Bank of Canada Accountability Act

An Act to amend the Bank of Canada Act and to make consequential amendments to other Acts

Sponsor

Andrew Scheer  Conservative

Introduced as a private member’s bill. (These don’t often become law.)

Status

Second reading (House), as of May 19, 2022

Subscribe to a feed (what's a feed?) of speeches and votes in the House related to Bill C-253.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.

Bank of Canada Accountability ActPrivate Members' Business

May 19th, 2022 / 6:10 p.m.
See context

Conservative

John Williamson Conservative New Brunswick Southwest, NB

Madam Speaker, New Brunswick is large in its mind, and it is large in its geography as well. Thank you for recognizing me and permitting me to address this important piece of legislation. I should remind the House and members here that when we cut right through it, inflation is the price that we and all Canadians pay for the things that the government told us would be free. That really cuts to the core of this debate and why this bill is so important.

Parliamentary oversight and accountability are key pillars of our democracy that we as legislators should be determined to protect and safeguard. Members of Parliament have a great deal of respect for the work done over the decades by Canada's auditors general, along with the Parliamentary Budget Officer and the other independent offices of Parliament. As chairman of the public accounts committee, I have heard from our current Auditor General, Ms. Hogan, and her deputy, Mr. Hayes, on a number of occasions this year. I can say that MPs from both sides of this chamber welcome their analysis on the machinery of government, through audits of federal departments, agencies and Crown corporations.

The Auditor General's office has historically performed a valuable service to Canadian taxpayers. Their work informs us in this House of both the missteps and the achievements that come from fulfilling policies and programs implemented by the Government of Canada. With few exceptions, these policies and programs are tied to mandates given to them by the executive, that is the cabinet. Of course, those mandates come ultimately from Canada's voters. When civil servants do not adhere to these mandates, it is on us, as parliamentarians, to hold them accountable and to make course corrections.

As such, I wholeheartedly support Bill C-253 to bring the Bank of Canada under the purview of the Auditor General by including the central bank under section 85 of the Financial Administration Act. What this bill would do is authorize the Auditor General to include the Bank of Canada in her normal audit cycle, which means the Bank of Canada would be subject to the same types of routine audits that Crown corporations and departments undergo. That is it. At its core, this is about accountability and transparency, and adherence to its mandate and Parliament.

I applaud the member for Regina—Qu'Appelle for introducing this bill, because he, like me, wants accountability from the Bank of Canada to ensure it adheres to its mandate. Some hon. members protest that MPs should not examine or even criticize the Bank of Canada, because it is independent, but this is a view out of step with democratic oversight in the United States, Britain and other countries where lawmakers are today vigorously debating what their central banks got wrong. We can just turn to a couple of headlines, which read, “Former Fed Chair Ben Bernanke said the central bank erred in waiting to address inflation”, and “The Fed's slow response to inflation was a mistake”.

Another one, from the Financial Times, states, “MPs turn on bank's handling of economy as [British] government feels heat from cost of living crisis”. In fact, even here in Canada, the media are reporting about Bank of Canada officials. In this case, “Carolyn Rogers says the Bank of Canada is learning from its mistakes”, yet some feel that this House has no role in this debate.

Historically, the Bank of Canada has been focused on a stable rate of inflation, and the bank's previous governors successfully kept inflation under control. It was not always easy and it required work, independence and a focus on results. However, in recent years, the bank's references to employment targets has been a consideration. If colleagues look at the bank's website or listen to speeches that officials have made, other considerations are now being added by bank officials in its considerations.

More recently, the bank has also started to indicate that other goals, such as environmental and social objectives, would or could influence policy. Since the pandemic, the Liberal government's deficit spending program has been underwritten almost exclusively through the bank's use of quantitative easing. That is a fancy word for expanding the money supply, which is a polite way of saying “printing money”.

As my hon. colleague just pointed out, when we expand the money supply, we dilute or reduce its value, and that is what has happened today in Canadian wallets. Their paycheques and their savings are worth less than they previously were.

