Finance Committee on Feb. 4th, 2008

[The Chair, Conservative, Rob Merrifield]

I see all the members who are in the room at their seats, so with that we'll call the meeting to order.

We want to thank the witnesses for coming forward. We have the Department of Finance here.

We're here to discuss the issue around and with regard to the Bloc motion, Mr. Paul Crête's motion. We'll have that before us. We will hear the testimony, do a round of questioning until we have sufficiently answered the questions around the table, and then we'll ask Mr. Crête to entertain the motion and we'll carry on from that point. Is that fair?

With that, we will invite Mr. Robert Dunlop.

I believe you're doing the presenting. If you'd introduce the people who are with you and make your presentation, then we'll open the floor for questioning.

The floor is yours.

[The Chair, Conservative, Rob Merrifield]

Thank you.

With that, we'll open up the floor to any and all questions.

We'll start with Mr. McKay. You have seven minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you.

That was an extraordinarily brief presentation from the finance department.

If Mr. Crête's motion were to be adopted, it would fly in the face of the rule that all surplus has to be applied to debt. Would that be correct, if these proposed funds were taken out of the surplus this year?

[Robert Dunlop, General Director, Economic Development and Corporate Finance, Department of Finance]

That would presuppose that the proposal is to do this with funding from the year-end. Most of these proposals couldn't be done as year-end spending. What is normally required is that a grant be given to an organization that's a third party from the government. Then this third party, or a provincial government, would undertake the spending.

As for the diversification fund, the funds would be transferred to a province. Technically, it would be possible to use projected surplus money from this year for that purpose. But for program spending such as technology partnerships, that couldn't be done as a year-end.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What about enhancing the employment insurance fund? Are there technical problems with this?

[Mark Hodgson, Senior Policy Analyst, Labour Markets, Employment and Learning, Social Policy, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

The employment insurance account is an accounting entity that tracks premium revenues and program expenditures. It isn't an account that contains cash. So I'm not sure how you could—

[John McKay, Liberal, Scarborough—Guildwood, ON]

So it wouldn't necessarily be money. It would simply be a change in the rules of eligibility.

[Mark Hodgson]

At this point, the Employment Insurance Act determines what is credited to and debited from the EI account.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Would it therefore require an amendment to the EI legislation?

[Mark Hodgson]

If you were to change the nature of the EI account, then you would need to change the Employment Insurance Act.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In respect of the $1.5 billion for support measures for workers and the $1.44 billion for employment insurance, am I right to assume that this would require completing legislative changes to the EI before the end of this fiscal year, if it were to go through? Am I correct in that?

[Mark Hodgson]

To answer the second part of your question first, if you wanted to have this done before year-end, then your legislation would need to have received royal assent before the end of the year.

I'm not sure what is meant by “support measures for workers affected by the crisis”. Presumably that would be a new purpose for the EI program, which would require legislation. If you wanted to change the nature of the EI account, you would need legislation.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In terms of the $1.5 billion in reimbursable contributions to companies to allow them to purchase new equipment, would you understand that to mean changes to tax legislation, or is that program spending?

[Robert Dunlop]

We see that as program spending. That would be under the control of the government and you wouldn't be able to do it as a year-end measure.

To add to what Mr. Hodgson said, the EI account would still be controlled by the government. You wouldn't be able to make a one-time payment and then disburse the funds over time. It would still be accounted for when the money is actually spent.

[John McKay, Liberal, Scarborough—Guildwood, ON]

We're not necessarily talking about the money here, as such. We're simply talking about the enhanced ability of people who are laid off to access moneys in these special circumstances.

[Robert Dunlop]

Yes, but I was answering your question about whether you could do this as a year-end measure. In both of those cases it would be a program, so the funding would be accounted for when it's actually spent, not as a year-end matter.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Notionally you couldn't even take it out of the surplus until the legislation actually passed.

[Robert Dunlop]

That's right. Even then you wouldn't be able to with the EI account. Because the EI account is controlled by the federal government, the accounting rules don't allow you to expense it other than in the year the money is spent. The difference is the case with, say, making a grant to a provincial government. The federal government can take year-end funds and surpluses and provide them to a provincial government, which the federal government does not control, expense it in the current year, and the province spends it later. That's the accounting treatment.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Any EI-enhancement spending effectively gets bumped over to another fiscal year. Any moneys that are transferred to a province could be accommodated in this fiscal year, and unless you set up a third party you wouldn't be able to do a technology partnership thing.

Do I have the summary on that?

[Robert Dunlop]

That's correct.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you.

There are those who argue that this is clearly not the way to go. There is a school of thought that this is crazy. Have you thought about the other part of reducing or eliminating tariffs? Is that a viable way to provide assistance to the manufacturing and forestry sector, which wouldn't necessarily require year-end spending?

[Robert Dunlop]

I believe that proposal has been made by some industry groups. As we do with all pre-budget submissions, I'm sure it has been examined.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Is there any costing on that?

[Robert Dunlop]

No, we don't have costing on that.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

They are the Department of Finance. Why would they?