Government Operations Committee on Feb. 1st, 2011

[The Chair, Liberal, John McKay]

Ladies and gentlemen, I see a quorum.

I'd like to welcome all colleagues back to the government operations committee in this new year. This is our first meeting.

We're more than pleased to welcome to the committee Mr. Page and his colleagues. I'll leave Mr. Page to introduce his colleagues as he sees fit.

[Ed Holder, Conservative, London West, ON]

A point of order, Mr. Chair.

[The Chair, Liberal, John McKay]

Yes, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Mr. Chair.

Welcome back, everyone.

Just quickly, I want to say that Chris Warkentin would have been here today, but he's having a baby.

[Voices]

Oh, oh!

[Ed Holder, Conservative, London West, ON]

Only a man would say that.

[A voice]

His wife's doing all the work.

[Ed Holder, Conservative, London West, ON]

She's doing all the work--as is typical in most households. But Mr. Warkentin sends his regards.

Mr. Chair, the reason I've called a point of order is this. I'm always delighted to hear from the Parliamentary Budget Officer. It's great to have him here again.

I'm not normally part of the steering committee, so I'm basically speaking on behalf of Chris Warkentin, if I may.

The principal part of the steering committee is to establish the agenda for the timeframe going forward. It's done in consultation amongst members around this table, through their steering committee representatives.

I was struck by the fact that we only found out that the Parliamentary Budget Officer would be here.... As I said, while I welcome him here, and he's always welcome at this committee, I just found it very strange that the decision had been made. I do know, from the standpoint of the Conservatives, that a phone call was made by the chair to our steering committee representative, and at that time he was advised that the Parliamentary Budget Officer was going to be speaking.

I know that Chris Warkentin had a comment that, from the standpoint of timing and all, whether or not it was the right time to have the Parliamentary Budget Officer here in light of the budget timeframe...and maybe it would have been better after that. But when he spoke to the chair--this is what Mr. Warkentin said to me, and I apologize that it's third-hand--the comment from the chair to him, with regard to the Parliamentary Budget Officer attending, was that, well, you'd better find it out from me before you read it in the newspapers.

And you know what? That was true. The call was appreciated. I can't speak for the other colleagues on whether they were consulted in advance--perhaps they want to have a comment on it--but it just strikes me....

I'm not sure I'd call it condescending, because that is not the chair. That is not the chair I've come to know and respect. But it strikes me that it's just inappropriate, in the role of this committee and the work that we're trying to do, to go around the steering committee in terms of setting an agenda like this.

I'm quite frankly troubled by it. I know that my colleagues on this side of the table are troubled by it. This is no disregard to the PBO being here. Frankly, as I said, he's always welcome. To me, the issue is making determinations ahead of the committee, on behalf of the committee, that should be the prerogative of the committee. I just feel, from our standpoint, that's been taken in a direction that is not appropriate and doesn't show regard for the hard work of this committee and the important work that we have to do.

Those are my comments, Mr. Chair.

[The Chair, Liberal, John McKay]

Are there any other comments from colleagues?

Well, it is a point of order, and I'll respond to the point of order.

As you know, we did have a steering committee meeting. We had no agenda set as of when we left, and we had six meetings coming up. I couldn't leave the agenda empty. The Parliamentary Budget Officer did issue a report, last month now, which is four-square within the mandate of this particular committee. It speaks to a specific study that we are doing, the translation of which will be available at the end of this week.

Like you, we appreciate the work that the Parliamentary Budget Officer does on our behalf. I did speak to as many colleagues as I could over the course of the week prior to our return, and it seemed to be a consensus that Mr. Page would be invited.

I did make several efforts to contact Mr. Warkentin. And I did make the comment, because I believe in the collegiality of trying to work with people prior to any media issue. The media were actually quite interested as to what we were going to be doing for the next few weeks.

So it was an effort on my part to make sure that we had something on the agenda. As I say, it's four-square within the mandate. The report is timely and is of relevance to us.

[Ed Holder, Conservative, London West, ON]

I'm not trying to debate the chair, but I thought, frankly, that the whole issue on which we have the Parliamentary Budget Officer, that study, was already wrapped up, and that the report had been written and, I believe, sent to translation.

