Evidence of meeting #204 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.
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Of government spending...? I'd have to do some mental math, which is always tricky. Chris is much better than me. As a percentage of GDP, it is 1.1% rising to 1.3%, but as a percentage of government expenditures....
12:55 p.m.
Senior Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer
Sorry, as Yves said, I'm not very good with on-the-fly simple arithmetic, but it looks to be below 10%. It's probably, I would guess, around 7% of total expenses.
12:55 p.m.
Conservative
Blake Richards Conservative Banff—Airdrie, AB
Sure.
In the mandate letter that the Prime Minister gave to the Minister of Finance, he identified meeting the government's fiscal anchors as one of the top priorities, saying:
Ensure that our fiscal plan is sustainable by meeting our fiscal anchors of balancing the budget in 2019/20 and continuing to reduce the federal debt-to-GDP ratio throughout our mandate.
You indicate, though, that the government has been inconsistent in its reporting on progress towards meeting those two fiscal anchors in budgets and in its fall economic statements. It sounds like what you're saying is that the government is moving the goalposts on how it judges its fiscal management. If so, can you explain how the Liberal government has, in fact, done that?
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We flag that in our report by raising a couple of issues of interest to parliamentarians. One of them is the government's progress in meeting its fiscal anchors.
As you pointed out, one of the fiscal anchors that the government had was balancing the budget by 2019-20. It never—to my knowledge, at least—has explicitly abandoned that fiscal anchor. As you pointed out in the mandate letter from the Prime Minister to the Minister of Finance, there was a commitment to balance the budget in 2019-20.
12:55 p.m.
Conservative
Blake Richards Conservative Banff—Airdrie, AB
Are you saying that it hasn't abandoned this so there's some possibility that this could occur?
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Officially, not to my knowledge or explicitly. In fact, the website that tracks mandate letter commitments still shows that commitment as “Actions taken, progress made, facing challenges”.
1 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
There are challenges, yes, but it's obvious that this fiscal anchor has been abandoned. There's no doubt about that.
In our report, we suggest that the government might want to be more explicit about that and focus instead on the federal debt-to-GDP ratio.
1 p.m.
Conservative
Blake Richards Conservative Banff—Airdrie, AB
Or to put it differently, it could be more honest about it.
1 p.m.
Liberal
The Chair Liberal Wayne Easter
Did you not ask for the debt-to-GDP ratio, as well? No? You don't want that stated.
We'll go to Mr. Dusseault. Then we'll go over to Mr. McLeod.
1 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Thank you, Mr. Chair.
I thank the Parliamentary Budget Officer's representatives for being here today.
Among the thoughts you submitted to parliamentarians, there is a section on measures that were not announced. I can give you the opportunity to talk about them.
What do you think of the new way of projecting government budgetary expenses and including them in the budget? What effect will that have on the transparency of certain expenses that are not explained, although parliamentarians must nevertheless express opinions about them?
1 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
You have raised two points.
The first is the fact that the federal budget and the estimates will be better aligned, that is to say the parliamentary appropriations which you, as parliamentarians, must make decisions about. I think this is an improvement to transparency. According to the old presentation, budget measures were subject to a vote; parliamentarians had to approve them. This year, we have a new way of doing things. From now on, the Treasury Board Secretariat and the government present certain budget measures by department. It is now possible to match budget measures and parliamentary votes on which you must make decisions. I think this is an improvement.
However, this does not fully meet some of the criticism addressed to the government, according to which parliamentarians must speak out on budget items before Treasury Board has carried out its meticulous review of them. It is possible that changes will be made after parliamentarians vote on the appropriations. That criticism remains valid, but in my opinion, there are not many ways to remedy this unless we change the very structure of parliamentary appropriations.
In your question you also raise the matter of measures that have not been announced. There has also been an improvement in that regard, as compared to the transparency of previous budgets. However, there are a lot of unannounced measures. In fact, we do not know the exact number but the amounts are rather large. That said, it is a bit surprising that there is a negative amount in the 2019 budget.
There is a negative of $3.8 billion over a five- or six-year horizon. This suggests two possibilities, or a combination of both; a decrease in expenditures that have already been provisioned, or increases in taxes and tariffs. Without having details, we can't know whether these are expenditure reductions or funds that are no longer needed, so that budget space has been freed up. There is a lot of uncertainty about that.
The upside is that in the past, that uncertainty would not even have been mentioned. Today, we mention the existence of a large amount that corresponds to unannounced measures or expenses. We mention their impact, but the measures themselves are not specified.
