Finance Committee on Dec. 7th, 2022

[Daniel Béland]

This is a very good question. Thank you very much.

Yes, the CPP Investment Board is actually something we discussed in a paper that we wrote for the now extinct Mowat Centre, a paper that I can send to the clerk or someone else at the committee who can distribute it. We wrote this paper quite a few years ago and it's still available online. We discussed the CPP Investment Board as a potential template to create a permanent equalization or fiscal federalism commission in Canada. Your question goes in the right direction in the sense that this is something that we have considered, and I think this is something that we should still consider moving forward.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

If you could share that it would be helpful. I did just want to point out that you used the example of education as an area in which the federal government has very low involvement, and yet you also pointed out that as a country our test scores and education outcomes compared with our peers' are quite high. Correlation isn't causation, but I might at least posit that we should explore that maybe the reason why we have good outcomes and scores is that our federal government isn't as involved in education. I will leave that there for now.

Mr. Giroux, we talked a little bit about tax points and transfers. There really is just one taxpayer. We all have these tax-sharing arrangements now with provincial governments. Is it really like a tax point transfer discussion that has to happen, or can it be just allocated based on revenues generated from that province with which there is tax-sharing agreement? Do you have to really get into this tax point transfer? It seems quite complicated. Could you not just say, look, there's one taxpayer who pays this much in tax and it's all going into the same pot? Is that a conversation that ought to happen, or is the system we have set up working okay?

[Yves Giroux]

That's all in the eyes of the beholder. The last time there was a significant tax points transfer, as Mr. Soderstrom pointed out, was 1977. It was a long time ago. Personally I think this issue is behind us for a reason, and that's because tax points don't have the same value in different jurisdictions. It's much more lucrative to transfer the tax points in Alberta than to get the same tax points in New Brunswick or Quebec, for example. That's why probably there was a one time...or the last time was back in 1977, because they don't have the same value. Personally I think that issue is behind us and we should consider it done. That's an idea that has probably done its time.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

I have one final question. We just heard a little bit of a discussion about inflation. We did have the Auditor General's report yesterday, but there appear to be 15% of COVID pandemic benefits that have now been questioned in terms of eligibility criteria. I'm not into the politics of that, but from an inflationary perspective, would it be your opinion that money that was given out as part of this would have had an impact on the inflationary pressures we've seen?

[Yves Giroux]

It's clear, especially with the numbers that the Auditor General was mentioning in her report yesterday, that when you're talking about dozens of billions of dollars, it adds to the inflationary pressures. Even though it's decimal points only, it still is an addition to inflation.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We are now moving to the Liberals with MP MacDonald for five minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

I want to continue a little bit on that conversation you just had with Mr. Chambers relative to target spending.

Was it appropriate for the government to very specifically target spend? What type of inflationary impact would that have on programs such as CERB, when individuals basically lost their jobs and so on and so forth?

[Yves Giroux]

It would be hard for me to say it was not appropriate to have these programs when the House, I think, voted unanimously for them. I would be going against 338 MPs and 100 Senators. I'm not that courageous yet, or not close enough to retirement.

[Some hon. members]

Oh, oh!

[Yves Giroux]

I would say it was probably appropriate. The impact of not providing these programs would have been, I think, catastrophic. We would not have talked about inflation; we would have talked about depression, probably mass bankruptcies and significant human cost.

[Heath MacDonald, Liberal, Malpeque, PE]

I guess something I'm interested in a little bit is that the federal government did much of the heavy lifting through the past two and a half years in COVID. We're seeing many surpluses in budgets right across the country. Their credit in many of these provinces will allow them to borrow more next year and maybe more the following year.

How do you measure that going forward? How do you foresee that in your forecast on what will transpire as far as transfers and things like that?

If they spend based on this year's income because of the federal contributions through the pandemic.... I guess if the bond writers are basically looking at them and allowing them to maintain their level of achievements and then they go out and spend more the next year or the year after, we're going to see another decline. We will be sitting back at this table again talking about transfer payments not being enough, possibly.

