Finance Committee on May 2nd, 2013

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is meeting 119 of the Standing Committee on Finance. Orders of the day, pursuant to Standing Order 81(4), we are dealing with the main estimates 2013-14, votes 1, 5, 10, L15, 25, 30, 35, 40, and 45 under Finance, referred to the committee on Monday, February 25, 2013.

Colleagues, we have officials here from the Department of Finance. We want to welcome you back to the committee to discuss main estimates.

We have Sherry Harrison, assistant deputy minister, corporate services branch. My understanding, Ms. Harrison, is that you'll be doing the opening statement for the officials, so if you could present the opening statement, and if you could introduce your colleagues at the table, then we'll have questions from the members for the officials.

[Sherry Harrison, Assistant Deputy Minister, Corporate Services Branch, Department of Finance]

Thank you, Mr. Chair.

My name is Sherry Harrison and I am the Assistant Deputy Minister responsible for Corporate Services at the Department of Finance. With me today are officials to assist in responding to your questions on the 2013-14 main estimates for the Department of Finance.

The main estimates for 2013-14 total $87.6 billion. Over 99% of total departmental requirements, or $87.5 billion, relate to statutory items that have already been approved by Parliament through enabling legislation. The statutory items are displayed in the estimates document for information purposes and will not be included in the appropriation bill.

Within the statutory forecast, there is a net increase of $2.4 billion over the 2012-13 main estimates, with the major contributing factors being: a $2.7-million increase in transfer payments to the provinces and territories resulting from the legislative funding formulae; a $1.5-billion increase as a result of transitional assistance payments provided for under the comprehensive integrated tax coordination agreements with Quebec and Prince Edward Island; a $1.3-billion decrease in interest on unmatured debt as a result of the interest estimate being revised to reflect the decrease in the average forecast of interest rates; a $0.4-billion decrease in other interest costs as a result of the interest estimates being revised to reflect the decrease in the average long-term bond rate; a $10-million increase for payment to the International Bank for Reconstruction and Development for the development and implementation of pilot projects to demonstrate the role of innovative market incentives in agricultural applied research; and a $6.5-million increase for the purchase of domestic coinage reflecting the savings identified as part of the spending review offset by net redemption and administration costs due to an accelerated profile at penny redemption rates, as well as increased cost estimates for demand and metal price increases reflective of recent growth projects for overall coinage.

The voted grants and contributions include a decrease of $210 million resulting from the cessation of payments to Export Development Canada for debt relief by the Paris Club.

The operating vote reflects a net increase of $9.4 million over the previous main estimates. The increases are mainly due to $10 million for the department's relocation to 90 Elgin Street in 2014-15, $6.8 million for government advertising programs, and $1.2 million for collective bargaining. The increases were offset by decreases of $4.2 million related to savings identified as part of the budget 2012 spending review, and $4.4 million for various sunsetting funding related to personal income tax initiatives, corporate finance and asset management, the G-20 framework working group, GST technical issues, and maintaining the strength of Canada's financial system.

We would be pleased to address questions that the committee may have on these main estimates.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now continue with questions from members, starting with Ms. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair, and good morning everyone. Thank you for being here today.

My first questions are generally on operating expenditures. The main estimates state that operating expenditures will be increasing by $9.4 million overall. Is that correct?

[Sherry Harrison]

That's correct.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Looking at some of the details, budget 2012 meant a $4.2-million cut, but I noticed that advertising is up by $6.8 million. Is that $6.8-million figure correct?

[Sherry Harrison]

From main estimates to main estimates, that is correct. Last year, it was $3.2 million and this year it's $10 million in the main estimates.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay, so it's a $6.8-million increase. Can you tell us more about that? Why does the Department of Finance feel the need to advertise itself in a way that we would see a $6.8-million increase in advertising?

[Sherry Harrison]

Mr. Chair, could I have my colleague Mr. Catta come up to talk about the specifics of the advertising item, please?

[The Chair, Conservative, James Rajotte]

Mr. Catta, go ahead please.

[Jean-Michel Catta, Assistant Deputy Minister, Consultations and Communications Branch, Department of Finance]

The $6.8 million is for economic action plan advertising, which is essentially to inform Canadians about the measures that are contained in the economic action plan. It's also that they not just be informed, but that they can avail themselves of the benefits of these various measures.

At this point in time, in terms of how the $10 million will be spent this year, decisions haven't yet been taken. This will be determined over the coming weeks and months. But the general purpose is economic action plan advertising.

[Peggy Nash, NDP, Parkdale—High Park, ON]

The estimates specified the following objective, “government spending is focused on results and delivers value for taxpayer dollars”.

Do you feel that the so-called economic action plan advertising is delivering that value for taxpayer dollars?

[Jean-Michel Catta]

I think there's a couple of dimensions to this.

