, and say we are going to allocate $10 billion for defence, environment, agriculture and so forth, go through the whole list, and we do not need a budget.
Mr. McKay: We are getting off into some fairly theoretical, hypothetical situations.
Senator Tkachuk: You brought it up — I am following up. You are the one who said this is a great thing; I am just asking you the question. Why cannot it be done for all the departments?
Mr. McKay: In theory, there is no reason why you cannot do it for all departments.
Senator Downe: When Minister McCallum was before this committee, talking about the expenditure review exercise, he spoke about the reallocation of programs for government priorities; and obviously, this arrangement with the NDP is now a government priority.
Do you know, in the negotiations — and you may not because your involvement appeared to be limited — if the NDP expressed any concerns about what was cut under the expenditure review exercise that they wanted restored?
Mr. McKay: I do not recollect any crossover between Bill C-48 and expenditure review.
Senator Downe: They were looking for additional funding. They were not interested in restoring anything that had been cut is what you recall.
Mr. McKay: I do not recollect any connection between restoring something under expenditure review and Bill C-48.
Senator Downe: Just a brief comment on the previous discussion, the other side of the argument than the one advanced has been that the government has been under tremendous criticism because the Department of Finance has been underestimating, or has been unable to project the amount of the surplus. At the end of the fiscal year, the government had to put that excess surplus on the debt, which was a public policy decision, but there was no debate.
It could be argued that this bill could be a precedent for setting out a framework for public policy debate, including parliamentarians, as to what we should do every year if we end up with these massive surpluses, as opposed to having it automatically go on the debt.
Mr. McKay: There is some fettering now of government discretion by virtue of Bill C-48.
Senator Day: I would like to follow up on Senator Downe's point. I want to get the process in mind. In September of this year if there is a surplus, suppose the government wants to put some of that towards the accumulated debt. This is an unbudgeted, unaccounted-for and unpredictable surplus. Say 50 per cent goes to pay down the debt, and the government wants to use the other 50 per cent for whatever priority issues might come up. How could the government do that after the budget has been out and this is an unplanned surplus?
Mr. McKay: Do you mean a surplus in September of this year for the fiscal year ended March 31, 2005?
Senator Day: Yes. I want to know the accounting process, because the supplemental estimates are over for the fiscal year. How does the government spend that money?
Mr. Devries: There is no authority for the government to allocate that excess surplus, if it happens to be in excess of the $3 billion set in the budget, to any other initiative except for it to be applied against the debt.
Senator Day: Perfect. This is giving authority to the government to spend the funds, but there is a built-in assurance that there will be some money available to pay down the debt of $2 billion in the year before this is triggered, and then it is enabling legislation. As you say, it gives the government the ability to do this within these various categories; is that correct?
Mr. Devries: Yes.
Senator Day: Have there yet been any funding agreements for one of these various categories under Bill C-48? I would like a sample of one to see what it looks like and what would be triggered as a funding agreement.
Mr. Devries: To my recollection, there have not been any yet. There has been a press release by the Minister of State indicating how the $800 million will be allocated, but the agreements have not been signed yet. It is my understanding that no agreement has been signed.
Senator Day: Could you refresh our memory on the allocation of the $800 million?
Mr. Devries: As Mr. McKay said earlier, that would be set up on a provincial per capita basis.
Senator Day: Do you mean within an existing funding arrangement?
Mr. Devries: A new funding arrangement would have to be set up. It will build on one already in place for the transfer of the gas tax to the provinces and municipalities.
Senator Day: That was the point I was trying to make. There can be existing mechanisms in place that can be supplemented, or there can be new programs established, but in each event, there will be some type of funding agreement entered into.
Mr. Devries: That is correct.
Senator Day: This committee maintains its mandate throughout to deal with government spending and estimates. There is no reason why this committee could not bring in you or any other representatives to ask about a funding agreement at any time. These funding agreements would be in place by the time the surplus is established in September.
Mr. Devries: These funding agreements would have to be in place prior to March 31. We have to establish the liability with respect to each of those two fiscal years during the fiscal years in question. We cannot do it after the fact.
Senator Day: Before the fiscal year is out, you know the mechanism by which funds may be disbursed in these various funding agreements. The funds that may become available will be determined March 31. Around September of the next fiscal year, you will determine whether there will be some funds that might be disbursed under those existing already established funding groups.
Mr. Devries: That is correct.
Senator Day: Therefore, we could bring somebody in and study it well before the funds are spent and disbursed?
Mr. McKay: No question.
Senator Eggleton: There is accountability.
The Chairman: The Department of Finance put out a document for this committee called “Bill C-48, an act to authorize the Minister of Finance to make certain payments,” and it contains certain questions and answers.
I would like to follow up on what Senator Day's question that says,
Are the spending commitments outlined in the recently announced agreement with the province of Ontario over and above those contained in Bill C-48?
The answer that is given is,
The agreement with the province of Ontario included commitments for incremental spending on post- secondary education, housing and infrastructure, which are also included in Bill C-48.
Then it goes on to say,
It would be possible for the government, once it is reasonably satisfied that a surplus of at least $2 billion will be realized by year-end, to use the authority under Bill C-48 to satisfy its commitment to the Government of Ontario in the priority areas identified in Bill C-48.
Mr. McKay, how much of Bill C-48 could potentially be spent in Ontario?
Mr. McKay: Actually, we do have that information. There is no question that there is some overlap, and the numbers I have presume an equal amount in both fiscal years, which may or may not occur. As I have said previously, you could spend it all in one year and none in the next.
Given that caveat, Bill C-48 overlaps with the Canada Ontario agreement could potentially be $200 million in 2005- 06 and $200 million in 2006-07 for higher education. It could potentially be, for housing and infrastructure, $150 million in each of those years, and on the cities initiative, $149 million in each of those years.
The Chairman: That is $500 million.
Senator Murray: We were led to believe that Bill C-48 was in addition to existing commitments, among which I thought were the commitments made in the agreement with the Government of Ontario; right?
Bill C-48 was not even a gleam in the eye of Mr. Martin or Mr. Goodale when the agreement with Ontario was done, was it?
Mr. McKay: The genesis of Bill C-48 was when the Conservatives did an about face in April, and the Ontario negotiations started earlier than that period of time. I cannot recollect when the agreement was actually entered into, but it was a similar period of time, certainly the spring.
Senator Murray: Ontario will get its piece out of the agreement between the federal and Ontario governments. There is nothing new for Ontario in Bill C-48, right?
Mr. McKay: Right.
Senator Tkachuk: The general income tax rate reduction was left out of the Budget Implementation Act, Bill C-43. The Minister of Finance wanted it reduced from 21 per cent to 19 per cent. My understanding is that as part of the deal with the NDP, that would be gone in order to pay for this particular $4.5 billion, but then there was some kind of an arrangement made to bring in this tax cut under a separate bill. When is that bill coming?
Mr. McKay: Bill C-43 deleted the sections with respect to the tax reductions for corporations from 21 per cent down to 19 per cent, and you know the parameters as well as I do. There is no connection between the deletion from that and the paying for in Bill C-48. They are two separate ideas.
Senator Tkachuk: The NDP wanted that out of principle. You agreed to it so you must know why they wanted it.
Mr. McKay: There is a principle but it is a little lost on me.
With respect to the reintroduction of those tax measures, notice is on the Order Paper.
Senator Tkachuk: Will that happen in the fall?
Mr. McKay: Yes.
Senator Tkachuk: There is $100 million for the protection of workers' earnings in the event of employers' bankruptcy. When will that bill be introduced?
Mr. McKay: I will leave that response to the officials because that is not part of Bill C-48, as you are aware.
Senator Tkachuk: It was part of the agreement.
Mr. McKay: It was part of the agreement but not part of Bill C-48. It is not clear to me that it requires a legislative initiative. I defer on that particular question.
Mr. Devries: I do not have the answer to that question.
Mr. Heiss: I do not know.
Mr. Devries: We will obtain the information for the committee, senator.
Senator Tkachuk: Was a written agreement made between the government and the NDP on all of these matters or was a napkin simply tabled with the Department of Finance?
Mr. McKay: I have heard various versions that the agreement was reached in a motel room, in the back seat of a Chevy, on table napkins and on dissolving paper.
Senator Tkachuk: Those are all new to me. Is there a piece of paper between the two the parties with an agreement between two the parties?
Mr. McKay: I have not been privy to a specific form of agreement between the two parties. There may well exist a form of agreement and I would assume that there is but I am not privy to it.
Senator Tkachuk: You think there is an agreement.
Mr. McKay: I am working on an assumption only because I have no basis to state further than that.
Senator Tkachuk: That would be the normal thing to do. Should such an agreement be tabled in Parliament?
Mr. McKay: I do not think I should respond to that because that should be determined by Parliament.
