Government Operations Committee on May 13th, 2022

[The Chair (Mr. Robert Kitchen (Souris—Moose Mountain, CPC)), Conservative, Robert Gordon Kitchen]

I'm calling the meeting to order.

Good afternoon, everybody. Welcome to meeting number 20 of the House of Commons Standing Committee on Government Operations and Estimates. Today the committee will be hearing from the Parliamentary Budget Officer about the main estimates for 2022-23. It will then continue its study on the air defence procurement projects.

Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely by using the Zoom application. Regarding the speaking list, the committee clerk and I will do the best we can to maintain a consolidated order of speaking for all members, whether they are participating virtually or in person.

I'd like to take this opportunity to remind all participants in this meeting that screenshots or taking photos of your screen is not permitted.

Given the ongoing pandemic situation and in light of the recommendations from public health authorities, as well as the directive of the Board of Internal Economy on October 19, 2021, to remain healthy and safe, the following points are recommended for those who are attending the meeting in person.

Anyone with symptoms should participate by Zoom and not attend the meeting in person. Everyone must maintain two-metre physical distancing, whether seated or standing. Everyone must wear a non-medical mask when circulating in the room. It is recommended in the strongest possible terms that members wear their masks at all times, including when seated. Non-medical masks, which provide better clarity over cloth masks, are available in the room.

Everyone present must maintain proper hand hygiene by using the hand sanitizer at the room entrance. Committee rooms are cleaned before and after each meeting. To maintain this, everyone is encouraged to clean surfaces such as the desk, chair and microphone with the provided disinfectant wipes when vacating or taking a seat.

As the chair, I will be enforcing these measures for the duration of the meeting. I thank members in advance for their co-operation.

My apologies. We're having a little computer glitch, so we're just going to suspend briefly.

[The Chair, Conservative, Robert Gordon Kitchen]

We're back in. I apologize for that. It is Friday the 13th, and computers—at least mine—have been nothing but glitchy today.

I'd like to welcome Mr. Giroux and his colleagues. They are here with us.

I'll give you five minutes to make an opening statement.

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

Thank you, Mr. Chair.

Good afternoon, Mr. Chair and members of the committee.

Thank you for the invitation to appear before the committee today.

We are pleased to be here today to discuss our analysis of the Government’s Expenditure Plan and Main Estimates for 2022-23 fiscal year, which was published on March 1, 2022 ^x.

With me today I have Kaitlyn Vanderwees, our lead analyst on the Estimates, and Christopher Penney, our lead analyst on defense issues.

The Main Estimates for 2022-23 fiscal year outlines $397.6 billion in budgetary authorities, $190.3 billion of which requires approval by Parliament. The first part of this money, about $75 billion, was approved through C-16 at the end of March.

Of note, proposed spending for the Indigenous portfolio will total $45.4 billion in these main estimates, which represents a 214 per cent increase over Indigenous-related budgetary expenditures in 2017-18. This significant increase is primarily related to the roughly $20 billion in compensation for First Nations children and their families.

Additionally, Federal spending on Elderly Benefits is set to increase by $6.7 billion, or approximately 10.9 per cent, to a total of $68.3 billion in 2022-23, and the Canada Health Transfer will grow by $2.1 billion, or 4.8 per cent, to $45.2 billion in 2022-23.

A concern that I would like to point out is that while the government refers to the main estimates as the government's expenditure plan, they generally do not include any measures in the corresponding budget, nor do the departmental plans, and therefore they present an incomplete picture of government spending.

As such, it hinders your ability to understand and scrutinize the government's funding requests, track new policy measures announced in the budget or identify the expected results of new budget measures. This committee has released recommendations in both 2012 and 2019 to remedy these shortcomings, notably to table the budget and main estimates concurrently with consistent information and present details of new spending presented in main and supplementary estimates in departmental plans as soon as possible.

I see no reason that they cannot be implemented. These changes would create a cohesive, intuitive and, critically, transparent financial decision-making process for legislators.

We'd be pleased to respond to any questions you may have regarding our analysis of the expenditure plan and main estimates for 2022-23 or other PBO work.

Thank you, Mr. Chair.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Giroux.

We will now start questions. We will start with Mr. Paul-Hus for six minutes.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Giroux.

Thank you for being with us, and thanks to your colleagues as well. It's always a pleasure to see you.

Near the end of your statement, you mentioned a major problem, which the committee noted in 2012 and 2019, and that's the fact that government spending and the budget don't match up.

Does that explain the other problem that recently arose, which you reported and which is the reason you're here today?

I'm talking about the $15 billion discrepancy in the National Defence budget that the President of the Treasury Board couldn't explain. Even the explanation given by the deputy minister, who was accompanying her, wasn't clear. That's why we asked you to appear today to explain the $15 billion amount, which doesn't appear in the documents initially presented to parliamentarians.

We're being asked to approve spending that doesn't match up. Does what you said today explain this $15 billion discrepancy in the budget?

[Yves Giroux]

Yes, this is one of the potential consequences when federal budgets, which are tabled on varying dates, don't align perfectly with the estimates.

As you said, the Minister of Finance's budget allocates $15 billion for the Department of National Defence that can't be completely explained by what's presented in the budget or the supplementary estimates.

The federal budget includes $15 billion for National Defence, part of which comprises investments over several years to increase spending by the Department of National Defence. However, there's no explanation for the rest of it, at least not in the information available to the public or to my office. The information in the budget isn't consistent with the main estimates documents that you're required to approve as parliamentarians.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

I see.

I'm going to ask a simple question related to this.

The government presents its budget to MPs, the public and the media. For example, let's say it announces that the deficit will be $25 billion. Is that true, or will subsequent budget updates be issued during the year? Is it possible we'll never really know where it stops?

