Government Operations Committee on Feb. 8th, 2011

[The Chair, Liberal, John McKay]

Yes, we'll start it and give the minister some extra time.

Mr. Warkentin.

[Chris Warkentin, Conservative, Peace River, AB]

I think the decision was to discuss this later, but I just wanted some clarity. Are the second-hour witnesses coming?

[The Chair, Liberal, John McKay]

As far as I know, yes.

[Chris Warkentin, Conservative, Peace River, AB]

Who made the decision? This was a surprise to me, but I've been gone. Apparently it's a surprise to all my colleagues as well. I'm just wondering what the determination was.

[The Chair, Liberal, John McKay]

I'll speak to that and the clerk will speak to that at the beginning of the second hour.

Minister Day, please.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

Thank you, Mr. Chair. I also want to thank my colleagues for inviting me here today to talk about the government's plan for reducing and eventually eliminating the deficit. The plan is designed to manage government spending, monitor our program results to date and establish safeguards for the future.

The International Monetary Fund has said that Canada is an economic miracle. The International Monetary Fund is not usually given to divine pronouncements. The OECD has said that Canada's economy shines. The World Economic Forum says that Canada has had the strongest financial platform for the last three years of any other country in the world. There are significant reports by Stats Canada of over 400,000 jobs created since June 2009. I would suggest that doesn't happen by accident but by certain policies and principles being in place, but I won't take the time to go into all of those.

I'd like to get right to the point of some questions the Parliamentary Budget Officer has raised relative to our plan and make some overriding comments.

First of all, we do have a plan. It's very clear. It's laid out in a number of budget documents. The plan is one that I think you are familiar with. We show a very clear deficit reduction. We show a deficit of $45.4 billion in 2010-11, and then the next year you'll see a reduction, where it will drop to $29.88 billion. Of course, you have all these documents, I'm sure, in both official languages. That will be a result largely of the end of our economic action plan--$19 billion will no longer flow forward--and $1.28 billion in restraint measures, including operating budget freezes.

For 2012-13, we see another drop of $8.8 billion. That's due to $2 billion in restraint measures and economic growth. Then in 2013-14 it moves to $11.5 billion, finally coming to $1.78 billion in 2014-15--

[The Chair, Liberal, John McKay]

Excuse me, Minister, there is a point of order by Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Minister, these are very attractive charts, but we don't have them on screens. We don't have copies of them. We can't see what's on them.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

I can certainly make those available.

I think the member would be aware that these are also produced in the budget documents, which I would have assumed you would have. They're also online.

I'll make sure you get copies of those.

[The Chair, Liberal, John McKay]

Is there any possibility of having them during the meeting as opposed to after the meeting?

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

Sure. I'll ask that the page be reproduced immediately.

[The Chair, Liberal, John McKay]

Thank you.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

Now, in terms of the plan itself and the questions around it, Mr. Chairman, there should always be open and vigorous debate about a government's spending and its plans. The debate, however, should not be one-sided, and all facts should be brought out.

I congratulate the Parliamentary Budget Officer on being able to stand in a very isolated position and be one of a significant minority when it comes to questioning the credibility of the plan. Of course, all government plans and documentations need to be looked at, scrutinized, and examined as to their credibility.

There was one quote that was used by the Parliamentary Budget Officer related to the International Monetary Fund. Just quickly about our plan, I would like to read from the report from the International Monetary Fund, which says, “The authorities appropriately target a return to balance at the federal level over the medium run, with an ambitious and growth-friendly plan.”

Another quote, from page 3 of that report: “...Canada is the only G-7 country that virtually recouped the loss in employment (apart from Germany) and output during the recession by mid 2010...”. That's on page 3 of the IMF report. Also, I have another quote: “The rapid turnaround of activity and vigorous domestic demand owes much to the government’s rightly-sized and well-targeted macroeconomic stimulus.”

From page 13: “The mission praised the fiscal response to the crisis during 2009-10 and supported the authorities’ medium-term plans under the budget.” That is support for those plans.

I have another quote, again on page 13, that it was “noted that the March 2010 Budget was appropriately focused on balancing the budget over the medium term”.

From page 15: “From an international point of view, Canada’s overall fiscal outlook in the aftermath of the crisis stands out as among the best in the G-20.”