How has all of this worked out? As members of Parliament, we should not be afraid to ask, to probe questions and to seek answers. The bill we are considering would allow the Auditor General to conduct audits of the bank through its normal 10-year cycle. Such audits include performance evaluations, something that is not happening now as it would go beyond the fiscal balance sheet examinations.

This is an important and key addition, particularly since the central bank is implementing monetary policies that are without precedent, and this will have massive implications for things like interest rates, inflation, growth and household incomes going forward. It is necessary that the Bank of Canada be subject to more transparency and accountability by Parliament.

Of course, there is precedent for allowing the Auditor General to have jurisdiction over arm's-length independent financial institutions. The Public Sector Pension Investment Board operates free of political interference but is still subject to the Auditor General's oversight. This bill follows virtually the same model by amending the Financial Administration Act's exemption for the Bank of Canada to match the Public Sector Pension Investment Board. Again, we are calling for the Bank of Canada to be covered in a way that other arm's-length agencies are.

Let us return to mandates and accountability. The Bank of Canada and its governor, Tiff Macklem, wield an extreme amount of power by setting our nation's monetary policy, not economic policy, as one of the members on the government bench said, but monetary policy.

I would argue that the bank's governor is the most powerful unelected civil servant in Canada. At the same time, he is bound by the mandate of his office and therefore subject to accountability, for us to ask how this governor is doing in his job. Unlike other institutions that report to Parliament, the Bank of Canada is audited by external auditors, who are appointed by cabinet on the recommendation of the finance minister. Therein lies the problem. There is not enough oversight or independence.

The bank is responsible for maintaining low and stable inflation, a safe and secure currency, financial stability and the efficient management of government funds and public debt, but at its very core, the governor is responsible for keeping the rate of inflation between 1% and 3%. How is he doing? The rate of inflation, in this country, has hit 6.8%. That is a 30-year high and not a record of success.

Political elites do not want MPs or Canadians to talk about the Bank of Canada's shortcomings. This is to protect the governor from proper and legitimate criticism, yet Governor Macklem has blown Canada's inflation targets and, in doing so, was cozy with the Liberal government.

He should have done his job instead of echoing government talking points about non-existent fiscal anchors. The incestuous relationship between the Liberal government and the Bank of Canada should never have been permitted to develop.

Because the Bank of Canada did not properly perform its job, Canadian households are paying a high price and, I fear, will pay a high price for years to come. Interest rate hikes will be more punishing, and price increases will last longer than had an independent Bank of Canada acted sooner.

Instead of talking about the punishing financial hit on Canadian families and businesses, these gatekeepers, to shield the governor from legitimate public scrutiny, cried, “Respect the bank's independence.” Those cries ring hollow after the governor failed to exercise his own independence from the Liberals. The bank should be held accountable for its errors. This is not interference. This is accountability.

This bill is a modest reform to grant Parliament some oversight, since the Auditor General's audits would be tabled in Parliament and studied by its members. It would bring Canada's Parliament in step with other democracies in probing the Bank of Canada's implementation of its mandate. It would allow MPs to hold the Bank of Canada accountable and to ask and seek answers.

Conservatives do not wish to diminish the Bank of Canada's independence, but we want to ensure it is acting independently while fulfilling its mandate to control inflation. I support this bill, and I urge others to do likewise.

Bank of Canada Accountability ActPrivate Members' Business

May 19th, 2022 / 5:45 p.m.
See context

Liberal

Francis Scarpaleggia Liberal Lac-Saint-Louis, QC

Madam Speaker, internet-fuelled populism is like a twister. It is a twister that sucks in any and every manner of grievance against the so-called elites, the so-called gatekeepers, the experts or at least the well-informed. This twister is driven by conspiratorial narratives shared on and amplified by the Internet, more specifically social media.

