Public Accounts Committee on May 1st, 2008

[The Chair, Liberal, Shawn Murphy]

I'd like to call this meeting to order. On behalf of the committee, I want to extend a warm welcome to our witnesses.

This meeting is broken down into two separate meetings, really. We're going to have a one-hour meeting with the new Parliamentary Budget Officer, Kevin Page. He's accompanied by Mr. William Young, the parliamentary librarian, and Mr. Sahir Khan, also with that particular office. I understand he is a new employee.

I have a few remarks by way of background, colleagues. The Parliamentary Budget Office was just established in the last several weeks. Authority for this position came from the federal Accountability Act. It's my belief that the impetus for the creation of this particular office came in part from some of the inconsistencies in federal forecasting that we've seen in the federal government. It's fair to say that over the past 10 years a lot of our revenue projections have been out by anywhere from $10 million to $15 million.

However, there were reports, particularly one by Mr. O’Neal, that confirmed some of the methodology used by the Department of Finance. In any event, Parliament does approve its budget and its spending allocations based upon certain assumptions delivered to Parliament by the Department of Finance, and if these assumptions do not prove to be correct, then of course the credibility of Parliament itself becomes eroded. On the other hand, it would be difficult to see a situation where we would replicate the Congressional Budget Office, as we see in the United States, or replicate the whole budgeting and forecasting apparatus that exists in the Department of Finance.

So the office has been established. Mr. Page is new on the job. I'm not so sure the job description has been totally defined. We're very pleased to have him with us for an hour. I understand both he and Mr. Young have opening statements, and I'm going to turn the floor over to them. Who will go first, gentlemen?

Mr. Young.

[William R. Young, Parliamentary Librarian, Library of Parliament]

Thank you, Mr. Chair and members of the public accounts committee. Good morning.

I welcome the opportunity to appear before you. As you mentioned, I'm here today with Kevin Page, Canada's first Parliamentary Budget Officer. As you're aware, Parliament legislated these new functions, creating an officer of the Library of Parliament, a position that would operate within the library's established mandate of providing authoritative , reliable, non-partisan, and independent knowledge and information to parliamentarians. For me, and I think for you as parliamentarians, the creation of a Parliamentary Budget Officer constitutes a significant initiative to strengthen Parliament's ability to hold the executive to account.

As the oversight committee for the Public Accounts of Canada, I believe that you can play an important role in making the Parliamentary Budget Officer an effective instrument for Parliament, one that complements, not competes with the work and resources currently available to improve Parliamentarians' understanding of the fiscal position of the Government.

What is fundamentally important is that a Parliamentary Budget Officer adds value to your work. As such, I know we would benefit greatly from your insights as we begin implementing new services through this new office and officer.

In fact, I might suggest exploring a consultative approach as a vital part of the Library's efforts to shape these new functions to serve Parliamentarians effectively.

An ongoing informal dialogue with members will help us deal with the questions that will certainly arise as statutory provisions are interpreted and given life through the delivery of this new service. What are the specific needs and requirements of parliamentarians? How should priorities be set in the face of competing demands?

Who better to answer these questions than the clients of these services? I hope you agree.

Kevin Page, the individual who took on the challenge of being Canada's first Parliamentary Budget Officer, started work with us just after Easter. For those of you who may not have seen his curriculum vitae, copies are available.

Kevin is one of very few individuals with experience working on relevant fiscal forecasting, policy, and expenditure portfolios within all three economic agencies of the federal government. This broad perspective will be of tremendous value to parliamentarians, and certainly, if required, to this committee.

As you will see, Kevin is a “people person” with a good sense of humor and a great reputation.

His phone is already ringing with calls from skilled professionals from both inside and outside government who want to work with him. I think this is great news for Parliament. It's also a huge opportunity for us to build the library's research capacity and to add value to the services we already provide to parliamentarians.

Thank you, again, for your invitation.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Young.

I'm going to ask Mr. Page for his opening remarks.

