Public Accounts Committee on May 13th, 2008

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

There were tons of complex issues in the budget. I just think of the fiscal balance, the equalization issue. That in itself was a major task, without even dealing with all the other complexities in the budget.

[Sara Beth Mintz]

Yes, it was incredibly challenging, and I welcomed the challenge and undertook to work whatever hours it took to do the job and do the job well, and that meant many hours.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

What I'll say in conclusion here.... How much time have I got left, Chair?

[The Chair, Liberal, Shawn Murphy]

One minute.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

I've seen a fair number of budgets since I've been here in Ottawa. I've seen budgets provincially and federally over my time. I thought that was a very well-communicated budget. The package of materials that was produced helped me, as an MP, to communicate to the media and helped them understand the budget. It was to me a first-class job, and if you folks had anything to do with that, I would give you very high marks.

[Hugh MacPhie]

Thank you, Mr. Fitzpatrick.

And without correcting Hansard, I believe it was Mr. McCallum himself who said nice words at the conclusion of Budget 2007--although, Mr. McCallum, I don't recall that specifically, but I think that is what you said.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

I assume also that Mr. McCallum's background with banks and financial institutions... You have done some work for that part of the Canadian economy as well?

[Hugh MacPhie]

We have served financial institutions, yes.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

So they had confidence in hiring Mr. McCallum and they had confidence in hiring you, Mr. MacPhie.

Thank you very much.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Fitzpatrick. Thank you very much, Mr. MacPhie.

That concludes the second segment. On behalf of the committee, I want to thank you, Ms. Mintz, and I want to thank you, Mr. MacPhie, for your appearance here today.

We will now adjourn for 30 seconds and we'll have the minister with us for the last hour.

I would ask the media to leave, please. The meeting has not been adjourned. We're going to go for another hour with the cameras and we're going to invite Mr. Flaherty, if he's here.

[The Chair, Liberal, Shawn Murphy]

I'd like to call this meeting back to order.

This is our last one-hour segment, colleagues, and we're very pleased to have with us the Minister of Finance, the Honourable Jim Flaherty.

Welcome, Minister Flaherty.

Before we go to the first round, I'm going to urge the members again. We are dealing with very specific contracts, and I'd ask the members to keep your questions short, brief, succinct, and I would ask Mr. Flaherty, of course, to keep his answers short and to the point.

Having said that, we're going to go to the first round of seven minutes to.... Excuse me. I forgot.

Do you have an opening statement, Mr. Flaherty?

[Jim Flaherty, Conservative, Minister of Finance]

Yes. Thank you, Chair.

Mr. Chairman, I appreciate the opportunity to meet with you and the members of the committee today to set the record straight with respect to the work that was carried out in support of the second budget, Budget 2007.

In some instances, in the House of Commons and in the media, this work has been mischaracterized and, quite frankly, belittled.

It is a pleasure for me to be here today with you. I would like to say a few words regarding contracts and clarify certain points.

First let me say that I do not regret hiring MacPhie & Company or Sara Mintz. They provided good value for money for the taxpayers of Canada. These people worked long hours to help us deliver what is unquestionably the most important document of the government, the national budget. I do regret, however, that administrative functions were not followed, and I'll have more to say about that in a minute.

The national budget, as you know, is the financial road map of the government. It provides a snapshot of Canada's fiscal situation. It sets out economic projections going forward. It presents new tax measures and policies from various departments and crown corporations, and it provides a series of annexes and technical papers providing extremely detailed financial information.

This particular budget, Budget 2007, was an historic document. It dealt with many complex issues, such as equalization, which are difficult to communicate to the public, and it was the largest budget document ever, at 477 pages. When you pick up the actual budget documents, you really don't get a sense of the scope of the work involved.

I look around the room to see if any of you have ever worked on a budget. I guess Mr. Christopherson would have in the province of Ontario, so he has some idea of the complexity involved. It is far more complex and labour-intensive than many may think. For those of you unfamiliar with the budget process, let me take a few minutes to mention some of the stages involved.

Clearly, you cannot have a budget without policy. Policy work for Budget 2007 began soon after Budget 2006, which was delivered on May 2, 2006. First we identified stakeholders to provide input into the process: representatives from municipal governments, representatives from provincial and territorial governments, academics, associations, consumer groups, business groups, members of Parliament, and so on.

Second, there were officials from the Department of Finance. The finance committee of the House, my staff and I spent hundreds of hours over the course of months travelling the country and meeting with various people and holding pre-budget consultations. We gathered political ideas from our political colleagues and other departments. We also opened up the pre-budget process to all Canadians by offering online consultations.

Thirdly, all of the ideas were then carefully reviewed, prioritized, and eventually costed. All policy decisions were reviewed with our long-term economic plan in mind--that is, Advantage Canada. We believe that this is the responsible approach.

Fourthly, budget policy briefings were held. During those briefings, department officials presented binders of policy options and various alternatives. Over the course of months, these were eventually reduced to a manageable and affordable budget package that reflects the priorities of Canadians.

As policy development moved closer to a final package, a team of communications, parliamentary affairs, and logistics people from within and outside government swung into action. These people were looking at a mountain of work within very compressed timelines. They were responsible for quantitative and qualitative research, writing, and editing of the budget speech; writing and graphic design for all of the companion documents, the fanfolds, “The Budget in Brief”, and in 2007 the fiscal balance document; also writing and producing briefing books and materials for members of Parliament; writing and producing videos and website content; producing budget day presentations for cabinet and staff; coordinating the production that is budget day--an event that involves literally hundreds of people both here in the parliamentary precinct and throughout Ottawa; organizing budget lock-ups for members of Parliament, hundreds of stakeholders and the media; and developing pre- and post-budget rollouts, including speeches and events.

