Government Operations Committee on May 8th, 2023

[The Chair, Conservative, Kelly McCauley]

Colleagues, we'll call this meeting to order.

Welcome to meeting number 65 of the House of Commons Standing Committee on Government Operations and Estimates.

Pursuant to Standing Order 81(4) and the order of reference adopted by the House on Wednesday, February 15, 2023, the committee is meeting to consider the main estimates 2023-24.

Of course, we welcome back for an opening statement our Parliamentary Budget Officer, Mr. Giroux. They often talk about the legendary 12th man in football. You are the 12th man of OGGO, I would say. I'll hand things over to you for five minutes, Mr. Giroux.

Just before we start, colleagues, I'll remind you that we may have bells for a vote at around 4 p.m. We just need UC to continue until five minutes before the vote, and then we'll suspend to vote. Are we fine with that?

[Some hon. members]

Agreed.

[The Chair, Conservative, Kelly McCauley]

That's wonderful.

Mr. Giroux, the floor is yours for five minutes, please.

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

Thank you, Mr. Chair.

I hope your reference to my being the 12th man also refers to a potential increase to my salary to equal that of a quarterback.

[Voices]

Oh, oh!

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

Good afternoon, Mr. Chair and members of the committee. Thank you for the invitation to appear before you today.

We are pleased to be here to discuss our report titled “The Government’s Expenditure Plan and Main Estimates for 2023-24”, which was published on March 3, 2023.

With me today I have our lead analyst on the report, Kaitlyn Vanderwees, and Jill Giswold, our office's senior analyst who also handles issues related to estimates.

The government’s main estimates for 2023-24 outline $432.9 billion in budgetary spending authorities. Voted authorities, which require approval by Parliament, total $198.2 billion. Statutory authorities, for which the government already has Parliament’s permission to spend, total $234.8 billion.

Consistent with previous estimates, money transferred to other levels of government, individuals and other organizations account for most of the planned spending, totalling $261.4 billion. This is followed by government operating and capital costs, which total $133.7 billion and interest payments on the public debt, which total $37.8 billion.

Notable areas of spending in these main estimates include $76.6 billion for elderly benefits, which represents $1 of every $6, and $49.4 billion for the Canada health transfer, which represents $1 of every $9. Professional and special services spending, which includes contracts with external consultants, will be close to $20 billion, an increase of $2.2 billion or 13% from last year's main estimates.

As budget 2023 was tabled after the 2023-24 main estimates, these estimates do not reflect new budget measures. As such, the 2023-24 budgetary authorities will rise with these anticipated funding requests in the supplementary estimates.

In accordance with the PBO's legislative mandate to provide impartial, independent analysis to help parliamentarians fulfill their constitutional role, which consists of holding government accountable, my office publishes analysis of the government's budget, as well as the main and supplementary estimates. On April 13, my office published our “Budget 2023: Issues for Parliamentarians” report. The report is designed to assist parliamentarians in their budgetary deliberations, highlighting key issues arising from the budget, which announced $69.7 billion in new spending on a gross basis.

We would be pleased to respond to any questions you may have regarding our estimates analysis or other PBO work.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you, sir.

We'll start with Mrs. Kusie for six minutes, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair.

Thank you very much, Monsieur Giroux and team, for being here today.

Monsieur Giroux, how has inflation impacted spending in the main estimates and, in particular, spending on the government's initiatives around housing?

[Yves Giroux]

That's an interesting question because inflation drives up some government spending, notably spending that is indexed to inflation, for example the old age security and the guaranteed income supplement, which are indexed to inflation. From that perspective, government spending has increased due to inflation. However, if my memory serves me well, federal funding for housing is voted on each year and is program funding that has to be approved by Parliament. This is not automatically indexed, so when inflation rises, the funding, if it remains stable, loses some of its real value as inflation progressively erodes some of the funding that's spent on housing.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

You mentioned there's over $12 billion in revenue or spending decisions for which there are no specific details.

What aspects of this spending do we know?

[Yves Giroux]

We don't know anything about that, except that for some years it's a net expenditure, while in other years it's a reduction in expenditures. It's $12 billion in absolute value, but on a net basis, it's closer to $800 million, consisting of subtractions and additions. Beyond the mathematical sum of these amounts, we know nothing about what's behind these numbers.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

In your report, you mentioned that professional and special services spending will be close to $20 billion.

Is this significantly more or less than normal?

