Finance Committee on Nov. 3rd, 2014

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

In any of your current reports was the declining oil price reflected in your analysis?

[Mostafa Askari]

Not the most recent decline in oil prices, but we have a framework for estimating the oil prices for our forecast because we need that. That's mostly based on the future prices in the markets, and then we make some adjustment to that, and use that. But, no, the most recent declines are not reflected in our projection.

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

Thank you.

I want to follow up on some of the questions from Mr. Cullen on the EI tax credit.

Your report on the government's small business job credit predicted only 800 jobs would be created over two years at a cost of almost $700,000 per job.

From our perspective, this credit provides employers with a perverse incentive, to hire only once they are near the $15,000 cut-off for EI premiums.

One aspect of this was referred to by my colleague Ralph Goodale who asked you to look at how many businesses are near the $15,000 threshold. Specifically he asked you whether you could find out how many businesses paid between $14,000 to $16,000 in EI premiums in 2013.

Were you able to get this information from the government?

[Mostafa Askari]

No, we did not get that information. We searched for the information from other sources, and we could not get it. We have not made a formal request to the government as to whether they have those numbers or not.

When we did the study, I think one of the issues was that this whole credit is relatively small when you compare it to the size of the economy. So any kind of negative or positive impact of that credit on job incentives, or whether firms will make a different kind of decision because of this credit, to us was not an issue. It's so small that it's not going to have a huge impact on any business, one way or another.

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

Obviously the Parliament of Canada Act gives you “free and timely access to any financial or economic data in the possession of the department that is required” for you to execute your particular mandate within your office. Despite that fact, your office—at least in the past—had a long-standing running battle with the government, which has often refused to give you information we feel you are entitled to.

I recall—and this was before I was elected to office—that your office was prepared to go to court to defend the right to obtain this information.

Can you give an update to this committee on your efforts to get information from this government, and have there been any ongoing challenges?

[Jean-Denis Fréchette]

There are always challenges.

I can provide you with some data. For the first time in the past six years the PBO will publish its own annual administrative report that will contain our statistics on our relationships in terms of requests for information.

In the last fiscal year, 2013-14, our rate of success with the requests that we made to departments is 55%, so in 55% we got everything that we wanted to have and what we required to do our job. In 45% of the cases it doesn't mean we got nothing, but it was incomplete. In some cases it was nothing.

So yes, we continue the work of building bridges. A good example is that on a weekly basis I have contact with various departments, and we are trying to develop some kind of approach, agreements or an MOU in some cases, so that will facilitate the access to information.

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

Are you getting that information on a timely basis?

[Jean-Denis Fréchette]

In some cases, yes, we do. In some other cases, no, but timely is always a matter of how much time we take to develop the questions, or how quick we are. We are quick to reply to a department that says it doesn't have exactly what we want.

Sometimes we have to understand that the department doesn't have the data or the information in the format that we want so we have to give them some time. Timeliness is there, but as I said, not always, but that we can understand.

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

Quickly, is there still a problem getting information at all, and if so, would you still be prepared to take the government to court?

[Jean-Denis Fréchette]

In some cases there are still difficulties getting the information. As I mentioned before, eventually when there is no hope of getting the information, that will be the signal to go to court, but we're not there yet.

[Arnold Chan, Liberal, Scarborough—Agincourt, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Chan.

We'll go to Mr. Keddy for seven minutes again.

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

Thank you, Mr. Chairman.

Welcome to our witnesses, to the Parliamentary Budget Officer and to your team, and thank you for the work you do on behalf of parliamentarians and all Canadians.

I need a bit of help on one of the statements that came out of your office lately on government spending. “There is policy room to permanently increase spending or reduce the tax burden by 1.4 per cent of GDP ($28.2 billion in 2014-15) while maintaining the stability of public debt over a 75-year horizon.”

I need some help here trying to figure out how you can.... I understand a one-year projection, that's pretty easy, or even four or five years. But how can you project what's going to happen with public debt over a 75-year horizon?

I remember 20% interest rates in the eighties, and they were not pretty. A lot of things can happen in the world that are way beyond government's control, so I wonder how you can think about a 75-year horizon.

[Mostafa Askari]

I remember the 20% interest rate as well, sir, but....

[Jean-Denis Fréchette]

You had a mortgage.

[Mostafa Askari]

That's right.

The study that we do—and we call it fiscal sustainability, which is a long-term study—is the sort of standard kind of exercise that most OECD countries actually do. This is to help governments and policy-makers have a framework for the future, taking into account the impact of long-term trends, like the demographic changes. We don't really call the study a forecast; it's a scenario now, a “what if” scenario. We assume that the current fiscal structure that exists right now would not change, which means no new tax measures, no new expenditure measurements. There are some of the standard assumptions that you make in terms of how the expenditures will develop over time, or taxes; the tax burden would remain constant. Under those conditions, and assuming that the interest rates, as you mentioned, will go to their normal level, over that 75-year period—you may have ups and downs during that period, but on average, if they stay at the normal level—then you can measure the impact on the government balances every year, and then that will help you to measure the impact on overall public debt. That's the framework.

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

Thank you for that.

I have another question. We announced the children's fitness tax credit at a cost of about $25 million to $35 million per year over the long term—short long term, for politics. Together, measures announced since budget 2014 have, in your words, “...only a small fiscal impact in 2015-16 and 2016-17, and a negligible impact going forward”.

If you looked at that, did you also look at not just the economics but the economics of a healthier society? We have a rampant obesity problem in Canada. We have type 2 diabetes in grade-school children, as we've never had it before in this country, which will absolutely come back to haunt us at some point in the future. I just wonder if you worked that into your equation, because I couldn't find that.

[Mostafa Askari]

In response to your question, maybe it's not an answer, but we normally do not measure those kind of effects, from a policy measure, whether it affects the health of the population and how a healthier population will affect the economy. That becomes the second-, third-, and the fourth-round impact of a policy measure that we do not normally take into account. Not that they're not there; they are there, but in our kind of work we do not normally do that.

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

This is just a comment; you don't have to answer. My suspicion is that, for $25 million to $35 million a year, we're going to get paid back by a huge dividend with improved health care of society and a healthier society. I mean we've got obesity rates that are off the charts. We've got an unhealthy workforce. We've got lost time. All of those things cost the Canadian taxpayers and governments and society dollars.

[Mostafa Askari]

That, of course, assumes that people who put their kids into sports won't do that without that credit. That's a major assumption.

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

Okay.

The recent “Economic and Fiscal Outlook” noted that the Canadian economy is...you know, we've created roughly 65,000 new jobs in the first three months of 2014. Recent gains have been almost entirely in full-time positions in the private sector. That builds on our strong economic record of one million jobs since the depths of the recession, mostly full-time, private-sector jobs.

If we look at the broad spectrum of job-creating measures taken by our government since 2012, including the reduction of the corporate tax rate, having fostered the conditions necessary for increased economic growth—and I think, quite honestly, we did that as a government—would your analysis of the jobs added to the economy change if you took these measures into consideration?

[Mostafa Askari]

Sorry, what—

[The Chair, Conservative, James Rajotte]

You have one minute remaining.

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

Your analysis was somewhat less than that. Would that analysis change if you took our analysis of the jobs added to the economy, if these measures were taken into consideration?

[Mostafa Askari]

All the estimates that we have essentially take into account all the policy measures that government has introduced over time; this is always taken into account both on the positive and negative side, it doesn't really matter. The only thing, as I mentioned, that we don't take into account are some of those effects that you were mentioning about a healthier population and how those would eventually affect.... Those kinds of things we do not take into account.