Evidence of meeting #8 for Government Operations and Estimates in the 40th Parliament, 3rd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was departments.
A recording is available from Parliament.
Liberal
The Chair Liberal Yasmin Ratansi
Order, please. We're continuing with our study on the freeze on departmental budgets, the budget envelope, and government operations. Our focus has been the public service, the service that's going to be affected, and the demographic change.
Today we have with us Madam d'Auray and Mr. Smith from the Treasury Board.
Welcome again, Madam d'Auray. You are going to be a permanent fixture here. I understand that you have some opening remarks.
Michelle d'Auray Secretary of the Treasury Board of Canada, Treasury Board Secretariat
Yes, Madam Chair.
Liberal
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
Thank you.
Madam Chair, it is my pleasure to be here today to give you some of the details concerning the freeze on departments' operating budgets announced in the March 4 budget, which the committee is studying. As you mentioned, Mr. Smith, who is the assistant secretary of the Expenditure Management Division at the Treasury Board Secretariat, is with me today. I will make a brief statement, and then I would be happy to answer any questions you may have.
During his appearance on March 22, the President of the Treasury Board talked about the government's three-point plan to return to balanced budgets by 2014-2015. I would like to briefly remind you about these three points.
The first point concerns targeted measures to slow the pace of growth of federal program expenditures. The two examples featured in the budget are the reduction in the growth of the budget of the Department of National Defence and the international aid envelope. The second point concerns a decrease in the government's operating costs. The freeze on departmental operating budgets is included here. The third point concerns a series of reviews of the government's operating expenditures. This includes strategic reviews and a review of government's operating expenditures, that is administrative expenses.
Let's now turn to the freeze on departmental operating budgets, which will be frozen at 2010-2011 levels until 2012-2013. This measure is expected to achieve savings of about $1.8 billion by 2012-2013.
This freeze applies to all federal organizations appropriated by Parliament, including departments, agencies, and crown corporations; that is, all departments and agencies in the core public administration; all separate agencies, including the Auditor General, the Information Commissioner, and the Privacy Commissioner; crown corporations that are funded through appropriations voted by Parliament, such as CBC/Radio-Canada, the Canadian Tourism Commission, and museums and galleries; the Canadian Forces; the RCMP; and other agents of Parliament.
For 2010-11, departmental operating budgets total about $54 billion. These are at the highest levels they have been in over a decade. This amount is roughly comprised of $28 billion in personnel costs, which are wages and salaries, and $26 billion in other operating costs, such as professional services contracts, telecommunications, leases, utilities such as heat and hydro, materials, and supplies.
The freeze does not apply to: economic action plan spending, which ends in March 2011; any Budget 2010 measures not included in the main estimates, which have just been tabled; new policy initiatives that could be approved by cabinet; and non-discretionary labour costs, such as parental benefits or severance pay. The Treasury Board will provide a challenge function on any proposals that may involve increased operating expenditures.
As I believe I have said in the previous presentation here, and as the President of the Treasury Board did as well, there is no freeze on wages. Members of the federal public service will receive the planned increase in wages for 2010-11, which is set at 1.5% by the Expenditure Restraint Act and in collective agreements.
Departments will be expected to cover these salary increases, as well as any other increases to their operating costs, by finding efficiencies within their own operations. In the past, departments and agencies were reimbursed for these costs centrally, but they will not be in this instance.
As we indicated earlier, there is no freeze on hiring. Organizations, departments and agencies can fill vacancies or expand staff so long as they respect the overall limits on operating spending. In other words, departments and agencies will continue to manage their workforce using all of the strategies they already use. We are confident that over the next few years, retirements and normal attrition will likely provide departments with the necessary flexibilities to manage the size of their workforce.
In fact, other than continuing the freeze on spending on travel, conferences, and hospitality at 2008-09 levels for an additional year that was included in the 2009 budget, no single line item in operating budgets is targeted by this freeze. The government has chosen this approach, rather than across-the-board or additional targeted cuts, based on lessons learned from the past.
Deputy heads are best placed to make the decisions they need make to deliver the services within their mandates and their main estimates. This is what they do; this is what we do, day in and day out. We adjust our operations upwards, we adjust our operations downwards, depending on the priorities and the mandates we are given.
In fact, we believe the freeze may provide additional incentives to innovate and find efficiencies, because with the freeze on operating budgets and the administrative review, which was also announced in the budget, these will provide opportunities for internal efficiencies and improved services. In fact, if you look at the timelines, the review of administrative services is planned for this fiscal year to be reported in the 2011 budget, and these are looking at efficiencies across the government, as opposed to department by department. So that will enable us, as a result of the recommendations coming out of that review, to consider what changes need to be made to administrative operations across the government, rather than just by looking at them department by department.
In conclusion, Madam Chair, I gave you a brief overview of the elements and components of the freeze on departments' operating budgets. This is a key component in the government's overall strategy to keep growth and spending down.
