Finance Committee on Dec. 3rd, 2012

[The Chair, Conservative, James Rajotte]

Ms. Nash, on that point.

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

Well, the Parliamentary Budget Officer has already gone to court and I understand that Finance is one of the ministries that had not supplied information to him. Before attending this meeting, I didn't check the Finance website, but I understand this was one of the ministries that the PBO had gone to court over, which is why I'm raising it here.

[The Chair, Conservative, James Rajotte]

I don't see how it relates to the two votes before us today. It's probably something the committee would want to have a fulsome debate on. I'm going to take it as a notice of motion, so we will deal with it at our next meeting.

You're free to ask the officials questions on the topic as they've answered today, but the answer they've given today is that the department has complied with it.

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

Okay. If it's because of the court action that the minister has now complied, I'll certainly check that out, but I'm not aware of that. That would give us time to verify that.

[The Chair, Conservative, James Rajotte]

So we'll deal with it at our next scheduled meeting.

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

Thank you.

[The Chair, Conservative, James Rajotte]

I have Ms. Glover on the list for a five-minute round, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I don't really want to continue this conversation about the PBO because it is misleading. The PBO has stated very clearly that he's actually pulled back on his original intent.

But nevertheless, we're here on the estimates. Given that the opposition insisted on hearing about the estimates, I'm going to open the floor up to Ms. Harrison who has graciously given her time to us.

One of the questions that hasn't come up yet is an explanation on the debt. I know Monsieur Caron actually talked about the unmatured debt numbers.

I'm going to open the mic up to you, Ms. Harrison. Could you explain exactly what that line means, the interest on the unmatured debt and why there's a difference there? We touched on it a little bit, but I want to make sure that everyone understands exactly what that is before we leave here today.

[Sherry Harrison]

Thank you for the question.

I'll refer to my colleague, Mr. Pagan, to respond.

[Brian Pagan]

There are two entries in supplementary estimates (B) related to interest costs. The first is interest on unmatured debt, with a total estimate today of $18.5 billion or $18.6 billion. Then a separate entry just a few lines below on other interest costs.

The presentation of our interest costs separated in this way responds to recommendations of the Auditor General and they are being presented in these supplementary estimates in this way for the first time. So it reflects, at the recommendation of the Auditor General, better information and more transparency in terms of the component elements of our interest costs.

On unmatured debt, this is the interest cost of outstanding bonds and certificates of indebtedness. There's a debt management strategy that is presented as part of the budget that is designed within the Department of Finance in collaboration with the Bank of Canada. It meets a number of different objectives, first and foremost, servicing our government operations, but also responding to both domestic and global needs in the debt market in terms of the various maturities, the durations of different offerings.

What we're seeing here in supplementary estimates (B) reflects a decrease in the private sector forecast for interest rates from 1.3% at the time of the budget to something like .93% right now and this is in keeping, again, with developments globally, in Europe, the United States, and Canada.

[Shelly Glover, Conservative, Saint Boniface, MB]

I appreciate you doing that because I wanted to make sure Canadians who are listening hear that it's a decrease in interest because there has been a change.

There aren't many changes in the supplementary estimates with regard to the finance department so that is one I would have thought would have been the subject of some more scrutinizing or questions here at committee. I wanted to make sure that people who are listening understand it's a decrease because of the projections made by economists in the private sector, and it does reflect what Mr. Catta said about outside pressures we face with regard to Europe, with regard to the United States, and other challenges outside our border.

I appreciate you going through that and allowing us to understand how these revisions get made, by what means they're actually made, and who has influence over whether they do get affected.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

Ms. Nash.

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

I have another question on the same subject as Ms. Glover in terms of interest rates. Obviously global factors play a role, but I also notice recent analyses that say the reductions in government spending also play a part in the softening of our domestic growth, and therefore impact the interest rates the bank recommends.

The domestic austerity measures mean that government spending—which is of course a large part of our economy, governments at all levels—has been moderating, and that has an impact on GDP. It was something the Parliamentary Budget Officer raised earlier this year. The Canadian Bankers Association also raised it in their presentation to the finance committee.

I'm wondering what your take is on that.

[Brian Pagan]

It's a very complex area.

I think to start it's perhaps important to remind the committee that the government through budget 2013, through Canada's economic action plan 2013, adopted what I think outside observers consider to be a very balanced approach in terms of austerity or consolidation versus the ongoing need to continue to provide support for the Canadian economy.

The consolidation, the austerity announced in budget 2013, amounted to, as I recall, something in the order of $5.2 billion against a program base total estimates of $270 billion, so it was a relatively small percentage of overall spending precisely for the reason you cited. If reductions are too onerous, too sudden, or significant, they can have negative impacts not only on the provision of services but on underlying growth in the economy.

At the same time part of what drives interest rates is that bundle of outstanding debt. We're seeing that play out now in Europe. If debt gets too large, becomes unmanageable, interest rates go north. They increase, and it becomes....

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

But that's not the issue here in Canada.

[Brian Pagan]

It is not, I would argue, because of the measures that this government and previous governments have taken to manage our debt down to put us on a downward track in terms of debt to GDP and the underlying size of the debt.

If the question is what component of our interest rates is driven by the size of the debt versus the size of program reductions, I'm afraid I can't answer that. I don't know if anyone can. Suffice it to say it is driven by a number of different factors, one of which is the overall size of debt as a portion of the economy. That's something this government is mindful of and wants to ensure is managed in such a way that servicing our debt does not become a problem, and therefore drive up interest costs as we've seen both in other countries and in this country in the past.

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

Thank you.

[The Chair, Conservative, James Rajotte]

I have a couple of questions following up on Ms. Nash's comments. Mr. Pagan, if Canadians and parliamentarians want more information with respect to unmatured debt, we have the “Debt Management Report” and the “Debt Management Strategy”. Would you recommend these sources for finding more information on this matter?

[Brian Pagan]

Yes, there's a chapter. First of all, I stand corrected. I said budget 2013. That's what we are beginning to work on now. The minister is out consulting on this. Of course, it was budget 2012 I was referring to.

[The Chair, Conservative, James Rajotte]

You haven't written it yet.

[Brian Pagan]

In budget 2012, there's a chapter devoted to our debt management strategy.

[The Chair, Conservative, James Rajotte]

You went through some of the changes that the finance department made to the estimates. If you could supply those to me as the chair, I will ensure that all of the members get them. It would be helpful in a letter form.

I have Mr. Simms, if I have no other Conservatives.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

On the points that were made earlier, I feel like a little retribution. I do go to the website quite often. I'm driven there by constituents who have no idea about this plan. Let me bring up one fact that I regret I didn't bring up earlier. This is from Ipsos Reid on April 2, 2012. They say that 92.1% of the people surveyed did nothing as a result of seeing the ad. Of the 7.9% of people who did do something after seeing the ad, only 22.6% of them went to the website.

Ms. Glover said earlier that a lot of people were calling her office. If these ads were more effective, fewer people would be calling, because they wouldn't have to. I will take the bit of advice you gave earlier about providing my own advice on how to communicate this. I have never done that before, but I will in the next round of consultation. Direct mail is probably a better way to go about doing this. I take your advice.

I have a quick question, though.

[The Chair, Conservative, James Rajotte]

Ask it through the chair, please.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Yes, my apologies. I am interested in how you brought together this—you gave it an acronym—harmonization sales tax in Quebec.