Evidence of meeting #15 for Government Operations and Estimates in the 43rd Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was pandemic.
A recording is available from Parliament.
Conservative
Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC
Thank you, Mr. Chair.
My questions will be along the same lines as those of my colleague.
Currently, you are not in a position to give us an overview of the cost to the government of the pandemic in 2020 or to forecast what those costs will be for 2021. As you have no information, you cannot express an opinion. There is a grey area, a twilight zone, representing who knows how many billions of dollars, perhaps several hundreds of billions. Is that correct?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We are not in a position to say how much the 2020-2021 year has cost to date in response to the pandemic, since we have no information in real time. We are basing ourselves on our forecasts, which we revise as soon as we get new data. That gives us a picture that is not perfect but that is not totally unreasonable either.
For the financial year starting on April 1, everything is based on our forecasts, which will also be revised as we receive additional data, on the labour market, for example.
To have information that would allow us to determine how much the 2020-2021 year has cost to date in response to the pandemic, we would need direct access to the government's accounting system.
Conservative
Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC
So you are not in a position to provide an estimate because you have no access to the information that you would have normally. Is that correct?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We have a good estimate, albeit an imperfect one, given that we are talking about unprecedented expenditures compared to those we usually deal with.
Conservative
Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC
I saw a report on TV that talked about the public's perception: because vaccines are available, people believe that the worst is behind us and things will be a lot easier in the future.
In your opinion, do the current budget forecasts reflect the reality?
If everything goes according to the plan that the government has announced, the vaccinations should be complete by the end of September. That means we have nine months to get there.
If people have to stay locked down, do you feel that we will exceed the amounts invested in the various programs this year?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
When we did our forecast at the end of September, we had labour market projections. The data that was published subsequently were even better than we had forecast.
We feel that our forecasts at the end of September are still valid. Of course, you are mentioning very significant uncertainties, such as the renewed lockdown and the speed with which the lockdown is eased. That will depend in large part on the vaccinations and on new variants of the virus.
Normally, we would update our forecasts in April, but we will probably do it before then because of the way the economic situation is evolving.
Conservative
Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC
When the government talks about economic forecasts and expenditures, it often brings up the argument that interest rates are very low, almost at zero. I find that short-term way of looking at things very troubling because we know that interest rates can go up very quickly. So if we extend the forecast out to five or 10 years, we could be in a bind.
The last time we met, I believe we estimated that, considering COVID-19 only, interest repayments on the deficit for that year would come to about $15 billion per year at current rates. If the rates increased to 2% or 3%, those costs will explode.
Should we take a much more prudent approach in the future? Is it not unwise to continue spending money on the assumption that interest rates are low?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
A rise in interest rates is one of the risks we established in our economic and budgetary forecasts. We do not see interest rates rising in the short or medium term. That should not happen before the end of 2023 or 2024. Basically, any rise in interest rates will be modest.
We are never free from turbulence. We saw that in February and March 2020. Unpleasant shocks and surprises can occur. We are not sheltered from a financial shock that could happen elsewhere on the planet and that would cause interest rates to rise. If that did happen, funding the debt would cost much more. But that is not on anyone's radar.
Certainly, a deficit like the one we are forecasting for the current year cannot be repeated for a number of consecutive years without putting the federal government's financial viability into peril or without medium- and long-term financial consequences.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you very much.
We will now go to Mr. Drouin for five minutes.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Thank you very much, Mr. Chair.
Mr. Giroux, I am going to be talking about basically the same things that Mr. Kusmierczyk brought up.
I would add, however, that, in Canada, we have a number of authorities responsible for health. The provinces and territories receive financial transfers from the federal level. I am curious to know what you use as a basis for your analysis of those transfers.
Since December, a number of reports have shown that the provinces and territories have not yet committed expenditures to match the federal transfers. Clearly, we are paying the costs of the deficit and, one of these days, we will be paying the costs of repaying it.
So amounts transferred to the provinces and territories have not been spent. I can't speak about the situation in other provinces and territories but I can speak about the situation in Ontario. There is an act under which, if the province shows a budgetary surplus, it must pay down the debt even with the federal money intended to help Canadians during the COVID-19 pandemic.
