Finance Committee on Feb. 10th, 2009

[The Chair, Conservative, James Rajotte]

I call to order the fourth meeting of the Standing Committee on Finance. The orders of the day are, pursuant to Standing Order 81(5), supplementary estimates (B) 2008-09.

For the first hour we have witnesses from the Department of Finance, and for the second hour we have the Canada Revenue Agency.

I believe Mr. Miller will be presenting an opening statement on behalf of the department. Mr. Miller is with the Corporate Services Branch.

Mr. Miller, you have up to five minutes, and we'll go to questions from members immediately thereafter.

[David Miller, Corporate Services Branch, Department of Finance]

Thank you, Mr. Chair.

I am the executive director of the financial management directorate at the Department of Finance. With me today are departmental officials, who are here to assist me in responding to your questions. Perhaps I could just take a brief moment and have them introduce themselves and their roles.

Brian.

[Brian Ernewein, General Director, Tax Policy Branch, Department of Finance]

I'm Brian Ernewein, the general director of the Tax Policy Branch at Finance Canada.

[Paul Rochon, Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance]

I'm Paul Rochon, the assistant deputy minister of economic and fiscal policy.

[Rob Stewart, Director, Financial Sector Policy Branch, Department of Finance]

I'm Rob Stewart, the general director of the Financial Sector Policy Branch.

[David Miller]

As you know, we are here to answer your questions on the 2008-09 supplementary estimates (B) of the Department of Finance. The other organizations within the finance ministry—the Canadian International Trade Tribunal, the Financial Transactions and Reports Analysis Centre of Canada, the Office of the Superintendent of Financial Institutions, and PPP Canada Inc.—have not requested additional resources in these supplementary estimates, so today's discussion focuses solely on the requirements of the Department of Finance.

The department's responsibilities include preparing the federal budget, developing tax and tariff policy and legislation, managing federal borrowing on financial markets, administering major transfers of funds to provinces and territories, developing regulatory policy for the country's financial sector, and representing Canada in international financial institutions and forums.

These supplementary estimates identify a total reduction in the budgetary requirements for the Department of Finance of just under $701 million, revising our annual budgetary requirements downward from $80.4 billion to $79.7 billion for this fiscal year.

The change in budgetary requirements includes a reduction in public debt charges of $2.2 billion. This forecast was completed in August when these supplementary estimates were prepared. A revised estimate of public debt charges for the 2008-09 fiscal year is reported in Budget 2009.

Also included for information purposes is an increase in transfer payments to the provinces and territories of $1.2 billion, reflecting payments to public trusts relating to the three Budget 2008 trusts and Budget 2007 protection payments. Please note that these latter two items are statutory in that they have already been approved by Parliament through enabling legislation, but this is the first opportunity to display them in an estimates document. Again, they are displayed for information purposes only and will not be included in the appropriation bill.

In terms of items requiring parliamentary approval, these supplementary estimates (B) request an additional $249.4 million in the voted appropriations. First, it includes $15 million in the operating expenditures vote, vote 1b of the Department of Finance, to support the work of the department related to the government advertising programs.

Secondly, there is an increase for the Department of Finance vote 5, grants and contributions, for a payment to Nova Scotia of $234.4 million in respect of the crown share adjustment payment. The payment settles a very long-standing issue with Nova Scotia on compensation for the loss of profits the province could have earned through a 1982 agreement related to offshore oil, which was subsequently superseded in 1986. It results from the acceptance of an expert panel report on this issue, which provided the methodology to be used in making future payments, and the estimate of past liability for crown share adjustment payments.

Finally, these estimates include a transfer of $2 million to the Canadian International Development Agency to support the World Bank's new debt management facility for low-income countries.

That concludes my opening remarks. Of course, we would be pleased to address any questions the committee may have on these estimates.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Miller.

We'll start with Mr. Pacetti, for seven minutes.

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

Thank you, Mr. Chair.

Thank you, Mr. Miller, for appearing before the committee.

Perhaps you could just go over this a little bit slower for me. We seem to be transferring $234 million to the Province of Nova Scotia for something that happened in 1982, and then we say it was superseded in 1986. I believe there are going to be some other payments based on the Atlantic Accord, and then there are going to be other payments for equalization. How does this come about all of a sudden, where we're going to be accounting for something that relates to 1982 and 1986? Don't accounting rules mean we should be accruing some of these expenses?

[David Miller]

Maybe you'll handle it?

[Alfred LeBlanc, Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

Yes.

The $234 million is a payment in the context of the crown share adjustment payment provisions. That's a long-standing provision between Canada and Nova Scotia. A legislative framework was agreed to. It required that regulations be set out to implement that legislation.

Agreement on the regulations was never reached, so the government created an expert panel to provide advice on how those regulations should be set out. That panel reported and provided advice on how that legislation should be put in place and implemented. It also provided an estimate of the value associated with those adjustment payments. The $234 million covers all of the liability, up to date, for those provisions.

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

But you must have had an idea of some minimal amount of payment you had to have made. Wouldn't you have provided for that? You would normally provide for some type of contingency or reserve. You knew there was a liability, so it's not something that just appeared out of nowhere all of a sudden.

[Alfred LeBlanc]

Well--

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

I'm just very uncomfortable with the $234 million.

[Alfred LeBlanc]

Yes.

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

It's not $234; it's two $234 million. It's a bit of a problem. I understand you're going to explain it to me. You're going to explain it to me again and you're going to do a very good job, but I just have a difficult time understanding how that can happen overnight. This is something that should have been in the regular appropriations. It can't just show up in the supplementaries.

[Alfred LeBlanc]

The two parties were quite far apart. There are legitimate differences of opinion on how one would calculate it. It is extremely complex. There were very wide differences in what one might have--

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

Are there more moneys to come from this?

[Alfred LeBlanc]

The panel gave an estimate of future value and also gave advice on how the regulations should be put in place. The estimate provides a ballpark sense of what the regulations might generate, but the future liabilities will really arise out of the provisions that are put in place to implement the recommendations of the panel. The panel did their work with certain inputs. The numbers going forward will depend on a range of factors, including gas prices and other costs associated with a project, so it's--

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

Which panel was it?

[Alfred LeBlanc]

It was the expert panel, the crown share panel.

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

Did they look just at Nova Scotia or at all the other provinces? There must be--

[Alfred LeBlanc]

It's a provision that is unique to Nova Scotia and the Government of Canada.

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

You didn't answer my question in the sense of additional liabilities coming forward after 1986.

[Alfred LeBlanc]

Yes. The panel estimated the total for existing projects, and it goes for quite a number of years, I think, out to 2028--

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

Let's just talk about until 2009.