Government Operations Committee on Nov. 26th, 2013

[Bill Matthews]

I don't recall if that was a budget item or not. My colleagues may.

[Marcia Santiago]

This was an example of an off-cycle decision.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

So this actually does represent a...what did you call it?

[Marcia Santiago]

An off-the-budget cycle....

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Looking at the estimates from an examination as a parliamentary committee, how can we ensure that it actually does get used for its stated intention for the rightful celebration of the anniversary of the Korean War? How do we know for sure that it's actually spent on that? Is there any safeguard that you can alert us to?

[Bill Matthews]

In this case specifically there are two answers. One is advertising, so you will see or hear something. That's a very easy answer. But more importantly Public Works and Government Services Canada does produce an annual report on advertising and you will actually see the contracts let. I believe they disclose by department and dollar amount. So you will get a sense of what was actually spent.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you.

Mr. Van Kesteren, you have five minutes, as well.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you all for being here. I'm new to this committee and this is a fascinating education for me. I'm beginning to get a picture.

One of the pictures that I've gotten is you mentioned that traditionally this stems from the days of the feudal times when the king was trying to get more money and tax the people. The shift is definitely that the king was trying to get the money and spend the money and now the people are spending the money and getting the king to agree to that money being spent.

The one thing that I'm finding is key to this whole thing is predictability, isn't it? You have rightly pointed out that the main estimates are budgetary items that we know we're going to spend. Then during the course of the year we find these unpredictable things that cause us to have to go back to the king, the crown, and say we need a little more money. Have I got that right so far?

[Bill Matthews]

I'd say partially right.

There are unpredictable things. The flooding is a great example of an unpredictable thing. There are also things that simply were planned in the announced budget but the spending plan of the department wasn't ready in time to make it into main estimates.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

But it's still unpredictability. The predictability side would be to have all those things in the main estimates.

One of the things that you mentioned—and I caught this myself, too—was pensions. A pension would be a predictability but it's not when the actuaries come in and say there's not enough money here, we need to plunk down another chunk of change. You mentioned the rail but I also noticed that—and I was just paging through this thing quickly, on page 45— “The increase in total actual expenses in 2012-2013 is $329 million as compared with the 2011-2012 actuals and the increase of $203 million over 2012-2013 planned results are both mainly due to an increase in payments to fund actuarial deficits in the Public Service Pension Plan.”

That's another reason, I suppose, why there's a danger in defined benefits as opposed to defined payments.

How often does this happen? How often do we have discrepancies?

[Bill Matthews]

I'd say a couple of things.

Pension accounting is complex and so you will see some cash from time to time—and I will turn to my CFO colleague here in a moment—where the actuary makes a recommendation to flow additional cash.

From a fiscal perspective, accounting perspective, and a budget perspective, pensions are a long-term game. These are defined benefit plans, as you have mentioned. What you will see over the course of an employee's career are swings in investments, returns, that will actually cause it to go up and down, and predicting what those will be.... The accounting standards allow some flexibility, so the finance department can manage those quite well. That does not mean, from a cash perspective.... From time to time there's a need for an injection.

I'll see if Christine wants to—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Maybe you can answer this question.

In the last five years, how often have we had to have an infusion in our pension plan?

[Christine Walker]

For the public service pension plan, which is the largest pension plan, this was the first one they've had. What happens is the office of the chief actuary, which actually resides in OSFI, does a tri-annual report. This time, after the tri-annual report, they said that we had to inject $443 million per year over the next 13 years into the pension plan.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I don't need any more. That's wild, that's sizeable.

I suppose another one would be interest rates. That's why we watch interest rates too much.

Currently, what is the national debt and how much would be affected directly by interest rates, as opposed to bonds that are tied into interest rates?

[Bill Matthews]

I can tell you the interest expense for 2012-13 is about $29 billion, so that's just interest on debt in total. I have it in my head—if you give me two minutes I can probably find the number, I think I have Public Accounts here with me.

If you have another question you want to ask while I bring this up, go for it.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Sure.

Tied to that, historically—and I think we can go back in history a long way—governments have, I would suspect, many times been in debt. We've seen a prolonged period in the western world. Traditionally, tied to GDP, what is a comfortable level of debt? I think we're at about 36% to GDP right now. Is there something that the Treasury Board feels we should strive for?

[Bill Matthews]

That's more a question for the Department of Finance. They do have a target. My recollection is that we're at 33% to 34% debt to GDP, but you probably have more up-to-date information than I do. I know Finance has a lower target. If you compared the federal government to other countries, we'd be doing quite well. That doesn't mean that's the right thing, but it's quite positive.

There are reports done that compare countries. The challenge in comparing countries is, outside Australia.... Canada and Australia are about the only two that put all their liabilities on the books.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I think that we're the only countries that don't tie in all of our three levels of government.

[Bill Matthews]

We do, in other reports.

If you looked at France, for instance, France doesn't put their pension liabilities in the books. So you can't really do a comparison between France and Canada because they haven't got the whole picture. But, if you look at Canada and Australia, both are financially healthy and both complete liabilities.

To get back to your last question, the total interest-bearing debt of the Government of Canada is about $892 billion. Of that, total public sector pension liability—if I can read across this line—it looks like it's $67 billion. Is that correct? Sorry, $151 billion. You'll find that in the Public Accounts of Canada, which are the financial statements of the Government of Canada.

It's not in your book.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Oh, so that's not in our briefing?

[Bill Matthews]

It's not in your book.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Can you give me that one more time? What is that total?

[Bill Matthews]

The total interest-bearing debt for the Government of Canada is $892 billion. Then if I go across on that line, public sector pensions are $151 billion of the $892 billion.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I don't quite understand it. Maybe I could get an explanation for that.

[The Chair, NDP, Pierre-Luc Dusseault]

Thirty seconds left.