Senator Tkachuk: Do you think it should be made public if it is not laid before Parliament? We do not know what the agreement is because we have only the bill. If an agreement exists, then perhaps it should be tabled. Is there more to this?
Mr. McKay: If there is more, it is not within my prerogative and I have not seen anything.
Senator Tkachuk: I am sure you will see it later.
The Chairman: Thank you, senators and Mr. McKay, for providing the committee with an overview of this two- page bill.
Senator Murray: While departmental officials are here, I want to ask for general information on something that has been on my mind.
Would they obtain for the committee some of the departmental studies with regard to the various scenarios of the price of oil and the effect on the economy and on the fiscal position of the federal government. I presume the department has been conducting those projections.
Mr. McKay: I would have to anticipate that that is true.
Senator Murray: Would the department allow us to see those?
Mr. Devries: I will see if they are available. In a number of cases, the studies are published and available on our website. I will take a look at that.
Senator Day: Is that information critical to the study of this bill?
Mr. McKay: No. It is for the general knowledge of committee members.
The Chairman: We appreciate the input of the witnesses to our study of the bill, in particular in respect of the parliamentary aspects, which are extremely important to many senators around this table.
Honourable senators, our next witnesses are from the Treasury Board. Charles-Antoine St-Jean is the Comptroller General of Canada.
Mr. St-Jean began his career as a chartered accountant with the well-known firm of Ernst & Young. During 1984- 98, Mr. St-Jean provided leadership to several public sector portfolio clients including the Canada Post Corporation, the Canadian Broadcasting Corporation and the Canada Customs and Revenue Agency. In 2000, he joined Cap Gemini Ernst & Young as a vice-president. He was appointed Comptroller General of Canada in May 2004.
Mr. St-Jean is joined today by Mr. John Morgan, the Acting Assistant Comptroller General. Welcome, gentlemen, and we look forward to hearing your views on Bill C-48. Before doing so, I wanted to hear from Senator Tkachuk and Senator Stratton.
Senator Tkachuk: I have a motion to adjourn.
Senator Harb: Can we hear from the senator?
Senator Tkachuk: There is a motion to adjourn on the floor. All in favour?
The Chairman: All those in favour signify by saying “aye.” Contrary minded?
Senator Harb: We have not called a vote. I wanted to find out the rationale for my colleague in trying to put in a motion to adjourn a debate. If you want to vote on it, go ahead. I just find it bizarre.
We are about to hear from a distinguished group of people to tell us about a very important piece of legislation and we are turning around to adjourn the debate. Is he planning to take a holiday? We are here to work.
Senator Stratton: It is your side that did not have your numbers here, senator. That is why; we are just waking you up.
Senator Harb: My colleague went to the bathroom. Is that a good enough reason to adjourn?
Senator Day: I told the Chairman.
Senator Harb: If you have to go, you have to go.
Senator Day: Mr. Chairman, calling this meeting back when I had asked you if it is okay if I went outside for a short while, starting the meeting and then allowing this kind of nonsense to happen is not the way we normally act in this committee.
Senator Harb: We have to have bathroom rules here.
Senator Day: It is not the way we normally act. That is the way you act. That is not the way we act. When you embarrass your Chairman, who is your side, that is not fun.
The Chairman: Senator Trenholme Counsell has asked for the floor.
Senator Trenholme Counsell: I think of the Senate as a dignified body and I am really shocked that this kind of behaviour would take place in the presence of such distinguished representatives of the government who are with us today.
You were in the process of reading their biographies, and this is a great sign of disrespect to Mr. St-Jean and Mr. Morgan. I think it is rudeness beyond acceptability.
Senator Tkachuk: If we are going to have this discussion, it is always in order to move adjournment. It is one of the rules that we have.
Senator Harb: Change those rules.
Senator Tkachuk: You can go ahead and do that if you wish, Senator Harb. All I did was move the motion. It was perfectly in order to do so. It is not a sign of disrespect to anyone.
I have no interest in passing Bill C-48. I oppose this bill. There is no reason for me to be here except for my role as a member of the opposition, and to ensure that, as best we can as a Parliament, we get to examine the bill. It was okay to have clause-by-clause today, not to allow us the opportunity to debate this over a number of days. That was all okay, but when I move a motion of adjournment, somehow it is a sign of disrespect.
Anyway, with that, let us go on. I am sure that he was not too upset, and our witness probably enjoyed it very much.
The Chairman: Senator Tkachuk, there is a motion on the floor. Are you withdrawing that motion?
Senator Tkachuk: I thought we voted.
Senator Day: We did and you lost.
Senator Tkachuk: I am not withdrawing that motion. I thought we voted.
Senator Day: I think it is important for the record. We sat here for two hours and 15 minutes; I spoke to the Chairman and asked if I had time to leave for a short while and said please do not start until I get back. I come back in here and the meeting has started and there is a motion on the floor. Now, I do not know how this thing got started, but I was just down the hallway a little bit — I can tell you which cubicle I was in.
Senator Tkachuk: You have eight members here on this committee.
Senator Day: I do not care how many members I have here. I am the vice-chairman of this meeting. I asked the Chair not to start the meeting until I returned.
Senator Tkachuk: What is your point?
Senator Day: The point is that you should not have entertained this motion until we were back here because we were just outside in the hall.
Senator Tkachuk: I will make a point of waiting for you all the time, Senator Day.
Senator Day: Would you?
Senator Tkachuk: I will make a point of that.
Senator Day: We have all heard it. I am sorry you got caught up in this, Mr. Chair, but you know that is the case, that I did say that. Let us call the question.
The Chairman: All those in favour of the motion raise their right hand.
All those opposed to the motion raise their right hand.
Motion defeated.
Mr. Charles-Antoine St-Jean, I would like you to make your presentation. We would like you to make your presentation and following that, honourable senators will have a number of questions about your oversight and the parliamentary scrutiny for this bill, and accountability and transparency components of the bill and what your procedures will be. You now have the floor.
Mr. Charles-Antoine St-Jean, Comptroller General of Canada, Treasury Board of Canada Secretariat: Thank you very much, Mr. Chairman. I welcome the opportunity to appear before this committee to respond to its questions regarding Bill C-48.
As you mentioned, my colleague, Mr. John Morgan, the Acting Assistant Comptroller General for the financial management analysis sector from my office is with me here today.
[Translation]
As you may know, my mandate is to strengthen financial management and internal audit throughout the federal government. One of my responsibilities is to oversee new spending initiatives and so I am keenly interested to ensure that appropriate mechanisms are put in place with respect to the proposals outlined in this Bill.
[English]
Similar to other appropriation bills, Bill C-48 would provide enabling legislative authority to ministers to make payments for the specific purposes approved by Parliament.
The Chairman: Mr. St-Jean, could I ask you to slow down? What you are saying is translated either from English to French or French to English, and we have to be fair to the translators.
Mr. St-Jean: Bill C-48 is unique in that this is the first bill that provides spending authority subject to a minimum fiscal surplus in 2005-06 and 2006-07. This represents a prudent approach to fiscal management in that such fiscal dividends would only be authorized to the extent that there is a $2 billion surplus in those two years. In addition, it provides for a $4.5 billion cap on the spending proposals contained in the bill over the two-year period.
[Translation]
The approval of such a Bill, well in advance of year-end, also provides more lead-time to determine the specific management framework concerning the programs.
[English]
Prior to such payments, the specific terms and conditions would require Treasury Board approval. These terms and conditions would detail more specific programs parameters along with the appropriate level of audit, evaluation, reporting and accountability provisions. My office reviews such proposals prior to their submission to Treasury Board for approval.
Subsequent to Treasury Board approval and prior to March 31, agreements would then need to be signed with the recipients outlining the terms and conditions for the payments and their dependency on the determination of the fiscal surplus.
[Translation]
As the financial results are being finalized, the amounts owing to recipients under these agreements would then need to be confirmed, charged to the surplus and audited by the Auditor General in accordance with the Government's accounting policies.
[English]
To the extent there is an earlier certainty of the fiscal surplus in excess of $2 billion, the amounts payable under the agreements could be determined prior to year-end. The amounts payable could then be released, as they are needed, in accordance with the terms and conditions of the agreements.
Along with any specific reporting that may take place with respect to the overall measures contained in Bill C-48, it is expected that the various estimates documents and the Public Accounts of Canada would highlight the responsible ministers and departments, the recipients, details on how these funds are intended to be used and subsequently how they have been used.
[Translation]
Mr. Chairman, this concludes my opening remarks. I would be pleased to respond to any questions that your Committee might have.
[English]
The Chairman: Thank you. In item eight of your opening remarks, you say that:
Prior to such payments being made, specific terms and conditions would require approval by the Treasury Board.
I would like to know what role you personally or your office will play in drawing those specific terms and conditions, and secondly, have some of those terms and conditions been drafted already, and to what extent are they prepared?
