Finance Committee on March 30th, 2023

[The Chair, Liberal, Peter Fonseca]

You have about 10 seconds or so, Minister.

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

It is probably because the CRA restarted, at the end...

We have not really come out of the pandemic, but the programs have ended. It is probably because of the audit and recovery work being done that we are getting complaints at the CRA.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister.

We're now going to our last questioner.

I have MP Baker for the Liberals.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Hello, Minister. It is a pleasure to see you. It is also a pleasure to see all the officials who are with you today.

First, I want to thank you and your entire team for the important work you did during the pandemic. It is easy to forget the volume of work that had to be done in a very short time, when so many people needed help.

As you said earlier, Minister, programs had to be created and put in place and financial support had to be sent to the people who found themselves in extremely vulnerable situations. You did that. That really is impressive. People should be proud of that work.

Minister, you were asked a question earlier about audits and I would like to come back to that.

I think my constituents in Etobicoke Centre and all Canadians who are watching us want to understand the work that has to be done and the processes that have to be followed when an audit is done. People do ask a lot of questions about audits and the amounts of money.

I am really talking here about audits relating to financial support during the pandemic.

Could you explain a little about the work that is done when an audit of those amounts of money is carried out?

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

Thank you for your question.

Since it is technical, I will let the officials answer it.

[Cathy Hawara]

I can answer you regarding businesses.

We currently have an audit program in place. The first step is to do a risk assessment. To do that, we have access to various sources of data and to the information we have. We also have tools for assessing the business information risk that enable us to evaluate those sources of information in order to determine the risk.

Once we have an idea of that, we can construct our audit plans. We started auditing very early on, in the case of the program for businesses. We began a first phase in August 2020. We used that first phase to learn more about the type of question, about non-compliance we were seeing, in order to build the second phase, which was launched in November 2021 and is still underway. We are in the process of concluding the first year and we will be starting the second shortly, in a few days.

It is a process based on a risk assessment, to make sure our resources are deployed in the right places. That process also enables us to learn and adjust our plans as time goes on. We are ready to make the results of these efforts public as they relate to employers.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Can you tell me the approximate number of businesses and individuals who should be getting audited? I am referring specifically to the financial support provided during the pandemic.

[Cathy Hawara]

I will answer the question as it relates to businesses and my colleague Mr. Lemieux can answer the question as it relates to individuals.

Some 4,401 audits are underway or have been completed. That gives you an idea of the proportion. Other audits will have to be done for the second year of the second phase. I think that in total, we are going to do between 7,000 and 8,000 audits in connection with the Canada Emergency Wage Subsidy, the CEWS.

As well, we have identified a group of applicants who falsified their applications and were assisted in doing so by a third party. At present, we have about 5,000 of these cases. These are 5,000 applicants who will be audited. So that gives you an overview of the scope of the work.

I would like to remind the committee that 460,000 employers received the CEWS.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baker.

Thank you, Minister.

Thank you to all the officials—your team here—for their testimony and for coming before our committee for this study. We really appreciate it. Thanks for your flexibility today.

Members, at this time we're going to suspend as we bring in our second panel. Thank you.

[The Chair, Liberal, Peter Fonseca]

Welcome back, everybody. We're resuming the meeting.

We have a lot of witnesses with us here for the second panel. You should have this in your notice of meeting.

With us are many witnesses from the Department of Finance. We also have witnesses from the Financial Transactions and Reports Analysis Centre of Canada, as well as from the Office of the Superintendent of Financial Institutions.

I understand that Mr. Christopher Veilleux will be making an opening statement of up to five minutes.

Go ahead, Mr. Veilleux.

[Christopher Veilleux, Director General, Management Directorate and Chief Financial Officer, Department of Finance]

Thank you, Mr. Chair.

Good afternoon, Mr. Chair and committee members. Thank you for the opportunity to present the 2023-24 main estimates on behalf of the Department of Finance.

I would like to begin by acknowledging that I'm speaking to you from the traditional, unceded territory of the Anishinabe Algonquin peoples.

Joining me today are other departmental officials to assist in providing a more in-depth perspective on the rationale and policies supporting the numbers within these main estimates.

As you know, the Department of Finance supports the Deputy Prime Minister and Minister of Finance and the Minister of Tourism and Associate Minister of Finance by developing policies and providing advice to the government with the goal of creating a healthy and resilient economy for all Canadians.

The 2023-24 main estimates reflect departmental budgetary spending of $128.9 billion. This is composed of $128.5 million in voted budgetary expenditures and $128.8 billion in statutory budgetary expenditures. The 2023-24 main estimates reflect a net decrease of $9.4 million in voted budgetary expenditures from the 2022-23 main estimates, stemming primarily from sunsetting funding related to the COVID-19 economic support and recovery advertising initiative.

Statutory expenditures are not included in the appropriation bill, as they have already been approved by Parliament through enabling legislation. However, they are included in the estimates for information. The statutory budgetary expenditures in these main estimates reflect a net increase of $18.3 billion in statutory budgetary expenditures, which is mainly due to an increase in interest on unmatured debt and a legislated increase in major transfers to other levels of government.

This concludes my overview of these main estimates for the Department of Finance. My colleagues and I would now be pleased to answer any questions the committee members may have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Veilleux.

Thank you very much to all the officials who are with us here today.

Just before we go to members' questions, I'll note that I did scan the room and speak to a number of the members about how much time we have. We will look to conclude before 1:55 because some of us have to get to another meeting, and we want to get to a couple of questions on this report at the conclusion of the second panel.

Now we'll go right to questions from members in this first round.

We have the Conservatives for six minutes.

MP Lawrence, the floor is yours.

