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.
NDP
Matthew Green NDP Hamilton Centre, ON
Thank you for that clarification.
Would it be safe to assume, then, that because of the nature of COVID and perhaps the changing work environments, with companies finding efficiencies and governments retracting, there would also be a corresponding lower prospective job market? Would there actually be fewer jobs available as well? Or what might be the result of that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's possible, but in fact with an aging population we probably anticipate the opposite—that is, fewer people being in the labour force, fewer people working. That would not be because there weren't enough jobs, but because there were not enough people of working age. People 65 and over may well want to work, or some of them may very well be capable of working, but as they get older and older, they are less inclined to work.
What is likely to happen, all other things being equal, is a decline in the unemployment rate over the medium and longer term as people get older and there are fewer people available to fill the jobs that do exist. All of that is based on long-term demographics. Of course, there could be economic shocks, like the one we are currently living, that turn this on its head, but the longer-term trend is of an aging population and a declining unemployment rate—all other things being equal, of course.
NDP
Matthew Green NDP Hamilton Centre, ON
Thank you. I'm trying to get an outlook for the next generation, notwithstanding the fact that our aging population has had some good years and of course some other decades that might not have been so good.
I want to take a moment right now and zero in on your legislative costing note on eliminating interest on the Canada student loans program. In it, you have suggested that it will cost $315 million for 2020–21. It showed that in the past five years, ESDC has written off, waived or forgiven more than $2 billion in students loans due to financial distress and what student borrowers are experiencing here throughout COVID. That's on top of the $410 million ESDC has to spend to contract the administration of Canada student loans programs to DH Corporation over the same period of time.
In your opinion, what would be the effect of eliminating student loan interest payments; what effect would it have on borrowers; and could this help potentially offset the losses experienced by the student loan defaults and writeoffs?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The cost estimate we did, which was pegged to not imposing interest on student loans, as you pointed out, was a $315-million gross cost, minus $5 million in reduced tax credit for the interest expense. Of course, this would probably have a positive impact on the number of defaults, given that the amount owed by students collectively would be lower, so the probability of default, other things being equal, would probably go down slightly.
That's one thing we considered, and we also noticed when we did cost estimates in a previous setting. In the electoral campaign a couple of questions were asked by various parties on various student loan measures. When relief measures are afforded to students, they have a corresponding impact in reducing the number of bankruptcies, loans in default and loans written off.
NDP
Matthew Green NDP Hamilton Centre, ON
I note that the new Biden administration has extended the freeze. We have not, to date. We're hoping this government will go down that path.
Just for my own clarification, what is the effective rate right now on the program? Is it also impacted by the really low interest rates?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, it is, but given my apparent age it's been a while since I've paid interest on student loans.
Maybe Xiaoyi or Trevor knows the going rate on interest on student loans.
Director, Fiscal Analysis, Office of the Parliamentary Budget Officer
I believe the interest rate on that program is close to the government's own borrowing costs of close to the prime rate of interest.
Conservative
The Chair Conservative Robert Gordon Kitchen
That ends our first round. We'll now go into our second round, going for five minutes, then two and a half minutes, and then five minutes.
We will start with Mr. McCauley for five minutes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Thanks, Mr. Chair.
PBO attendees, what a pleasure as always to have you back.
Has PBO done a risk analysis around GDP and costs related to vaccine delays? We've seen this week we have zero vaccines. Next week it's next to zero. I'm wondering if your numbers take into account those delays and potential delays down the road as well.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
When we did our last fiscal and economic outlook, we stated it was based on the premise that the government restrictions, public health restrictions, would be gradually lifted over the next 12 to 18 months, and also assumed that a vaccine would be developed.
One risk to that outlook, a concern, was the resurgence of the virus or delays in lifting these restrictions. We mentioned that, but we did not quantify that risk because it would be highly hypothetical. As the situation evolves, we will be updating our fiscal and economic outlook.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Unfortunately, the delays are not hypothetical anymore. They're actually happening. It would be interesting to see.
You said the fiscal guardrails are contradictory and incompatible. Are you able to briefly expand on that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Based on our projections on the unemployment rate, the number of hours worked and the unemployment rate are supposed to go back, will go back or are expected to go back to pre-pandemic levels by mid-2022, so somewhere in the first half of 2022, while the employment rate, the proportion of adults who work, is on a downward trend due to demographics. Because the Canadian population is getting older, there are more and more seniors in the adult population and they're less inclined to work. The proportion of adults who will want to work is going down slightly because of more people getting old as a proportion of the workforce.