They are narratives like vaccines do more harm than good; the government is insisting on vaccination to help the pharmaceutical giants; the World Economic Forum is secretly working to subjugate us to their dastardly interests and oppressive vision; and climate change is an idea promoted by eco-socialists and the world government villains at the United Nations who use Greta Thunberg as their apprentice.

This one was mentioned by the member opposite in his speech: The mainstream media is simply an arm of the government, and we cannot believe a word they say, even if what they say is well researched and supported by fact. Here is another conspiratorial narrative: The Bank of Canada is working hand in hand with the Liberal Minister of Finance to create inflation, especially asset price inflation, to benefit the Liberals' friends.

It all makes sense to a receptive but uncritical mind. Bill C-253 is intended to feed the conspiratorial populist narrative. There is not much to the bill itself. It is short. It is so short that it makes one wonder why even take the time to introduce and debate it.

The bill would require the Auditor General to be one of the auditors of the Bank of Canada. The bank's auditors are selected by the Minister of Finance and approved by cabinet. KPMG and Ernst & Young currently audit the bank. Bill C-253 impugns these independent auditors, suggesting that somehow they do not do their job properly, even though they are bound by professional codes of conduct.

The other problem with appointing the Auditor General as one of the bank's auditors is that the Auditor General is not equipped to audit the bank. The Auditor General's role is to audit departmental programs against stated goals and objectives and to highlight shortcomings in the effective execution of those programs. The audit process is meant to be constructive, but it is also, in essence, a critique of the government. Naturally, opposition parties use AG reports in their efforts to undermine public faith in the party in power.

This is fair game and an essential part of maintaining democratic accountability, but the Bank of Canada does not have programs per se. It has policy objectives and policy instruments. The success of its actions depends on a host of extraneous factors, such as government fiscal policy and international economic trends, including supply shocks and the like. These are all things the bank does not control, unlike a government department that has direct control over its programs.

The Auditor General does not have the capacity to cast credible judgments on the bank's policy performance in a dynamic economic context, as compared with the static context of bureaucratic programs. The trap the Auditor General could easily fall into if it were called on to judge the bank's economic policies, assuming it agreed to do so in the first place, is to come to tenuous if not potentially false conclusions masquerading as truth and fact, in the process undermining the bank's credibility with the public and risking a populist backlash.

What the sponsor of this bill does not seem to understand is that the bank's success in, say, meeting its inflation targets depends on the extent to which the public believes it will be successful in doing so. There is nothing worse for the economic welfare of Canadians than a public that has lost faith in the bank and a public that does not believe the bank can control inflation. This is what is at the heart of the dreaded wage-price spiral.

Bill C-253 is pure populism, a populist attempt to undermine public faith in a highly specialized institution, all being done for partisan political gain in a Conservative leadership race. As Andrew Coyne, who is hardly a Liberal apologist, has said:

Auditing the bank may make no practical difference to how it is governed, but that is not the point: The point is to suggest there is some sort of deep-state hanky-panky going on inside the bank, which only an outside audit could bring to light. The point is to demonize the bank, to discredit its leadership and undermine public confidence in its policies.... This is a particularly hazardous moment to be playing politics with the bank.

We have seen this movie before. We have seen what happens when Conservatives try to get their hands on independent public institutions like Elections Canada. There are a few of us here in the House who still remember the “unfair elections act” that the member for Carleton stickhandled on behalf of Stephen Harper at the time. Back then, the Conservatives invented a different bogeyman, one called “election fraud”, to justify voter suppression.

The word “conservative” encompasses many ideas and habits, none more important than prudence. The members opposite are not adhering to that Conservative value, a value that is alien to populism.

Bank of Canada Accountability ActPrivate Members' Business

May 19th, 2022 / 5:25 p.m.
See context

Conservative

Andrew Scheer Conservative Regina—Qu'Appelle, SK

moved that Bill C-253, An Act to amend the Bank of Canada Act and to make consequential amendments to other Acts, be read the second time and referred to a committee.

