National Defence Committee on March 6th, 2013

[The Chair, Conservative, James Bezan]

Thank you. Your time has expired.

Madam Gallant, you have the floor.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

I will be sharing my time with Mr. Opitz.

Through you to Minister MacKay.

Minister, I see there is a request for an increase to appropriation in the amount of $725.7 million regarding the settlement of the Manuge class action lawsuit. While I understand the approval of the settlement is currently pending before the court, are you able to speak further on what exactly these funds will do for those who are involved in this case?

[Peter MacKay, Conservative, Central Nova, NS]

Madam Gallant, before I say that, I want to thank you for the work you have done advocating on behalf of members, their families, and veterans, particularly in the Petawawa Base, where I know you represent them well.

This was a historic settlement, as you know. This was a case that was before the courts. It affected our military personnel, both serving and some retired members. This has been a priority for our government. After the Federal Court ruled in May 2012 on the Manuge class action lawsuit, we took immediate action. I announced we would not be appealing that decision.

We then worked to end the Pension Act offset, which was at the root of this issue. We followed up with the appointment of a federal representative who negotiated the settlement with class action counsel.

The $725.7 million you refer to has been requested to support the implementation of the settlement in principle—that is, the action itself. That amount of money includes retroactive payments that in fact go back to 1976. It also includes interest on the payments.

It also includes the additional amount to ease the income tax implication for retroactive payments, because, as you know, under the income tax rules there could be significant penalties.

As well, this sum includes a $10 million scholarship fund for class members and their families. I should note that in accordance with the terms of the agreement, it sets aside funds to cover future claim payments should they arise.

The decision, as you would know, is being finalized by the court. It's there for review. There is an issue of payment to legal representation that has been somewhat contentious. We've filed our objections as to the percentage the lawyers were seeking in this case.

It's a landmark case. Mr. Manuge himself and many of the claimants have expressed certainly their relief that this court action is now settled favourably, and I think it has been seen quite widely as a generous settlement.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

First of all, I'd like to welcome Minister Findlay. I've had the opportunity to work with her before, and I know the members of the Canadian armed forces are going to be exceptionally well served. Thank you very much.

Minister, welcome. I'd like you to give us some detail, if you can, about the request of an increase to the vote 1 appropriation in the sum of about $438 million shown on page 96, relating to the Canada First defence strategy. Clearly that's a large amount. Can you clarify how that will be used there?

[Peter MacKay, Conservative, Central Nova, NS]

Thank you, Mr. Opitz.

That is a very specific question and a good one. As you know, the Canada First defence strategy provides a road map, a detailed plan, a costed plan that includes long-term funding to rebuild and modernize the Canadian armed forces, an organization with which you are very familiar.

Part of the vote 1 appropriation, the $234.9 million, will be used to fund critical Canada First defence strategy-related activities that include operational costs. They include such things as support to force generation, continued support for personnel readiness, something that I know this committee studied in considerable detail and has produced a very helpful report on. This is an important element of everything we do. It's one of the pillars of the Canada First defence strategy, the readiness component.

As well, we have requested part of this sum that you've identified, the $438 million figure. We have identified $203.5 million to support the implementation of payment in lieu of severance. So again, this is a very specific allotment. This is done in order to align the severance payments, the pay system for military members, with that of the current public service. It's done in a way that will lead to significant savings in the long term in what I believe is a system that is fair to all. Canadian Forces members may now have the option of cashing out their existing accrued severance, either immediately or at the end of their careers. This may be something that you yourself might avail yourself of, Mr. Opitz.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

Thank you, Minister. I think it's important to know where we've been, where we are, and where we're going.

I'd like you to comment on how this compares to pre-2006 budgets.

[Peter MacKay, Conservative, Central Nova, NS]

Again, that's a great question.

As you know, as a result of changes in the operational tempo and changes that we have seen in the economic outlook, we are required to be very prudent with every dollar. Having said that, we're still in a significantly better position than we were just a few short years ago. We've made investments across the board as a result of this Canada First defence strategy, first put in place in 2008. This is a long-term plan that provides for investments in infrastructure, in equipment and personnel, and in this readiness component. We have seen growth in the number of both regular and reserve force members. We have seen significant investments across the country at our bases and in our training programs, all of which will enable us, as you heard before this committee in evidence from people like Peter Devlin, the head of the Canadian army, to be in a place where we can provide the type of outstanding service that we have come to expect from members of the Canadian Forces. They're better trained, better led, better equipped, and better able to meet a very volatile security environment that we know is out there.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

Minister, there is a cumulative transfer out of vote 5 of roughly $1.7 million to the Canadian safety and security program. Could you explain, sir, this transfer and the breakdown of the security programs that are going to see an increase in this funding?

[Peter MacKay, Conservative, Central Nova, NS]

That is a very specific question, and I'm just going to refer to my notes.

Mr. Opitz, this is related specifically to the Canadian safety and security program. It's a program that's federally funded and has been allocated $43.5 million. This deals specifically with programs that provide science and technology solutions in support of our government's efforts to strengthen response to or prevent or mitigate in all circumstances serious incidents and acts of terrorism, crime, and natural disasters. It's a program that was transferred out of vote 5. These initiatives include the acquisition of tools to better analyze Internet traffic and defend against attacks on telecommunications. We've heard a lot internationally and here at home about the perils of cyber attacks, and this is all about further arming ourselves, quite literally and figuratively, against some of those threats.

