Government Operations Committee on Oct. 19th, 2023

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Yes, politicians definitely only like to talk about those things that are sensational.

[Some hon. members]

Oh, oh!

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

In your report, you gave the passport example, but on page 12 of your report, continuing on the passport example, you said, “There is a considerable level of uncertainty on these potential cost savings and efficiencies as they will be dependent on whether overall costs of the passport program return to prepandemic levels and if the efficiencies lead to processing more passports.”

What advice would you give to IRCC to track, or to look for, these efficiencies and to measure these efficiencies?

[Yves Giroux]

Maybe they already do that, so maybe it will be very easy for them to listen to me. I would say it would be tracking the usual costs of processing a passport application and tracking the costs of the new system, the e-application, to see what the differences are and if there are any that could lead to cost savings for the government, and to see the time it takes to process both streams, which could lead to increased efficiency for citizens who require passports.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

I'll move to another element that you examined in your “Overview of the Government's Digital Service Transformation” report. In it, the CRA stated it could not publicly disclose the information that Employment and Social Development Canada freely provided. What do you think the reasoning is for that? Were there any discrepancies between the analysis of the two departments that could lead to secrecy in sharing this information or, I'd rather say, a lack of transparency?

[The Chair, Conservative, Kelly McCauley]

I'm afraid you're not going to have time to answer that. Would you be able to provide it in writing to us?

Mr. Kusmierczyk, please, go ahead for five minutes.

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

Thank you so much, Mr. Chair.

Mr. Giroux, thank you so much for responding so quickly to our request to appear before the committee. We know we didn't give you a huge heads-up, but I think all of us here appreciate that you always answer the call and always answer the bell. Thank you so much, sir, for being here.

If you don't mind, I want to ask you a question regarding the break-even analysis that you did for the Stellantis and VW battery plants. I hope that's okay.

In my hometown of Windsor eight years ago, under the Conservative government, my community had an 11.3% unemployment rate. I imagine if you go up and down the Highway 401, manufacturing communities like mine had unemployment rates north of 7%, 8%, 9%, 10%. They were bleak years in our community. Businesses were closed. The impact was that restaurants and businesses shuttered doors and people left the community because they had no jobs. They had no prospects. Interestingly enough, it was the Leader of the Opposition who was the minister of jobs at the time. Things were tough.

As you can imagine, the investment that this Liberal federal government has made in the Stellantis battery plant and in the Volkswagen plant is the biggest, most important investment that we've seen in the history of our community over the last 100 years. It's huge. Again, they are large sums. There's no doubt it is a big investment.

We know that the Conservatives are against this investment, much like they were against investing in working-class communities like mine back in 2015, so that's not a surprise. I'd venture a guess that if they ever had the chance, they would pull the plug on that investment, on both the VW plant and the Stellantis battery plant.

I'm not going to ask you to comment on that, but what I want you to respond to is this. You mentioned in your report that the break-even point for that major investment—and it's $28 billion—is 20 years. It's wonderful to hear that Canadians will get a return on their investment, that this will be a net-zero cost to Canadians. These are production subsidies too, performance subsidies. The company has to perform, has to build a certain number of batteries and has to keep a certain number of jobs to get those subsidies. These are not upfront subsidies.

However, the president of the Automotive Parts Manufacturers' Association took issue with your report. He stated that it is based only on the production of cell and module battery components and that it does not include the 20-year payback window. It doesn't include revenue generated from new vehicle assembly, from manufacturing subcomponent parts, from the mining of raw materials, from recycling or from construction—the entire supply chain that will be anchored in place because of these historic battery investments in Windsor, St. Thomas, Kingston and elsewhere.

Can you respond to the president's questions or concerns with your analysis?

[Yves Giroux]

I certainly can. I think that's a mischaracterization of our report. We did take into account the direct, indirect and induced economic impacts of the battery plants in our report.

I think it's Mr. Volpe you're referring to. Where he takes offence or where he has concerns with our report is that the Trillium Network report—which is the basis on which the government decided to go with the five-year return on investment—also assumed that there would be a whole ecosystem that would be built, including electric vehicle assembly plants, but we have yet to see a Volkswagen assembly plant. We took out these other aspects because they have not materialized yet. In the Trillium report, they say that all of these other things would require additional subsidies, so to take a more reasonable approach, we looked at the direct, indirect and induced economic impacts of the battery plants themselves, taking into account that these would lead to spillover effects, as every major investment does.

Speaking to the soundness of our approach, the Government of Quebec and the Government of Canada—ISED—used the same methodology as we did for Volkswagen and Stellantis to assess the economic impact of the Northvolt investment that was announced a couple of weeks later.

[The Chair, Conservative, Kelly McCauley]

That is your time. Thank you.

We're now switching over to Ms. Vignola for two and a half minutes, please.

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

Thank you very much, Mr. Chair.

I'll go back to the “Economic and Fiscal Outlook—October 2023”.

In appendix C, titled “Detailed revenue outlook”, I see that the personal income tax estimate for 2028‑29 represents 132% of what is indicated for 2022‑23. Based on the same years, the proportion is 101% for corporate income tax and 109% for non-resident income tax. I'd like to understand the huge discrepancy between those figures.

