Evidence of meeting #51 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A video is available from Parliament.
12:50 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Thank you, Parliamentary Budget Officer. I appreciate your presence and your team's work.
Officer, did your office anticipate the COVID-19 pandemic?
12:50 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The short answer is no.
12:50 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Did your office anticipate the war in Ukraine?
12:50 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Again, it's no.
12:50 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I don't blame you for that. I don't think the Department of Finance did either.
However, you've made a case here today that sometimes life comes at you fast and that we have to be prepared as a government and as a country for these unanticipated events. You've given some suggestions here for parliamentarians to have a better lens on long-term sustainability, like old age security benefits and child benefits.
How can the government report to Parliament better, so that we can at least anticipate the expenses we know we will have?
12:50 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
First of all, I was worried when you asked me if I had anticipated that. I was worried you would blame me for that. Thankfully, you didn't.
In response to your question, it's not that difficult to provide these long-term expenditures, or at least an estimate of these long-term expenditures. We do that. We are a small office. As part of our fiscal sustainability report, we incorporate longer-term trends and projections when it comes to old age security, child benefits, equalization payments and transfers to provinces. It's not super-easy to do, but it's doable. In fact, it's good practice, and recognized by the OECD and other international institutions, that governments should provide or undertake that type of long-term projection to have an idea of whether their policies are putting the country's finances on a sustainable or unsustainable medium and longer-term track.
We do that on an annual basis. There's no reason that the Department of Finance and the government could not do the same.
12:50 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I do hope government members are texting Mona Fortier at the Treasury Board right now and asking for these changes.
I would like to talk to you about your work in regard to what you viewed as an underestimation by the Department of Finance of debt servicing costs in the fiscal year 2027. I think you said it was by several billion dollars.
Has that assessment changed since we've seen an uptick in interest rates?
12:50 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The department has not published, at least to my knowledge, an updated estimate of the debt servicing costs. You're probably referring to our stochastic debt sustainability analysis, in which we indicate that there's a significantly higher risk that the debt servicing cost will be higher than expected by the government due to the increase in debt and also the expected increase in interest rates.
12:55 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
The government has brought us essentially double the spending on our debt. They've essentially doubled our debt load. They're not anticipating future events. They're not reporting to Parliament what they know is already caked into the books. As you said, they should be able to report on these things, and they have yet to tell us what kind of deals they've cooked up with the NDP when it comes to pharmacare or dental care or all these other things that may happen.
Do you believe that the government needs to be more up front on all of these things?
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I certainly think there is room for improving transparency, especially when it comes to medium-term and longer-term fiscal forecasts.
As I mentioned on a couple of occasions, the budget that was tabled in April lays out a fiscal track, but that fiscal track does not include significant measures that were promised during the last electoral campaign, notably pharmacare and additional funding for mental health. There are also demands when it comes to increasing national defence spending to meet the NATO target of 2% of GDP, and there is tremendous pressure from provinces to significantly increase health care transfers.
All these pressures are there, and I think the government will probably have to either agree to deliver on some of these commitments or else be clear that some of these cannot be met.
12:55 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you. Thank you, MP Albas.
Now we're going to the Liberals and MP MacDonald, and that will conclude our second round.
MP MacDonald, go ahead for five minutes.
12:55 p.m.
Liberal
Heath MacDonald Liberal Malpeque, PE
Thank you, Chair. Thank you, Mr. Giroux and your team, for what you do. Hearing some of your advice certainly helps us parliamentarians as we create policy.
I want to add a little bit to what my colleague said. Prior to COVID-19, we were very fortunate to have economic stability. Inflation was exactly on target, and our unemployment numbers were extremely good. I think we went into COVID-19 in really good shape, and I think the recovery of our economy is certainly showing the strength we had prior to that.
In your report, you requested that all governments at every level expand their analysis to give a total Canadian perspective. Can you elaborate on what you mean by that?
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I assume you're referring to the fiscal sustainability aspect.
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I refer to the fact that when we are looking at longer-term or medium-term fiscal sustainability, we should also consider other levels of government in our analysis of long-term fiscal sustainability. It's one thing, for example, to look at the fiscal situation of the federal government, but given that it's the same taxpayer supporting his or her municipal, provincial and federal government, we also need to take into consideration the finances at the provincial and municipal level, although we find in studying that issue that what matters the most for long-term fiscal sustainability is the federal and provincial fiscal sustainability. That's what I mean when I suggest that we take a whole-of-Canada approach, especially in the context of fiscal sustainability.
12:55 p.m.
Liberal
Heath MacDonald Liberal Malpeque, PE
Thank you.
Recently here in Prince Edward Island there was a report about so many millions of dollars left on the table relevant to COVID recovery. It was interesting to hear about that and about how you would decipher some of those challenges.
Our government expects to reduce spending by $9 billion over four years, beginning in 2023. Just comparably—and I know you answered some of this—how do we stand within our economic situation right now, coming out of the past two and a half years? Can you elaborate a little more on our fiscal positioning and our economic value going forward? Are we on the right trajectory?
12:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
With an expected reduction in deficits from the very high levels of the pandemic, what we anticipate is a substantial reduction in the deficit going forward, to about 0.3% of GDP in 2026, if I'm not mistaken. If that materializes, that would put the debt-to-GDP ratio on a downward trajectory, which would be key in restoring Canadian long-term sustainability, at least at the federal level.
However, as I mentioned before, that doesn't take into account potential additional investments or spending items when it comes to platform commitments of the 2021 election campaign, or calls for Canada to increase its defence spending or health care transfers to the provinces. However, that doesn't mean that if the government were to fulfill all these commitments and respond favourably to these pressures, it could not reach its debt-to-GDP targets or achieve the reduced level of deficit; it would just mean that it would require additional revenues and increased taxes.
All that is to say that we are on a relatively good track as a country, when we look at the federal level, for a reduction in the deficit and a reduction of the burden of the debt as a share of the economy, but that depends a lot on what will be done in the future to respond to pressures that the government is faced with.
1 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP MacDonald.
We want to thank the Parliamentary Budget Officer for appearing before our committee. On behalf of all of the members of the committee, thank you for your insights, your reports and the work that you do, and for answering so many of our questions. We also thank Dr. Yan, who is with you today.
Thank you, Mr. Giroux.
On behalf of the clerk, the analysts and everyone here at committee, we thank you for appearing before us.
Members, on that, I want to let you know that Monday's meeting will start at 3:30 rather than at 11 a.m. On Tuesday, FINA is meeting from 11 to 1 and again from 3:30 to 5:30.
On that, shall we adjourn?
1 p.m.
Some hon. members
Agreed.
1 p.m.
Liberal