But before I do that, on behalf of all members of the committee, I want to congratulate you on your appointment and wish you all the best in your new role. Perhaps, Mr. Page, if you don't mind, you could introduce Mr. Khan and also tell us what his particular responsibilities will be. I understand that he's relatively new to your office.

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

Mr. Chair and members of the committee, thank you for giving me the opportunity to speak to you today. I would also like to thank the parliamentary librarian, Mr. William Young, for all his efforts in implementing the position to increase the Library of Parliament's capacity to serve Parliament, and Mr. Allan Darling, who's not here today, a retired senior public servant who worked diligently with the parliamentary librarian to make this position a reality.

Mr. Chair, the office of the Parliamentary Budget Officer underwent a 33% increase in staffing this week with the hiring of one of two directors, the director of expenditure and revenue analysis, Mr. Sahir Khan. Mr. Khan has experience in the government with two central agencies: Treasury Board Secretariat and the Privy Council Office. But he also has a long résumé in the financial community, working in New York City, in consulting firms in the area of turnaround environments. So I welcome Mr. Sahir Khan, our first new director.

We will also have a 25% increase in our staff next week with the addition of another director, the director of economic and fiscal analysis, Mostafa Askari. Mr. Askari will start on Monday. He also has substantive experience in the government. He's working now at Health Canada, but he has worked at the Department of Finance as well. He has also worked at the International Monetary Fund and at the Conference Board of Canada. So he'll bring wide experience in the area of fiscal analysis, economic analysis, and forecasting.

In my opening remarks, I would like to take the opportunity to tell you how I approach the work of the Parliamentary Budget Officer. I have four messages. They are the same that were recently given to the Standing Joint Committee on the Library of Parliament and to the Standing Senate Committee on National Finance.

It is an honour and a privilege to serve Parliament. Thank you for giving me this opportunity. We also have an important and timely opportunity to move forward with the role of the Parliamentary Budget Officer. The building process will take time. Today marks an early but important step in the consultation process.

I am honoured to be Canada's first Parliamentary Budget Officer and to be an independent officer within the Library of Parliament, an institution with a long and prestigious history in Canada that has a tradition of providing objective, non-partisan analysis and advice to Parliament.

It is important that members of the Joint Committee be comfortable with me as their Parliamentary Budget Officer. Trust must be accompanied by professional, unbiased and competent advice for me to be an effective servant of Parliament.

As the parliamentary librarian has noted, I have spent more than 25 years in the federal public service. Many of these years were spent in central agencies where I had the opportunity to work with others in the provision of advice related to economic, fiscal, and expenditure management issues. This is my first opportunity, however, to work as an independent officer of the Library of Parliament. I have lots to learn about how Parliament works, and I am looking forward to serving and working with you in this new capacity.

I believe we have an important and timely opportunity with the creation of this position of Parliamentary Budget Officer. The importance stems from Parliament's “power of the purse”, which is a fundamental feature of democracy.

The genesis and momentum for the creation of the Parliamentary Budget Officer role reflect a number of important concerns expressed by parliamentarians over the past decade. The chair has noted some of these. First, there were concerns that the size of fiscal forecasting errors was hindering public and parliamentary debate on budgetary choices. Second, there were concerns that more was required to strengthen accountability and effective scrutiny by Parliament of government spending and future spending plans. Third, there were concerns that private members' bills needed to be costed early in the legislative process and better integrated in the budget-making process.

The mandate of the Parliamentary Budget Officer is outlined in the Accountability Act, and it is now part of the Parliament of Canada Act. It has three components.

The first is providing objective analysis to the Senate and the House of Commons about trends in the economy, the state of the nation's finances, and the estimates of the government. The second is providing related research, when requested, by a committee of the Senate or the House of Commons, including the House of Commons Standing Committee on Public Accounts. And the third is estimating the financial costs of proposals introduced by a member of either House other than a minister of the crown or by a committee.

The mandate includes one important provision that gives the power of the Parliamentary Budget Officer access at convenient times to any financial or economic data in the possession of the department, which is required for the performance of his or her mandate. This will stretch the budget of the officer and the analytical capacity of the supporting team. Mr. Khan is quite happy we have that provision.

