Foreign Affairs Committee on April 25th, 2012

[The Chair, Conservative, Dean Allison]

Pursuant to Standing Order 32(5), the Department of Foreign Affairs user fee proposal relating to Passport Canada was referred to the committee on Thursday, March 29. I want to welcome our officials from Passport Canada. They are going to talk to us and give us a bit of an update on what's going on.

From Passport Canada, we have Christine Desloges, who is the chief executive officer. Welcome, Christine.

We have Lisa Pezzack, who is the director general, policy, research and communications. Welcome, Lisa, to you. And we have Michel Brunette, director, resource management and compliance. Welcome to all of you.

I believe, Christine, that you have an opening statement. Then we'll take some time to ask questions, going around the table. I'm sure you know how everything works here, so we'll turn it over to you. The floor is yours.

[Christine Desloges, Chief Executive Officer, Passport Canada]

Thank you very much, Mr. Chair and honourable members of the committee.

I'm delighted to be here today to speak to you about Passport Canada's fee-for-service proposal, the result of two years of inclusive public consultations under the User Fees Act.

I will begin with an overview of Passport Canada's operating environment and the challenges we face from a business point of view. I will then outline our accomplishments in preparing and consulting on our fee-for-service proposal.

Passport Canada is one of the most visible services offered by the Government of Canada. Last year, we issued more than 4.8 million passports to Canadians, and more than 99% of our clients received their passport on time or earlier.

Passport Canada is a self-funding special operating agency working on a 100% cost-recovery basis. We are funded solely through the fees paid by passport applicants. These fees have not increased since 2001, except for a $2 postal fee increase in 2005. And yet, the business of issuing passports is much different today than in 2001. Over the past decade, Passport Canada has more than doubled the number of passports issued annually. Today, 67% of Canadians hold a passport.

Passport Canada runs a deficit on every booklet issued. A fee increase is needed to support our move to the e-passport, to bolster our ongoing fight against identity fraud, and to support our shift from a five-year to a 10-year business cycle.

When I speak about a business cycle, it is because, as a cost-recovery agency, Passport Canada functions more like a business than like a conventional government department. We use activity-based management to monitor and track the actual cost of each part of our operations.

Over the past decade, we have streamlined our business processes, making effective use of technology, and have found operating efficiencies wherever we could. However, our existing fee structure has fallen out of step with our business realities, and it cannot support the investments needed to keep pace with the advances in technology, international standards, and recommended practices. These concerns were raised by the Office of the Auditor General in 2005, and were reiterated by the public accounts committee in 2006 and in 2008.

The national roll-out of the ePassport and the implementation of its associated technology is a very complex project. Adopting the ePassport requires the creation of an entirely new passport booklet. We must build up an operating inventory of blank booklets.

Producing the ePassport also means replacing our printing technology across Canada, as well as IT system changes. Moreover, to ensure consistent service to Canadians, staff here in Canada and in our missions abroad must be trained in the new technology.

I will now move on to a snapshot of our User Fees Act process.

We began by consulting Canadians about our services through a website questionnaire, and we received input from more than 7,000 Canadians. We involved external stakeholders by organizing round table sessions with representatives from consumer and industry groups. More than 70 non-governmental potential interest groups were also invited to provide input through a letter campaign. We believe that these consultations and outreach initiatives provided an accurate overview of Canadians' opinions and preferences.

Mr. Chair, I can assure you that we listened closely to what our clients and stakeholders told us during our consultations, and I'm pleased to report that the results highlighted Canadians' satisfaction with Passport Canada's services.

Further, there is widespread support for the 10-year passport. About 80% of Canadians said that they will opt for a 10-year validity booklet, but many still want the option of having a five-year e-passport booklet as well.

So we will also continue to offer Canadians the option of a five-year validity booklet at a lower upfront cost.

Canadians told us they value being able to travel freely to many destinations around the world, without the need for costly visas. That is why, once its technology and the new security features were explained, most Canadians expressed a favourable view of the e-passport, citing the need to comply with international practices and stay at the forefront of passport security.

