Government Operations Committee on March 1st, 2011

[Ed Holder, Conservative, London West, ON]

And would you say that is normal practice? Is that better or worse than for any prior years?

[Sally Thornton]

It's stable for this program. It's low compared to many others.

[Ed Holder, Conservative, London West, ON]

If I might, to me the real question as it relates to students is are you concerned that we are being punitive with students in terms of their ability to repay their debts?

[Sally Thornton]

I have no concerns of that nature at all. In fact, when students look like they're going to be in default, there have been a number of programs put in place to help them better manage that debt to ultimately repay--both to prolong it, but also recent programs have helped lower the interest rate for those who are in need. The debt write-off comes when there is actual default. So first there's potential default, programs that assist the students, then there may be an actual default. There are a number of mechanisms to try to recover through other sources prior to it being written off. So no.

[Ed Holder, Conservative, London West, ON]

I would imagine that as tuition fees go up across the country there is a concern about the students' ability to repay their debt, and I find it interesting that you say that statistically your debt average is in some cases lower than other jurisdictions'. That has to become a real concern, so I applaud you for that. I think that's important.

If I might then redirect now to Mr. Smith, please, I want to make note that you said in your testimony--and I'll just look at it from here under statutory spending--that the $886 million net increase in statutory spending will not form part of the appropriation bill that Parliament is asked to approve in support of the supplementary estimates.

I just want to be clear. Maybe you could answer it this way. The supplementary estimates then, it appears to me, don't represent an increase in spending plans. It seems to me that the amount you've advised us about is within the spending limits specified in budget 2010. Can you confirm that?

[Alister Smith]

Yes, it is well within the limits from budget 2010. The point of saying that the estimates of the statutory spending are not part of the appropriation bill is just to explain that it is not part of the demand from Parliament for resources in these supplementary estimates. It's really there for information purposes. We want to reflect any changes in forecast spending for statutory purposes in the supplementary estimates for the information of parliamentarians.

[Ed Holder, Conservative, London West, ON]

Then I'd like to offer compliments to your department and staff. You've indicated that this is the smallest supplementary estimates (C) that you've had in the last three fiscal years. Did I hear that correctly?

[Alister Smith]

That's correct.

[Ed Holder, Conservative, London West, ON]

I think from time to time we're allowed to celebrate some good news. From that standpoint, I offer my compliments. It's tough out there, and there's no question there are challenges. You're being asked, like other departments, to be thoughtful, just as Canadians are being asked--no, they're not being asked, they realize the challenges they face in their day-to-day lives. We've said consistently that this recovery is fragile, but it's coming along.

We were the last country of the G-7 to get into this global recession, and by every account the first to come out of it with jobs created. I think there's some very positive news. There is certainly a demand, and taxpayers are telling us that we've got to be thoughtful with their money. I want to make it clear that it's not our money; it's taxpayers' money.

I need to celebrate that, and congratulate you and the department.

One of my colleagues opposite, Madam Coady, asked how we can be assured of spending controls. I don't know if you had a chance to properly respond to that. You seem to be very confident in what you're presenting today, but how can we be assured that the spending controls are in place?

[Alister Smith]

We can be quite confident that the operating budget freeze will control operating spending. We are setting the bar, essentially, in this current fiscal year, 2010-11, and then freezing for the next two years. Since departments have to respect their program or operating votes and cannot exceed those votes, we are quite confident that spending will remain controlled at least for program and operating votes, vote 1 for most departments.

[Ed Holder, Conservative, London West, ON]

I think that needs to be said. I appreciate that.

Madam MacPherson, a question was asked of you as it relates to the PMO's commitment to lead by example and reduce their budget by some half a million dollars, approximately. Once again, I think that's an opportunity where they need to be applauded. It's a demand that all departments are being asked to do, and the PMO is no less impacted by that.

Do you think from the standpoint of the operations of PMO, it will impact their ability to provide service through all departments?

[Marilyn MacPherson]

In my opinion, I think they will be the same as every other organization, where they will have to find strategies in order to continue to provide service. Whether you're in the PMO, PCO, or Veterans Affairs, people will have to figure out how best to be able to serve their clientele.

[Ed Holder, Conservative, London West, ON]

It's interesting, when there is a limited amount of time, you only do a smattering of each.

Mr. Lakroni, and perhaps through you to Mr. McBain, I was interested to read and understand better about the decision to consolidate the Department of National Defence in the Nortel Carling campus. I have a broad sense of the rationale based on the information you've given us. I understand that 48 locations are going to be reduced to 10. What happens to ongoing leases and the like? How do you mitigate the loss associated with that?