1 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes. It's a big cloud of uncertainty.
1 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I have another question.
I think you were the one who raised the alarm a few years ago about the fact that government program expenditures were not increasing every year at the same rate as government forecasts, which would translate into a type of quiet austerity. From one year to the next, the percentage of increase in program expenditures was not very high. Is this still your impression, or has the situation been corrected since?
As an illustration, expense forecasts did increase substantially, as they went from $308 billion in 2017-18 to $371 billion in 2023-24. In your opinion, is that realistic, or could those figures indicate a type of insufficient growth?
1:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We talk about that in the report. We talk about the distinction the budget makes between departmental spending—which is projected to increase at an annual growth rate of approximately 3%—and spending obligations related to the public service pension and benefits plan—which are expected to decrease or have almost no growth. Our estimate was based on government numbers that weren't disaggregated. Given what we know about the pension plan liabilities and interest rate projections, we concluded that operating expenses would increase by approximately 3%.
Is that enough? Determining the right level of spending is a highly political matter, so I will make just one editorial comment: the projected 3% growth in operating expenses is not in line with historical data for recent years. Expenses are to be expected. The forecasts or projections do not assume the introduction of new policies, but every year, the government does make policy changes. It is therefore reasonable to expect that real growth and expected growth will not be the same.
1:05 p.m.
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
I have another question, which I could have put to the Bank of Canada officials, but I'm going to take advantage of the fact that you are here and ask you.
We can see a fairly significant difference in the GDP growth projections. The bank forecasted a GDP increase of 1.2% in 2019, as compared with 1.8% projected by private sector economists. In fact, 1.8% is what the government used in its 2019 budget. To my mind, 0.6 percentage points remains a pretty big difference. You are the parliamentary budget officer, and you projected a 1.6% increase in GDP.
Could you please explain to parliamentarians how GDP growth projections can be so different? It does, after all, have a major impact on overall economic forecasts.
1:05 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It has to do with the relative weight given to various factors. I can't speak for private sector economists or the Bank of Canada.
As for our office, we expect business investment to pick up during the second half of 2019, with energy prices and the curtailment of Alberta oil production favouring investment and economic recovery. We also expect interest rates to remain relatively stable until the end of 2019. In addition, the labour market should remain fairly strong across the country, nationally speaking. Given all those considerations, our projections are likely to be a bit more optimistic than others.
Some uncertainty does, however, persist, particularly on the international trade front. Therefore, our projections are probably not as optimistic as others in that regard.
1:05 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you all.
We'll now turn to Mr. McLeod and then back to Mr. Poilievre.
Mr. McLeod.
1:05 p.m.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you, Mr. Chair.
Thank you to the witnesses for presenting here today.
I wanted to touch on a report that was put together by your office in the middle of April on the infrastructure investments in the territories. The report was critical of infrastructure spending in the north. I found it odd that in spite of many announcements on roads, highways, airports and housing, the report came out in the fashion that it did. It raised a lot of questions.
Can you verify that your report was looking solely at the investing in Canada plan and not at the broader scope of infrastructure?
I raise this because without including measures such as the trade and transportation corridors initiative, the investments in housing, the investments in broadband, disaster mitigation and everything else, it really doesn't paint the bigger picture when it comes to infrastructure investments.
1:10 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We wanted to look at the impact of the investing in Canada plan, so we focused mostly on this. With respect to the specifics, I think Jason would be in a better position to answer your question.
April 30th, 2019 / 1:10 p.m.
Jason Jacques Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer
With respect to the specific elements that we looked at, it contained the entire envelope of federal spending, the roughly $180 billion. To your point, broadband is of course a part of that overall envelope.
To the extent to which you mentioned that there are significant investments occurring, one of the key findings of our report, both in the case of the territories and of the provinces, is the fact that there is money being spent and new infrastructure being built. It was more focused on the question of whether it is actually incremental in nature.
Based upon our analysis, the preliminary data seems to clearly indicate that incrementality is not being met.
1:10 p.m.
Liberal
Michael McLeod Liberal Northwest Territories, NT
The report generated a lot of discussion, and many people have pointed to the fact that this is more of an accounting exercise. They also point to the fact that the report and the exercise lags quite a bit behind in actual activity. Sometimes it's behind in years until all the bills are paid.
It makes me question the logic of the report. It only focused on one piece. It didn't look at the big picture, so why the report? Why not do a comprehensive report rather than just one section of investment, one program, only the investing in Canada plan, when there are many other investments being made? If this is supposed to be to our benefit, I don't see it.