Evidence of meeting #9 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 service.
A recording is available from Parliament.
Liberal
The Chair Liberal Yasmin Ratansi
It's the committee's rule to allow five to ten minutes, so if we could just not waste time and allow them—
Liberal
The Chair Liberal Yasmin Ratansi
Okay, fair enough; then you'll have less time for questions.
Go ahead, Mr. Gordon.
National President, Executive Office, Public Service Alliance of Canada
Thank you, Madam Chair.
As national president of the 172,000-member Public Service Alliance of Canada, I welcome this opportunity to appear before the government operations and estimates committee during your important study on the freeze on departmental operating budgets.
In Budget 2010 the government determined that the time is ripe to start the transition from economic stimulus announced in the 2009 federal budget to measures designed to pay down the debt that flowed from the stimulus package. Those measures are almost exclusively targeted to reductions in government expenditures. For Canadians, expenditure restraint equals a reduction in services provided by the federal government at a time when they need them most.
For the federal public sector workers, expenditure restraint equates to job loss, income restraint, and a combination of the two. In this regard, it needs to be understood that the workers and their families did not cause the financial crisis or the recession that it spurred, but many have paid for it through unemployment, under-employment, personal bankruptcy, reduced incomes, and deteriorated retirement savings, as well as underfunded pension plans.
Federal public sector workers did not cause the crisis, but they are paying for it through the wage restraint bill imposed in the 2009 Budget Implementation Act, an act that imposed wage increases on all federal public workers for four years and rolled back previously negotiated increases for more than 30,000 PSAC members and many other federal workers.
While the 2010 budget does not extend the wage restraint program, it fundamentally changed the way it is to be implemented, to the detriment of Canadians. Under the Expenditure Restraint Act, the 1.5% increase mandated for 2010 is to be funded out of departmental operating budgets. As a result, all departments will be subjected to an across-the-board 1.5% cut that can only result in services and employment cuts.
At this stage, the full magnitude of the impact of the 1.5% cut to departmental operating budgets has yet to be seen or felt. What has been seen is more than disquieting. For example, PSAC has been informed of the loss of 27 positions at the National Gallery of Canada. The loss of those positions has included the elimination of all public education delivery at this national institution. This in turn greatly reduces the National Gallery's ability to deliver upon its mandate.
Other job losses have also been reported, at the Department of Foreign Affairs and International Trade and at Citizenship and Immigration Canada in Sydney, Nova Scotia. At Citizenship and Immigration Canada, for example, 140 positions have been cut, mostly of terms and casuals; these were announced less than a week after the budget was tabled. This can only increase the backlog within the department.
In addition to the 1.5% cut imposed on departments for the 2010 wage increases, the government has frozen departmental operating budgets for 2011-12 and 2012-13 fiscal years, with an anticipated increase in the consumer price index of 4.3% over these years. Departments will experience a further decline in their operating budget of approximately $900 million. Budget 2010 left little doubt as to the government's intentions in this regard when it said:
Practically speaking, salary and operating budgets of departments will be frozen at their 2010–11 levels in 2011–12 and 2012–13.
For federal public sector workers, this announcement was and remains a double-edged sword. On the one hand, the government has clearly and unequivocally signalled its intention to attempt to negotiate collective agreements with a zero percent wage increase over the two-year period, and on the other, it has opened the door to more cuts as departments struggle to cope with increased costs and frozen operating budgets.
Moreover, by freezing the operational budgets of departments at the 2010-11 level, the government is telling workers in the federal public sector that there will be fewer of them providing services to the public, while asking people to do more with less. It may make for a good sound bite, but it's unsustainable and will inevitably result in less provision of services and poorer quality services for Canadians from coast to coast to coast.
Finally, while the operating budget freeze announced in the budget of 2010 does not directly extend to other federal organizations for which the expenses are not appropriated by Parliament, the government expects them to follow suit and freeze their operating budgets.
PSAC, and in particular PSAC members employed by Canada Post Corporation, have already seen the impact of this announcement. Less than a month after Budget 2010 was tabled in Parliament, Canada Post announced that it will be contracting out its call centre operations in communities across the country, as well as the National Philatelic Centre in Antigonish, Nova Scotia. If implemented, this announcement alone will result in the loss of 300 Canada Post jobs, and while some of these jobs may be replaced by precarious employment in some of the affected communities, it's just as likely that these jobs will move out of the country. We expect more of these kinds of announcements as the federal organizations accept the government's announcement as a decree.
