Government Operations Committee on Oct. 2nd, 2018

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

That's reassuring. Thank you so much. Now I'll move on to questions about your expanded mandate.

One of the new responsibilities is to cost political parties' platforms. You'll be doing that right before next year's election. Can you explain how your office is preparing to fulfill this new responsibility? What deadlines are you working with? What kind of resources will you need?

[Yves Giroux]

I'll try to keep this as brief as possible considering how much we're doing to prepare.

First of all, my predecessor asked the Speakers of the Senate and the House of Commons to increase the OPBO's budget by an amount believed sufficient at the time to handle the expanded mandate. That request was granted, so we will be getting substantially more analysts. We'll have about 42 employees, which includes administrative assistants, other support staff, analysts, and management, including me. We do have more resources now.

With respect to preparations themselves, we are developing a number of tools that will enable us to respond to requests more quickly and efficiently. For example, we are working on a model that will enable us to estimate, as well as we're able, how much the Canadian Armed Forces will grow. We are already laying the groundwork for requests we anticipate receiving. We have also developed models to estimate the costs associated with certain relatively simple fiscal measures.

We are developing the tools we'll need to address issues we expect to see in campaign platforms.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

You're already on it.

I have a question that seems especially timely to me considering the recent election in Quebec.

Before the campaign began, Quebec's Auditor General released a report on the state of Quebec's finances. That came out just as the campaign kicked off. I thought that was a novel idea. It meant totally non-partisan information was available at the beginning of the campaign, and that enabled parties to campaign on their own platforms.

Do you think the federal government might consider having the Auditor General release that kind of report?

[Yves Giroux]

At the federal level, I don't think the Auditor General is in the best position to do that. It's more a job for my office. In fact, I do plan to do something similar.

Traditionally, my office—or my predecessor—released reports in April and October detailing the economic and fiscal outlook. One is due out later this month and another in April 2019. We plan to update it right before the election campaign as set out in the Parliament of Canada Act, which governs my office.

We're going to issue an update to the April economic and fiscal outlook in late May or early June. My mandate shifts slightly before the election campaign, and at that point, there will be an economic and fiscal outlook update that the political parties can use to draw up their financial framework.

[Alexandra Mendes, Liberal, Brossard—Saint-Lambert, QC]

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. McCauley you have seven minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Jacques, welcome back.

Mr. Giroux, congratulations. Welcome to our committee. It's a pleasure to have you here.

You sat in on a bit of Mr. Robson's presentation with us. In his report he talks about a $96-billion unfunded liability because of the way the discount rate is being used. Do you share his view on the discount rate and on the unfunded liability?

[Yves Giroux]

I don't.

[Kelly McCauley, Conservative, Edmonton West, AB]

The follow-up is the public sector. The PSAB is talking about perhaps reviewing that. I'm wondering if you have a comment about the discount rate needing to be changed.

[Yves Giroux]

It's something that has to be looked at very regularly for the unfunded liability or the liability to be as closely matched as possible to reality. However, I would be curious to see Mr. Robson's opinion if interest rates were, as Mr. Deltell mentioned, 23%. Maybe he'd have a different opinion of the appropriate discount rate. Maybe he'd be more in favour of something that's closer to 5% or 6%.

[Kelly McCauley, Conservative, Edmonton West, AB]

If the interest rate swung back and forth severely like that, would it not be reflected using the RRB then? That would bounce up and down with interest rates as opposed to sticking with an arbitrary number drawn out of the past. Does it change?

[Yves Giroux]

The real return bond rates don't necessarily move up and down with the nominal interest rate. That's why it's attractive, because it tends to be much smoother and lower than nominal interest rates because it removes the inflation component, so it would not necessarily move up and down with the swinging nominal interest rates.

[Kelly McCauley, Conservative, Edmonton West, AB]

Just quickly, on the Public Sector Pension Investment Board, do you have an opinion—that's barely in your mandate, I realize—on the returns of using passive versus active investment for the board?

[Yves Giroux]

The rate of return traditionally tends to be higher if you have an active management strategy because of risk taking. However, for a pension plan that's as big and that has such a long-term perspective, personally I believe it's appropriate to be a bit more aggressive than passive to ensure that it has as high a rate of return as possible while maintaining an acceptable level of risk. To maintain an acceptable level of risk, the best solution is to diversify. It would be unwise to buy, for example, one stock or a very limited number of stocks. But, with the size of its assets, it can manage to have a much more aggressive stance while also limiting its risk exposure by diversifying into different markets, classes of assets and so on.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay. I understand that.

One of the items I noticed with it, though, and I don't want to call it an issue, was something that we brought up—part in jest, but part in reality—when the president was here I think a year and a half ago. They've underperformed the Standard and Poor 500 eight out of the last nine years despite last year paying almost half-a-billon dollars in costs, as opposed to.... I could take that money and buy an ETF for $21 million and fees. We see the same thing with the CPP in terms of increasing the army of people behind the CPPIB and added costs.

I'm looking at this and wondering if this is the right way we should be going to get the best returns for our public servants and for our taxpayers.

[Yves Giroux]

That's a very specific question. I'm not sure I'm the best person to answer that question at this stage in my mandate.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay, fair enough.

We're studying the estimates right now, and the process. Of course, it comes back a lot to vote 40 and the change in the Standing Orders to allow an extra six weeks for alignment. With the extra time for the alignment and the changes, have you seen an improvement in the speed of the programs getting to Treasury Board and getting approved by Treasury Board?

I always quote a previous.... I don't know if it was Mr. Jacques or Mostafa who used the word “sclerotic”, but I quite.... The previous PBO criticized the current and previous regimes, saying it was the sclerotic pace of getting the programs out the door, not the actual alignment, causing the problems.

I'm wondering if there's been an improvement since the most recent change.

[Yves Giroux]

I'm not aware of a significant improvement. There might have been some anecdotal improvements for some specific proposals.

[Jason Jacques, Senior Director, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer]

I think up to this point, based on the data that the Government of Canada has published on the TBS website, we haven't seen a significant improvement just in terms of the dollars that have been approved.

What we are looking forward to, of course, is the next supplementary estimates, where we can actually do a year-over-year comparison, a comparison looking back to budget 2016: In the fall of budget 2016, how many new items were actually approved at that point, and similarly with respect to budget 2017. That's something we track on a regular basis in terms of the actual rollout of the budget.

All that said, check back, because as Mr. Giroux mentioned, we will be preparing our regular analysis of the next supplementary estimates. That's information that we will have in the document.

[Kelly McCauley, Conservative, Edmonton West, AB]

The change in the Standing Orders has a two-year sunset. They have two years to do proper alignment. You've commented that based on what you've seen so far, we haven't seen any appreciable change. In fact I saw I think one report showing that we're actually slowing down the approval process.

Do you think we'll be able to get this done within a two-year period that makes it worthwhile having taken away some oversight from Parliament and from this committee to allow this experiment to happen?

[Yves Giroux]

I think the best way to speed up the approval process and to improve the oversight would be to have a budget that is, to be honest, much earlier in the process. It's very difficult to do anything that's meaningful and significant when you have a budget that can be tabled at virtually any time of the year.

In my opinion, which I may change when I get more experience in my mandate, having a budget at a fixed date early on in the process would probably be the best way for parliamentarians to be able to—

[Kelly McCauley, Conservative, Edmonton West, AB]

You answered my last question, which was to see if you'd agree—

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

[Kelly McCauley, Conservative, Edmonton West, AB]

Previously, in 2012, they had suggested doing a fixed one.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Madam Benson, you have seven minutes, please.