Government Operations Committee on March 22nd, 2010

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

Patrick Brown.

[Patrick Brown, Conservative, Barrie, ON]

Thank you, Madam Chair.

I have just a comment first.

Earlier when we had questions there was a reference by my colleague, Mr. Dewar, about the price and expense of advertising. I should just mention, since this is your first time joining us today, that we actually talked a lot about this a year ago, and the question from the opposition a year ago was why we weren't advertising more. I heard references to how much the Obama administration spent on advertising to promote the stimulus program, and a website was pointed out. Actually, one of Ms. Hall Findlay's questions was why we didn't promote it more.

Taking that suggestion from the opposition, Canada has done an excellent job at actually highlighting the stimulus investments we have seen. It is important to clarify that it was actually a suggestion from the opposition.

In terms of the fiscal management we are seeing in Canada and how it compares to other countries, there has been some positive coverage about how Canada's debt-to-GDP ratios are very strong and how the spending during this stimulus period is scheduled appropriately to phase out. Is there anything you could share with the committee to highlight for us why Canada is in such a strong position and how we compare to other countries in terms of our debt ratios?

[Michelle d'Auray]

I will ask my colleague, Mr. Smith, to answer that for you, Madam Chair, if that's okay.

[Alister Smith]

Thank you.

If I could refer the honourable member to the budget, there is a good account of our fiscal position, which we expect to remain the strongest in the G-7. We start out with an advantage of having a much smaller total government net debt to GDP than other G-7 countries, and on page 63 of the budget there is indeed a table that shows this. We are in quite good shape in comparison to other countries. Even with the projected increase from 2007 to 2014, we remain far below the debt-to-GDP ratios of other countries.

[Patrick Brown, Conservative, Barrie, ON]

What choices do you believe have resulted in the accomplishment of having the lowest debt-to-GDP ratios in the G-7? Are there some specific approaches that Canada has taken that have put us in such a more fortunate position?

[Michelle d'Auray]

I'd have to say, Madam Chair, one of the elements is that while the recession hit Canada, it did not do so in the same way or fashion as in other countries. In terms of the financial position and the regulatory position of our own financial institutions, if I can put it that way, we didn't have the same impact. We also didn't have the same issues as, for example, the United States had with housing and mortgages. In fact, we have a very strong housing sector and it keeps rebounding.

While we did have quite an impact on the manufacturing sector, other parts of the Canadian economy were able to remain if not completely stable and strong, at least the dip was not as pervasive as in other countries.

I would say overall it was our regulatory framework, our fiscal position in that we were running surpluses up until the recession, and therefore we were able to release some funds in order to stimulate the economy. Overall, if I look at the financial, fiscal, and regulatory positions--and just the overall economy--we were in a stronger position going into the recession than other countries.

[Patrick Brown, Conservative, Barrie, ON]

There have been numerous references to different savings the governments are looking at, everything ranging from cutting back the patronage positions—something I thought was just excellent—to attrition in the public service. Do we have any figures on some of these measures? For example, on attrition in the public service, do we have a figure of estimated savings that will be accounted to the government through that measure?

[Michelle d'Auray]

If I may, Madam Chair, the biggest amount of savings will come from the freezing of operating budgets of departments. There is, as indicated in the budget documents, about $1.8 billion of foregone expenditure that is in fact going to contribute to the reduction of the deficit. That will in fact come from departments having to manage within their operating envelopes and making choices, improving efficiencies, reorganizing their activities, not filling all of the positions that come from attrition, changing and focusing the hiring, because there is no hiring freeze--in fact, hiring will continue in the federal government, targeting the competencies we need. I think there will be a range of measures and activities that departments will be putting in place in order to meet the containment in terms of cost, or the rate of growth, if I can put it that way.

I would add one element, which is that the operating budgets in 2010-11 of departments are probably at the highest levels they've ever been. So with $54 billion, we're peaking in terms of operating budgets, in terms of planned expenditure. So going forward, we should be able to manage within those.

[Patrick Brown, Conservative, Barrie, ON]

Is that the reason for the $2.8 billion decrease from 2009-10 to 2010-11 in the main estimates?

[Michelle d'Auray]

The major amount I think that's attributed to that is there's a reduction of $1.8 billion for the freezing of operating budgets, and then the additional reductions come from reductions, for example, I believe from National Defence in terms of close to a billion dollars. Then a certain amount comes from the international assistance envelope, which is also capped at an expenditure of $5 billion, but the automatic increases that had been planned will no longer be provided. Again, their savings come from what we call foregone expenditures, i.e., they were planned expenditures, but they will not be made.

[Patrick Brown, Conservative, Barrie, ON]

Thank you.

[The Chair, Liberal, Yasmin Ratansi]

Are you done?

[Patrick Brown, Conservative, Barrie, ON]

Yes.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

Mr. Dewar for eight minutes, please.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, Chair, and thank you to our guests for their help in going through the estimates and some costs around governance.

I had a question with regard to the cost containment by departments, and we were trying to get from the minister how this would work. What I'm seeing is a picture where the departments are given a number and are basically told, go forth and find those--however you want to put it; some people call them efficiencies, other people would call them reductions, and other people would call them cuts.

Was there any direction given in terms of where they should find them, how they should go about doing this in terms of managers being directed by, obviously, their ministers and I guess ultimately by the president? Or is it just, here's the number, go forward and find the savings and efficiencies?

[Michelle d'Auray]

I would say most of the deputy heads are responsible and accountable for the management of their organizations in the current state today.

[Paul Dewar, NDP, Ottawa Centre, ON]

Right. I understand that.

[Michelle d'Auray]

Going forward, that would still continue to be the case. So they have set operating budgets; they have programs and mandates to deliver. The flexibilities they currently enjoy, they will continue to enjoy, if I can put it that way, in order to be able to manage within those operating budget envelopes. So it does give all the flexibilities necessary to consider whether or not you need to replace all of the positions necessarily, in a certain area of work. In other instances, it could be that services could be combined. There could be use of technology to do things differently.

[Paul Dewar, NDP, Ottawa Centre, ON]

If I may, there's just been no direction from government--

[Michelle d'Auray]

There's no direction, no--

[Paul Dewar, NDP, Ottawa Centre, ON]

They've just said, here's the number, and that's it, that's all--

[Michelle d'Auray]

That's correct.

[Paul Dewar, NDP, Ottawa Centre, ON]

That's what I had from the minister.

[Michelle d'Auray]

They will continue to manage within their existing flexibilities and responsibilities.

[Paul Dewar, NDP, Ottawa Centre, ON]

Right, but the government, the cabinet, the President of the Treasury Board, didn't say, “Here are the criteria, here are the principles.” He just said, “Here's the number”, right, if I can take that from what you're saying.