Mr. St-Jean: For all new transfer payment programs, specific sets of terms and conditions must be set out to describe the nature of the activity, what we call the result-based accountability framework, and also our technical documents that spell out the way those funds are disbursed and monitored. Specific terms and conditions describe that, and those are reviewed by my office any time there are new terms and conditions or new programs.
The Chairman: Have you been reviewing terms and conditions for Bill C-48?
Mr. St-Jean: Not for Bill C-48, as they have not been given the specific programs yet. The government has announced that they intend to spend money in those areas. When programs are clearly identified where they say the money will be coming from Bill C-48 and there are specific terms and conditions, they will be reviewed at that time.
The Chairman: So at present, as we speak now, there are no terms and conditions for any of the four categories specified in Bill C-48 that have come to your office for your review?
Mr. John Morgan, Acting Assistant Comptroller General, Financial Management and Analysis Sector, Office of the Comptroller General, Treasury Board of Canada Secratariat: Mr. Chairman, not specifically for Bill C-48; however, for the transfers of sums related to the gas tax revenues, the terms and conditions related to that particular program, a component of which would relate to public transit, that has come through the office, and we have provided comments on that. However, the public transit component of Bill C-48 has not yet come through.
The Chairman: For education and foreign aid, nothing has come before you yet in terms of terms and conditions.
Mr. St-Jean: That is a fact.
The Chairman: When do you expect it? We have been told two different dates. First, the actual surplus would not be known until August, and then later they said September of this year. When would you expect the terms and conditions to be laid before you?
Mr. St-Jean: I made reference to the prudent nature of this approach for spending. It could come at any point in time during the year, but before March 31. My predecessor at this table said all the agreements have to be in place, signed, sealed and delivered, before March 31, so I expect those terms and conditions to come during the year, well in advance of the year-end. Then you have a clause that says, “Amounts cannot be disbursed or cannot be incurred unless you have certainty of the surplus.”
The prudent nature of the bill gives us time well in advance to use all the instruments and the due diligence on the proper design of the program so that it is completed with sufficient lead-time. This bill makes it easy to do all of that sooner, which is the neat thing about it.
Senator Tkachuk: I got the impression from Mr. McKay that the money could be spent all in the first year, over two years, or all in the second year of the agreement. That is not what I heard from you, so I want to clarify that point. This does not mean that even though everything is all organized, the money is spent. How does that all work? How does the authorization take place?
Mr. St-Jean: The terms and conditions go with the Treasury Board submission. That is where it is approved for spending. When are you talking about spending, you use the word “spending” and not “disbursement.”
Senator Tkachuk: What is the difference?
Mr. St-Jean: There is a big difference in the sense that the prudent nature of financial management asks us as much as possible to disburse the funds only when the need comes in. Here, the approach would be to commit the funds, to make the liability on the books of the Government of Canada, but the actual disbursement could be over a year, two years, three years, depending on the need of the organization. It is a bit more prudent.
Senator Tkachuk: In reality, under Bill C-48, this money does not have to be spent over two years. It could be spent over five or six?
Mr. St-Jean: It is incurred. From an accounting point of view, it is booked in the accounts of the Government of Canada over that period of two years, but it is possible to disburse the cash over time and as the need arises, which gives Parliament a better oversight on the activities.
Senator Tkachuk: For example, could the housing money or the foreign aid money be tucked into next year's budget? The money is here in Bill C-48, but it can be tucked into next year's budget. Mr. McKay said that the money does not have to be spent this year. He actually made quite a point of saying that they can do what ever they want to do. They can wait until next year to spend the money.
If you reduce the amount of planned spending on foreign aid next year because $900 million is included this year, then there is no new money for any of the items. It can be tucked into the budget and it will not be necessary to put this bill into next year's budget. Is that right?
Mr. Morgan: I would expect that next year's budget would reference the spending related to Bill C-48. However, the degree to which there is certainty as to that spending will depend on the amount of the eventual surplus.
Senator Tkachuk: There will be no way for the NDP to know any of this was new money. They do not know the planned expenditures next year so they can take this $900 million and tuck it in the foreign aid budget next year. How will the NDP know whether this is new money? They will not know for certain.
Mr. Morgan: I believe Budget 2005 showed a three-year profile of planned spending. I suspect that there would be some ability to determine that, although I am uncertain of the level of detail related to the individual measures.
Senator Tkachuk: The government has been setting up three-year, five-year and 10-year spending timeframes for the last seven or eight years. Does anyone know anything more than that, especially the citizens of Canada.
Mr. St-Jean: Those numbers are public, as my colleague referenced, such as the planned spending for the next three years. That would be the reference level so a member of Parliament could confirm whether that incremental spending is taking place by referring to the previous year.
Senator Tkachuk: I may want to come back to that point.
Senator Harb: I have not had an opportunity to see the agreement between the NDP and the government. I looked at the bill and cannot help but think that either the NDP is truly naive or the government is truly clever. What do you think?
You are with Treasury Board, and you are likely shaking your head over the proposed legislation that attempts to propose spending for the next three years because you know, as we all know, that Parliament cannot oblige a future government to do that which a previous government has decided to do. Is that true?
Mr. St-Jean: I had that discussion with the Auditor General just last week. In terms of this three-year approach to spending the government is signalling well ahead of time what it intends to do with the surplus. This is a prudent way of proposing the management of the financial affairs of the Government of Canada because it gives sufficient lead-time to the departments to think through their spending. In the past, it was done at the last minute as the fiscal year drew to a close, and at times there might have been agreements needing refinement later.
The three-year planning gives us plenty of time to target and to develop the proper instruments, terms and conditions so that an audit can be performed, and to put in place the proper management framework. The Auditor General said that my point has some validity, although it is not perfect.
Senator Harb: It is terrific to have a plan before Parliament and Canadians that has two components: capital expenditures over the next five to 10 years and operating money for staffing and social programs. However, something strikes me differently about this because we have only part of the story. The government proposes to commit to $4.5 billion above any surplus of $2 billion. Do you have on the books what the government will spend on those same items in the succeeding fiscal years?
Mr. St-Jean: Bill C-48 covers only two years. That is the extent of the authority sought in the bill.
Senator Harb: In a sense it is conceivable that the government will proceed and spend the money without putting new, additional money for those programs.
Mr. St-Jean: It is not within the scope of the bill to go beyond two years.
Senator Harb: It is conceivable for the government to proceed with the $4.5 billion commitment within the two years. That would mean that it would not have to take any money from the pot.
Mr. St-Jean: It is conceivable to the extent that the bill refers to “may incur,” not “must incur,” and that the spending can take place during the year if there is enough certainty of the $2-billion surplus. The government might choose to enrich certain programs if it has that certainty. It provides the government with the authority to spend but that is all.
Senator Harb: My next question is in respect of the capacity to disburse the money. For example, you can allocate $50 billion for education but if you do not have the capacity to spend it, the money will not be spent.
Has Treasury Board looked at the capacity to spend that money should the government proceed and put it in place first? I raised a question recently with an official from Treasury Board who appeared before this committee. It was about the reallocation of resources and the appropriation of funds within departments and across departments. How will this program be managed relative to other programs of the government? Will there be a special secretariat to ensure that the money came as a result of a commitment, political in nature but parliamentary in substance? We want to ensure that it is done well and that government has fulfilled its obligation. Will you do it like that or will it be treated like anything else?
I do not know whether you have read the agreement between the NDP and the government. Might anything in that agreement tie the hands of Treasury Board in administering that program?
Mr. Morgan: I am not aware of the details of the agreement with the NDP. Legislative authority will be provided through Bill C-48 as laid out in the bill. It will be for the government to determine the precise allocation of those funds within the limits set out in the bill. There are a couple of unique things about the bill: It is subject to a $2-billion surplus; and, if the surplus does not provide the full $4.5 billion over that two-year period, there will have to be some mechanism in place to determine the relative allocation of those funds to the recipients as laid out in the bill and in the timeframe of the two-year period. That is something that is unique.
Other than that, in terms of the parameters, I believe that a number of these measures will build on existing programs. It remains to be seen what the details are in terms of programs, but our understanding is they will build on existing programs. In that respect, things should move faster in terms of firming up the terms and conditions.
Senator Harb: It is an excellent precedent. It is terrific to see the government coming forward with long-term plans in terms of intentions of how and what they will spend on what programs.
I want to ask if you have conducted studies to prepare an action plan for the Government of Canada so this will not become the exception but rather the norm. In that way, municipalities, provinces and even Canadians can see what is coming in three years or five years from now so that they can do proper planning.
If a hospital is in the process of planning to buy equipment, they know first-hand that there will be money coming over the next 24-48 months.
Mr. St-Jean: We have informed them that in the event of a surplus they may be eligible for funds. This is a “may” and there is a big caveat, which is the fiscal position of the government; is it prudent to make those payments?
