Government Operations Committee on March 18th, 2024

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

Thank you, Mr. Giroux and your colleagues, for joining us today.

The recent Auditor General's report on the ArriveCAN scam found that it was extremely difficult to follow the money. In her estimation, Canadians did not receive value for the money spent. We have the procurement ombudsman's reporting on an extreme lack of documentation throughout the procurement process and on interesting practices like bait and switch.

In your role as the Parliamentary Budget Officer, it is your role not only to provide Parliament with an analysis of macroeconomic and fiscal policy but to also help us in raising the quality of parliamentary debate and providing greater transparency and accountability. I certainly appreciate the role that you play.

As numerous investigations are undertaken and reports and audits continue to be tabled, what concerns you the most about the spending of this current government?

[Yves Giroux]

That's a broad question.

I'd say that what concerns me the most is the disconnect between the increased level of spending, which is a policy choice, and the performance indicators that don't seem to be markedly improving.

Departments and organizations have to adhere to performance indicators. They determine which indicators they'll be following and they also determine the targets that they aim for. Over time, we've seen an increase in the number of public servants and in public expenditures, but year after year, despite the fact that departments choose their performance indicators and the targets, they don't seem to be getting significantly better at reaching them.

I've used the analogy before with some of your colleagues. It's as if the students determine the topic of the test as well as the pass mark, but a portion of them still fail. That's what worries me with the increased level of spending. We increase spending, and as taxpayers we provide more resources. Despite that fact, while there are some sectors in the public service that are doing great, others seem to be trailing behind, unfortunately.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

I have to believe that you're also concerned with the amount of debt that the government is serving at this time. In your report, you mentioned that there is an increase of $3.2 billion in interest payments on unmatured debt, and I'm really interested in that. For this past fiscal year, this means that total interest payments on unmatured debt will reach $36.8 billion, and that came from your report.

In that report, you also specifically referred to total interest payments on unmatured debt. My understanding is that unmatured debt is essentially debt that is not yet due. Is that correct?

[Yves Giroux]

Yes, but it's also excluding some other interest-bearing obligations such as the obligations the government has towards the pensions of public servants. The interest on the debt is what really matters, and it's expected to be $46.5 billion this year.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

You beat me to my next question. Are there further interest payments that the government is paying on matured debt that are not included in the $36.8-billion number that you cited?

[Yves Giroux]

Yes. As I mentioned, interest on the unmet obligations of the government toward pension plans of its employees also adds to interest on unmatured debt. The debt servicing costs are what really matter, and they are expected to reach $46.5 billion this year.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you so much.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mrs. Block.

Mr. Sousa, please go ahead, sir.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Thank you, Mr. Chair.

Thank you for being here again today to discuss some of the mechanics and some of the alterations to the budget as we go forward.

As you can appreciate, a budget is a living document, so things change. Things have to be assessed and things have to be modified accordingly, and of course your job is to look forward. The Auditor General looks at what has happened in the past; you're trying to assess what decisions are being made and how they can affect us going forward. It's an important task and very important work that you do as a result.

There are lots of discussions about the big items that you have in your report. National defence, FTEs, indigenous communities, social programs and interest on debt are all major items, I believe, that you highlighted as being issues that have changed or maybe have been increasing.

However, you also have lots of frozen allotments. You have realignments of previous spending and how we're refocusing spending to deliver to Canadians. I think you broke it down into those two sections.

Before I get into the items that are affecting some of the changes as a result of the increases, can you reaffirm what the frozen allotments are? What realignment of parts of government is taking place to offset some of these issues?

[Yves Giroux]

Frozen allotments are amounts that have been approved by Parliament but that the Treasury Board—as a group of ministers—has decided to freeze so that departments cannot access them. You can freeze these amounts for a variety of reasons—waiting for certain conditions to be met, for example, or to ensure that these amounts don't get spent and are reallocated to other initiatives. That's in a nutshell what frozen allotments are usually done for. It's two broad categories.

