Evidence of meeting #77 for Finance in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A recording is available from Parliament.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I'll be quick.
The government seems to be confused about what constitutes a tax-based expenditure. There are two ways to give money to a specific group. The first is through a direct subsidy, which comes out of government coffers, and the second is through a tax credit, which constitutes a tax-based expenditure. Could you comment on the benefits and drawbacks of using each of those measures to basically fund certain groups?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
We haven't done any research on that. It is not for me to comment on that.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Let's talk, then, about the definition of a tax-based expenditure. What constitutes a tax expenditure, and how does it differ from the other method used by the government, in other words, providing grants?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
I'm not quite sure what you're referring to. Your question is about—
the definition of the tax expenditures....
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I just want you to define “tax expenditure”. What constitutes a tax expenditure as defined by accountants throughout the world?
Conservative
The Chair Conservative James Rajotte
We're over time. Can we get this sent to the committee after? We are over time for this round.
We can provide that to the committee. We'll provide the extra numbers.
Thank you.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
Sure.
Conservative
The Chair Conservative James Rajotte
Oil prices were mentioned, and I wanted to follow up on Mr. Van Kesteren's line of questioning. It seems to me that is the main difference between your office and the budget projections.
What were your projections for oil back in 2014, the price of crude oil WTI?
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
I don't know that off the top of my head, but I can get back to you.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
They were certainly very consistent with the futures prices at the time when we did our last projection, which were certainly much higher than what we have right now. Futures prices were much higher at that time, given that the oil prices had not declined yet.
Conservative
The Chair Conservative James Rajotte
Okay.
I'm just looking at your economic fiscal outlook of October 2013, and it seems to me for 2014 you were predicting $100, and this is WTI; 2015, $90; 2016, $85; and 2017, over $80.
On July 2014, it was over $100; October 2014, $85; January 2015, $50; and April 2015, $57.
I think we're almost putting too much.... It's almost like asking who's going to the Stanley Cup. The closer you get, of course, the better you can predict it, but I don't know if we should put too much into any oil price figure going out more than two days, frankly. It's very challenging.
I think perhaps what a number of you were saying was let's not be too critical of the budget numbers and let's not be too critical of your numbers. There are two sets of numbers; take them for what they are. They're two data points and let's use that as information. But for us to say, yes, in 2017 oil prices are going to be this, I didn't hear anybody predict the oil price drop from $100 per barrel to $50. I didn't hear anyone predict it. I mean, everybody now is saying they predicted it, but....
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
You are absolutely right, sir.
Parliamentary Budget Officer, Library of Parliament
Not only are you right, but I'm also happy that the economists on my team or in Ottawa did not predict the oil prices exactly right at that time, because all these economists would be playing golf in the Bahamas right now. It's a very valid point, but we still have to use some projections to—as we said before—do our calculations and have some scenarios.
Conservative
The Chair Conservative James Rajotte
This is why, Mr. Askari, I appreciate that in response to Mr. Cannan you said in terms of going out to 2080—because I had the same question when we go out to 2075, how can you possibly tell—that it’s more of a model than a prediction. I appreciate that clarification.
I have just about a minute left. My final question is on tax-free savings accounts. I'm a huge supporter, obviously. I don't want to ask you about the policy. You know, I have a tax-free savings account and I put money in investments. Obviously the companies that are invested in benefit from those investments that I and another 11 million Canadians are making in those companies.
Have you as an office done an analysis of the benefits of those investments that those 11 million Canadians are making in companies in Canada? Have you or anyone done an analysis of the resulting economic benefits?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
No; I guess what you're saying would be correct if there are extra savings as a result of the policy, because that money has already been invested in other instruments, and again, the companies continue to benefit from those investments already—
Conservative
The Chair Conservative James Rajotte
Sorry, I probably didn't make it clear.
I may invest in stocks and bonds, but if the vehicle comes up of a tax-free savings account I may decide that instead of doing this with the money, I will invest in a tax-free savings account that goes to company X, which has a resulting economic benefit as a result of me being induced to invest in that way by the tax-free savings account.
Has your office done an analysis of any resulting economic benefits as a result of the moneys that Canadians have put in their tax-free savings accounts and the companies that have been invested in?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
Again, I guess my understanding of your question is that if you move your money from, let's say, another savings account or another equity into a TFSA, you haven't really changed the amount of savings and investment you have had. So the benefits to companies will still be exactly the same benefits. They will have benefits, but because of the—
Conservative
The Chair Conservative James Rajotte
Yes, that's not.... Sorry, I'm out of time here. I'll have to take that up with you later on.
Mr. Brison, please.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Mr. Chair.
I was just going back to your updated fiscal outlook, including budget 2015 measures where it shows zero...just a balance but no surplus in 2016-17; deficits of $2.6 billion in 2017-18; $2.7 billion in 2018-19; and $2.5 billion in 2019-20.
Would the biggest difference between your numbers and the government's numbers be projected oil prices?
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
That's one of the differences. A rough estimation is that it probably accounts for maybe half of the discrepancy between our budget balance projection and the government's.
There would be other underlying assumptions, of tax bases and effective rates, that we don't have to make a comparison.
Liberal
Scott Brison Liberal Kings—Hants, NS
Sure.
The chair said, quite rightly, that nobody predicted a 50% decrease in oil prices. But the government is projecting a 50% increase and at the same time cutting the contingency reserve. During uncertain times, where so much is riding on the price of oil and the uncertainty inherent in that, isn't there an argument to be made that we ought to, from a sound budgeting principle perspective, actually be increasing the contingency reserve, during a time like this?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
Typically, you're right. Typically, if there is more uncertainty, you try to have more contingency for the uncertainty.
Liberal
Scott Brison Liberal Kings—Hants, NS
What would be an argument for the government, during more uncertain times, to cut the contingency reserve?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
I wouldn't know that, sir.
Liberal
Scott Brison Liberal Kings—Hants, NS
I think I might.
You've done quite a bit of work in the past on the demographic shifts and the future trajectory of health care costs, as an example, for provincial governments but also the federal funding component. You've said in answers to questions from Mr. Saxton and others that the impact of TFSAs is not on the current fiscal framework but is on the future fiscal frameworks of both provincial and federal governments.
With these measures, the quantum is debatable, but is it not absolutely undeniable that there will be a reduction in future governments' capacity, federal and provincial, to invest in health care, at a time when health care costs we know will rise, as a result of these measures that are back-end loaded in terms of costs to the taxpayer?