Senator Harb: Do you suggest that this should become the norm? Do you suggest that in the event of a surplus that is where we will spend the money? As parliamentarians, we would then have some guidance and, as Canadians, we would see how the government might spend money in the future.
Mr. St-Jean: As I mentioned to my colleague, I find this to be a very prudent way of doing business, giving a heads- up a long time in advance. When the government has surpluses, it can say where it wants to put the funds, which gives officials time to have discussions with various levels of government and other partners. With advance notice, governments can find the best configuration of partnership to deliver on some of the programs.
Personally, I like this kind of approach. It has to be limited in terms of scope. It has to be a small percentage of the overall spending, but it gives some heads-up to all parties.
The Chairman: This is the second time you used the word “prudent”; you used the phrase “prudent nature of financial management,” in the overview of your presentation.
What is prudent about having a bill pass Parliament that says if we pass a limit of $2 billion and realize a surplus, we may or may not spend the surplus on the four items? What is so prudent about “we may or we may not”? There is no obligation to spend it on these four items, so how does that make it prudent?
Mr. St-Jean: What is prudent is that it allows for additional planning time. Determining the financial position of the Government of Canada is not a simple task. Things change. There are additional revenues or expenses and it is tough to get a good handle on the fiscal position of the Government of Canada in the last two to three months of the year.
This bill lets us say that we understand the complexity of coming up with a financial position, so do not wait until the last minute to come up with programs to spend the additional surplus. Recipients can tell us well in advance, what they would do with a certain fiscal position. This bill enables them to start discussions with all of their prospective partners well before January, February or March.
The Chairman: There is nothing mandatory in this bill — the government may do what it wishes. Your prudent approach could raise false hopes for potential recipients such as low-income students, people living in social housing, Aboriginal Canadians, and so on. If the money is available but may not be used, does this not raise false hopes? What is prudent about that? Do you understand my question?
Mr. St-Jean: I appreciate that; I think your question deserves a more political answer. I am just dealing with the people that are trying to develop complex programs. There are many players and we have to have contractual agreements in place with clear guidelines. For the people who are executing those programs, it gives us a lot more time.
I appreciate that might be creating some false hope. If the fiscal surplus is not there, some people will be disappointed.
The Chairman: Even if it is there, it may not have to be used.
Mr. St-Jean: I appreciate that; even if it is not there, the way that the bill is, it is a “may.”
The Chairman: Exactly.
Mr. St-Jean: It is more for Parliament to exercise its role there, to decide what they want to do with it. However, they give guidance to the civil servants and also partners; these are some of the areas we would like to explore ahead of time.
The Chairman: They may be wasting their time and effort if it will not be used as well. I made my point, I think. I do not know if you understood it.
Senator Stratton: You talked about the control given by government with the use of Treasury Board approval as an example, and that would be used for accountability. Was not that the same Treasury Board approval that gave approval to the sponsorship, to the misuse of HRDC money, and for gun control?
Based on that, if we have been exposed to the Gomery inquiry as to the sponsorship scandal, the HRDC scandal and the gun control scandal, how in the world could Canadians expect there to be a change in what will happen with this money — for example “for foreign aid, an amount not exceeding $500 million”?
I did not get a satisfactory answer from Mr. McKay. There is no description or control as to how that spending will take place.
I quote from the bill, subclause 2(2):
The Governor in Council may specify the 10 particular purposes for which payments referred to in subsection (1) may be made and amounts of those payments for the relevant fiscal year.
And from clause 3:
For the purposes of this Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to
How can we expect change and give reassurance to Canadians that we will not have another sponsorship scandal, another HRDC scandal or another gun control scandal?
Mr. St-Jean: On that point, I would like to give you 100 per cent assurance it will never happen again; I cannot. Things will happen, unfortunately, and this is a reality of life.
What we can do, though, is minimize the risk that they happen in the future; and that is what we are working very hard at doing.
Two things come to mind that have changed some of the conditions that allowed those things to happen. One is the renewal of all the transfer payment policies for the last two to three years and last year in particular. There has been a massive push to review each and every one of the terms and conditions of the transfer payment programs that exist. There are about 750 of them, so there is an extensive inventory of instruments that deal with roughly $25 billion of transfers a year.
We have many complex instruments, which are under review. They are challenged and in place with stronger terms and conditions. There is an accountability framework an auditing framework and an evaluation framework. The Treasury Board and the Office of the Comptroller General with other departments are working on the terms and conditions. That element gives us a better sense that we will have better control.
We are significantly reviewing and revamping the internal audit policy and the chief financial officer model to put in place better governance of internal audit and more independent auditing. We are discussing those matters and exploring how to provide stronger checks and balances. This is a work-in-progress.
The minister is very supportive of the approach, and the community in general is supportive. We will see some fundamental changes in the next few months to give us more assurance and minimize the risk.
The government has announced that by March 31, 2009, it wants most or all the departments' financial statements audited, and we are working hard to make this a reality. We are starting with a readiness check this fall with the first wave of departments. A number of actions are being taken to strengthen the financial management and control.
Senator Stratton: Take, for example, the gun control issue. In previous years, this committee received the supplemental reports from the Department of Finance. Year after year, we complained because the department needed additional funds for gun control. The problem escalated over the years; we complained, but nothing changed.
How do you prevent that from happening again? The government made a commitment that gun control was supposed to cost virtually nothing to the Canadian taxpayers, something like $85 million and, in the end, it ended up costing in excess of $1 billion. How can you tell us what is committed to a program without knowing where it will go? How can you assure the Canadian people and this committee that a situation like that cannot occur again?
Mr. St-Jean: I cannot go back to what happened in the past. I just started my job about a year ago. We are looking at improving the reporting to Parliament. We are improving the RPP, the report on plans and priorities, and the departmental performance report, DPR, in terms of content and quality.
In the coming years we will ask all departments to provide us with their financial statements as part of the DPR; a few years after that the departments will be audited. We are asking for more disclosure in the DPR, and the audit committee will be asking for much stronger disclosure.
In the private sector, we have MDA, or management disclosure and analysis. I would like to see those documents become more robust so that this information provides more transparency. These are some of the things we are working on to help us in the future.
Senator Stratton: You have not told me, not in my mind, how that would change what took place with respect to gun control. The government kept feeding it despite the fact we knew what the numbers were in each supplement and despite the fact that, year over year, the money was growing exponentially to the program.
You as a Comptroller General can raise the flag, but if the government decides to plow ahead anyway, it will plow ahead.
The Chairman: Mr. St-Jean, do you wish do comment?
Mr. St-Jean: My role is to report and ensure that the reporting take place. That is what I will do.
[Translation]
Senator Murray: Mr. St-Jean, you say there is a $4.5-billion cap. There's nothing preventing the government from spending, beyond this bill, any surplus of $6.5 billion.
In theory, we're talking about an amount of $6.5 billion, that is a surplus of at least $2 billion and $4.5 billion in spending. Beyond that amount, there's nothing preventing the government from spending any surplus. Are you confirming that?
Mr. St-Jean: The government announces what it wants to do through budgets, through the Estimates.
[English]
Senator Murray: Prudence is very much in the eye of the beholder. I have the December 2003 communiqué when the Martin government was sworn in and the later communiqué when you were appointed. These communiqués deal with the re-creation of your office as an independent office. You have been here since, on several occasions, with Mr. Alcock.
I entertained the illusion, as it has turned out to be, that the re-creation of your office as an independent office would be an ally to Parliament in terms of strengthening or regaining some parliamentary control over public spending. Perhaps that is not your job.
You have good things to say about this bill, and I am trying to understand it from your perspective. I suppose it is true that identifying these general areas of activity gives you and some others inside the government a better idea of where $4.5 billion of surplus money might be spent and therefore, in a general way, give you an opportunity to focus your minds on how this might be done. However, from a parliamentary point of view, it is an abomination. It is another blow to parliamentary control of the public purse.
Mr. Chairman, the committee may want to call Mr. St-Jean here in six, 12 or 18 months to discuss all of this again. As of today, there is not much he can tell us except that he looks, as we all do, at clause 3. There it is. It sets out the fact that the Governor-in-Council may authorize a minister to spend money in all these ways, and all Mr. St-Jean can tell us today, and it is not fair to ask him to tell us more, is that there will be terms and conditions approved by Treasury Board, and before Treasury Board approves them, and indeed before Treasury Board gets these submissions, his office gets a chance to review them. That is all there is. That is what you have come to tell us.
The Chairman: That, and the fact that it is prudent.
Senator Murray: I appreciate that but, for the moment, I am not sure there is much more he can tell us.
The Chairman: Do you have more to tell the committee, Mr. St-Jean?
Senator Murray: I do not think you know any more than we know.
Mr. St-Jean: As I mentioned, it is more a matter of the process.
Senator Murray: We are talking about two different processes: your internal process and our parliamentary process.
Mr. St-Jean: I appreciate the difference.
