Government Operations Committee on Oct. 22nd, 2026

[Rolande Kpekou Tossou, Senior Analyst, Office of the Parliamentary Budget Officer]

We don't really have regional data, but what we've observed is that, in terms of exports, the impact is more pronounced in Quebec than in many other provinces. For instance, the aluminum industry is concentrated in Quebec and is one of the hardest-hit sectors, as is copper and so on.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Thank you very much, Mr. Chair.

Thank you to the witnesses.

[The Chair, Conservative, Kelly McCauley]

Thank you, Madame Gaudreau.

Mr. Bragdon, go ahead, please.

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

Thank you, Chair.

Thank you to the witnesses who are here today. I appreciate your time.

Ms. Ryan, your report projects that there will be $732.9 billion in federal borrowing over five years, compared with $333.3 billion in cumulative budgetary deficits. Why is borrowing projected to be more than twice the accumulated deficits? Does this risk understating the pace at which federal government debt is growing?

[Annette Ryan]

It's driven by a couple of large categories. The large spending on defence procurement will require cash outlays in the period in which the equipment is purchased. From an accrual accounting perspective, it will be recorded on the books, essentially with the period that it's amortized. When you buy a car, you have the debt associated with it. You could sell it at any time, so it constitutes an asset, but it depreciates every year. That's one major category.

The other major category, which has a lot of complexity within it, is essentially financing that goes to a range of Crown corporations, independent agencies, special funds, and so on that will create financial assets, but given that the funding will be in these separate entities, the borrowing is happening now and it's being moved to different organisms.

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

With the increased borrowing, Ms. Ryan, the annual federal debt charges are projected to reach $83 billion by 2030-31. What's the cost for Canadians when more public money goes toward interest payments rather than toward health care, infrastructure and other public services? Obviously, this is going to be transferred down. There is a generational cost to this. We are continuing to add to the overall national debt.

I know that things are being described creatively and in different ways that I think Canadians have grown accustomed to—it's certainly a transformational approach—but there's a cost associated with it. Can you go into that a little bit?

[Annette Ryan]

I can. The report highlights that public debt charges are set to grow from $24.5 billion in 2021, when it was $640 per capita, to $59.3 billion in this current year, and then, as you say, to $83.8 billion in five years. It is the fastest-growing element in the budget.

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

That's a huge concern. When you are accumulating that level of debt and then interest payments on the debt, that obviously is eventually getting transferred back to the taxpayer.

Another component I want to bring into this, Ms. Ryan, is oil prices. I know that the report references oil prices right now. Because of the high price of oil and since we're an exporter of oil, that is helping the bottom line for Canada's books big time, in that we're dealing with an ever-increasing amount of pricing on oil.

It's adding to the revenues, which is obviously allowing our borrowing capacity to grow as well, but it's effectively becoming a one-two punch, because there is inflationary pressure every time there are fuel prices that rise and the cost of oil rises. When we're able to borrow more as a government, what happens is that adds to the debt and puts inflationary pressure on.

Can you go into how this may very well be creating even more of an affordability problem for Canadians from coast to coast?

[Annette Ryan]

I'll make a couple of points.

First of all, I think revenues are up strongly in the five-year period, declining after oil prices and inflation go down, as we all hope they will, but the new spending that the government has taken on is back-end loaded through this five-year period. That's one way that there's a concern about the fiscal picture that we wanted to highlight with the report.

I think you're quite right that the number of public debt charges is going to rise through the period, from $640 a head to $1,400 this year, and then up to roughly $2,000 a head five years out.

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thanks.

Mr. Danko, go ahead, please.

[John-Paul Danko, Liberal, Hamilton West—Ancaster—Dundas, ON]

Thank you, Chair.

Thank you once again for joining us. It's good to see you again. I think a lot has changed since you initially were here before committee, and you've had some time to settle into your role.

I want to first set the context of the discussion that we're having today, because my colleague earlier raised some of the crises around the world that are ongoing and unfolding at the same time.

We're talking about Canada's budget, Canada's finances and the stability of Canada's finances within the context of the trade war, which has been initiated against Canadians by the U.S. government. Their objective, as they've stated, is to destroy the Canadian economy and essentially force subservience and make us the 51st state, whatever that means.

My colleague mentioned the tariffs, the war in Iran, Ukraine, the bond market fluctuations increasing costs, Venezuela and Cuba. I'll just use one example. The Government of Canada put a temporary suspension on the excise tax on gasoline, diesel and fuel. Otherwise, in a normal period of time, this would be revenue that would contribute to meeting that second fiscal anchor, but, because of these global crises that are ongoing, the government is having to take extraordinary measures within the context of these crises.