I believe the creation of the position of Parliamentary Budget Officer comes at an opportune time.

First, the economic and fiscal situation of Canada is relatively strong as measured by many macroeconomic indicators. It can be argued that it is better to launch this role in a period of relative economic strength rather than weakness.

Second, we are in a Parliament with a minority government. Political scientists such as Professor Peter Russell have noted that this encourages debate about budgetary choices as well as negotiation and compromise on legislation.

Professor Russell will be speaking at the library's distinguished visitor series this Friday from 9 a.m. to 10:30 a.m.

As we look ahead, we can envisage many important and interesting debates. These include current debates about the impact of the weaker U.S. economy on Canada's economy and fiscal situation and the adjustment pressures in manufacturing related to a high dollar and high input prices. They also include important longer-term debates about raising the living standard in Canada; ensuring balanced income growth amongst Canadians; addressing the issues related to aging demographics; ensuring environmentally sustainable economic growth; and realigning fiscal resources to new priorities in a balanced budget framework.

As well, as we have seen in recent years, particularly by the work of this committee, there are always challenging initiatives that are launched by government departments and agencies with good intentions, which benefit from additional scrutiny by Parliament. In these types of cases, the Parliamentary Budget Officer should play a positive role in supporting Parliament through the provision of financial analysis based on best practices.

Building the capacity to support the mandate of the Parliamentary Budget Officer will take time. A number of months are required to build and integrate new analytical capacity within the Library of Parliament. That process has started. With the 2008 budget tabled and the 2008-09 estimates now before standing committees, the next key milestone in the normal budgetary cycle for the Parliamentary Budget Officer will be the 2008 economic and fiscal update in the autumn and the 2009 pre-budget consultations.

One can envisage a number of overlapping phases of development in the building process: first, a consultation phase with Parliamentarians on priorities and potential outcomes, as well as consultations with departments and agencies on the way we will exchange information;

secondly, there will be a team-building phase in which the office will be staffed within the Library of Parliament to serve parliamentarians; and thirdly, there will be an implementation phase in which products and services are provided to parliamentarians.

In the context of establishing the role of the Parliamentary Budget Officer, a number of concerns have been raised publicly, including concerns about the independence of the advice, the size of the budget for the position and whether or not the Officer will provide independent forecasts.

In this regard, I wish to note that the Parliamentary Budget Officer will maintain the tradition of the Library of Parliament in the provision of independent, non-partisan advice. I will utilize all the resources provided to it in the most effective manner possible, which includes leveraging current resources in the library, in federal departments and agencies through the provision of information, and to external stakeholders interested in serving Canadians. I will work with private sector forecasters and the Department of Finance to ensure that there's a satisfactory comprehension and oversight by parliamentarians on the economic and fiscal outlook, the related risks, and the implications for fiscal planning and budgetary choices.

As I close, I want to thank you for giving me this important opportunity to open the dialogue on the implementation of the role of Parliamentary Budget Officer.

It will be an honour and a privilege to support your efforts to ensure that the revenue and spending measures that are authorized by Parliament are fiscally sound, that they meet the needs of Canadians with available resources, and that they are implemented effectively and efficiently.

I am looking forward to hearing the views of honourable members on their expectations for the office and how it can best support their activities.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Page.

Colleagues, we're going to have one round of six minutes each. That's two Liberals, two Conservatives, one New Democrat, and one Bloc member.

We'll go to the first member of the Liberal Party, Mr. Wrzesnewskyj, for six minutes.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you, Chair.

Welcome, Mr. Page. I expect we'll be seeing you relatively often at this committee.

Mr. Page, you've arrived at a very interesting time, an exciting time in a lot of ways, and you perhaps have started planning ahead. What sort of capacity do you believe needs to be put into your office to be able to do your job properly in terms of economic forecasting and with regard to budget analysis, and then providing committees or parliamentarians with budgetary options on top of the costings of private members' bills?

