Government Operations Committee on Dec. 3rd, 2024

[Yves Giroux]

When it comes to future spending, I think we'll have to see what the budget tells us—or a fall economic statement, if there is one. However, I expect future supplementary estimates—if there are supplementary estimates (C) this year—and the main estimates to continue to include spending on government priorities, which have been laid out in various documents recently—budgets 2023 and 2024, as well as ministerial and prime ministerial statements.

You're probably much better aware of the details of these priorities than I am. I would expect to continue to see spending in these areas.

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

Fiscal sustainability to support some of the programs that we're talking about is essential. I know that our overall growth of GDP and our ratings as a country relative to the other G7 countries are still strong. We want to maintain certain measures as we go forward, in order to protect the interests of Canadians and to enable us, certainly, to provide economic growth and revenue increases in our system.

[The Chair, Conservative, Kelly McCauley]

I'm afraid that is your time, Mr. Sousa.

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

Thank you, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

Perhaps the PBO can provide a response in writing.

We'll go to Mrs. Vignola.

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

Thank you very much, Mr. Chair.

Mr. Giroux, Mr. Creighton and Ms. Giswold, thank you for joining us.

Mr. Giroux, you mentioned that, if the House did not give its approval in time, the departments would have to draw on their own funds to finance their activities.

What are the consequences of this?

[Yves Giroux]

In fact, it varies from department to department. In general, departments should be doing what we call risk management and cash management. We're talking about twenty billion dollars out of a budget that exceeds $500 billion. For some departments, it would be a little more difficult. Indeed, they would have to defer certain expenditures to subsequent years.

That said, this would probably not be the case for all government departments and agencies. For example, the Department of National Defence has a budget in the tens of billions of dollars. In general, some appropriations lapse each year, particularly for capital expenditures in this department.

Often, 14% to 19% of capital budgets go unused from one year to the next. It is therefore quite possible that many, if not the vast majority of departments, reallocate funds from one envelope to another to make ends meet. However, this is not possible for all organizations requesting funds.

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

Earlier, I took a quick look at the main budget amounts from 2019 to 2024. I noticed that, when I took office, in 2019, the main budget requested $355.6 billion. Today, the budget is $449.2 billion. Even during the pandemic, the amount wasn't as high as it is now.

Does this worry you?

How can we ensure that the debt‑to‑GDP ratio is not beyond our means?

[Yves Giroux]

I'm not really worried about it, because we're talking about government priorities. The government has decided to spend in certain areas. So it's a question of public policy and priorities. Taken in isolation, the level of spending is not necessarily something that can or should cause concern. What can give cause for concern is the nature of the services provided, in relation to the sums allocated. Collectively, are we getting value for money? This is a subjective question, and answers vary depending on who you ask.

The other aspect of your question was about financial viability. Compared to the other G7 countries, Canada is in an enviable position, because its debt‑to‑GDP ratio is relatively low, especially compared to the United States. On the other hand, the government has set budget targets. In light of what we've seen over the past few months and recent announcements, the government has increased the risk of not meeting its budget targets.

When the government sets itself budget targets and puts itself at risk of missing them because of conscious decisions, and not because of unforeseen external events, that's worrisome.

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

Earlier, I asked the minister a question about the departmental results reports and the public accounts of Canada. The Secretary of the Treasury Board said there was a tracking tool. Now, tracking tools are accessible, but they're not necessarily transparent. Adequate follow‑up needs to be continuous.

Does it make sense to receive reports on departmental results and the public accounts of Canada almost a year after the accounts have been closed?

Isn't there a way to do things better and faster so that all parties can do their analytical work?

[Yves Giroux]

In my opinion, this situation puts you in a very uncomfortable and difficult collective position. The government is asking you to approve funding for almost the entire year, when we still don't know what happened last year.

We have an idea, but we don't have the final deficit figures for fiscal 2023‑24, which ended on March 31. It's now December, and we still don't know. We don't have performance indicators for departments and agencies.

However, these organizations are collectively asking you for billions or tens of billions of dollars. In my opinion, this is not really the way to ensure sound management of public funds.

There are some fairly simple ways of resolving this situation. One is to compel the government, by legislation, to table the public accounts of Canada by September 30. The government is perfectly capable of doing this. Provincial governments with fewer resources are capable of doing it, and other jurisdictions are capable of doing it year after year. All it takes is the will to take away the government's discretion to table the public accounts of Canada when it suits them.

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

Am I to understand that there is currently no legislation on this subject?

[The Chair, Conservative, Kelly McCauley]

I'm sorry, but that is our time, Ms. Vignola.

Ms. Blaney, go ahead, please.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Thank you, Chair.

It's very nice to have you back with your amazing team.

