Public Accounts Committee on March 3rd, 2009

[Sheila Fraser]

Mr. Chair, I will ask Mr. Maxwell to describe the framework.

But again, I think the framework that is put in place for different contributions or different transfers is really a policy decision, which goes back, in many cases, to negotiations between the federal government and the recipients of those transfers. As I say, it's a policy decision, so we would not comment on whether it should be in place or not.

[The Chair, Liberal, Shawn Murphy]

Mr. Maxwell.

[Neil Maxwell, Assistant Auditor General, Office of the Auditor General of Canada]

Thank you, Chair. I'll be brief.

Thank you for that question.

We've talked a lot about the types of transfers that are unconditional. This is an example where there were quite a few conditions. The accountability framework that was put in place in 2008 had a number of different aspects, and very much the kind of thing that was put in place is typical of that portion of transfers where there are conditions. These are all following the transfer payment policy that the Comptroller General described.

For example, it requires a program evaluation. It requires some measurement of what the actual impacts are. It requires some reporting of information to the federal government from the province. It also had an interesting aspect on the question of incrementality. That's been mentioned several times today. It's a very interesting aspect, where it gets a third party to in fact certify that the funds were used incrementally--in other words, that the provinces didn't take the federal money and simply displace their own funding.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Weston and Mr. Maxwell.

Mr. Christopherson, four minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair.

I want to continue on the notion of conditions, and I accept totally, Madam Fraser, your position that the decision of whether there should be conditions is a political one and politicians will be held to account through our public process. But here's what throws me off.

There's a notional understanding that having these operating principles is a good thing because they start to explain what it's for. So to me, once you walk through that door you've made the commitment that you're looking for some kind of accountability, otherwise you wouldn't have made even an operating principle. You would have just left it wide open and said you're fine with it being very loose, much like with the health transfer--you understand there are wide parameters, that's the way you want to do it, you mean it to be that way. But once you start talking about operating principles, it suggests notionally that you're looking to put some constraint. Since they're not legally binding, and all that happens after they're in place is that the provinces make a similar announcement that is consistent with the operating principles, but with no detailed follow-up, nothing attached to it....

What I'm curious about is that supposedly there's an assumption--I believe that's your word, Madam Fraser--that the people of the province or territory would hold them accountable. But without something legally binding, what good does it do? How much of it is being achieved? And I am separating those that you want to be flexible from ones that you're beginning to do something on, even if you don't put any real clamps on it.

Just help me understand how this “assumption” might work if there's nothing binding being passed down to the citizenry of that province or territory.

[Sheila Fraser]

Chair, I think that's the crux of the issue with the trusts. In effect, if we look at programs like equalization, or wherever there are no conditions, it's quite clear that there are no conditions and that the provinces can use them as they wish and as they are spending more. But when we get into the trusts, there are public announcements about what they are to be used for. I certainly think most Canadians would think that's where the money is actually going, but as you point out, there are no true legal obligations on the provinces and territories to spend the funds that way. They can basically spend them as they wish, over a varying period of time, and for various purposes.

As a minimum, there's an issue around the communication of what these trust funds are and what they do, and I think it comes back to the legislatures and the Parliament of Canada deciding what kind of accountability they want around these amounts of money.

[David Christopherson, NDP, Hamilton Centre, ON]

Mr. Wright, what are your thoughts?

[Rob Wright]

I'll ask Barbara to comment, and then I have a comment as well.

[Barbara Anderson]

It is a good question, and it's something we struggle with. The operating principles are a method of having a common understanding between governments for what the objective is, but we haven't talked at all about the accountability of the people, and I will say from our experience in this vast number of trusts.... One of the first ones we did was for medical equipment, and there was not a radiologist in Canada who could not tell me down to the very last penny how many MRIs his province had bought. It was the same with the child care. The child care groups knew exactly how much money had gone through these trusts to their provinces, and they certainly were very effective in demanding that the money be spent.

So it's just an aspect of how the accountability is gained through this mechanism.

[The Chair, Liberal, Shawn Murphy]

Very briefly, Mr. Wright.

[Rob Wright]

There's $60 billion a year in transfers to the provinces on areas of common priority and shared responsibility, and there's a continuum of accountability and conditionality. In some areas, such as on our current infrastructure, the extra $4 billion, we want to make sure it's incremental or it's not going to flow. Similarly, there are some quite considerable conditionalities on the labour market agreements. You get into CHT/CST and there are some conditions, but on a few select policy issues that really aren't comprehensive in terms of value for money. There's no conditionality, and in fact I would put trusts in between that and equalization and territorial transfers where there's absolutely no conditionality; it's for general purposes.

