Finance Committee on March 30th, 2023

[Adam Chambers, Conservative, Simcoe North, ON]

How much will we spend on the Canada health transfer next year? Is it $49 billion? That's within $3 billion and $4 billion.

[Evelyn Dancey]

Yes.

[Adam Chambers, Conservative, Simcoe North, ON]

We're spending almost as much on debt servicing costs as we are on transfers for health care. It seems to me that the priority of the government should be to service the debt because it's grown so much. Part of the reason is interest rates, which have been driven up by a number of factors. We can get into some of them now, but we don't have time.

The Governor of the Bank of Canada just last week said that deficit spending made interest rates go higher this year. That is one of the things we're looking at. Would you agree with the previous Governor of the Bank of Canada?

[Julie Turcotte]

On that point, I will point out that the budgetary balance has improved sharply over the last couple of years following the increase from pandemic emergency supports. The fact that the budgetary balance has improved sharply also provides a signal of declining net stimulus provided by fiscal policy over that period of time.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chambers.

Now it's over to MP Chatel for the Liberals for five minutes

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I think Mr. Chambers will agree with me as to what demanding work this is, starting months and months before the date the budget is tabled. We know this because we too have lived through budget seasons at the Department of Finance.

I congratulate you on the excellent work you are doing. This was not an easy time to be doing a budget. On the one hand, you have to be fiscally prudent; on the other hand, opportunities are presenting themselves that must not be missed. I think this budget achieves those objectives.

Ms. Turcotte, you spoke just now about net debt to GDP. I would like to come back to that.

It is amazing that Canada is the country with the best net debt to GDP ratio of all the G7 countries, they being our competitors for tomorrow's economy. We also have the lowest deficit to GDP in the G7 countries.

Can you tell us more about Canada's financial health in the middle of this international competition toward the economies and the green economy of tomorrow?

[Julie Turcotte]

There are two parts to that question.

In terms of the fiscal advantage, the risk premium associated with the government's obligations, for example, may be lower. So that allows us to have interest rates in the long term that are lower than in other economies, which is an advantage for Canada.

I think my colleague wants to answer the second part of the question.

[Nicolas Moreau, Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

What I am going to say relates to the credit side, so it is somewhat like what my colleague said.

By having a lower debt to GDP, our debt repayment capacity is necessarily higher, and this means we can have a AAA credit score, which is what most of our credit scores are in the world at present.

Our premium, as compared to other countries', is therefore much lower. It is even negative, if we compare it to some countries. Our interest rates are therefore much lower. Our capacity to repay the debt is therefore also much higher, in this case.

[Sophie Chatel, Liberal, Pontiac, QC]

So we have the means to back up our ambitions, which is a good thing.

One of the issues I am very interested in is the measures for combatting money laundering and terrorist financing.

I know you are going to be in charge of preparations for the review of the Canadian system that will deal with these questions. Can you tell us more about that?

These are things that the committee is following very closely.

[Nicolas Moreau]

Yes, I can tell you a bit about that.

The budget states that we will be doing a program review, something that is mandatory every five years. The last review was in 2018. Given that the Department of Finance is responsible for the system, we are going to initiate public consultations.

An announcement will in fact be made in the near future in order to consult the public and the various levels of government to find out how we could do things better. There are always ways to innovate. As well, there have been a lot of technological developments and other factors, given these recent years, that we will have to take into account in the next review. How we support the review will be by producing a document, making recommendations to the Minister, and distributing them.

[Sophie Chatel, Liberal, Pontiac, QC]

I very much encourage you to follow all the recommendations made by the Financial Action Task Force, the FATF, which my colleagues and I are following closely.

My question relates to our investments. One of the key items in the 2023 budget really is the transition to a green economy. This means creating infrastructure and laying the foundation so our businesses and our workers can achieve outstanding success in the economy of tomorrow. Some people in Canada are interested in the opportunities to be seized for that purpose.

Can you tell us, in very simple terms, what advantages, what foundations the budget is laying? As compared to what the Americans are doing right now, where do our key advantages lie, as reported in the budget?

[The Chair, Liberal, Peter Fonseca]

MP Chatel, we are at the end of your time. It goes quickly.

We are moving to the Bloc and MP Ste-Marie for five minutes.

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

Thank you, Mr. Chair.

From my perspective, if we examine the figures provided by the Parliamentary Budget Officer, managing the debt to GDP ratio refers to the question of fiscal imbalance. This is a very important problem, but it is political, so I am going to spare you on that subject.

The government supported people during the pandemic and spent huge amounts. We in the Bloc Québécois have asked that the government eliminate the deficit in the employment insurance fund generated during the pandemic. If we look at the budget, at page 233 of the French version, we see that this will not be the case. Not only does the budget announce that there will be no reform of employment insurance, but it also announces that the workers and businesses that contribute will make up the deficit. For 2021‑22, that will amount to $25.9 billion. This year, it is $24 billion, and equilibrium will be achieved in 2030.

Can you confirm that I am reading the situation correctly?

[Evelyn Dancey]

Yes, you found the right table. I will add that the government has already reimbursed the Employment Insurance Operating Account by transferring $27 billion to it. As the name indicates, the employment insurance program is an insurance program, so it is provided that workers contribute to it. There is a seven-year period for restoring the Account.

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

Thank you for your answer. That is very clear.

I would like to add a brief comment: barely four out of ten people who lose their jobs have access to employment insurance. From our perspective, and again, this is a political question, this is an insurance policy that doesn't work. If my fire insurance policy told me that I have one chance in two of being covered, I would go and look elsewhere. In my opinion, employment insurance is not achieving its objectives.

Mr. Hammond, I don't know whether you are able to answer on behalf of the Office of the Superintendent of Financial Institutions. On the subject of risks, we see that the banks are having problems in the west and that some are going bankrupt, including Silicon Valley Bank and Credit Suisse.

How does your office see these risks and what is the situation of financial institutions in Canada at present?

[Michael Hammond, Chief Financial Officer, Office of the Superintendent of Financial Institutions]

As CFO for OSFI, I'm not in the best position to comment on this, but what I can say is that OSFI's mandate is to ensure we have a sustainable and effective financial services industry in Canada. We've had significant investments in that area, and the superintendent has taken action recently, as you will have seen, when there's a problem.

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

I gave it a try. Thank you for your answer.

Coming back to the Department of Finance, I am going to ask two questions.

First, Ms. McDermott, regarding the health agreement, are there conditions attached to the transfers? If so, what are they?

[Alison McDermott]

In fact, for the $2 billion that will be granted this year, there are no conditions. However, to participate in the five per cent guarantee, we want to have a commitment from the provinces about data collection.

This is mainly a matter of getting the provinces' cooperation in the realm of data collection, but it is also about getting information on what the provinces are already doing with their populations, to have a better description of the status of their systems.

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

So it is talking about cooperating with respect to data and showing that the money transferred is in fact going to the health care sector.

[Alison McDermott]

Yes. In fact, most of these conditions relate to the other parts of the agreement. So the conditions concerning the Canada Health Transfer are minimal and are related to this cooperation on data collection.

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

Okay. Thank you.

There isn't enough time left for my other question.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

Now we're moving to our final questioner, MP Blaikie, for the NDP.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

My understanding is that the government has made a choice to allocate $25 billion of its CERB debt to the EI account. I'm wondering if you can share with the committee what impact that has on the way the government reports either its deficit or its cumulative debt. Does it make a difference whether that $25 billion of debt is parked with the EI account or on the general ledger?

[Christopher Veilleux]

Thanks for the question. I'll hand it over to Allison.