Evidence of meeting #54 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was impact.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Jean-Denis Fréchette  Parliamentary Budget Officer, Library of Parliament
Mostafa Askari  Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
Helen Lao  Economic Analyst, Economic and Fiscal Analysis, Library of Parliament
Scott Cameron  Economic Advisor, Analyst, Economic and Fiscal Analysis, Library of Parliament

3:55 p.m.

Conservative

The Chair Conservative James Rajotte

[Public proceedings resume]

I call this meeting to order, the 54th meeting of the Standing Committee on Finance. We are on committee business.

I am going to go to Mr. Saxton, who has a notice of motion.

Mr. Saxton, please.

3:55 p.m.

Conservative

Andrew Saxton Conservative North Vancouver, BC

Thank you, Mr. Chair.

Every member should have a copy, in both official languages, of the motion before them. I just would like to say that this is a motion similar to what has been put forward previously for other BIAs. Bill C-43 will be referred to committees this week and should provide ample opportunity for not only our committee to study our sections but other committees to study theirs, as well.

The motion attempts to send many of the new or amended acts to separate committees. This includes, for example, all the industry items going to the industry committee, or the temporary foreign worker program changes to the human resources committee, etc.

Let me remind my colleagues that the majority of the measures in this BIA implement budget 2014 measures or previously announced government measures. Our proposal is to have committees report back to us by November 21, giving us the last week of November to study and get through clause-by-clause, as well as giving the analysts time to put together all the proposed amendments.

The minister will be appearing before our committee on November 19. We propose starting with officials for the divisions our committee will be studying, and then moving on to witnesses right away after that. Note that we ask opposition members to indicate to the clerk or chair as soon as possible what divisions or sections are a priority for officials. This way, we won't need to go through every division in order—as with the all-party briefing, which has already taken place, and most members had the opportunity to ask questions at that time—especially if there is no need for questions for that particular section. Let's try to focus on the sections that have the questions.

Thank you, Mr. Chair.

3:55 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much, Mr. Saxton.

I'll go to Mr. Cullen, please.

3:55 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

I'll be brief, Mr. Chair. I appreciate the motion by Mr. Saxton. This has been done before. That doesn't actually make it a good way to make laws. This is an incredibly complicated piece of legislation, being 460 pages in length and with 401 clauses, about a dozen of which fix old omnibus bills, so a new omnibus bill to fix an old omnibus bill, which had in it changes to fix the omnibus bill prior to that.

We're going to come to some agreement on the calendar, at least for the finance committee to study this. Our challenge has been previously and remains with this motion that we are going to, in effect, try to carve out this bill. If committee members will remember, when the first major omnibus bill came forward, the opposition, the New Democrats, tried to get the bill actually divided.

Witnesses have to come before all of these committees on these important laws that are being changed. We needed to hear the witnesses and make amendments to the legislation in real time in that process. You don't have this bit of a mess in which other committees see this bill nominally and are not able to amend it directly, and all of that gets dumped back towards the finance committee. Finance committee then does clause-by-clause over a day, because it's been ordered by the government in a time allocation fashion to deal with hundreds of clauses with we don't know how many amendments. Much of the time, committee members who will be voting did not hear the witness testimony. As the chair or the government members will point out, we can sub in and sub out MPs from other committees who may not have heard the witness. It's just a mess. This is why the mistakes get made.

This might seem procedural to some, Mr. Chair. The problem is that when you make mistakes in legislation, the effects of it end up in court. They end up costing Canadians time and money, and in other cases just make flat out bad laws.

With such a massive omnibus bill touching on so many different parts of our legislation and with the way governance is done here in Canada, it seems to be a lesson that has not yet been learned by this government. Of course, we'll be voting against this. The government members will push this through regardless, I suspect. But at some point or another they have to find a way to not have these kitchen sink bills show up in Parliament, with so many completely unrelated clauses—unrelated to the budget, unrelated to each other—and pretend that this is somehow a coherent piece of legislation, because it's not.

Of course, the New Democrats will take the work on seriously, because we do. Public safety, industry and science, human resources, natural resources, citizenship and immigration.... We could have had another dozen committees, I'm sure, brought into this. But this is as complicated a way as can be to make law in Canada. No wonder the government keeps making mistakes, which don't cost them but certainly cost Canadians.

Thank you, Mr. Chair.

