Evidence of meeting #14 for Public Accounts in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was year.
A video is available from Parliament.
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Thank you very much.
I plead guilty to speaking too quickly. I will try to slow down.
I'd like to go back to Finance to talk about the debt and the deficit, but before I do, I want to clarify one thing. The public accounts say, underneath figure 3, “All direct proceeds generated from the federal fuel charge are returned to the government of origin.”
Mr. Leswick, is that not correct, or what am I misunderstanding here?
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
I'm sorry. Can you just refer to the figure?
12:20 p.m.
Conservative
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
What page is that?
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
It's in the public accounts. I'm looking at page 4 of our clerks' report, but they've taken it from there. It's entitled “Sources of Federal Expenses, 2019-2020”. The note states, “Figure 3 presents the...federal government expenses in 2019–2020. They amounted to $373.5 billion.... All direct proceeds generated from the federal fuel charge are returned to the government of origin.”
If you can get back to us, that's fine.
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
You're referencing nothing in the public accounts; that's different.
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
It's taken from the public accounts, I believe, but perhaps I can email you and we'll get back to this. I don't want to waste your time.
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Go to page 16 of the public accounts, volume I. There is a shaded box at the bottom of that page that I think should help address the question.
12:20 p.m.
Conservative
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
It says, “The fuel charge proceeds [returned] $2.7 billion.... [T]he bulk of proceeds were returned through Climate Action Incentive payments. Eligible individuals residing in these provinces were able to claim the payments”. So—
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
It's the bulk, but not all, isn't that right? That's what I was trying to get at; some are paid to...other than that. I believe there is a leakage there, but perhaps we can talk about that some other time.
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Yes, there's a very small leakage, but the bulk is through the climate action incentive payments to households.
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
I'll go quickly here. The deficit was $39.4 billion. Even correcting for the small amount of the pandemic that had started in March, we had quite a large deficit. From my review of things, it's largely because of a drop in tax revenue due to a slowing of the economy.
Mr. Leswick, would you agree with that assessment?
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Thank you for the question. I can take the lead, and then Mr. Sabia can jump in if he wants to add.
The year-over-year change was roughly $25 billion. You're right: On the expense side, COVID-related expenses were in the range of $7 billion, directly related to the emergency response benefit. On the revenue side, however, there were two weeks in the year when there was a huge shock to revenue as the economy virtually shut down overnight. We estimate that even on the revenue side the shock was between $7 billion and $10 billion.
There was a lot going on on the revenue side. Mr. Lawrence, you're totally right: There was a slowing economy at the tail end of 2019; there was the COVID-related shock, as I said, which pretty much shut down the economy overnight; and then there were a number of government programs that really obscured revenue receipts, whereby the government provided tax deferrals on corporate taxes, personal income taxes and excise taxes.
Fundamentally, it was really hard to make sense of what was going on with tax receipt right at the tail end of the fiscal year and in the early part of the new fiscal year, just because you had so many interactions in play. We estimate, though, that the revenue shock alone was $7 billion to $10 billion.
Again, then, expense of $7 billion and revenue drop of $7 billion to $10 billion takes you to about $15 billion to $20 billion of COVID-related impacts upon the public accounts that you have in front of you.
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
However, even including the impact, which I grant you is difficult to calculate exactly, there was a trend of slowing revenues while expenses continued to grow. Is that fair?
12:20 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
We had slightly higher than expected expenses, and one was related to major transfer programs. We were talking about the Hibernia agreement, which was not forecasted at the time of the 2019 budget. Other expenses relate to a whole potpourri of things: litigation, higher pension service expenses. You're talking probably in the range of $5 billion to $7 billion on what is a pretty big revenue and expense base.
But yes, I agree....
12:20 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Just to clarify, prior to the pandemic, we were already on a course of decreasing revenues and increasing expenses.
12:25 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Remember, we had produced budget 2019, which is the reference in the public accounts, in March 2019. The government did provide a fall fiscal update in late 2019, where we had forecasted a deficit for the year of about $25 billion.
There was an uptick in expected deficit for the year between those two forecasting periods, yes.
12:25 p.m.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Would you agree, then, that a significant method of paying down the massive deficit that we will no doubt have from last year, and the over $1 trillion we owe in debt...that growth is one of the best ways to pay that debt off?
12:25 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Yes.
12:25 p.m.
Deputy Minister, Department of Finance
Well, Nick just said the key word: Our answer is “yes”.
If there were more time to elaborate, I'd be happy to elaborate on our thinking around that. However, yes, growth is fundamental to the well-being of Canadians, as you know, and it's fundamental to our ability to manage our debt over time.
12:25 p.m.
Conservative
The Chair Conservative Kelly Block
Thank you very much. I appreciate that answer.
Mr. Blois, you have six minutes.
January 26th, 2021 / 12:25 p.m.
Liberal
Kody Blois Liberal Kings—Hants, NS
Thank you, Madam Chair.
I will give the deputy minister a chance in a moment to explain a little bit about the growth strategy on the other side. I certainly welcome him to his new role.
My first question, either for him or perhaps Mr. Leswick, is about page eight of volume I. We talk about our government debt-to-GDP ratio, which, of course, was quite healthy in 2020. There are going to be challenges, we know, because of COVID. It talks about the IMF and combining provincial, territorial and local governments, and then also assessing the Canada pension plan and the Quebec pension plan, and the debt-to-GDP ratio stood at 25.9%.
I would like to try to get some clarification. Obviously, the federal debt-to-GDP of the national economy is about 31% in this updated statement. Provinces would also carry their own debt.
How are we duplicating...in the sense that there's only one Canadian economy? Would it not be higher than that? Can someone explain to me a little about why it's at 25.9%?
12:25 p.m.
Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance
Thank you for the question.
We do reconciliations, and I would ask members to look at page 34. I'll just pause one moment so folks can get to that page. Give me a thumbs-up when you're there. Perfect.
You see the representation of Canada's debt dynamics in an international context. You also see below the accounting framework, to be able to put G7 countries on a comparable basis to compare their respective debt loads. It's a complicated set of math here, but effectively what we're doing is—yes, you're right—putting all governments together, sovereign and sub-sovereign governments all together, to provide a total government perspective.
Then, there are also adjustments, such as...and you can see where we add the assets of the CPP and QPP. It's a necessary adjustment to put things on a comparable basis, because other sovereigns effectively take their CPP and QPP premiums and just put them against general revenues. In order to put it on a comparable basis, we add the assets of these plans into our debt. Likewise, we also bring in the consolidated debts of the provincial governments on top of that.
You can see there are opposing forces that lead to this kind of funky bottom line, which you referred to, where—