This is the International Monetary Fund. I would also note that the IMF predicts that the Canadian economy will return to full potential one year earlier than the Parliamentary Budget Officer predicts—that is, in 2015 rather than 2016. Finally, the International Monetary Fund predicts a much smaller structural deficit—in fact, $5 billion—than what the PBO predicts, which is $10 billion in 2015-16.

Mr. Chairman and colleagues, the plans and the economic forecasts of our government are based on a process that has been used since 1994. If you'll recall, it was not a Conservative government that started that process in 1994. That process involves a well-publicized list of a variety of economists and people who do the predicting of economic interest rates, etc. It's a well-publicized list. They're consulted every year. From that consultation, then, a decision is made in terms of what kinds of factors will go into the budget.

Now, all of those predictors, all of those forecasters, are used, and were used, in us establishing the timeline of getting our deficit virtually to zero or close to zero by a certain point in time. It was from their predictions that the plan was endorsed. I will say that it's one thing to be courageous, which I think the PBO is. But he is basing his questions in absolute contrast to all of the economic predictors with home government consults and a significant array of reports from the IMF and the OECD. It is absolutely his right to do that, but when talking about this, we need to understand what he is going in the face of, and we are in fact ahead of that reduction plan.

Now, Mr. Chair, we talked about how we are going to get there. Basically, we are into, now, a three-year operational freeze of government spending. That $54 billion of operational spending—which goes across the board—we are freezing for the next three years. We also have, as you know, in place a strategic review every year, where we ask a certain number of departments and agencies to do an overview of all of their expenses and look for 5% savings, prioritizing in each of those. We are continuing to have success in that particular program.

These are the basics of the elements we are using to make sure we stay on track, a process that, as I have said, is still to this point largely endorsed by the IMF and by all of the predictors with whom we work.

Mr. Chair, I would just close by saying, in light of comments made by the Parliamentary Budget Officer on one thing that seems to have grasped some media attention of late, that the amount of attrition we have in the federal government service—that is, public servants leaving the federal government—is largely due to retirement. It's not entirely so; they go on to other professions or leave for other reasons. Depending on which year you're talking about, it's just over 11,000 people.

Now, Mr. Chair, in his own statement of February 1, 2011, the PBO challenged that. It's certainly his right to challenge it, of course. But I want us to question and think about the accuracy of the challenge, because it's not based on fact. He makes the comment:

The President of the Treasury Board has noted that public service attrition will be a primary mechanism to achieve the operating freeze savings targets....

Well, I didn't say that, but I did say, as he said here,

...approximately 11,000 public servants vacate their positions each year.

He said I said that. I did.

Then he goes on to say, in his next point:

Using publicly available data for 10 relatively large departments from the 2010-2011 reports on plans and priorities documents, we

—meaning, that is, he himself—

note that the cumulative reduction over three years amounts to about 1100 employees.

Some people, Mr. Chair, say that in the “1100”, he was talking about something different. Well, he wasn't, because in his final sentence on that point he goes on to say: “This figure is well below the 11,000 annual attrition figure highlighted by Minister Day.”

Mr. Chairman and colleagues, a cursory survey of all documents will easily show to somebody who is not even an expert in surveying documents that the attrition rate in the federal public service is over 11,000 a year. The PBO is insisting it is 1,100. He is grossly wrong. I am not saying he has done that intentionally. I have no idea why he would perpetrate a figure like that, but when somebody is so off base—over 1,000%—on an easily attributable and documented number of over 11,000, then you have to question the methodologies. I do not question the intent; I certainly question the methodologies.

Mr. Chair, we are on track. I'm happy to report, as I have, the observations from around the world about the Canadian economy. We hope it continues. We are in a fragile global recovery, so we are proceeding with caution, but we are on track and we are going to get there, and not by slashing programs to people, not by slashing health care, not by slashing provincial transfers—we are going to maintain the transfers, and in fact, we increase them by 6%—but by freezing our own government operations, by continuing to reduce corporate taxes for small business and medium-sized and large job creators, and by maintaining efficiency in terms of our own spending.

I believe we'll get there, barring a cataclysmic fiscal global event, and that's the path we are proceeding on.

