Government Operations Committee on March 1st, 2011

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay, thank you.

I only have a couple of minutes?

[The Vice-Chair, Conservative, Chris Warkentin]

Twenty seconds.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay, one question.

This is to the Prime Minister's Office. You talk about leading by example and cutting the budget by approximately 5%. But I understand that the total cost of the PMO has risen by about 30% over the last two years. It's gone to $9.9 million from $7.6 million. My concern is you're recognizing some of the office positions are changing. You did hire tremendously for the increase, of course, with the economic action plan. How can we be assured we're not having these increases, that some of what I'm going to call innate increases are not—

[The Vice-Chair, Conservative, Chris Warkentin]

Ms. Coady, your time is up, so if you want any kind of an answer, you had better release the witness to have comment.

[Marilyn MacPherson]

I believe that when the Prime Minister's Office did increase their budget, they did explain that they had done so in order to have a larger communications staff in order to help the Prime Minister and the ministers to communicate with Canadians, and to a lesser extent there was an increase in travel.

In light of the current fiscal restraint, PMO took the position that they would lead by example and actually looked internally and cut. You're right, they grew to a certain extent, and then they recognized the circumstances that we're in from a fiscal point of view, and they made some decisions to cut internally.

[The Vice-Chair, Conservative, Chris Warkentin]

Thank you very much.

Madame Bourgeois, for eight minutes.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Mr. Chairman.

Good morning ladies and gentlemen, thank you for being here once again.

My first question is for Mr. Smith and it concerns the portfolio of Human Resources and Skills Development Canada.

If I correctly understood, you are seeking supplementary estimates totalling $149,541,000. That's one of the two budget items for which you are requesting an additional amount. If I have correctly understood, that first amount would be used to write off the debt of some 62,000 students who haven't repaid their student loans. These are loans that are granted to students. First, I would like to know whether writing off the debts of postsecondary students is normal and whether it occurs every year. This means that all of Canada, including Quebec, will be using taxpayers' taxes to write off the debts of those 62,000 students who have a right to vote. I'd like to hear what you have to say on that point.

[Alister Smith]

I might turn to my colleagues for some more detail to answer your question.

Yes, it is normal that we write off unrecoverable student loan debts. Eight out of ten borrowers do repay on time and with very few difficulties. For those who have difficulties, there are a range of things we try to do to prevent default. In the event that a loan essentially becomes irrecoverable, there is a debt write-off process and due diligence is applied and it's applied to all students who are in this situation before determining that the debt has to be written off in this way.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Pardon me; I simply want to get a clear understanding of this.

Human Resources and Skills Development Canada is also seeking a second item in the amount of $311.2 million for student loans. That means that we're writing off debts with one hand and providing money with the other. The $149 million represents nearly half the second amount of $311 million. You're saying that 8 out of 10 students repay their loans, but I calculate that only 5 out of 10 do that. I'd like to have an explanation on that point.

[Alister Smith]

Perhaps I can turn to one of my colleagues, Sally Thornton.

[Sally Thornton, Executive Director, Expenditure Operations and Estimates Division, Treasury Board Secretariat]

Thank you.

There are two different items here. The first is the write-off of student loans. Those are loans that have been made historically; 99% of them were made more than six years ago and there's been no action since. They are not collectible by statute; they go through a process to determine that they will not be able to be collected and they are written off as an accounting exercise, usually annually. The number is large here, because it's three years.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

So these are students who received loans more than five years ago, and every year we write off part of those loans that cannot be recovered.

[Sally Thornton]

Yes.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Is the amount allocated to writing off debts still the same, $150 million? Is this the first year an amount this big has been sought?

[Sally Thornton]

It's the right magnitude over each year. This one shows three years, hence $150 million, but it's actually the same. On an annual basis, it's been stable for a decade; it's less than 1% of the overall portfolio.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

All right.

