Finance Committee on Dec. 1st, 2011

[The Chair, Conservative, James Rajotte]

I call this meeting back to order.

We have a second panel here to help us consider supplementary estimates (B) 2011-2012, and votes 1b, 5b, and L15b under Finance.

A number of officials are here today. My understanding is that Ms. Sherry Harrison, assistant deputy minister of the corporate services branch, will be making an opening statement, and then all the officials will be available for questions.

I'll just point out to all of the officials that the “dean of estimates”, Mike Wallace, is here at the committee.

[An hon. member]

Hear, hear!

[The Chair, Conservative, James Rajotte]

It's wonderful to have him back.

Ms. Harrison, we look forward to your opening statement, and then we'll have questions from members.

[Sherry Harrison, Assistant Deputy Minister, Corporate Services Branch, Department of Finance]

Good afternoon, Mr. Chair.

My name is Sherry Harrison. I am the executive director responsible for the Financial Management Directorate at the Department of Finance. With me today are officials to assist in responding to questions regarding the 2011-12 Supplementary Estimates (B) for the Department of Finance.

These Supplementary Estimates (B) reflect an increase in departmental spending of $1.337 billion. It is noted that $1.325 billion relates to statutory items that have already been approved by Parliament through enabling legislation. These statutory items are displayed in the Supplementary Estimates (B) for information purposes and will not be included in the appropriation bill.

For the statutory authorities, the items related to the $1.325 billion increase are as follows: $925.1 million in additional fiscal equalization payments to provinces that would otherwise have experienced a decline in major transfers from the federal government between 2010-11 and 2011-12. This is also referred to as total transfer protection. We also have $536.1 million for a transitional payment to Newfoundland and Labrador under the 2005 offshore arrangement, which included the requirement for a transitional payment in 2011-12 should the province not receive equalization in that year. There are also $151.4 million in recoverable payments to Ontario and Prince Edward Island to help mitigate the impact of revised data for the computation of equalization payments; a $86.4 million increase in payments to provinces based on an updated payment schedule for the incentive for provinces to eliminate taxes on capital; $33.7 million in an additional fiscal equalization offset payment to Nova Scotia under the 2005 offshore arrangement; $18 million in additional fiscal equalization to Nova Scotia, which is related to the 2005 offshore arrangement; $7.9 million for an increased recovery from Quebec under the youth allowances recovery as a result of updated data; $34.6 million in an increased recovery from Quebec for the alternative payments for standing programs as a result of updated data; and a $410 million decrease in the interest cost estimate due to a downward revision of forecast short-term interest rates.

The $7 million increase in voted grants and contributions is related to the Harbourfront Centre funding program. This program was renewed in Budget 2011 for five years at $5 million per year from 2011-2012 to 2015-2016. An amount of $2 million was reprofiled from 2015-2016 to ensure that sufficient funding is available to meet the quarterly advance payment regime of the renewed program.

The operating vote reflects an increase of $4.9 million. This increase is comprised of government advertising programs, ongoing activities related to the HST, a reprofile of funds for the task force for payment systems review from 2010-11, and the project office for the departmental move to 90 Elgin.

The wording for non-budgetary vote L-15 is being amended to increase the total amount payable to the International Development Association, from $384.2 million to $441.6 million, to reflect the sixteenth IDA replenishment. This change is represented by a dollar item in the supplementary estimates because it signifies a modification of authority embedded in existing legislation.

We'd be pleased to address any questions the committee may have on these supplementary estimates.

[The Chair, Conservative, James Rajotte]

Thank you very much for your opening presentation.

We'll start members' questions with Mr. Julian. I'll just encourage all members to stick as closely as possible to the estimates we are considering here today.

Mr. Julian, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair, and I certainly will.

I wanted to start by looking at the Auditor General. The total budgetary allocation is $88,736,000. Is that the total that was provided to the Auditor General?

[Sherry Harrison]

Mr. Chairman, we were asked today to appear concerning the Department of Finance's supplementary estimates. I don't have an official here with respect to the Auditor General's estimates.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

No, but the amounts are on page 52 of the supplementary estimates. Under Auditor General, it shows program expenditures of $78,297,061. I'm just looking for that supplementary estimate.

Is that the allocation that goes to the Auditor General's office?