There is some limited conditionality that enhances, yes, accountability through the public process and the interested parties involved. It's less than the directive on, say, some areas where you know you must achieve a specific objective. You have to choose areas where you have common priorities and where it's important. Frankly, it's not a zero-sum game. If you wish to attach conditionalities in some of these areas, you may not get the level of funding you might otherwise see from the federal government. That's a reality, so that's a trade-off government makes. Again, it's a continuum; it's not one-size-fits-all. They all do spur innovation. Again, we have to ensure the government is making informed choices on that area, and I can assure you we do.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson, and thank you, Mr. Wright.

Mr. Young, you have four minutes.

[Terence Young, Conservative, Oakville, ON]

Thank you, Chair.

My first question is for the AG, and then if anybody else can answer this question, I'd love to get some insight into it. It is with regard to greenhouse gases and accountability for the environment and environmental programs. I'm trying to understand—just to back up, when you watch the weather on TV at night, you see there's a cold front coming from the far north and there's warm air coming from the south, etc.—if there is any possible way that you know of to measure the effectiveness of environmental programs to reduce greenhouse gases, when we really only occupy half of one continent. The air of the whole planet moves around at all times, so is there ever going to be a way we can actually accurately measure the effectiveness of such programs?

[Sheila Fraser]

I wish the Commissioner of the Environment were sitting here, because I think he would say yes, that there are, and he would give you a very articulate response as to how that can be done. Unfortunately I can't, but I would certainly say government is claiming results from these programs. If government is saying they are going to spend x hundreds of millions of dollars or billions of dollars in environmental programs to reduce greenhouse gases, I am sure these very bright public servants have thought of ways of measuring it.

[Terence Young, Conservative, Oakville, ON]

Madam Fraser, the Canada social transfer funds are really important priorities for people in the provinces, for post-secondary education, social assistance, and children's programs, and my understanding is they all meet national standards. Could you comment on the standards involved, and what would happen if this model were used in, for example, the trusts?

[Sheila Fraser]

Again, in this study, it was simply a description of the different types. We didn't get into the fact of whether they had to meet standards or not. I don't believe there are conditions in that, but perhaps the deputy.... I don't believe they are required to meet standards. I think the only condition is in the health transfer, where there are sort of broad principles in the Canada Health Act.

[Barbara Anderson]

To answer that quickly, the conditions of the Canada health transfer are in the Canada Health Act. The Canada social transfer only has one condition, and that's for mobility, so that people cannot be denied social assistance because of their residency. But there are no standards in the legislation per se.

[Terence Young, Conservative, Oakville, ON]

Not for post-secondary education?

[Barbara Anderson]

Those are common standards and are done outside the transfer system itself.

[Terence Young, Conservative, Oakville, ON]

I have a question for Mr. Wright, please.

During difficult times, like the times we're in now, it's really important that the transfers aren't cut. We saw a time in 1997 when the government of the day, the Liberal government, cut transfers to the provinces by about $2 billion, which created a lot of difficulty for families and working people, etc. If budget 2009 is passed as it has been presented, what would you expect with regard to transfer payments?

[Rob Wright]

I think it is important, given the federal fiscal challenge over the medium term. The government has reassured provinces it will continue to grow the transfers quite substantially. The Canada health transfer, which is the largest, grows at 6% a year. The Canada social transfer will grow at 3% per year. The territorial finance is a little different. It will continue to grow. After having grown by 55%, equalization will grow in line with the overall growth of the economy.

I think it is a very strong story. I know that when we consulted pre-budget, Janice McKinnon, who was at one of our sessions—she was a minister of finance in the early 1990s—remarked on the fact. It was a deliberate decision to reassure the provincial governments. On their side, it would be clear that the Government of Canada has asked provincial governments to be full partners in the stimulus the country needs right now. They can make use of that funding for the similar types of partnerships we've put in play in the government's recent budget.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Wright.

Ms. Ratansi, four minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you.

I love your answer. In 1993 when the federal government took over, they inherited a $500 billion debt, a $43 billion deficit, and they left the Conservative government with $13 billion in surplus, strong fundamentals.

Just for the record, Mr. Chair, I would love to have been in that situation if I had been in government. However, my question comes back to the deputy minister, who stated that every five years you check to see the effectiveness of the transfer payment models. That's what I heard. Did I hear it right or was I wrong?

[Rob Wright]

It was five to seven years.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

No problem.