Finance Committee on Oct. 3rd, 2022

[Adam Chambers, Conservative, Simcoe North, ON]

Minister, I know you're a very intellectually curious person and you're very smart, so I'm curious as to whether you wondered whether this package is going to add to inflation so that maybe the government could reduce spending in other ways to offset this measure.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I think all members of this committee are very smart and I think all MPs are very smart. We looked carefully at the level of spending, and we looked carefully at the need to provide some targeted support to Canadians.

As I said in my opening remarks, the incremental cost of the new measures is 0.1% of Canada's GDP. I think it's also really important to bear in mind that not only is Canada's debt-to-GDP ratio the lowest in the G7 but also that our deficit is also the lowest in the G7, so we are striking a balance.

[Adam Chambers, Conservative, Simcoe North, ON]

We didn't get an answer, so we'll move on.

Minister, you mentioned that the deficit is really good. The deficit is really good because Canadians are being crushed by inflation, and the government is posting record revenues every year, every month, every week on the backs of Canadians. Now the government is getting rich from inflation, yet we're supposed to be very thankful that you're giving just a little bit back to Canadians through this bill. Are you just going to keep spending these record revenues that are going to drive inflation higher?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Maybe as a starting point it's worth saying that I'm very glad that Conservatives support this measure. It is the right thing to do, and everyone around this table is agreed on that.

In terms of inflation, we really have been careful to strike a balance between targeted compassionate support and fiscal responsibility. From my perspective, the proof point is comparisons across the G20. Countries around the G20 are in economic situations similar to our own. Canada has the lowest deficit. That is meaningful. That speaks to fiscal responsibility.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Minister.

Canada has the lowest deficit because we are crushing our citizens with inflation and reaping the rewards. The government is the only entity in this country that is significantly benefiting from inflation. That's why you have all this money to give out, and in fact your entire fiscal plan is based on inflation staying quite high. This is why you're able to spend this kind of money.

I'm glad you mentioned comparisons and you brought up the German chancellor. They announced cuts to their gas taxes just last week. They announced pauses to their energy costs to provide relief from the single measure that's driving inflation. We are the only country that is choosing to increase taxes on energy. Why do we believe that we know better than the rest of the world when it comes to the price of energy and increasing our taxes, such as the carbon tax?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

There are lots of points in there, Mr. Chambers, so I'm going to start where you began, which was talking about Canada's relative fiscal position in the G7.

The reality is that inflation in Canada is elevated. It's too high, but it is actually lower than in our peer countries. Inflation in Canada is lower than in the U.S. It's lower than in the U.K. It's lower than in the eurozone, yet even though inflation is lower here, we also have a lower deficit than other G7 countries.

Again, I think Canadians expect all of us around the table to have a bit of partisan back-and-forth, and that's why I turn to the international comparison for a proof point, because to me that's about not marking your own homework and about showing where Canada stands relative to our peer countries.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister. Thank you, MP Chambers.

For our final questioner for the minister today, we have MP Chatel for five minutes, for the Liberals.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Speaker.

Welcome, Deputy Prime Minister.

A year ago, I was not in politics at all, but I lived the crisis among Canadian citizens. I was very worried. We were heading into a crisis, not only the one brought on by the pandemic, but also an economic crisis. I can tell you how much you and the government have reassured us. You have been there for Canadians when we needed help, and we have come out of this pandemic stronger. I say well done for that. It was through very targeted support measures that you were able to do that, while maintaining, as you said, a low debt-to-GDP ratio, which is the envy of the other G7 members.

Today, though, inflation is rampant around the world. You also assured us that in this respect we had a very enviable position compared to the other G7 countries. I have checked this myself. Having said that, I agree with my colleague Ms. Dzerowicz that our citizens in our constituencies are experiencing difficulties. In rural ridings, there are sometimes people who have difficulty paying for the gas they have to put in their car to take their children to day care. Groceries cost more too.

How do you strike a balance between supporting the most vulnerable right now and putting in place a program that is not going to create inflationary pressures?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for the question, Ms. Chatel, and for your hard work. It is truly a great benefit to our government and to the citizens of your constituency to have an economist with so much experience as an MP. I am very grateful for your advice.

You have asked perhaps the most important and difficult question of the day. The reality is that everyday life in Canada today is really difficult for the average person. It's important for all of us to recognize that reality.

At the same time, I have great faith in the common sense of Canadians. I believe and hope that they understand that, on the one hand, we need to provide targeted assistance to the most vulnerable and the least fortunate and, on the other hand, that it is very important to maintain a fiscally responsible approach. When you look at the actions of other countries around the world, you can see that abandoning fiscal responsibility can lead to a very quick reaction in the markets, and the consequences in everyday life can be worse than the reality today.

Our government will therefore pursue a well-balanced approach. On the one hand, we will continue to provide targeted assistance to the most vulnerable: the inflation relief measures we are discussing today, the housing supplement and the proposed dental payments. In my view, this is really a moral obligation. At the same time, we're going to maintain a responsible approach, which really means that we can't do everything.

