Evidence of meeting #31 for Public Accounts in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was year.
A video is available from Parliament.
4:45 p.m.
Liberal
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Conservative
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NDP
David Christopherson NDP Hamilton Centre, ON
Great. Thank you, Chair.
Just following up on Mr. Harvey's question, I have only a really short amount of time, but is there a quick answer to build on where Mr. Harvey was, as to how the public ended up being responsible for these billions of dollars in cleanup when I assume these started out as private interests?
4:45 p.m.
Comptroller General of Canada, Treasury Board Secretariat
In some cases, Mr. Chair, it did start off as private. When you're into health and safety issues, especially at the time these liabilities were created, there wasn't the governance that exists now, and if you have a health and safety issue and no one else is responsible, the government is often the ultimate risk holder.
Hopefully, the rules now are more effective than they were in the past.
4:45 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
That's something worth pursuing.
In the couple of minutes I have, can you tell me if any departments or agencies overspent their parliamentary appropriations?
4:45 p.m.
Comptroller General of Canada, Treasury Board Secretariat
Thank you for that question, Mr. Chair. There are none this year.
In volume 1, there's actually a note in the financial statements in which we state there are none. If there are any, we disclose those, just to make it easier on members in the future. If you are looking for that, it is in the financial statements.
4:50 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
Great. Thank you.
In terms of budget projections, for a long time now there have been accusations, regardless of the party in power, that the government of the day is always generating a forecast for a huge deficit, and then it ends up not being that and then they look like heroes. Then the political accusation is, “You did that on purpose. You set that number up so that you could come in here, x number of months later, and look like a hero”, and there have been repeated promises by governments coming and going that they're not going to do that any more.
One of the benefits of all of that is that the PBO now exists, and I see that the government is now prepared to honour its promise to make that officer an agent of Parliament. That's very good. Let's make sure that happens ASAP.
However, overall, how is the government doing now, partisanship aside, compared to historically, in terms of those projections? Are we starting to see less of a swing in that range, or do we still have an issue?
4:50 p.m.
Comptroller General of Canada, Treasury Board Secretariat
I'll start, and then I'll turn to my colleagues from the Department of Finance.
The first thing you'll see is departments lapsing. The Department of Finance knows that departments are going to lapse, so they build a lapse factor into their forecast.
I would say that historically, and my friends from the Department of Finance can correct me, government's been pretty good at projecting expenses. Revenue is often the more challenging piece. If you go back to when this discussion started, the reason was different every year.
If you look at where the expenses were different from projections in budget 2015, it was in areas like employment insurance. The economy was not as strong as originally forecast, and we had transfer payments to Alberta and Newfoundland that were related to fiscal stability. Again, those were for unforeseen things. I think that's explainable.
They may wish to comment on my statement about revenues versus expenses and which are tougher to project.
4:50 p.m.
Deputy Minister, Department of Finance
Thank you.
For the year that just ended, the projected deficit turned out to be $4.4 billion lower than originally estimated in the 2016 budget. That is $4.4 billion in the context of a total budget that includes $300 billion in revenues and $300 billion in expenses. The expense side was very close, almost spot-on.
This past year, the surprise was that revenues came in at $4.3 billion higher than we had projected in the 2016 budget.
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Deputy Minister, Department of Finance
It's much higher primarily due to much higher growth in personal income taxes, due to growth in dividend payments.
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Deputy Minister, Department of Finance
Well, we are not 100% certain, but it could be due to individuals deciding to take funds out of private corporations in anticipation of tax rates increasing in 2016, both in the provinces and at the federal level.
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NDP
David Christopherson NDP Hamilton Centre, ON
Is that an issue, Auditor General, that we should be looking at, or is that par for the course, in terms of what we are hearing here?
4:50 p.m.
Auditor General of Canada, Office of the Auditor General of Canada
I think individuals will always respond to tax announcements, and they will always do tax planning. If people were taking dividends out of their corporations at that time in anticipation of changes in tax rates, that's something you would expect would happen. I'm not sure there is anything there that's particularly of issue. The main thing is just to be aware that when there is an expectation of new tax measures, people will do their tax planning and make whatever adjustments they need in their tax planning to be able to put themselves in the best position.
4:50 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
Wouldn't you be able to project some of that? If you've done it enough times, and you've done certain things and know there is going to be a behaviour, isn't there some way that this can be taken into account and projected? It sounds as though they were totally surprised.
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Deputy Minister, Department of Finance
Indeed, we had projected a certain amount, more in the range of $1 billion to $1.5 billion.
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Deputy Minister, Department of Finance
Although the absolute amount was off by $3 billion, as a share of the base, and I don't have the exact base, it's—
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NDP
David Christopherson NDP Hamilton Centre, ON
To be fair, you missed the number by three times the amount.
4:50 p.m.
Conservative
The Chair Conservative Kevin Sorenson
Thanks very much, Mr. Christopherson.
We'll go back. Just on the tax planning, when you introduce a new, higher tax rate at 31% or 33%, whatever it's going to be.... As someone once said, if you know it's coming, you work to your own best advantage. In fact, we have one guy running for politics right now who says that if he doesn't pay any taxes, it just shows how smart he is.
4:55 p.m.
Liberal
Shaun Chen Liberal Scarborough North, ON
I want to start by thanking the witnesses for appearing before our committee today.
As l was reading through this report, and particularly the observations of the Auditor General, it really struck me how important it is for us to have reliable and accurate information, because as government and parliamentarians we require this information to gauge not only how well we, as a country, can meet our financial obligations, but also how we can sustain programs and fund new ones. It's critical that we have accurate data that we can use to make sound decisions, and particularly where there are estimates, it's important that they be reasonable, based on not only sound accounting practices but also on industry's best practices.
I note on page 2.43 in the Auditor General's observations that the government uses discount rates that are “on the higher end”. Even though they are within the “acceptable range” by public sector accounting standards, these rates nonetheless result in “a lower estimate for long-term liabilities”. Contrary to my NDP colleague's pondering of whether or not the government of the day has an overstated deficit, this very much goes against the notion of that, because the discount rate used to estimate the accrued benefit obligations of government-sponsored unfunded pensions is 3.9%, whereas the “benefits sponsored by the consolidated Crown corporations and other entities” have a wide range of discount rates that are used. As stated on page 2.28, these rates can be from 2% up to 3.8% for unfunded pension benefits.
My question to the Auditor General is with respect to the methodology that the government uses. How does it select the discount rates so differently from the other public institutions and the private sector? My second question is, what would the Auditor General recommend with respect to this issue?
