Government Operations Committee on March 25th, 2014

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

I think that's a critical component, because we do really set policy government-wide when it comes to expenditure management and how things are reviewed. I've been a real advocate for better benchmarking in the system. I remember in one case a few years ago a report came back saying that a program was working well. I asked how we knew it was working well. The answer that came back was that everybody who got money out of the program really liked us. That's just not good enough in today's world. You have to have better benchmarks, better ways to measure performance, to ensure we're getting value for the tax dollar that is being expended. You always need to question if there's a better, more accountable way to deliver excellent service to Canadians. That's what we're looking for.

Basically, that's what I'm trying to drive through the system. I think we have made some changes in expenditure management that mean the reviews of existing expenditures are more robust and are driven towards making sure the programs and activities make sense.

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Okay. Thank you.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you, Mr. Trottier. Your time is up.

We will now turn to Mrs. Day, who also has five minutes.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Good morning, everyone.

Thank you for being here, Mr. Clement. It is important to have you here for this meeting.

I would like to talk about employment insurance. You can see where I am going with this. In the past, the Liberal Party and the Conservative Party have transferred $57 billion. Do you intend to put the $57 billion back into the fund?

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

Could you repeat your question, please?

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

The Liberals and the Conservatives stole $57 billion from the employment insurance fund. Will this estimated $57 billion be put back into the EI fund?

[Bill Matthews]

I can take the question.

Thank you for your question.

In recent years, the EI model has changed.

The new regime has the EI operating account, which actually tracks premiums in and expenses and revenues out. It was a tracking account. This was not money that was held in a separate fund; it's all inside the CRF. Over time there had been basically more come into the account than was taken out of the account. That was just a tracking account; it was not a separate fund. The decision was made several years ago to actually start fresh—over an economic cycle, premiums and expenses should basically match—and to basically start from scratch in terms of the EI operating account. There was legislation passed by Parliament to establish that account and effectively start fresh.

The old bookkeeping account is gone and it was replaced by a new one, but it was largely just two different bookkeeping accounts, and the new legislation established the EI operating account.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

Let me ask you a supplementary question.

The financial information about the EI fund is in the Public Accounts of Canada, volume 1, section 4. We know what it is, it is written. Employers and employees contribute to the employment insurance fund, which currently generates around $3 billion of surplus a year. Where does the $3 billion go?

[Bill Matthews]

Thank you for the question.

The way the account works, it basically has to cover off the administration of the account as well as the actual benefits that flow out of the account. The recognition on the EI account is that you don't look at it year by year. It's an economic cycle. You'll get debate among economists over how long an economic cycle is. Some would say seven years, and some would say shorter or longer, but the intent is that the premiums over time should basically equate to the expenses that come out of that account.

The account is there. It's to be tracked. In theory, if it starts generating surpluses year after year, that would cause someone to look at the premium rate setting and ask if the premiums are too high or if they should be reduced. Conversely, if you're running a deficit year after year, that would cause the question of whether the premiums should be increased. The purpose of that account is to track that spending and the related revenues, but I would say that you shouldn't look at it on a year-by-year basis. You do have to look at it over time.

[Anne-Marie Day, NDP, Charlesbourg—Haute-Saint-Charles, QC]

We must then expect contributions to be lowered across Canada, given that there are surpluses.

My second question has to do with the Public Service Superannuation Act. Based on main estimates 2014-15, that amount is supposed to increase by $442 million, which is significant. What are the liabilities of the public service pension fund estimated at? Who manages the fund? Is it managed in Canada only or are there managers outside Canada as well?

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

Do you have that, Yaprak?

[Yaprak Baltacioglu]

Yes.

For our federal government employee pension plan, the plan value is $42.4 billion. The liabilities were assessed at $46.8 billion, so we have an actuarial deficit of $4.2 billion, as you mentioned.

Every few years actuaries come and assess where our investments are and what our future liabilities are. This one was done in 2011. There's going to be another assessment in 2014, so we will have a better sense.

Who manages this account? We have the Public Sector Pension Investment Board. It is outside the government. They are basically an investment body. They invest in all sorts of places. They invest in Canada. They invest internationally. Like all pension investment bodies, they invest in the best markets where they can get better returns.

The reason the actuaries said that we have a deficit is that 2011 came right on the heels of the economic downturn in 2009-10. The markets went down, and with that all of the pension plans had quite a lot of challenges. This reflects that.

Under law, the moment we're under a deficit, as you correctly pointed out, we have to put payments in. On the Treasury Board side, under “Statutory”, we explain that this year it's $443 million that we have to put into the pension plan. We will do so, I think, for the next 12 years. However, if the actuarial definition changes, if the number comes down, then probably our payments will change.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you, Mrs. Day.

Mr. O'Connor, you have five minutes.

[Gordon O'Connor, Carleton—Mississippi Mills, CPC]

Good morning, Minister. I have just a few questions.

The first one is on equalization. I'd like to know how much we are transferring to provinces on equalization, and maybe it's too complicated to tell me, but roughly how much each province gets. What are the criteria for equalization, and is everybody being assessed on the same basis?

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

Do you have that handy, Bill?

[Bill Matthews]

I can't give you actual numbers. I can tell you that the Department of Finance posts on its website a list of equalization payments by province.

Generally speaking, the criteria are the same. The only caveat I would add to that is that there are some other agreements, such as—I'm going from memory here—the accords with Nova Scotia and Newfoundland, which actually are outside of the equalization payment formula. You do have to factor those in, but as for the best source of information for equalization payments, the Department of Finance updates their website, I believe quarterly, with their forecasts on those fronts.

[Gordon O'Connor]

Can you tell me what the criteria are?

[Bill Matthews]

I cannot, but I can look into it.

[Gordon O'Connor]

Well, I did a little bit of research. My understanding is that Hydro-Québec is excluded from calculations of the revenues of the Province of Quebec, yet Hydro-Québec, in the 2012 numbers, which are the last ones I can find, gave the province $900 million in taxes. Is this accurate? Is this being excluded?

[Bill Matthews]

I'm sorry, Mr. Chair. I think questions on the equalization formula are probably better directed to the Department of Finance. It's really their—

[Gordon O'Connor]

I never get to talk to the Department of Finance.

Okay. I'll try another one, and you'll tell me it's some other organization.

Under the Constitution, education is a provincial matter, yet I think we are giving something like $10 billion a year to universities. Why are we doing it if it's not our responsibility?

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

I can try my hand at that one, Chair.

Obviously, for primary and secondary education, we don't have any role, but we do have a role in research and in innovation, as well as in training. I think those are three areas where there is a recognized federal role, either independently of provincial governments or in concert with provincial governments. The bulk of that money, I would surmise, goes to those three categories, particularly R and D.

For some of our R and D, there are billions of dollars in tax credits that go to private corporations that are involved in innovation, but there are also public entities such as research institutes and universities that do research. We try to work with them to make sure that it actually gets to market. That's the kind of research we're mostly interested in, although we also fund curiosity research that does lead to things as well.

[Gordon O'Connor]

Yes, and I accept the research thing—that's pretty common-sense—and we're involved in training, but a heck of a lot of money is going to university students for loans and things like that.

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

That's another area. You're quite right. Yes.

[Gordon O'Connor]

Why are we into that area?