Finance Committee on May 18th, 2017

[The Chair, Liberal, Wayne Easter]

I call the meeting to order. For the record, we're continuing to deal with Bill C-44, an act to implement certain provisions of the budget tabled in Parliament on March 22, 2017 and other measures. We will start where we left off with witnesses from the Treasury Board Secretariat on part 4, division 21.

The floor is yours, Mr. Ermuth. I believe you had finished your remarks. Is that correct?

[Roger Ermuth, Assistant Comptroller General, Financial Management Sector, Office of the Comptroller General, Treasury Board Secretariat]

We had finished our remarks. You had left us with a question. We're happy to start with that or with other questions.

[The Chair, Liberal, Wayne Easter]

Yes, I had raised a question. If you have the answer, I'm all ears.

[Roger Ermuth]

To recap, your question was on how we know the departments will be efficient in their service delivery. From our perspective, under the current regime, there aren't necessarily great incentives to be efficient because it's very difficult for departments to raise the fees. From our perspective, having all fees under the service fees act is actually an improvement. By having the CPI, it at least means that the current split between the private benefit and the public benefit remains the same. One of the other things to consider is in most cases, the folks who are consuming the services are not paying 100% of the costs. In other words, in terms of inefficiency, departments still retain a fair amount of departmental appropriations in the game in terms of what they're going to be subsidizing.

My final comment is in terms of how we make sure that there are incentives for efficiency. There is the improved visibility that's contained in the legislation in terms of having the reports tabled on an annual basis, which lay out the costs as well as the fees collected. Parliamentarians and Canadians can see how that gap is either growing or staying the same along with any other service fee improvements.

[Raj Grewal, Liberal, Brampton East, ON]

What division is this?

[The Chair, Liberal, Wayne Easter]

It's division 21, part 4. It's the last division in the budget implementation act.

Roger, I have a couple of questions spinning off that before I go to other members.

This is going to be published annually. Is there any way parliamentarians can get a complete list of service fees, or user fees? In the farm community we would call them user fees; you might call them service fees. Whether it's the Canadian Food Inspection Agency or whatever, is there anywhere we could get a complete list that says what the fees were 10 years ago, and what they are now? I know there's an obligation to report annually. Is reporting done in a way that you have a chart, which says CFIA, PMRA, whatever, down the complete list, of the fees for this year and next year rather than total amounts of money? How is this stuff going to be recorded?

[Roger Ermuth]

One of the challenges in the user fee or service fee world is exactly the consolidation of the reporting. Currently departments may report on their fees. CFIA, for example, does have a fairly robust reporting that they table as part of the information that goes with their departmental performance reports. It doesn't go back 10 years. However, longitudinally, an analysis could be done going back in terms of what they've reported depending on—I don't know what they were reporting 10 years ago. I know within the last couple of years that they have been reporting on their fees.

One of the proposed amendments in this legislation is the fact that, on an annual basis, the Treasury Board Secretariat would take all of the departmental reports and consolidate them. Therefore, we would start to be able to have a centralized database with all the information. After time, longitudinally, you would be able to look at that in an easier and more accessible way versus having to pull out individual departmental reports.

[The Chair, Liberal, Wayne Easter]

I have one further question. Is there any anticipation—this is kind of new—in which service fees, and excise taxes, are tied into an escalator, tied to CPI?

My question is unfair. You can't answer the question. My question was along the lines of whether anyone is willing to anticipate a review in three years to see how this is working and anticipate whether or not that's the way we should go.

[Roger Ermuth]

From our perspective, the inclusion of the escalator and tying it to CPI and saying that unless a department has in its own enabling legislation with a built-in escalator, in which case it was set through their legislative process...was basically to say that at a minimum we want to make sure that the gap in the public-private split—the difference between the fees collected and the cost of delivering those services—remains static. As costs go up, by CPI and so on, the fee should then go up accordingly.

Looking at it from an individual fee perspective becomes part of the discussion for the departments that are looking at their fees—raising, modifying, potentially even reducing them as efficiencies or whatever come through, but looking at their fees in terms of what or how these come into play. The experience since 2004, with only 18 fees coming through, either by being introduced or renewed, means that we have literally thousands of fees that have not had any increase in decades, in some cases. As a result, the departmental appropriations—general taxpayer dollars—are being used to subsidize those specialized services.