The first is, as you well know, the economic action plan is at the heart of the government priorities. It is sort of a major instrument to generate economic growth, jobs, and so forth. It is a key piece and a key priority of the government's agenda. So from that perspective, it is legitimate that the government would want to communicate and would want to let Canadians know about these priorities.

The second aspect is that through our own research that we've done—public opinion research, focus groups, surveys as well—Canadians have indicated they want the government to inform them about the government's priorities and programs.

These two objectives, if you like, meet in some way through advertising, if I can say so. Advertising is part of a communications tool kit that is available to communicate with Canadians about the government priorities.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Really? I mean, it's interesting. I've had a lot of feedback from Canadians who say there's nothing specific in those ads that tells them about specific programs or services that are of benefit to them, but they see it as government promotional advertising. The ads talk about good government, and that's certainly in the eye of the beholder. I have to say there's been tremendous backlash—and I'm speaking primarily of locally in my community—from folks who have said they feel the government is engaging in propaganda on their tax dime.

Has there been any consideration of that, given that surveys have shown very diminished returns for the effectiveness of this advertising?

[The Chair, Conservative, James Rajotte]

Just give a brief response please.

[Jean-Michel Catta]

No. Our own research shows...and in fact after each sort of advertising campaign, we are required to evaluate the results and the effectiveness. What's interesting is that over the last two or three years, the awareness of the economic action plan has risen from about 40% or 45% two or three years ago to close to 65%. That's what our results show, which is quite significant. So from that perspective, it shows that to some extent it resonates with—

[The Chair, Conservative, James Rajotte]

Okay, thank you. Thank you, Ms. Nash.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair. Welcome to the officials, again.

I have to say that I have the exact opposite happening in my riding. When I go places, people are thanking us for making them aware of what the government has done so that when they file their taxes, they can actually take advantage of things like the children's fitness credit, the hiring credit for small business, etc. Without the advertising, many of them say that they wouldn't know about it. The hiring credit just comes right off, so it's a wonderful tool to be able to advertise and teach people what it is they're going to be saving as a result of the measures taken by this government.

Talking about savings, I note that in budget 2012 our government had outlined that it would be looking at some areas of savings. I believe there are some savings reflected in the main estimates from that. Could you tell us about the identified savings as a result of budget 2012?

[Sherry Harrison]

In response to that, maybe I'll focus on the voted operating reductions.

The department has a reduction of $4.4 million reflected in the estimates with respect to operating savings. There are three areas within the operating vote that we have focused on.

We are streamlining our internal services. We've taken a number of measures to consolidate some of the functions and to realign some of the activities. On the policy and research side, we're consolidating some of our research and analysis function on the policy side to generate savings. We also have some small savings in our operating costs related to better use of information technology. For example, in our recruitment programs there's a greater use of Skype, and online applications and such.

[Shelly Glover, Conservative, Saint Boniface, MB]

Excellent. Thank you.

I want to talk about the transfer payments to the provinces. I note that in the main estimates there's a $2.7-billion increase in transfer payments to the provinces and territories. I think this is as a result of the legislated funding formula. I'm wondering if you can explain to the committee how the funding formula has changed and how this change will affect the provinces.

[Nipun Vats, Director, Federal-Provincial Relations Division, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

There aren't actually any changes this year with respect to the funding formula for major transfers to the provinces. There are some legislated growth rates with respect to the major transfers. First of all, in the equalization program, the total entitlement grows by a three-year moving average of the gross domestic product. The Canada health transfer grows at 6%. The CST grows at 3%. Territorial formula financing, which provides similar benefits to the territories as equalization recognizing their special circumstances, grows with respect to a legislated gap-filling formula between a proxy for the expenditures that the government needs to provide services and a proxy for its revenues. Those growth rates in those four major transfers are the lion's share of the growth in that transfer payment.

[Shelly Glover, Conservative, Saint Boniface, MB]

That's very good. It's great to hear about the increases in transfers. How will that help our provinces and territories?

[Nipun Vats]

These transfer payments provide significant funding to provinces and territories with respect to equalization. It's an unconditional grant whose objective is to enable provinces to provide relatively comparable services at relatively comparable levels of taxation. The CHT is funding for health care for provinces. The CST is for social programs with a focus on education, child care, and services such as those. TFF, territorial formula financing, is a lot like equalization, but in the territorial context. It is actually the vast majority of government revenues for the three northern territories.

[Shelly Glover, Conservative, Saint Boniface, MB]

My province of Manitoba is one of the only provinces that still gets the total transfer protection. I must note that I've been flooded in my office because as we continue to increase funding for the provinces, we have an NDP government in the province of Manitoba which just raised the provincial sales tax. So there's lots of disappointment out there with regard to the NDP government in my province.

[The Chair, Conservative, James Rajotte]

Are there any comments on that from the officials?

We'll go to Mr. Brison, please.