Government Operations Committee on Feb. 10th, 2009

[The Chair, Liberal, Derek Lee]

I see a quorum, colleagues. We'll call the meeting to order.

Today we're going to be looking at the supplementary estimates; however, the focus is going to be on stimulus spending, as previously agreed. So for that purpose we have invited as witnesses, and we're very grateful for their attendance in relatively large numbers, individuals from Statistics Canada, who are going to help us with some of the economic theory here. Then we have individuals from the Privy Council Office and the Department of Finance.

I would ask the members to try to keep the questioning focused on the issues of stimulus spending. On the Statistics Canada side it was hoped we would be able to have a look at inputs-outputs from that proposed government stimulus spending. It's up to the members to decide what outputs are desirable, but certainly jobs, employment, would be one.

Then we'll look to both the Privy Council and the Department of Finance to tell us how they propose to get this money out the front door, whether it is business as usual or whether there is some tasking going on to ensure that the apparently urgently needed stimulus spending gets out as soon as it can.

I'm going to invite Statistics Canada to present first, and I will introduce Karen Wilson, the assistant chief statistician, national accounts and analytical studies, and Michel Girard, director, industry accounts division.

Ms. Wilson.

[Karen Wilson, Assistant Chief Statistician, National Accounts and Analytical Studies Field, Statistics Canada]

Thank you, Mr. Chair, and thank you for inviting us here today.

I would like to take a few minutes to give a brief statement about Statistics Canada's role as the national statistics agency and about a few products and databases that may be of interest to this committee.

Our mandate at Statistics Canada is to collect data about Canadian society and the economy and make information products available so that Canadians can make informed decisions and policy-makers can make informed choices. An important feature of the Canadian statistical system is that it is internationally recognized to be of high quality in terms of accuracy, and it is accessible to all users, including transparent access to the sources of data used and to the methods used to compile the information.

We constantly reflect and ask ourselves if we are doing our job well and whether the data system is adequate to answer the questions of the day. And then we react to our questioning.

In response to recent economic events we have been deliberating on a number of issues, both here in Canada and in international meetings with other national statistics agencies. First, is the data system providing enough information on the financial crisis for policy-makers to react, and is our data timely enough to give signals early enough for policy to react?

We have begun to put more emphasis on information products related to financial markets, including credit market data and the balance sheets of households, businesses, and governments of the nation.

We continue to produce the high-profile indicators such as gross domestic product, employment, and inflation, and have also begun to look at how we can adjust our data services towards more timely information on various industrial sectors.

I would like to bring your attention to three other products and services that may be of interest to the committee.

First, we publish a detailed database on the infrastructure of the nation. By infrastructure I mean roads, highways, bridges, and water and sewer systems, as well as power generation and transmission. This database includes the value of the stock of these types of assets by province and territory, as well as the average age of these assets, the value of annual depreciation, and repair and investment expenditures on these assets. This database was developed in cooperation with Infrastructure Canada.

Another product that is available on an annual basis for use by analysts is our input-output tables, and these are also available by province and territory.

The I-O tables present a comprehensive portrait of the production of goods and services by Canadian industries. For example, when a car is produced there are thousands of different parts, but energy and other services and labour are used in the process. The I-O tables can take apart the production of that car into its detailed inputs.

The tables are used to build I-O models that can be used to simulate, for a given amount of production of an industry, how much employment is potentially created and what other goods and services will be required for that production. This kind of simulation could be done for spending on roads and highways, or more generally for adding to production of any given industry.

Finally, Statistics Canada produces analytical studies using our data products on issues of significant importance to the country where we have a comparative advantage to fill information gaps. For example, a recent study on the effect of infrastructure on productivity of Canadian businesses concluded that about one-quarter to one-half of business sector productivity growth over the last 40 years was attributable to infrastructure capital.

I have a list of the recent studies related to infrastructure available and can leave it with the clerk, if you're interested.

I hope this information is helpful, and we would be pleased to answer questions.

[The Chair, Liberal, Derek Lee]

Thank you very much. It sounds as though you have absolutely framed what we are looking for.

We'll go to questions later. At this point I'm going to invite the two other institutional groups of witnesses to present, if they wish, at this time. From the Privy Council Office we have Simon Kennedy, deputy secretary to the cabinet for plans and consultation; Tim Sargent, assistant secretary to the cabinet, liaison secretariat for macroeconomic policy; and Marilyn MacPherson.

Ms. MacPherson, are you providing the opening statement?

[Marilyn MacPherson, Assistant Deputy Minister, Corporate Services Branch, Privy Council Office]

Yes, I am.

[The Chair, Liberal, Derek Lee]

Okay. Please go ahead.

[Marilyn MacPherson]

Thank you.

I have a very short statement that is specifically geared to the supplementary estimates, and then I have colleagues here who will address the budget issues.

[The Chair, Liberal, Derek Lee]

Thank you.

[Marilyn MacPherson]

Good morning, Mr. Chair.

