Evidence of meeting #28 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was families.
A recording is available from Parliament.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Have you met with Statistics Canada to relay your concerns in regard to this? Many of my questions probably cannot be answered if you don't have that information broken up.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
We are in discussion with Statistics Canada regarding some of the recent changes to the subnational government debt. Unfortunately, this is just at the aggregate level.
I think the point you raised about looking at the province-by-province angle is critical. I think it is necessary to do it in a very systematic and consistent way with the other sectors in the government universe. Unfortunately, with some of the limitations of data and of capacity, at least on our side, we don't have the capacity to do it.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I think you have to be able to put forward a report, but if you look at what's happening in Newfoundland and Labrador right now, with an ongoing filibuster and what they say is a crisis in their ability to pay their bills compared with other provinces' ability, such as that of my province of British Columbia, which has balanced its books, to have better data like that.... I really hope government members take advantage of their opportunity to talk to the Minister of Finance or to the Minister of Industry regarding this.
Moving forward on that report, it talks about “in about 35 years”, based on last July. In 35 years we will see a divergence between the federal government's debt load and the provincial debt load. Could you explain that, briefly?
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
This divergence in our 2015 report was driven by the settings of current policy both at the federal and subnational levels. Much of the pressure from population aging is limited at the federal level to its elderly benefits, whereas at the provincial level there's a broader impact from population aging on, let's say, health care spending, which is a significantly larger share of the economy than elderly benefits. Population aging combined with what we call excess cost growth—the growth in health spending that we can't explain by fundamental drivers, such as economic growth, population aging, or inflation—are the two factors contributing to the pressures on subnational governments.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
We might just have to wait for your newest report. I don't want to talk too short term, although Mr. MacKinnon did mention cherry-picking. In my area of the Okanagan, cherry-picking is actually a very worthy industry.
Getting back to this here, obviously if you can't break out the debt levels by subnational categories, it must be just as difficult to break out demographics.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Actually, the demographics are somewhat easier, because Statistics Canada does produce long-term demographic projections by province and territory. It is clear from those that the demographic transition of population aging varies quite a lot across Canada, across the provinces. Typically, the eastern and Atlantic provinces are facing a much more rapid transition on that front. In the central and western areas, it is somewhat slower.
There is some subnational fiscal data that is broken out by province, but not in terms of assets and debt.
NDP
The Vice-Chair NDP Guy Caron
Sorry, Mr. Albas. That is all the time you had for this round.
I will now move to Ms. O'Connell, for five minutes.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Thank you, Mr. Chair.
Thank you, all, for coming.
In the models or the analysis in regard to disposable income, you mentioned that for things like mortgage payments, interest on that is not calculated within that. That would be additional. What about something like property taxes? Is that a factor in your calculations for the disposable income?
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
My recollection is that property taxes aren't included.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Other...government transfers are. Old age security payments or EI benefit payments, let's say, would be part of that income, and then the taxes that come out of it, but not property taxes.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
The reason I ask that, Mr. Chair, is that.... I recognize the job you have to do in terms of looking at each piece of legislation, but when you look at it as a whole—especially in my community, the GTA, where we have quite high property taxes—any investment in infrastructure.... Just a stabling of property tax increase would provide a lot more disposable income. I don't suspect property taxes will be frozen, but any stabling of that would result in a lot of money for people with homes or even for those who rent, for example, in communities like mine.
As I said, while I appreciate that you have to look at each thing individually, there are significant impacts on that. For example, in my municipality, in Pickering, about $400,000 in city spending represents about a 1% tax increase—in Uxbridge it is even less. So $400,000.... We can't pave a driveway for less than that sometimes. That makes a significant impact on the disposable income piece of the modelling. I will just make that point, in terms of the overall...larger picture.
In terms of the small business analysis and calculations, preferential tax rates are not the only factor for small businesses to invest and grow. Is that correct? How do you look at the modelling of it?
Economic Analyst, Library of Parliament
Our model is a macro model. We don't differentiate between large and small.
There are a number of important variables that affect investment. One of them is the interest rate you can borrow at, as well as the cost of investment goods and capital goods, depreciation and taxes.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
What about the ability or expansion of customer base?
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Through demand....
Economic Analyst, Library of Parliament
Demand, yes, absolutely.... That is very important.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Somewhat leading back to my earlier comments that if people have more disposable income, more ability to spend, whether it is a small or large business, that is an impact in the model, in terms of businesses being able to invest, grow, etc.
In regard to Bill C-241—and I apologize if I am jumping all over—the cost estimates and the modelling.... When you came up with the cost of the increase of the rebate percentage, how did you model in terms of...? Did you find there would be an increase in the usage of this rebate?
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
It's a very simple calculation, actually, because there is a 68% exemption without this right now, and moving it to 100% is just closing up the amount that has already been calculated for the 68%, which is around $400 million. The additional cost would be around $190 million.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
You didn't calculate that there would be an uptake in this rebate, for example. It's simply from one percentage to the next.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
Exactly.
Liberal
Jennifer O'Connell Liberal Pickering—Uxbridge, ON
Then that would mean you also didn't take into account the possibility that school boards—again, I can't speak for all provinces, but certainly in my province—are making more and more cuts. I don't suspect that this rebate would be a reason to purchase something, but if they are tightening budgets overall, it could have an influence. I recognize you can only look at the modelling based on the percentages, but you don't take into account trends within the spending of school boards.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
No, we don't.
NDP
The Vice-Chair NDP Guy Caron
Coincidentally, it is my turn to ask questions and I have three minutes. Someone will be keeping track of the time for me.
