Evidence of meeting #37 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 ships.
A recording is available from Parliament.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Exactly. It's based on inflation forecasts, but over such a long period of time, forecasts are difficult.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
We hope not to go back to the inflation rates of the 1980s.
Earlier, Mr. Bains talked about what was included in the operating costs, specifically the salaries of the military. Is the cost of uniforms, food on the ship, training, and so on, included? Is that all included?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, those costs are included.
What isn't included is the cost of supervision at National Defence headquarters, for example. It's assumed that these costs would be incurred anyway, whether there are combatants or not. These costs would be negligible compared to other operating costs.
Food and uniform costs are included, as well as benefits for sailors on the ships.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Is it possible to predict the long-term economic benefits of a project like the surface combatants?
What are the direct and indirect costs associated with it?
Conservative
The Chair Conservative Kelly McCauley
I'm afraid unless you can answer that in four seconds, you'll have to provide it in writing to us.
Mr. Johns, go ahead for two and a half minutes, please.
NDP
Gord Johns NDP Courtenay—Alberni, BC
This project is expected to represent the largest expenditure in Canadian history. The publicly available information about the project's gender-based analysis plus focuses on the design of the ships. Can you speak about how the economic benefits might be distributed and whether the project is likely to improve economic equity for historically disadvantaged groups?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's not something we have considered. We would need to make assumptions as to who will be employed in the shipyards that will be building the ships, as well as the military personnel who will be on board the ships, and it would be difficult to make these assumptions in 2022 for a program that will span 65 years. We can assume that the composition of navy personnel on board these ships, for example, will remain predominately male, but beyond that, whether females will make up an ever-increasing part to the point where there will be parity and whether it will include other traditionally disadvantaged groups in Canadian society is very difficult to estimate. I think Department of National Defence officials would be in a better position to answer that type of question, taking into account their own plan for inclusion and recruitment purposes.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Okay.
This project is expected to be the largest expenditure in history. We talked about that. Has your office conducted an analysis of the local economic benefits that might be generated over the lifetime of the project? Also, when you're calculating that, are you keeping wages stagnant or will they meet the rate of inflation? We know that our military men and women are highly underpaid and their wages are not increasing with the rate of inflation, which is equally disturbing.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We have made the assumption that, going forward, wages will follow inflation. Inflation over such a long period is difficult to predict accurately, so doing so relies on hypothesis and assumptions. Regardless of what inflation is, we have made the assumption that wages will be growing at the same rate as inflation.
Conservative
The Chair Conservative Kelly McCauley
Thank you very much.
Mr. Barrett, go ahead, please, for five minutes.
October 31st, 2022 / 11:40 a.m.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
Good morning. Thanks very much for your work and for taking our questions this morning.
You mentioned that three-quarters of the navy budget will be consumed by these costs going forward. To be clear, that's the navy budget, not the budget of the Canadian Armed Forces. What is that budget today?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Thank you for giving me the opportunity to clarify that point. We have estimated in-house that the navy's operations budget is about $4.5 billion per year. If we bring in the CSC, the Canadian surface combatants, operations and maintenance budget in current-year dollars—so the cost that will be incurred in years and decades to come on a comparable basis in 2022 dollars—that would eat up about $3.8 billion of the $4.5 billion. The CSC operating budget will be a significant portion of the navy's operating budget. However, that does not take into account the fact that the navy's budget may very well increase over time to accommodate the increase in costs due to the CSC. If we were to accommodate the CSC operating budget right now to make it fit within the navy's current budget, something would have to give, obviously.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
A $3.8-billion upward adjustment would be required to maintain the status quo if the CSC were brought online with the navy, based on those numbers.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Not necessarily, because the surface combatants are replacing existing ships. I don't know off the top of my head what these current ships cost to operate and maintain on an annual basis, so it would not necessarily mean an upward adjustment of that magnitude. There's a difference there that could need to be made up, or the navy could make different choices with respect to other types of operations that it could decide to lower or to slow down in order to accommodate the CSC within the current budget.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
I appreciate that you don't have that. Is that a calculation that's been completed and that you have, or no?
Advisor-Analyst, Office of the Parliamentary Budget Officer
Actually, I can speak to the current estimated operating costs for the Halifax-class fleet. It's between $800 million and $1 billion. When we say $3.8 billion, that's incremental. It would be the difference between the two.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
Would that be—I'm not writing these down as you say them—a $2.8-billion upward adjustment that would be required?
Advisor-Analyst, Office of the Parliamentary Budget Officer
Roughly, yes.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
Okay.
I'm quite sure my math teacher is very proud of me.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
When was the last time the projected weight of these these ships was updated?
Analyst, Office of the Parliamentary Budget Officer
We can speak to the fact that the 2021 report had the lightship weight at 7,800 metric tons. That has not changed in this report, so it would be in 2021.
Conservative
Michael Barrett Conservative Leeds—Grenville—Thousand Islands and Rideau Lakes, ON
Okay.
Has DND released their life-cycle projections?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No. In fact, they've never released such a life-cycle cost.