Canadians clearly indicated that they support a reduced price for children's passports and this is reflected in our proposal. Children's passports will still be valid for five years and fees will remain at 60% of adult five-year passport fees. In preparing our proposal, our goal was to keep the fee for the 10-year ePassport as low as possible.

Under our proposed new fee structure, the 10-year ePassport will cost $160, meaning that it will actually cost less per year than the current passports. The 5-year ePassport will however cost more per year. In addition to our consultations, we conducted an international comparison. With this proposal, Canada compares favourably to other countries despite being in the unique position of operating on a fully cost-recovery basis, contrary to our international counterparts.

After listening to everything Canadians told us, consulting with consumer and industry organizations, and evaluating passport services in other countries, we published our fee-for-service proposal on November 10, 2011. We invited Canadians to provide input on the proposal until November 25. During that period over 7,000 people visited the web page, and 56 provided input.

Passport Canada replied to all the input by mid-December within the prescribed timelines. As per the User Fees Act, those who submitted input were allowed to request independent advisory panels if they were unsatisfied with our responses, and no requests were received.

This brings us to the parliamentary tabling of our proposal, which we believe will best serve the interests of the millions of Canadians who depend on Passport Canada for reliable, secure, and internationally respected travel documents. Our organization prepared a balanced and comprehensive fee-for-service proposal. The proposal accurately reflects our costs and puts forward a fee structure that will allow us to move to a 10-year business cycle.

After more than a decade without increasing passport fees, the new fee and service structure will allow us to modernize services and improve the security of the passport program, while ensuring the financial sustainability of the organization. Thanks to the implementation of the ePassport, Passport Canada is ensuring that Canadians will have travel documents that are secure and highly respected the world over.

Passport Canada is working closely with its public- and private-sector partners. In order to ensure a timely deployment of the ePassport, the months ahead will be critical. Passport Canada will ensure that services to Canadians will not be affected as we transition to the new technology.

Thank you, Mr. Chair. I will be pleased to answer any questions you and the committee members may have.

[The Chair, Conservative, Dean Allison]

Thank you very much.

Madame Laverdière.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much, Mr. Chair.

I thank Ms. Desloges for this very interesting presentation on an important topic, a service a large number of Canadians have access to and need on a regular basis.

My first question concerns transfers to consular affairs. I note in particular that regarding the 10-year passport, $25 consular fees continue to apply. We may assume that people who opt for the 10-year passport will be making half as many passport applications. This will thus significantly reduce the amounts that are transferred to consular affairs. Can you tell us a bit more about that, please?

[Lisa Pezzack, Director General, Policy, Research and Communications, Passport Canada]

Of course. The consular fees do not come to us. They go directly into the fund—

I'm going to have to use the English expression—Consolidated Revenue Fund.

Consular affairs are a departmental responsibility and this has no impact at all on our program. However, in connection with the consular program, it is up to them to decide whether they want to impose a fee change, in light of these circumstances.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much.

I do understand that Consular Affairs, which is still financed significantly from this amount of money, will get less money from Passport Canada. On a related topic, numbers have been coming out that not all the money received for the consular fee was transferred to Consular Affairs . In the past, some of the money—at some point numbers were flying, $30 million, I think it was—collected for consular fees didn't go to Consular Affairs and stayed in passport services. However, then we saw numbers that it was the other way around or something like that.

What kind of measures are you taking to make those figures available to everybody, so that we can look at the situation exactly and understand it well?

[Lisa Pezzack]

We don't have any control over the arrangements between the department and Finance and Treasury Board in terms of how much money is then transferred to the Consular Affairs section of the department, but I can assure you that the $25 fee is deposited directly into the Consolidated Revenue Fund from our program when it is collected.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

So if I understand well, it means that some of the money collected for consular fees may not go to Consular Affairs.

