Government Operations Committee on May 29th, 2020

[The Chair, Conservative, Tom Lukiwski]

I will call this meeting to order.

I am flying a little blind here, unfortunately, gentlemen and ladies, because my Surface Pro is not connected. We have had major difficulties trying to get some connection, so I'm on my iPad and I don't have access to a lot of the other things we normally have when these meetings are connected. I'm going to be going a bit from memory today.

We have with us two witnesses in the first hour. We have Mr. Giroux from the Office of the Parliamentary Budget Officer. In the second hour we will have a representative from the Auditor General's office, Ms. Karen Hogan.

We will have one hour set aside for both of these meetings. We're slightly behind schedule now, which is probably my fault because of the technical problems we've been having, but we will go into questions and answers very quickly.

I want to remind members that we have a schedule for next week. We're meeting Monday and Friday next week. On Monday it is from 2:00 p.m. to 4:00 p.m. Eastern Standard Time, and on Friday from 11:00 a.m. to 1:00 p.m. Eastern Standard Time.

The week following, which I believe is the week of June 8, and the week following that, the schedules change somewhat. Instead of Monday meetings, we go to Tuesday meetings from 5:00 p.m. to 7:00 p.m. Eastern Standard Time on both Tuesdays, and the same time as normal on Fridays. Those meeting times are subject to change, however.

For our witnesses, I am asking that all witnesses who are making presentations today try to keep them succinct.

I understand, Mr. Giroux, you have one that is no more than five minutes long. I would appreciate if you could keep to that timeline.

I would also suggest, if possible, that if you are making a statement in either French or English, you maintain that language for the entirety of your statement. It is the same thing when responding to questions. If a question is asked to you in one official language, please respond in the same official language. This will greatly assist our technical staff. If you try to alternate between French and English, sometimes it proves difficult for our technical staff to keep up.

Mr. Green, I would suggest that we allow Mr. Giroux to make his short opening statement. Following that if you want to bring anything forward on a point of order, please do so.

Mr. Giroux, the floor is yours.

[Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer]

Thank you, Mr. Chair.

Thank you for the invitation to appear before you today. It's our first virtual appearance before this committee. We are pleased to be here today to discuss our recent COVID-19 economic and fiscal analysis. With me today I have Mark Mahabir, director of policy, costing.

Our pandemic-related work to date has included the publication of three scenario analysis reports on the impact of the COVID-19 pandemic and oil price shocks. Our scenario analysis reports are designed to help parliamentarians gauge the potential implications of the COVID-19 pandemic and oil price shocks on the Canadian economy and the government’s finances. This analysis provides a plausible illustrative scenario, and it's not a forecast. The scenario analysis is updated regularly as more data and information become available.

Our latest scenario analysis update report, which was published at the end of April, incorporates new federal measures announced up to and including April 24. Our updated economic scenario assumes real GDP in Canada will decline by 12% in 2020, which would be the worst on record since the series started in 1961. Under this scenario, the budget deficit would increase to $252 billion in 2020-21. Relative to the size of the Canadian economy, the deficit would be 12.7% of GDP, and the federal debt-to-GDP ratio would rise to 48.4% of GDP in the current fiscal year.

The latest fiscal results include $146 billion in federal budgetary measures that have been announced as of April 24 based on Finance Canada's and PBO's cost estimates. These numbers do not take into consideration measures announced after April 24. Their inclusion would increase the federal deficit by over $7 billion.

My office has also produced cost estimates of several measures of the Government of Canada, notably the Canada emergency benefit as well as the wage benefit. According to our analysis, the cost related to CERB would amount to $35 billion while the emergency wage benefit would cost $75 billion.

Up to now, measures announced by the government are temporary in nature. As soon as these measures expire and the economy starts to grow again, the federal debt-to-GDP ratio should start to grow at a much lower level and even stabilize; however, should the measures be permanent or some of them be extended, the debt-to-GDP ratio could keep on rising.

Mark and I will be happy to answer your questions on COVID-19-related measures or any work of my office.

Thank you, Mr. Chair.

[The Clerk of the Committee, Mr. Paul Cardegna]

I believe we may have lost the Chair's feed.

Mr. Drouin, could you chair the meeting, please?

[The Vice-Chair, Liberal, Francis Drouin]

Yes, certainly.

I am just going to put my language in English.

Thank you for the testimony.

I will now go to the Conservatives for six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Giroux, welcome back. It's good to see you, and it's good to have you with us.

Mr. Giroux, the most recent StatsCan labour force shows there have been three million jobs lost since February. When you add in people absent from work or those who had their hours cut back, it comes up to about 5.5 million. We have almost eight million on the CERB. How do you explain the gap?

