Finance Committee on March 18th, 2021

[Yves Giroux]

Well, “reasonable” is all in the eyes of the beholder, sir, so I would probably say it's amply sufficient. It's largely sufficient certainly, to say the least, to cover the needs expressed in the fall economic statement and then some.

In my humble opinion, the $100 billion is probably premature to include in a borrowing authority act, although it's up to you parliamentarians to decide on that. It could have waited until such time as the government lays out its plans for that additional spending. If there are any unforseen expenditures that need to take place, they could have been accommodated or they could still be accommodated with that contingency amount of some $87 billion, which is, again, a very significant leeway in the context of a borrowing authority.

[The Chair, Liberal, Wayne Easter]

This is your last question, Ed.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Giroux, you've raised concerns over the inability of parliamentarians to properly evaluate and scrutinize the government's borrowing and spending plan. Could you comment on what you consider to be the minimum amount of transparency one should expect of a federal government when it's asking for massive debt ceiling increases and billion of dollars of discretionary spending?

[Yves Giroux]

Well, traditionally when the government tables a bill that seeks to increase its borrowing authority, it does that together with a budget that clearly lays out its plans going forward—usually five years into the future. We haven't seen that yet. We see a borrowing authority limit that's being sought before Parliament, but we don't have the same full picture that is usually accompanying such an increase through a budget.

Hopefully, the next budget will provide additional plans that will probably seek to better justify this increase in borrowing authority, but so far it's only been a partial picture through the fall economic statement.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

We will turn to Mr. Fraser, followed by Mr. Ste-Marie.

Sean.

[Sean Fraser, Liberal, Central Nova, NS]

Thanks very much.

I appreciate your being with us, Mr. Giroux. I have just a few questions.

I will start where my colleague Mr. Fast left off, on the issue of the borrowing authority sought in Bill C-14. Some of my colleagues on this committee have previously referred to it as a blank cheque. I think Ms. Jansen actually used that phrase in the previous panel.

I just want to get confirmation. There is a significant difference between the borrowing authority and spending decisions of Parliament. Could you just explain that distinction, please?

[Yves Giroux]

The borrowing authority is the maximum amount the Minister of Finance can borrow to finance government operations. It doesn't necessarily go together with the spending authority. The spending authority itself is granted through separate bills, and can be such legislative statutory authorities as employment insurance or old age security, which are permanent programs on which Parliament does not need to vote every year. There are also operating expenditures, grants and subsidies and so on, for which Parliament has to grant authority to spend on an annual basis. That's done through main estimates and various supplementary estimates.

Even though the borrowing authority can be increased, it does not grant authority for the government to spend. They have to seek spending through separate bills.

[Sean Fraser, Liberal, Central Nova, NS]

There would be an opportunity for parliamentary scrutiny over new spending programs that the government could introduce in the upcoming budget or through some of the measures you've suggested. There would be an opportunity for parliamentarians to actually scrutinize and potentially vote on those new programs at the appropriate time. Is that correct?

[Yves Giroux]

That would normally be the case, indeed, but that's assuming we revert to the normal legislative process. The government benefited from extraordinary powers in the previous session.

Assuming we have the normal procedures for approving spending, yes, you are right, sir.

[Sean Fraser, Liberal, Central Nova, NS]

Certainly.

I want to talk for a moment about the wisdom of having parliamentary authority over the borrowing limit. This is something that is relatively new. In 2016 we actually adopted a new legislative requirement that the government, every three years, seek a review or permission to increase borrowing authority, should they wish to do so.

This is, in my view, an exercise in transparency. My understanding is that we have actually now come up on the legislated deadline. Can you confirm whether it's actually an option for the government to ignore the requirement to come back to seek further borrowing authority?

[Yves Giroux]

I would have to get back to you on that. Not being a lawyer myself, I'd have to look at the details of the legislation.

[Sean Fraser, Liberal, Central Nova, NS]

I would appreciate it if you could get back to the committee on that, if you don't mind.

One of the things that I find to be very important here is that we've seen, frankly, with our neighbour to the south certain political brinkmanship coming up whenever the federal government in the United States approaches its debt ceiling. On a certain number of occasions, there have been government shutdowns as a result of the fact that they've come up to that debt limit.

I'm curious to know whether you think it's a good idea to signal a few years into the future where the debt limit may be, and to provide a bit of a buffer so that we don't find ourselves in that circumstance where political brinkmanship could lead to a government shutdown.

[Yves Giroux]

Having a debt ceiling, so to speak, under the Borrowing Authority Act is certainly a good idea in the sense that it increases transparency. The borrowing is not just a mere by-product of all of their government expenditure decisions. In that sense, it's a very good improvement in terms of transparency.

Having a buffer also ensures that we don't hit a wall where if, for whatever reason, such as an election where Parliament is dissolved, there is no consensus or possibility to increase that limit, and we hit that hard limit, we have to stop government operations. That's an unfortunate situation that we have seen happen a couple of times in the U.S. Having a buffer is certainly desirable. The size of that buffer is up for debate, but both the Borrowing Authority Act, having a maximum amount, and a buffer are good ideas in terms of transparency, first, and then for the continuity of government operations.