On the one hand you have two indicators—number of hours worked and unemployment—scheduled to hit pre-pandemic levels probably in the first half of 2022. On the other hand the employment rate is on a downward trend no matter what you do. That's why I'm saying these are two contradictory—
Conservative
Kelly McCauley Conservative Edmonton West, AB
So we could be throwing lots of money at the wrong areas.
The Naval Association of Canada attacked the PBO briefly over the JSS report and also your upcoming report. I'm wondering if you could comment on that. Is DND is being fully open with your office on the cost comparison for the frigate program?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I read the criticism of our report. One of the criticisms was that we focused on a fiscal or a financial analysis, which is exactly what this committee, OGGO, asked us to do. I found it bizarre to be criticized for doing exactly what we were asked—
Conservative
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes. It was clearly laid out in the report that we were asked to do this. That's what we did, and we got criticized for doing it. Point taken.
We didn't compare, or we didn't include the industrial benefits. No, that was out of the scope of the report.
We were also criticized for basing the cost of the second ship, the Obelix, on the cost of converting the Asterix. That's a fair basis on which to cost a second ship, how much did it cost to build or convert the first ship?
There are a couple of criticisms like that, and the criticism also warned parliamentarians to carefully read the report. I hope it's not coming to you as a shock, but you're supposed to read the report carefully before you comment on it.
I found that a bit.... It is what it is. Naval officers work hard. They have served or are currently serving their country. I don't blame them for wanting the best ships possible, but the criticism.... If they have methodological changes that they would like us to make, we're always happy to consider them, and provide you the best analysis possible.
Conservative
Kelly McCauley Conservative Edmonton West, AB
With regard to the upcoming frigate report, are you getting full access to the information you need about this $70-billion to $100-billion program?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
So far, so good, yes, and the report is being drafted as we speak. There haven't been major access issues from the Department of National Defence and the Royal Canadian Navy. So yes, it's good news.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you very much, Mr. Giroux and Mr. McCauley.
We will now go to Mr. Drouin, for five minutes.
January 27th, 2021 / 5:45 p.m.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
Mr. Giroux, thank you very much for joining us once again. I would like to take this opportunity to wish you a wonderful year filled with reports that will inform parliamentarians, including myself.
I want to come back to Mr. Paul-Hus' question about the Canada Revenue Agency.
The agency told you that it was afraid to provide you with certain data because it might allow you to identify individuals. Have you consulted with the Office of the Privacy Commissioner of Canada to find a solution?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No. This is an outstanding issue that has been discussed with the Canada Revenue Agency for a very long time, even before I took office.
I did not consult the Office of the Privacy Commissioner, because the legislation is quite clear to me: my office must have access to information in a timely manner and free of charge.
Having said that, having worked at the agency, I understand their concerns very well. Section 241 of the Income Tax Act is quite clear: the agency must not disclose personal taxpayer information. However, that is not what we asked for.
On the one hand, the agency has this desire, which I would say is pathological, to protect taxpayer information, which is a good thing for taxpayers. On the other hand, it must provide timely and useful information to an officer of Parliament whose mandate is to provide information and analysis to members of Parliament and senators. It's a matter of finding a compromise.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
If this was a problem before you took office, the Office of the Privacy Commissioner of Canada could conduct an analysis to try to reconcile those two viewpoints. That would stop arguments about who has a right of access to the information. Third party advice might be helpful.
My colleague Mr. McCauley talked about the financial implications of a potential delay in vaccine delivery. I'm trying to see what sort of mathematical or economic model you could use to measure that.
The provinces started vaccination a few weeks ago, even a month ago, but they have not yet ended the economic lockdown because we are still in the first phase.
Will there be any financial implications of continuing the public lockdown even if vulnerable people are vaccinated? What indicators would show you that government revenues will increase even though we're still in lockdown? I am sort of trying to understand how you are going to analyze this measure.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I will let Mr. Shaw briefly explain how this situation could be analyzed.
Director, Fiscal Analysis, Office of the Parliamentary Budget Officer
In September, the Office of the Parliamentary Budget Officer published forecasts of the government's monthly revenues. According to most of the data we have gathered to this point, the government's monthly revenues basically match the forecasts in our office, regardless of the trends in the economy and the transmission of the virus.