[Christine Desloges]

I think that what we have said is that the money goes directly to the government's Consolidated Revenue Fund.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

I still have time, Mr. Chair?

Three minutes, thank you very much.

I have a question on the issue of passport security. I've seen a lot of questions and I've seen also that when you surveyed Canadian citizens there were some concerns about the security of personal information. I would like you to comment, if possible, on the measures taken to....

[Lisa Pezzack]

A number of features protect the security of the information. The difference between a regular passport and an electronic passport is that this has a chip in it. This is what it looks like. It has a little gold thing on it. Other than that, it's exactly the same.

The information that goes on the chip is exactly the same as the information that's already on page 2 of the passport, including the photo. Then the information is put on the chip and it's locked, and as part of that locking process, a digital signature is put on that chip that other countries will then be able to verify with the ICAO public key infrastructure to ensure that the information was put on once and hasn't been tampered with.

There are different kinds of RFIDs, radio frequency identification tags. The kind of card that is in this is a card that has to be read within 10 centimetres, and there's also what we call basic access control so you have to read this machine-readable zone on the passport and it has to be open. So you can't skim the information from it. We're quite confident that the information is protected once it's put on the chip, and that it can't be read and picked up by somebody who shouldn't be reading it.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much. That's quite a good explanation.

I have time for one last question.

I understand that it's a complicated process, and it's timely, and it needs to be done right. That's absolutely essential. Still, I think Canada is the last of the G-8 countries to adopt such a passport. Can you explain why?

That's not an aggressive question, by the way.

[Christine Desloges]

That is an excellent question. After the events of September 11, 2001, we had to strengthen our security procedures. First, we brought back to Canada all of the production of Canadian passports that was being done all over the world, in order to have better control over the production of the passport, which is a document. Secondly, we introduced facial recognition technology which allows us to compare the photo of the new applicant with what we have in our database. We now have 21 million files. We have to confirm whether the person making the application is really the same person as the one we have in our databases, or whether we are dealing with identity fraud, which is an increasingly frequent problem. We have made the passport issuing procedure more secure. Naturally, there has been an increase in the number of applications with the IVHO, or WHTI in English, the Western Hemisphere Travel Initiative, which you are all familiar with. Five years ago, there was an increase in passport requests when the American government started requiring that Canadians travelling to the United States have a passport.

This slowed us down a bit but allowed us to develop, in 2009, a pilot project for the issuance of ePassports for special and diplomatic passports. We issued 50,000 ePassports and so we were able to test the electronic passport technology and determine the most effective ways of implementing it. We also had to look for funding for the issuance of ePassports. We dipped into the 2008 and 2010 budgets for a government credit margin so as to begin implementing the electronic passport. We are in a consultation period under the User Fee Act, which will allow us to reimburse that loan. We are systematically rolling out this ePassport. I can assure you that we are doing everything in our power to accelerate its implementation.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to turn it over to Mr. Williamson, from the government.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you, Chair.

Thanks for being here.

I'm actually quite pleased about this announcement of a 10-year passport, but I have a couple of questions.

When do you expect the delivery of this? When will Canadians actually be able to get hold of a 10-year passport? What's the delay we're looking at, and what are the challenges you're facing in that period?

[Christine Desloges]

Perhaps I can take you through what we need to do.

I should say that the next few months are going to be critical. As I mentioned in my opening statement, we need to create a brand new book. We also need to build inventory. Last year we produced 4.8 million passports. We have to have sufficient inventory to be able to deliver this passport from coast to coast to all Canadians.

We need to bring in some updates to the information technology software, and that's well under way. We also need to procure some equipment, and that process is well under way. We actually expect the equipment to be there soon.

Then we need to roll it out, phase by phase, across the whole country, and then we need to install it in the major plants we have. We have two printing plants, one in Gatineau and the other one in Toronto. Finally, we need to do the training across the country.

We also need to be aware of the fact that, as we are cost recovery, we need to make sure that we balance demand with supply so that we do not waste anything. So we have to do a gradual elimination of the old passport and an introduction of the new one. We're working very carefully with the private sector as well as with our partners in government to ensure that this will happen as quickly as possible.