This is the third time the Parliamentary Budget Officer has been here, and it just strikes me--and I've noted what you said--that there seems to be a consensus. I don't know. Again, I'm just speaking to the principle of this as much as anything. So I'd like to ask, if I might, if the other members opposite want to comment on whether there was in fact a consensus to have the Parliamentary Budget Officer here or was it actually, from the standpoint, your determination to do so?

Go ahead, please.

[The Chair, Liberal, John McKay]

Ms. Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Mr. Chairman, I would not want us to spend too much time on this, as Mr. Page is here and the important thing is to ask him questions on his report. I would simply like to remind you that before the break, we committee members decided that we had to denounce the lack of information on departments available to the Parliamentary Budget Officer. On two occasions I moved a motion to that effect.

We must not forget that the Parliamentary Budget Officer is the representative of members of the House of Commons. On behalf of the members he must report to the House on expenditures. On two occasions, this committee supported a motion I moved regarding the fact that he was unable to obtain information. So, he was asked to go back to the drawing board and attempt to obtain this information. It is as a result of this type of motion that we now have the Parliamentary Budget Officer before us. I simply wanted to remind everyone of this.

The Bloc Québécois supported Mr. Page's appearance.

Mr. Chairman, it was a very good idea.

[Ed Holder, Conservative, London West, ON]

Thank you, Mr. Chair.

I do not disagree with my colleague from the Bloc about the motions she put forward because she felt it was important to get more information. That's not my point, though. My point is that the chair took a prerogative, and I would ask members opposite if that is what we deem the role of the chair to be. Is the role of the chair to make arbitrary decisions without the consent of the steering committee?

I'm not suggesting that the information the Parliamentary Budget Officer offers is not valid. I'm suggesting to you, though, that when the chair takes a prerogative without going through the steering committee, it strikes me that we're going to the very heart of what our parliamentary process is about. So when an arbitrary decision is made, I am troubled by that, and this is a point of principle that I stand on.

Madam Bourgeois, I am not talking about the merits of what the Parliamentary Budget Officer is going to say or has said in the past. I'm talking in terms of the principle of the role of Parliament and the role of the steering committee. I think our role has to be one of being supreme in terms of being able to effectively conclude our own destinies. We work through the chair, but I think we come to the point where the chair has a role, but through the steering committee.

[The Chair, Liberal, John McKay]

Unless there are other interventions, we'll just take note of Mr. Holder's concern, and he can raise that at the subsequent meeting of the steering committee. We'll proceed with Mr. Page afterwards.

Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chair.

I just want to note for my honourable friend that we've had kind of a varied fashion of developing our agenda, and we've had some steering committee meetings, but they haven't been on a regular weekly basis, for example. They've been called at times.

Also, we've had situations in which the committee has indicated its wishes, and I think the committee has indicated that it wanted to hear Mr. Page. I'm anxious to get to this, and I think we can see from the interest today that it's important we do so. I think it's important to Canadians that we have this sort of report and that we get on to the discussion at hand and that we perhaps save this discussion for a steering committee meeting.

[The Chair, Liberal, John McKay]

Thank you, Mr. Regan.

Not seeing any other interventions, I'll invite Mr. Page and his colleagues to present.

I was going to say welcome, Mr. Page, but maybe the welcome is a bit mixed.

[Kevin Page, Parliamentary Budget Officer, Library of Parliament]

Thank you, Chair.

I have a brief introduction. Mr. Sahir Khan is the assistant parliamentary budget officer for revenue and expenditure analysis. Jason Jacques is the author of one of the papers we're talking about here today; he's a senior analyst for us on the revenue and expenditure side. And Dr. Mostafa Askari is our assistant parliamentary budget officer for economic and fiscal analysis.

Thank you, Chair and committee members, for the opportunity to appear before you today in support of the committee's ongoing review of the government's operating budget freeze announced in Budget 2010.

The Parliamentary Budget Office released two notes for parliamentarians and Canadians on January 20, 2011. One note is entitled “A Comparison of PBO and IMF Projections” and another is entitled “Monitoring Update on the Government's Operating Freeze”.

The first paper provides some fiscal planning contexts for the government austerity measures — including the three-year operational freeze.