It seems to be a pretty full plate, so you must be prioritizing some of those roles, and there will most likely in the near future be a wish list of the types of resources you would require to be able to do a good job of these very important analyses.

[Kevin Page]

Thank you for the question, sir.

In terms of the capacity we'll need and how we will go about putting this capacity in place, as I said, the first phase is the consultation phase. It's really important that we take full opportunity for these types of meetings and have opportunities to meet with you individually or in groups so that we can get a better sense of those priorities in order to best serve you. I think that's actually a very important step.

Second, we've already started, as I've noted, with the hiring of Mr. Khan, one of the directors for revenue and expenditure analysis, and another director, Mostafa Askari, to help us with the economic and fiscal analysis. I consider it a very key step within the first month to hire the management team.

These are both folks who have extensive backgrounds in government and in the private sector in dealing with the kinds of issues that have been highlighted in the mandate, as you noted, sir--economic and fiscal trends, costing and related issues, and additional support on scrutiny with respect to the estimates process. Over the next several months, in addition to the consultations, there will be some additional hiring; we will go out and try to build the teams under Mr. Khan and Mr. Askari so that we have that kind of capacity.

We're also looking at building relationships with government departments and private sector forecasters as well in order to carry out this mandate. That will be a big part of our momentum going through the summertime. We're hoping that by the fall we will be partially staffed up and will have built these relationships with our private sector colleagues and with departments, particularly in terms of establishing those protocols for the provision of information, so we'll be in a place to actually start providing information as we look towards the 2009 budget.

Beyond then, sir, I have a hard time in terms of what those additional steps would be, but again, come the fall, we'll have built sufficient capacity for us to hope to play a role in helping you with respect to the implementation of the mandate.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

In regard to economic forecasting, we've seen the difficulties in the past that the government has had in providing accuracy. When you take a look south of the border at the U.S. Congressional Budget Office, have they been able to better forecast future economic trends and conditions than the executive branch of government? Have they been closer to the mark, especially in this last period?

We've seen how widely off the mark our last budget forecasts with the executive branch here in Canada were. I believe they were estimating 2.4% growth for this coming year; they've downgraded it this year to 1.7%, and it now appears that economists are saying 1.1%. Was the Congressional Budget Office better able to provide accurate information than executive branches? In other countries that have offices such as yours, does the level of accuracy tend to be more accurate than that provided by projections from the executive branches of government?

[Kevin Page]

Thank you for the question, sir.

First of all, I'll just comment about the reputation of the Congressional Budget Office: it is stellar. It is a highly used institution, perhaps even a model that we can aspire to, even though it exists within a very different system, a congressional system versus our Westminster system.

I don't have statistics today to tell you how the Congressional Budget Office has fared in terms of its projections one, two, or three years out relative to the executive, or in fact even relative to other forecasts that are provided in the United States. Having said that, I think one of the things we will seek to understand is how the Congressional Budget Office has built its capacity over time in producing those kinds of forecasts and maintaining that kind of independent, non-partisan approach.

In terms of other countries, I believe a paper was produced by the Library of Parliament that looked at what exists in other countries that is similar in nature to the Parliamentary Budget Officer role in Canada. Of those institutions, the Congressional Budget Office actually has the longest history, starting in the mid-1970s. You've actually seen quite a few countries start to build this type of capacity in recent years, particularly over the past decade or decade and a half. We've seen it in Korea, in Sweden, in the Philippines, and in the Netherlands. The U.K. has built a scrutiny office. Not all of them actually produce independent forecasts; some of them do, some of them don't. I apologize; I don't have an understanding of how their forecast records would compare with their executives' or with the private sector forecasts.

Underlying the provision of this advice, what we would hope to do in looking at forecasting information is provide a good sense of what's behind those forecasts in terms of assumptions--what the differing assumptions are, what the related risks are, and how they would impact budgetary choices.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Wrzesnewskyj.

Thank you, Mr. Page.

Monsieur Lussier, six minutes.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

Mr. Page, you have looked at the similar organization in the American Congress which has a staff of 230 and a budget of several billion dollars.