Madam Speaker, it is truly an honour to rise today and speak to my private member's bill, Bill C-253, the Bank of Canada accountability act.

Members may know that the Auditor General is empowered, under the Auditor General Act, to perform audits on government agencies and departments. However, there is a special carve-out, an exemption, in the Financial Administration Act that specifically excludes the Bank of Canada from the oversight that the Auditor General provides.

We are all familiar with Auditor General's reports. It is always a big day on Parliament Hill when the Auditor General tables a report after an investigation on behalf of Canadians into various departments, agencies and programs. Of course, it was the Auditor General's report many years ago that first brought to light the excessive expenses of the long gun registry. It was thanks to her work, at the time, that Canadians got to know the billion-dollar price tag of that useless and ineffective program. We can all think to times when the Auditor General has identified massive problems with the government's handling of everything from immigration protocols to transportation, and that is what this bill is all about: Bringing the Bank of Canada into line with other departments and agencies to provide that oversight so that the Auditor General is empowered to do the same types of audits that he or she does on all other agencies and departments.

Many in the Liberal establishment are opposed to this bill. The Prime Minister once said that “sunlight is the best disinfectant”, and then he ran around pulling the shades down on all the windows to keep things hidden. He is afraid of accountability and transparency now. In fact, he is so allergic to it that he has made a deal with the NDP to help cover things up at committees and in the House. It is not a surprise that Liberal parliamentarians and Liberal politicians are opposed to this bill, but Canadians are demanding this type of accountability and oversight. They are demanding it, because we are seeing unprecedented action by the Bank of Canada and unprecedented decision-making that is directly affecting the value of the money they have worked so hard to earn.

Many of the arguments against this bill that I have already heard through corporate, taxpayer-subsidized and government-subsidized media and Liberal politicians are all bogus. First of all, one of the critiques is that the bank is already audited. That is true. The bank is already audited by private-sector firms in Canada, but those are not the same types of audits that the Auditor General does. The Auditor General does not simply do a balance-sheet audit. It is not like the Auditor General goes in and tallies up everything on the left side of the ledger and makes sure it balances with everything on the right side of the ledger. No one is assuming that someone is leaving the Bank of Canada with bags of cash over their shoulder. In addition to balance-sheet audits, the Auditor General does performance audits, and that really is the whole point of this bill.

The Bank of Canada has made many decisions that have had a profound negative impact on Canadians. It decided, for example, to buy corporate bonds. It had a corporate bond purchasing program. Now, if we go to its website, it spells out some of the general criteria of what minimum thresholds companies would have to meet in order to have their bonds purchased by the bank. I should point out that it is a huge advantage to a company to have its bonds purchased by the central bank.

A bond is basically an IOU. It is debt. It is a company saying, “We don't have the money today, but loan it to us now and we will pay you back later.” Corporations have to pay for that. They have to pay interest on those bonds. When fewer people are willing to buy the bonds, those corporations have to raise their interest rates to sweeten the deal to attract more potential buyers, and that costs the corporations more money. When the Bank of Canada comes along and says, “We'll buy some of those bonds”, that is a huge benefit to the corporation that is selling the bonds.

Which bonds did the Bank of Canada buy? Why did it buy a bond from company A and not company B? Those are the types of things that we do not know. We do not know all the criteria that led to the decision-making. It could very well be that in very competitive marketplaces, say the airline industry, one airline's bonds were purchased by the bank and another's were not.

It is the same thing in the telecommunications sector. Perhaps one company's bonds were bought and another's were not. Let us be clear. It is not buying these bonds with its own money. The Bank of Canada creates money. When it buys these corporate bonds, it is creating new money right out of thin air, which has an impact on the purchasing power of the money Canadians have worked so hard to earn. In fact, it dilutes that every time new money is created.

