Finance Committee on April 29th, 2014

[The Chair, Conservative, James Rajotte]

Thank you.

I'll go to Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Welcome to our witnesses.

It's an interesting discussion. As you know, the Parliamentary Budget Officer's role is a complex and difficult one that is made more difficult, I suspect, because of requests that come to you from MPs and from political parties and for various other reasons. Those reasons can be political reasons. They can be anything, but they have an economic base.

I think it deserves to be mentioned that CRA is responsible under the Income Tax Act and under the Excise Tax Act. CRA members and officials are held criminally responsible for breaking confidentiality. That's not something to be taken lightly. It's certainly not something that is easy to deal with when you're dealing with personal information.

The other thing is the civic question on the tax gap that most G-20 countries don't follow up on, because you can't get good information on it, mainly because of confidentiality and the difficulty of handling it. I'm not asking for an answer on it, but I'm simply looking at your role and the difficulty of that role when you're trying to respond to questions with a limited budget. Even though you have a well-qualified team and a limited team, it's not an easy role.

I want to pick up on a comment that Mr. Askari made on the exports since 2000, because according to your information, really the exports since 2000 have not made a contribution to the Canadian economy. I'd like to explore that a little bit deeper. I don't think that's exactly what you meant, because I suspect if we took away the exports.... I mean, we are an export-driven economy and very much of that is commodity driven. If we took those exports out of the Canadian economy, I think we'd leave quite a gap there. Using rough numbers, 60% or 65% of our economy is export based. Of that, 72% or 73% is based on trading with the United States. I can't fathom that since 2000 it has really not made a contribution to the economy.

I'm going to give you a chance to explore that a little deeper.

[Mostafa Askari]

I'm glad you asked for a clarification. I think what I said was not that the exports do not make any contribution to the Canadian economy, but that exports did not make any contribution to growth in GDP since 2000. That's a completely different issue.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Absolutely. Thank you for that.

In trying to follow up on that point, your office estimated that imports from South Korea are in the $5 billion per year range. If we look at the cost of the fiscal framework for removing tariffs, there's a cost to that without question. It's not all profit. There has to be a net in there somewhere, a net gain. Comparable to the cost of removing tariffs as part of the comprehensive European trade agreement, the fiscal impact will be somewhere in the $50 million range. Is that...?

[Mostafa Askari]

Scott, do you want to talk about that?

[Scott Cameron, Economic Advisor, Analyst, Economic and Fiscal Analysis, Library of Parliament]

We're working with fairly rough data, but in the absence of an official fiscal impact costing of the government, kind of what we've gone with is that $50 million, yes.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Everything has a cost. Everything that government does has a cost. That doesn't surprise me, but I think the $50 million gets lost. People look at the $50 million cost and they forget the $4.95 billion left over. That's the difficulty of that estimate. I'm going back to the fact that we're a trading economy. We're based on trade, and we're trying to break down barriers worldwide. I think we've been fairly successful at that. Other governments have followed up, but not to the degree that we have. My fear is that people look at that number and say that there's a $50 million cost there but then they forget the $4.95 billion net gain.

[Scott Cameron]

I think our point was that it's a very small cost. There isn't much of a fiscal impact to that agreement.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Part of the discussion we had with the Governor of the Bank of Canada was on the challenge that Canada faces, a challenge that you folks would be very familiar with, on the growth of the economy, on keeping inflation under control and at the same time controlling competitiveness, and on our ability to compete on an international scale. I think we do fairly well, but without question I think we can do better.

What's the role of government? We can open the doors and we can break the barriers down, but how do we actually have some influence on competitiveness? Can we?

[Mostafa Askari]

I can get into trouble by answering that question, sir.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I might have got in trouble by asking it. I'm not sure.

[Jean-Denis Fréchette]

Just don't.

[Mostafa Askari]

I don't think I can make any comment. Again, it's a policy sort of question that we normally do not make any comments on.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Okay. That's fair enough.

Based on that same line of questioning, if we look at the Canadian dollar, and part of the discussion we had earlier—

[The Chair, Conservative, James Rajotte]

You have one question, please.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

—being at that 91¢, if the dollar falls too far then we also get a windfall for some of our exporters, but we also tend to lose productivity.

