Government Operations Committee on Feb. 1st, 2011

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chair.

You'll forgive me, I hope, if I feel some nostalgia for the days when the previous Liberal government used to be criticized for having surpluses that were larger than forecast, for not meeting its target. The Conservatives would be harshly critical of that. It's a remarkable thing now, and I look back fondly to the time when we were in fact, according to them, paying the debt down too quickly.

Wouldn't that be attractive now, when we have a record deficit and the debt's going in the wrong direction?Hopefully, it will eventually come down. The difficulty is, how do we assess that?

Mr. Page, I want to reiterate what you said in your opening remarks, that “this Government provided Parliament details on spending restraint by department and agency in 2006”. You're saying that the kind of information that this government, the Conservative government, was actually willing to give freely—at least in its first year in office in 2006—and which you received from the previous governments, you're saying in 2005.... They are now saying that it's a cabinet confidence. To me, that's a ridiculous statement; it's the same kind of information, but now they don't like the information. They don't like what it says, so they don't want to give it out. That's disturbing.

I hope that during their comments in the rest of this meeting the Conservatives will take the opportunity to...I hope my colleagues will explain why they're not horrified, embarrassed, and outraged at the cabinet's decision in this regard and how it makes them look. I mean, they must ask themselves.... How can they consider themselves even small-c conservatives when the government's deficit is so large, when it won't disclose the kind of information that would allow Parliament to assess how it's doing, and how it can possibly achieve what it claims it can? That's a very disturbing question.

Now, Mr. Page, since your last visit here, you've indicated that you did get some information from ten of the government's largest departments and agencies, and that they collectively, based on what they're saying, expect reductions of 1,000 full-time staff. But in fact you're saying that the Treasury Board president's own target for attrition is actually 11,000 full-time staff. They're giving no indication whatsoever of how possibly they're going to arrive at that.

I guess the question is, how can we have any confidence whatsoever in the government's financial forecasts?

[Kevin Page]

I noted that when it comes to this particular area of spending, which is one of the differences between the PBO's expenditure projections and the Department of Finance's, we have come up with a different assumption. We're assuming that the government will still have restraint, but it will be in the nature of inflation and population, in terms of average growth. It won't be an actual freeze on operational spending.

Until we see the actual plan, we can assess the risk from a fiscal perspective. We'll maintain that kind of forecast going out, so again, we're still waiting for the plan.

[Geoff Regan, Liberal, Halifax West, NS]

I will come back to this in a moment, Mr. Chair, if I have time.

Let me turn for a moment to the question of financial officers. I think they play a very important role in the accountability process within departments. In fact, I'm not saying that because of the fact that the president of the Association of Canadian Financial Officers, Mr. Milt Isaacs, happens to reside in my riding. I'm actually quite proud of that. He made some very important statements to this committee last spring, when he said:

Our main concern is the possible impact of the freeze on operating budgets. The impact that concerns us most is that oversight will become an afterthought. Oversight is making sure that rules and regulations are followed.

He then talked about the role financial officers play in providing that oversight within departments. I can imagine the important role that CFOs play, and auditors and accountants play, within companies, for example, and obviously within government as well.

What is your view? Do you think that's important, that they not be cut or lost through attrition? What is your view about the importance of the financial officers within departments and agencies?

[Kevin Page]

I think we can learn lessons from restraint experiences in the past in Canada. There are probably good ways to reduce spending and less good ways. I think you want to be careful that you don't lose financial and service capacity. You want to make sure that when you go through these restraint exercises, your capital is not suffering, the capital of departments.

As part of the stimulus package, we put lots of money back into federal laboratories and things of that nature. As we kind of move out, what will happen to that capital?

Those are all important, but until you see the plan and see how attrition is going to be impacted.... If attrition falls heavily on the financial officer group, we lose a lot. There are certain financial risks we have to be mindful of going forward.

[Geoff Regan, Liberal, Halifax West, NS]

I have only a few seconds left.

If they actually don't take the steps to achieve the goals they've set out, what happens, at the end of each year, for example?

[Kevin Page]

Parliament will be asked to approve those appropriations, so the restraint will go forward. I think it's important that you know how that restraint is having an impact on departments and on services for Canadians. Parliament, for sure, can freeze the operational spending if they want to, but then the question really becomes what the impact will be.

