Government Operations Committee on March 18th, 2024

[The Chair, Conservative, Kelly McCauley]

I call this meeting to order.

Good morning, everyone. Welcome to meeting number 110 of the House of Commons Standing Committee on Government Operations and Estimates.

Pursuant to Standing Order 81(5), the committee is meeting to commence consideration of supplementary estimates (C) 2023-24: votes 1c and 5c under the Department of Public Works; vote 1c under the Privy Council Office; vote 1c under Shared Services; and votes 1c, 15c, 20c under the Treasury Board Secretariat.

Just as a reminder, do not put earpieces next to your microphone. That causes feedback and potential injury to our very valued translators.

The intent is that we'll do about four rounds today. After we're done, we will do our votes on the estimates so that they can be reported to the House today.

We have with us, of course, our PBO and friend of OGGO, Mr. Yves Giroux.

Welcome back for the 15th or 20th time in the frequent flyer program. That's elite status with us. Thanks for joining us today.

Ms. Vanderwees and Ms. Giswold, welcome back as well.

I'll turn the floor over to you for an opening statement, Mr. Giroux. The time is yours, sir.

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

Good morning, Mr. Chair and members of the committee. Thank you for the invitation to appear before you today.

We are pleased to be here to discuss our report on the supplementary estimates (C) 2023-24, which was published on February 22, 2024. With me today are our lead analysts on the report, Jill Giswold and Kaitlyn Vanderwees.

The government's supplementary estimates (C) for 2023-24 outline $13.2 billion in budgetary spending authorities. Voted authorities, which require approval by Parliament, total $8.9 billion. Statutory authorities, for which the government already has Parliament's permission to spend, total $4.3 billion. This increase is largely driven by a $3.2-billion increase in interest on unmatured debt.

Major areas of planned spending in the government's final supplementary estimates for 2023-24 include personnel, national defence, indigenous programs and student financial assistance.

Supplementary estimates (C) include a further $409 million for budget 2023 measures, bringing total planned spending to date on budget 2023 to $10.4 billion, excluding off-cycle measures. To support parliamentarians in their scrutiny of budget 2023 implementation, we have prepared and published tracking tables that list all budget initiatives, the planned spending amounts and the corresponding legislative funding authority.

We'd be pleased to answer any questions you may have regarding our analysis of the estimates or any other work of the Office of the Parliamentary Budget Officer.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Giroux.

We'll start with Mrs. Kusie, please, for six minutes.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you so much again for being here, Monsieur Giroux.

Of course, we're incredibly disappointed to see that the amount put forward by the government is $7 billion more than we had anticipated in terms of their planned deficit. As we've seen with them, this is a trend. The numbers start at a certain level. Then they get worse and they get worse and they get worse, as we have seen with ArriveCAN.

In your report on refocusing government spending, you say that $500 million was planned to reduce consulting, other professional services and travel, with $350 million from professional services. Did this include a decrease in consulting costs?

Of course, we've seen with ArriveCAN that this government loves its relationship with consultants, with Liberal insiders. Consulting costs under this government continue to balloon, so did that include a decrease in consulting services, please?

[Yves Giroux]

The refocusing of government spending, the $500 million in savings for the fiscal year that is ending this year, has $150 million coming from travel services and a reduction in travel expenditures. The remainder, $350 million, is expected to come from a reduction in consulting services. These amounts have already been frozen by the Treasury Board. Departments cannot access them.

We asked for details on these expenditures. We find that a significant portion of them will indeed be reductions in consulting services, but for some departments, there were no details provided. Because the reductions will come from general expenditures, it's difficult to be absolutely certain that the totality of the $350 million will be a reduction in consulting services.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

All right.

In reviewing your report, it seemed to me—having been a public servant in charge of cost centres, I have a good understanding of them—that for the two major areas of defence and indigenous services, these were either funds that were in reserve or were just going to be given back anyway. In my opinion, the Treasury Board president certainly has failed on the objective that she set for herself back in July or August, I believe.

The Privy Council Office found $1.3 million by streamlining management structures, but from the recent ArriveCAN study, it seems that management is too complex to ensure accountability and compliance throughout the system. That has led to the astronomical cost overruns that we've seen in ArriveCAN.

Do you think that all departments should begin looking at streamlining management and services to be more efficient and to ensure that there are cost savings in the organization and in outcomes? What would you recommend, based upon what you've seen, both within your reporting and with the ArriveCAN scam scandal?