[Yves Giroux]

I'm not exactly sure I understand your question. I think what you're referring to is the capacity of provinces to borrow at reasonable rates because of the fact that their fiscal situation is sounder than it would have been.

The bond rates applied to provinces is usually that of the federal government plus a premium that varies across jurisdictions depending on the perceived risk of each jurisdiction. It's true that the fact they did not bear the brunt of the pandemic response or the cost of the pandemic leaves them in a better fiscal position. Without that, their debt levels would have been higher and the premium they have to pay compared to the federal bonds would probably be slightly higher than it is.

The counterfactual we will never know for sure because there's no way to run that experiment, thankfully.

[Heath MacDonald, Liberal, Malpeque, PE]

Do I still have time, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

You still have a minute and a half.

[Heath MacDonald, Liberal, Malpeque, PE]

The funding to the provinces, such as the $4-billion top-up to health transfers and $2 billion to clear surgical backlogs and improve conditions in long-term care.... That doesn't include the extensive support for the testing and contact tracing.

Do we, or do you, have any accounting or data that shows if the $4 billion plus the $2 billion top-up payments to reduce surgery backlogs and for long-term care funding was fully utilized for those purposes? Does your office have any accountability of that or tracking of it?

[Robert Behrend, Advisor-Analyst, Office of the Parliamentary Budget Officer]

As those monies are transferred to provinces, there's no accountability. The provinces were able to spend as they saw fit to meet their needs for services to their residents.

[Heath MacDonald, Liberal, Malpeque, PE]

Again, we're back to the accountability thing. I think everybody is saying now that maybe there should be some sort of measurement on how provinces spend their money relative to health care and some of the social programs they have. Measuring that, obviously, will be very complicated.

In short, saying the formula that's used for the equalization payments stays as is, but over and above that there's additional.... Maybe it's some of the stuff that Mr. Béland is talking about if there's an additional way to measure, like we do with every other program that we transfer from the federal government to the provincial government. We're transferring money all the time.

Would it be worthwhile to look into having it over and above the present equalization? If we increase the health care budget by 10% or 15%— I think we did say we would by 10%—is there some other mechanism besides testing the equalization? Obviously, from your point of view we shouldn't fool around with it too much.

[Yves Giroux]

If there's a specific purpose that the government has in mind—for example, improved health outcomes—it certainly is possible for the federal government to introduce such transfers. As I said before, Parliament can deem Mondays to be Fridays, so it can certainly do many more things than that. But that's an issue for politicians and legislators to debate.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP MacDonald.

I'm looking at the time, members. It is our practice on this committee that when we don't have enough time for a full round, we split the time equally. I'm looking at about 16 minutes, so it would be about four minutes per party.

We will start with the Conservatives.

MP Morantz, go ahead, please.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you.

Mr. Giroux, earlier in our discussion you mentioned, and I believe I'm right on this, that the transfers for provinces, whether they be equalization, health or social, are essentially without strings attached. The province gets this money and they can allocate it as they wish.

Recently, there's been some back-and-forth in the media over the health transfer. I noted that recently the health minister, Minister Duclos, was cited as saying in an article that Ottawa was ready to commit to additional health care dollars for the provinces and territories, but that this new money would come with conditions, which would include—so it's not an exclusive list—expanding the use of common key health indicators in building a world-class health data system for the country.

That statement seems inconsistent with your understanding of how this works. I'm wondering if you could comment on that. Does the federal government have the right to impose conditions on the provinces as to how they use these monies?

[Yves Giroux]

My understanding is that the CHT, CST and equalization are unconditional transfers, but given the needs of provinces, it's fair to assume that all of the money transferred to provinces for CHT goes to provinces. On whether the government has the capacity to do conditional transfers, again, I'm not a constitutional expert. I think there's as much politics in that as there are constitutional issues. That's why I'm happy to say that I cannot comment much more than that.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Mr. Giroux, after talking to you over the last years, I'm convinced you are an expert in everything.

[Voices]

Oh, oh!