As I mentioned, developing and rolling out Budget 2007 was an enormous task. To ensure that it was done in a timely and professional manner, we brought in help from outside, a practice followed for many years by past federal ministers of finance.

Obviously this budget material was confidential. I engaged people who I not only knew could do the job but who I could trust.

MacPhie & Company consisted of two individuals, Hugh MacPhie and Paul Tambeau. These two gentlemen are communications professionals who provided hundreds of hours of work on this file. They worked on several aspects of Budget 2007, such as participating in the budget search process; developing a comprehensive communication strategy; drafting, editing, and proofing various budget products, including the budget speech; managing the communications critical path and production schedules; and developing pre- and post-budget rollouts.

Sara Mintz is a lawyer with extensive private and public sector experience. Her responsibilities included working on policy, providing analysis and assessments to the budget director and senior Finance Canada officials, coordinating budget day logistics, and assisting the budget director.

These people have worked with me in the past during my time in public life. They are dedicated and hard-working. I trust them. They have always acted in the public interest.

As I have stated consistently, my office failed to follow some of the administration functions in engaging MacPhie & Company. As I've mentioned on several occasions both inside and outside the House of Commons, regrettably administrative functions were not followed with respect to the contract with MacPhie & Company.

I've been open and transparent about this. The moment my staff brought the error to my attention, I instructed my staff that all Treasury Board guidelines were to be followed to the letter. I made it clear that any other breaches would not be tolerated. I ordered a review by my new chief of staff. Errors were administrative, since the value for money was delivered, but I ordered the review, and we developed an action plan, which was first of all that there had to be strict compliance with all Treasury Board guidelines; second, that my staff must consult the departmental staff with respect to all contracts; and third, that my staff must advise me of any concerns expressed by the department to them concerning issues of contract.

I can say this at the end, Chair: it's far better to bring experts into the office on a short-term contract when needed than to hire permanent staff unnecessarily. It's cost-effective.

[The Chair, Liberal, Shawn Murphy]

Unless you have any quick concluding remarks, we'll move on. Are there any quick concluding remarks?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

No. It would take another five minutes or so, and that's probably too long. As I say, the administrative functions weren't followed; I'm happy to try to respond to those concerns.

[The Chair, Liberal, Shawn Murphy]

Thank you very much on behalf of the committee.

The first round is seven minutes. Go ahead, Mr. McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Thank you, Mr. Minister.

I'd like to say at the start that I have no evidence suggesting that either of the two individuals performed poor work; my only question has to do with the process.

When you say administrative functions were not followed, we know there was a lot of correspondence by e-mail between your former chief of staff, David McLaughlin, and public servants in the department, correspondence that I believe made it clear that it would not be appropriate to use an untendered contract in this case. Implicit in your comments, if I'm not mistaken, is the idea that you did not get told by your former chief of staff about this correspondence before the contract went out. Is that a correct interpretation?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Yes.

[John McCallum, Liberal, Markham—Unionville, ON]

So you only discovered that this was against Treasury Board rules after the action had already been taken?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I only discovered that administrative functions were not followed on July 24, 2007.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Minister, a provision in Bill C-50 has a certain connection to this: the Minister of Finance is given power to set up committees--advisory committees or other committees--in which the members of these committees can be appointed, bypassing Treasury Board rules. The minister can choose whoever he wants without any contracts, and the cabinet, through an order in council, can determine whatever salaries are to be paid. Your own officials confirmed this to me at the finance committee.

Would you share my concern that this might represent a problem in terms of doing indirectly what is now not according to the rules, by setting up a new mechanism that would allow Mr. MacPhie or somebody else to be put onto an advisory group at possibly a high salary and with no competitive bidding process?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Not at all. It's really a rather different subject.

Since I've been Minister of Finance, we've appointed a couple of panels that have developed some very important public policy in Canada: the children's fitness tax credit--which hundreds of thousands of Canadians took advantage of this year, I'm told--and the registered disability savings plan. The three experts who served on the children's fitness tax credit panel and the three experts who served on the panel dealing with registered disability savings plans were each paid $1.

The challenge is that when we appoint people, as we have recently--for example, the members of the Godsoe panel on international taxation and members of the Hockin panel on securities regulation--not all people who might be good people to have can afford to give up the hours and days that they're being asked to give up in order to perform this kind of public service.

This is a provision found in other federal department legislation. The ministers for public safety, industry, and social development have long had such authority. That's why it's in the bill--so that the Minister of Finance will have similar authority.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you. I guess I'm concerned about the lack of a competitive process, but I'll move on.

Bronwen Evans received a $24,877.50 contract to write speeches for you from June 2006 until last February. Can you confirm that she was your executive assistant and chief of staff at Queen's Park?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

She was certainly on my staff at Queen's Park, and at one point she was my chief of staff at Queen's Park when I was in one of the ministerial jobs I had there.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you very much.

David Curtin, who worked on your Ontario leadership campaign, received $24,877.50 to write your first budget speech in 2006. Can you confirm that he was also paid $3,350 to write a keynote speech earlier this year for you?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I believe so, but I would have to check the records on that speech.