Do you intend to use the same ratio to set the number of your own staff in relation to the budget of Canada?

[Kevin Page]

Thank you for your question, Mr. Lussier.

It would be impossible for us to have a budget equal to that of the Congressional Budget Office.

We have a budget, a status quo budget of about $2.7 million. I believe the budget of the Congressional Budget Office is upwards of $50 million. We're looking at a staff in the neighbourhood of about 15, relatively balanced between the economic analysis and forecasting division--six, seven, eight--versus a similar kind of contribution under Mr. Khan for the expenditure and revenue analysis--six, seven, or eight.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Do you have some flexibility in setting your budget? Are you independent? Will you have the same privilege as the Auditor General who sets her own budget?

[Kevin Page]

Our resources are part of the estimates of the Library of Parliament and will be established in that kind of context. The issue of resourcing came up at the two previous meetings. Concerns have been expressed, sir, as to whether or not there are sufficient resources. I think at this point, as we're just building and looking ahead at our budget this year and next year, our budget for this year is about $1.8 million, rising to $2.7 million next year. We'll work within those kinds of resources. There might be some small adjustments, and we'll work with the librarian in terms of establishing resources.

If it is felt down the road, sir, that if there aren't sufficient resources--and I think there are pressures coming from committees that we need additional resources--it could be dealt with in that context.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

You will be able to call on external resources, such as experts and specialists. How will you allocate your budget? Will you have a permanent staff or will you be able to call on temporary resources?

[Kevin Page]

That is an excellent question.

I will have to allocate my budget between permanent and temporary resources.

We'll be looking at that over the next few months. It's a similar question to the one raised previously by a member here, in terms of what our priorities will be. We'll be establishing a budget over the next few months. We will set aside a number of resources, several hundreds of thousands, so we can work with the private sector to deal with the issues that are brought to our attention. We also hope we can work in a collaborative way with some of our colleagues and academic institutions and get advice without using significant resources.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Will your staff be required to have a security clearance?

[Kevin Page]

Yes.

It would be important that our level will be set at

top secret or secret. I could say that of the two directors we've hired already. Mr. Khan has a top secret clearance, and Mostafa Askari has also worked in the fiscal environment at the Department of Finance, which has similar security.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Are the 15 additional staff already included in the staff of the Library? Will they have the same classifications?

[Kevin Page]

We will look at it.

I thank you for this question.

We would have to hire people able to provide the required services.

I was at the assistant deputy minister level in the public service. Mr. Khan was at a director general level. So our two directors will be at a director general level. We consider them relatively senior public servants and relatively senior even within the Library of Parliament.

Mr. Young may wish to add in terms of how those levels compare with other levels within the Library of Parliament.

[William R. Young]

First of all, I have to tell you that it is very difficult to hire economists who have the required qualifications for these positions. Also, the levels are somewhat higher than those of the other directors of the Library of Parliament but we are reviewing the classification of our directors as well as of the whole staff of the Library, like Alex and Lydia who are here today.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Will you be using lateral transfers to try and get staff and specialists from the Office of the Auditor General or from the Bank of Canada? Would that be a possibility?

[William R. Young]

We will start by reviewing the talent that is already there at the Library of Parliament. About thirty economists work for the Library and are available.

Mr. Page has referred to making use of the people who are already in place. We have talked about launching a national campaign to find qualified people.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Lussier.

Mr. Williams, you have six minutes.

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you, Mr. Chairman.

First I'd like to welcome Mr. Page to the Library of Parliament and to his new job in the budgetary role that he's going to be doing.

There are a couple of issues that I need to get clarified in my mind.

You mentioned that the first big one is going to be the fiscal update in the fall. Of course, there is the budget in the spring. These are the two major announcements by the Minister of Finance during the year. There may be others, but these are the two big ones that we expect.

When these documents are tabled in the House of Commons by the minister, how quickly do you expect to be offering your assessment on these numbers? Are you going to have access to the Department of Finance, to the numbers, so you can be concurrent, or are you going to have to take some time, like several weeks, to make your announcements?