From our perspective, then, putting the CPI in the legislation is really to keep that gap, so that the broader policy discussion can happen where it should happen, which is with the responsible ministers and their departments.

[The Chair, Liberal, Wayne Easter]

I shouldn't be asking so many questions, but I have one more.

If you're on the other end of these user fees, as I have been, there is a very strong feeling out there that this is going to reduce the incentive for departments and agencies and others providing these services to create the efficiencies needed within their own operations to provide the services in the most efficient way.

I don't mind admitting that this is one of the problems I have with this approach. Not increasing fees puts pressure on the provider of the service—the government agency or government department—to find efficiencies within and of themselves. That pressure is not going to be as strong when your fees can just go up according to the CPI. That's a concern that I have, and I don't mind admitting it.

I probably shouldn't be saying that, but in any event....

Mr. Ouellette.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Thank you very much for coming.

I have a quick question about the review panel. When you set these fees, how are you going to ensure that there's a broad enough spectrum of people involved in reviewing the fees to ensure that an appropriate fee is set? How do we ensure that there's a level of accountability to the industries or even groups or individuals who might be using these services?

[Roger Ermuth]

One of the fundamentals under the User Fees Act and under the service fees act is that consultation is critically important in setting these fees. One thing the service fees act does, from our perspective, is first of all include all fees under that gamut, whereas only 18 fees are technically under the User Fees Act. The responsibility of the ministers and of the departments to actually engage is clearly now articulated in what departments have to do.

In terms of knowing the stakeholders and making sure that the organizations are consulted, I would have to put faith in my colleagues and departments to know who their stakeholders are. As for making this information public, given that the public would have to be consulted, given that on an annual basis departments will be tabling in Parliament where their fees are going, and given that the CPI and any adjustments from it will also be tabled as part of that report, the information is at least out there. If a stakeholder group is accidentally omitted, my feeling is that through the transparency of what is being reported, such a group would be able to raise their hand and say, we need to play in this and have some conversation around it.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

One thing I discovered in large institutions—for instance, the University of Manitoba, and I'm sure it's like this in many other universities—is that often we have to bring together a consultative group or program review committee composed of people in the community or stakeholders before we have a program. Sometimes some departments do very well at it, and others do not do as well because people become very complacent and comfortable in their positions.

I have another question, however. If I'm using a government service, how do I know that the actual cost, whenever you get something from some department, whether of a city or a municipality or the federal government...? Sometimes I question how they actually come up with that price: “How did you determine that's the appropriate price?” It might have only taken you five minutes to do, yet you charged me $100, say, for that service.

Is there a way of sharing more information with the citizens who use those services to show the actual breakdown of the cost: “This is what it actually cost us to do it, and this is your cost”, which might be a portion of that? Is there a movement to be more responsive and transparent with citizens?

[Roger Ermuth]

One of the pieces we'll be doing in addition to this legislation is supporting Treasury Board policy.

Something we're considering for that framework is to what extent and what actually has to be shared with the stakeholder groups. One of the things proposed currently is understanding and sharing with the stakeholder group what the costs are, the methodology for how you've determined the costs. So if you only meet with the stakeholders to change costs or modify costs every five or seven years, it's at least understood how that model would work.

The other thing that would be part of that discussion would be around the private-public split. Obviously, the government and the minister have the final say in terms of how much. From a user perspective, they might say it should be more public versus private. There's a tension there, but the idea is that there would be a discussion of that as well, all of which leads into the setting of the price and an articulation of that price, and a consultation in terms of that whole process.

From experience of talking with some of my colleagues in departments where they're already engaging with stakeholders, that's exactly the type of thing they've been doing in terms of pre-work. They've been developing their costing model and understanding what it's going to take, having an internal discussion, a public-private policy discussion, and then engaging with their communities and their stakeholders around what that is in terms of setting the fees.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you for your presence today. I certainly appreciate the work you do for Canadians.

I'd like to start by asking a question. First of all, obviously, setting this to the CPI would require an ambulatory incorporation by reference, sometimes referred to as a dynamic incorporation by reference, because you're fixating a future price that is yet to be determined. Is that correct?