It says both the PBO and IMF are projecting deficits over the next five years that are cumulatively higher than the government of Canada projections. Indeed, the IMF estimates a cumulative deficit of $145 billion; the PBO estimate is $140 billion — and Finance Canada estimates that there will be a $107 billion cumulative deficit.

PBO and IMF analyses indicate that the current deficits are largely cyclical, meaning that as the economy recovers the deficit will decline, but that there is a structural component to the deficit which will continue to exist even when the economy returns to its potential.

Both the PBO and IMF are calling on the federal government to produce long-term fiscal sustainability analysis. Notwithstanding the recent and projected deficits resulting from the recession and the deficit-financed stimulus program, it is the view of the PBO that the major fiscal challenges facing the federal government relate to the challenges of aging demographics and relatively weak productivity growth, which are not addressed adequately by temporary freeze measures.

Budget 2010 announced three measures to reduce the rate of growth in operating spending. Collectively, these initiatives are referred to as an operating freeze and are expected to save $6.8 billion over five years. This includes $300 million in 2010-11, rising to $900 million in 2011-12 and $1.8 billion in 2012-13. Supplementary estimates (B) 2010-11 contained references to 51 reductions in departmental and agency budgets, for a total of $180 million in 2010-11 relative to the planned $300 million.

The second paper provides an assessment of the strategies used by a select group of federal departments to manage the impact of the government's operating freeze on human resources. According to the public accounts, personnel expenditures represent about 67% of operating expenditures. The analysis suggests that departmental business planning may not be aligned with planned resources set out in the 2010 budget.

The President of the Treasury Board has noted that public service attrition will be a primary mechanism to achieve the operating freeze savings targets, observing that approximately 11,000 public servants vacate their positions each year. Using publicly available data for 10 relatively large federal departments from the 2010-11 reports on plans and priorities documents, we note that the cumulative reduction over three years amounts to about 1,100 employees. This figure is well below the annual attrition figure of 11,000 highlighted by Minister Day.

Of the eight departments that provided PBO with the requested information on human resources, most departments identified budget constraint as a key factor in human resource planning over the medium term. Only one identified a concrete strategy to address its impact.

As you are aware, this committee and the PBO have requested details regarding how the planned operating freeze would be achieved over the projection period. The government indicated that this information is a cabinet confidence and will not be released to the public.

Parliamentarians may wish to ask the government to provide the strategy to achieve the estimated operating savings in the 2011 budget and ask departments and agencies to outline their plans to achieve their respective three-year savings contributions in their 2011-12 reports on plans and priorities.

It is our view that this would be similar to the approach the government took in its economic action plan, where the two-year stimulus strategy was outlined in the 2009 budget, including additional planned resources for government programs, before Parliament was asked to provide financial authorities. The transparency requirements for parliamentarians for stimulus should parallel those required for austerity measures.

The PBO also wishes to note that this government provided Parliament details on spending restraints by department and agency in 2006, prior to parliamentary approval of financial authorities, as did the previous government in 2005 in its expenditure review exercise. This raises the question as to why the application of cabinet confidence with respect to restraint measures appears to have changed in a relatively short period of time.

Thank you for this opportunity to speak and to serve this committee. We would be honoured to address your questions.

Thank you very much, Chair and committee members.

[The Chair, Liberal, John McKay]

Thank you, Mr. Page.

Madam Coady, for eight minutes.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much.

Thanks again, Mr. Page, to you and to your honourable colleagues for joining us today and for providing the parliamentarians with the analysis that you have. We certainly do appreciate the work you've done and the clarity with which you've performed your task.

I have a number of questions for you today, but I'm going to start with what I found to be very interesting: the projections by the IMF, the International Monetary Fund. In reviewing your report, you talk about the fiscal outlook comparison. Looking at what the IMF has said, based on their projections of December, what the PBO has said, and then what Finance Canada has said.... Actually, you've said that this year we're going to have less of a deficit than the finance department has said we will have, so it's going to be interesting to see how that comes out.

But I'm looking more towards 2015-16, because I think that's where Mr. Flaherty...even in yesterday's Globe and Mail, there was a report talking about how balanced budgets are not based on “crossed fingers”.

So I'm looking at what the IMF, the International Monetary Fund, is saying, and what our Parliamentary Budget Officer has said. Looking out in the five-year period, you're still showing a deficit, as is the International Monetary Fund, yet the finance department is saying no, that we won't have a deficit, that indeed we're going to have a surplus.