Does that mean that revenues are not necessarily keeping up with the rather significant increase in immigration or the number of permanent residents? Do you anticipate a certain stagnation in the number of companies or their revenues in the coming years?

[Yves Giroux]

That's a good question, and one we look at regularly.

First, non-resident income tax includes, among other things, the tax that the Canada Revenue Agency collects from entities that are not resident in Canada, but have revenue in Canada. These are not individuals. They're usually entities such as companies or trusts. So that tends to be pretty stable because, if taxes go up, their activities will move.

As far as corporate income tax is concerned, there have been a number of positive surprises over the past few years at the federal level, but also in most provinces where corporate income tax has been much higher than the models had been suggesting for a number of years. So when it comes to corporate income tax forecasts, we don't expect positive surprises all the time. That's why the forecasts are rather stable on that side.

Next, personal income tax generally tracks GDP growth quite well. This is fairly predictable, given that the base is fairly broad. These are millions of individuals, unlike corporations, where a much smaller proportion tend to be subject to tax.

This goes a long way to explaining why corporate income tax is expected to be relatively stable. It's because it has been much higher than expected in recent years, while personal income tax is expected to grow with nominal GDP growth.

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

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Go ahead, Mr. Johns, please.

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

Your report on the government's digital service transformation points out that there is “no centralized information on the total amounts that have been spent or saved on these initiatives, as the latter is generally not tracked.”

We've seen from contracts—like those for ArriveCAN, for example—how difficult or pretty much impossible it is to track and tally the government's spending on digital initiatives. We're glad we have Bill Curry from The Globe and Mail to do that work for us. We can't even track the headhunters and the middle people who are making loads of money off of these things. Now we're seeing that the savings from the digital initiatives are generally not tracked at all.

This is hugely concerning. If we aren't tracking how much is saved, how can we know if an initiative was worth it? When it comes to evaluating these projects, we're pretty much blind going in. Can you speak about what challenges or gaps arise when this information isn't available for analysis?

I'd also like to hear your thoughts on how this could be tracked and centralized, and what the benefits would be. Maybe you could speak about the economic leakages too.

[Yves Giroux]

Thank you.

When we talked to government departments about tracking the potential savings from digitizing some services, they almost unanimously pointed out that it's not just a perspective of saving money; it's to improve services.

They say that a main reason they don't track potential savings is that it's not the perspective in which they provide these services, although I would say that it's part of the equation, because there are savings if you move people away from in-person services or call centres towards e-services. A good way of doing that would probably be for the government central agencies, like the Treasury Board Secretariat, to require departments to track how much they're spending on providing a certain type of in-person or phone service versus e-services. It's not very difficult to do, in my humble opinion, although it might be challenging for some organizations that don't track their current costs.

I think any sound organization or any sound deputy head would want to know how much it costs them.

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

The employees and the union would probably be a good start, and workers on the front line.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Johns.

Go ahead, Mr. Lawrence, for five minutes. Then we'll go to Mr. Sousa.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thanks very much.

You mentioned in your opening comments the lateness of the public accounts. I know this is an area of frustration for you. You've expressed it publicly before. Could you explain to Canadians why that is an issue and why it causes challenges, not just for you but for transparency from the government in general?

[Yves Giroux]

It's a fact that we don't have public accounts, and today is October 19. We don't have public accounts yet, and the fiscal year of the government ended March 31. We are almost 7 months into the new fiscal year. You collectively have been asked to vote on appropriation, meaning to vote on allowing the government to get funding to function. You were asked that in March and you were asked that on a couple of occasions, but you still don't know what happened with the money you voted on 18 months ago.

It's a concern for me that collectively speaking, we don't know the outcome of the year that closed on March 31 and we're almost seven months into the next fiscal year. The International Monetary Fund says that best practices would call for public accounts to be tabled within six months of the end of a fiscal year. The Government of Canada, with all its machinery, could certainly do that if it wanted to. There might be a lack of willingness on the part of the government to do that. I don't know why. We have seen years when the AG signed off on the government's public accounts in September, but they were not able to provide them until weeks after that.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you for that. Indeed, if they were a public company, there would be some pretty severe consequences from their continued late reporting. You're exactly right, Mr. Giroux. We are asked to vote for something when we don't know what the results of the last version were.

Mr. Johns brought up the impact of the carbon tax. I want to read from the letter from the Governor of the Bank of Canada to the finance committee in response to my question. He said that according to the bank’s calculations, if the charge were to be removed from the three main fuel components—gasoline, natural gas and fuel oil—the inflation rate would decrease by 0.4 percentage points.

That's a 10% reduction in inflation, according to Tiff Macklem, the Governor of the Bank of Canada. If this is true, which I believe it is, and the government eliminated the carbon tax, and we had a 10% reduction in inflation overnight, would that help your numbers and would that help the economy?

[The Chair, Conservative, Kelly McCauley]

Please give a brief summary.

[A voice]

Yes.

[Some hon. members]

Oh, oh!

[Yves Giroux]

I'll pass, but....

Sorry.

[The Chair, Conservative, Kelly McCauley]

Thanks.

We'll go to Mr. Sousa, please.