It's also for the acquisition of high-speed cameras to analyze high-energy events, including blast responses to material and structures, as well as for upgrades to the Canadian Network for Public Health Intelligence to increase synergy among authorities for disease surveillance and response. So it's money that goes to the very root of much of the work that is being done when we transfer some of our funds to other organizations that we work very closely with on the subjects of safety and security.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

Minister Findlay, would you be able to inform the committee about the increase to the vote 5 appropriation regarding the definition phase of the arctic/offshore patrol ship project and its infrastructure projects?

[Kerry-Lynne Findlay, Conservative, Associate Minister of National Defence]

Yes, thank you, I can.

As this is my first occasion to be here with you all, I'd like to thank you for your welcome and say that I am certainly looking forward to working with Minister MacKay and the department in a time of transformation and adjustment. I'm looking forward to being part of maintaining the excellence that we know and have come to expect from our Canadian armed forces.

With respect to your question specifically, as you know, the government has committed to building and maintaining effective fleets for the Royal Canadian Navy and the Canadian Coast Guard. With this commitment, we are investing billions of dollars to renew the federal fleets for the future. These ships, the arctic/offshore patrol ships—or AOPS, as I've come to learn it—will enhance Canada's ability to exercise our sovereignty and surveillance of our waters, particularly off our northern coastline. This request for funds will be used for the definition phase of the AOPS project, which will see Irving Shipbuilding mature the ship's design. It is anticipated that the first ship for the navy will be delivered by 2018.

I should also note that this funding allows for progress to be made on implementing three infrastructure components of this project for jetty work in Esquimalt, in my home province of British Columbia, and in Halifax, and to build the Nanisivik naval facility.

[The Chair, Conservative, James Bezan]

Thank you. Time has expired, and the bells are ringing. According to Standing Order 115(5), it's my duty to suspend the meeting so that we can go to the bells, unless there's unanimous consent to continue on.

I'll ask for that and give Mr. McKay his chance to ask his round of questions.

Do I have unanimous consent to continue for another 10 minutes?

[Some hon. members]

Agreed.

[The Chair, Conservative, James Bezan]

Mr. McKay, you have the floor.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you for that generosity.

Minister, you've moved some money out of capital and put it into operating for the settlement of the Manuge lawsuit—$725 million, the better end of three quarters of a billion dollars—and yet the settlement figure, by the crown's estimates, are said to be $887 million. There's a discrepancy between supplementary (C)s of $725 million and $887 million of about $162 million.

I wonder if you could explain the discrepancy between what the crown says the cost of settling is going to be and what your appropriations are.

[Peter MacKay, Conservative, Central Nova, NS]

Yes. Mr. McKay, the short answer to that is that somewhere in the range of $200 million was paid up front. That money has already been transferred to the class action group. This is the further amount. The $725.7 million you refer to is now the second payment. There was a previous payment and an offset.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you for that.

The second number has to do with $438 million going into operating. It's a payment in lieu of severance. Can you advise the committee how many people in the military will be opting into this program and what this means in terms of retirement of actual soldiers, sailors, and airmen?

[Peter MacKay, Conservative, Central Nova, NS]

Mr. McKay, I'll have to take that under advisement because it is an ongoing number. There's a rolling total here, but we can give you the latest figures we have.

As far as those who are opting into this program now in lieu of severance, as I indicated to Mr. Opitz, there is a period of time in which members can choose whether to opt for this payment in lieu of severance. This is all, as I mentioned, about aligning the way in which the military provides these payments in concert with how the public service is currently treated.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What does this mean in terms of your necessary drawdown post-Afghanistan? Is it an annual figure, a regular figure, or is it a figure that has increased substantially by virtue of something? In theory, at least, you've got fewer people coming in and more people going out. Is this the cost of the people going out? Is this the differential?

[Peter MacKay, Conservative, Central Nova, NS]

There's an estimated amount for the voluntary severance payout of $850 million, and $203.5 million will be contributed toward the one-time cashout of severance pay.

I'm going to allow Kevin Lindsey to speak to that, to give you some of the greater detail and fidelity on that.

[Kevin Lindsey, Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence]

Thank you, Minister.

Mr. Chair, this severance payment really has nothing to do with members of the military coming and leaving. As you may recall, the government announced it would retire its severance liability for civilians by offering civilians the opportunity to take cash immediately or to defer it to some point in the future. The option existed to take the cash immediately without retiring, and in that way the government retired that liability. That same regime—

[John McKay, Liberal, Scarborough—Guildwood, ON]

So from my simple-minded understanding, someone who is a civilian in the military would presumably have this option, and instead of working on severance, they would take this money as a lump sum, but could potentially continue to work for the military?

[Kevin Lindsey]

Yes, and then that same option was extended to military members because the military had the same benefit as the public service. Serving military members have the option to take their severance payment while they continue to serve, rather than waiting until they retire. In that way, the government reduces the liability for that amount because they cease to accrue—

[John McKay, Liberal, Scarborough—Guildwood, ON]

There's a liability. I see. Okay.