Evidence of meeting #120 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A video is available from Parliament.
Senior Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
It partially comes from current revenues, and partially it comes from the issuance of new debt. In our—
Senior Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
Ultimately, they come from the national economy.
Conservative
Senior Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
Households and the business sector.
Conservative
Pierre Poilievre Conservative Carleton, ON
Right, so the same households that are going to be faced with record-high interest payments on their own debt will also be paying $14 billion in additional taxes on the government's debt.
Senior Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
Sorry to go back, but their taxes aren't going to be rising. The government is borrowing to finance, partially, those expenses.
Conservative
Pierre Poilievre Conservative Carleton, ON
I think we're coming to the same conclusion, one that the current government is having a hard time accepting. All the money that funds the government, literally 100% of it comes from taxpayers, and there is no other ultimate source of funding. There are temporary sources of funding in the way of borrowing. The government might find this surprising, but debt actually has to be repaid.
Liberal
The Chair Liberal Wayne Easter
I guess that's a point and not a question.
We'll turn to Mr. Dusseault.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
My thanks to all the witnesses for being here.
I saw a picture posted by my friend Jason on Facebook, which put into perspective the difference between a million and a billion. When we talk about billions, as in the case of the public debt charges my colleague was referring to, my friend was comparing one million seconds versus one billion seconds, one million seconds being the equivalent of 11 days, and one billion seconds being 31 years. So this puts into perspective the scale of the numbers we are talking about here and the increase in public debt charges from $24 billion to $38 billion.
My first question is about table 5 on revenues, particularly about the corporate income tax. Did you take into account the recent announcement reducing the tax on small and medium-sized businesses from 10.5% to 9%?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No, we did not consider that factor in the budget.
Trevor, do you want to answer that?
Trevor Shaw Economic Advisor, Analyst, Office of the Parliamentary Budget Officer
Yes. All the policy announcements that were included in the fall economic statement have been included in our overall revenue and expense projection.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Okay.
Has the fact that the tax on small and medium-sized businesses will be reduced to 9% been provided for by the government in the economic outlook included in its last two budgets?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Are you talking about its last budget or its economic statement?
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
In the previous economic outlooks, was it projected that the small and medium-sized business tax would decrease?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No, not in the last one. It was mentioned in the fall economic statement, but not prior to that.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
That's quite surprising, given that the government would have us believe that the reduction in the small and medium-sized business tax rate was planned from the outset, that it was an election promise and that there was nothing surprising about it, even though the economic outlook did not take this reduction into account. It is therefore a surprise that we must commend, since the NDP has been asking for it for a long time.
Let's turn to table 7 on employment insurance. It refers to the outlook for employment insurance. My question is about the fact that there is a continued increase in contributions.
How do you explain this increase since the unemployment rate is decreasing? We also see that the costs of the benefits are increasing from 20.7% to 24.9%. How is it possible to come up with those forecasts, given that the unemployment rate is going down?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I will let my colleague Mr. Shaw answer, but I can tell you that there has been a change in the legislation. There was a surplus of $2.5 billion until the end of 2016. Subsequently, according to the legislation, a break-even rate must be set that exactly matches the payments required until the end of the period in question.
Trevor, do you want to add something to that?
Economic Advisor, Analyst, Office of the Parliamentary Budget Officer
Not only is it the current unemployment rate and eligibility of unemployed people for EI benefits, but we also need to forecast this into the future because of the seven-year break-even rate. Based on our economic projections, if the unemployment rate is set to decrease this is going to have an influence on our seven-year break-even rate. Our anticipation for benefit payments as part of the EI program going out to 2023-24, all of this is going to affect the break-even rate, not only for the next year but all the subsequent years as well.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Okay.
I will now move to table 6, to which I referred earlier and which deals with expenses. I am interested in this issue because program expenses are up 1.2%. I am referring to the 1.2% increase in direct program expenses, while we know that, according to a number of public service collective agreements, there are wage increases exceeding that percentage.
How do you come up with those numbers, when it seems that a more significant increase is expected in public service salaries?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The answer is quite simple. To achieve those results, either the number of employees must be reduced—precisely because public responsibility is essentially for salaries and benefits—or employment in the public service itself has to stagnate, meaning that positions will simply not be filled.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Does the government corroborate and admit that, as you say, the plan is to reduce the number of employees or not to fill vacated positions?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Not yet. All we are noting is that the decrease in the deficit we are seeing comes in part from this decrease in expenses related to public functions. This has not been said yet, but not all the collective agreements have been signed yet. So I think there will be an announcement at some point.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
We must therefore expect the debt to increase as the collective agreements are being signed. If program expenses increase because collective agreements are signed, we must expect the debt to ultimately continue to increase.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That could be the case if we maintained the same level of employment or increased the number of public service jobs.