[Sally Thornton]

The second question you raised has to do with the statutory forecast for the demand for student loans, and that was the increase by $311 million. In that instance they've simply updated their forecast of projected loans based on more recent information. Since they last provided a forecast there's been evidence of more students taking advantage of student loans, so they've changed their forecast.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

I asked you the question because I realize—and it was the Parliamentary Budget Officer who provided us with this information—that transfers were made in order to write off these debts associated with student loans—unless I've misinterpreted the document. So this money comes from, among other things, labour market agreements that we had with Human Resources and Skills Development Canada. I'm thinking, for example, of the targeted initiatives for older workers, the Homelessness Partnering Strategy and the Skills and Partnership Fund. So if I've correctly understood, the students' debts have been written off using surplus money that we had, or money that we didn't need for those budget items.

[Marcia Santiago, Senior Director, Expenditure Management Sector, Expenditure Operations and Estimates Division, Treasury Board Secretariat]

If I may, no, we are not having certain programs reduced in order to write off debts. The reason you see funds available and they're assigned to these particular programs is that we try, in the course of preparing the estimates, not to ask for more appropriation than the cash that the department requires. What happens is, the department identifies a requirement to write off these debts; that's one item on the plus side of the ledger. On the other side of the ledger, we also know that the department has money they won't be spending. They won't be spending because they are re-profiling money into next year; they're not spending because there are conditions on some funds that haven't been met. So it's really more coincidental that there are these amounts of money in the departmental reference level that are not needed this year. No, it's not a case of the department cutting these programs in order to finance the write-off of the debt.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

So I correctly understood. Some $9.534 million was intended for the Targeted Initiative for Older Workers. If that amount isn't spent during the year, it can be used at the end of the fiscal year to transfer it elsewhere, which I find deplorable. We'll have to invite you back so you can explain that to us. The Targeted Initiative for Older Workers is an assistance program for older workers. It's the POWA that we're being asked to bring back. There is $9.534 million that can't be used for that.

An amount of $4.558 million is budgeted for the Homelessness Partnership Strategy. That means that it hasn't been used, but that money is needed. It's as important as the money that was invested in the YMCAs last week, during the break week. Do you understand? I find it quite odd that the $4.5 million hasn't been invested.

[The Vice-Chair, Conservative, Chris Warkentin]

Your time is up, Madame Bourgeois, so if you'd like an answer, you'd maybe better stop now and allow for a quick answer.

[Alister Smith]

I'll give a quick response to Madame Bourgeois.

What my colleague Ms. Santiago was explaining is that when we don't need the funds for a particular program, which may reflect just a drop-off in demand, that helps us reduce the overall requirements for appropriations. When we come to Parliament we ask for funds on a net basis, and we use any funds that are available in programs that are not being used to reduce the amount we were asking for from you.

So it doesn't mean that this program in any way does not have importance. Of course it has importance. But like other demographically driven programs, demand varies. If we don't need the funds, we will offset our requirements with them, with the funds that are in the programs.

[The Vice-Chair, Conservative, Chris Warkentin]

Thank you.

Mr. Holder, for eight minutes.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I'd like to thank our guests for attending this morning. This is a very important discussion, and I'm pleased that there are so many of you here to respond to our questions.

I've been listening with interest to your comments, statements, and some of the questions from members opposite. I was particularly interested in Madame Bourgeois's discussion about student write-offs. My colleague opposite and I come from London, Ontario, where we have the great University of Western Ontario, which I attended. If I'd only realized that I had the opportunity to be a laggard and not pay my student debt, I might be in a financially better position than I am today.

I'd ask a question on that as I look at the student write-offs, because I think the concern would only be from this standpoint. And if I might, Mr. Smith, I'll address this question to Madam Thornton, as I look at it being one of the items where you've written off student debt.

Madam Thornton, you indicated that bad debt in student debt tends to be at 1% of the overall portfolio. Did I hear that correctly?

[Sally Thornton]

Yes.