3:55 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. Cullen.

We'll go to Mr. Chan, please.

3:55 p.m.

Liberal

Arnold Chan Liberal Scarborough—Agincourt, ON

Thank you, Mr. Chair.

I want to echo the comments that Mr. Cullen has tabled, outlining the Liberal Party position again. This motion is part of an ongoing undemocratic process, part of a time allocation motion that would limit the committee's ability to study this bill, particularly now that we've set a deadline of November 27.

It's undemocratic in our view to limit debate and to have the complicated process of having this referred to a series of different standing committees then reported back to this particular committee under an incredibly tight deadline within the framework of a massive omnibus bill.

Bill C-43 includes a number of measures that have nothing to do with this committee, with the budget, and frankly don't belong in a budget bill and should not be before this committee.

For example, part 4, division 5 dealing with the denial of social assistance to refugee claimants in our respectful view does not belong before this committee. While subparagraph (a)(v) of the motion asks the immigration committee for their input on division 5 we do not believe that is sufficient. Immigration should also have the power to vote on these clauses and amend them as opposed to their simply being referred back to us. Under this motion the power to vote and amend these sections would rest solely with this committee.

For these reasons the Liberals will also oppose the motion.

3:55 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you, Mr. Chan.

I have no more speakers and will therefore call the question on Mr. Saxton's motion.

(Motion agreed to)

Thank you. That deals with our committee business.

I am pleased to call this meeting back to order. I are very pleased to have with us again the Parliamentary Budget Office. We have our Parliamentary Budget Officer, Mr. Jean-Denis Fréchette, bienvenue encore à la comité.

We also have the Assistant Parliamentary Budget Officer, Mr. Mostafa Askari who has been with us many times, welcome.

We have Mr. Scott Cameron, economic adviser, welcome to you.

We have Ms. Helen Lao, welcome back to the committee.

Monsieur Fréchette, I understand you have an opening statement and then we'll have questions from all members.

4 p.m.

Jean-Denis Fréchette Parliamentary Budget Officer, Library of Parliament

Good afternoon, Mr. Chair, Vice-Chair, and members of the committee. Since you introduced my colleagues who are at the table it's going to be a shorter presentation.

Thank you again for the invitation to appear and discuss the recent economic and fiscal research published by the PBO team.

In recent weeks, the PBO team has published four reports discussing pressing fiscal and economic issues. All highlight issues for short-, medium- and long-term federal fiscal management that should receive further parliamentary attention. Two of our papers highlighted questions regarding how the government manages its short-term fiscal targets.

Our analysis of the employment insurance account demonstrates that Parliament has passed legislation that sets premium rates higher than necessary over the short term, in apparent conflict with the intended management of the program.

Our report on balanced budget legislation should be of great interest to your committee because it is a theme of your pre-budget consultations. This report offers parliamentarians a solid source of analysis and information that could be very useful when they review this topic. They will have to identify the incentives that such legislation can create in terms of policy making to ensure that potential incentives that go against economically and socially optimal fiscal management are mitigated.

Over the medium term, the challenges relate to how much of the projected surplus can be allocated toward permanent fiscal measures. As the “Economic and Fiscal Outlook Update” highlights, we now expect Canadian economic growth in 2014 to be higher than originally anticipated in our April outlook. As a result of this, we projected that the budget would move into a surplus this year, following six years of deficits. On average, we projected annual surpluses of $8.8 billion over the outlook; however, measures announced on October 30, 2014, last week, have eliminated roughly half of this surplus, as shown in table 1 and table 2 attached to my remarks.

Much of the remaining fiscal room over the next two years is the result of temporary policies such as the direct program expenses operating freeze, the EI premium rate freeze, and asset sales, as shown in table 3. There is no longer any fiscal room for permanent tax cuts or spending increases. Introducing additional tax relief or spending initiatives would increase the risk of returning to deficits even further.

Over the long term, Parliament will need to consider the best policy response to the economic and fiscal consequences of an aging population, particularly with respect to health care costs. Our fiscal sustainability report highlights that the federal government is able to meet these demographic challenges with considerable fiscal room to spare. If the government takes a long-term approach to fiscal management, then there is room to maintain a sustainable debt burden while increasing borrowing for permanent tax relief or new spending by as much as 1.4% of GDP, or $28 billion in 2014-15. This increased borrowing would then be repaid as demographic pressures drop dramatically after 2033.