We would be pleased to answer your questions.
Liberal
The Chair Liberal Yasmin Ratansi
Thank you very much.
We will go to the first round of questions. For eight minutes, we'll start off with Mr. Kennedy.
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
Thanks very much, Madam Chair.
Thank you for your presentation.
I'd really like to get at this quite quickly. Given that you've got contractual obligations for a good part of your outlays each year—you already have your salary adjustment as an obligation, and you must have a certain percentage of the other $26 billion that you mentioned in non-salary costs—can you tell us how much of that is under obligation, or in other words isn't going to be susceptible to being reduced to make up for the freeze? In other words, there are your salary costs, and you're going to have pressures over two years, and that's 3% by itself. Have you estimated what other points of pressure there are going to be, and whether or not you have flexibility? Is there any of that kind of guideline coming from Treasury Board?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
In terms of the flexibilities, there are some fixed costs. For example, there are some fixed costs with regard to either rentals or utilities, depending on the size of the occupation. There is, however, quite a bit of flexibility when you look at professional services, when we look at transportation and communication costs. There is also some flexibility in how we manage information services. So there are some opportunities that are not what we would consider to be fixed costs, and these can be looked at by an organization, by a department.
We've also been--
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
Thank you.
Madam d'Auray, if it's possible, can you give us some indicators? It's clear you have that information. You've been helpful enough to tell us in broad strokes the divisions between labour and other. Out of the non-labour component, assuming that it's all subject to the 1.5%, on the other part, how much of it do you see as flexible and how much of it is not flexible? Can you give us an amount, roughly, that you're dealing with in terms of the expectations you're putting on departments?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
I'm sorry, what do you mean by the 1.5%? Do you mean the wage bill that is not--
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
That's correct.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
Yes, that's correct.
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
On the other part, helpfully, you're telling us that there are some parts, as you'll always see, rental and so on, which are obligations that continue into the future. Can you tell us what part is fixed and what part is flexible, roughly, from the $26 billion that is the non-labour component you've identified in your remarks?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
I will perhaps turn to my colleague to expand on that.
I think if we look at the main estimates and the standard objects, the areas that will likely provide flexibility, as I indicated, are on professional services, areas of transportation and communications. Those are where there is some flexibility, and that is by each department. You will see that in the main estimates in terms of those particular expenditure objects.
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
Okay, but can you give us today your estimate of what that constitutes? Is there a list available, either by department or as a way of guiding individual members? That would be much more efficient than us checking the standard estimates for each department. Is that possible?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
I will ask my colleague to give you a partial response to that, but in effect we would also have to go through each one of the elements per department to see what are in fact the areas that are not fixed.
If I may, I will ask Mr. Smith to add to that.
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
Just yes or no whether the information is available, Mr. Smith.
Alister Smith Assistant Secretary, Expenditure Management Sector, Treasury Board Secretariat
There's a breakdown by department and by category of spending in the budgetary main estimates, by standard object. It starts on page 1-26.
If you want even further detail, it is available online in the public accounts. You can go straight into—
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
The specific question, Mr. Smith, and Madame d'Auray, was this. Do you have identified those obligations that are flexible enough to represent choices for the minister? Otherwise, we're talking about cuts that will be done in the face of fixed arrangements. There's a smaller basket that is not fixed. We'd just like to know what that is.
Has Treasury Board identified that, yes or no? And if you have, could you provide it to us today or do we have to get it ourselves?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
They have not been identified because it is left with each organization. The votes in the parliamentary appropriations are done with each organization. Again, this was part of the approach, and it remains part of the approach. Really, it is up to each organization to make those determinations, because the votes and the amounts that are voted by Parliament are actually voted by minister and by department.
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
Thank you.
You have pressures arising from wages alone. What are the pressures coming from the other part, the fixed increases that are going to be there? We know about 1.5% on labour costs. Have you estimated government-wide the inevitable other cost increases? Those will be translated into choices for the departments. Have you looked at energy? Have you looked at other costs, within any realm of reasonableness, that are going to be going up no matter what the freeze says? Do you know what the pressures will be on departments coming from those other kinds of costs they have to reckon with? Has that been estimated by Treasury Board?
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
These costs are not estimated by Treasury Board because we do not estimate them on a normal basis.
Liberal
Gerard Kennedy Liberal Parkdale—High Park, ON
Madame d'Auray, I understand, but we're looking at a freeze, which has been advertised as flexible. But essentially the degree to which this doesn't just turn into service cuts is not in any way reckoned with by Treasury Board in advance. You're hopeful about it, you hope your deputies will do the best job they can, but there is no central understanding of how much flexibility there really is out there. That's what I'm given to understand from the two questions I've asked.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
We have a general understanding of what are the fixed operating costs of government because we look at each organization, as you will do, in the main estimates and the public accounts. We also have a fair assessment, like everybody, of what the cost of increases is likely to be, but we also—