How will you analyze those transfers?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
A little earlier in the financial year, in the second half of 2020, we conducted an analysis of federal transfers which was quite cursory, considering the extent of the amounts in question.
However, when we do our economic and budgetary forecasts, we consider what is known, namely the federal transfers to the provinces, to forecast the level of the deficit. We also consider that when we report on financial viability. We did one in February 2020 and we updated it at the end of 2020. We consider federal transfers when we assess the medium- and long-term financial viability of the federal government and of the provinces, both collectively and individually. We consider what we know, meaning the legislation in effect and the one-time transfers, when we want to prepare our forecasts on deficits or surpluses, depending on the time in which we find ourselves.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Speaking of transfers for social programs or for health, I am upset at the lack of reporting. I too have to report to taxpayers, but there is no report from the province to tell me how much of the federal money is spent in hospitals, or to increase the number of nurses in long-term care facilities, for example.
Do you feel that, starting in 2021, the feds should require that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That is a very good question, but federal-provincial dynamics are way beyond my mandate. I prefer not to poke my fingers into that machinery. However, your concern is perfectly valid.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
How can we assess how effective the transfers are? Transparency means that you can see through from both sides.
Let's just take the COVID-19 transfers as an example. I know that amounts were transferred to help schools buy fans or to improve their ventilation systems, for example. If we as parliamentarians do not have that information, how can we know whether those dollars were really used for those purposes? How can you know it yourself?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
In terms of transparency with the transfers to the provinces, the federal government clearly explains the intended targets of the amounts it hands over to the provinces and territories, including for the fight against COVID-19. It is clearly in its interests to do so.
The question you raise is more about the transparency from the provincial side. Do the provinces give the federal government credit for the sums that it transfers to them? That's a question I did not examine, of course, because I was focusing on the federal government's measures in the fight against COVID-19.
However, something could probably be explored from the provinces' side. Are they accounting for the money they receive from the federal level in a correct and timely fashion? As I said, those are dynamics that I have not yet taken a position on, for obvious reasons.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
I understand you completely.
I think that my colleague Mr. Weiler has some questions for you. That's all for me.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Drouin.
We've come to the end of your five minutes at this point in time.
We will now go to Ms. Vignola for two and a half minutes.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you very much, Mr. Chair.
I am also going to continue along the lines of my colleague Mr. Kusmierczyk. I gather that you wanted to find an answer to his question.
Do you think it would also be possible to find out the impact of the pandemic on aerospace workers and on the subsidies that the sector has received?
Putting all the programs together, this sector's contribution to Quebec's GDP amounts to $25 billion. When I say aerospace, I am talking about aircraft construction and everything related to it, such as the engines and the parts.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Thank you for your question.
I am probably not in the best position to tell you what effects the pandemic has had on aerospace. But we could look at the sector and report on it, if the committee so wishes.
As you say, the sector is an important one for the Canadian economy. Clearly, it has been severely affected by the pandemic and probably will continue to be so for a number of years. The airline industry will not go back to what it was in February 2020 as soon as the pandemic is behind us. It will probably take a number of months.
If the committee passes a motion on the topic or if parliamentarians are interested, it is something that we could consider.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you.
On the subject of vaccines, neither we as parliamentarians, nor the public, nor even you as Parliamentary Budget Officer have seen the contract, the costs and the agreements. Have you ever seen anything like that? To your knowledge, is there a precedent?
Does the matter concern you in terms of the quality of your work?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I am sure there must be precedents, but, unfortunately, none comes to mind. I feel sure that there have been precedents with specific national defence contracts, for example, but they probably go back to before I was appointed. The people who have been in the office longer than me probably have a better idea of precedents like that. If they are listening, they are probably yelling specific examples at their screens, but I can't hear them.
Of course it affects my work, because it makes the accountability and transparency a little more difficult. It is difficult to determine whether the government got a good price for the purchases it has made or intends to make. It prevents me from giving you information and analyses, which clearly are of great interest to you.
Conservative
NDP
Matthew Green NDP Hamilton Centre, ON
Thank you, Mr. Chair.
I'm going to go back to the small businesses. We heard about the programs that were rolled out, and we were talking about how we might be able to list who got what in some of these subsidies. I'd like to go further.
Were you able to disaggregate who received these by way of the size of their business, whether they were small or medium businesses versus larger corporations?