In addition to the freeze of salaries and operating budgets, as well as the 1.5% cut that flows from the budget pronouncements, the wage increases both legislated and negotiated for 2011 must be funded out of the existing departmental operating budget. But Budget 2010 continues to expand strategic reviews across the government departments. Strategic reviews, whereby departments are requested to assess all their programs and identify 5% of the lowest-priority and lowest-performing ones, have resulted in a $1-billion cut to government spending over the past two years. Additional savings from previously announced 2009 strategic reviews will reduce government spending by $287 million by 2012-13.
While periodic reviews of expenditures are appropriate in any organization, the principle underlying the government's strategic review process is flawed, and fundamentally so. By mandating at the outset of the review a 5% expenditure reduction, the government is forcing departments to cut, no matter how efficient they are and no matter how important the services are that they provide to Canadians. Moreover, the 2010 budget makes the situation that much harder for departments and increases the chance of real and tangible service cuts, because the past practice, whereby departments could reinvest 50% of strategic review savings internally, has been ended by Budget 2010.
From the perspective of PSAC, the measures outlined above are decidedly wrong, the wrong way to bring the federal budget back into balance. While these and other Budget 2010 measures will reduce government expenditures by $452 million in fiscal 2010-11, the reduction will increase to slightly more than $5 billion in fiscal 2014-15; moreover, over the course of the 2010-2015 period, more than $15 billion will have been cut. This is a huge amount of money, and it cannot be cut from the government's expenditure without undermining employment and income security of federal public sector workers and services that Canadians need and deserve from their government.
The funding issue that is of critical importance to our members employed in the federal public sector is that it has a potential impact on their employer-sponsored pension plans. In the lead-up to the 2010 budget, much was said about the financial state of the federal superannuation plan by the C.D. Howe Institute and the Canadian Federation of Independent Business, who very publicly argued that public service pension plan benefits should be reduced.
In the face of this reality, federal public sector workers and members of both the military and the RCMP have campaigned to protect the integrity of the pension plans they have and that they continue to pay for. To date, more than 70,000 people have signed our petition to the Prime Minister on this matter. Despite the financial health of the plans, attested to in the latest actuarial report tabled in Parliament in November 2009, Budget 2010 did not end speculation that the government would change benefit plans, or worse.
In light of the constraints on departments' operating budgets, Budget 2010 stated that the “government will engage with public sector bargaining agents and will assess measures taken by other jurisdictions in Canada to ensure that total costs of compensation are reasonable...”.
National President, Executive Office, Public Service Alliance of Canada
I'm just getting to it now.
The government will also continue to examine ways in which all compensation costs, including benefits, could be better managed
The PSAC will participate in the process and will make constructive proposals to government. What we will not do is engage in a process designed to redefine public sector pensions and benefit plans in such a way as to reduce benefits for active and retired members.
Thank you, Madam Chair.
Liberal
Gary Corbett President, Professional Institute of the Public Service of Canada
Thank you, Madam Chair.
Good afternoon, members of the Committee, and thank you for inviting us to make a presentation on the effects of the freeze on departmental budget envelopes. This freeze will have repercussions for our members who do the work, as well for the quality of services provided to Canadians.
The 57,000 professionals represented by the professional institute proudly provide a gamut of service to ensure the health and safety of all Canadians. Let me describe just a few of the contributions to our society. Meteorologists monitor our weather conditions and warn us of impending storms. Engineers ensure that our roads and bridges are safe. Nurses provide care in northern communities. Financial experts regulate the financial institutions. Auditors recover millions of unpaid tax dollars from large corporations. Scientists monitor the earth's tremors, the receding Arctic Ocean, and climate change.
These are but a few examples of the dedicated and experienced professionals who work across government in an environment under constant review and cost-cutting. They work in constant concern that the federal government leaves itself without sufficient regulatory tools, expertise, or financial and human resources to position Canada to innovate or to deal with the potential environmental, public health, or national security crisis.