We are pleased to meet with the members of the Standing Committee on Government Operations and Estimates. I am accompanied by Simon Kennedy, Deputy Secretary to the Cabinet (Plans and Consultations) and by Tim Sargent, Assistant Secretary to the Cabinet, Liaison Secretariat for Macroeconomic Policy. We also have other officials here to assist us, whom I will introduce if necessary.

I am pleased to appear before the committee today to talk about the 2008-09 supplementary estimates B for the Privy Council Office.

PCO's last appearance before the committee was in April 2008, regarding our 2008-09 main estimates.

As you and the committee members know, the Privy Council Office reports directly to the Prime Minister and is led by the Clerk of the Privy Council and Secretary to the Cabinet. In his capacity as head of the Public Service, the Clerk is the official link between the Prime Minister and the Public Service.

The purpose of today's appearance is to discuss the 2008-09 supplementary estimates for PCO as well as the budget issues.

PCO is requesting an amount of $10.08 million in three areas: for the Afghanistan task force; for the internal inquiry into the actions of Canadian officials in relation to Abdullah Almalki, Ahmad Abou-Elmaati, and Muayyed Nureddin; and for the commission of inquiry into the investigation of the bombing of Air India flight 182.

The first request is for $4.742 million to fund the establishment and the operations of the Afghanistan task force.

On February 8, 2008, the Prime Minister announced the creation of the cabinet committee on Afghanistan and an Afghanistan task force within PCO to better coordinate and ensure the effectiveness and success of Canada's activities in Afghanistan. The task force has the objective of providing advice and support to the Prime Minister and the cabinet committee on Afghanistan in the delivery of a strategic plan to transform Canada's role in Afghanistan. Key results to date include the establishment of six priorities for Canada in Afghanistan; re-profiled programming; establishment of benchmarks; enhanced communications and engagement with Parliament, including a tabled quarterly report: and increased civilian staffing.

The second request is for $2.944 million to fund the ongoing activities of the internal inquiry into the actions of Canadian officials in relation to Abdullah Almalki, Ahmad Abou-Elmaati, and Muayyed Nureddin.

The internal inquiry was established on December 11, 2006, under part I of the Inquiries Act on the recommendation of the Minister of Public Safety and Emergency Preparedness. The Honourable Frank Iacobucci was appointed commissioner. The terms of reference direct him to determine whether the detention of the three individuals in Syria or Egypt resulted, directly or indirectly, from action of Canadian officials, and if so, whether those actions were deficient in the circumstances, whether any mistreatment resulted from the actions of the Canadian officials, and whether there were deficiencies in the provision of consular services.

Additional funding is requested in these supplementary estimates B because of additional time required by the commissioner and his staff to complete a number of required tasks, which include receiving submissions from the Attorney General regarding proposed factual findings; preparing and sharing with inquiry participants an unclassified summary of relevant facts and receiving submissions on this summary from participants; receiving and considering submissions on the appropriate standards for the conduct of Canadian officials, based principally on a public hearing held on January 8 and 9, 2008; agreeing with the Attorney General on a report for public disclosure that would not cause injury to national security or international relations; and additional hearings on final submissions.

The third request is for $2.395 million to fund the ongoing activities of the commission of inquiry into the investigation of the bombing of Air India flight 182.

The commission was established on May 1, 2006, under part I of the Inquiries Act. The terms of reference of this commission require the commissioner, the Honourable John C. Major, to conduct the inquiry as he considers appropriate with respect to accepting as conclusive or giving weight to the findings of other examinations of the circumstances surrounding the bombing of Air India flight 182. Additional funding is requested for 2008-09 in these supplementary estimates, since the work plan had to be adjusted as a result of extensions to the hearing schedule, which were due to the high volume of documents received by the commission and to unforeseen delays in getting the documents.

In closing, I would like to thank you for giving me this time to inform you of the ongoing initiatives in the 2008-2009 Supplementary Estimates (B).

[The Chair, Liberal, Derek Lee]

All right. Is there something else from Privy Council, then?

[Marilyn MacPherson]

No.

[The Chair, Liberal, Derek Lee]

Then we'll go to the Department of Finance.

Is there an opening presentation?

Mr. Richardson, please go ahead.

[Stephen Richardson, Associate Deputy Minister, Department of Finance]

Thank you, Mr. Chair. I have a brief opening statement.

The plan will provide almost $40 billion of economic stimulus in support for the Canadian economy over the next two years. Including incremental funds from other levels of government, the total economic stimulus provided will be over $50 billion. This is equivalent to 1.9% of gross domestic product in 2009 and 1.4% in 2010.

Key federal government components of the plan include $12.8 billion for action to help Canadians and stimulate spending, including a Canadian skills and transition strategy and personal income tax relief; $7.8 billion for action to stimulate housing construction, including a home renovation tax credit, support for energy retrofits, and investments in social housing; almost $12 billion for immediate action to build infrastructure, including funding for roads, bridges, rail, small craft harbours, broadband Internet access, electronic health records, laboratories, and border crossings across the country; and $7.5 billion for action to support businesses and communities, including $1 billion for a community adjustment fund.