In conclusion, these reports were prepared because of Parliament's interest in these issues and, as I mentioned, the specific interests your committee, in particular, had in some of them.

We also remain dedicated to find new ways and approaches for our reports to meet your needs.

My colleagues and I will be happy to respond to questions you may have regarding our “Economic and Fiscal Outlook” or any other relevant matter.

Thank you, Mr. Chair.

4:05 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much, Mr. Fréchette, for your presentation.

We'll begin members' questions. We'll start with seven-minute rounds with Mr. Cullen, please.

4:05 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Thank you, Mr. Chair.

I would also like to thank Mr. Fréchette and his team. I found his remarks very informative.

Mr. Fréchette, my first question concerns your presentation. My second question pertains to employment insurance and the program that was announced.

Let me start with your fiscal projections. Do the recent announcements by the government raise the risk of returning to deficit here in Canada?

4:05 p.m.

Parliamentary Budget Officer, Library of Parliament

Jean-Denis Fréchette

That's what was mentioned in my remarks.

4:05 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Does it also raise the spectre of what is sometimes referred to as “structural deficit”, in which the government has made commitments that drive it, on a structural level, toward seeing more and more deficits in Canada?

4:05 p.m.

Parliamentary Budget Officer, Library of Parliament

Jean-Denis Fréchette

As we have shown in the tables that are attached to my remarks, you can see in table 2 the calculation we did there for the structural deficit.

4:05 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Just to be clear, right now as we look at the strength or weakness, depending on your projections of the Canadian economy, with the commitments that have been made on the books by the government, are we, in effect, watching the implementation of a structural deficit in Canada?

4:05 p.m.

Parliamentary Budget Officer, Library of Parliament

Jean-Denis Fréchette

I will refer that question to Mostafa. I'm sure he would like to add something on this.

4:05 p.m.

Mostafa Askari Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament

What we are forecasting for the economy is that, over the last three or four years of the projection period, the economy will be operating above its potential level. We close the outward gap in 2015 and then for the rest of the projection period the economy will be operating above potential. What this means is that some of the revenues that you will see over that period of time would not be structural revenues. They are cyclical revenues; so those things, obviously, over time, once the economy goes back to potential, will lose that increase in revenue, so that's why—

4:05 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Sorry, can you describe what these one-time revenue sources are, typify what some of these would be?

4:05 p.m.

Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament

Mostafa Askari

Sure. There are two or three factors here. One is what we call the cyclical factor, which is that once you're above potential, you get some extra revenues because the economy is operating above its normal trend. That part we call cyclical revenues. Those are not permanent; they're temporary revenues because the economy will go back to potential, and so revenues will go back to their structural level.

There are a couple of temporary factors, which we have mentioned in our calculations, that go beyond the structural budget balance. These are some of the adjustments that were made to the direct program spending in the past budgets, which are temporary measures. One was, essentially, booking the change in the insurance premium for seniors, which was done, and that booking is obviously a saving, but it's a temporary saving for the government because that is only done over a seven-year period.

Then employment insurance is another addition to the savings, which was booked. Again, the way that employment insurance is structured, it has to balance over a seven-year period, so whatever gain you have right now will be offset by losses in the future.

4:10 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Again, we often use analogies of households to try to understand this government-made function, to be able to relate this to Canadians. A household receiving a one-time payment and then running its household books in such a way as to expect that payment to continue on, even though we know it's one-time, runs that household, as does a government, back into deficit, back into borrowing quickly if big, expensive promises have been made.

4:10 p.m.

Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament

Mostafa Askari

Exactly. That's why we have calculated this in table 3 that we provided today. At the bottom of table 3 is what we call permanent fiscal policy room.

4:10 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

But there's no room.

4:10 p.m.

Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament

Mostafa Askari

It is negative now. After last week's measures that were introduced, based on our calculations, that room is negative over the medium term.

4:10 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Let's turn to the EI hiring tax credit for a moment. Your estimation was very, very different from what the government continues to report, in terms of the economic impact for the costs of the $550 million out of EI.

Has the government come forward with an analysis that you've been able to see?

4:10 p.m.

Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament

Mostafa Askari

No. We've not seen any analysis from the government on the job impact of this.

4:10 p.m.

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

They claim 25,000 person-years, I believe.