As if program review in the 1990s weren't enough, the 2005-2010 strategic review exercise required federal departments and agencies to cut their overall programs by 5%. Now in 2010-11, the federal budget imposes an additional freeze of 5% on the already stressed operating budgets, at a time when departments must find funds to cover the 1.5% wage increase and bonuses for senior managers. The professional institute is concerned that this freeze will harm the ability of the professionals we represent to fulfill their mandate, and it will impact upon the quality of services to Canadians.
Additionally, considering the complexity of federal government operations, decisions by one department often affect others. For example, if Environment Canada, for instance, decides to cut certain programs that are integrated with those of, say, Natural Resources Canada, what can Natural Resources Canada do? Can it carry the ball alone? Probably not. Each department will prioritize its own programs to be cut. In an era of globalization and effective service delivery, is such a disjointed approach the best direction to go in for Canada and Canadians?
When I met with Mr. Day we spoke of the government's plan to reduce the size of the public service through attrition. While this strategy may reduce the payroll in the immediate term, it will be very damaging in the long term because of the loss of accumulated knowledge and the inability to mentor a new generation of professionals to do the business of government. In short, the government may reduce bodies, but it cannot replace knowledge. Such an approach is not a sound or healthy business practice for any organization, be it private or public.
Further, the government advocates modernization of the public service, and we applaud this. However, how can young graduates and/or experienced professionals be attracted to work in a place that is constantly underfunded, not to mention berated? Traditionally, potential recruits were attracted to the public service by stable employment and a sound and secure benefits package. As these are gradually chipped away, what will attract new recruits?
Our point is this. Without a well-educated, highly skilled workforce and a modern infrastructure, Canada has little or no chance of remaining competitive in today's global marketplace. The federal science function is particularly vulnerable. While the return on investment in public science research is not always discernible or substantial in the short term, it is the lifeblood of innovation. Yet public scientists are diminishing in numbers, and the resources and infrastructure at their disposal are also dwindling.
The consequence of meagre funding for public science was addressed in Sheila Weatherill's report of the independent investigator into the 2008 listeriosis outbreak. Many of the readiness problems identified by Ms. Weatherill could be solved using her recommendations of having
...appropriate human resources available to respond to workload requirements, comprehensive training based on required competencies and skills, timely delivery of ongoing training and supervision of inspection staff structured to encourage enterprise and accountability.
The government's desire to move towards deregulation does not serve the public good. Recent sad examples include these deaths from the listeriosis scandal and thousands of Canadians who continue to suffer financial hardship provoked by the economic crisis.
While the March 2010 federal budget introduced some steps towards stronger financial regulation and policy changes to protect consumers with more timely and appropriate interventions, more basic applied and regulatory research and science is needed. I refer you to the governments of the United States, Great Britain, and Australia, which have substantially increased their support for publicly funded science, which is known to be a key driver of prosperity and economic competitiveness.
Why is Canada waiting to follow their lead? The robustly funded federal public science program is the perfect catalyst for Canada's current economy and truly leads to innovation.
One of our objectives here today is to offer viable considerations and solutions to the government's budgetary challenge. These and other suggestions have been shared with Minister Day. Institute members want to be active participants in identifying solutions in tough economic times.
Take, for example, outsourcing. The institute believes that the government should review its reliance on outsourcing and move to repatriate public service work within the public service. In 2009, the government spent $8 billion on professional and special services, representing one-quarter of the total operating budget for salaries and benefits. This figure, based on the information contained in the alternate federal budget for 2010 by the Canadian Centre For Policy Alternatives, is alarming. The same source also indicated that the government plans to spend $11.3 billion for contracting out work and services in 2009-10. And of that amount, almost $7.9 billion is earmarked for professional and special services alone.
In her December 2008 report, the Auditor General of Canada reported that the government spends more than $7 billion on professional and special services. Obviously, taxpayer dollars can be saved here by using public service professionals.
A study conducted by the professional institute last year revealed that in the area of information technology alone, three departments outsourced more than $700 million, including the Public Health Agency of Canada, the Canada Revenue Agency, and PWGSC. The institute is astounded and dismayed that the government relies on third-party services for public safety, an area that requires considerable ethics, confidentiality, and sensitivity.