The plan also contains existing and new measures to provide up to $200 billion in support of the extension of financing for Canadians and Canadian businesses through the extraordinary financing framework. It takes measures to strengthen Canada's financial system, including moving forward with willing provinces on a Canadian securities regulator.

The plan is based on three major principles: the stimulus must be timely, targeted, and, where appropriate, temporary. With that in mind, the government is moving forward to quickly implement measures from the plan.

Last Friday the government tabled Bill C-10, which contained legislation to give effect to various measures proposed in budget 2009, including important income tax measures such as an increase to the basic personal amount, the upper limits for the two lowest tax brackets, and an increase to the age credit; important changes to employment insurance, such as the five-week increase for regular EI benefit entitlements for two years; and further safeguards for the stability of Canada's financial system, such as additional flexibility for the Canada Deposit Insurance Corporation.

Bill C-10 also would provide authority to make payments out of the consolidated revenue fund totalling nearly $6 billion for infrastructure, housing, and community adjustment. Together with the value of the tax and employment insurance changes, Bill C-10 provides legislative authority for approximately $11 billion of stimulus, or about half of the stimulus to be provided in 2009.

As well as moving forward without delay with the Economic Action Plan, the government recognizes the need to report on the progress made in the implementation of the Economic Action Plan. The first report will be tabled in Parliament at the beginning of March and further updates will be provided in June and December.

We welcome any questions you may have.

[The Chair, Liberal, Derek Lee]

Thank you to all the witnesses. The statements were right on the money.

We can go to questioning now. First to Mr. McTeague, for eight minutes.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Chair, thank you.

Thank you, witnesses, for being here today.

I will go very quickly to you, Ms. Wilson. Your comments here are very apropos, as the chairman has pointed out quite correctly. I guess for all of us here speed is of the essence.

In your experience, what sectors of the economy or business can receive stimulus and translate into jobs? What sectors of the economy have demonstrated the ability to do this rapidly, as opposed to several months down the road? This has been the fear of many, that despite stimulus it may take several months to finally impact where it needs to impact, especially at this very critical juncture.

[Karen Wilson]

That question is very difficult to answer from a statistical point of view. We're in the business of providing historical facts on what has transpired in the past. We do not do any forecasts, and unfortunately, the input-output models are not temporal models that can tell you anything about the timing of the stimulus. So I would have to defer that question to other experts who do that kind of analysis.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

In your historical experience, you have talked here a little bit about infrastructure. Your model with respect to the input-output tables.... I'm wondering if you could give us from a historical point of view what industries, what sectors of the economy, tend to be able to respond more adeptly to stimulus of this magnitude.

[Karen Wilson]

What input-output models can give you is a base estimate of the relative magnitudes of stimulus, and that changes over time, so we would have to go back and do a type of simulation based on queries about specific industries to answer that question.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

All right. Your comment here.... Let me take one, then: infrastructure, about productivity. You refer to a recent study on the effect of infrastructure on productivity of Canadian business, which concluded that about one-quarter to one-half of business sector productivity growth over the last four years was attributable to infrastructure capital.

Am I to take it then that you have the ability to look at a model from previous occasions, determine its effect on productivity, but you cannot make a nexus, a connection between investments by governments towards job creation? That doesn't exist? How do economists then forecast what impacts there will be, if Statistics Canada can't give that information?

[Karen Wilson]

We can give relative impact statements, but economists generally take our database and they build econometric models that build behavioural aspects of the economy into their models and then do that type of analysis.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Then what impact statements do you have relative to infrastructure that you can provide to this committee?

[Karen Wilson]

I don't have one right now in front of me, but we could respond to those questions.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Yes, would you provide them, please, through the chair?

[The Chair, Liberal, Derek Lee]

It's a huge field. The witness is probably going to need some focus. For example, a very well-defined economic sector might be an area where they would have input-output data just for that particular sector or region.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Region? Automotive and infrastructure, I think, for now, and I would invite other colleagues to suggest areas they believe would also be helpful without overburdening StatsCan. But I think you probably get the flavour of where we're trying to drive here, and I'm hoping this can be of some help.

Perhaps I could shift to the automotive sector just for a split second. You have some fairly important information that you have provided to us on that sector. I'm wondering, in that sector, in the breakdown of information about the automotive sector, if you have the ability to determine where components might be. Say, for instance, the concern I think some of us might have is that the federal government invests money in the auto sector, and at the end of the day or at the end of the line, some of the supply chain means a lot of that money may wind up offshore. For instance, products come in from China, which has obviously the unintended effect of reducing the objective of getting Canadians back to work.

Do you have information that is that precise and works its way through the supply chain, for outsourcing purposes?

[Karen Wilson]

We don't have the outsourcing specifically, but we do factor imports into the model.