Government Operations Committee on Feb. 29th, 2012

[The Chair, NDP, Pat Martin]

I will call the meeting to order.

Ladies and gentlemen, welcome to the 30th meeting of the Standing Committee on Government Operations and Estimates.

We're pleased today to welcome the Parliamentary Budget Officer and his delegation in dealing with the study of estimates and supply by our committee.

You are very welcome, Mr. Page, and thank you for coming. You have the floor for introductory remarks.

[Kevin Page, Parliamentary Budget Officer, Library of Parliament]

Thank you, Mr. Chair and committee members, for the opportunity to appear before you today.

I applaud all members of the House of Commons Standing Committee on Government Operations and Estimates for undertaking a study on the state of Canada's estimates and supply process.

Let me assure you that you'll have the full support of the Office of the Parliamentary Budget Officer in this important work. The time is right for substantive change. The context for change is both institutional and fiscal.

From an institutional vantage point, I agree with Senator Murray who recently described the estimates and supply process as an “empty ritual”.

From a fiscal vantage point, as you know, it is anticipated that the government's 2012 budget plan will call for significant and sustained spending restraint. This is an important time to better engage the watchful eye of the legislature to ensure that spending restraint implementation is carried out by the government and public service in a way that effectively manages fiscal and service-related challenges.

One of the key principles underlying responsible parliamentary government is that the House of Commons holds the “power of the purse”. The House must be able to satisfy itself, as the confidence chamber, that all spending and taxation is consistent with legislation, Parliament's intentions, and the principles of parliamentary control. When this is accomplished, Parliament is serving Canadians.

In my view, this is rarely accomplished. Parliament is at best only giving perfunctory attention to spending. Are members comfortable to vote on some $104 billion in annual discretionary expenditures, examining $267 billion in total program spending, with about 90 hours of collective effort among parliamentarians and with some departments and agencies seeing no scrutiny whatsoever, as was the case in 2010-11?

Too often, almost as a matter of convention, Parliament is starved of the information necessary to perform its fiduciary responsibilities. How often does Parliament see real decision-supporting financial analysis prepared by public servants on new legislation or procurement? The answer is almost never. Is it possible to hold the government to account without access to decision-supporting financial analysis?

As the Parliamentary Budget Officer, I was very disappointed, as I am sure many of you were, to learn that departments and agencies have been instructed by the Treasury Board Secretariat not to provide Parliament with information on the government's spending and operating review in the upcoming departmental reports on plans and priorities. This is a 180-degree change in direction from last November. It is a significant development. It undermines Parliament. How can Parliament provide spending authority without details by departments and agencies? Should Parliament ever vote on supply without financial information and analysis?

The time has likely come to ask whether we've designed an estimates and supply process to serve the power-of-the-purse role of the House of Commons, or whether we have allowed it to be reworked over many years so that it primarily serves only the government. What have we done? Have we created a system so complex—with different accounting between budget and estimates, a mixture of information on program activities and outcomes, and a voting system based on inputs like operating and capital—that only a handful of people really know how the whole system hangs together?

Is it not time to say that so much of the information we put in our estimates books represents simulated transparency at best—transparency whose purpose is to obfuscate and confuse, not to support accountability? Have we created a system where the budget is so disconnected with the estimates that officials from the Treasury Board Secretariat, my old department, think it is normal to inform members of Parliament that they will not see the details of the 2012 budget in the 2012 reports on plans and priorities.

Do we want the House of Commons to have the “power of the purse”? If we did, and we thought it was truly important to be respectful to our Westminster roots, our Constitution, and the Financial Administration Act, we would build accountability and the estimates and supply process around this principle.

What happens when we repeat things like the power of the purse belongs to the House of Commons but we behave in a totally different way? Could it be that our respect for our institution is diminished?

Public servants like me are asked to be caretakers of these institutions—their underlying principles and values. We get paid by taxpayers to do this. We do not have the necessary tools to do it well.

William Ewart Gladstone, a former Chancellor of the Exchequer, a four-time Prime Minister of the United Kingdom, said in 1891:

If the House of Commons by any possibility loses the power of the control of the grants of public money, depend upon it, your very liberty will be worth very little in comparison.

When it comes to principles that underpin institutions, if it was important 100 years ago, it is just as important today. The stakes are high.

I think the system needs to be examined on three levels: process, structure, and support. On process and support, we need to ask ourselves why parliamentarians are not incentivized to scrutinize departmental spending before they give their consent. Why?

Are committees even required to review the estimates? The answer is no, thanks to a long-standing order famously known as the deemed rule. Could there be a more symbolic and symptomatic testament than the deemed rule to the state of dysfunction and disuse of the estimates and supply process?