Simply put, too much money is spent on contracting out, with little or no accountability. This is another area in which the government can make substantial savings.
In closing, I would like to thank you for your work. It is very important that politicians understand the impact of their decisions. Our members want to provide top quality services for the good of all Canadians. However, it is becoming more and more difficult to fulfill that mandate with limited financial resources.
Thank you for your attention and I am available to take your questions.
Liberal
The Chair Liberal Yasmin Ratansi
Thank you.
We now go to Mr. Poirier. You have five to seven minutes.
Claude Poirier President, Canadian Association of Professional Employees
Good afternoon. My name is Claude Poirier. I am President of the Canadian Association of Professional Employees, or CAPE. With me today is Claude Danik, Executive Director of CAPE, and Hélène Paris, CAPE's Research Officer.
We represent about 12,000 economists, sociologists and statisticians who work for the Government of Canada. They provide advice and analysis to departments and agencies across Canada. We also represent more than one thousand translators, interpreters and terminologists at the Translation Bureau, probably including these interpreters here in the booth. And, finally, we represent a little short of 100 researchers and analysts at the Library of Parliament, from whom, I am sure, you receive very valuable services.
I would like to thank the committee for inviting us to comment on the effects this government's budget will have on our members and also on the Canadian public. You will find with my speaking notes questions that we are asking departments and agencies regarding the cuts they will make.
My first comment will be to say that our members probably advised this government that it was going in the wrong direction; that is, putting more pressure on an already over-pressurized public service; putting at risk succession, given the number of public servants about to leave on retirement; endangering the transfer of knowledge from one generation to the other; compromising the quality of services offered to the Canadian population; and unavoidably increasing the workload and the number of people exposed to stress and burnout. But that should have been obvious.
Canada already has a problem replacing some of its work force. Take our members from the economics and social science services group, for instance. The number of vacant positions is still very high. Why? Because we cannot find enough candidates to fill the needs of departments and agencies. Actions that threaten wages, benefits, pensions or job security will not help attract qualified professionals.
Another example would be the Translation Bureau. We know that Canada as a whole needs to find 1 000 new translators per year. However, universities only produce about 200 of them per year and the Translation Bureau hires most of them. The Canadian government created a scholarship program to increase the number of students, and therefore the number of graduates. But, once again, attacks on the public service will not help us recruit qualified professionals.
In the three groups we represent, the average age is quite high. The number of employees going into retirement will peak around 2014, and because of a gap in hiring in the 1990s, there will be a serious lack of succession.
What about the security of the Canadian public? If this government freezes budgets and starts cutting programs, will we see an increase in the number of unsafe products hitting the market? Will we see problems with the safety of food and drugs? Can we expect problems, if a new pandemic hits Canada? Will we have the necessary expertise? Will we still have the necessary corporate knowledge?
What if, instead of solving its deficit by forcing federal government employees to choose where to cut their budgets, our government had the courage to make decisions and select which program would be cut, and to take responsibility for it in the next election? That is called accountability. Being accountable means making decisions and being judged for them.
No, this government was not ashamed to let others be the bad guys and take all the criticism. Yes, I used the word “deficit”. Isn't it strange that the current deficit is mostly related to global crisis and that Canada was one of the least affected countries? Even the Fraser Institute concluded that the steps taken by this government had no effect on our recovery. What is worse, this “man-made” deficit is used as a pretext to again cut services provided to the Canadian public. This is nothing more than a deficit engineered to give the government a good reason to hit on the public service once again, for ideological reasons.
Just imagine telling your family that you're cutting, in all sectors of spending, an even 5% per year for the next three years—15% in total. The 15% on entertainment would probably make you very unpopular among your teenagers, but what about 15% on food, or 15% on health care products? You would be seen as very bad parents indeed.
Cutting public spending constantly year after year without decent reflection is very bad government. Cutting taxes for large corporations, if it's not needed, is also bad government. Those companies that are not profitable won't see the difference: if they don't make a profit, they don't pay taxes anyway. On the contrary, offering tax rebates to the oil industry doesn't make sense.