Mr. Morgan: As was referenced earlier, the nature of the statutory spending in Bill C-48 is similar to other budget bills including Bill C-43. While there is an overall aggregate of $4.5 billion, it is subject to a surplus of $2 billion. Other provisions in Bill C-43 spoke to funding for the transfer of gas tax revenues to trusts for the provinces and for child care. Previous budget bills provided lump sum payments to trusts for the benefit of provinces. The bill is not unusual in terms of its level of detail but it is unique because of the conditional surplus of $2 billion.
Senator Eggleton: Earlier, you said that this bill would give Parliament — not Treasury Board or the executive — better oversight. I heard you say that and I want to explore how that better oversight will come about.
If there were no Bill C-48, and if the government were to see a potential surplus this fall for spending on things in addition to reducing the debt, the normal practice would be to decide on a program and book it by the end of March. For example, the money could go into a foundation. That would be a normal way of doing things, and then a decision is made and the money is spent. Is that correct?
Mr. St-Jean: Yes, that is correct. The entire surplus must be charged against the debt unless you have an instrument such as this bill. In this case, Parliament has some flexibility to suggest spending if there is an appropriate surplus because it would not know the details on a timely basis before March 31. Rather than put all of it against the accumulated deficit, Parliament could authorize spending, but to book it for March 31. From that perspective, there is more flexibility.
Senator Eggleton: We know now, which we would not have known before Bill C-48, about the spending envelopes that the $4.5 billion would go into in accordance with the division of the relevant formula.
Mr. St-Jean: This is new.
Senator Eggleton: More importantly, if by March 31 a decision were made the additional revenue would be available to put into these spending programs. The agreements would be in place but would still be subject to the final determination of the surplus, which would not be known until about August or September. Is that correct?
Mr. St-Jean: Yes.
Senator Eggleton: That means the government could set up this money at the end of March but not a penny could be spent for about five or six months. Is that correct?
Mr. St-Jean: Yes.
Senator Eggleton: Five or six months gives Parliament ample time and opportunity to bring in ministers and departmental officials to talk about every little detail.
Mr. St-Jean: I should correct that; if there is sufficient indication that there would be a surplus greater than $2 billion, some spending could take place before March 31 that could be charged against it. Generally speaking, spending should take place after the surplus is determined and audited.
Senator Eggleton: That would be five or six months after the March 31 fiscal year-end.
Mr. St-Jean: Yes, it would be around September.
Senator Eggleton: This is quite different because of the period of time created by that condition. Parliament could look at any of the proposed expenditures before the money is spent. Any parliamentary committee could make recommendations on the expenditures before they occur. That has never happened before.
Senator Murray: Read clause 3.
Senator Eggleton: The expenditures have to be booked by March 31, but the money cannot be spent until the surplus is determined and audited.
Senator Murray: When would the programs and projects come before us? Read clause 3.
Senator Eggleton: That would happen any time between the end of March and the end of September.
The Chairman: Mr. Morgan will give us the answer.
Mr. Morgan: I will try to provide a bit more information. Given that the agreements have to be signed by March 31, we are trying to flesh out the details of these programs to set up the agreements. It is likely that in 2006-07, the departments could include the terms, negotiations and their respective directions in their RPPs. I believe there would be some opportunity to look at these documents as part of the estimates process. As we indicated earlier, these are statutory disbursements but they are reported in the estimates and are subject to the scrutiny of Parliament.
Senator Trenholme Counsell: This has been most interesting. I will ask about your printed opening remarks because they seem contrary to the inferences we heard earlier that this is not only very prudent but also immensely detailed in terms of what you will require of ministers and departments before and after the money is spent. It is highly detailed and strict in respect of specific program parameters, appropriate levels of audit, signed agreements, accounting policies, et cetera. In particular, number 14 says that it will highlight the details on how these funds are “intended to be used and subsequently have been used.”
Have you been more strict in terms of applying all of your skills, interests and concerns to this bill? It is unique, as we have been told, and somewhat open to interpretation. Would this be considered quite routine now in 2005 in terms of the level of requirements and expectations of ministers and their departments?
Mr. St-Jean: As mentioned earlier, we performed a great deal of work to renew terms and conditions of about 740 transfer programs. I believe that there are 100 programs left. We are putting these standards in place to ensure that we have clear conditions under which to make those payments.
The DRPs and the RPPs are strengthened every year with the expectation that we will see more robust reports from the departments. This process will take more than one year to complete, but we are moving toward a more comprehensive disclosure to enable Parliament to do a scrutiny of the spending.
If you want to call a department to explain a certain program, the information is in their DPRs. That gives you the information to start asking questions.
Senator Trenholme Counsell: Did you feel that because of the unique nature of this bill, you were facing a special challenge?
Mr. St-Jean: I appreciate it might be perceived differently by different stakeholders. The business of government is quite hectic with many different agreements and discussions taking place all the time.
What this gives us is the heads-up to have stronger, better-defined agreements, with better expectations spelled out in the agreements. There is better research and this document gives us more time to do due diligence.
That would be the major difference; otherwise, it would be the same.
[Translation]
Senator Day: I still do not have a clear idea of the role of your office or the role of the Treasury Board Secretariat. I would specifically like to understand the agreements you discussed. There have to be agreements for beneficiaries before March 31. Is your office negotiating those agreements?
Mr. St-Jean: No, those agreements are negotiated by the various departments responsible for the various programs, in cooperation with the Treasury Board Secretariat, which currently plays a supervisory role in ensuring that the agreements are consistent with the government's policies and objectives and with the customs and usages of the best practices.
Subsequently, once my office and my colleagues are involved in the review of terms and conditions, we must ensure that the managerial framework of these agreements is appropriate. However, the nature of these agreements and all the negotiations are determined by the departments, in some instances by the Minister of Finance himself, depending on the agreements, and in cooperation with the Treasury Board. Our sole purpose is to manage.
Senator Day: Let's say your committee wants to study these agreements before funds are disbursed. Does one have to go to the Treasury Board Secretariat? Is it preferable in future that you review these agreements before us?
Mr. St-Jean: From my understanding of the system of governance, I think it would be more appropriate to ask the minister responsible for that agreement, program or initiative to come and discuss the proposed approaches, mechanisms, partnerships and control mechanisms with you. However, above all else, it's the department that acts.
Senator Day: It is our intention to do that before these funds are disbursed. Can we do that?
[English]
Mr. Morgan: I would think ministers would be available. Certainly, if the details and funding agreements were signed, the reports on plans and priorities would give an opportunity to ask the ministers about the details. Depending on the certainty of the surplus, that would drive when the funds are actually advanced on those agreements, but that could take place after September of the following year.
Senator Day: I want to make sure that until this agreement is in place, you as “verificateur” will make sure there are no funds disbursed; that is one of the steps that must be in place.
[Translation]
Mr. St-Jean: All new agreements and programs must be reviewed by my office to ensure their terms and conditions are up to standard. To add to the comment by my colleague, I would say that it is the RPP that would give you the heads-up on initiatives planned for next year. Based on the initiatives disclosed at that time, you could invite them to come and discuss their plan.
[English]
Senator Banks: Mr. St-Jean, thank you for your indulgence. I am not normally a member of this committee but I once was, and I am reminded today how much I miss it.
As a clarification, does your office normally examine detailed program spending terms and conditions before the passage of a budget bill that authorizes the commitment of the funds, the booking of the funds?
Mr. St-Jean: I have been there for a year. I would not think so, no.
The Chairman: Mr. Morgan, do you want to answer?
Mr. Morgan: In order for these to be booked, we would review the funding agreement to ensure the liability is created by March 31. We would be privy to that and ensure we can book the funds.
Senator Banks: Will that be the case if this bill is passed?
Mr. Morgan: Yes, by March 31.
Senator Banks: Thank you.
Senator Tkachuk: Does not the budget normally do what you say Bill C-48 is doing? Does not the budget lay out the parameters of spending?
Mr. St-Jean: What is new with this bill is that it gives you a one-year heads-up.
Senator Tkachuk: Is not that what the budget does? I have heard the Minister of Finance talk about 10-year spending. Is this an oops-I-forgot budget, or how does this work?
Mr. St-Jean: As we mentioned before, unless you have this in place or in any kind of future budget, the surplus has to be booked against the accumulated deficit. Here, that gives you the opportunity to do a fiscal dividend so you can book before closing your books; that is a new approach. In the past, any surplus had to be booked automatically against the accumulated deficit. This bill gives you the latitude to keep your book open even after March 31 and make a decision to book it or not depending on the fiscal position of the government. That is a new one.
Senator Tkachuk: What is to stop a government for doing it for all the departments? What is to stop the government from saying oh, we have a budget and a month later introduce another bill saying if there is any extra money, we are not even going to tell you how we will spend it; we will spend it on anything we want.
