Finance Committee on Oct. 29th, 2013

[Mostafa Askari]

We believe so. The Finance Department released their first aging report last year, which was done over a 50-year period. We do it over a 75-year period. They didn't call it a fiscal gap. There was a number in one footnote that looked very similar to the fiscal gap measures that we have in our studies. We believe they follow essentially the same methodology that we use in our calculations.

[Mark Adler, Conservative, York Centre, ON]

And the same risk factors are built in, roughly?

[Mostafa Askari]

Yes, they use essentially the same factors. We did a comparison between our Fiscal Sustainability Report last year and the Department of Finance's report. We provided that publicly and it's available. The numbers seemed very close.

[Mark Adler, Conservative, York Centre, ON]

Our government seems to have our deficit under control. We propose a balanced budget by 2015. However, the provinces are another story. There are some that stand out in particular, like Ontario. How serious is the threat of provincial debt to the national picture of fiscal sustainability? What happens if a province like Ontario goes into serious financial default, fiscal default?

[Mostafa Askari]

If they go into default, there will be a huge implication on their borrowing rates. The borrowing rates of Ontario would be a major element in the overall Canadian picture, given that it's the largest province in Canada. Overall, there is only one taxpayer; it will affect everybody. But exactly how much will depend on the circumstances and what the situation is.

[Mark Adler, Conservative, York Centre, ON]

Is the PBO looking at any of that right now?

[Mostafa Askari]

No.

[Mark Adler, Conservative, York Centre, ON]

It's outside your mandate.

[Mostafa Askari]

Our mandate is not to look at provincial finance. We do that in the context of sustainability, but we look at the provinces as a whole, not province by province. We don't have the resources to go province by province and it is not consistent with our mandate.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

How much time do I have?

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Mark Adler, Conservative, York Centre, ON]

I'm good, thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

Mr. Côté, go ahead.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Fréchette, I want to begin by talking about your position, which was created by the Conservatives in 2006 to prevent non-transparent decisions of successive Liberal governments. Mr. Flaherty—and I was in full agreement with him at the time—said that governments cannot be accountable if Parliament and Canadians don't know what the real state of public finances is.

When it comes to the $7-billion difference in what was made public by the Department of Finance, can that be seen as a problem in terms of good governance or even, ultimately, as an ethical issue?

[Jean-Denis Fréchette]

Thank you for the question.

I would not go that far. The problem is the following. As Mostafa explained, part of the $7-billion amount—about $1.9 billion—stems from additional revenue, especially that from corporations and institutions. Part of the remaining billions was adjusted at the end of the year, or rather “the next year”, for some departments that did their calculations based on cash rather than based on accountability, as they should for that report. That time frame and information are not available. As Ms. Nash said, this is a matter of confidentiality for the Cabinet. That data has not yet been verified or approved by the Cabinet.

Nevertheless, as I mentioned earlier, I thought it was encouraging when the minister said that he was prepared to provide us with explanations on that issue. He did partially explain matters. I think it is a positive development that a new openness exists and that a new bridge has been created. That being said, I am continuing to work on building bridges and accessing that data. You are entirely correct in saying that we need to have access to the data to be able to provide parliamentarians with some explanations on everything that is happening at the executive level.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Okay.

I would like to change topics and discuss economic forecasts. If my understanding is correct—and I have not found any information on this matter—you use the approach of the Department of Finance to make your forecasts. Those forecasts are related to budgetary cuts, and that has an impact on the gross domestic product.

A few years ago, economic sectors tended to use a multiplier of 0.5. So for a $1-billion cut, the impact would be a decrease of half a billion dollars in GDP. The IMF now admits that this was a mistake and that the rate was much closer to 1.

Could you tell me what multiplier you use to calculate the impact of federal budget cuts?

[Jean-Denis Fréchette]

We use the multipliers from 2009-2010. Those are the multipliers we currently have, and we will continue to use them in our calculations.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

And what is that multiplier?

[Mostafa Askari]

There were multipliers for different kinds of spending that were reported at the time. We have taken into account different spending and applied different multipliers to that. There is a range of multipliers that the Department of Finance has used for different parts of the spending. That's available in the budget. We can provide that information to you if you want.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Let's say that, to get an idea of the general economic situation, we are staying fairly close to the IMF practices, or following them exactly. We are talking about a real multiplier fluctuating between 0.9 and 1.7. I assume that what you use is somewhere along that scale.

[Mostafa Askari]

Well, the IMF provided the study that showed that during a financial crisis multipliers actually may be somewhat larger. Our assumption is that the Department of Finance, in calculating these multipliers after the financial crisis of 2008, actually took into account the special circumstances at the time. We believe that those multipliers are reasonable in their size.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Okay.

How much time do I have left, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have 30 seconds left.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

I will give them to the committee as a gift. I'll stop here.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Colleagues, we are brushing up against 2 p.m., so I think we will end it here and thank our guests.

Monsieur Fréchette and all of the staff here today from the Parliamentary Budget Office, thank you so much for being here before the committee. We look forward to our ongoing relationship.

Colleagues, we will see you next Tuesday.

Thank you. The meeting is adjourned.