Procedure and House Affairs Committee on March 16th, 2011

[David McGuinty, Liberal, Ottawa South, ON]

Today is a good example. It took putting a pistol to the head of the government to comply, after four months of requests, to deliver up some information on the costs of 18 crime bills. Now that we have dragged at least partial information out of the government, and we know it's incomplete from a quick perusal of 1,000 pages, Parliament is now in a position to provide the information to the PBO and he can do his job. But if he had requested this information from the Treasury Board, he would have been told he was not entitled to it as an officer--not a full officer but a quasi-officer of Parliament--because of cabinet confidences. Is that right?

[Alister Smith]

His entitlements are spelled out pretty clearly in the Parliament of Canada Act, and they don't include information contained in cabinet confidences.

[David McGuinty, Liberal, Ottawa South, ON]

Okay.

Can you help us understand why there's such a gap? For example, let's take the F-35s. The report was issued last week and there's a $14 billion or $15 billion difference. We know the government is relying on faulty information from the manufacturer of the plane, which was rejected by the Pentagon three months ago.

Why are Canadians having to suffer through this kind of story line when the PBO was set up precisely to help Canadians come to grips with the real numbers--not hidden--so they could know where their money was...? Why are we facing this?

[Alister Smith]

We have some differences of opinion, no doubt, between DND, which does its cost assessments, and PBO on these matters. I am really not qualified to talk about the PBO study on the F-35s and the quality of the methodology, the application of the model that was used. DND would be. But these differences are not unfamiliar when people are trying to assess very long-term, large projects of this kind.

[David McGuinty, Liberal, Ottawa South, ON]

My last question, Mr. Chair, reminds me of debating one of my teenagers over some kind of university lecture course and my kids regularly reminding me that everybody is entitled to their own opinion but not to their own facts.

How is it possible that we have two sets of facts? We have an officer of Parliament telling Canadians one thing and we have a government, the most secretive in Canadian history, saying another thing. How is it possible that Canadians are still suffering through a situation where they can't get access to information about what they're paying for?

[Alister Smith]

In the case of the F-35s or some other analyses that are done by PBO, there are also differences of assumption and differences of models used. Those also need to be factored in. It's not just a matter of facts and differences on the facts.

[David McGuinty, Liberal, Ottawa South, ON]

Perhaps what we need, Mr. Chair, is an arbiter who can sit down and moderate the differences between the Government of Canada and the PBO. This is crazy. We're supposed to be overcoming this by having the PBO precisely to deliver up numbers that are warranted, that are bankable, that are understood, that are serious. Part of the problem is he's not getting information.

[The Chair, Conservative, Joe Preston]

Thank you.

Mr. Albrecht, for five minutes.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Mr. Chair, I'm going to try to follow the line of questioning I had earlier.

First of all, Mr. Smith, thank you for being here. I'm really glad that you have 27 years of experience in the estimates process. As a fairly recent parliamentarian, I can say it is probably going to take me at least 27 years to begin to understand even part of what you know.

You earlier indicated, in terms of the committee process, that the committee can reduce but not increase the estimates. We've had some assumptions here that perhaps the government is spending money that hasn't been approved. Does the federal government spend any money without the approval of Parliament as it goes through the estimates process?

[Alister Smith]

No, it doesn't.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

It is important that Canadians understand that. Every expenditure has to find its way into those estimates or supplementary estimates and be approved by a committee and subsequently by the Parliament of Canada. Is that correct?

[Alister Smith]

Yes, unless there are statutory expenditures.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Right.

I want to go back for a minute to the Treasury Board “Guide to Costing”. I understand there are seven steps in that process. I'm not sure you'll have time to go through all of the seven steps, but there's one in particular that is perhaps a little confusing. That's step five, where it states that there is costing, pricing, and funding. It says these are three distinct functions. It would be helpful if you could explain the difference in those terms--costing, pricing, and funding--as they relate to step five of the Treasury Board costing guidelines.

[Donna Dériger]

I'd be happy to answer.

There is often a blurring of those concepts.

On costing, we try to keep to the pure concept of what does it cost, what did it cost, or what do I estimate it is going to cost. Pricing can then come into play if, for instance, there is an aspect of cost recovery in which a department might be involved. Establishing the price, or the amount to cost recover, often does not recover full cost. So there's a policy decision that it would be reasonable to recover x dollars as opposed to the full amount.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Could you give me an example of that, just to help me understand? One that comes to my mind is passports, but I'm not sure if that's a legitimate one.

[Donna Dériger]

Passports would be a very good example of a revolving fund that is on full cost recovery. Whatever their full costs are, they are expected to recover those full costs through the price charged for a passport.

I'm trying to think of another example, and one is just not coming to mind at the moment.

Funding is a separate issue altogether. You can estimate that something is going to cost something, but if the funding is not forthcoming, then you're going to have to reassess what it is you plan to do.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I'm probably not much better off than I was before, because I'm still having difficulty understanding. I can understand the difference between the costing and the pricing, but when you come to the funding, it would seem to me that's it's simply a matter of taxation or of some implementation of some policy to recapture the costs.