So what is good government? Good government is avoiding destroying the Canadian public service in the hope of securing a majority in the next election. Good government is seeing that you do not lose corporate knowledge. Good government is putting the interests of the Canadian public first. Good government is listening to the in-house experts who tell you that you are making a mistake. Good government is asking questions before, not after, when it is too late.
Thank you for your attention. I am now available to take your questions.
Liberal
The Chair Liberal Yasmin Ratansi
Thank you.
We'll go to Mr. Isaacs, for between five and seven minutes, preferably.
Milt Isaacs President, Association of Canadian Financial Officers
I'll try to keep it brief.
President, Association of Canadian Financial Officers
Good afternoon. I appreciate the opportunity to speak to you today.
I represent 43,000 Canadians. They are financial officers. With the exception of 20, the balance are employed in the federal government.
These financial officers see themselves as more than just employees: they see themselves as stakeholders. They are purpose-driven, they want to make a difference, and they are members of the Association of Canadian Financial Officers, or ACFO.
ACFO is a bargaining agent and ACFO is an advocate. We are advocates for sound financial management. As advocates, we've published various studies on financial management. As advocates, we submitted a brief to the Gomery inquiry. As advocates, we are problem-solvers. I'm proud to be the president of the ACFO.
My members understand the importance of controlling expenditures, and that is what this new budget is trying to do. However, we have concerns with this budget. Our main concern is the possible impact of the freeze on operating budgets. The impact that concerns us most is that oversight will become an afterthought.
Oversight is making sure that rules and regulations are followed. By the way, these are your rules and regulations.
Financial officers provide advice. They provide options within the rules. They are responsible for financial oversight. They understand the crucial role that oversight plays in the delivery of programs, while departments may not; a department's main focus is the delivery of programs, and usually oversight is secondary.
What happens when operating budgets are frozen? Well, departments are faced with options and choices: program or oversight? Program wins. For example, when a financial officer's position becomes vacant, it could get absorbed into programs; when that happens, you've weakened oversight. You've lost your financial road map.
A big part of that road map is the Federal Accountability Act. Financial officers are already struggling to implement the act. We are seeing greater levels of stress within the financial community. Now comes the frozen operating budget. We're living with the act, but now we have a budget that potentially conflicts with the implementation of the act. Both the budget and the act need financial capacity. That means people.
What happens if you don't have people to provide oversight? Not too long ago there were cuts in the Canadian Food Inspection Agency. They proved to be disastrous: we had a listeriosis outbreak in which 22 Canadians died and 57 were gravely ill, so we can see how a lack of oversight had a profound impact.
A lack of financial oversight also has impacts. Remember the Ponzi schemes? Many Canadians lost hundreds of millions of dollars because of Ponzi schemes. In Alberta, Canadians lost over $160 million; in Toronto, Canadians lost $60 million; in Quebec, Canadians lost tens of millions of dollars. Many of these people lost everything--their homes, their retirement nest egg, and their dignity. Most of these people do not have the years to recover. I would suggest that investment in oversight could have saved these Canadians hundreds of millions of dollars.
What happens when oversight does exist? Remember the banking crisis? In Canada, we have rules and regulations for banks. They are enforceable. They protected us from the meltdown. This is not the case in the United States. In the last quarter of 2008, U.S. banks lost $26 billion. Canadian banks earned $2.5 billion.
Now, if we didn't have rules in place, and if we didn't have public servants to enforce them, the story might be different. The President of France, Nicolas Sarkozy, agrees. He said recently, “We can no longer accept a capitalist system without rules, organization, regulation.” And he's a right-wing thinker in France. Wow, have times changed.
Rules by themselves have no teeth. We need to make sure they're enforced. That's one of the jobs of a financial officer. Financial officers need to be seen as an investment, not a cost.
You need to ensure rules are in place. You need to ensure they're clear. You need to ensure they're enforced. Why? Because Canadians expect it, and because you are accountable to Canadians. We would like to help.
Thank you.
Liberal
The Chair Liberal Yasmin Ratansi
Thank you.
We'll go to the first round of questions. Madam Siobhan Coady, you have eight minutes.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Thank you very much.
I appreciate each and every one of you being here today to lend your knowledge and expertise to this very important question. Thank you very much for giving us a little bit of time at the start of this meeting to resolve some committee business. I certainly appreciate your attendance, as well as your patience.
