Finance Committee on April 30th, 2019

[Yves Giroux]

As Jason mentioned, the aim of the report was to look at whether there was indeed incrementality as a result of the federal investments. That was one of the main goals of the federal government's programs when they were announced in 2016. Incrementality at that point was an important aspect, with a view to stimulating economic growth and creating jobs.

We knew we had a good idea from the federal numbers, so the intent of the report was to look at whether the federal investments had really triggered incremental spending by provinces and territories or whether there was some displacement. We had heard that anecdotally and we had heard that also from parliamentarians who were not convinced there was full incrementality, quoting very valid reasons. For example, some provinces and territories were cash-strapped. In some regions there was believed to be a lack of a sufficient number of projects that were ready.

We looked at this and looked in aggregate at expenditure plans of provinces and territories when they were available. For sure, though, the data is not perfect, and our reports—this is valid for this report as well as for any other—can only be as good as the quality of the data we're provided.

[Michael McLeod, Liberal, Northwest Territories, NT]

I'm hoping that at some point we're going to see a comprehensive report with all the different investments included.

My final question is a question regarding one of the projections you have in the economic and fiscal outlook in table 1. You have listed the contribution of exports to real GDP growth at 1.2% in 2020. Then it drops down to 0.6% in 2021.

I'm curious as to why. Maybe you could explain to us the cause of this projected decrease.

[Chris Matier]

Those are the contributions to real GDP growth from the export sector. Actual export volumes are growing faster than that, but that's the actual impact on the headline “Real GDP Growth” numbers. You're correct, though, that we have fairly solid growth up until 2020 and then the decline after that.

It's more of the moderation in the U.S. economy that we see. We had U.S. growth of around 2.5% per year. We also have the world economy more broadly returning back to growth in 2020—rebounding. Then, for the U.S. economy, there's the moderation after that.

[The Chair, Liberal, Wayne Easter]

Thank you all.

We will turn to Mr. Poilievre and then go back to Ms. Rudd, who will be after Pierre.

[Pierre Poilievre, Conservative, Carleton, ON]

You find that the government has almost $4 billion of unannounced spending and no way identified to pay for it. Is that an accurate characterization?

[Yves Giroux]

Do you mean in the non-announced measures?

[Pierre Poilievre, Conservative, Carleton, ON]

Yes.

[Yves Giroux]

That's not what we find. In fact what we find is that in aggregate there could be $4 billion of non-announced measures, but it translates into a net minus $3.8 billion. It's thus either a net reduction in expenditures, increases in taxes or a combination of both.

In your scenario, in the example you mentioned, $4 billion of non-announced expenditures would probably mean $7.8 billion of other, offsetting reductions or tax increases, for a net of minus $3.8 billion. That, then, is what we find: the government mentioned in its budget non-announced measures for a net of minus $3.8 billion.

We asked Finance officials and were not provided with concrete explanations—budget secrecy or decisions still to be made. Whatever the reasons, valid or not, we don't know. We interpret this as expenditure reductions or tax increases or a combination of both for the forecast period, totalling a net $3.8 billion.

[Pierre Poilievre, Conservative, Carleton, ON]

What is an non-announced measure?

[Yves Giroux]

It could be anything that the government has not yet announced. It could be a tax increase. It could be an expenditure reduction of any sort. It can be virtually anything.

[Pierre Poilievre, Conservative, Carleton, ON]

Why would a government include an unannounced measure like that?

[Yves Giroux]

It's quite common, when the government has valid reasons to believe that it will indeed announce such measures. It has either made a decision already or there is a certain level of certainty with respect to actions the government will make, but it's not ready to announce it. That could be for commercial confidentiality reasons. It could be for strategic reasons. It could be for the sake of negotiations.

[Pierre Poilievre, Conservative, Carleton, ON]

In other words, when you say $3.8 billion, that means that for the overall fiscal framework to go ahead as foreseen, they would have to find either $3.8 billion in new revenue or $3.8 billion in spending cuts or some combination thereof.

[Yves Giroux]

Yes.

The fact that it was a non-announced measure in the budget suggests it's more advanced and they will have to find—

[Pierre Poilievre, Conservative, Carleton, ON]

I got it.

Just quickly, in what years will they have to find it? We're running out of time.

[Yves Giroux]

It's laid out on page 30 of the English version.

[Pierre Poilievre, Conservative, Carleton, ON]

Okay. I'll take a look at that.

Can you also provide us with the direct program spending of the government in the years 2015-16, 2016-17, 2017-18, 2018-19, 2019-20 and all the way through to 2025-26?

[Yves Giroux]

We can certainly provide that.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

On infrastructure, you indicate, Mr. Jacques, that you did not find incrementality. In laymen's terms, what you're telling us is that the government's infrastructure programs didn't actually deliver additional infrastructure that would not have otherwise occurred.

Is that an accurate description of incrementality?

[Jason Jacques]

That's an accurate description.

I think the key finding in our report is that you do see a bit of a boost, but the boost that the government said we were going to get out of it, in terms of the matching of one dollar of federal spending by three dollars from other levels of government is certainly not borne out by the data.

Again, this is something that, when you look at the empirical research, is borne out in other jurisdictions.

[Pierre Poilievre, Conservative, Carleton, ON]

Government includes a bunch of spending under its infrastructure envelope that doesn't actually necessitate additional construction of anything.

For example, transfers to the provinces for so-called child care programs could pay staff members at a provincial level, even staff members who don't necessarily provide child care, but it doesn't necessitate new child care facilities actually being built.

Do you have any evidence with regard to how much of the so-called $180 billion the government has committed to “infrastructure” will actually go to the construction of new assets that would not otherwise have been built?

[Yves Giroux]

I don't think we have that level of granularity, because there are thousands of projects in Infrastructure Canada's database and we have not gone through each and every one of them and made that judgment call.

[Pierre Poilievre, Conservative, Carleton, ON]

Let me just conclude by asking, do you have a different definition of infrastructure from the government's?

[The Chair, Liberal, Wayne Easter]

I'm sorry, Pierre, you're out of time. We've been holding people close.

Ms. Rudd.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair, and thank you for coming to present to us today.

There are a couple of questions coming out of your remarks and something I would like to clarify, if you could give me one second here. We were talking about the money for veterans.

I found your summary table in your report. Thank you very much. I'm a numbers person; I appreciate the clarity of numbers.

Just for the record, based on the former program under the last government, the present clients would receive $22 billion. Under the pension-for-life scenario that has come in under 2019, those same present clients will receive $25 billion, an increase of $3 billion. New entrants would receive the same, as they did in the plan preceding this plan.

There is a net increase of $3 billion, just for the record. I know you were struggling there about the 5% and what have you, so I thought this would be helpful.

The other thing in your fiscal outlook and in your remarks today is that you said you project that federal debt will “decline to 30.5% of GDP in 2020-21, which is almost 1.5 percentage points below the government's official debt anchor. We also project the federal debt-to-GDP ratio to fall to 28.9% of GDP in 2023-24.”

Could you explain to people who might be watching or interested in hearing this what a “debt anchor” is?