Finance Committee on March 23rd, 2021

[The Chair, Liberal, Wayne Easter]

Thank you.

Before I go to Ms. Dzerowicz, who is on next, I know that the officials are here, and at committee several times now there has been a lot of discussion around the borrowing cap and whether it is right to borrow up to that cap. Is it equivalent to spending at that level?

I would ask somebody from the Department of Finance or the officials if they could come in to explain in layman's terms what the borrowing cap is. Regardless of whether it's $1.8 trillion or $1.6 trillion, what does it really mean as compared to spending?

[Nicolas Moreau, Director General, Funds Management Division, Financial Sector Policy Branch, Department of Finance]

Chair, I can take this question.

We have explained in the past basically where this number is coming from. It's the sum of the expected financial requirements for the next three years, as presented in the fall economic statement of 2020. To this, we add the overall level of stock that already exists and the money that has been used so far to help fight against the COVID-19 crisis.

When you look at the limit that we're proposing, it's different from providing.... It's a borrowing limit. It's different from approving the spending. By that, I mean that granting borrowing authorities is one thing, and spending is something else, because it needs to go through appropriation bills. It needs to go through different processes in order to be approved. For example, the next budget will propose spending—a new program. This will need to be voted on.

Putting in place a new limit does not per se—does not at all, in fact—provide authorization to spend that money. It's just a limit on the capacity of the government to borrow money from the market.

[The Chair, Liberal, Wayne Easter]

Thank you.

I have on my list Ms. Dzerowicz and then Mr. Fragiskatos.

Go ahead, Julie.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank Mr. Fast for his thoughtful explanation of what his worry is around this section. I'm just going to expand a bit more on what Mr. Moreau was just talking about, for those who might be watching or would be interested in knowing.

If they go to the fall economic statement and go to page 141, they are able to see exactly how we end up with—I had to practise this earlier today—the figure of $1.831 trillion. It's exactly what Mr. Moreau was alluding to. It's the current borrowing cap, with the emergency spending, some adjustments around Canada mortgage bonds, and then what is expected to be borrowing until 2023-24.

I think it's laid out very well. I appreciate Mr. Moreau very well articulating that there is a complete difference between a borrowing cap and spending.

I will have a question for officials in a second, but I want to make one more point, which is for Mr. Julian, who was talking about how the government hasn't presented the revenue side yet. That is indeed not included in Bill C-14, but the good news today is that our Deputy Prime Minister and Minister of Finance has announced that we will be presenting our budget on Monday, April 19, and I think we'll be hearing quite a bit on that date about the revenue side, in addition to the overall budget and what our game plan is moving forward.

As for my question, I'm hoping that maybe one of our officials can make this crystal clear. I believe it was our Parliamentary Budget Officer who said this. Can you please confirm that should this $1.831 trillion borrowing authority pass, Parliament still needs to approve government expenditures under this borrowing authority? If someone could just make that crystal clear, I'd be very grateful.

Thank you.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Moreau.

[Nicolas Moreau]

Thank you, Mr. Chair.

Yes. As I said before, any new spending will need to be approved by Parliament. Like I said, this is a borrowing limit. It's only in order to provide for the government to borrow that money in the market.

The reason we're doing this is that in 2017 the government put in place the Borrowing Authority Act in order to increase transparency on government borrowing. By setting a limit, the government is coming in front of Parliament at least every three years in order to make sure it has been transparent and has presented exactly what the government market debt will be. That's the capacity to borrow, basically, in the market.

[The Chair, Liberal, Wayne Easter]

I have Mr. Fragiskatos next, and then Mr. Ste-Marie.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair, and thank you, colleagues.

I would just say that we ought to think back to the testimony that was given by the Parliamentary Budget Officer last week. The question was put to him about the debt-to-GDP ratio, and he said it was in and around the range of 50% now, which admittedly is high. Certainly in relative terms, it exceeds in significant ways what we saw prior to the pandemic. However, it's a pandemic, and that necessitated emergency programs, which were bound to drive up the overall debt.

We have a debt-to-GDP ratio that still, compared to other G7 countries, is quite healthy and quite strong. Compare, for example, Canada's debt-to-GDP ratio to those of the U.K., Germany and the United States. All those countries, whose economies are considered by the vast majority of economists to be very strong still, have debt-to-GDP ratios that far exceed what exists in Canada at the present time.

The other point I would make to ease the concern of Conservative colleagues is that we've been here before. In the early 2000s, Mr. Chair, as you know, the debt-to-GDP ratio was at about the same level it is now, give or take a bit, and we were still able to see robust economic growth well into the 2000s. Of course, things turned in 2008, but that's a different story.

I think these points need to be put onto the table to reflect what actually exists and to provide context. Officials have already spoken to the distinction—the very important one—between borrowing authority and spending authority, Mr. Chair, so for that reason, I won't be supporting the amendment.