Mr. St-Jean: I referred to the prudent nature of this year because this is a relatively conservative amount compared to budgets in the past. When you compare $4.5 billion to a surplus of recent years, it is in the ballpark of our experience.
I would have some problems with a considerably higher amount.
Senator Tkachuk: What is the difference if the principle of this is okay? You are the comptroller. You are giving comfort to the government in saying it is okay to do this. If it is okay to do this for $4.5 billion, it is okay to do it for $10 billion or $15 billion.
Mr. St-Jean: I am saying it is okay in that it gives a margin of precision, which is, compared to the experience of the past, not unreasonable in terms of the potential surplus. It is relatively modest compared to the overall budget of $200 billion. This amount represents 2 per cent of the budget.
The Chairman: Mr. St-Jean, thank you for your presentation.
I now invite Mr. Stanley Hartt and Mr. Finn Poschmann to come to their seats. Honourable senators, I would like to extend a welcome to Mr. Finn Poschmann from the C.D. Howe Institute, which is a national, non-partisan, non- profit organization that promotes the application of independent research and analysis to major economic and social issues.
Mr. Poschmann is the associate director of research and senior policy analyst at the C.D. Howe Institute, where he has worked since January of 1998. For more than a decade previous, he was with the Library of Parliament's research branch. He has worked in numerous areas within the field of economics but has primarily been concerned with public finance and taxation and federal-provincial relations.
Mr. Stanley Hartt is appearing today as an individual. Mr. Hartt holds a law degree from McGill University. He was a partner with the law firm of Stikeman Elliott until 1985. From 1985-88, he served as a deputy minister of the Department of Finance. From 1989-90, he was the chief of staff to Prime Minister Brian Mulroney. He is currently Chairman of Citygroup Global Markets Canada. Mr. Hartt must appear before another committee, so perhaps he could speak first.
Mr. Stanley Hartt, as an individual: Thank you. I have three comments to make.
First, senators should be alarmed at the precedent that Bill C-48 sets for the manner in which legislators are invited to use or, in this case, fail to use, the traditional power of Parliament to control public spending. Those powers were hard-won. We did not shed any blood in this country over this control, but our forbears in Britain, whose parliamentary system we inherited, did. The supremacy of Parliament on spending matters is a very valuable tradition; we should not be casual about this tradition.
I watched my former colleagues in the department and the new people from the Treasury Board try to make a silk purse out of a sow's ear this morning. The concept that spending should not be authorized based on, “The Minister of Finance is authorized to spend money on” and then a word is inserted at the end, or four words, at the end of that sentence. They are all good things, motherhood and apple pie, and they would all be wonderful things to spend money on, but not without program parameters and without any sense of how the money will be spent, in full knowledge of the fact that the government will feel it necessary to divest itself of the actual money in terms of legal commitment by March 31. It will then say to you, “Honourable senators, oh, you know, after March 31, after the conditional agreements are signed and entities are set up to which we have got rid of this bothersome, troublesome, pesky money, you will still be able to call people in and ask them questions.” Sure you will, but you will have decided already that the money can be spent, whether you like it or not, and this is an awful thing in terms of our parliamentary traditions.
We normally spend money out of budgeted revenues or even planned borrowings. The suggestion has been made that it is a great national interest to preserve the lapse or to prevent the lapse. The lapse was not invented in order to handcuff governments or to cripple legislators in their attempts to do the wonderful things that they try earnestly and all day long to do. The lapse was invented for the opposite purpose. If, at the end of the fiscal year, the money is not spent, guess what; it reduces the debt. That does not mean it goes into a black hole. If a priority arises that you wish to deal with thereafter and there is not enough money in the current year, you can always re-borrow what you just paid. The lapse was invented to give Parliament another chance to say whether money should be spent or not. To say that to avoid the lapse, we take it, we pass it over to another entity, a corporation with or without shared capital, or some trust or some foundation, and then it is gone, but we can always ask questions, I do not find that comforting or prudent or desirable in terms of our parliamentary traditions.
The second point is that priorities change. As Deputy Minister of Finance, I always had to deal with a list of pressures. Let me tell you, it was long, because the departments would furnish us with all kinds of things that were important.
The interesting thing is that Canada does not lack for good causes. We have scarce resources and lots of good causes. The pressures are always there.
I have nothing against these four things, because they are all good, but why would we want to say we will take $4.5 billion and just commit it to that, and then we can ask questions about the details, and the Comptroller General will come back and tell us about the details of the agreement?
Let me give you one example that stems from the work of this Senate itself. I had the honour to be one of the counsels to 10 of your colleagues when they went to the Supreme Court in the Chaoulli case. Senator Kirby's committee, then vice-chaired by Senator LeBreton but now by Senator Keon, came up with an incredible report called The Health of Canadians: The Federal Role. That report recommended the health care guarantee to prevent individuals from falling through the cracks of our medical system and not getting medically necessary services within medically advisable time. Because this report was so groundbreaking, the senators — 10 of them, not the whole committee, because one or two abstained — decided to engage counsel and intervene in the Supreme Court. They were granted the right. Their factum was the source of most of the reasoning of the majority of the court.
Here we have the court saying that it is no longer up to government, no longer up to cabinet, no longer up to the Prime Minister, even with or without the NDP, to decide how much money there is for health care. There is now an obligation of result, $41 billion over ten years, which sounds like a huge amount. The provinces agree on the amount and everyone cheers the health care accords. The problem is that if the people do not get their necessary treatment in the time that medical science says is the maximum amount of time, then the government is vulnerable to further actions that could next time actually deprive us of our medical care system.
The Prime Minister says that Canada will not have a two-tier medical system, but races around giving out asymmetrical negotiated one-off grants based on Bill C-43, and he even talks about some of the things that might be done under this bill.
I say to you, why would Parliament want to commit its priorities for the next two fiscal years before they knew what they were? We have an example of one that is earth-shattering. It is one that most Canadians, if they could understand what is going on, would say, “Yes, you give money for that.”
The NDP should be blushing because they did not withdraw this budget bill and suggest putting the money into medicare in light of that judgment. The health care guarantee does not mean it can be applied only in relation to a publicly funded, universal health care system that is government delivered and paid. It is valid to satisfy the constitutional rights of Canadians by having private sector supplementation to eliminate the bottlenecks in the public system. However, Parliament has not yet made that decision. When Parliament does decide, it might need some of this precious surplus.
My final point is the mechanics of Bill C-48. I have always objected to the institution of the concept of foundations as a way to avoid lapse. The Auditor General commented that it makes it difficult to determine whether the spending went to where it should go leading to the question; did we receive value for money? The expectations must be determined before you can know whether you received value for money.
Clause 3 bill builds on the mechanics of the foundations by creating many new ones — companies with share capital and companies without share capital, grants, and payments in any way. It is simply a matter of taking the money off the books. I am not certain whether it is prudent to do that or why that would add predictability.
The Gomery committee will report on December 15, if they keep to the announced schedule, and thirty days following that, the Prime Minister has promised to call an election. Add the writ period to that timeframe and there will be a new Parliament before March 31.
This bill appears to be nothing but an attempt to save political skins in the interim. Far be it for me to say, given the roles I used to play, that there is anything wrong with saving political skins. Let us call a spade a spade and stop trying to make this bill appear prudent and the way of the future. As a former deputy minister, I think that if it is the way of the future, it is a bad thing.
Mr. Finn Poschmann, Associate Director of Research and Senior Policy Analyst, C.D. Howe Institute: Thank you, senators. I had difficulty in preparing my speaking notes on Bill C-48 but I did find a nice lead-in: Bill C-48 is very short. Brevity can be a good feature in many walks of life and in legislation. Perhaps it is a good thing that Bill C-48 is short because it proposes to spend about $11.25 million per word. That is pretty much where my kind comments end.
Bill C-48 is problematic for a lengthy list of reasons, some of which have been spoken to by Mr. Hartt. Bill C-48 arrived from outside the budget process so it was completely severed from the tradeoffs normally involved in budget making. Budgets are intended to reflect the balance of competing priorities that policymaking and politics produce. Bill C-48 is a footnote to that process.
As well, the bill focuses relentlessly on the money and leaves out important details on the nature of the expenditure. It is a triumph of politics over policy and asserts that money is to be spent on a few categories and matters not what they are. It is an appropriations bill, a spending authority bill. Worse, Bill C-48 does not include guidance on how to prioritize even within the list of categories. The federal budget is supposed to the document that reveals government's choices about spending priorities. We are looking at $1.5 billion dollars of incremental money presumably to be spent on post-secondary education and affordable housing. Normally, such a tradeoff is revealed when the budget is tabled but Bill C-48 would punt that decision into the political murk and the $4.5-billion spending authority with it.
The bill does not explain what it speaks to accomplish. No objectives or goals are defined so you cannot say whether the bill achieves according to its intent. The spending imperative runs over the efforts of staff in many departments to control costs and reign in spending. The government's expenditure review process, barely out of the cradle, has been tossed by the wayside and replaced by a half page of scribbled lines.
