Evidence of meeting #27 for Government Operations and Estimates in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was general.
A recording is available from Parliament.
4:30 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Gentlemen, how does the NORAD announcement of yesterday affect going-forward numbers? Does it make a significant difference or had you already considered some of these numbers in your report?
4:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
After seeing the announcement yesterday, we enquired with the public service as to whether these numbers were included in the budget announcement, and they were already included in budget 2022. Therefore, yesterday's announcement with respect to NORAD does not change the numbers in our report, as we already included budget 2022 expenditures in our report.
4:30 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Great.
On the last question, on inflation, generally what we've heard over the last several years with this committee is that procurement inflation for naval, air force, etc., is generally running double current inflation. Are those numbers still holding? If we're seeing the current inflation at 6.8%, are we expecting almost 14% inflation with our procurement?
4:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The impact—
4:30 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
I realize it's tough going forward 10 years, 20 years, but....
4:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The impact of inflation is twofold.
On the one hand it reduces the real impact of the amounts that the government is budgeting for national defence, so it reduces the purchasing power of the amounts that are established by the government to DND. On the other hand, inflation increases the GDP so it makes it more difficult for the government to reach the 2% target under NATO. It has a double impact in that sense.
4:30 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't know if that answers your question.
4:30 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
It does a bit. I understand that you have the denominator changing, as well as the other side.
I'm just curious whether, in your forecasting, you are keeping the general two for one, for procurement inflation over regular inflation.
4:30 p.m.
Adviser-Analyst, Office of the Parliamentary Budget Officer
It's difficult to know beforehand what the impact of this economy-wide inflation regime we've now entered would be on defence-specific inflation. Thus far, we've assumed that the defence-specific inflation would increase along with the economy-wide inflation, not as a function of it but increasing along with it.
4:35 p.m.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Is it easy to update this report when the updated PSPC numbers come out for ship costs and that?
4:35 p.m.
Adviser-Analyst, Office of the Parliamentary Budget Officer
Yes, it should be straightforward.
4:35 p.m.
Conservative
4:35 p.m.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you.
We'll now go to Mr. Housefather for six minutes.
4:35 p.m.
Liberal
Anthony Housefather Liberal Mount Royal, QC
Thank you very much, Mr. Chair.
Thank you to the Parliamentary Budget Officer for being here.
Mr. Giroux, I want to ask a question related to the previous motion that Mr. McCauley put forward.
4:35 p.m.
Conservative
4:35 p.m.
Conservative
The Chair Conservative Robert Gordon Kitchen
Bear with us for a second. There's no sound in the room.
4:35 p.m.
Liberal
4:35 p.m.
Conservative
4:35 p.m.
Conservative
The Chair Conservative Robert Gordon Kitchen
Let's try that again.
Mr. Housefather, would you start again, please.
4:35 p.m.
Liberal
Anthony Housefather Liberal Mount Royal, QC
Thank you so much, Chair.
Mr. Giroux, it's great to have you with us today.
I want to come back to the motion that Mr. McCauley just put forward. He talked about how, in 2017, Canada changed the way we calculate what is in defence spending. I guess the idea was that, because we did it that way, we were including new costs into defence spending that previously weren't there, which might artificially increase the percentage of GDP that we're spending on defence.
Can you clarify whether that was a Canadian government decision or whether that was a NATO decision that allowed us to do that, and whether that is now being done throughout NATO?
4:35 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The changes that were introduced in 2017 allowed governments, including the Canadian government, to include veterans benefits and pensions for consideration in reaching the 2% target of NATO. It was an application that Canada made to NATO seeking to include that, and it was accepted by NATO. Other countries are also doing the same. They include veterans benefits and pensions in the calculation of their defence spending for the purpose of the NATO definition.
4:35 p.m.
Liberal
Anthony Housefather Liberal Mount Royal, QC
Again, basically this was a decision by NATO to allow this. When we're looking at the different numbers you've come up with to show us the percentage of GDP that different NATO allies are spending, we're comparing apples to apples, because all countries could do this if they want. Isn't that correct?
4:35 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That is indeed my understanding. Yes.
4:35 p.m.
Liberal
Anthony Housefather Liberal Mount Royal, QC
Perfect.
I want to go a different question.
As you know, with the purchase of 88 new jets, the national shipbuilding strategy and the new NORAD announcement yesterday, we're suddenly in the midst of managing a number of large, complex procurement projects that require significant capital investments all at once. This is significantly more than we've seen in the last couple of decades.
What are some of the complications you have noticed in your studies that arise from undertaking multiple large and complex procurements consecutively? Could you perhaps share some of the lessons you've learned from doing your reports on this?