[Yves Giroux]

When it comes to management in the public service, some of you may know that there are executive-class executives in the executive group. There are five levels, from EX-01 to EX-05, and in addition to that there are deputy ministers, including associate deputy ministers. It's not uncommon for departments to have five levels of executives, with one or more associate deputy ministers and one deputy minister.

It leads to a situation in which an employee can have seven levels of management above them, including EX-01 to EX-05, an associate deputy minister and a deputy minister.

There is certainly room for de-layering, as some would say, and it's something that was considered many years ago in the public service. Some EX classifications would be collapsed, leading to three layers of executives as opposed to five, which can have its own drawbacks by adding to the approval process and leading to many other issues.

The short answer to your question is yes: There's room to reduce some levels of executives in the public service.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

I think that's evidenced by our long-time inability, because of the several layers, to determine who approved GC Strategies. As well, as we've seen, this gives different levels of management the ability to blame each other. I think it definitely would improve accountability, further to your point.

Throughout the ArriveCAN scam study, we've seen that there is significant missing documentation. Have you encountered this as you've been completing your studies in your role as head of the PBO?

[Yves Giroux]

We don't have the same role. I don't have the same role as the Auditor General, so I don't always need to have the same level of documentation as the AG.

In general, I have found that the information that we have needed has been provided by government departments. As I said, we don't have the same mandate, so we don't require the same level of proof.

In general, we have not had major issues in getting the documents that we need for the purpose of the types of reports that we have been preparing for the benefit of parliamentarians.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

What I'm hearing consistently from your reports and through your evaluation is, I think, also what we've concluded on this side of the table: The problems that we're seeing in the ArriveCAN scam are endemic throughout government.

Thank you very much, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mrs. Kusie.

Mr. Bains, please go ahead, sir.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

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

Richmond residents have the longest life expectancy in Canada. As we look ahead to consider our future economic position, how much will the benefit to the elderly increase in the medium and long terms? What is the benefit?

[Yves Giroux]

We've seen, either in the main or in the supplementary estimates, that benefits for seniors will amount to about $81 billion this year, and they're expected to rise to more than $90 billion over the foreseeable future. By 2028-29, they're expected to reach $99.7 billion. They're expected to increase by between 5% and 7% per year in the next couple of years.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Have the increasing costs as a result of an aging population had an effect on your long-term projections?

[Yves Giroux]

Yes. The aging population obviously has an impact on the long-term sustainability of all levels of government in the country, including the federal and provincial governments. However, we find that the federal government, because of the nature of its own spending, is still sustainable.

When we last checked in July, when we last released a report, despite the aging of the population, federal finances were still sustainable, due to the very nature of the government's spending, which consisted mostly of transfers to individuals and to other levels of government.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

I'm going to switch to the Department of National Defence.

According to your department, one-fifth of the proposed budgetary spending is for national defence, and this includes $591 million for the Canadian multi-mission aircraft project, $510 million for the strategic tanker transport capability project and $235 million for the North Atlantic Treaty Organization's assurance and deterrence measures in Europe.

In 2014, when Russia invaded Crimea, the Harper government's funding for the CAF fell below 1% of GDP. With the addition of the items just mentioned, what per cent of Canada's GDP is allocated to military spending now?

[Yves Giroux]

We have not done a recent update, since April 2022, of the Government of Canada's spending on military expenditures as a share of GDP. That's something we are considering doing.

It's not as straightforward as it may sound, because the NATO definition not only includes spending on national defence but also spending on veterans issues as well as the Canadian Coast Guard, among other things. The calculation of the proportion of GDP that goes to national defence under the NATO definition is not always straightforward, so I don't have an updated figure, unfortunately.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

We haven't completed that exercise.

[Yves Giroux]

The Government of Canada may have, but we have not updated that figure since the last time we published it in 2022.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Can you please provide an update on the impact of policy interest rate increases on debt servicing costs, and can you describe implications for the government's expenditure plan?

[Yves Giroux]

We estimate that this year's spending on debt servicing costs will be about $46 billion, and with the interest rate increases and the time it takes for the impact to be fully felt on the stock of debt as government debt gets refinanced progressively, we expect that amount to increase to $62 billion by 2028-29.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

How much do the estimates provide for implementation of Jordan's principle?

[Yves Giroux]

I'll have to go back.... Jill tells me....

Go ahead, Jill.

[Jill Giswold, Senior Analyst, Office of the Parliamentary Budget Officer]

In supplementary estimates (C), we saw $804 million for the continued implementation of Jordan's principle. That was for 2023-24.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

There are some negative values in the supplementary estimates. What do these figures represent? Do you see this often?