Do you want to talk about how those two are interconnected?

[Mostafa Askari]

Certainly.

The Canadian dollar has a very important role to play, given that it impacts both our exports and our imports because it determines the cost of imports. One way or another, there has to be a rate at which it optimizes the impact on the Canadian economy. Nobody really knows what that rate is. There are some estimates of what they call the purchasing power parity of the dollar, which used to be around 89¢ or 90¢. I don't really know exactly what it is right now. That doesn't necessarily mean that's an optimum rate for the exchange rate.

[The Chair, Conservative, James Rajotte]

I'm sorry. I hesitated, but I want to be fair to all members here.

Mr. Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

Thank you for joining us and for your presentation, Mr. Fréchette.

I would like to turn to the report you wrote about the main estimates. You came back to a problem that seems to me to keep happening. I am talking about the lack of accountability and the significant differences between what are called the main estimates and the budget announced by the government.

You pointed out that the two processes are moving further and further apart and that we are now in a situation where only 85% of the budget is explained in the main estimates, a percentage that is constantly going down.

You also pointed out the different accounting methods used in the main estimates, where general accounting per se can be clearly seen, and in the budget announced by the government.

Could you tell me what purpose parliamentarians currently serve? Is it possible for us to properly analyze government expenses or is this an exercise that is becoming more and more futile?

[Jean-Denis Fréchette]

I will pass that question to Mr. Askari, who can provide you with more details about the subject.

The PBO exists to help parliamentarians. Our purpose is to identify precisely that kind of situation. We try to provide parliamentarians with explanations as much as we can, but things can get difficult. We brought it up in a report so that parliamentarians can debate it.

In that sense, once we have given you the information, I assume that you have the tools you need for that debate.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Askari, do you want to answer the question?

[Mostafa Askari]

You are absolutely right.

At the moment, the main estimates are not very useful in examining the government's financial situation because of the different accounting systems. Two years ago, we advised the parliamentary committee to change the system in the main estimates and we hope that that will eventually be done.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You said that we have the tools we need, but I have here a quotation from your predecessor, Mr. Page. In the Canadian Parliamentary Review, he wrote this:

One of the key principles underlying responsible parliamentary government is that the House of Commons holds the “power of the purse”. The House must be able to satisfy itself, as the confidence chamber, that all spending and taxation is consistent with legislation, Parliament's intentions, and the principles of parliamentary control. When this is accomplished, Parliament is serving Canadians.

In my view, this is rarely accomplished.

I think he meant that we as parliamentarians do not have the tools we need to do the job adequately. The main estimates really are the most detailed report in which the government indicates what it wants to spend across all its programs. But rarely do the various committees, including the finance committee, analyze the government's intentions with any rigour.

This is about the budget and soon we will be studying the bill that is to implement it. We have already objected to the short amount of time we have to examine this bill in an appropriate and meaningful way. The same applies to the government's accounts.

How could we change things to make the government accountable to Parliament and to the House of Commons?

[Jean-Denis Fréchette]

First, I would like to say that I agree with my predecessor's statement. I remember having said at this committee that I remember fondly the committees—and this goes back 10 or 15 years—that used to go over the main estimates perhaps for two months. Each of the responsible committees did an in-depth review of the estimates.

I have no recommendations to make. As I said, I agree with Mr. Page. Some people talk about reform, others talk about different approaches. The Standing Committee on Government Operations wrote a report that was full of recommendations. It is really a committee of the kind that must make recommendations along those lines. The committee recommended, for example, using an idea from Robert Marleau, a former clerk of the House of Commons, that the old system be a model that would give committees more time than one month to review the main estimates.

Mr. Marleau went further. when he appeared before that committee, he recommended that the three principal committees, the Standing Committee on Finance, the Standing Committee on Government Operations and Estimates and the Standing Committee on Public Accounts should have not only a kind of parliamentary budget officer, but also highly specialized research officers to help them in their work.

With that, I will let you take a look at the deliberations of that committee.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

I have one final question for you, but I would first like to make sure that you will be sending the committee the information about the temporary foreign worker program that my colleague asked for.