In addition to the corporate bonds, it has been buying government bonds, and boy has it ever. It has been on a buying spree for almost two years. From the beginning of the pandemic, when the Prime Minister ran out of other people's money to borrow, he had to turn to the Bank of Canada, and the Bank of Canada was only too happy to oblige.

The Bank of Canada, since about April of 2020, has been bankrolling the Prime Minister's deficit spending to the tune of about $400 billion. That is $400 billion of new money created right out of thin air. That is what is causing the inflation today, and that is why Canadians have a right to know what the bank was doing and what criteria it was following, and report back to Parliament and ultimately to Canadians.

We have never seen this type of intervention in our monetary policy in our nation's history. Back in the great global recession of 2008, the previous Conservative government held the line on monetary policy. It was a difficult time. Many of my colleagues were in the House at that time. A lot of difficult decisions had to be made, but the previous Conservative government understood that if money starts to be printed out of thin air it makes an already difficult situation even worse.

That is what we are seeing today as we are coming out of the pandemic, after two years of hardship and the emotional toll it took on Canadians individually. People had to go long periods of time without seeing their loved ones. Many small business owners were watching their entire life's work evaporate as restrictions prevented them from opening their doors and serving their customers.

Coming out of that, now Canadians are being faced with punitive rates of inflation. Things that had cost $10 or $12 are now going for $18 or $20. One almost needs to get a pre-approval on a new loan to go grocery shopping these days as we see the prices escalating. Tools, lumber and all types of everyday purchases Canadians make are going up and up. The government would have us believe this is just something that happens and that it is like the weather: “We are going through an unexpected cloudy period, and inflation is up a little this quarter.” That is nonsense. Inflation does not just happen. It is a direct result of the monetary policy of the Bank of Canada working hand in hand with the government of the day. That is why this proposed act is so necessary. We need to restore the independence of the Bank of Canada.

The Bank of Canada's independence has been undermined by the government's decisions to bankroll its deficit spending with all that new money creation. That is why prices are going up today. It is actually rather simple. If we have the same number of goods but dramatically increase the number of dollars going around, prices will go up. It is not rocket science. In fact, these are basic laws of economics. More dollars chasing fewer goods equals inflation. That is precisely what we are seeing today.

The government will try to have us believe inflation is happening because of external factors. Do members remember when it tried to blame the war on Ukraine? It tried to blame inflation on Putin's illegal invasion of Ukraine. Guess what? Inflation was happening long before the invasion of Ukraine. The previous summer, on the eve of the election, inflation was already ticking up to record levels.

We all remember the famous quote the Prime Minister said in the middle of an election when inflation was only at about 4%. Do members remember those days, when inflation was only as bad as 4%? Our party started to challenge the Prime Minister and the Liberals on this and highlighted to Canadians it was their economic policy causing the inflation. What did the Prime Minister come back with? He said, “you'll forgive me if I don't think about monetary policy.” Well, we do not forgive him. He should think about monetary policy. I guess he does not understand it, otherwise he would know that he is to blame for all that inflation.

Liberals try to say that it cannot be the Prime Minister's fault, that, yes, there is inflation in Canada, but there is inflation in other countries, too. That is true. Other countries that made the same foolish decisions to run the printing presses during a time of economic contraction are also experiencing record levels of inflation. Some countries did not do that. There are several countries around the world that preserved the value of their currency and are not experiencing the same punitive levels of inflation that Canadians are having to pay.

The government's argument is a little like if someone told me I was putting on a bit of weight and I might want to look at my eating habits, and I said that obesity is a North American problem, that obesity rates in North America are the real challenge and that it cannot be anything I do because I live in a continent where it is a challenge for a lot of people. No, of course not. It is because of the decisions of each individual, just like it is the decisions of each individual country that are causing the inflation we are seeing today.

At the end of the day, the dollars that we carry around with us, the ones and zeros in our bank accounts, have no intrinsic value. We cannot do much with a 20-dollar bill or a 100-dollar bill. The only reason why other people accept it as payment is that there is a level of trust. There is a level of trust that someone else will accept it as payment and give the same value that was received. When the Bank of Canada undermines that trust by creating all that money washing through our system, it devalues the value of the money that people work so hard for. It is a form of fraud.