Again, Mr. Flaherty says it's not through “crossed fingers”, so I'm concerned. How do the PBO and the IMF arrive at their figures? Would you have any idea of how the finance department came to their conclusions?

[Kevin Page]

Thank you for the question.

If you look to the medium term, we should probably start by saying the IMF, the PBO, and certainly the Department of Finance are saying the deficits will decline. I think we're all saying, for the most part--certainly the IMF and the PBO are saying--that a large part of the current deficit is cyclical, which means as the economy recovers it will go away. Both the PBO and the IMF are saying there's a small structural component to this deficit, which will not go away even when the economy recovers back to its potential, which for both the PBO and the IMF is about in the timeframe of 2013-14, so we're still showing a deficit when the economy is back to its potential. We've closed this outward gap but we still have a deficit.

The primary differences between the PBO's forecast and the forecast of Finance Canada is on the expenditure side. One of the differences is the issue we're here today to discuss, the operational freeze. I guess what we are saying is until we see the plan, we're not prepared to say that the operational freeze is achievable.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

That's exactly where I want to lead. You are saying it's really in the planned spending freezes. I think Mr. Flaherty said yesterday that it's going to be achieved through the planned spending freezes and the end of the stimulus funding, so I want to get to those planned spending freezes.

As you know, we're supposed to have $300 million in 2010-11. So far we've seen about $180 million reflected in estimates, so I'm reflecting on what you said on page 3 of your report. It says that:

Overall, there is limited evidence that current plans will meet the President of the Treasury Board’s public service attrition target (i.e. 11,000 full-time positions per annum).

This is one of the main components: Mr. Day has said we're going to have approximately 11,000 public servants leave their positions, and that's one of the ways we're going to contribute to this freeze.

Could you speak to why...? If Mr. Day's figures on attrition are off by so much, is it safe to say the Conservatives are going to meet their budget freeze estimates this year and going forward?

[Kevin Page]

We would all benefit by seeing what the overall, top-down plan is for expenditure restraint, how much of the savings of $1.8 billion, ongoing two years out, is achieved through attrition, how much through other measures, and again, what will the impact be on service levels.

Just from looking at bottom-up data, looking at department's HR plans, we don't get the sense—we looked at 10 departments and we see cumulative reductions of 1,100—that there seems to be at least a concerted plan early on that they're going to achieve all these savings through attrition. If you add up those 10 departments, we're talking about 160,000 employees, which is a large part of the core public service. It does remain to be seen that there are other aspects to the plan that we haven't seen in terms of savings, but again, we would like to see the plan.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Absolutely. I think I speak for this committee: we would like to see the plan too. We've been asking deputy ministers those very issues. It's quite critical.

I note one of the departments, the corrections department, for example, didn't furnish you with the information that you require, and certainly that we require, to get a good sense of how many more employees they're going to need for the Truth in Sentencing Act.

It is interesting to note that Statistics Canada published figures back in 2007 on the public service attrition rate, and of course they haven't reported back since that time. That would play an important role in knowing the impact on the operating budget freeze.

I want to go to a third point, and that is something you raised in your opening comment. This is on cabinet confidence. We have heard this is quite an issue, and that's one of the reasons why you're not getting the information you need.

You mentioned that in 2005 the Liberal government at the time published all its planned cuts by ministry and by business line. It was even on a website before those cuts were actually made.

If it wasn't a cabinet confidence in 2005, why do you think it's a cabinet confidence in 2010-11?

[Kevin Page]

I don't have an explanation for why it is a cabinet confidence, which I think is an important issue for members.

The current government also released in its first year, 2006, the fall 2006 spending restraint measures before Parliament was asked to vote on authorities. Again, I think the situation has changed.

If I could, I would just like to add that Correctional Services Canada has subsequently given us a copy of their human resources plan, and we also did get a copy of the plan from the RCMP. They did come after we released the report.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you.

What exactly did you ask the Conservative government? What information did you ask them for? On how many occasions did you ask? When did you make these requests? When did they finally get back to you? What exactly was their response?

That is going to be important for this committee because we're going to have to start pushing for this information as well.