Finance Committee on May 8th, 2017

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I think Germany has a AAA rating too.

[Nicolas Moreau]

I'm not done with my statement. I also said “with positive interest rates along the curve”, which is not the case in Germany right now because there are some sections of the interest curve that are still negative in Germany. But you're totally right that Germany also has a AAA rating.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Yes, they do. I just wanted to make sure we have that on the record. We don't want to have anything improper there.

That's it, Sir. Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Mr. Moreau, thank you for being here and for giving us that presentation.

You said the government had to return to Parliament at least once every three years to seek parliamentary approval as regards the public debt. You said the requirement provided for accountability and greater transparency on the government's part.

Could you please explain how it is more transparent to inform Canadian taxpayers of the exact amount of borrowing—which stands at more than $1 trillion—when they don't necessarily see all the related details? How does that provide greater transparency?

[Nicolas Moreau]

It will be more transparent in the sense that the public can now know the facts, since the facts will be reported at least once every three years.

Under our current system, only the marginal increase in the debt is reviewed each year. It may be slightly more difficult for Canadian taxpayers to understand the data than to review all the government's borrowing requirements over a maximum of three years.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Each year, Parliament is called upon to pass the budget, meaning the government's expense budget. It may be a hypothetical situation, but let's look at the following case. Parliament has passed the expense budget, but after three years, Parliament doesn't approve the bill tabled by the minister.

How can the budget limit be raised? Is it through a bill?

[Nicolas Moreau]

The limit would be raised through the borrowing authority. Essentially, it would be a legislative process, so it should be tabled in Parliament.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So, the amount would be increased directly under the legislation.

[Nicolas Moreau]

Exactly.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Passing a bill is a complex process. We deal with it on a daily basis. The process takes time and it's left to the whims of the elected officials, who are called upon to vote on the issues.

Let's go back to the hypothetical case I gave you. Parliament passes the expense budget, in the form of appropriations, for one year. Have you considered that the budget proposed in the government's bill may be higher than the authorized limit? Could these types of disparities occur? Through this type of bill, could Parliament pass a budget that exceeds the authorized limit?

[Nicolas Moreau]

If the government were to announce new appropriations or new budgetary expenditures that exceed the limit, it would need to request a new budget limit. To do so, it would need to go through the whole process. That's how the system allows for more transparency, as I said. If the government wants to spend more and the limit becomes restrictive, it will need to be transparent and ask Parliament to raise the limit.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

In terms of whether the limit is restrictive, I understand the following:

The proposed new borrowing authority framework would provide the Government with flexibility to meet unforeseen needs and standing authority to refinance outstanding market debt, subject to an annual approval by the Governor in Council.

So the cabinet....

So you have some flexibility. If you must quickly raise the authorized budget limit, for unforeseen reasons, you can do so through the Governor in Council, without Parliament's authorization. That's what it seems.

Is that true?

[Nicolas Moreau]

That's very true. However, we're talking here about an emergency, an unforeseen economic shock that would require the government to increase its borrowing program. That's completely different from a situation where the limit is raised because the government wants to increase program spending or tax credits.

If there's an economic crisis like the one that occurred in 2007, which forced the government to increase its borrowing program, provisions in the legislation would provide this flexibility. However, to increase program spending, we would need to request, before Parliament, an adjustment in the authorized budget limit.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay, but let's get back to my hypothetical case. What will happen if Parliament refuses to raise the budget limit?

[Nicolas Moreau]

In this case, it would reject most of the budget implemented. The budget limit is established based on the government's financial needs, which are specified in the budget.

Do you understand what I mean?

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

No, I'm not sure I understood what you just said.

Could you repeat it?

[Nicolas Moreau]

If the budget announced by the government includes, for the next five years, fiscal projections that make the established limit insufficient, the limit must be raised. If the limit can't be raised, it's as if the government can't get the established budget approved.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

It would have the same impact as a budget defeated before Parliament. A vote on the budget limit would be considered a vote of confidence.

[Nicolas Moreau]

Exactly.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

That's all for me, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

You're okay?

All right, then Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I have a few brief questions that I need clarification on.

The number was $1.3 trillion?

[Nicolas Moreau]

The exact number is $1.1—

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Yes, rough numbers.

What's the current debt?