I hope that we have found, for the moment, an approach that will allow us to help the people who need it most, while maintaining a fiscally responsible position. Other measures have also been proposed. I think it is always important to have a flexible approach, to be humble and to always be aware of the reality in Canada and globally. There's a lot of uncertainty in the world and you always have to be ready to take new measures if they're needed.

[The Chair, Liberal, Peter Fonseca]

Thank you, Madam Minister and Ms. Chatel.

Of course, Minister, thanks also to your members.

That, actually, is our time, Minister.

We do want to thank you for coming before the finance committee to answer many questions here on Bill C-30, but you also answered many on other pieces of legislation, as well as on inflation and the cost of living, so we thank you for that.

Members, we're going to suspend before we bring in the Office of the Parliamentary Budget Officer and the officials who will be coming in for our next panel.

[The Chair, Liberal, Peter Fonseca]

Members, we're back, and we have the Office of the Parliamentary Budget Officer here with us.

We have Jason Jacques, director general, costing and budgetary analysis, and Nasreddine Ammar, senior analyst, costing and budgeting analysis.

We have you for 30 minutes.

Let's hear some opening remarks.

[Jason Jacques, Director General, Costing and Budgeting Analysis, Office of the Parliamentary Budget Officer]

Good afternoon Mr. Chair, vice-chairs and members of the committee. Thank you for the invitation to appear before you today.

I am Jason Jacques, chief financial officer for the Office of the Parliamentary Budget Officer. With me today, I have Nasreddine Ammar.

We are pleased to be here today on behalf of the office. Mr. Giroux sends his regrets. Unfortunately, he had pre-existing travel commitments that he was unable to cancel.

Consistent with our mandate to provide independent non-partisan analysis to Parliament, our office released a cost estimate of Bill C-30 on September 29.

As you know, this bill proposes temporarily doubling the GST credit to support those most affected by inflation. As you've read in the very good analytical background material generated by the Library of Parliament, our office estimates that Bill C-30 will cost approximately $2.6 billion, benefit about 11.6 million individuals and provide an average household benefit of approximately $225.

Nesreddine and I would be pleased to respond to any questions you may have regarding our analysis of Bill C-30, as well as other questions you may have regarding related PBO reports.

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Members, with the limited time we have, we will probably only have enough for one round. You may want to split your time if that is the case.

We have MP Albas for the Conservatives for six minutes.

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

Thank you, Mr. Chair.

Thank you to the Parliamentary budget office representatives who are here today. Thank you for the work you do.

I will be splitting my time with MP Lawrence, so I will get right to the point.

In your work, you've shown that there is going to be a cost of $2.6 billion for the bill, versus the government's own number of $2.5 billion. Can you name exactly why the discrepancy—

[Jason Jacques]

I think the—

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

—or is it just that everything costs more under this government?

[Jason Jacques]

As a starting point, typically we generate about 40 to 50 cost estimates a year. There's virtually always a difference between our estimates and those generated by the government. I would say that in the big scheme of things, this ends up being a rounding error overall.

In addition, Nasreddine may have some additional and more detailed commentary with respect to the precise modelling we use, in comparison to that used by the Department of Finance.

[Nasreddine Ammar, Senior Analyst, Costing and Budgeting Analysis, Office of the Parliamentary Budget Officer]

Thank you.

I think the difference between the two estimates could be explained by the different sources of data that we used to calculate that additional GST created. For example, our costing is based on Statistics Canada's population income projection using a 2017 survey, with some economic adjustment to consider the economic reality in Canada right now. However, I assume that the finance department estimates are based on the most recent T1 database. That's the main source of this difference.

In addition to that, I think that since we are using Statistics Canada data and assuming implicitly that everyone eligible would claim the GST credit, the reality could be slightly different, because some people cannot or don't, or there is no tax field and there is no information on that small percentage of the population. That could also explain the difference on cost estimates between PBO estimates and the finance department's estimates.

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

In the interest of time and Mr. Lawrence getting a chance to speak, I'll say that we've had a bit of a discussion today with the Minister of Finance around this bill, as well as other bills, such as Bill C-31, and in fact all government spending in this environment. From a macroeconomic viewpoint, is the government's spending inflationary in general?

[Jason Jacques]

I would stick to very safe ground, which is that already tilled by the Parliamentary Budget Officer, my boss, last week, when he appeared before the Senate banking committee. At that point, he indicated that conceptually, any point at which you are spending additional money would be inflationary. However, given the sums of money involved in the current situation, it's relatively negligible, so it's a relatively small amount.

That said—

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

Could the government have cut back on other spending to offset those concerns?

[Jason Jacques]

Certainly historically other governments have performed that type of activity.

I would mention as well that next week we are releasing our economic and fiscal update. With it, we will be responding to questions raised by parliamentarians on this point with respect to the inflationary impact of the government's affordability agenda, looking precisely at Bill C-30 and Bill C-31. Those numbers will be released in all their glory next week.

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

Thank you. I'll pass whatever is remaining of my time to MP Lawrence.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much, and thank you for being here.

I want to go over some quick math, if I can. You put the benefit per individual who is eligible at $225 or thereabouts. Is that correct?

[Jason Jacques]

Yes.