[Alister Smith]

When you get to the funding stage, you are relying on those costs. You are relying on those costs to determine how you should fund, and how much, and what kind of source of funds you need, as well as to determine the duration of your funding for that particular initiative. The fact that good funding depends on a good assessment of costs is basically the bottom line there.

[The Chair, Conservative, Joe Preston]

Thank you.

Madam DeBellefeuille, is there anything from you?

Mr. Godin, do you have anything further? No.

Do I have anybody else on my speaking list?

We thank our witnesses for this section. Thank you very much. We will suspend for about 15 minutes.

Thank you very much for coming today and sharing your knowledge with us.

[The Chair, Conservative, Joe Preston]

Order.

We have Kevin Page, the Parliamentary Budget Officer, with us.

Mr. Page, I understand you have a short opening statement. If you would introduce your guests with you, we will move on and finish our last hour of what seems like a fairly long day today.

[Kevin Page, Parliamentary Budget Officer, Library of Parliament]

Thank you, Chair.

Actually I have a few introductions. With me today are Sahir Khan, assistant parliamentary budget officer for expenditure and revenue analysis, and Dr. Mostafa Askari, assistant parliamentary budget officer for economic and fiscal analysis.

Good evening, Mr. Chair, vice-chairs, and members of the committee. Thank you for inviting me and my colleagues to speak to you today about fiscal transparency in the context of your specific review of the existence or extent of government compliance.

I have a few brief opening remarks based on the Parliamentary Budget Officer report dated February 25, 2011 entitled Analysis of Government Responses to a Motion of the House of Commons Standing Committee on Finance.

My views on the provision of financial information and analysis to Parliament are shaped by three points. First, the Parliament of Canada owes a fiduciary duty to the Canadian people to control public monies on their behalf. Canada's Constitution established and affirms this duty. Second, to assist in the fulfillment of this duty, the Parliament of Canada, through the Accountability Act in December 2006, created the position of the Parliamentary Budget Officer and tasked him or her with providing independent and transparent analysis on economic trends, the nation's finances, the estimates, and costing. In order to provide such analysis to Parliament, the Parliamentary Budget Officer needs access to financial and related information and analysis contained within the government's Expenditure Management System. This information and analysis is routinely collected, generated, and presented by government departments and central agencies.

PBO analysis of documents provided by the government to the House of Commons Standing Committee on Finance, and tabled on February 17, 2011 in the House of Commons, addressed three issues: first, the estimated costs of the planned reduction of corporate income tax rates; second, the incremental costs to the fiscal framework of the government's justice legislation; and, third, the estimated cost of the F-35 aircraft.

From a PBO perspective, with respect to corporate profits and tax revenues, the government has provided an adequate response to the finance committee request. In addition to projected income components such as corporate profits, personal income, etc., parliamentarians are advised to ask the government to provide underlying assumptions in all future annual budgets and updates.

Second, with respect to justice legislation, the government has not provided an adequate response to the finance committee request. Again, Chair, we have not seen the information tabled today, but the government has not provided an adequate response to the finance committee request.

Full compliance with the request requires clarity around the projected cost estimates, such as whether they are incremental or presented on a cash or accrual basis; a breakdown of costs between operating and capital for all information provided; details of the government's underlying methodologies, assumptions, cost drivers, and risk; and basic statistics, such as head counts, annual flows, and unit costs per inmate, per employee, and per new cell construction.

A modest example of the nature and extent of such compliance might be found in the PBO report entitled “The Funding Requirement and Impact of the 'Truth in Sentencing Act' on the Correctional System in Canada”.

Third, with respect to the proposed acquisition of the F-35 joint strategic fighter, which was included in the original FINA motion, the government has not provided an adequate response to the finance committee request. Full compliance with the request requires details of the government's underlying methodologies, assumptions, cost drivers, and risks; documents related to acquisition and life cycle costs; and an explanation as to why new or unplanned sources of funds from the fiscal framework will not be needed to fund the new purchase.

A modest example of the nature and extent of such compliance might be found in the PBO's report entitled “An Estimate of the Fiscal Impact of Canada's Proposed Acquisition of the F-35 Lightening II Joint Strike Fighter”.

Thank you for the opportunity to speak. We would be happy to take your questions.

[The Chair, Conservative, Joe Preston]

Thank you very much, Mr. Page.

I want to remind the committee that the point of reference on privilege that came to us doesn't mention the CF-35s. We'll talk about the crime stuff and go that way. I'll give some leeway, but for the most part, that's not part of the point of privilege that brought us here.

Mr. Brison, you are up for seven minutes.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

And thank you, Mr. Page, and to your team, for your important work on behalf of Canadians.

My question, first of all, is, have you had an opportunity to read the data that was provided to committee 17 minutes before the ministers appeared before committee earlier today?

[Kevin Page]

No, sir, I have not seen the material.

[Scott Brison, Liberal, Kings—Hants, NS]

So you do not believe that the time provided this afternoon provides an adequate time to study, in a substantive--