Government Operations Committee on June 14th, 2023

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you.

Next is Mr. Kusmierczyk.

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

Thank you, Mr. Chair.

Thank you, Mr. Giroux, for being here once again in front of this committee and for providing your sage insight and again sharing your and your team's hard work.

Budget 2023 announced that there would be a reduction in outsourcing. This has been an issue that has captivated this committee for quite some time. The reduction in outsourcing would be particularly for management consultants. I wanted to ask you whether you believe that this is a step in the right direction for providing savings for the public.

As a second question, what considerations and what factors should we as MPs be weighing or looking at to make sure that we get that balance right? Again, we've heard that obviously in many ways the consultants do bring value, especially when it comes to knowledge exchange and best practices. What considerations should we weigh as we go about finding that balance as we reduce outsourcing?

[Yves Giroux]

That's an interesting question, a question I didn't expect. I also didn't expect you to be so nice in your preamble by saying that I'm sage. Thank you very much for that.

Reductions in outsourcing, I think, should be achievable with some effort, but not overly difficult, given that there has been an increase over time, especially in the last couple of years, in the use of outsourcing. I think it is indeed a step in the right direction to reduce these types of expenditures and rely more on the knowledge that already exists in the public service.

As to what to look for and what to do when it comes to reducing outsourcing, that's probably outside my immediate remit, but it's about ensuring that services to populations are not unduly reduced. Some of these consultants are not just management or IT consultants; there are also service providers for first nations and Inuit health in rural and remote communities, as well as other types of consultants who are necessary. For example, engineering services for the Canadian Forces may be in short supply in some specialized areas.

It about ensuring the savings do not come at the expense of potentially more expenditures down the road, or poorer outcomes when it comes to health, for example.

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

Is it also fair to say that....? Obviously, this government has a very robust posture, I guess you could say, or policy program. It's developing tremendous programs like $10-a-day child care. Another example is the complete revitalization of the industrial manufacturing heartland in Canada, which is a very ambitious policy on the part of this government. Just today in the House, we were debating the Canada disability benefit. This is generational and historic, in that it will provide financial security for millions of Canadians and lift hundreds of thousands of persons with disabilities out of poverty. Again, it's a very ambitious program, one that has a tremendous impact on Canadians.

Is there a danger that if we cut some of the consulting too much, it might have an impact on this progressive, robust program of bringing in tremendous changes that benefit Canadians? Is there a danger it might actually hamper our ability to deliver on those generational programs?

[Yves Giroux]

It depends on the areas where the consulting services are cut, the specific type of consulting services that will be cut. If you cut management consultants, I don't think the risk is there. However, if you cut, for example, engineering services or health care providers for remote communities, or even some IT specialists supporting or developing key systems, there can be a risk.

Is there capacity in the public service to replace these consultants? There probably is in many of these areas, but not in all of them.

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

As another question, I'm changing gears a bit.

We have the benefit, as MPs, of having your presence here quite frequently to help us understand the budget and estimates and do number crunching. A lot of Canadians don't have the benefit of being able to call on a Mr. Giroux to explain, for example, the details of the budget.

Are there any recommendations for making the estimates in the public accounts a little easier to read or interpret for Canadians looking for information in the budget and supplementary estimates? Is there anything we can do to make those easier and more accessible for Canadians and MPs to access?

[The Chair, Conservative, Kelly McCauley]

I'm afraid any insight you might have on making it easier will have to wait. The estimates will have to continue to be difficult to understand and cut through.

Colleagues, if it's okay with you, there are two and a half minutes left for the Bloc and the NDP. I'll combine the two of them if that's fine with everyone.

Ms. Vignola, go ahead for five minutes, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

The Department of National Defence made the headlines this week.

Some of our soldiers in Latvia, in particular, are required to pay for their equipment out of their own pockets. However, we also know that this department doesn't spend its budgets from year to year. Consequently, why do we have underequipped soldiers who are required to pay for their equipment out of their own pockets, and a department that isn't spending the money set aside to equip its soldiers?

[Yves Giroux]

That's a good question to which I unfortunately don't have an answer. I don't have any information on that specific example.

However, the fact that a department doesn't spend all the amounts that are allocated to it isn't necessarily a good thing. As a taxpayer, I prefer that a department not spend all its votes rather than waste them, but one can definitely conclude that a department as large as National Defence is capable of properly planning its capital spending and balancing its budgets, especially its capital budgets and spending amounts.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Lastly, the department is being advised to learn how to plan more appropriately.

Are you planning to conduct a study on the cost to replace the Aurora CP‑140s?