[Yves Giroux]

Mr. McCauley, it's not that easy to explain the gap for now because data is still coming in, and people were strongly encouraged to apply for the CERB.

We know, for example, that Statistics Canada is incurring difficulties that were not anticipated due to the unusual circumstances. They are having difficulty collecting data in the usual manner.

There is also the fact that many people who were not considered employed or self-employed may still be eligible for the CERB.

It goes without saying that there has been very little oversight and few verification mechanisms included in the design of the CERB because the goal of the government was to send money to individuals as quickly as possible.

It is quite possible that there are people who apply who would not otherwise be eligible, and, hopefully, verifications after the fact will catch some of these people who applied who might not have been eligible.

It is very difficult to explain solely through fraud and abuse, and the number in the labour force survey, LFS, suggests that a lower number of individuals might have been eligible for the CERB than what is suggested by Statistics Canada.

[Kelly McCauley, Conservative, Edmonton West, AB]

CERB was supposed to be, ballpark, about $30 billion. We're already up to about $40 billion in benefits in month two.

Do you get a sense of what the CERB costs will be at the end if it's not extended? How much higher is it from your [Technical difficulty--Editor]?

[Yves Giroux]

We have not revised our estimate recently. We revised our estimate after the emergency wage benefit was announced, but we haven't updated our estimate since.

With the coming into force of the wage benefit, we were expecting a slightly lower take-up of the CERB, which has not happened. The numbers keep rising for the CERB.

We will have to update—

[Kelly McCauley, Conservative, Edmonton West, AB]

Let me interrupt you and just continue on this—

[The Chair, Conservative, Tom Lukiwski]

Mr. McCauley, if I can just interject for a moment, I apologize again. I somehow lost the connection just before you started speaking.

We'll be going with five-minute rounds for the first round, then four minutes, then two minutes.

Mr. McCauley, I will add some time to you for this intervention. Please go ahead.

[Kelly McCauley, Conservative, Edmonton West, AB]

All right, thanks.

Mr. Giroux, the flip side is the wage subsidy. We've had nowhere near the uptake that's been expected. Originally $76 billion was set aside; only $7 billion has been used.

Why do you think the uptake has been so low? Did the wage subsidy come out far too late after the layoff decisions happened, or is it, as I'm anecdotally hearing, that the wage subsidy is just being used for surviving in place, so to speak, but is not being used to hire people back?

[Yves Giroux]

That's a very good question. Unfortunately, we don't know yet why the uptake in the wage subsidy is so much lower than the government and we originally estimated. It could well be that it's more beneficial for some businesses to just lay off their workers and benefit from the wage subsidy until they can resume their operations to full capacity, but we don't know that yet for sure.

[Kelly McCauley, Conservative, Edmonton West, AB]

So a possible rethink of eligibility might be a good idea.

I want to pop over quickly to the “Strong, Secure, Engaged”. We had asked for a report on defence spending, how much was collapsing, what's on schedule and what's behind. You had told us originally the end of May. Where is the report? It is the end of May now.

[Yves Giroux]

We asked the department for updated information, and we did not get it. As you mentioned, we were hoping to release a report by the end of May, but we haven't received the information we were hoping to get, so we have to postpone that.

[Kelly McCauley, Conservative, Edmonton West, AB]

Was that information from DND?

[Yves Giroux]

Yes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Why?

[Yves Giroux]

We don't know why.

[Kelly McCauley, Conservative, Edmonton West, AB]

That's disgraceful. This is half a trillion dollars of spending. Are they refusing to give it to you? Are they ignoring you? What are they doing?

[Yves Giroux]

Apparently the current situation makes it very difficult for departmental officials to provide us with the information.

[Kelly McCauley, Conservative, Edmonton West, AB]

But this was only a couple of months.... Had they been ignoring it for longer than the current situation?

[Yves Giroux]

We were supposed to get the information on time to provide parliamentarians with an update on “Strong, Secure, Engaged”. May was the target date for us, but we didn't get the information on time.

[Kelly McCauley, Conservative, Edmonton West, AB]

When are you going to get the information from DND?

[Yves Giroux]

We were told that it would be delayed by a couple of weeks, but we have not received it yet.

[Kelly McCauley, Conservative, Edmonton West, AB]

Would you be able to report back to us in mid-June on whether they have given you that information? That's disgraceful that DND, for half a trillion [Technical difficulty—Editor]. It's just like asking for the bid information on the ships, where they delayed for years.

Let me ask you one last question. Will all this emergency spending going on right now put into jeopardy the “Strong, Secure, Engaged” spending plans?