Government Operations Committee on May 8th, 2023

[Parm Bains, Liberal, Steveston—Richmond East, BC]

One of the challenges in that same area, as identified by Vice-Admiral Topshee in his experience, was that once department employees develop the necessary talents, they're soon identified and often hired out into the private sector.

Is there any amount of investment in the public service that...? Or is this part of a new normal that pushes governments to continue using outside services?

[Yves Giroux]

It can be one factor. It's quite common in areas such as IT services, where the expertise is in very short supply. Providing training to government employees in these sectors risks making them even more attractive to the private sector. That's one big risk. It explains why government departments have to use outside consultants.

I've discussed this with a couple of government deputy ministers. That's what they clearly told me, especially when it comes to IT. That is one reason that explains the use of external consultants, because it's very difficult to find that expertise, even if the government wanted to hire employees with that expertise.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Bains.

Next, we have Mrs. Kusie for five minutes, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you, Chair.

Federal spending on elderly benefits has been increasing, and you project that by 2027-28 federal spending on elderly benefits will reach $93.8 billion.

Can you tell us the primary reasons these costs are rising, and how federal spending is accommodating the increase?

[Yves Giroux]

There are three main factors behind the increase in elderly benefits. The first is the recent top-up of 10% for elderly benefits, for those aged 75 and older. That's a one-off. The are two other main factors. First, there is demographic growth. As Canada's population ages, not only are there more seniors, but they represent a larger share of the Canadian population. The second main factor is inflation, because these benefits are fully indexed to inflation. When there is inflation, these benefits increase. They increase with population; they increase with the level of prices; and they also increase as a result of discretionary policy decisions.

They're accommodated within the federal budget through increased government revenues. In the absence of savings elsewhere, they either increase the deficit or crowd out other types of spending. What we are seeing for the next couple of years is that these will grow at a relatively solid pace, but not at a pace that will make this unsustainable at the federal level.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you.

The Canada health transfer is expected to grow by $4.2 billion, to a total of $49.4 billion in 2023-24, and rising to above $60 billion in 2027-28. Is this growth driven by the new federal-provincial agreement, from 3% growth to 5% growth, or are there other factors that are impacting this amount?

[Yves Giroux]

The growth in the CHT going forward is impacted almost exclusively by the new agreement to increase the CHT by a minimum of 5%. In the absence of that enrichment, it would have grown by a smaller amount each year, as nominal GDP growth is expected to be lower than 5% in most years, except for 2025-26, if I'm not mistaken, when nominal GDP growth is expected to be above 5% anyway. That's a year in which the enrichment to the CHT would not have made a big difference, whether it happens or not.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you.

The government earmarked $3 billion over five years to implement a new framework for long-term care standards. You mentioned that this will not be adequate. What about this do you think is not sufficient, and how do you think the government will have to reprioritize to address these spending gaps?

[Yves Giroux]

We did a report a few years ago, if I'm not mistaken, where we looked at how much it would cost to implement national standards when it comes to long-term care, notably the number of hours of care per day, per person, as well as increasing the salaries and wages of those who work in long-term care. I think it was at the request of an NDP MP.

We found that the costs would be significantly higher than the $3 billion over five years that is mentioned in the budget, or the funding that has been earmarked for that specific initiative.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

The federal debt-to-GDP ratio is projected to increase temporarily. What is driving this increase, please?

[Yves Giroux]

The federal debt-to-GDP ratio is increasing in the short term as a result of slower-than-expected GDP growth—so, inflation and nominal GDP. Inflation is expected to slow down. Also, government spending, notably the deficit, is expected to increase, which will put pressure on the debt-to-GDP ratio. This is what is driving the increase in the ratio.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

What changes by this government need to happen to successfully reduce the debt-to-GDP ratio, in your opinion?

[Yves Giroux]

If the government wanted to keep the debt-to-GDP ratio on a downward trend in each and every one of these years, it would need to either increase taxes this year and next or decrease spending—or a combination of both—to ensure that the ratio maintains a downward trajectory in each and every one of the next five years.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

The outlook for real GDP growth over 2023-27 presented in budget 2023 is slightly weaker compared to the PBO's March outlook. What is creating this weakness, please?

[Yves Giroux]

It's a difference in the growth. The growth is expected to be slightly lower in the outer years, because of the faster growth earlier in the period. It's a displacement in growth.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Do you think there have been changes to Canada's economic outlook since your March report?

[Yves Giroux]

There's nothing substantial, nothing fundamental. Our March outlook is still valid, by and large, in our opinion.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mrs. Kusie.

We have Mr. Kusmierczyk, please.

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

Thank you, Mr. Chair.

Thank you, Mr. Giroux and your team, for again coming to OGGO and providing some excellent responses.

Your report highlighted the significant investments that are being made for seniors. One dollar out of every six dollars in the budget is being spent on our seniors, and rightfully so. That includes programs like OAS and GIS.

Under the Conservative government, there were 2.7 million more Canadians living in poverty and 45,000 more seniors living in poverty. I wanted to ask you if the significant investments that the Liberal government is making in our seniors, in Canadians, through programs like OAS and GIS, are having a positive impact on Canadians' well-being.

[Yves Giroux]

I haven't looked at the number of seniors living in poverty or below the low-income threshold. I assume the recent investments in or enrichments to elderly benefits will have a positive impact on the number of seniors living below the low-income cut-off. When I say “positive impact”, I mean lowering the number of seniors who live in poverty.

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

I'm going to take that as a yes.

The 2011 Conservative Party election platform unequivocally states, “we will not cut transfer payments to individuals or to the provinces for essential things like health care, education, and pensions”. Less than one year later, they introduced cuts to the old age security, basically, by increasing the age of eligibility from 65 to 67. I wanted to ask you why the Conservatives would raise the age of eligibility for OAS from 65 to 67. What was the point of that?

Furthermore, what impact would that have had on our seniors had the Liberal government not reversed it in the very first year it came to office? What impact would it have had on our seniors if the Conservative cuts to OAS had been allowed to continue?

[Yves Giroux]

I can't speak to the intention of the government when it announced that in 2011. I can probably safely say that there are two main reasons for doing that. One reason can be to reduce the overall cost of the program. The other reason can be to provide further work incentives. When the country is faced with labour shortages, it provides an incentive for older persons to remain in the workforce for a couple more months or up to two more years.

The impact this would have had on seniors is difficult to determine precisely. It's quite clear that in the absence of old age security for an additional two years, there would be more seniors living in poverty.

I should point out, however, that the change was scheduled to be implemented very gradually over a number of years. I don't remember exactly the timeline over which it was to be implemented.

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

As I understand it, those Conservative cuts to old age security would have started taking place this year, in 2023. Is that correct?

There would have been hundreds of thousands, if not millions, of seniors who would have been robbed of average annual payments of up to $7,000 had the Conservative policy still been in place. Is that correct?