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

Thank you very much, Mr. Chair.

Thank you to our witnesses, especially for appearing in person. I think it makes this a lot easier. We had a meeting last week that was a bit challenging, so I really appreciate it.

The one person I guess I'm missing is the Minister of Finance. Instead of making that a negative, I will turn it into a positive. I would once again like to thank the Minister of National Revenue for coming last hour. We greatly appreciate that.

I want to start with the current budget, and then I will work my way back.

The current budget is forecasting about $15 billion in savings, $7 billion of that coming from an across-the-board 3% cut. I'm a little skeptical that this will actually happen, because the last fall economic statement said there would be $3 billion in department savings, and in reality there was not $3 billion in savings. It was a bit—what's the proper word here, because I don't want to go too hard—disingenuous, because under that column, the Department of Finance put elapsed COVID savings to fill in the gap of that $3 billion in savings.

I don't think that's altogether fair, but I would like your comment on it.

[Christopher Veilleux]

I will pass that question to Evelyn Dancey, the ADM of the fiscal policy branch.

[Evelyn Dancey, Assistant Deputy Minister, Fiscal Policy Branch, Department of Finance]

I'm not quite sure about the question left with me. There's a comment about the fall economic statement. We reported $3.8 billion of savings against a $3-billion commitment.

We're quite confident the measure in the budget will result in the savings announced. A process will be led by the Treasury Board Secretariat now that the budget has been tabled.

If there's something more specific, I would be happy to try to address it.

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

When I think of savings across a department, what I think of is, perhaps, reductions in expenses, reductions in overhead and reductions in every type of cost. I don't think of its being lapsed savings from COVID benefits not paid out, but that's what the budget seems to say. Am I correct in that?

[Evelyn Dancey]

With respect to the forward-looking measures in the budget and the 3% reduction you speak of, this is very much a forward-looking exercise with the intent of adjusting the budgets of the departments and other entities that are within scope.

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

I'm sorry. No. Maybe we're confused here.

I'm looking backward. There was supposed to be $3 billion in savings from departments. There wasn't. We discussed this with officials and they confirmed that this was in fact lapsed. In other words, it was dollars not spent on COVID benefits. It was put in that line item.

Is that fair or accurate? Can you see why I might be skeptical about the department's ability to deliver on 3% across-the-board tax cuts, when they've already failed to deliver on last year's supposed cuts?

[Evelyn Dancey]

I guess all I can offer on that type of question is that there are two different savings measures announced in budget 2023. One of them is the 3% reduction in professional services, which is a forward-looking exercise. There's a second measure, which is a realigning of previously announced spending plans.

The commitment the fall economic statement delivered on was similarly of that latter category. It was a review of previously announced spending plans in order to identify amounts that were unallocated or unnecessary, or items where take-up wasn't required. They're two different types of exercises.

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

Thank you very much for that.

When we go to the forward-looking cuts, they were very scant on details. Could you flesh that out? Will there be reductions in the public service? Will there be reductions in the footprint? Where will these cost savings come from?

[Evelyn Dancey]

I won't be able to elaborate on the specific details today, because those kinds of decisions will be made in the coming months by deputy ministers and ministers, who know their businesses best.

I would point out that, in particular, refocusing government spending—this is the name of the measure you spoke of with the 3% in professional services—is a measure whose savings begin to take effect in 2024-25. It gradually ramps up over three years. That's to underline that there's time for the organizations to plan, and there's probably flexibility with respect to implications for jobs.

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

I, as well as academia, including a professor at the University of Ottawa, have some skepticism that those cuts will ever occur. In fact, many academics, as well as other individuals, have stated quite clearly that they don't believe you'll deliver on those cuts, and that even though our debt-to-GDP ratio is already increasing, it could continue to increase if you fail to deliver on them.

If, in fact, you're unable to deliver on the savings you're promising, it will almost certainly impact our debt-to-GDP ratio and put Canada in a worse financial position. Isn't that correct?

[Evelyn Dancey]

As the ADM of fiscal policy, certainly one of my top priorities coming out of the budget is to see through the savings exercise and the fiscal actions the government has just announced. I believe there's a credible process. It will be led by the Treasury Board Secretariat.

I agree with your point that a fiscally material amount of savings has been booked and that it must be delivered upon. The scale is significant to our calculations and our planning.

I think the debt-to-GDP aspect is probably a line of conversation you don't want to use up your time on, but I'm happy, if you want to, to return to that.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

Now we'll go to the Liberals and MP Baker, please, for six minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

Thank you to everyone for being here today and for your work every day on behalf of Canadians and the recent work you've been doing in a number of different areas, including on the most recent budget. Thank you for that.

I'd like to start by saying, as a continuation of the discussion that was just had about the 3%, that I had the opportunity as a member of the Ontario legislature to sit on the Treasury Board of the Government of Ontario, and we went through an exercise of trying to refocus spending. We may have called it something slightly different, but it sounds very similar to what's in this budget and these estimates.

Prior to that, I used to work for a company called Boston Consulting Group. I worked with companies that were trying to do something similar in the private sector. I know how challenging that can be.

Notwithstanding those challenges and notwithstanding the sum of money involved that you've spoken to and how important it is to our fiscal plan, I have great confidence in your ability to deliver on that. I'm looking forward to seeing you deliver against it. I just wanted to express that.

I want to ask about the net increase. I think I heard in the opening remarks mention of the fact that the net increase in the statutory budgetary expenditures is “mainly due to...legislated increases in major transfers to other levels of government”. In other words, when we say “legislated increases”, we mean increases have been passed by members of the House of Commons.

Could you provide us with a list of these transfers and the increases to each of them?