My question for you is this. Is it fair to say that this is not business as usual and that some of the initiatives that the government is being forced to take are in response to these global pressures, which are also impacting other G7 countries around the world?

[Annette Ryan]

It is absolutely the case that we face many, many challenges as a country. Our role at the parliamentary budget office and mine as Parliamentary Budget Officer—six months in, thank you—is the aspect that.... You say that the government was forced to take these measures. I would respectfully offer that the government chose a very ambitious path to focus on investments into the medium term.

I think I would draw the committee's attention to our report about the operating budget anchor and the associated tables we published that display the details of several hundred subsidies to business and tax expenditures the government did classify as operating versus capital. I think the choices for committee, parliamentarians and so on include things like if some of those subsidies to business, tax expenditures and so on are not achieving their stated goals from the period when they were put in, perhaps those are choices as well.

I think that, in the interest of parliamentary debate, part of our role is to shed light on other choices that could accompany the very ambitious expansionary agenda that the government has set forward.

[John-Paul Danko, Liberal, Hamilton West—Ancaster—Dundas, ON]

I completely agree that it's the imperative of the government to make smart, strategic choices about how taxpayers' dollars are invested.

On the operating budget, there's reason for optimism there, but on the capital side, again going back to this theme of global uncertainty, a lot of the investment the federal government is making in these significant federal programs—whether it's in infrastructure, defence, housing, energy, nuclear or the electrical grid—is focused on creating market certainty, attracting direct foreign investment and using that public money to leverage private investment.

My question is, if we were to not make these investments, what would be the risks in just allowing the market to do what it's going to do and not trying to generate an anchor of certainty in Canada?

[Annette Ryan]

It's clear that there's always a risk in not acting. It's absolutely true.

What we've been trying to highlight to support informed parliamentary and public debate is that, essentially, in order to move from those commitments and aspirations to the results, there will need to be a range of activities that come together successfully to turn announcements into borrowing, spending, projects and assets, and then subsequent prosperity, productivity, revenues, incomes and so on. Setting the table so that all committee members and members of Parliament understand all of those subsequent stages that lie ahead of us is what we're trying to do, so that parliamentarians can decide not just whether it's a good plan but whether it's being properly implemented and executed in getting its results.

[John-Paul Danko, Liberal, Hamilton West—Ancaster—Dundas, ON]

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

We'll go to Mr. Lawrence.

Mr. Lawrence, welcome back. It's always a pleasure to have you.

[Philip Lawrence, Conservative, Northumberland—Clarke, ON]

Thank you.

I believe the last time I was here, Ms. Ryan was here. There we go. It's a coincidence, I'm sure.

Congratulations on your six-month anniversary, Ms. Ryan.

I want to talk a bit about Alto, if we can. We'll go through some basic questions.

What was the government's estimate of the cost of the Alto high-speed rail?

[Annette Ryan]

It was $60 billion to $90 billion to construct.

[Philip Lawrence, Conservative, Northumberland—Clarke, ON]

How much did your office place as the potential cost of the Alto high-speed rail?

[Annette Ryan]

We set our estimate at $75 billion to $113 billion.

[Philip Lawrence, Conservative, Northumberland—Clarke, ON]

That's 25% more, if I'm doing my math correctly. Your guys are better at math than I am.

Of course, in costing a project like this, there are a lot of assumptions you have to make, and it's difficult work. One of the assumptions that I might take issue with is how you utilize the European construction and their overruns. Our infrastructure tends to run closer to the overruns we see in the U.K. or in the United States.

Could you explain your choice to utilize the European standard for overruns and undercosting of projects?

[Annette Ryan]

Super quickly, that is the basis for our study. We looked at other high-speed rail projects across the world, and their costs are driven by the number of kilometres you have to tunnel, the number of kilometres you have to build bridges for and that type of thing. In order to baseline against the government's figures, that's what we did. We benchmarked other projects.

On balance, the outliers in that international study were the U.S. and U.K. What we wanted to highlight with that study was that if Canada follows a path of good management and good execution, with that 25% shift that you mentioned, there is actually a lot of overlap in our two ranges of estimates. There's a chance that the government could hit its targets if it follows the European experience for construction. If, however, it gets into the cost overruns, judicial challenges and regulatory problems that the U.S. and the U.K. experienced, we wanted to flag that costs could be much, much higher.

[Philip Lawrence, Conservative, Northumberland—Clarke, ON]

I'll say again that I would take issue with that. Can you name for me another high-speed rail project in Canada?

[Annette Ryan]

I cannot.