Thank you.
Good afternoon, Madam Chair, vice-chairs, and members of the committee.
I would like to thank you for having invited me and my colleagues to speak to you about the freeze on operating budgets imposed by our government as part of Budget 2010.
I would like to make a few opening remarks on the fiscal context for restraint and on a proposed framework for analysis that could help serve this committee.
I wish to note that I am making available two documents: a document that describes the proposed risk and impact assessment for spending restraint, and a document for your information that provides an update of the Parliamentary Budget Office's assessment of the government's infrastructure stimulus fund, based on data from applications received on the January 29, 2010, closing date for the program.
I also wish to note that later this week my office will be releasing an analysis of the projected employment insurance premium revenues and expenses.
I have three key messages for you today.
One, the fiscal context is challenging. Notwithstanding Canada's relatively strong fiscal performance when compared to some other countries, parliamentarians are facing two large fiscal waves. First comes large federal budgetary deficits caused by the economic downturn and the implementation of a deficit finance stimulus package. This short term wave will be followed soon after by growing costs for baby boom retirees drawing elderly benefits and health care services as well as weaker budgetary revenues due to declining growth in labour supply.
Two, there is no fiscal consolidation without pain. To avoid large unsustainable budget deficits over the long term, parliamentarians may need to choose between higher taxes, changes to statutory transfer programs and less spending on direct program expenditures. According to PBO analysis and fiscal projections, the restraint measures introduced in Budget 2010 are not sufficient to return the federal budget deficit back to balance over the next five years based on average private sector forecasts, or to address the fiscal pressures related to aging demographics.
Three, there is both a strategic opportunity and a need to strengthen the estimates review process. Recent improvements in expenditure management information and the implementation of strategic reviews helped set the stage for new levels of fiscal transparency and involvement in a decision-support capacity of the government operations and estimates committee and indeed all standing committees that support the review of departmental activities.
Budget 2010 proposes expenditure restraint on operational spending. For 2010-11, departmental budgets will not be increased to fund the 1.5% increase in annual wages, which will require reallocation from operating budgets. For 2011-12 and 2012-13, operating budgets of departments will be frozen at 2010-11 levels.
The key question for today is, do parliamentarians have the decision support information they need to exercise parliamentary oversight on the proposed operational budget freeze? I think the answer is no. In the view of PBO, my office, the Budget 2010 operation restraint measures are ill-defined. There is insufficient information available on the planned spending baseline the government has chosen. We do not know from a fiscal planning basis what it includes or excludes, relative to operational spending, nor do we have a departmental breakdown on the spending baseline.
We do not know the strategy the government will employ to implement the savings measures. Will it be broad-based or targeted? Will central agencies responsible for the provision of policy advice be restrained in the same way as departments and agencies like the Canadian Food Inspection Agency, the coast guard, or border services, which are responsible for the provision of health and safety services?
In our view, Parliament needs information and analysis in a structured and timely fashion in order to examine the risks and impacts of restraint measures. The PBO proposes the need for an analytical framework to support the work of this committee that provides a risk and impact assessment from both a fiscal and a service delivery vantage point.
From a fiscal vantage point, committee members need to know what the risks are in achieving the proposed fiscal targets. Are the savings realizable? Are they cashable? Are they dependent on reasonable levels of demand for programs or services? Are there potential downstream fiscal pressures resulting from cost deferrals related to an operational freeze?
From a service delivery vantage point, committee members need to know the risks and impacts to service levels for Canadians, from speed of service, quality, or cost perspectives. Are there risks and impacts to the longer-term service capacity of government related to changes in employment, processes, or capital levels?
To prepare this type of analysis, the PBO, working on behalf of this committee, needs access to information. From a fiscal perspective, PBO needs access to planned and approved fiscal framework and departmental annual spending reference levels--historical and projected--as well as lapsed voted authorities.
From a service delivery perspective, we need departmental strategies for savings, service level standards, and fully loaded costs for program activities for affected departments. PBO requires committee support to obtain the required information for decision support to members. A previous request for similar information made by the PBO to the Treasury Board Secretariat has been turned down. Planned approved reference levels were deemed a cabinet confidence.
In the report PBO is releasing today on infrastructure, PBO benefited significantly from the support of this committee in receiving information. We've had good collaboration with officials from the department of transportation and infrastructure. As a result, members have timely access to information and analysis on the size, type, and nature of projects in the spending profile of the infrastructure stimulus fund.
PBO is undertaking a survey this summer to examine the impact of the infrastructure program. With timely and adequate access to information required to assist the operational freeze, PBO could prepare for this committee an assessment of risk and impact of 2010-11 savings in the fall of 2010 and a similar assessment of future savings prior to Budget 2011.
Thank you very much. We look forward to your questions.
Thank you very much. We look forward to your questions.