I did look at the report, and I saw that you highlighted the notable amount of planned spending in the supplementary estimates relating to military procurement and support, and you mentioned a couple of the aircraft and the joint support shipbuilding.

What I'm curious about is that the AG did her report earlier this week, and she talked about military contractors' responsibility to follow the industrial and technological benefits policy. She talked about how she's seeing them not always being able to demonstrate that they implemented this policy, which states that an equal amount of the contract value must be invested in the Canadian economy. I think she found that, for 10 out of 60 procurements over $100 million, the policy was either not applied or did not include a full obligation.

In any of the work you're doing, are you looking at this? Can you tell us a little bit more on it if you are?

[Yves Giroux]

Yes, that's something we looked at ourselves a few years ago. We looked at how private sector corporations or those that get contracts to deliver on military procurement and military spending in general were fulfilling their obligations when it comes to the benefits for the country.

We found something quite strange. For example, if these corporations invest in research and development, they get multiple credits. Instead of being one-for-one, one dollar of credit per one dollar of expenditure, they can get up to nine times the credit.

You would think that a private sector corporation investing in research and development in the country would try to minimize its own expenditures and invest in R and D to get maximum bang for their buck, but very few do that. They instead go for the one-for-one, and to meet their obligation, they invest in or spend on normal procurement items that are not that structurally beneficial for the Canadian economy. It suggests that the ITB program, as we call it, is not really delivering as much impact as one would expect for the country in terms of research and development.

When corporations get contracts, by and large, they do meet the requirements, but they do it on items that are not as beneficial as they could be.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Just so that I can wrap my head around this, you talked about how they're not investing in that research and development. We know that in Canada, we tend to not have as many resources to put into that. If we did, of course, it would give us a lot of opportunity economically, so I'm wondering if that is one of the significant gaps. Without that investment, it means that Canada doesn't own as much knowledge as it could own, which could really give it opportunities in this sector.

[Yves Giroux]

I think that's the logical assessment.

Another sector where they could invest is post-secondary education—in universities and colleges where they do some research. They're not doing that as much. They tend to go with suppliers to fill their operational need, not items that would have structural benefit for the economy. They go for day-to-day operations.

You're right. It could be seen as a missed opportunity to generate more benefits for the country, but they're not.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Thank you. That's very helpful.

The next part I want to touch on is this: You talked about the money being requested by Veterans Affairs Canada.

This is always an issue of discussion. What types of expenditures by Veterans Affairs Canada qualify, in your opinion, for the 2% NATO target? That is something that gets brought up all the time. I'm curious about your assessment and what you believe that actually is.

[Yves Giroux]

There are some expenditures in Veterans Affairs that qualify, and others that don't.

Mark can probably provide a more detailed answer than me.

[Mark Creighton, Senior Analyst, Office of the Parliamentary Budget Officer]

Yes, thank you for your question.

Under the strictest reading of the NATO definition, only military pensions for current or past service members apply.

However, it's not really possible to get the amount reported to NATO without including some benefits. There's no easy, one-to-one mapping between those. There could be some amount going towards NATO in that sum, but it's not possible to know until it's actually published and reported to NATO.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Okay, thank you. That's always the fun part.

I'm wondering if you could talk about the delay in receiving the public accounts and how that impacts your ability to do the work.

[Yves Giroux]

Well, it's something that is very concerning, because it goes against what should be.... I think it's detrimental to your work as legislators. It's also detrimental to our work in helping you make sense of public expenditures. I don't think it's good transparency and accountability practice to have the public accounts so late. We still haven't seen them.

In legislation, the government has to table them by December 31. However, if the House is not sitting, they have to table them within 15 sitting days of Parliament in the next year, which could mean February or even later if there are delays in the House coming back. It could be almost a year after the year has ended.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Hallan, welcome back. Go ahead for five minutes, please.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thanks, Chair.

Mr. Giroux, it's always great to see you.

Recently, the "food professor" highlighted in a report how the carbon tax adds to the overall price of food because it increases costs down the supply chain. This is because there's a cascading effect, as we know. When there's a carbon tax on the farmer, there's a carbon tax on the transporter or trucker, and a carbon tax on the retailer selling the food. At the end of the day, it gets passed down to Canadians, who today are struggling more than ever to afford food, because the cost of food has gone up.

Mr. Giroux, would you agree that the carbon tax has increased the price of food for Canadians?

[Yves Giroux]

I think the answer is obviously yes.

If you have a fuel charge or any other type of levy imposed on producers of food or any type of good, you expect some of these costs, if not the totality, to be passed on to consumers.

I can't comment on the study you're talking about, because I haven't seen the methodology, and we have not estimated.