Is it not a problem that there is no regular review process for the more than $100 billion of tax expenditure programs, which are very much like other spending programs, but also carried forward each year with scant attention?

Are committees tasked with reviewing estimates able to dissent? The answer again is no. They're unable to increase spending. Minority reports or reductions of estimates are rare.

Are committees encouraged to make substantive recommendations? According to a 1979 ruling by the Speaker of the House of Commons, the estimates and supply process was not the time. When is the time?

Do committees have specialized support to review the estimates? Yes, but the extent of the resources available to you and your colleagues would not likely fill most of the chairs around this table. Surely the time has come to design a process that incents scrutiny before consent and provides members of Parliament with the tools and capacity to recommend improvements in how we spend taxpayer money.

On structure, it makes little sense in a 21^st century world for parliamentarians to be voting on inputs like operations and capital, and grants and contributions that cut across a department spending many billions of dollars for a diverse set of program activities. Given the recent experiences with border infrastructure funds and aboriginal housing and education, would it not make more sense to consider program activities (five, 10 or 15 per department) or their associated outputs as more relevant control gates? Why should ministers and their accountability officers be able to move monies from one activity to another without scrutiny or consent? Would voting on program activities not encourage more meaningful scrutiny on service level impacts as we move forward with spending restraint? Would this not help simplify our estimates system, which collects financial and non-financial performance data on program activities?

Clearly, any changes to our estimates and supply process need to be home-based and homegrown, but can we learn from other responsible parliamentary government systems? I think we can, and I encourage this committee to explore lessons learned in other countries. Sweden, for example, includes performance frameworks for proposed programs in its budget. Committees debate these performance frameworks. New Zealand has a proactive disclosure of decision-supported financial analysis in memorandums to cabinet and votes supply on a program activity basis, as does South Africa. There are academic scholars, such as Professor Joachim Wehner at the London School of Economics and Professor Allen Schick at the University of Maryland, who have travelled the world and studied different budget and appropriation systems and could be of great service to members of this committee, if there was interest.

Finally, I close with the repeat of yet another question. Do you want the power-of-the-purse role to rest with the House of Commons? If so, there is work to do. As George Bernard Shaw said, “Progress is impossible without change...”.

Thank you very much. I would be honoured to address your questions. Merci beaucoup.

[The Chair, NDP, Pat Martin]

Thank you very much, Mr. Page, for a very thought-provoking report. I know there will be a great deal of interest around the table.

The first round of questioning is for the NDP's Mr. Alexandre Boulerice.

Alexandre, you have five minutes, please.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

Thank you for your report and for coming here today, Mr. Page. I would like to congratulate you on your good work, which requires a lot of patience.

You have provided us with a very interesting report, though a bit depressing in terms of the quality of the work that we are able to do as parliamentarians. As depressing as all that might be, it is not surprising, given what we have been seeing since we have been in Parliament. The estimates submitted to the legislator seem to be a fait accompli and we don't feel that we will be able to make any significant changes. As our witness Mr. Jordan told us, the parliamentary approval system for the estimates rarely works.

Let me go back in time a little. In December 1998, the Standing Committee on Procedure and House Affairs made a number of recommendations and suggestions. One recommendation was that, when they submit their planning documents every year, departments and organizations inform the committees of all possible directions and of the issues they will be working on, beyond the fiscal year in question. In your opinion, could something be done? Is there something worth implementing?

[Kevin Page]

Yes.

I would like to start by thanking you for your support.

You must be referring to the expenditure planning reports of departments and agencies. You are asking me if it is possible to have a different report that looks at all the program activities and their performance. I think that's possible. The reality is that, when representatives of the executive, of the government and of the Treasury Board, review the activities of a department in light of cuts, they are reviewing a document that is very different from the spending report provided by the department or the agency. So it is quite possible because the information and the analyses are there.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.

The other question I wanted to ask you has to do with what Mr. Macdonald from the Canadian Centre for Policy Alternatives said when he came to see us. In his view, when reports on plans and priorities are submitted, the impact and effects of programs are reviewed, as well as government investments and spending. We try to see if it is efficient, if it works.

But in terms of tax breaks, tax credits and tax cuts for large corporations, there is no follow-up. We are in the dark. We have no idea if things are working. Some people wax lyrical about how wonderful everything is and how they are changing the world. We have our doubts. And there are no tools to help us check what the effects are in actual practice.

Do you think that, in addition to examining the possible effects of expenditures, we should also look at the effects of tax breaks and tax cuts?