Is it possible that we'll find out later but that the budget presented to us doesn't really give us the true picture?

[Yves Giroux]

If I had to explain this in clear terms, I'd say that the budget the minister and government table in the House is probably more up to date than the main estimates, which are the focus of today's discussion.

The main estimates are a snapshot of the public finances and spending planned by the government departments and agencies as of March 1 ^st, whereas the budget is introduced in April. The main estimates are a document that lags behind the actual situation. The federal budget tabled by the minister is more up to date than what we're discussing today, which is the legislative instrument that funds the government's operations.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

I'll move on to another subject.

This week, we welcomed Kevin Mooney, the president of Irving Shipbuilding Inc., to the committee and discussed the contract for the surface combatant ships, the 15 future frigates.

The committee has a lot of data for our study on naval operations, but we're having trouble understanding it.

On Tuesday, Mr. Mooney said that, based on the data presented, the estimated cost to build the 15 frigates was currently less than $60 billion. He also told us that our government had estimated the cost of the project at about $60 billion. However, the estimate cited in the report you published last year, or two years ago, was $77 billion.

Mr. Mooney also told the committee he was issuing quarterly updates. However, you often tell us you find it hard to get the information you and your team need to do your work.

Have you received a more accurate update on the frigates?

We hear various numbers: less than $60 billion, approximately $60 billion and $77 billion. Which is the right amount?

Can you answer that question?

Perhaps your colleague who handles defence issues can.

[Christopher Penney, Advisor-Analyst, Office of the Parliamentary Budget Officer]

We haven't received any updates at this time. We can definitely do a new search to update the data should committee members wish.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

We'd like that.

I'd also like to note that we adopted a motion last week calling on the government to prepare a progress report on all maritime and air defence procurement issues. That report would have to be submitted to the committee on June 30.

One thing's for sure: we want to know where we stand. No one really seems to know where all these billions of dollars are going, and that's a major concern.

Here's my last question.

Are you conducting studies on any defence procurement topics other than ships?

[Yves Giroux]

We're doing a study on the target of 2% of gross domestic product, GDP, to be allocated to national defence spending. It will be available in the next few weeks.

With regard to defence and procurement, we still have the option of updating previous studies in light of new data and information.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Great.

Thanks very much.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Paul-Hus.

We will now go to Mr. Kusmierczyk for six minutes.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you very much, Mr. Chair.

Mr. Giroux, you've recommended in your report that a fixed date, as I understand it, be adopted for tabling the budget so that it can be reflected in the main estimates to, as you said, avoid confusion.

This year, Russia invaded Ukraine on February 24. Obviously things happened around the world and domestically that require significant expenditure and attention. If this rule were in place, I would argue that there wouldn't have been time for the budget to respond to that major development.

I want to ask whether your recommendation to have a fixed date for the budget is not too rigid.

[Yves Giroux]

That is certainly one of the disadvantages of having fixed dates for budgets. It removes discretion on the part of the government as to the timing of tabling the budget; however, even if a government has discretion, as governments have had for the last several decades, there's always a possibility of unforeseen events happening that throw a monkey wrench into the fiscal planning of the government.

When the Minister of Finance tabled her budget in April, the invasion of Ukraine was already behind us, but there could be other events happening in the next couple of days that would severely affect the fiscal planning of the government. There's always the possibility of affecting the government's finances, and that's why the government always has a possibility of tabling an update if it's deemed necessary.

As we saw in the distant past—for example, when September 11, 2001, happened—the government tabled a budget in December that was outside of the normal cycle. There's always that possibility of tabling an update.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Items in the supplementary estimates undergo due diligence through the Treasury Board process to basically ensure that the public is getting good value for money.

When you align the main estimates with the budget, could that in any way interfere with that work in terms of providing that deeper analysis before it's voted on?

[Yves Giroux]

It's a possibility, especially if the Department of Finance and the Treasury Board Secretariat don't work together or don't work well together.

In my experience, having worked on several budgets, it is possible to overcome these obstacles by having the Department of Finance and the Treasury Board Secretariat work very closely together on potential and decided budget measures and having the Treasury Board Secretariat do its due diligence, possibly before the budget, so that items in the budget can also be included in the main estimates or in the supplementary estimates.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

With regard to the government's expenditure plan in the main estimates report, you highlight the fact that this government is putting forward increases for elderly benefits. These have increased by 4.9%, which is $2.9 billion. You highlighted in this report what we're seeing here. It says, “Over the same time period, the percentage of persons 65 and older in low income has been steadily decreasing and is projected to slowly decline over the medium term.”

Can you tell us what is happening in terms of that number? What is the reason that fewer Canadians over the age of 65 seem to have low incomes?

[Yves Giroux]

I'd have to get back to you on the specifics.

I can tell you about what's driving the increase in expenditures on elderly benefits: It's mostly demographics. There's an increase in the size of the population aged 65 and over. The increases in benefits notably include the one-time increase in statutory GIS spending related to the one-time payment for GIS recipients who received pandemic benefits.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Is it possible that as the government invests more money in our seniors, we are seeing a reduction in the number of seniors who are living in poverty or living in low income? Can you draw that conclusion?

[Yves Giroux]

It's quite possible—especially for low income seniors who are receiving the guaranteed income supplement—that as they receive increased benefits, fewer of them are below the poverty line or the low-income threshold.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Okay, I got it. Thank you, Mr. Giroux.

Do I have any more time, Mr. Chair?

[The Chair, Conservative, Robert Gordon Kitchen]

You have one minute.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Great.

In your work plan, one item is a “stochastic debt sustainability analysis”. Can you explain to laypersons like me what a “stochastic debt sustainability analysis” is?