Public Accounts Committee on Nov. 20th, 2013

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Thank you, Mr. Chair.

I certainly appreciate the opportunity to ask a few more questions. Something is still on my mind. My colleague Mr. Carmichael raised a really interesting point. We're seeing an increase in personal income tax revenue; we're seeing an increase on the corporate side. I do know there's some loss of revenue with crown corporations offshore, but those are up higher. We've seen over the past several years, since 2006, a number of tax reductions both on the personal income side as well as the corporate side.

Mr. Robidoux, could you explain how you can have that, where you have increased taxes while you have decreased tax rates? Could you explain how that would work?

[Benoît Robidoux]

There are two factors. First, the reduction in tax rate has a cost to it, but again when the economy is growing, these costs will be more than offset by the growing economy. That's why you end up with still higher revenue despite the fact you reduced the taxation rate. It all depends on how much you reduce the taxation rate, but for the tax reduction we had, it was enough to be more than offset by a growing economy.

Now there's the other issue that it's very difficult to estimate, to get something very precise about it, but there's also this issue and this view among economists that when you reduce tax rates it leads people to work more if you reduce the tax on working, it leads businesses to invest more if you reduce tax on investment, and so on. There's the feedback normally into the economy over time when you reduce tax rates. You incent people to save more, invest more, or work more. There's potentially some of these second-round effects in these results. Some economists like to think that these things are there.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

I appreciate hearing that, Mr. Chair.

Now, I'm going to go to page 1.3, the fourth paragraph down. Basically, it talks about the economic recovery, because we're talking about a stronger recovery. This economic recovery has underpinned a strong rebound in Canada's labour market, with over one million more Canadians working now than July 2009 when the recovery began, an increase of 6.1%. Canada has outperformed all the other G-7 economies in economic growth since the start of the global recession and it's recorded the strongest growth in job creation over the recovery.

In your opinion, sir, what are some of the factors that would have led to this, I would say, to at least a foundation for more economic growth, bearing in mind, obviously, our economies are so integrated?

[Benoît Robidoux]

Mr. Chair, we believe, and this is what we have said in our document, that the strong fundamentals in Canada, whether economic, financial, or in the fiscal foundation, have led to a better performance during the global slowdown and in the recovery than is the case with some other economies. This is also reflected in better employment performance than elsewhere and in more creation of jobs by Canadian businesses.

Clearly, the strength of the Canadian economy through that period was not driven by a strong global economy. We did suffer on the export side particularly in that year, so that was not the source of all this job creation. As I said before, it's the domestic economy; we believe that the strong fundamentals we had entering the crisis and after the crisis helped a lot to support that creation of wealth and jobs.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

That's perfect. I think this goes back to Mr. Hayes' comment on needing to open up more markets and to your comments on the potential in Asia.

Now, you mentioned the strong economy and the fundamentals we have. That makes me look at how we're going to deal with some of the changing demographics. If you have a strong economy, you can afford to look after people through different programs and services.

Page 1.7 talks about major transfers to persons. Particularly, I want to go to elderly benefits, because I'm from a riding in which the demographics, Mr. Chair, are such that we have a lot of seniors in my riding. This set of public accounts shows that these benefits have gone up 5.8%.

Can you explain some of the other personal transfers that were increased and how important they would be to a Canadian family?

[Benoît Robidoux]

Well, elderly benefits were one. Clearly, these are indexed to consumer price inflation, and because of the aging of baby boomers there are obviously many more every year who pass the age of 65 and receive these payments thereafter. This was one factor that led to that growth of 5.8%. In our predictions, we expect this kind of 5% to 6% to be sustained for a number of years.

As to other transfers, employment insurance benefits have been falling through the years. These are transfers to employees, again reflecting fewer unemployed, to a large extent. Children's benefits are again indexed to CPI; these have been growing too. And the federal transfers to provinces for health and for the social transfer—the first one at 6%, the second at 3%—are a strong source of growth for provinces in their revenues, obviously.

I guess I will stop there.

[The Chair, NDP, David Christopherson]

That's very good and very helpful. Thank you so much.

Time has expired, so we will move over to Monsieur Giguère.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you.