[Kevin Page]

Absolutely. As I said in my presentation, the government's tax expenditures amount to over $100 billion every year. Can we change our system of accountability so that each department submits a report with tax expenditures to the committee? That is absolutely feasible.

It is also possible to find information on tax expenditures on the website of the Department of Finance. But that information is in some alternative universe. The information is not included with the work of this committee or Parliament's Standing Committee on Finance.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

How much time do I have left?

[The Chair, NDP, Pat Martin]

You have one minute, Alexandre.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Let me tell you about a file I worked on last fall. In the estimates, the amount listed for the border infrastructure fund was $83 million. We finally realized that some of that amount had been invested in the G8 legacy infrastructure fund.

As parliamentarians, what can we do when an amount is earmarked for something but, at the end of the day, the money goes to something else? How can we do our jobs properly?

[Kevin Page]

In my view, it is important for a committee like this to start a discussion on what is the best control gate for parliamentarians. Is it operations, capital, or program activities? I feel it is time to change the control gate for parliamentarians. If your control gate is program activities, for example, Parliament will have more control.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much.

[The Chair, NDP, Pat Martin]

Thank you, Alexandre.

Next is Mike Wallace for the Conservatives.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to thank our guests for coming today.

I was looking forward to the report from the budget officer. As you know, I've been active in the file on estimates since basically I got here.

I do know why they called you, in this magazine Power and Influence, a media star, because most of your previous comments were comments, and I was looking for suggestions in terms of what we could do better.

Now, I know that your office put together a system that's available to all members of Parliament in terms of looking at actual spending. Part of my issue here is that we have mains and budgets coming at the same time. A year goes by, and at the end of the fiscal year, six months later, you get the actuals to do the actual comparison.

So the approach that you've developed for members of Parliament to use is that we can look at actuals as they go, as they're reported. What I'm looking for today are what suggestions you have for improvements. Have you looked at anything specific? One item is the tool you've added for members of Parliament to better scrutinize the actual spending that will happen.

You talked about “deemed”. Do you recommend that we get rid of deemed, and how do you recommend doing it? Do you think each committee should do it? Should there be a special committee on estimates only, as we have here, just to look at everybody's estimates?

You allude to what's happening in other states—for example, Australia. You brought it to my attention that they have more of a programmed approach. Do you have actual solutions that you're recommending to this committee to look at? That's why we're having this study. We're having experts like you, who have looked at these issues, to give us suggestions to make improvements.

I do agree with you that it's important for Parliament to be able to scrutinize these things, the actual spending of the $259 billion, in a more appropriate way. I may not agree with some of the things you've said about what the role of the government is, or the opposition, but this is for us to have a better understanding, when we stand up and vote for it, of what we're voting for.

Based on that, do you have any suggestions for us?

[Kevin Page]

Thank you, sir.

I think probably the most important suggestion I could make, that I think would both incentivize parliamentarians to scrutinize and make the work they do have more meaning, would be to change the control gate: move it away from voting on inputs, operating capital, and grants and contributions to a program activity basis.

I can't imagine what it would be like to be a new parliamentarian and get estimates books and public accounts books and budget books thrown in front of you and be asked to vote on an operation that cuts across a whole department when we have departments that spend billions of dollars. I know, having worked on seven different departments—three central agencies, four line departments—that when people talk about, say, the coast guard....

I worked at Fisheries and Oceans. They get the coast guard. They should vote on the coast guard. They should vote on search and rescue, on icebreaking. Those are real to people on both coasts.

I worked at Agriculture Canada. Farm financial programs—those are real to people. They should vote on farm financial programs.

I worked at HRSDC. They should have separate votes on the grants and contributions in that program, whether it's for training or the elderly or whatever.

So the number one recommendation, sir, is to change the control gate. Make it a program activity-based system, just the way it exists in Australia, New Zealand, South Africa, and other countries.

I think it would incentivize people. People would understand it. And then when people are looking at how to monitor whether or not they're doing restraint well, they could look at these activities—these are the control gates—and look at performance relative to those control gates. I think it would just reduce the complexity tremendously.

On process, the “deemed” rule to me is just a symptom of failure. It's like people have thrown up their hands and said, “We can't do this. It's useless. Why am I wasting my time?”

To that, in part I think we have to understand...and I don't even know; I need help to understand why people feel that way. We don't feel that way when we do research here; we released a paper yesterday to parliamentarians and Canadians on a costing of Bill C-10.