[Sherry Harrison]

In the estimates, that number reflects the authorities to date this fiscal year for the Office of the Auditor General.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Okay, and it also talks about the International Labour Organization. Are you aware of how much, within that $78 million, is provided for it?

[Sherry Harrison]

I'm sorry, that question should be referred to the Office of the Auditor General.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Okay. Can you tell us, then, how these supplementary estimates relate to previous years?

[Sherry Harrison]

No, I'm sorry. Mr. Chair, we came here to speak specifically to the Minister of Finance's department. We don't have officials here to speak to the estimates of the Auditor General.

[The Chair, Conservative, James Rajotte]

These figures are from the main estimates, not the supplementary estimates.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

They're part of the supplementary estimates publication, as you know, Mr. Chair, so it's fair to ask those questions.

I see from the supplementary estimates last year that for programming, it was $78,768,000, and for this year, as far as program expenditures are concerned, it is $78,297,061. So there's a deduction or a cut in the money accorded to the Auditor General's department of half a million dollars. I'm wondering, in the analysis that was done around the $78 million, if you can answer that question or provide that information to the committee, as to why the amount was cut to the Auditor General.

[Sherry Harrison]

Mr. Chair, we came prepared to speak to the department's estimates. We'd be pleased to refer those questions to the Auditor General for an answer on their portion of the estimates. We were asked.... The meeting notice was—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Fair enough, but you wouldn't provide that information to us later. You're suggesting that this committee needs to talk to the Auditor General.

[Sherry Harrison]

We can refer that question to the Auditor General's office and have them provide that back to the committee.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I was going to ask a similar question around the Canadian International Trade Tribunal, because there are cuts there as well of nearly half a million dollars. We're seeing, in the ministry's supplementary estimates, cuts in a number of different areas.

I wanted to come to the supplementary estimates relating to the HST, the harmonized sales tax credit. Are any of those funds moneys that will be sent to, or allowed to remain in, British Columbia because of the implementation of the HST there? Of course, as you know, in B.C. there was a clear rejection of the HST last summer by British Columbians. Within that $1.566 million, to what extent are any of those funds being sent to British Columbia?

[Sherry Harrison]

None of those funds are being sent to the province. That $1.566 million relates to funding to support the department's ongoing activities related to HST. The department is responsible for HST policy and legislation, and these are operating costs for the department in that role. They do not flow through to British Columbia.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Okay, thank you, and thank you, Mr. Chair.

That's important to note because, as you know, there's a great amount of discussion in B.C. presently about the HST and allocations coming from the federal government.

Concerning the allocations that go in recoverable payments to Ontario and Prince Edward Island, could you explain to us how much of that funding is going to Ontario and how much is going to Prince Edward Island, out of the $151 million?

[Chantal Maheu, General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

Of that $151 million, $150 million will go to Ontario, and $1 million to P.E.I.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Julian.

We'll go to Mr. Jean, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair.

My interest is in relation to debt. I grew up in Fort McMurray. You may have heard of it. It's a small little town of about 150,000 people in northern Alberta. In 1967 there were about 1,500 people there, and I remember back in the seventies when the economy was extremely hot, interest rates went up to, I think, about 22% to 24%. Then we had what I remember as the national energy program, which closed down pretty much every business in northern Alberta—in fact, all but about two. I remember one was my parents' and the other was a lottery, which means that you either have to be a government-run monopoly or very, very cheap.

That was a joke, by the way.

I'm interested in debt interest charges, as I did see a tremendous number of businesses go broke because they couldn't afford the high interest rates of 22% to 24%. We, of course, are in an interesting area right now. The Government of Canada has very low interest rates, and we have an opportunity to balance our books and actually pay off debt.

My question is, what would happen if interest rates returned to their 1980 levels, relating to public debt? What would happen to public debt interest charges?

[Doug Nevison, Director, Fiscal Policy Division, Economic and Fiscal Policy Branch, Department of Finance]

If I may, Mr. Chair, that would obviously be a very significant hit.

In the budget documents and the updates of economic and fiscal projections, we always include a sensitivity analysis for a number of variables, and their effect on the budgetary balance. One, at the back end of the update, looks at an increase in interest rates. So basically, for every 100 basis points, or one percentage point increase in interest rates, you would see a deterioration in the budgetary balance of about $800 million in the first year, building to $2.3 billion by year five.

So if you were going, as you said, to very significant interest rates, that would be a huge hit.