In table 1.1 on page 1.18, under the heading Loans, Investments and Advances, it is evident that, over the past 10 years, the amounts have literally skyrocketed, going from $14.594 billion to $133.348 billion. The details of that amount appear in table 9.2 on page 9.4. It shows $133.347 billion and change. Perhaps the most interesting thing, which appears only in tiny print, is the footnote that says “These loans are recorded at cost.”

The Public Accounts do not list the fair market value of those investments anywhere. Does that mean, then, that, if those investments were to go down in value and the amounts listed were to lose a portion of their assets, the budget surplus announced for 2015 could end up being a $20-billion deficit, for instance?

Basically, what I am saying is that the $133 billion represents where things stand. But if we had a detailed list, we might learn that the fair market value of the total amount is less than the $133 billion indicated.

I think it would be more appropriate for the Department of Finance officials to answer that question.

[Benoît Robidoux]

You are asking excellent questions, Mr. Giguère, but again, I'm not sure I'm looking at the right line in the right table. Would you mind slowing down a bit and telling us whether you are actually referring to table 1.2?

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Fine.

In table 1.2, under the heading Loans, Investments and Advances, the amount listed for Enterprise Crown corporations and other government business enterprises is $133.347 billion. The details of that amount appear in the table on page 9.4. The amount showing in the March 31, 2013 column, at the bottom right-hand corner of the table, is $133 billion. Back in 2004, that amount was $14 billion. And today, it's $133 billion, so 10 times what it was.

Just below table 9.2, you added an important note that reads “These loans are recorded at cost.” It refers to a list or inventory, but I can't find the details of that inventory or its fair market value anywhere in the three volumes. That means that, when it comes time to do something with that $133 billion, the actual value may be less.

Isn't it right that such a lesser value would immediately be reflected in the deficit?

[Benoît Robidoux]

To the best of my knowledge, that is true. If each and every year, there's a change of some sort, a sale or outflow of those assets, the difference between the fair market value and the cost value should indeed be taken into account.

A check would be necessary to determine whether it would directly affect the debt, the accumulated deficit, or whether it would be considered an expenditure. Regardless, you are right.

That's true for every year. It's also possible for some of those assets to have a higher market value than the original book value. That's generally what happens. Most of those assets go up in value.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes, but the problem is that, beginning in 2008, with the recession, this budget really skyrocketed. It involved tainted commercial paper. You say they go up in value, but that surprises me. Whatever the case, the problem remains.

Nowhere in the three volumes did I find a detailed list or inventory of the fair market value that $133 billion represents. If it's in there, please tell me where.

[Benoît Robidoux]

I am sure it doesn't appear in the Public Accounts. We're talking about crown corporations with their own bookkeeping practices. It should actually be done at the market price.

We'll make sure to follow up with you. We'll try to determine whether we can find the market value of those assets. I think it will be possible for certain crown corporations whose bookkeeping reflects the market price. So we'll be able to find the market value if the information exists.

We'll follow up with you on that.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

So a correction will be made, and you will add a list of—

[Benoît Robidoux]

Nothing will be corrected. We'll determine whether the information is available in other documents. This is in line with the standards in place for recording—

[The Chair, NDP, David Christopherson]

I'm sorry; we have to end it there.

That also ends our time, colleagues. On your behalf, I will thank our witnesses today. Thank you very much for the fulsomeness of your answers.

Might I also say, on behalf of public accounts, which is the one committee that tries—we don't always succeed, but we try—to be as non-partisan as possible when the moment calls for it, that this is one of those moments. You have heard representatives from all three caucuses express to you how proud they are of the documents and of the fact that we have what is called our 15th year of unmodified audit opinion. In street lingo, it's a clean audit.

The government of the day gets bragging rights for it; that's fair enough. But we all understand that more than one party has been in government during the 15 years, and we all understand that this kind of work is the result of the professionalism of our public service. We are sincere in acknowledging to you the pride that we have that this document is here unmodified; that it's a clean audit 15 times in a row. That makes Canada look good. We feel good about that.

Thank you. Please pass on to everyone who had anything to do with this our appreciation for their professionalism. We are lucky to have the public servants that we have.

With that, you are now excused.

Colleagues, this meeting stands adjourned.