We anticipate, to answer your question, that we will start the rollout at the end of the calendar year. At that point, we will be issuing both an e-passport and a non-e-passport for five years. We'll roll it out across the country, and when we are in a position to offer it to all Canadians, we will roll out—likely in the spring of 2013—the 10-year e-passport to all Canadians.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you. That was very helpful, particularly drawing down the current stock.

This is actually a big issue. I have a border riding. I'm right next to the state of Maine. In fact, I have an island in New Brunswick southwest, Campobello, with 400 or 500 households, and nine months of the year there's no direct link to Canada and to get to the rest of the riding it's an hour's drive through the state of Maine. So a passport is not a convenience. It is a requirement for these citizens, as for many others with blood ties on both sides of the border.

Can you talk to me about the cost. Why $160? Why not similar fees as to what we're saying today? I recognize there are costs that go into it but it's also one where.... You're going to tell me that there are more costs to produce it, and I understand that, but why are the fees so high? That's probably the biggest issue all members of Parliament are going to get. Why are we paying so much now for a new passport?

[Christine Desloges]

I think the first thing is that we have not had a fee increase in 10 years. The second part of the answer is that we're pretty much the only passport agency in the world that is 100% cost recovery. For the third part, I should say that we do activity-based management, activity-based costing, on every single process, every single channel, and every single office to make sure that we are as efficient as we can be, because we have no other source of funds than the revenues from the sale of passports and other services. We do have externally audited annual financial statements every year. In fact, the auditors are coming into our offices very shortly.

What I'd like to do is ask Michel Brunette to take us through how we put together the proposal and the fee structure.

[Michel Brunette, Director, Resource Management and Compliance, Passport Canada]

When the 10-year electronic passport was created, we had to balance the program for a 10-year period. We used activity-based management criteria, as Ms. Desloges mentioned, to determine what the costs would be over 10 years.

In addition, we wanted the cost of the child passport to remain at 60% of the cost of a 5-year passport, while keeping the cost of the 10-year passport as low as possible. We know that the 10-year passport subsidizes the child ePassport, among other things. That is, roughly, how we arrived at the $160 cost.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Chair, what's my time like?

[The Chair, Conservative, Dean Allison]

It's at two minutes.

[John Williamson, Conservative, New Brunswick Southwest, NB]

I'm curious, how do you expect this to impact employment? For example, there was, I think anyway, a ramp-up in employment post-9/11 when passports became a requirement. We saw the lines, and we saw the government, the passport office, react. Do you see administrative cost efficiencies here from a 10-year passport, in terms of staffing levels and things like that?

[Christine Desloges]

Actually, I should say that we are producing more passports now with fewer people than we were during the crisis five years ago, so we have enhanced our efficiency by introducing national workload management. We also have a national tactical response team that watches in an executive committee every week, looks at the dashboard and the demand right across the country, so as to see how we can rebalance and meet all service standards. That's what we do right now.

The challenge with the introduction of the 10-year e-passports is that we must move to a 10-year business cycle. This means that for the first five years, the demand is there, but then on year six, those folks who have a 10-year e-passport are not coming back. So the demand drops dramatically, and what you have is first applicants and children. As Mr. Brunette just mentioned, children's passports are subsidized. Not only are they 60% of the cost of an adult's passport, but they also cost us more money to produce because we have to confirm that the adults getting the passports are the custodians of the children. So in fact it requires greater scrutiny to produce children's passports. That's a significant factor.

We have to be able, in the second part of the cycle, to sustain our operations, downsize the organization, and then upsize as the clients are coming back at the end of the cycle. That's a significant challenge, which our colleagues in other countries have not met. In fact, in the case of New Zealand, when they introduced their e-passport, they went to a five-year e-passport and they doubled the price.

[The Chair, Conservative, Dean Allison]

Thank you very much.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Can I ask another quick one?