Government Operations Committee on Nov. 26th, 2013

[Bill Matthews]

Thirty seconds? Okay.

The total debt of the government is $892 billion and, of that $892 billion, the pension liability, which is a form of debt, is $151 billion.

[The Chair, NDP, Pierre-Luc Dusseault]

Ms. Day, go ahead.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

When a department does its budget forecasting, it looks at the next few years, sometimes one, two or three years ahead, and it determines what it will spend or how much it will ask for in the estimates. Either it uses the funds or it doesn't. Obviously, departments can carry amounts forward.

An argument could be made that asking a department to carry forward unspent amounts or not to spend as much as it should would result in savings that could be put towards the debt. That's a simplistic way to look at things. It's completely irresponsible. If a bridge needs repairing, the money to fix it needs to be spent, because if the bridge isn't repaired, as in the case of the Champlain Bridge, it could do damage. If an accident occurred, it could cost more than the savings intended to go towards the debt.

The same applies to railroads. Last summer, I travelled across Canada, and I can tell you they were in poor condition. When it comes to railroads, it's as though we're stuck in the 1960s. It's actually shocking that there aren't more accidents.

Then there's the matter of employment insurance. In order to increase revenue, program expenditures are slashed and access to the program is reduced. That way, the government is able to transfer more money. Is that responsible behaviour? It's not your job to answer that question, but the minister's, one day or another.

That brings me to another question. On the subject of the $955 million for the payment of accumulated severance pay benefits, you said that 70% of people had decided to cash out their benefits and that the other 30% had chosen to wait, with their benefits being set aside. Was a cash flow budget done with the entire $955 million going into this year's budget? If not, was a forecast done in terms of those retiring in one year's, two years' or three years' time? Was the amount payable spread out over a number of years so as not to include it in the budget right away?

[Bill Matthews]

You asked two questions.

The first has to do with capital. If the government were to review its spending, most of the cuts would be to operating expenditures.

If you look at the planned spending on capital, you will not see a drastic difference between current years and previous years. It's a very good thing to keep an eye on, because there is always the question when one is reducing spending whether you are reducing in the short term and will incur some costs later on. Keeping a close eye on capital spending is a good thing to do.

The second question was on the severance. The actual fiscal liability for the severance has already been booked, because the Department of Finance and accounting standards would dictate that we have to recognize the benefits employees earned. They were entitled to it, so it was already reflected in the books. The liability exists on the books already.

What we're seeing now is simply cash going out the door that will reduce the liability. The $955 million is the estimate that has been made for the current fiscal year in terms of how many employees will request cash. It's an estimate and is based on past practice.

Our first estimates when we first did this were based on the experience of Canada Post, because they did a similar program. I think their experience was that 75% of employees took the money up front. Our experience to date is a little bit less, but really, this is a matter of cashflow, and not a matter of something affecting the bottom line of the government.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

More than $2 billion went to help with the flood situation in Alberta. I believe it was around $3 billion. And yet the amount allocated to the Lac-Mégantic accident in Quebec was $156 million. Both were major disasters. We're disappointed for the victims of the Lac-Mégantic tragedy.

Alberta doesn't have 35 million people. We're not talking about California or Tokyo. It has a small population, and so does Lac-Mégantic. It's an area with a small number of residents. Why is there such a huge difference?

The estimates set out funding for Alberta to help with recovery costs following the floods. Could you define “recovery”? Do you mean economic recovery?

[Bill Matthews]

There are two things. The actual disaster financial assistance program is a specific program that was originally designed for natural disasters. It's a program that is formula-driven. The funding for the Alberta floods, which did hit a very densely populated area of Alberta, Calgary, etc.... The formula that is agreed upon with the province is that the federal government reimburses the provinces for a percentage of what they spend. It's also based on what they spend on a per person basis, so per capita. There's a very formulaic approach for that program, and historically, it was based on natural disasters.

It's not around economic recovery. The money for Alberta is around the actual recovery from the event itself from a cleanup perspective.

On Lac-Mégantic, the money that's been committed so far is twofold. One is around the actual cleanup, but there are also some funds for economic redevelopment recovery and things like that, and that's the second piece. So there's a different mix at play there.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you, Ms. Day. You're out of time.

We now move on to Mr. O'Connor.

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

First, just back to the debt, my understanding of debt is that you have the federal debt and you have provincial debts, because we as taxpayers have to pay it all anyway. When a country calculates its debt, it has to calculate both of them together. Other countries are like unitary states, like Britain or whatever. Their provinces are inside their bills, so they have debt also.

Is it difficult to compare a country's debt against another country's debts?