If people agree to provide labour to an employer for a given salary and then at the end of the quarter or the end of the year the money they receive for the work they have done is worth less, they have been defrauded of what they agreed to. They cannot go back and take away 6% to 10% of their labour. They cannot go back and tell the employer that the dollars they were paid with are now worth less, so they would like some of their time and energy back. They cannot do that. They have already given that to their employer, and the money they receive is now worth less than what they agreed to. That is why inflation is the worst form of tax.

Of course, governments love inflation, because it makes the debt they have accumulated easier to pay off. Inflation is great for people who have the ability to borrow, and that is what we saw during the pandemic. As the Bank of Canada washed all that money through the system, the people who got the money first got to buy things before prices went up. These large financial institutions and investors who had access to that early money first were able to accumulate all the assets. By the time the rest of us get the money, through wage increases and other phenomena, the prices have already gone up and those wealthy investors get to sell at record profits. That is why there have been such big winners during the last two years. Members should look at the stock market and check what bank shares have done in the last two years. Bank shares have gone up dramatically since the start of the pandemic.

When we look at the Bank of Canada's balance sheet and the money supply charts, factoring in all the money in Canada, everything from the ones and zeros in our bank accounts and the digital money that we all have in our chequing and savings accounts to the cash and all the various credit products that exist out there, the rate of increase in the money supply tracks almost identically with the balance sheet at the Bank of Canada.

That is what this bill is all about. It is about providing the first steps toward accountability and transparency so that Canadians can have their confidence in the Bank of Canada restored. The independence of the Bank of Canada has been undermined by the political decisions of the Prime Minister. If we want to get our finances under control, if we want to get the value of the money that we have worked so hard to earn stable, we need this first step toward accountability so we can understand what the decision-making process was and what the costs were to Canadians.

I have one final point. We are going to hear arguments from the opposite benches about why this bill will undermine the Bank of Canada's independence. In fact, it is quite the contrary. The Bank of England is subject to parliamentary oversight through its equivalent of the Auditor General. The Reserve Bank of New Zealand has the same types of audit provisions that I am proposing today. The European Central Bank has similar types of provisions, with its version of the Auditor General. In fact, Canada is a bit of an outlier in the fact that it is allowing its central bank, which has such enormous power over our economy, to be excluded from this oversight.

This bill is long overdue and I hope all members of the House will support it.

Bank of Canada Accountability ActRoutine Proceedings

February 9th, 2022 / 3:50 p.m.
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Conservative

Andrew Scheer Conservative Regina—Qu'Appelle, SK

moved for leave to introduce Bill C-253, An Act to amend the Bank of Canada Act and to make consequential amendments to other Acts.

Mr. Speaker, I want to sincerely thank my colleague, the hon. member for Carleton, who has been warning about the dangers of inflation for some time now, which is very relevant to my bill.

My bill is called the Bank of Canada accountability act. Right now, the Bank of Canada has a special exemption from the purview of the Auditor General. The Auditor General is not able to conduct the types of audits that he or she does over other government departments and agencies.

Since the beginning of the pandemic, the Bank of Canada has massively expanded the money supply in Canada. As a result, we are seeing runaway inflation. In addition to buying government bonds, the Bank of Canada has also purchased corporate bonds, and what this bill would do is grant the authority to the Auditor General to conduct the typical types of audits, in addition to performance audits, so that we can have a better picture of what the bank is doing. This would ensure that the bank is ultimately responsible to Parliament.

Our trading partners around the world already do this. The United Kingdom, Australia and New Zealand all have their auditor generals perform this type of function over their central banks. It is high time that we expand the accountability and transparency measures of the Auditor General to include the Bank of Canada.

(Motions deemed adopted, bill read the first time and printed)