Finance Committee on April 26th, 2012

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I want to pick up on a couple of things that were said. First of all, I'm simply a soccer mom. I'm a parliamentarian, but I'm a soccer mom, so when I do my budget at home I take into consideration the revenues I have, the expenses I have, any investments I may have, and to get to the bottom line I have to include everything.

The frustration I have, Mr. Page, is that whenever I ask questions that are sensitive to you, because you really haven't included the good stuff, you try to stay away from it and you don't answer the question. So when Ms. Nash says we expect transparency, absolutely, that's why we created your position. We expect transparency. We expect honesty and fairness. Mr. Matier actually did say that you did take into consideration that chapter on innovation, on research, that kind of stuff, so I'd like him to point out what page that's on. He said EI as well. I see where EI is. So all I'm asking, and I hope it doesn't take you four minutes again, is to point out the page.

While you're looking for that, sir, I'd like to also ask you to clarify a couple of other things, because I only have five minutes and really four of those minutes were wasted dancing around the question last time.

The province-to-province health care spending, I thought that was an excellent question by Ms. Brown, and the ten-year projections I thought was an interesting comment. I would love to see that. If you could provide that to us, the ten-year projections of what the health care spending was, province to province, territory to territory, that would be very helpful.

I also want to comment that although I remarked about the one chapter on entrepreneurship and that kind of thing that seems to be absent, and Mr. Matier is going to get me the page in your report where it's addressed, I really don't see any investment information either, and how that assists in keeping Canadians in a situation where we're at an advantage. So things like, for example, the hiring credit for small business, the community infrastructure improvement fund in the budget, the Canadian Coast Guard--they have $5.2 billion that will generate jobs as well--all of those things help to generate jobs.

Again, going back to your contention that there are going to be 100,000 jobs lost, they're hypothetical. I know that now, after listening to you--that is what I asked you in the very first moment, and which you danced around for four minutes--but I do want to know, where are those projections for all these created jobs? It seems awfully odd that you would leave those out. So I'm giving you a chance here to explain where they are, and if you did leave them out who asked you to do that, because that's not transparent. That is not fair. That is not what a soccer mom would do in calculating a budget or making comments about a budget.

Frankly, there have been other economists who have said, Mr. Page, that you're very pessimistic when you do these things and there are things that are missing. So if you criticize the government on what's missing, it's because we've asked you to do a job, and we appreciate that. But you can't come here and do exactly the same thing and then try to dance around the question. So I'm giving you an opportunity to explain.

[Kevin Page]

I'll defer to Chris to provide the page numbers in the announcement, but I think as Chris said earlier, what we provide in our tables are figures that are provided on a net basis. When we're talking about jobs, we're talking about net jobs. When the government spends additional moneys--and there's roughly $1 billion of additional spending in the 2012 budget, and there was lots of spending in previous budgets--that creates jobs. Then when there's money being taken away, so to speak, because of program spending--and we're not commenting that that's a bad thing at all--there's a job impact to that as well. So the numbers are provided on a net basis, and Chris will provide you with the page numbers.

[Shelly Glover, Conservative, Saint Boniface, MB]

What page number, sir?

[Chris Matier]

That's page 11, footnote 7.

The reason we didn't break out all of the job impacts by category was simply the size. These are relatively small amounts of money.

[Shelly Glover, Conservative, Saint Boniface, MB]

So for the people at home who might be listening, because this is an interesting topic, this value refers to the net reduction in government spending contained in budget 2012. It has nothing to do again with taking the good and the bad and coming up with a bottom line once again--

[Chris Matier]

Actually, I disagree. It does. The net is that. There are spending reductions and then there are spending increases. The net is the sum of those two things.

[Shelly Glover, Conservative, Saint Boniface, MB]

Okay, if you could break them down for me I would--

[Chris Matier]

I could. I would only say that again we're talking about.... We tried to focus on--

[Shelly Glover, Conservative, Saint Boniface, MB]

You won't have time to do it here. I'd like it in written form, if you wouldn't mind. My time is up, unfortunately, but I'd like it in written form so I can actually see that you did provide the fair, transparent, balanced report that I'm hoping it is.

[The Chair, Conservative, James Rajotte]

Okay, thank you, Ms. Glover.

Mr. Mai, you have the floor.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Chair.

I'll come back on the F-35. You had a letter to DND. Why did you feel it was important to ask DND that sustainment costs, including operating and support OS costs, be reconciled with the estimates published by the U.S. Department of Defense cost analysis and program evaluation unit?

[Sahir Khan]

Thank you for the question.

When we produced this report for parliamentarians a year ago, public estimates were not easily readily available for the F-35A variant, nor were long-term sustainment costs, so at that time we felt this would be.... Well, we were asked to produce this estimate under the Parliament of Canada Act.

Subsequently, reports have been published by the U.S. Improving Government Accountability Act, which is the audit and investigative arm of Congress, as well as by the U.S. Department of Defense CAPE unit--capability assessment and program evaluation--which has produced two estimates on the sustainment costs, and the Government Accountability Office has now produced average unit procurement costs.

