Government Operations Committee on Nov. 23rd, 2023

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

Can you speak about the operating in terms of renewing programs like that and how long before the funding is set to end before they announce its renewal on the operating side?

[Yves Giroux]

Yes. If memory serves me well, there was sufficient funding for infrastructure for waste water and water, but insufficient funding to ensure the continuous operation of water and waste-water treatment plants in first nations communities.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Chambers, go ahead, please.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Welcome, Mr. Robson. It's a pleasure to have you here.

When you mentioned how your heart was skipping a beat about some changes in public accounting, I recalled that when I tell my wife how some things make me excited about public accounting, she tells me to get a life. Making no comments about the things that make you excited, it's nice to be in a room with others who get excited about the same things.

You did an interview yesterday where you said you were concerned that the government's budget numbers would deteriorate over the next short period. Could you expand on that briefly?

[William Robson]

It's partly a matter of concern about the economy. There's nothing unusual in that and nothing dramatically different from what the government showed in its numbers.

It's worth commenting quickly, though, on the reliability of the projections. One of the comments I made at the time of the fall economic statement was that we are now on the verge of the 2024-25 fiscal year, which was the final year of the projections in the government's fall economic statement in 2019. The projected spending has gone up by more than $100 billion over that period—so on average, every year, $25 billion more.

Now, partly that's inflation. We can debate the degree to which the inflation was actually caused by fiscal policy. I think it certainly bears some responsibility for it, so you don't get a total pass on that. The other thing that's happening is that we are getting fiscal frameworks delivered with very straightforward knowledge that there's more spending to come that's not in them.

I do have concerns along the lines of what I expressed earlier, that we're kind of being trained not to take these things seriously. If a fiscal framework is announced, a formal budget presented or a fall economic statement, and then days later there's an announcement of a significant new program that wasn't in it, then it kind of undermines the value of the process itself, and our hearts should all beat faster when that happens.

I mean it not just as flattery to this group when I say that the work of parliamentarians in forums like this is absolutely critical to holding governments to account. When you see a framework that's laid out as though we should take it seriously and you know there are significant spending programs that are not yet accounted for in it, you have to put up your hands and object and say you're not getting the numbers that matter.

The other thing I'll quickly say, if I haven't run out of time, is that we have the debt-to-GDP ratio as a very hard indicator. It's widely accepted as a measure of fiscal prudence. It should be going down and it's not. It's going up. That's just the wrong direction of a very basic number.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Robson.

The Bank of Canada has been pretty clear in recent times that it's recommending all governments restrain spending to 2.5% growth year over year. When asked after the fall economic statement what the spending growth rate increase was, the Department of Finance had no answer for that number. There is some confusion about whether it's a nominal growth rate or real.

The Department of Finance did not calculate that number. Do you find it weird or bizarre that the Department of Finance isn't tracking to a recommendation that the Bank of Canada has made in order to bring inflation down?

[William Robson]

I haven't done the calculation you mentioned in that exact way, but let me reinforce the point I think Governor Macklem was making: The economy is operating at capacity. If governments are increasing their spending at a rate that's faster than the productive capacity that the economy can grow, then it's making the job of monetary policy more difficult because the economy is running too hot.

The other thing that's important to mention is that, if you're increasing your share of GDP that's going to the federal government, something else has to shrink. Right now, we are in a pretty severe housing crunch. We need at least to be maintaining the share of our GDP that we are putting into housing or the shortage is going to get worse. We also need to raise the share of our GDP that's going to into capital investment, because it's too low. Capital per worker is falling, and that's why productivity is falling and living standards aren't rising. It's a problem if the federal government is projecting its share of the economy that it uses directly to increase...and it's a problem if the rate of growth in government spending is exceeding what the economy can produce.

[Adam Chambers, Conservative, Simcoe North, ON]

I believe that's my time.

[The Chair, Conservative, Kelly McCauley]

Thanks very much. That is our time.

Mr. Kusmierczyk, you have the floor.

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

Thank you so much, Mr. Chair.

I want to pick up on a point that Mr. Robson raised about productivity.

Some folks talk about spending. I like to call it investment. What we have seen in the last three years is over $30 billion of foreign direct investment. Canada is number three in terms of attracting foreign direct investment. We've seen $30 billion of investment in the last three years in the clean-tech sector. You have incredibly innovative companies, global and world-class companies, setting up shop here in Canada.

Obviously there is Stellantis, and LG is building batteries in my hometown. LG is a world leader in battery manufacturing. There is Volkswagen in St. Thomas, which is, again, a multi-billion dollar investment. There is Northvolt in Quebec. Then you have a number of other companies up and down the supply chain like Umicore, which is going to build cathodes. There are POSCO and GM. Again, these are all incredibly innovative companies.

Do you see the potential, the opportunity, for productivity gains with these companies setting up shop in Canada, highly innovative companies, especially if it's through tech transfer or knowledge transfer? I'm just curious if you could maybe speak to that.