We need to look at the process and try to incent people more. I think if they could have an impact, if people sitting on a standing committee, when they bring in a deputy or a minister, could say, “You know, we've looked at this program activity, and this seems like a weak program activity. We know we can improve performance”—and I know you're the type of member who likes to ask those kinds of questions—“so I want to come back and see you next year; I want this improved.”

I think we should have reports coming out of every standing committee around those program activities to try to improve them. The deemed rule should just go. I don't think it's even part of the conversation. To me, it's just a symptom of failure.

On support, you have to ask yourself, do you have access to the people and the resources you need? But again, I don't think it means creating a parallel process around Parliament. The public service has to support everybody around Parliament in a different way.

For instance, yesterday we found ourselves providing a financial analysis, a 90-page paper, peer-reviewed by seven people, on one aspect of Bill C-10. Why can't the public service do that? We had two people working on it. Why can't the public service...? Before, when we used to do that work.... You should get access to that.

In terms of standing committees reviewing the reports, I think these reports on plans and priorities and departmental performances are weak. They're communication vehicles. Nobody uses them. I worked in all three central agencies. They don't go to cabinet.

[Mike Wallace, Conservative, Burlington, ON]

How would you improve them?

[Kevin Page]

Well, I know that members on the executive...and I've been in cabinet rooms. When they sit down and start talking about austerity, and they're looking at strategic operating reviews, they're looking at a very different framework, a program activity framework that's very real, not a communications tool.

Everybody needs to see that information. People would get charged up and incentivized to scrutinize spending. They would understand it. It's very understandable. I just think we've made the system so complicated.

I could go on and on, but certainly, let's change the gate. Let's make it program activity-based. Let's change the process. Let's incentivize people to actually do this. Take away the deemed rule. Let's look at support. Let's try to find a different way, without increasing resources, to support you in a better way.

[The Chair, NDP, Pat Martin]

Thank you very much, Mike, and Mr. Page.

Next we have Denis Blanchette for the NDP.

You have five minutes, Denis.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you, Mr. Chair.

Thank you for your presentation, which was very informative. By listening to you, I got the feeling that, as parliamentarians, we might be slightly stuck in tradition. It no longer makes sense, it is getting bigger and we are no longer able to follow it properly. Our problem is that we are sort of lost in a sea of numbers and we are no longer able to make sense of those numbers. We have to take a different approach. The organizational culture has to change.

When you started working on a database project, you must have looked at best practices. You mentioned some countries that have best practices. Do you have some examples in mind that show how, in a situation as sticky as ours, the process changed in order to give parliamentarians and the public access to intelligible information?

[Kevin Page]

Yes. I worked for the Department of Finance, the Privy Council Office and the Treasury Board Secretariat. So I have seen information like that. When a decision needed to be made, the government, the executive and the cabinet would look over the information. It is really a different type of information. That is what Mr. Khan, who used to work in the private sector, prepares as part of the decision-making process. You analyze the goal. It is like a performance evaluation. It is a financial analysis that makes it possible to examine the various options and calculations. It is also a risk analysis.

In my view, if you are trying to improve Parliament's accounting, that is the type of information you need. It is an analysis. When the government makes decisions, I am pretty sure that it looks at and uses that type of information. So why would the information not be shared?

[Denis Blanchette, NDP, Louis-Hébert, QC]

The information is there. It is perhaps poorly organized and it is surely not well presented or compiled.

In addition to the suggestion you have made in response to my colleague, could you tell me what would be some winning short-term strategies in order to start making progress and making the estimates more readable for everyone. We talked about changing the structure; we said that the organization and organizational practices are going to change, but that is a long process. Do we need to change the frames of reference and come up with a new way to do the follow-up? Will tracking activities be enough? Where should we actually start for quick results? I am referring to the so-called quick wins.

[Kevin Page]

I heard an expression used by Mr. Kissinger in a geopolitical context. He said that:

not every problem in the world can be solved with a short-term solution.

I think it is difficult to find win-win solutions. Yet I don't think that a wide gap between the budget and the estimates is a good idea. That creates a problem right from the start. It is possible to continue to track spending every quarter. Jason Jacques has developed a website—not a lot of money went into it—that makes it possible to examine those types of expenditures. It is a way to help you, but it is not a solution.

You really need two documents that are basically identical: a budget document for the government to explain its policies and to provide economic projections and fiscal forecasts, and a document for departments explaining program activities within the same fiscal framework.

[Denis Blanchette, NDP, Louis-Hébert, QC]

So you are telling us that, in order to determine the estimates, we should draw on the documents used by the Public Accounts of Canada. Is that right?

[Kevin Page]

Yes.

[Denis Blanchette, NDP, Louis-Hébert, QC]

How much time do I still have, Mr. Chair?