I guess we're here today to try to provide you with as much information as we can. Is there a plan, and what will be the impact? Until we see the plan, we can't really assess what the impact will be.

[The Chair, Liberal, John McKay]

Thank you, Mr. Regan.

Mr. Vincent, you have five minutes.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

I find this very interesting, and I will continue in the same vein.

The situation is unacceptable. Mr. Holder was referring to that very bank—I am not sure if he recalls this—which was saying that there would be no recession. Counting on that bank for budgetary advice is a bit doubtful. I will get back to that.

There is mention of a plan, then some other plan, but we have never seen one. The Conservatives have been in power for five years, and we have heard them brag about a plan for five years. Have you ever seen a government plan?

[Kevin Page]

You are referring to a government plan on austerity measures?

[Robert Vincent, Bloc, Shefford, QC]

No, I am referring to a budget plan, with respect to you. Your duty is to assess reports and budgets the government will introduce. They constantly talk about their plans. You yourself were referring to plans: you have never seen their plans, you do not know what their plans are. Over the last five years, have you seen a single plan?

[Kevin Page]

Yes. It is possible to say that the Economic Action Plan, around which there was a great deal of transparency, aimed to improve the economic situation and job prospects. It is also possible to assess the distribution of tax measures.

[Robert Vincent, Bloc, Shefford, QC]

Very well.

When you studied this plan, you said the government had to reduce expenditures by $300 million. You have been able to find $180 million; so $120 million are missing. That is the smallest challenge. The amount is set at $300 million this year, but will increase significantly over the next few years, rising to $900 million, then to $1 billion.

We are heading towards an election. The Conservatives are trying to cover up a lot of things, so that they can say that we are heading in the right direction, given that they have set a $300-million target to reduce spending. Yet, you believe they will not even be able to reduce spending by $300 million, so how can they expect $900 million worth of cuts the following year and $1 billion the year after that?

[Kevin Page]

It is true that the gap between $300 million, $900 million and $1.8 billion is wide. Given the current economic situation, with a periodic deficit of approximately $40 billion, the issue of the $300 million is not that big of a problem. However, over the next two years, we are going to have to look at far more significant issues.

[Robert Vincent, Bloc, Shefford, QC]

I would now like to refer to one other point you looked at. You estimated that the deficit will be $11 billion in 2015-2016. The IMF estimates it will be $5.4 billion. But the Department of Finance forecasts a $2.6-billion surplus. What kind of magical thinking did the department engage in to come up with a $2.6-billion surplus?

[Kevin Page]

It is important to note that we are all relying on the same economic assumption. The differences arise when we transpose economic assumptions within the economic projections. We have found the operating budget freeze to be a good explanation for part of this significant difference. In reality, it is difficult to say whether it is possible to achieve savings. There are other reasons. There can also be differences due to the interest on the debt. However, one of the major differences today is still the issue of the freeze.

[Robert Vincent, Bloc, Shefford, QC]

Given the accounting information you yourself have and what the minister has, given the fact that the figures are not always correct or that they don't always make sense, would you trust him to administer your own budget?

[Kevin Page]

As Ms. Bourgeois said, it is important to assess risk. In a recent report, an economist in my office assessed risk and designed a way to quantify it within the forecasts.

When you look at the history of the tools we use for economic projections in the private sector and fiscal projections, you realize that there is a great deal of risk. Minister Flaherty, like the IMF, indicated that the European and U.S. situation, the exchange rate and the Canadian debt could certainly point to negative risks. And whenever we talk of negative risks or structural deficit, it is not a good sign from a fiscal standpoint.

[Robert Vincent, Bloc, Shefford, QC]

In other words you would not trust him to administer the budget of Canadians any more so than you would trust him to administer your own budget. It can be said that he is administering both. Based on what you said, we simply cannot trust such a finance minister.

[The Chair, Liberal, John McKay]

Thank you, Mr. Vincent.

Mr. Calandra, you have five minutes.

[Paul Calandra, Conservative, Oak Ridges—Markham, ON]

Thank you, Mr. Chair.