Bill C-48 would throw money at spending in areas where a substantial amount of money can disappear with little to show for it. That is not helped by the fact that the bill does not state its intent in the first place. It has a backward- looking mechanism to determine spending amounts that is foreign to budget-making. We do not draft budgets in that way and the Auditor General will have difficulty when trying to sense of it at the end of the year.
The mechanism undermines public sectors managers to stay within budget near the year end. I do not see it as smoothing out the process. The policy makers and public sector managers still know that any money they do not spend by March 31 will go to another program. If you are not in one of the four areas, then you know for sure it will go to another program. I do not see where March burn off is limited by this process.
If the government of the day were to put its mind to it, there is an out and they would not have to spend a single penny in any of the areas identified by Bill C-48. Parliament could vote the supplementary spending authority that would eliminate the surplus. Imagine a February budget in 2006. It could lay out new foundations, new trusts and new allocations to which the money would be committed by March 31, and it could be in any area chosen by the government because it would be a new budget with no constraints. Bill C-48 is not helpful at steering spending and it moves Parliament farther away in respect of how priorities are sorted through by government.
Bill C-48 will not be easily corrected because the flaw is fundamental to the concept of the bill. I presume Bill C-48 will pass but I hope that in the future the other place will send proposed legislation that is more amenable to proper oversight.
Senator Tkachuk: If the surplus went to foundations or other organizations listed in the budget and left there, would it fulfill the requirements of Bill C-48?
Mr. Hartt: Yes, in the sense that you cannot have it both ways. If you need to create a mechanism to declare the money spent, then “spent” is the operative word. The liability is created because the expenditure is booked and the money is gone from Parliament's purview. Perhaps the foundation could be told to spend or to not spend the money when it so chooses.
I am not implying any bad will behind this bill but I worry about the opposite phenomenon — that the orgy of spending becomes habit forming and continues into periods when we are not blessed with such great resources. The beneficiaries of this spending do not stop asking for money just because there is no longer a surplus. If they receive the money when there is a surplus, what happens when we no longer have a surplus? They still expect it, want it and might turn back on parliamentarians.
Orgies of spending are always bad and when it is done to prolong the life of a government by one week or a few months, it is truly bad.
Senator Eggleton: Think about the Conservatives' years of spending orgies.
Senator Tkachuk: Senator Eggleton threw me off what I was going to ask.
Senator Eggleton: That was my intention.
Senator Tkachuk: It came back quickly. I asked Mr. St-Jean earlier about whether this money can be placed in next year's budget. Mr. McKay said that the money does not have to be spent this year, it can be spent next year; there is no obligation to spend it this year and the government can decide whenever it wants to spend it.
In reality, none of this is necessarily new money. In theory, I am not saying in fact, because I would not think that the government would do anything like this — all of this could be in the budget and this could all be a sham. This could all be in next year's budget. In other words, money originally allocated would simply be not allocated and this money substituted.
Mr. Poschmann: I just realized that a good way to describe this is as a sort of quantum neverland. What happens by March 31 is that an agreement has to be in place — a trust, an agreement with a locality, whatever it is — it can be anything, but it has to be fully in place by March 31 in order to tell ourselves that there is a commitment. However, it is a contingent commitment because, as we heard this morning, we simply do not know whether the authority will be there under the terms of Bill C-48 to fulfill that contingent commitment.
The money is both spent and not spent at the same time. You do not know until there is a quantum click five months down the road that tells you whether your program is alive or dead. It is a very strange neverland. It makes it hard to figure out from an outsider's perspective, who wants to look at the spending plans and search for evidence about what is to be achieved this year and next, and why government is comfortable appropriating funds for doing that. It makes it hard to find evidence about those priorities.
Senator Tkachuk: My understanding from the bill is that the money has to be over $2 billion dollars in surplus funds — in other words, the first $2 billion goes to the debt. Let us say it is only $1 billion over that in each year, so there is only a total of $2 billion of the $4.5 billion. Does this bill take any effect or does it have to have the full amount?
Mr. Hartt: It seems to me it can be partial amounts.
Senator Tkachuk: It can be partial amounts.
Mr. Hartt: Yes.
Senator Tkachuk: Cabinet will decide how these partial amounts are allocated. They will say we only have $2 billion so we will spend it on this. That is why I wanted the agreement tabled because I do not know whether the NDP wants to be involved in this whole process. They are the ones who made this agreement; and it is public knowledge that they were part of it.
Is there a way for them to become part of it without this information becoming public as to how this money will be allocated in the future? Will it be simply the NDP and the Liberals getting together and saying we only have $2 billion and we will spend it on whichever of these four items we want today?
Mr. Poschmann: Let me phrase this carefully. I am unaware of any legal manner in which an agreement, if there is one, could influence how money is allocated under this bill.
It may do so through a mysterious process in cabinet but that is entirely a political process. After this legislation is passed, if it is, it would have nothing to do with the chamber anymore.
Senator Tkachuk: This is a political bill; it is not like a legal document. In other words, if the NDP feels the promises are not fulfilled, they cannot sue anybody or sue the people or the government, or take the Minister of Finance to court for not following through in an agreement that they have signed with a minister of the Crown.
Mr. Poschmann: That is correct. The government of the day retains a tremendous amount of discretionary power over how the money is allocated under this bill, including the ability to propose other spending legislation that would eliminate the room for spending under this bill.
Mr. Hartt: Do not forget that the previous witnesses from the Department of Finance and the Comptroller General's office made it clear that the knowledge of which you speak will not be known to anyone, cabinet included, until September or so of next year. The Prime Minister, if he meant what he said, has already promised us there will be an election before that. You are talking about the NDP suing; politically their reaction would have to be in the House, but in the next Parliament.
Senator Tkachuk: Thank you, chair.
The Chairman: This bill, as the lawyer for the Department of Finance told us, under subclause 1(1), says:
... the Minister of Finance may ... make payments out of the Consolidated Revenue Fund
Later on, if you look at the purpose clause of the bill, which is clause 3:
For the purposes of this Act, the Governor in Council may, on any terms and conditions that the Governor in Council considers appropriate, authorize a minister to
It lists a long series of things, not one of which gives room for any parliamentary oversight.
Is there anything that either of you can suggest to this parliamentary committee, something that could be said or done to improve this to give some parliamentary oversight so there could be transparency and accountability built into the system?
Mr. Hartt: Senator Eggleton pointed out twice to previous witnesses that Parliament has oversight in the sense that after the fiscal year end, as it is becoming clear whether there is any money and what it might be spent on, they can call people in and ask for explanations. That is a kind of oversight, but it is not the kind of oversight that I traditionally associate with the parliamentary control over the spending power. In other words, the money is blown; now we are going to be told, because people are nice and they will show up and sit in this chair, how it was blown.
Mr. Poschmann: I do not think I have anything to add to that. The list of possible uses and payments from clause 3 is not that different from authorities granted under legislation. What is odd about this bill is the way it is disconnected from the rest of the priority-setting process.
Senator Harb: Gentlemen, each of you made comments on parliamentary oversight that impressed me. I am not about to read what is in the mind of the government but I think the government, in drafting the legislation the way it did, has that exactly in mind.
Let me say why it has that. First, as part of the authorization, there are subclauses 3(e) and 3(f). I suspect that is where the government could deal with this notion of oversight; it could take the money, put it in either a new corporation or buy shares in one of the existing corporations, and say it has fulfilled the commitment under the agreement. It could then say that it wants to look at other elements of how to spend the money — agreements with the provinces or the municipalities, or the capacity to spend that money.
I asked the Treasury Board earlier if the system had the capacity to spend the money even if you were to put it in there. If you do not have the capacity to spend, then the money will not be spent.
I say the government was exceptionally smart in trying to deal with the wishes and aspirations of Canadians in coming up with something that is flexible, such as Bill C-48.
Of course, we would have preferred not to have it in the shape that it came to us. However, under the circumstances, Mr. Hartt, you stated yourself there is nothing wrong with political arrangements. I think it was perfectly right for the government to respond to the needs of Canadians in that they did not want an election. By and large, they wanted to see the government implement some of the commitments they had in previous bills and previous budgets. This is the better of two evils, sleeping with the devil or dealing with the devil. I think it is good. What do you think?
Mr. Hartt: As I said, Senator Harb, I have nothing against the subject matters to which money could be allocated. No one could have; these are all good things.
Who could say they were against affordable housing, foreign aid, the environment or training and education?
The problem is that normally, in a budget, Parliament is presented not just with a list of subject matters to which money will be allocated, but with some backup, some preliminary program parameters and some intent for how the money will be used.
The budget documents — I know, because I used to prepare them — are very thick, and they go as far as ways and means motions and back-up material. A lot of energy and effort is spent by department officials going around and explaining to Canadians in general and interest groups speak for groups of Canadians how this money will be spent.