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Chair, do I have time for a last question?

[The Chair, Liberal, Wayne Easter]

Yes. Go ahead for your last one, Sean.

[Sean Fraser, Liberal, Central Nova, NS]

You mentioned that you have conducted an assessment on the cost of some of the programs outlined in the fall economic statement. I know that you have done it previously on other measures as well.

Throughout the course of this pandemic, we've heard testimony from Mr. Macdonald from the Centre for Policy Alternatives that in fact had the government not borne the expenses of some of these programs—let's use the rent subsidy as an example—that cost would have fallen somewhere else.

Could you confirm whether there's a counterfactual or give us your assessment as to whether the cost actually would have been greater across the economy had the federal government not introduced some of these programs and instead had let the cost of the pandemic response fall to the private sector, to the household or even to provincial levels of government?

[Yves Giroux]

We didn't do a counterfactual because for the counterfactual the shock would have been so immense that I'm not sure our models would have been able to absorb all of that. The best alternative to a counterfactual would probably be trying to look at other similar countries that didn't provide the same level of support, if there are any, and I doubt that there are any that ran that very rough experiment. It's certain that there would have been very difficult situations for millions of Canadians, businesses and households had the government not provided support.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thanks, all of you.

I might say, Ms. Yan, that if you have a supplementary point you want to make at some point in time, just raise your hand. Hopefully, I will catch you.

We're turning to Mr. Ste-Marie, who will be followed by Mr. Julian.

Go ahead, Gabriel.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good morning, Mr. Giroux and Ms. Yan. Thank you for joining us. Thank you also for the important work you are doing. You must have some impossible weeks, with all the work you have to accomplish and all the analyses you have to do. You are doing particularly essential work during this pandemic, when it is difficult to obtain reliable data and to track the historic expenditures that are being made. My hat is off to you; on behalf of all my colleagues, you have my thanks.

I would like to begin by asking you once again about the topic that two of my colleagues have addressed, the spectacular increase in the debt ceiling. I'd like to make a clear distinction between borrowing authority and spending authority.

You told Mr. Fraser about it, but I would like to be assured that this borrowing authority is not automatically the approval for the government to spend that money as it wishes.

More specifically, I would like the assurance that each of the government's additional expenditures will have to be voted on by parliamentarians. Is that in fact the case?

[Yves Giroux]

Thank you, Mr. Ste-Marie.

Yes, the debt limit is one thing. It allows the government to incur debts up to a maximum amount. The amount proposed is $1,800 billion. That does not mean that the government can keep spending until that amount is reached. It's not a credit limit, as on a credit card, for example. Another process has to be followed in order to do that. So this is a constraint that combines with others that already exist in the process of approving appropriations.

In order to fund its annual operations or programs, the government has two methods it can use. One method applies to existing programs that are established in legislation, like old age security. In that program, the expenditures depend entirely on the number of recipients. The amount of the expenditures for old age security is therefore not limited by a budget envelope.

The government can also spend using budget appropriations, which must be approved each year by an act voted on in Parliament. That is the case for the operating expenses of the departments and of Parliament, as well as for grants and contributions. So that is a constraint also.

In addition, the government cannot borrow more than the current limit, which is $1,168 billion. The government is proposing to increase that to $1,800 billion. Those two constraints combine to limit expenditures or at least control them.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

I would like to be sure that it would not be possible for the government, using the signature of the person representing the Governor General, to use that increased ceiling on borrowing to spend as they like, even during an election.

[Yves Giroux]

No, you are right.

When Parliament is dissolved, a special procedure called the Governor General's Special Warrants is used. The goal is to fund government operations only so that the operations can continue or emergency situations can be dealt with.

It's a convention; the idea is not to fund new initiatives. If ever that were the case, the Governor General could refuse to sign the warrants, which, in practical terms, basically never happens. In an election campaign, the public service and the government apparatus make sure that operations continue.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

That is how I read it, but now that you are confirming it, I am greatly reassured.

It will be two years ago tomorrow that the Government of Canada last brought down a budget. As you said earlier, Mr. Morneau presented an economic and fiscal snapshot last summer, and the Minister of Financepresented the Fall Economic Statement 2020.

Is it acceptable that parliamentarians have not had a budget for two years, at a time when expenditures are reaching exceptional levels?

[Yves Giroux]

I will leave you to decide whether it is acceptable or not. It certainly makes your work more difficult, because you are being asked to approve expenditures and initiatives, at a time when no one has the full picture of the impact on public finances and the economic situation.

In addition, we do not know the government's short-and medium-term plan for the direction of public finances and the economy. That makes your work and mine a little more difficult, because we have to gather information based on announcements made over weeks and months to try and understand the situation and guess the government's future direction.

Without a budget having been tabled, we are missing a complete picture and the direction that the government will be taking in the coming years.