[William Robson]

I tend to be an optimist when it comes to the ability of emerging technologies to let us all earn better livings in jobs that are safer, cleaner and more rewarding. I am fundamentally optimistic about that.

The trouble is that, when I look at Canada over the last number of years, I'm just not seeing the kind of investment performance here that we're seeing in the United States and in other OECD countries. When you compare investment per worker in Canada over the last few years to that in the United States and the OECD countries, we're falling behind. We had closed the gap with the United States considerably. We were never all the way there. They are a very high-investment economy.

In the middle of the last decade, we closed the gap entirely with the rest of the OECD, and lately it's off a lot. What's particularly concerning is that we're falling behind the United States most in the areas we would most like to see high investment rates in. You touched on the sectors. I'm not talking about the particular companies, but when it comes to machinery and equipment investment, the average Canadian worker is now getting less than 60¢ on the dollar per investment dollar enjoyed by the typical U.S. worker. The situation with respect to the OECD is a little better, but we're nowhere close to them.

When it comes to intellectual property products, which are software and the intangibles that a lot of us expect are really going to drive progress over the next little while, investment per worker in Canada is barely a quarter of what it is per worker in the United States. This is quite a recent development, so I'm encouraged when I hear—

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

If you don't mind, Mr. Robson, I want to interrupt you for a second. Again, with the Inflation Reduction Act in the U.S., the Canadian government had to respond, but these companies have a choice. These are international global companies: Volkswagen, Stellantis, LG and Northvolt. These companies could go to the United States and get the same deal financially that they're getting in Canada. Why are global companies confidently investing in Canada? We're seeing that.

[William Robson]

Partly it's because we have a dynamic automotive sector, so the infrastructure is there. It's an attractive place to be. It has a trained workforce. There are a lot of good reasons to invest in Canada. I worry that a little bit too much of it is related to government subsidies when you have long-term fiscal pressures, and we've already heard a little about that.

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

The subsidies are the same, so Canada and the U.S. are in direct competition, and we're beating the United States in terms of major global investors here. Is it outside the realm of possibility that the investments we're making, for example, in child care and health care, are the things that are making a big difference when companies decide to locate on this side of the border and not on the U.S. side? I mean, the numbers are indicators. We're the number three destination in the world for foreign direct investment, and it's only going higher.

[William Robson]

The numbers on capital investment generally tell a totally different story to what you've just said. Canada is getting cents on the dollar per dollar invested per typical U.S. worker. In Switzerland, investment per worker is double what it is in Canada. We are simply not equipping our workers as well. I'm glad of the individual success stories, but when you look at the numbers across the board, they're not so encouraging.

I think Canada should be doing more to incent investment of various kinds. We do have to match the United States when it comes to depreciation. It's possible that we could do a lot better on some of the intangible investments if we had a special lower tax rate for intellectual property, a derived income, as a number of countries, including the United States, have done.

There are things we could be doing, but in general, right now, when I look at the numbers on investment, I see the capital stock falling per worker as it has now done for seven years. That has not happened since the 1930s and the Second World War. I do not think that the prospects for turning our performance in terms of real wage growth and living standards are good if we do not get those global investment numbers out.

I'm happy to hear about the individual stories, but when you tot it up across the board, there's something—

[The Chair, Conservative, Kelly McCauley]

I'm sorry, Mr. Robson, but I need to cut you off there.

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

Mr. Chair, I'd like to put forward a notice of motion, if that's okay.

[The Chair, Conservative, Kelly McCauley]

I'm afraid your time is up. Can we wait until the end to take care of that, Mr. Kusmierczyk?

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

Sure, we can do that.

[The Chair, Conservative, Kelly McCauley]

Ms. Vignola, please go ahead for two and a half minutes.

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

Thank you very much, Mr. Chair.

Mr. Giroux, over the past few months, there's been a lot of talk about consultants and the need to respect public servants and make better use of their expertise. Regarding the School of Public Service courses, it looks like the budget isn't changing despite the need to invest in training to improve public servants' knowledge and expertise. They have a lot already, but it's always good to invest in more.

People say that they want a better public service, that they want to support public servants' training and their interests, that they want to reduce the number of consultants, but then they don't invest in training those people. Do you see a disconnect there?

Is there money for training other than the School of Public Service budget?

[Yves Giroux]

There are other budgets for training in the public service. Each department has an envelope for employee training. It falls under operating expenses, personnel expenses or the purchase of goods and services. They buy training from other suppliers.

The School of Public Service also operates in part on a cost recovery basis. That may explain why its budget doesn't seem to be going up. It sells its courses and services to departments and agencies, including my own office. Our employees have access to some of the courses offered by the School of Public Service.

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

If I understand correctly, it's pretty hard to find out the exact amounts the government invests in personnel training for each department and for the School of Public Service. You'd literally have to create a new line item.

[Yves Giroux]

We'd definitely have to ask each and every organization what they spend on employee training. We'd also have to separate training and language training, which is a big part of the training budget for many organizations.

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

Thank you very much.