[The Chair, Liberal, Wayne Easter]

Thank you, Peter.

We'll go to Mr. Ste-Marie.

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

Thank you, Mr. Chair.

I first want to say how much I appreciate the contribution, hard work and suggestions that the Conservative committee members have put forward. Since the election, their ideas have gone a long way towards making measures better.

I agree with the points raised by the honourable NDP member Peter Julian. We have to tackle the revenue side of the equation, because giving way to the immoral use of tax havens is not cutting it. As far as this amendment is concerned, however, I do think it's important to remember what André Giroux, the Parliamentary Budget Officer, told us, as Mr. Fragiskatos mentioned. Mr. Giroux said that, with respect to Bill C-14, increasing the borrowing limit is not synonymous with introducing new spending measures.

Every expenditure has to be approved. Parliament overseas spending through supply votes, not the debt ceiling.

Keep in mind that playing with the borrowing limit is the tactic Republicans use in the U.S. to trigger crisis after crisis. When the government reaches the limit, it can't write any more cheques: public servants stop being paid, pension and employment insurance benefits stop going out, and government service providers shut down.

That is an irresponsible approach, and for that reason, I will be voting against the amendment, especially since a vote for the amendment is akin to a non-confidence vote—and all the consequences that go along with it.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Ste-Marie.

I have Mr. Julian next, who will be followed by Ms. Jansen.

Go ahead, Peter.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you, Mr. Chair.

I have a question for our witnesses. Do they have comparative figures for borrowing authorities—and I understand that the systems are different in different countries—as compared to the size of the economy in other major industrialized countries?

[The Chair, Liberal, Wayne Easter]

We'll go to Mr. Moreau.

[Nicolas Moreau]

As you've said, there's no comparable measure that exists elsewhere in the world. The closest that exists is in the United States. They have a debt ceiling. It's different from a limit, because in our case, if we were to reach the limit, we would still be able to reissue the debt that's already in circulation and also [Technical difficulty—Editor] the debt limit that exists in Canada compared to the ceiling in the U.S.

Of course, the ceiling in the U.S. is much higher, because they have a much higher debt-to-GDP ratio and a higher debt in circulation. I think the U.S. is close to twofold what we have in terms of debt as a share of GDP when we compare Canada to the U.S. The closest one will be the U.S., but in terms of the level, it will be much higher in the U.S. because they have a higher debt level right now.

[The Chair, Liberal, Wayne Easter]

We'll go back to you, Peter.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you, Mr. Chair.

I listened closely to what Mr. Ste-Marie, Mr. Fast and the government members had to say. After listening to the comments on all sides, I will be voting against the amendment.

[The Chair, Liberal, Wayne Easter]

We have Ms. Jansen, who will be followed by Mr. Fast.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

The numbers are massive, so massive that Ms. Dzerowicz has to actually practise how to say the number, which is quite shocking and should be shocking for Canadians.

Mr. Moreau, I thought maybe you might be able to help me better understand this. Are we asking for this enormous increase in credit limit because we have already spent it, or are we increasing our credit limit so dramatically although we absolutely have no need of it? Is it one or the other?

[Nicolas Moreau]

Thank you, Mr. Chair.

Basically, as you know, we already have a limit in place of $1.168 trillion. We have not reached that limit yet, but in terms of spending that already occurred, we need to look at the stock of debt, and we need to add to this what we've done under the extraordinary borrowing authority. That included $286 billion of spending that was put in place. We produced a report in October 2020 concerning that spending. When we add that to the current limit, yes, we're already above, but as you know, this is something we want to change, and that's in Bill C-14. We want to add the extraordinary borrowing authority to the overall limit.

Therefore, the answer is no. When you look at what we're requesting, we're looking at the expected spending for the next three years—not spending but financial requirements, as presented in the fall economic statement. To this, we're adding prudence by a factor of 5%. This is what we are asking for, and this is why the level is $1.831 trillion.

[The Chair, Liberal, Wayne Easter]

Mr. Moreau.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Okay. If I can, I'll just make sure I totally understand this. You're saying we need this entire amount because we have already spent it and we plan to spend it over the next three years. We need the entire amount.

[Nicolas Moreau]

Just to be clear, this amount includes a stock that already exists in the market, as well as expected financial requirements for the next three years.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

When you say “expected financial requirements for the next three years”, is that information we're going to be receiving on April 19, in the budget?

[Nicolas Moreau]

The expectations are based on the forecast that was produced in the fall economic statement, and this is money that has not been spent yet. Basically, those are monies that are expected to be spent in the future.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

I apologize. You have mentioned that none of it can be spent without permission first, but we're making sure it's there because we know we're going to spend it anyway. Is that a correct way of explaining it?