What is unnerving about this bill is that an arm was twisted in a hotel room, or anywhere else, I have no idea where it was, and a list of good-sounding things was established. Money was allocated.
I accept your point that some effort was made to ensure that, through Treasury Board, there was scrutiny of the mechanics by which the money would be readied for disbursement. There was some responsibility exercised, but it is such a far cry from the normal budget process that I urge you, even if you hold your nose and support this bill and pass it, not to continue the rhetoric that this is a good idea and this is how we should do everything in the future. This is not a great innovation.
Mr. Poschmann: Mr. Chairman, there is an interesting segue in the question from talking about Parliament to talking about government. This legislation asks Parliament to pre-authorize contingent spending on a bunch of nice things and a player to be named later. That is the novel part of this legislation for the budget-making process. I think Mr. Hartt is right to express worries about where it leads.
Senator Harb: There is a Catch 22. This is exactly what the Auditor General has told us over and over again. We know that before the government spends any money, it has to come to Parliament and ask for authorization to spend that money, and then proceeds to set up corporations, agencies, and foundations and do the good things they want to do. The government does exactly what the Auditor General asks it to do, and then we have to turn around and start whipping them.
Mr. Hartt, knowing what we know now, and the fact that we have this bill before us, what would your recommendation be to the government, if you were in an advisory position? Would you recommend it set up a corporation, put the money aside, and identify the parameters of the programs under which they would spend that money, or just pass it like a flat cheque to the provinces and tell them to spend it on anything they think is best?
Mr. Hartt: I am glad you continued to ask me what I would advise the government to do. I do not think you would want to hear my answer to that question unqualified.
If you had the Auditor General sitting in this seat, she would say, “Senator, please do not tell me this is what I wanted you to do. Yes, I want to know that Parliament has taken cognizance of the spending before it happens. Yes, I want to know before money is passed into a foundation just to make it disappear by March 31 that somehow there is some basis for me to audit what it is it was spent for so I can tell you whether you got what you were paying for.”
I do not think the Auditor General would applaud this. I do not know if you are scheduled to hear her or not, but I cannot imagine she would say putting a nice sounding word at the end of a sentence that starts, “The Minister of Finance may make payments to,” is what she was looking for. She was looking for program parameters designed to enable her to say, “Parliament intended to accomplish this by the money it voted, and it either did or did not accomplish that.” That is what an auditor can do. An auditor cannot invent what was in your minds when you authorized this. Frankly, I am not sure there is any mind in which the “this” is present, even as we sit here today.
The Chairman: The Auditor General looks for value for money. I cannot recall the Auditor General ever saying she wanted to have a series of foundations and endowments set up at arms length over which there is no parliamentary scrutiny.
Mr. Hartt: She said the opposite.
The Chairman: Exactly.
Senator Murray: I have already indicated my scorn for this bill. Mr. Hartt, I wonder if you are too strict and taking too classic an approach as to what should be done with a surplus. I understand your position is that it goes to pay down the debt, and if you need more money for something else, go borrow it from the money you have used to pay down the debt.
You are almost old enough to remember the St. Laurent government. Mr. St. Laurent saw a windfall coming one time from the estates of a couple of dead, dying, or recently deceased Canadians, and his government took the point and endowed the Canada Council.
An argument could be made that this is what is happening with this bill. The government could say, “We are up to $4.5 billion, and we are saying it can go to this or that.”
I objected to the foundations at the time they were created. However, my objection was that so many of them were being created through legislation but rather through the Canada Corporations Act and, as several people have observed, put beyond the reach of Parliament. That would be, in many cases, the last we would hear of how the money was being spent by these non-governmental agencies for public policy purposes. That was my objection. We are making some headway, slowly bringing them back in within our purview, so that is progress.
I tend to think that if there is an unanticipated surplus, it is a proper decision for the government to take. If the government decides it does not want to spend any of it or not all of it on reducing taxes, or it wants to spend all of it on reducing the debt, then it can put it to some other purpose.
My problem is that in this bill, Parliament has really nothing to say beyond authorizing the generality. To me, compared to this, the foundations are looking pretty good. The idea of the foundations, given proper parliamentary oversight and accountability, is looking pretty good.
Mr. Hartt: Senator Murray, I do remember Mr. St. Laurent. I met him several times. My father was a member in his party in his government. I remember that era very well. I will bet you money that you will not find that a bill to say that the unintended surpluses that came from the estates of the two people shall be used to form — fill in the blank — the Canada Council, and nothing more. My bet is that somebody knew the Canada Council's mandate and an enactment established the roles and members' of the council.
This is what is wrong with this bill. I am not against the Canada Council. You could have changed all these four things and given all this money to the Canada Council. My problem is not with the fact that surplus monies are spent but that they are being spent in an ersatz, innovative, outside-the-budget process with no back-up, no program parameters and none of the historical precedents.
Senator Murray: Is it your position that the surplus should go only to pay down the debt?
Mr. Hartt: It would depend on circumstances because there are times when the answer to that would be yes, but not always. For example, it would have been so much better if in the original budget there had been a list of spending, with matching revenues; an estimate of the surplus; a list of additional spending should the surplus be greater than anticipated; and a fully fleshed out set of parameters just like every other program that is funded by the budget.
Senator Trenholme Counsell: Mr. Hartt, I am interested to know why you spent about one-half of your presentation on the Supreme Court decision. I know you are using it as an example of needs that may arise from unexpected sources. Is it for that reason only or is there another reason for your dwelling on the Supreme Court decision?
Mr. Hartt: I did use it as an example because it is par excellence. Rarely does any event, political pressure or even court decision, take out of the hands of the Department of Finance, the Minister of Finance, the entire cabinet, Parliament and the government, the discretion about how much is enough for a goal or a program. In this case, there is an obligation of result. The government, if it chooses to maintain a monopoly over a universal, state-paid, state- managed health care delivery system, has to ensure that no Canadian who has access to a lawyer falls between the cracks and receives medically necessary treatment in a time that is not medically timely. Any such person could sue, the result of which could be a declaration that goes beyond declaring invalid two clauses in Quebec's legislation that made private insurance illegal.
I am using it as the example par excellence. I have to confess that it is also because the senators on the Standing Senate Committee on Social Affairs, Science and Technology came up with the perfect, totally complete and self- defining constitutional fix such that I thought senators would have some sympathy for the example.
Senator Trenholme Counsell: I do not know whether this question is appropriate as a follow-up. You seem like a very wise man and you represented the senators in this decision. Is there a little manoeuvring going on? Where is the integrity in all of this? I am amazed by the amount of attention being afforded this today.
Mr. Hartt: So that all conflicts of interest are declared, I wrote a paper in 2002 for the C.D. Howe Institute, which was the locus classicus of this argument that the Charter guarantees Canadians timely access to the health care that the government provides. It found its way into the court case, which had already begun in Quebec, and it was cited not only by the senators in the report of the committee but also in each factum made before the court: the Canadian Medical Association, various health clinics from British Columbia and two appellants who had launched the suit.
I originated this argument so I am not here to shill for the senators but rather to shill for my paper, the C.D. Howe Institute, the brilliance of the Standing Senate Committee on Social Affairs, Science and Technology and the wisdom of the Supreme Court.
Senator Banks: I will revert to the second question raised by Senator Murray in respect of parliamentary scrutiny of substantial spending, a large part of which is from parliamentary appropriations, not just from the proceeds of estates to which Senator Murray referred.
The Financial Administration Act, which created the Canada Council, specifically excludes the Canada Council from section 17, which is the intrusive kind of audit in which the Auditor General may determine whether there is value for money.
The Auditor General is the auditor of record for the Canada Council but that is to determine that the books are in order. However, the Auditor General, in that and other cases such as some foundations, does not make a determination as to whether the money was spent on other than the general intent outlined, perhaps similar to the content of this bill. There is no specific application made to Parliament or elsewhere with respect to the policies, which change from time to time, of Canada Council's spending. Part of the reason behind that is the thinking in respect of matters to do with the arts, their adjudication and that of the Social Sciences Humanities Research Council and the Canadian Foundation Institute that decisions are better made by persons other than politicians, even other than bureaucrats. Do you agree with that premise?
Mr. Hartt: Absolutely, senator. The arm's length independence of granting councils and agencies is important. Imagine, after some of the scandals witnessed recently, if we were to find that a ballet dancer received a grant to study because she worked for a candidate of a certain party? That would be terrible.
I hope that you are not suggesting that it is precedence so we should have an environmental council, a post- secondary council, a housing council and a foreign aid council, all of which would have independent granting authority. This spending is of a completely different nature.
The Chairman: Mr. Hartt and Mr. Poschmann, I thank you for taking time from your schedules in the middle of a sunny July day to help us in our deliberations on this difficult and important budget bill.
The committee adjourned.