[Bill Matthews]

It is difficult for two reasons. Number one, the accounting standards that Canada, Australia, and a few other countries use are far more strict. For instance, if you were to look at the financial statements of Greece, they're not very pretty, but they also don't include a lot of liabilities that should be on the books—pensions, benefits, things like that. So you have to understand what accounting standards are in play.

On the second piece, you're quite right, you do need that understanding of total government. So when you look at the public accounts of Canada, you're only seeing the federal portion, but there are also provincial and municipal. Not all countries are the same. China has five levels of government. I think the U.K. has two, if I recall correctly.

Statistics Canada and its similar organizations in other countries do make an attempt to publish whole-of-government debt information, so they consolidate the three. You can actually look at a comparison among Canada and other countries. From a Statistics Canada perspective, you'll get all the levels of government together, but you're still hamstrung by the differing accounting standards at play, so you do have to understand if they've included all of the liabilities on their books. For instance, OECD produced a report comparing countries, and in the fine print you'll notice that they say, well, not all the accounting standards are the same, and so it is very difficult to compare.

I always look to Australia because their accounting standards are solid. They get a clean audit opinion, so you know you have good numbers there. If you look to the U.K., they've only recently been able to produce their first consolidated financial statement. The U.S. produces one, but they don't get a clean audit opinion, so you have to take the numbers with a grain of salt.

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

In Canadian terms, our debt is 80% or 82%, or something like that, isn't it?

[Bill Matthews]

If you go whole of government for all three levels, you're up in that range, yes. I heard it was 87%.

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

A different topic...health. It says on first nations and Inuit health, we want $285.5 million on the supplemental estimates. My understanding is we pretty well know how many natives there are and where they are. etc. Why can't we budget better than having a situation where we have to throw $285 million on their health plan?

[Bill Matthews]

This is another one of those examples of something that was committed to in a budget and it has now been through the process of going to Treasury Board and getting all the questions asked and properly developed spending. So the money for first nations and Inuit health was a budget 2013 commitment, so it was in the budget, $1.8 billion over three years. So this is one chunk of that, but the $1.8 billion over three years, if it's evenly split, is about $600 million. This obviously is not that much.

The program itself is targeted at supplemental health benefits, addiction centres, primary care health, so it's very much focused program spending. It lines up with the budget. This is not a surprise. It was just a matter of waiting for the program to get through the proper approval processes, to line them up and get the spending going.

[Gordon O'Connor, Conservative, Carleton—Mississippi Mills, ON]

My final comment is, I don't mind if you save money. I'm for saving money; I'm not for spending. I like saving, so congratulations. Thanks.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you.

On that positive note, I want to thank the witnesses for coming here today to meet with us. It was a productive meeting.

[Pat Martin, NDP, Winnipeg Centre, MB]

Am I not on the list?

[The Chair, NDP, Pierre-Luc Dusseault]

No, you aren't.

[Pat Martin, NDP, Winnipeg Centre, MB]

I did ask for a spot after Madame Day. Do we have a few minutes before the bells ring?

[The Chair, NDP, Pierre-Luc Dusseault]

We have a few minutes left if you'd like to ask a quick question.

[Pat Martin, NDP, Winnipeg Centre, MB]

Okay, thank you. I'll try to be brief.

[The Chair, NDP, Pierre-Luc Dusseault]

We'll keep an eye on the clock.

[Pat Martin, NDP, Winnipeg Centre, MB]

Some of it is to comment on things that we've heard throughout this very useful exercise. I do want to compliment both the officials from Treasury Board for coming to us with a very clear, concise presentation. It's very helpful as we as a committee struggle to do a more robust and thorough job of examining the estimates.

One comment Diane made, though—and again, she was perhaps joking—was that we're calling for government to reduce spending. I think that was the comment she made.

In actual fact—and you say you were complying—isn't it true that in 2006 the total expenditures were $205 billion of government, and in 2013-14 it's $275 billion? So even with the budgetary restraint and the cutbacks, the budget of Canada has exploded. The $892 billion is the total debt, but the accumulated deficit, just the accumulated deficit, is $602 billion. Does that sound accurate to the Public Accounts?

[Bill Matthews]

I'm just thumbing through. So if you go to Public Accounts, they have a lovely...and this is not on a cash basis, but there is a 10-year spending profile, revenues and spending. So I'll go back the full 10 years. In 2004 you would have seen total expenses of about $191 billion.

I believe, Mr. Chair, the member quoted 2006. Spending, again on an accrual basis, not on a cash basis, was $211 billion, and in the year just ended it was $275 billion.

[Pat Martin, NDP, Winnipeg Centre, MB]

It was $275 billion. That's the point I was making.

[Bill Matthews]

You were asking about the actual accumulated deficit itself, which sits at $602 billion, you're quite correct.