[Yves Giroux]

That isn't yet in my work plan; some elements haven't been decided yet.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

All right. Thank you.

Now I would like to discuss Trans Mountain, a project with costs that have exploded from $12.6 billion in 2020 to $30.9 billion in 2023. Canada has invested more than $4 billion in this project, and resale now appears to be impossible without realizing massive losses.

What would be the consequences for taxpayers if the Trans Mountain pipeline were sold in accordance with what's determined in the project?

Is it normal to spend that much public money on a project that ultimately has no direct impact in Canada?

[Yves Giroux]

There are two potential answers to that.

The consequence of the sale, which we still estimate would be transacted at a price below acquisition and expansion cost, could very well be a net loss for taxpayers. The amount of the loss will be determined based on the selling price when the government comes to sell the pipeline.

As for benefits to taxpayers, I would say that the government acquired the pipeline to provide easier market access for Canadian oil. As you know, that oil is landlocked and has no access to other export markets than those in the United States. Consequently, there could be benefits for producers, such as better export prices, in particular, since it would be easier to find other buyers than national buyers and American refineries.

The government probably decided to buy the pipeline to ensure higher prices for a barrel of Canadian oil and to secure easier export capacity.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

The government is increasingly hiring full-time employees, having made 23,000 new hires, which brings the total to more than 400,000 employees.

We discussed the fact that it is reasonable for the number of Canadian government employees to equal approximately 1% of the population. However, we have now exceeded that 1%.

Do current needs justify this?

What should we expect with regard to service quality and performance following these hires?

[Yves Giroux]

As a result of the number of public servants who have been hired in recent years, we should expect very good services. We have gone from 342,000 full-time employees in 2015‑2016 to more than 400,000, as you mentioned, in the year that ended this past March.

Consequently, we should expect excellent services, but that's not what we're seeing in all sectors.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Giroux.

Mr. Johns, you have five minutes, please.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I want to briefly go back to the carbon tax.

Eight in 10 Canadians would get a rebate back on the carbon tax. They would get more than they paid at $170 a tonne, when we get to the end, if you want to call it that.

Can you tell me how much the carbon tax would contribute to inflation?

[Yves Giroux]

Based on a study by the Bank of Canada that one of your colleagues quoted, the bank has estimated that the carbon tax contributes about 0.5% to inflation.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Okay.

Now, let's say we get rid of the carbon tax and we go toward subsidies and regulations or try to do nothing. The U.S. has made it clear that there would be a border carbon adjustment. What would implementing that on the eight in 10 Canadians who would get it back under the current mechanism of the carbon tax look like, versus getting rid of it and having the border carbon adjustment? How would that play out in terms of cost on the eight in 10 who would currently get a rebate?

I imagine that inflation would actually go up significantly more.

[Yves Giroux]

It depends on exactly what is done in place of the carbon tax, but if we speak just about a carbon adjustment at the U.S. border, that would probably lead to an economic slowdown, and that could be significant, depending on the amount of the adjustment that the U.S. imposed. It's not unthinkable that if this was a significant adjustment, it could lead to significant negative impacts on sectors that are more energy-intensive.

We've seen what happens when the U.S. imposes taxes for Canadian exports when it comes to wood products. It's been an ongoing dispute for a number of years. Here the effect would depend on the magnitude of that border adjustment and what types of other instruments are implemented in place of a carbon tax.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Don't I know it on softwood lumber. I live on Vancouver Island.

On the $170 a tonne, if that was imposed on everybody at the border without the rebate, I imagine that it would drive inflation significantly.

[Yves Giroux]

It would drive inflation up in the U.S., but in Canada it would probably have the opposite impact. It would act as a depressor on economic activity and on prices, so it would be the opposite impact or effect, which is not much better. In fact, you could say it's worse, because it would depress economic activity.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Yes. Got it. Thank you for that.

I moved a motion here at the committee to get an idea of the costs of our study on McKinsey. We wanted all documents related to this study. I moved a motion to expand the study to include the big six, but without asking for every single document. I was worried about costs associated with that.

Can you speak about your letter to us? You were unable to get all of the data. You cited that it's $8.2 million at the translation bureau, just for.... I'm sorry. It was PSPC.

Can you give us an idea of what your overall guess would be? What is the request we made costing the Canadian taxpayer?

[Yves Giroux]

Based on the information I received and the short discussions I had with a couple of senior officials, the majority of the costs that they were able to identify were related to the translation of thousands of pages of documents. They said that the other costs would be very diffused and difficult to pinpoint, because they don't tend to track the activities of each and every one of their staff members.

This would have required a significant number of hours, but in the absence of a system that tracks by activity, they cannot estimate that precisely.