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.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
The budget for Canada's national shipbuilding strategy has increased significantly. What effect will that ultimately have on achieving the 2% of GDP target?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
If the budget increase for the national shipbuilding strategy involves National Defence or the Coast Guard and the overall spending envelope for defence increases commensurately, that will increase defence expenditures.
If on the other hand the budget increase for the national shipbuilding strategy reduces expenditures in other sectors, it will have no effect. It depends whether they are interrelated or whether it is strictly new funding.
Conservative
NDP
Gord Johns NDP Courtenay—Alberni, BC
It's an honour to be joining you today from the homelands of the Nuu-chah-nulth people on the unceded lands of the Hupacasath and Tseshaht today, on National Indigenous Peoples Day. I'd like to also give a huge shout-out to all first nations, Inuit and Métis people on this important day.
Mr. Giroux, on a per-capita basis, how much would Canada need to spend in 2022-23 to meet the NATO 2% target?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I haven't done the calculation precisely, but we have $18 billion in additional spending that would be necessary. Considering the Canadian population, that would be close to $500 per capita, if I'm not mistaken. Chris is not kicking me under the table, so I'm probably approximately right.
NDP
Gord Johns NDP Courtenay—Alberni, BC
If Canada were to invest the $18.2 billion shortfall needed to meet the NATO target in 2022-23, would defence spending surpass federal health care spending?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I'd need to look at health care, notably the Canada health transfer. I'm not sure if it would be above that, but it would certainly be very close.
NDP
Gord Johns NDP Courtenay—Alberni, BC
It's my understanding that it would exceed the Canada health transfer.
We know that our health care system is in a state of deep crisis. Too many Canadians don't have a family doctor or are suffering because of delayed surgeries or experiencing hallway medicine in overburdened hospitals. Meanwhile, health care workers are burning out and some are leaving health care altogether.
This year, the provinces asked for an immediate increase to the Canada health transfer of $28 billion. Unfortunately, this year's budget missed that opportunity to provide a lifeline to our health care system.
For 2022-23, what percentage of Canada's GDP is the federal government spending on health care? Is it at least 2%?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Again, I don't know the answer off the top of my head, but I could certainly get back to you with that number.
NDP
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's probably above 2%, given the CHT, but it's close to 2% and maybe slightly above. That's a ballpark number.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thank you.
The 2% NATO target is intended to demonstrate military readiness and political will. If the government were to make significant new defence expenditures, potentially at the expense of other priorities like health care, what metrics could track whether Canada is achieving the goal of military readiness?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a very difficult question. The NATO spending target is a spending target. It's not a target or a metric that assesses military readiness.
In questions that your colleagues asked prior to yours, they asked what a quick way would be to reach the 2% target that would still make sense. Mr. Housefather asked that question. A quick way that would not necessarily make sense would be to increase eligibility for veterans' pensions or significantly increase veterans' pensions. That would help with reaching 2% of GDP on defence, but it would not help in any way for military readiness.
I'm not the best person to assess what the best metric is for military readiness. For that question, you'll need somebody who's a specialist in military doctrine and military operations. Unfortunately, I cannot answer whether the 2% spending target by NATO is also something that would materially contribute to military readiness. It depends where the spending is directed.
NDP
Gord Johns NDP Courtenay—Alberni, BC
I'd have to argue that taking care of our veterans would create better readiness, given the labour market shortage we're in, by attracting people to the military. I appreciate your comments.
Have you conducted an analysis on what community benefits, such as job creation, might be expected in Canada were the government to significantly increase defence spending in the short to medium term to meet the 2% NATO target? Is it possible that many of the benefits of such spending would be seen beyond our borders?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We have not done such a study. To do that, we would need to make certain assumptions as to the mix of spending that would be domestic. These would include military personnel stationed in Canada versus the proportion of military personnel stationed abroad, and the purchase of equipment and the proportion that would be produced and manufactured domestically versus the proportion that would be sourced from foreign countries.
We have not done that study. It would require a series of assumptions that would be questionable in some instances.
NDP
Gord Johns NDP Courtenay—Alberni, BC
The climate crisis is anticipated to be growing as a source of geopolitical conflict. What percentage of Canada's GDP is the federal government spending on mitigation and adaptation efforts, both here at home and abroad?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't have that number off the top of my head, but it's probably a very small fraction of the amounts that we are talking about today.
NDP
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Johns.
That ends our first round. Now we'll go to our second round.
We will start with Mr. Lobb for five minutes.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Good afternoon, everybody. Good afternoon, Mr. Chair.
Thank you to Mr. Giroux again for coming to committee.
My first question is for him.
Mr. McCauley touched on the inflation piece. For 2022, 2023 and 2024, what inflation rates did you use in your calculations?
Adviser-Analyst, Office of the Parliamentary Budget Officer
These inflation rates were from the “Economic and Fiscal Outlook—March 2022”. As for the exact figures, I don't have those in front of me.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Thank you.
On table 3-3, the expenditure for 2022-23 is $36.3 billion. In 2017, we know that NATO agreed to change the calculation and you note that $7 billion in the increase was just due to that. Is that correct?
Adviser-Analyst, Office of the Parliamentary Budget Officer
It is, more or less. Without having the data that this committee just passed a motion for us to retrieve, it's hard to break down exactly what makes up that difference.
I should also point out that the change that occurred in 2017 was something that was done at National Defence. It was allowed for a long period of time under NATO guidelines. It's just that the government, I suppose, finally acted on that. At least, this is what we suspect, and we will certainly find out more once we receive the data.