It's always interesting to have the Parliamentary Budget Officer here, and of course it's always interesting to hear my Liberal colleagues waxing poetic on nostalgia and how they think about those times when they were in control of the budget of this country. I can tell you that the provinces, territories, and municipalities of this country certainly don't look back with nostalgia at the $25 billion in unilateral cuts to health, education, and social services. They certainly don't look back at that and say, “Wow, I wish we could return to that type of budgeting.” I can't imagine that our military, after 10 years of misery under your government, looks back and waxes poetic on nostalgia and how beautiful it was when you were in control of them. I know Canadians, when they check their pocketbooks, certainly don't look back and say, “Oh, that was a great time for us. We should go back to that.” That's when your government was overtaxing them and stealing millions of dollars in sponsorship scandals.

I guess the only people who actually look back with nostalgia are you and the members of your cabinet who were entitled to their entitlements for so long and are now desperate to return to the time when the entitlement fairy would swoop over this place and allow Liberals to extract all those entitlements.

Mr. Page, there are a couple of things that bother me. You would agree with me that somebody could benefit from advance knowledge of what's in a budget. Would you agree with that?

[Kevin Page]

In the context of taking—

[Paul Calandra, Conservative, Oak Ridges—Markham, ON]

I mean a business individual. Somebody having advanced knowledge of everything that's in the budget could potentially....

[Kevin Page]

Could potentially, yes, sir.

[Paul Calandra, Conservative, Oak Ridges—Markham, ON]

You've mentioned here a number of times that until you get the information you need, it's hard to make an actual analysis of it. But that didn't stop you from going to the newspapers on January 20—The Toronto Sun, The Globe and Mail, and The Toronto Star—and commenting that you can't square it, that it just doesn't add up. You've had no problem making comments to the media, but you say you can't make specific comments until you see the actual budget and paperwork. If I'm wrong, parliamentarians can tell me I'm wrong. But I don't know of any provincial or federal government that debates and presents its budget in advance of actually presenting it to their legislature or to Parliament. I'm unaware of anyone who has ever done that.

You have a problem also with cabinet confidentiality. Now, you were in the Department of Finance and a number of departments in the nineties. I only wish that those people who criticize cabinet confidentiality right now would have had the same level of desire for open government in the nineties when the federal Liberal government was decimating provincial government budgets on health and education.

The reality is, we have cabinet confidentiality because people can benefit or prosper from advance knowledge of what's in a budget. That's the way the parliamentary system has worked. It has always worked that way. That's the way the provincial governments operate, whether they're NDP, Conservative, or Liberal.

Do you not agree that the government of the day—in this instance it's a Conservative government of the day—or any government has the opportunity and absolute right to put together what they believe is their framework, where the country should go, present it to Parliament, and then after that parliamentarians, before they actually pass a budget...?

I can appreciate that the Liberals are having trouble with this, because they don't usually show up or they vote for us when it comes to budgeting. They're in a difficult spot because they actually support everything we do, and then they go, “Wow, my gosh, we're in trouble because they're on the right course. We have to vote for them or just not show up.”

But doesn't the government, under a parliamentary system, have the absolute responsibility to treat those things that should be confidential as confidential? Then they go to Parliament, present the budget, and say, “Here it is. Vote on that budget.” And then parliamentarians come to you and say, “Based on what you see, are the projections realistic?” And then they and we can make a decision, as parliamentarians, about whether this is appropriate or not.

Sorry to be a bit frustrated on this. I think it devalues the office when we fight this in the media, as opposed to doing what we're supposed to do: look at what the government presents, make projections based on actual knowledge, and not go willy-nilly all over the place and get all upset. Parliamentary tradition has forever been that the government presents a budget it created in secrecy. That's why we have budget lock-ups. That's why there's cabinet responsibility.

Why is it that now we should be forgetting all about that and moving towards a system like the United States has, where we negotiate a budget in public? Maybe we have our little moneys here that we could sprinkle...I know that would be a Liberal attraction, because they love their entitlements--

[The Chair, Liberal, John McKay]

Mr. Calandra, your time has expired.

Unfortunately, Mr. Page, you won't be given an opportunity to respond.

I think I can squeeze two more rounds--one Liberal, one Conservative--before we're--