As you pointed out quite clearly, Budget 2010 with its expenditure restraint on operational spending is going to have an impact. What we're studying, of course, is that impact. We've had before us a number of deputy ministers, a number of department officials, and others who have talked about that. Some have said that there will be minimal impact on the public service. Some have said that there will be minimal impact on services, that we can actually move through this and still do some of the hiring that's required by some of the departments. That's one message we've gotten. However, Treasury Board President Stockwell Day talked about freezes and cuts to the public sector.
Mr. Gordon, you've said that this budget is a clear attack on quality in the public service. I want to come back to that.
I also want to talk to you, Mr. Poirier, about the fact that you said there is no question that the public service will experience a reduction in size, that when employees are leaving through natural attrition, they may not be replaced.
I want to talk about some of those things, and to ask you if you're privy to some of the discussions with deputy ministers, because we believe it rests with them to make the choices within their departments. Have you been part and parcel of some of the discussions with deputy ministers on the reductions or on some of the challenges within the departmental budgets?
Before I ask that question, allow me to go to Mr. Isaacs.
Mr. Isaacs, you just talked about financial officers who are already struggling to implement the act. What you're referring to is the Federal Accountability Act. Could you be a little more specific on that? You're saying that we're living with the Federal Accountability Act, but now we have a budget that potentially conflicts with the implementation of the act. Could you be more specific on that? You talked about the financial officers, and you talked about, I think, some of the challenges they're facing, but could you be a little more specific on why you say that?
President, Association of Canadian Financial Officers
Thank you for the question.
What I'm referring to there is that, again, in the choices that departments have to make, oversight becomes an afterthought. When a financial officer's position becomes vacant, and you have to deal with this zero budget, that's an option that I would suggest to you would be considered.
Here we are, a community that is trying to implement and maintain this act so that it has some virtue. When you displace that, we're really going to be... The difficulty is trying to implement the act when, at the same time, the potential of the financial management community is shrinking as a result of the freeze on the budget.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Have you had discussions with deputy ministers, or have you heard of discussions with deputy ministers about this concern? Are you seeing a reduction in the number of financial officers? Is that what you're saying, that you've actually had a reduction?
Liberal
President, Association of Canadian Financial Officers
Yes, absolutely. We're at the early stage in terms of how departments are going to try to manage through this.
I've had 30 years of experience in the federal government. I went through the 1990s. It's certainly an interesting landscape this time around. Here we have a freeze on budgets and strategic program reviews over the next three years--that's 15%. That's quite a challenge.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Mr. Gordon, you talked about how this is a clear attack upon the public service. Are you privy to any of the plans? Is there a strategy for how that's going to occur? We're hearing that some departments are moving ahead with hiring. I'm not sure how that can occur when we have such a restraint.
What impact will that have on services to Canadians?
National President, Executive Office, Public Service Alliance of Canada
I have not had any direct discussions with deputy ministers, but in the structure of the Public Service Alliance of Canada we have presidents of components who meet on a regular, ongoing basis with the deputy ministers and their senior officials. I have asked them to set up those meetings and find out what the plans are, keeping in mind that the budget was introduced to the House, and the effects of the restraint only come in as of April 1 this year.
On the first cut, the feedback I got from my colleagues was that the departments are still examining it. But then we see Citizenship and Immigration in Sydney being closed, with 140 jobs gone there. Then we see at the National Gallery, 27 jobs there. And Canada Post announced, just after the budget, 300 jobs there. So you can see the trend is only beginning.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
So I'm hearing that we have a financial risk and a services risk.
Mr. Poirier, you talked about having problems replacing some workers; that you have positions available but you're not getting people who are interested in entering the public service. Could you expand on that? Are you seeing that as a result of the budget, or has that been going on for quite some time and you're concerned about that going forward?
President, Canadian Association of Professional Employees
I really think it's been going on for a while. Today's problem is the consequence of a succession of actions that started years ago but have been culminating in recent years.
You probably should meet with the real managers of the public service, because deputy heads don't really manage. They report to the minister, so they have to be on the same page. The real managers we meet have been under pressure for years due to reductions in the budgets and poor quality of work conditions.