[Yves Giroux]

We found in our analysis that the spending for these services has increased by a third over a number of years, going back to 2016, and I can be corrected on the exact year. It has gone up by a third. It's increased by 13% year over year, so it's a significant increase.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

In your opinion, what is the primary driver in increased spending on management consulting?

[Yves Giroux]

When it comes specifically to management consulting, which has increased at a faster pace, even though it represents a small portion of it, it's difficult to pinpoint one factor, because management services can take various forms. It's very difficult to figure out exactly what's behind that, especially at a time when the public service has been growing. There are services that you would normally expect the public service to be in a position to provide.

It's understood there's always a component of management services that will be necessary, for example, when the government is embarking on new programs and needs an outside, impartial perspective on its own management, but for the growth to be what it is, it's a bit surprising. It's not questionable, but it's surprising.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

You mentioned in your report that the private sector forecast of nominal GDP is $29 billion, 0.9%, lower per year.

Why is the nominal GDP lower over 2023-27 compared to your March 2023 outlook?

[Yves Giroux]

It amounts to differences in the perspectives on inflation. It's a combination of inflation perspectives, which are different, and also real growth, which is slightly different. In total, it doesn't make for a significant gap between the private sector and ourselves. It's mostly based on slightly different perspectives on the outlook for inflation as well as real growth.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Total budgetary authorities have decreased by $10.4 billion in the 2023-24 main estimates, but you said that the apparent decrease in spending will likely be more than offset by the up to three supplementary estimates tabled over the course of the year.

Can you elaborate on why that may be, and do you expect total spending for the year to increase from the year prior?

[Yves Giroux]

We can look at the estimates themselves to get a picture of government spending, but government appropriations are not tabled in one document. Usually, the government tables its main estimates very early in the year, in fact before the fiscal year starts, but it is supplemented by supplementary estimates as priorities become known and the budget gets tabled. For that reason, looking just at the main estimates paints an incomplete picture of overall government spending.

A more accurate picture is provided in the government's budget, which includes most of the elements that the government plans on spending. That's why we indicate that government spending as outlined in the main estimates is incomplete, because the main estimates were tabled before the budget was tabled. We know full well there was at least $9 billion of new spending announced in the budget, but it was not in the main estimates. There will be at least that much new spending, which is not in the mains. It will have to be included in supplementary estimates (A), (B), or even (C).

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Jowhari, go ahead, please.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Chair.

Once again, welcome, Mr. Giroux and your team. I consider you and the team the combined 12th member of this committee. Thank you to you and your team for always being available on very short notice when our office calls to ask for clarification. Whether it's on a review of a report you've put out or we have a question we want to clarify, we've seen great response, so thank you once again for that.

Thank you for your report. In section 2, under spending especially for elderly benefits, you've indicated that money for elderly benefits is the single largest area of federal spending, and you further broke it down under the three different programs and highlighted where these funds are going. You specifically talk about the increase in the 2023-24 budget and then the projected budget for 2027-28. You also highlighted some of the policy decisions. Can you elaborate on those three points?

[Yves Giroux]

We expect spending on old age security and the guaranteed income supplement to rise significantly over the next couple of years due to two main factors. The first is demographics: As the population of those aged 65 and over grows, that will increase the population eligible for these two programs. Second is inflation, obviously. There's a third factor that contributes to the growth in expenditures for old age security and the guaranteed income supplement, and that's the top-up for those aged 75 and over, which the government recently introduced. These three factors are driving growth in expenditures on old age.

[Majid Jowhari, Liberal, Richmond Hill, ON]

To clarify, this round the elderly benefit is increased by $7.5 billion, 11%, and it's going to go up to the tune of $76.7 billion. Then you're projecting that by 2027-28, it will go to about $93.8 billion. You highlighted the fact that the 10% top-up is playing a major role.

Thank you for that.

I'd like to go to the expenditures on the consulting side. Under 2.3, “Professional & Special Services”, on page 8, you say specifically, “While management consulting only accounts for a small portion (5 per cent) of overall spending on professional and special services, it has shown consistent growth”. Is that 5% of the overall spend 5% of $20 billion? Can you expand on that one, please?

[Yves Giroux]

Sure. Spending on management and consulting services amounts to slightly over $800 million, between $800 million and $900 million, which is roughly 5% of the $20 billion that is spent on professional and special services. That's why we say it's a small portion of the overall expenditures on professional and special services.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay. So it's roughly $800 million, which is 5% of the $20 billion.

Can you tell us into which buckets that $20 billion is going? From your point of view, are those good investments?