Thank you for your interest. I look forward to your questions.

[The Chair, Liberal, John McKay]

Thank you, Minister.

The first question is from Madam Coady.

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

Thank you very much, and thank you, Mr. Minister, for making yourself available for a short time this morning. Because I only have a short time, I will be concise in my questions, and I would appreciate, Mr. Minister, your being concise in your answers, just to get as many of the questions that need to be answered in as possible.

I agree with the minister on one point. I think the Parliamentary Budget Officer is indeed courageous. He's courageous to continue asking the questions that he needs to ask in order to get the answers for the Canadian people that he thinks are appropriate to ask this government for, because he has concerns about this.

You mentioned the IMF and you also mentioned the Parliamentary Budget Officer. The minister will know, and he can certainly attest to this, because it's in a public document, that the IMF also questions the financial outlook in five years' time—the plan is a whole other issue, because I don't think there is one—saying that the International Monetary Fund disagrees with the government and that we will still be in deficit.

My first question to the minister concerns the 11,463 civil servants you mentioned in question period and again this morning. You will know that the Parliamentary Budget Officer went out to talk to 10 different departments. Those 10 departments make up about half of the operating spending of the government; they are your largest departments. They represent about 160,000 public servants.

In response to the Parliamentary Budget Officer, those departments came back to his office and indicated that they have 1,133 individuals who would leave their positions. So either the department is misleading this committee and the Parliamentary Budget Officer or the government is.

That's my first question: are you talking about net? If every year 11,000 leave their positions, then we would certainly be without public servants by now. We know that you have been adding public servants.

My first question is, what departments are you referring to when you talk about those 11,463 civil servants. Is that net? And how do you mitigate the risk, if we're having 11,000 civil servants leaving this year and you have not rehired any of them?

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

Mr. Chair, there are a number of significant inaccuracies in what my friend has just talked about.

First of all, with respect, I think it's one thing to say, “I totally disagree with the government plan”; it is a factual inaccuracy to say there is no plan. We have a plan; it's documented; it's published for all to see and criticize. We have a plan. To say you disagree with it.... Absolutely. But it is factually inaccurate to say we don't have a plan.

Also, my friend talked about something the IMF said relative to five-year projections. The IMF made a number of statements, in some of which it's asking the government to look at numbers. But if she could give to me the document that says they significantly question our five-year plan, I'd like to see it. It may be there, but I haven't seen it.

Mr. Chair, on the element of attrition, I have simply and plainly said that it has been over 11,000—I think I gave the figure in question period along the lines of what—

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

It was 11,463.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

I actually double-checked that. For last year, I believe it was 11,154.

Then the PBO came out with a statement—

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

Can you give us the net number, please?

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

—saying with regard to 1,100 employees: “This figure is well below the 11,000 annual attrition figure highlighted by Minister Day.”

The media and others, quite rightly and understandably, posed that as if there is, as I believe there is, a giant gap between the two offices: first of all, the number we have through the public service, which is over 11,000, and the PBO's, saying that it's only 1,100.

I'm saying to the PBO—

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

Minister Day, would you kindly answer my question about whether it's net?

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

I'm answering the question. I've said 11,000 is the attrition figure.

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

The attrition figure. Now, when we look at the numbers of the requirement for this year alone in order for you to meet your fiscal outlook, we are going to have to have some serious discussions about what departments and how you're going to get to the attrition figures you require—the 11,000 overall—in order to meet your fiscal outlook.

What the PBO said, 1,133 individuals, is from your departments, Mr. President. So how could the PBO's numbers, when they're talking to those 10 departments saying they're not going to meet the attrition rates required by the time specified...?

This committee is studying the budget freeze and its effects, so my first question is this. The departments have told us in the fiscal outlook that there will be 1,133 individuals net whom they will lose in order to make their budget predictions. That's one thing. That's not the number that was required to meet the fiscal outlook you gave.

[Stockwell Day, Conservative, Okanagan—Coquihalla, BC]

What's the number that was required?

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

You said 11,000 over time.

The second question is, how are you mitigating the fact that you're going to be losing that number of positions, and in which departments? That's the question we're studying. For example, if we're losing a tremendous number of people in the coast guard, is that not a concern as to how service will be delivered to Canadians?