Government Operations Committee on June 20th, 2011

[The Chair, NDP, Pat Martin]

I call to order the fifth meeting of the government operations committee in the 41st Parliament.

We're very pleased to have attending before us, to defend the main estimates of the Treasury Board, the President of the Treasury Board, the Honourable Tony Clement.

Minister, you might want to introduce the other officials you brought with you.

Thank you for being here.

[Tony Clement, Conservative, President of the Treasury Board]

I will do that in the course of my remarks.

Thank you for the opportunity to be here today. Let me thank you, through you to the members of the committee, for the invitation.

I'm pleased to be here to discuss the 2011-12 main estimates and the supplementary estimates (A). As you know, strong fiscal management is one of our government's top priorities.

I'm presuming I can go right into my remarks, if that's all right. Then we'll carry on.

[The Chair, NDP, Pat Martin]

Absolutely.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

By staying focused on balancing the budget and reducing the debt, we aim to keep taxes low and promote long-term economic growth.

We want to ensure Canada continues to be a place where people invest their money and grow their businesses. We want to ensure Canada will offer Canadians opportunities to work and contribute to their communities. These are the objectives driving us. And despite the large injection of stimulus funding we made over the past two years, I am pleased to say we are on track to balancing the books by 2014-15, a year ahead of the plan outlined in March.

Our government's commitment to this goal is clear in the responsible spending plans set out in the 2011-12 main estimates and supplementary estimates (A). The main estimates currently total $250.8 billion in expenditures for operating and capital costs, transfer payments, and the public debt charge. This represents a reduction of $10.4 billion in planned spending from the 2010-11 main estimates.

Also in the main estimates, program and operating votes are down by about $720 million, or 1.5%, from the 2010-11 main estimates. This amount is accounted for mainly by the winding down of the infrastructure initiatives we had under the economic action plan. The reductions also include a $3.4-billion decrease in planned statutory spending on interest and other costs.

Also shown in the main estimates is a $1.1-billion decrease resulting from the implementation of the harmonized sales tax.

The 2011-12 main estimates are in line with decisions from budget 2010 and previous budgets. Budget 2010 outlined our three-point plan to balance the budget. The first part of that plan is the winding down of the stimulus. The second part includes a number of measures to ensure the government lives within its means.

These include a freeze on the operating budgets of departments, and many other measures to restrain the growth of spending. But they do allow for some flexibility to implement budget priorities, among other things, and to accommodate cost pressures related to essential services.

Essentially, we have taken the same approach to balancing the books as Canadian families have. They have looked at their expenses and set priorities. They expect their government to do the same, and that's what we have been doing to great effect.

The third part of our government's plan to balance the budget includes continuing the strategic reviews on all of our program spending. This process requires departments to assess whether programs are achieving their intended results, are effectively managed, and are appropriately aligned with the priorities of Canadians and with federal responsibilities.

In 2010, the last year of the first four years of strategic reviews, 13 organizations were involved. They identified savings of more than $500 million annually. Together with measures to restrain the growth of national defence spending, this first cycle of strategic reviews resulted in $11 billion in savings over seven years, and more than $2.8 billion in ongoing savings.

Eliminating the deficit will also require new actions planned in the most recent budget, including the strategic and operating review. This process will involve the efficiency and effectiveness of government operations and programs in order to ensure ongoing value for Canadians. We will put about $80 billion of direct program spending under the microscope. The goal is to find at least $4 billion in ongoing annual savings by 2014-15. Every organization will be asked to develop two scenarios: one representing a 5% reduction, and one representing a 10% reduction in their spending. Unlike strategic review, the spending base will include all operating expenditures, including wages, salaries, and professional service contracts, for example, as well as grants and contributions, capital, and payments to crown corporations. Indeed, about two-thirds of the review base is represented by operating expenses. With this approach, we are taking a page from the private sector, which regularly conducts operational reviews to find areas for cost savings and productivity gains.

This is the first time in 15 years the government has conducted a review of the scope, and we believe that challenging times like these can also be opportunities to look critically at the programs and services we provide, their relevance, and how best to deliver them.

Let me also take a moment to describe the highlights of supplementary estimates (A), both government-wide and TBS-specific. Supplementary estimates (A) are part of the normal parliamentary approval process to ensure that previously planned government initiatives receive the necessary funding to move forward.