Given that these are in the public domain, and they're done by respected institutions, our sense is that parliamentarians could be well served to have them as reference points for estimates that are now produced by the Department of National Defence alongside their own guidelines, which provide definitions for such things as life-cycle costs and operating and support.

We think it could be very useful for parliamentarians to have these reference points, because they are in the public domain. They are being updated on a periodic basis, and they remain estimates, but they're well explained as such.

We can provide the reports from the GAO and that could help you in your review.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much.

I'm going back to Mr. Page. You note that budget 2012 will result in 43,000 fewer Canadians being employed, then you spoke about 100,000 lost jobs. What do you think the impact will be in the national capital region?

[Kevin Page]

The analysis we provide very much follows the same methodology provided by the Department of Finance in the 2009 budget, the 2010 budget, and the 2012 budget—it's an aggregate number. We have not broken out estimates for what the impact would be in Ottawa. We've undertaken an exercise working with departments, department by department, program by program. What will the job numbers be? Hopefully, we'll have something for that shortly.

We're also doing some broader work on compensation.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

What do you think the impact will be in the long run, if we talk about more general...?

[Kevin Page]

More generally, I think it speaks to a question and our response provided, I think to Mr. Hoback, that there could be some.... We're taking some tough actions now, reducing our debt-to-GDP ratio, and there will be initial drag in the short term. I think Chris was quoting some private sector economists on this. But in the longer term, this might be a price or a trade-up well worth taking.

What we're saying in terms of the announcements today is to highlight this in a transparent way, that there are these trade-offs, and when we take these trade-offs we're aware we are taking them.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

In your report you indicate that we'll reach a historic low in direct program expenses of 5.5% of GDP in 2016 and 2017. What will be the impact of this decrease in direct program spending, according to you?

[Kevin Page]

If we freeze the direct program spending in nominal terms, it's somewhere in the neighbourhood of $115 billion, so we're saying almost flat or negative growth over the next five years.

That direct program spending, as you say, will fall very dramatically. The question for us, and what we would like to provide to parliamentarians, is what will the impact be? In that context, what programs are being eliminated? What is being done to efficiency measures? What's being done in the context of public service? There's analysis for us to do.

Again, that is almost a record low level of direct program spending.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

How will it impact poverty and inequality?

[Kevin Page]

We have no comment. We have no analysis.

Again, we are trying to do the distribution analysis, department by department, but I think the government is quite focused on trying to do this operationally. Mr. Jean talked about that.

We were going to look at that. What are the plans in place to achieve these efficiencies? Are there plans? Can we get to these levels?

I think that's a task we're going to turn to ourselves. We're not saying it can't be done, but certainly there will be risks.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

I have just one more question.

With the volatile global economy, do you think it's too early to present an austerity budget?

[Kevin Page]

When we provide these estimates, we want to be clear to Parliament where we think the economy is vis-à-vis potential. We're saying right now, as we look in this particular context today, that we're probably operating somewhere about two percentage points below potential.

The IMF and the OECD present similar analyses from the reports. Their numbers are very similar to ours. We are talking about a consolidation program in that context, so there will be drag in the context of the economy operating below potential.

There is an impact, but as we get back to potential through the medium term, that impact will be mitigated. In a global economy with lots of uncertainties, who is to say where we'll be a year or two years from now in terms of potential?

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

We'll go to Mr. Jean, please.

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

Thank you, Mr. Chair.

I want to reiterate what Mr. Rajotte said earlier. I really do appreciate your work. I am probably one of the one or two people who actually stay up at night to read the stuff and get giddy about it, because it is very interesting. I do appreciate that, and I appreciate your department's work as well. Saying that, we have to ask our questions, and we are very interested in that.

I do appreciate your comments to Mr. Mai, suggesting that initially doing this and maybe dragging the economy a little bit, which makes a bit of sense—it does make sense—over the medium term and the long term is going to be of a real benefit to Canada. I think that's what it's all about: real long-term benefit.

On page 3 of your report you talk about three things that would cause us to have problems, and one is the larger impact of commodity price weakness. I want to comment on that. On page 11 of your report you talk about how you revised the commodity prices up modestly.

We had the Governor of the Bank of Canada here a couple of days ago, and he said that commodity prices are high and they're going to remain high for the foreseeable future. I do see a conflict in that, and I would like a revised update based on that expertise from the Bank of Canada and what he sees as being the ongoing commodity prices.

I also want to know if you've taken into consideration the Canadian Energy Research Institute and its forecasts for what's going to happen, for instance in the oil sands generally, and for energy across the country.

[Kevin Page]

Sir, on the commodity prices, effectively we were using the Bank of Canada commodity price index. If you look at the data, the latest releases of the Bank of Canada commodity price index for March 2012, you will see year-over-year declines of the overall index, probably of about 12%.