[Roger Ermuth]

On the specific mechanism, I apologize. What's proposed in the legislation is that we would set it to the CPI, and the calculation is articulated in there. I'm not familiar with the exact mechanism of which you're speaking.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay.

Mr. Chair, the Standing Joint Committee for the Scrutiny of Regulations has taken issue with crown corporations such as Canada Post fixating a future price that has yet to be set. In the last Parliament, we actually passed legislation, called the Incorporation by Reference Act, to allow government in certain cases to be able to do that by reference tables. There is still some issue of whether it is proper to affix a fee that's yet to be determined by a rate. So I imagine that the standing joint committee will want to review this.

As a quick question, does it apply to crown corporations or just to government departments?

[Roger Ermuth]

It applies just to the government departments.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I'm happy to hear that, because government departments at least have internal processes to be able to check costs, where many crown corporations or some ports and whatnot might have less infrastructure to be able to evaluate those fees. We have found that some of those different crown corporations or boards that are set up might not be able to get timely information.

How appropriate is CPI? I understand the simplicity, because it is a well-established and understood index. By the same token, it often relates to a family's average basket of prices. Obviously, applying a metric that is meant to relate to an average consumer's consumption and the prices that they're subject to is much different from government services specifically being charged to an individual user.

What is wrong with simply having a three-year rolling review? Again, CPI is a rear-looking indicator. We basically look to the past to see if prices have gone up. Why not have every three years a review of government fees to be able to say, where there are regional differences in the price of gas, our cost for gas has gone up, or our cost for electricity, or our cost for labour in this region because of these fixed negotiation contracts? They're much divorced from the average consumer and whether the price of eggs went up.

Why is the government simply going with an index that is grossly out of sync with government services?

[Roger Ermuth]

From the perspective of what's proposed in the legislation, CPI was chosen, number one, because it's a very simple metric as well as something that covers the wide gamut of fees charged, everything from icebreaking down to campsites and so on. The idea of trying to figure out another indicator that would fit across the broad selection was a little more challenging.

The fact that it is backwards-looking and that it will always be trailing was in some ways intentional. The idea was that we should be putting in the increases where the increases make sense, and by that point the inflationary impact has already been articulated versus being anticipatory.

In terms of doing a three-year review of all of the fees, with the thousands of fees and so on, we considered whether there was some other way of doing it. The amount of work required to do that, to come down to probably a very small incremental adjustment, if there were an adjustment of multiple percentages, would again create an argument as to whether that is more material than a minor inflationary impact. The decision was made to stick with the CPI.

The final comment on the CPI is that doing it this way and also publishing it on an annual basis and telling users, as part of the report, that the following year the fees were going to go up would let people see, understand, and actually start to plan for what that would be.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I'm not necessarily opposed to changes to the User Fees Act, because it is a cumbersome piece of legislation. It was created by a private member's bill, and obviously a private member's bill that we just don't have the resources as government to put together. However, the government of the day decided that it would work with the private member and thus we put in place a system that was very cumbersome to update user fees.

This is my current challenge with this: is it theoretically possible that a department that is well managed and is able to reduce costs would have increases to user fees, since they are linked to the CPI, even though the service itself should be self-liquidating and there should not be a profit mode for government? Is that theoretically possible under this arrangement?

[Roger Ermuth]

Again, it's important to look across the wide gamut, the thousands of fees. I guess possibly if a department was recovering 100% of the fees and had efficiencies, then the fees could drop down. One way that would happen is through the annual reporting process. First of all, it would be visible that the department was now charging more, and as a result, that would raise questions from a stakeholder group. Again, because it's tabled in Parliament, the parliamentary committee could also pick up on it and call in the department to look at that.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

You want parliamentarians and the general public to go through a document in which there are thousands of different fees to basically find the deficiencies in order to raise and then correct those? Is that what you're counting on?

[Roger Ermuth]

No. First of all, departments are going to manage it. Departments know, and the rules state, that the fees collected cannot be greater than the cost. If there are significant deficiencies or there is major efficiency or whatever, one of the things that would do is actually trigger the department, through policy, to go back and look to make sure they are still keeping that within the range.