Specifically, the government-wide Supplementary Estimates (A) support the request for Parliament's approval of $2 billion in expenditures in 19 organizations. This amount is within the spending level specified in Budget 2010. In the Treasury Board Secretariat Supplementary Estimates (A), we are seeking $1.3 billion. This amount results from the Secretariat's role in funding a cash-out of severance pay for public service employees. This is happening in accordance with the collective agreement for three occupational groups, signed on March 1.

All these measures are part of the government's larger commitment to the prudent management of taxpayer dollars.

Mr. Chair, I'm proud of the government's economic record and its plan to ensure Canada remains at the forefront of economic growth and job creation. These main estimates and supplementary estimates (A) show the government is on track to implement its freeze on operating budgets.

As I mentioned earlier, program and operating votes are down by about $720 million from the year before. Also, if you compare spending in the estimates tabled to date for 2011-12 to total spending put before Parliament for 2010-11, you actually see a $2.7 billion decrease, excluding transfer payments and public debt.

Mr. Chair, we are also committed to improving the accountability and transparency in reporting to Parliament, and have been so for some time. For example, there are changes to the format of the 2011-12 main estimates. Part I now includes the trend of the budgetary main estimates accounts for the last ten years. In part II, for each department and agency we have added a brief description of the mandate or purpose of the department and the department's explanation of the major reasons for a material change in requirements from the previous year.

This change to the format of the main estimates is on top of improvements we have made over the past decade to supplementary estimates documents. These include a listing and description of horizontal initiatives requesting funding through supplementary estimates, and that means initiatives involving two or more organizations; an expanded introduction that includes descriptions of the largest dollar-value items; and summaries of authorities by ministry.

In addition to my responsibilities as President of the Treasury Board, I am also the minister responsible for FedNor, the Government of Canada's economic development organization serving northern Ontario. It's a position I've held proudly since 2006. In this regard, I'm joined today by Industry Canada's assistant deputy minister for regional operations, Mitch Davies, and at the back, FedNor's director general, Aime Dimatteo, should be around here somewhere, I hope.

Since April 2006, FedNor has invested more than $263 million in over 1,240 projects to benefit northern Ontario's economy. Our goal is to ensure that these investments and projects are having a positive impact on the economy of northern Ontario communities.

I was pleased to see that budget 2011 included a further commitment to northern Ontario of $4 million over three years to establish a cyclotron laboratory in Thunder Bay. This investment, through FedNor, will help create medical isotopes for early detection of cancer cells. The Government of Canada is pleased to support the Thunder Bay Regional Research Institute as it continues to develop new leading-edge technologies and products in medical science and research that will benefit the world.

Starting this August, we'll be taking another step to improve accountability and transparency in reporting to Parliament. We will require federal departments and crown corporations to prepare quarterly financial reports and to make them public. This will allow each department to provide a window into its own financial situation on a quarterly basis and give parliamentarians and Canadians enhanced information on government spending. It will facilitate timely oversight by parliamentarians of government expenditures and it will complement other information currently provided by the government, such as departmental performance reports and the annual public accounts of Canada.

I’m joined by the Secretary of the Treasury Board, Michelle d’Auray, and by other officials here, Bill Matthews and Christine Walker, and I previously introduced Mitch. At this point we are certainly here to take your questions.

Thank you, Chair.

[The Chair, NDP, Pat Martin]

Thank you very much, Minister.

Our order of questioning is that the first round goes to the official opposition, the NDP, and it will be Alexandre Boulerice.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

I would also like to thank the President of the Treasury Board for spending some time with us today.

The Auditor General, the Parliamentary Budget Officer and other agencies have recently and in the past few years stressed that the process for reviewing estimates was still and had always been a problem. You might say that every year there's a new way of counting money. As part of the budget, it's difficult to compare the main expenditures from one year over another, even for the Main Estimates. We are always told that it's in the supplementary estimates where we'll see the difference. But it's difficult to have an overall view and compare apples to apples. It's more like we're comparing apples to oranges. It's difficult to retrace the money, check whether it really was spent and where, if necessary, and if it was spent wisely.

You've been in possession of the Auditor General's findings for several months now. She recommended that the way the estimates are written be changed to make them clearer and more uniform so that we can do our job as parliamentarians properly.

I would like begin by finding out what measures you took in the wake of the Auditor General's recommendations in that respect.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

As I said two weeks ago, we thank the Auditor General for her 10 years of service to Canadians.

The first chapter contains a recommendation to the Treasury Board Secretariat to review the reporting practices so that Parliament is better informed of the total costs of interdepartmental measures.