We found that they're amounting to almost $12 billion in 2023-24, and $7 billion of that is to be reprofiled to subsequent years. These are amounts that won't be spent in the current fiscal year but in subsequent fiscal years, and about $500 million of that is repurposing government spending.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

In your opinion, are those appropriate measures to take, given some of the constraints that are before us? Are you engaged? Do they give you some forewarning as to what is being repurposed or how it's going to proceed?

[Yves Giroux]

I don't get forewarnings. However, we can ask for details from the Treasury Board Secretariat as to the amounts that are being frozen or reprofiled. We can, if we want, get into the weeds as to exactly what's being reprofiled.

To the first part of your question on whether that's a good way to measure, I think it is. When central agencies, as we call them—Treasury Board Secretariat—see that this money won't be needed, it's prudent management to ensure that it is frozen to ensure that it doesn't get spent on other purposes and is reprofiled to future years, or if there's a savings target, that the money is frozen to ensure that it doesn't get spent by departments.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

In terms of interest on debt and what happens going forward, can you give a sense to this committee, and to those who are watching, of what interest on debt is as a percentage of our overall budget today, as compared with what it was 10 or 20 years ago?

[Yves Giroux]

I have a proportion of the overall revenues that interest on debt represents. It's about seven-point-something per cent. I don't have the exact number in front of me. It will be rising to about 10% over the next few years. That's been increasing.

Before the pandemic, it was slightly above 6%, but in my lifetime it's certainly reached levels that were much higher than that. It was above 30% in the early 1990s.

Interest on the debt as a share of federal revenues used to be much, much higher. It's much lower than it used to be at its peak, but it's increased compared with the record lows it reached just before or during the pandemic.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

I'm well aware that in previous governments interest was a substantial percentage of the overall budget. It was a substantial amount. Frankly, there were higher interest rates back then too. There wasn't as much planning in terms of locking in those bonds and issues over longer periods of time. This government—

[The Chair, Conservative, Kelly McCauley]

I need you to wrap up, please.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

I'll proceed in my next round of questions.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

Ms. Vignola, go ahead, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Giroux, let's go back to the carbon tax. Even though Quebec doesn't pay it and it represents about 0.15% of total inflation, off the top of my head, I think it's interesting to put things in perspective.

You said earlier that this year, roughly eight out of 10 households will receive more than they paid out in tax. Will it be the same in 2030‑31?

[Yves Giroux]

We believe that it will obviously be the same thing because, although the amount will increase, the structure will remain the same. There have been no major changes to the carbon tax.

Just to let you know, we will probably be updating our distributional analysis, given that some provinces have signed on for the carbon pricing system since our last report and some adjustments have been made to exclude heating oil. So we will be updating that analysis in 2024. However, essentially, the 80% figure should not change much because, even if tax goes up, its structure remains the same.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Is that still true when you consider that the goods and services tax is paid on the carbon tax? Do the amounts stay more or less the same, or does the situation change, both today and in 2030?

[Yves Giroux]

There should be no change, because our analysis already includes the GST paid on the carbon tax, the tax on tax. We already include the 5% GST in our analysis.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

In terms of this tax on tax, wouldn't it be better to do it directly? Of course, there's a risk of losing a bit of money, but wouldn't it be simpler, from a tax standpoint, to manage a tax, whatever it may be, that's calculated directly on the initial amount, and not on an amount that already includes a tax on a tax on a tax? I'm exaggerating a bit, but this compound interest—I won't go so far as to compare it to loansharking—is still substantial.

[The Chair, Conservative, Kelly McCauley]

Please make it a short answer.

[Yves Giroux]

This is obviously something that irritates consumers a great deal. Quebec residents experienced it until a few years ago, when the Quebec sales tax was calculated on an amount that already included the federal goods and services tax. This is something that irritates people a great deal and, yes, it may be simpler to calculate the tax only on the initial amount rather than on an amount that includes a tax.