[John McBain, Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services]

What we look at is the portfolio view of all the requirements for the Department of National Defence. Of the 48 locations, 47 of them are held by Public Works and Government Services Canada. We are working now with National Defence to create a migration plan, which will be moving occupants out of those leases, out of some of the crown-owned space and into the Nortel campus.

To mitigate that impact, one of the things I would share with you is that the vacancy rate in the downtown Ottawa core is about 3.6%. It's a very tight market, with limited room and flexibility. By vacating some of these locations, it allows the market to refresh, to renovate those buildings. We will also renovate some of our crown-owned buildings for reuse, in that way giving us a more positive environment for taxpayer benefit.

[Ed Holder, Conservative, London West, ON]

Unfortunately, I think I'm out of time, but the question I would have asked, being given the opportunity—

[The Vice-Chair, Conservative, Chris Warkentin]

You may get a chance to do that in the next round.

Mr. Martin, if you wish to, take your eight minutes.

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you, Mr. Chairman.

Maybe I'll ask the question that Ed probably was going to ask next about Nortel. We're like-minded.

I'd like to touch briefly on four different areas in Public Works: Nortel first; then Atomic Energy; then CMHC; and then, if there's time, Natural Resources.

It seems to me that the government is always first in line when the assets of a bankruptcy are distributed. I remember that when John Manley was the minister around here, they delivered dump trucks full of money to Nortel. They got more federal government largesse than probably any corporation in history.

Why do we have to buy that property from them, now that they don't need it any more? Surely there are unpaid debts. The technology partnerships loans alone that they got far exceed the land value, the purchase price here. Did they pay back all of their technology partnerships loans, and Canadian job strategy loans, and all of those loans that weren't loans that went on in corporate welfare over all those years? Didn't they owe us a bunch of money? Why should we have to buy that land from them?

[John McBain]

Thank you for the question and the interest in the portfolio.

I can't speak to those previous loans or what was outstanding in that regard. We were invited—

[Pat Martin, NDP, Winnipeg Centre, MB]

I can almost guarantee they weren't paid back, because in direct opposition to the fact that 98% of all student loans are paid back, 98% of all technology partnerships loans were not. I doubt very much that Nortel was among the 2% who actually paid their technology partnerships loans back.

[John McBain]

We conducted an RFI in the Ottawa-Gatineau market in 2008-09 to look for an opportunity to consolidate National Defence to reduce these 48 locations. They identified as one of eight successful bidders in responding to our RFI. Subsequent to that, and before we were able to pursue it, we were invited to bid on the purchase process by the trustees in bankruptcy for the Nortel Corporation.

[Pat Martin, NDP, Winnipeg Centre, MB]

But we have a lien against it; surely whoever wrote these technology partnership loans put a lien against the assets of that company in case it never paid the loan back. Who would give multi-billions of dollars worth of loans without any security? You'd have to be irresponsible or reckless.

[John McBain]

I can't speak to the details of those loans.

[Pat Martin, NDP, Winnipeg Centre, MB]

If you don't have the answer to the question, I understand.

Next, I guess, is CMHC. My understanding is that CMHC has tons of money, billions and billions of dollars, because they charge insurance on every mortgage—and generous insurance—and hardly anybody defaults; in fact, they've been building a surplus of many billions of dollars. So why do we need to give them $793 million for them to do their job, which is to elevate the housing stock in Canada? That's why they were created and that's why we let them build up this massive reserve of billions of dollars. But they haven't built one new unit since 1993, since the Liberals ended the last social housing programs in the country. So from 1993 to today....

I just got a new mortgage. I paid $12,000 CMHC insurance on top of the purchase price; the mortgage was this amount plus $12,000. Nobody defaults on their mortgages, hardly, in Canada and they just make money hand over fist. Why do we give them three-quarters of a billion dollars to fulfill their mandate?

[Alister Smith]

I'll direct your question to one of my colleagues who has the answer.

[Sally Thornton]

Thank you; that's a good question.

As you may recall, in Canada's economic action plan up to $2 billion was provided for direct, low-cost loans to municipalities over two years through CMHC. So there are no costs to taxpayers. These are repayable loans, and all costs are recovered through loan interest rates. They've actually been used to cover what were shovel-ready projects, a lot of infrastructure, site preparation, roads, sidewalks.