In accordance with the Auditor General's recommendation, I asked my colleagues to review the government's reporting practices in order to establish greater clarity when it comes to the horizontal initiatives, for example.

It's important to understand that these procedures have been around for 99 years, I'm told. The roll-up procedure, for instance, that was used to report the G-8 legacy fund used a process that has been around for nearly a hundred years. That's not to excuse, but to inform you as to why a particular process was used at the time by the minister of infrastructure.

Minister Baird and I have concluded, quite rightly, that the Auditor General was correct, that this procedure in these kinds of circumstances does not meet our test, our high standards for being transparent to Parliament. The Auditor General has indicated that this was not a deliberate malicious act by myself or by Minister Baird, but there was room for improvement. We have taken that to heart and I have given, as I mentioned, instructions to the secretary that we will come up with a new procedure for similar situations so that there can be a greater transparency and accountability to Parliament.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much.

You addressed the matter yourself. As for the G8 Infrastructure Fund, you said in the media that it had been developed from the innovation or creativity—if I remember correctly, it was in English—of six of the region's mayors. I really want to highlight the poetry of the expression.

Were the decisions really made in consultation with six mayors or only with the mayor of Huntsville, the director general of Deerhurst Resort?

Mr. Minister, can you tell us how many times you met and if you kept files, notes from those meetings, from those discussions you had and about the criteria you used to choose the 32 projects that were selected? If those notes exist, are you willing to submit them to this committee?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

As the Auditor General said and wrote, every dollar was spent based on the priorities indicated by the municipalities, and we accounted for every amount spent.

That's an important aspect of this report. There has been no misallocation of funds. There has been no misappropriation of funds.

Having said that, as I said, there's no mystery here. When the G-8 fund was announced, there were quite a few.... I have 16 municipalities. North Bay also had their airport that needed some funding to be ready for the G-8 as we knew it at the time.

As a result of this process, there were over 242 projects that were arrived at to potentially be funded. I went to my mayors, not only the six. I went to all 16 municipalities. Six mayors were represented on a committee where we would convey information to them and they would convey information to us, but I went to all the mayors and said there was no way the Government of Canada would fund 242 projects and told them to get that out of their heads right then. I asked them to give us the best projects they had that conformed to the terms and conditions of the G-8 legacy fund. Those were the ones that we could at least consider for the fund.

So there's no mystery. I know MPs always consult with their mayors about which projects fit the terms and conditions of various infrastructure projects. So they said they agreed that 242 was too much and they suggested 32 or 33, which they conveyed to me, that conform to the terms and conditions that were set out by the Government of Canada. I conveyed them to the department and to the minister of infrastructure, Minister Bairdat the time, and that's how that process went.

The Auditor General has said that she would like to have seen more paperwork at the front end of that, and you know what? Looking back on it, I understand her concern. The good news for taxpayers is that at the middle and back end of this process there were contribution agreements signed. There were terms and conditions that were met and verified, and not a penny was spent in a way that was not consistent with the contribution agreements and the terms and conditions.

[The Chair, NDP, Pat Martin]

We're well over the five minutes allocated to the NDP.

Just before I hand it over to Mr. Jacques Gourde, there was a call for the production of papers, I believe I understood, from the NDP member, asking for the production of criteria and evaluation documentation at the front end that you spoke about. Are you willing to table those documents with this committee?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Certainly the terms and conditions are a matter of public record.

I should say to our new parliamentarians that I was quite open about decisions that were made by the Government of Canada when it came to these legacy fund projects. So we can certainly share with you the terms and conditions--absolutely.

[The Chair, NDP, Pat Martin]

I think he asked for the evaluation criteria.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

The notes from the meetings.

[The Chair, NDP, Pat Martin]

They would include the notes from meetings, etc., in the evaluation process.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

As I said, each project was required to meet the terms and conditions, and I can share those terms and conditions with the table, for sure.

[The Chair, NDP, Pat Martin]

Whatever documents you can provide would be appreciated.

Mr. Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chair. First, I would like to congratulate you on being appointed chair of this committee.

Second, I would like to thank the witnesses who are here and the minister for coming. We know that the ministers have very busy schedules. This is really a good opportunity for the committee members to be able welcome them.

Mr. Minister, my first question concerns the 2011-2012 Main Estimates. This budget is $10.4 billion less than the 2010-2011 budget.

What supplementary investments are planned for the good of all Canadians during the fiscal year in question?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Thank you for your question. The 2011-2012 Main Estimates show a decrease in certain investments because of the gradual decrease in initiatives in Canada's economic action plan, indeed, the ones that have helped stimulate our economy over the past two years. That was our goal.

