Evidence of meeting #85 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was budget.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Trevor McGowan  Senior Legislative Chief, Legislative Review, Tax Legislation Division, Tax Policy Branch, Department of Finance
Pierre Mercille  Senior Legislative Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Gervais Coulombe  Acting Chief, Excise Policy, Sales Tax Division, Department of Finance
James Greene  Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
Pierre LeBlanc  Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Patrick Halley  Director, International Trade Policy Division, International Trade and Finance Branch, Department of Finance
Laura Bourns  Senior Economist, International Trade Policy Division, International Trade and Finance Branch, Department of Finance
Nicolas Moreau  Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance
James Wu  Chief, Financial Institutions Analysis, Department of Finance

6:25 p.m.

NDP

Pierre-Luc Dusseault NDP Sherbrooke, QC

We're up to $1,168 billion.

6:25 p.m.

Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance

6:25 p.m.

NDP

Pierre-Luc Dusseault NDP Sherbrooke, QC

Thank you.

6:25 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

Mr. Liepert wants one quick question.

6:25 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I just want to follow up on Mr. Sorbara, who mentioned loan guarantees.

How do you factor that in as a liability?

6:25 p.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Wu.

6:25 p.m.

James Wu Chief, Financial Institutions Analysis, Department of Finance

Thank you, Mr. Chair.

I'm the chief of the debt management section at the Department of Finance. Loan guarantees for accounting treatment are not usually carried directly on the balance sheet. They are a contingent liability.

When we looked at the issue of the borrowing limit, the approach we took was the actual borrowings that the government or the crowns undertake in the markets or from financial institutions. That's how this borrowing authority was scoped.

In essence, it's very similar in scope with the existing borrowing authority approach, or the pre-2007 approach that existed and also had parliamentary approval. The focus or the scope is on the borrowing activities of the government.

I think, as my colleague Mr. Moreau indicated, the additional factor we've added here is the crowns.

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

Yes, I understand that, but I'm still not sure I understand how loan guarantees are accounted for.

Are they a liability, or how would that work with government?

6:30 p.m.

Chief, Financial Institutions Analysis, Department of Finance

James Wu

Yes, they're considered a contingent liability.

I think as Mr. Moreau indicated, on the balance sheet of a government, there are different types of liabilities, not just market borrowings or borrowings from the financial institutions. For a borrowing authority, we scope it to basically reflect the borrowings from the market or from financial institutions, and those other liabilities are not factored in.

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I'm sorry, the current debt is $691 billion. That's what we're borrowing.

As of the end of the last fiscal year, what was our debt payment annually?

6:30 p.m.

Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance

Nicolas Moreau

I don't have that number offhand, but it's something I could clarify for you.

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

Fine.

6:30 p.m.

Liberal

The Chair Liberal Wayne Easter

So that I'm clear on this loan business as well, I think you mentioned in your earlier statement contingent liabilities. Does that cover off the loan?

6:30 p.m.

Chief, Financial Institutions Analysis, Department of Finance

James Wu

No.

I'll give you some examples of other types of liabilities, like pension liabilities. There are other payables that the government may be liable for at the end of a fiscal year. These are factored into the total liabilities.

To give you a comparison or example, this balance sheet concept of total liabilities actually amounts to $1.088 trillion, but it is a different concept. It's a balance sheet concept, so guarantees vis-à-vis liabilities are captured under this different concept.

6:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Okay.

Mr. Liepert, go ahead.

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

What was that figure again?

6:30 p.m.

Chief, Financial Institutions Analysis, Department of Finance

James Wu

It's $1.088 trillion.

May 8th, 2017 / 6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

So our contingent liabilities are double.... If you added the contingent liabilities to the borrowing, it would more than double?

6:30 p.m.

Chief, Financial Institutions Analysis, Department of Finance

James Wu

I would actually express it in two different ways. One concept is the balance sheet concept, and this is where the question of other liabilities comes in, like contingent liabilities. That measure is sort of an accounting concept.

The concept we tried to capture here in the borrowing authority is basically market borrowing.

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I understand that. It's not the same thing. I understand.

Would the Bombardier loan be in that $1.088 trillion? Is that the kind of thing that would be in the $1.088 trillion?

6:30 p.m.

Chief, Financial Institutions Analysis, Department of Finance

James Wu

Sorry, the $1.168 trillion borrowing authority?

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

No, not in the borrowing, but in the contingent liability.

6:30 p.m.

Chief, Financial Institutions Analysis, Department of Finance

James Wu

Oh, I see. I would have to double-check with our accountants because some of them are carried on explicitly in the balance sheet. Others are in another category that are not reflected in the $1.088 trillion.

6:30 p.m.

Conservative

Ron Liepert Conservative Calgary Signal Hill, AB

I'm just trying to get a sense of what that is. I understand it's not a debt.

6:30 p.m.

Liberal

The Chair Liberal Wayne Easter

I think that's it.

Thank you folks for appearing and for those explanations. We are at 6:30.

Because there are votes tomorrow, we're only going to be able to meet for two hours, so we are going to have to try to move.... I'm worried about some of the people who end up coming here, sitting and waiting, and then we don't get them on. We're going to have to get back to some of the people responsible for some of these divisions and give you a heads up, because we're not going to get through them all tomorrow in two hours for sure.

I think we've decided that we will leave division 7 until Thursday, because we're going to hear from the parliamentary budget officers on Wednesday.

Thank you again folks for your presentations.

The meeting is adjourned.