Although the first phase of the economic action plan is drawing to a close, our government remains more determined than ever to respond to the priorities of Canadians. That's why, throughout the first phase, we consulted citizens through their provincial and territorial, and municipal governments to determine the priorities of the communities.

By the same token, we are in the process of implementing the second phase of the plan to continue stabilizing our economy, creating jobs and helping Canadians and their families in their efforts to improve their personal situation.

Our government will continue to invest public funds in a relevant, reasonable and responsible way as part of the second phase of the economic action plan. The Main Estimates show a net increase of $317 million in funding that will come from Infrastructure Canada, for example, as part of the Building Canada Fund - Major Infrastructure Component, through which we will continue to create jobs across the country, as well as make relevant investments in our communities that will prove to be beneficial over the long term.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Minister, could you please explain to the committee members how the 2011-2012 Main Estimates were improved, so that the parliamentarians can be better informed in that regard?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

We are obviously very committed to making things more open and transparent. I believe we've had a strong track record in this regard over the last five years plus. But I do recognize the need for more transparency to provide parliamentarians with more information, and we've incorporated a number of major changes to the presentation of the 2011-12 main estimates.

For example, part I of the Main Estimates now takes into account the trend concerning funding allocated as part of the budget in the past 10 years. So, parliamentarians will have data relating to a longer period of time when they assess our budgetary situation.

In part II, various aspects concerning the departments and agencies have been added, including a section on the mission, which provides a brief description of the mandate, the objective of the department or agency in question. So parliamentarians will also have more information about the departments and agencies. Furthermore, this section includes an explanation given by the department or agency in question about the main reasons for significant changes made to the requirements related to the previous fiscal year.

[The Chair, NDP, Pat Martin]

Could you finish that thought, please?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I'm done.

[The Chair, NDP, Pat Martin]

Okay, we're all done. We're well over time. Thank you, Mr. Gourde.

Nicole Turmel for the NDP.

[Nycole Turmel, NDP, Hull—Aylmer, QC]

Thank you, Mr. Chair.

I have a few comments and questions for the minister. This is interesting, hearing from you that the objective this year is to create jobs. It's also interesting to hear that you want to improve the lives of Canadians. When on the other side last week we raised questions about employment insurance in government, where the hourly pay will be decreased to $10.25, and when we asked questions about the G-8, we never got the real answers. We see expenses made that should not have been made. At this point you said you will get $4 billion per year back inside the government from attrition on top of that, and I want to relate that to improving the lives of Canadians, improving the jobs of government employees.

How can the employees inside the government trust what you are telling them, that it will be by attrition, when we don't have real answers to that? We need to know where the cuts will be. We need to know what will happen to them and which departments will be affected. On top of that, we saw 92 jobs that were announced will be lost, auditors' jobs, and their job is to review the contracts of government to make sure there is transparency, to make sure there is accountability. So how can we trust the information we get based on all the information from the G-8 and what happened today?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Thank you for that.

Of course, Madame Turmel, you'll soon learn that there are always ways to improve, and governments are always looking for ways to be more accountable and more transparent—at least our government is. That's why we rely on the advice of the Auditor General. As I've said from the very beginning, you mentioned the Auditor General's report, and it was very clear that not a penny was misallocated or misappropriated. Every penny was accounted for, and that's the standard we set for ourselves, because Canadians set that standard for us. We're very conscious of that.

You mentioned the process going forward with the strategic and operating review. You asked some very specific questions. Of course we're not at the stage yet where any decisions have been made with respect to the strategic and operating review. There will be a whole process where we will be asking departments for their assistance and their collaboration as we move forward with the strategic and operating review. It would be premature for me to suggest any conclusions at this particular juncture.

We have mentioned, and we mentioned it during the election campaign, that we will be relying primarily on attrition to reduce the ranks of the public service. The advice I have received is that by and large, year upon year, attrition accounts for 11,000 employees who retire or resign or move on to another position in another part of our society and our economy. So that is a good base from which to start.

As I've emphasized to you at this committee, and as I've emphasized to Canadians, we are doing a whole review, though, of programs and spending and the operations of government among 67 departments and agencies. This is, as I said, the largest review that's been accomplished in 15 years. I dare say there will be some difficult choices that will have to be made, and we'll make them sensitively, but we'll make them in the public interest. That's our mandate, our strong mandate from the people of Canada.