Public Accounts Committee on May 3rd, 2022

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much, Mr. Chair, and thank you to the witnesses.

I'm going to start with the Department of Finance. Looking through the public accounts, it states that the government received over $4.3 billion in revenue from the carbon tax. I'm wondering if you can once again confirm if it's revenue-neutral or not.

[Michael Sabia]

Mr. Chair, as I think is well known, according to an act of Parliament those payments have to be in balance and they have to be revenue-neutral.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Okay.

I'm just wondering, based on the figures here, how much of that $4.3 billion—or maybe it was above and beyond—did the GST that was collected on the carbon pricing account for?

[Michael Sabia]

I don't have that number. We'll have to get back to you on that.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Do you have any idea, though? Is it more than that or would it be included within that number? It's kind of bizarre that it's not in here. It's a common question that we all get: why is it applied on top and how much is it worth? Nobody seems to know the answer to it.

If you can get that number and table it with the committee, that would be very helpful. Do you have any inclination as to whether it's within that number or above and beyond it?

[Michael Sabia]

It would be over and above.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

It would be over and above. Thank you very much.

I do have a bit more of a regionalized issue. There are two of them, really, but there's one in particular when you look at the overall phase-out not just of coal but also of fossil fuels in general and the impact it's going to have on the government's bottom line.

I'm just wondering, as we go forward, what the projections for revenues are going to be like, given that one of the main drawers of income for the government is going to be systematically eliminated.

[Michael Sabia]

I'm sorry, Mr. Chair. I'm not sure I understand the question. I'm not trying to stall you here, I'm just trying—

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

No, that's fair. There's money brought in as revenue from the energy sector, from the oil and gas industry. That revenue will not be replaced with revenue from alternative energy sources. What impact is this decision going to have on the financials of the country going forward when you look at the projections?

[Michael Sabia]

Mr. Chair, I think the member is talking about a period of time that is beyond the period of time for which we would make projections. I'll back up and provide the following answer.

Obviously, we're living in a period right now, with energy prices being what they are, when those inflows of revenues are substantially increasing our revenues and also the revenues of a number of provinces. Over time, as the world evolves towards a net-zero world—and obviously that's a world headed toward 2050 and there's a substantial period of time between now and then—as you say, what are we doing about revenues? My answer to that is that over time, as fossil fuels wind down, one of the challenges Canada will have is to develop alternative engines of growth.

I'll give you some numbers. Fossil fuels used to be about 34% of business investment in Canada. Recently, they've been about 10% or 11%. That has to be replaced by the building of new engines of growth, and from those engines of growth there will be revenues.

We don't regard the trend toward net zero as something that is necessarily a threat to the revenue stability of the federal government. The challenge is building the alternatives that will drive growth and prosperity in Canada as we do evolve to a net-zero economy.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you for that.

In my last minute here, more locally, my riding and the riding next door to me in Saskatchewan are going to be two of the ridings hardest hit by the phase-out of coal. I understand that it's both provincial and federal. There is a line item, not so much in the public accounts but in budgets, that's been talked about a lot, and that's the coal transition fund. I'm hearing from the municipalities that will be affected that there's nothing coming their way.

I'm just wondering if you have any comments or if there is anything you're aware of that will be done to support those communities that are hard hit by that. Why is there not a line item in the public accounts for that?

[Michael Sabia]

There's no line item in the public accounts because what the member is pointing to is something that is prospective and in the future as opposed to retrospective. The public accounts, by their nature, are retrospective. However, there certainly is a substantial amount of work under way within the government, which was actually referenced in the recently tabled budget with respect to the work in particular that the Minister of Natural Resources, along with some of his colleagues, is going to be doing around that issue.

[The Chair, Conservative, John Williamson]

Thank you. I'm going to have to cut it right there. I appreciate that was a pretty good answer, and we can come back to that in our fourth round.

Finishing up this round though, I have Ms. Shanahan.

You have the floor for five minutes, please.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much, Chair.

Thank you very much, Mr. Sabia, for those interesting reflections.

I just want to clarify something. The intent of our pollution pricing system is to be revenue-neutral. Do the public accounts show that the revenues from carbon pricing were returned to their jurisdiction of origin?

[Michael Sabia]

There are two answers.

By and large, yes, they do. There are some timing differences in how things are reported and how they are reflected in the public accounts. The public accounts treat this issue.... The accounting structure is that it's based on the period in which revenues are received and expenses are incurred, so when they are assessed or when they are disbursed. Because of that, that does lead to, as I say, some timing differences. Those timing differences will resolve themselves over time. For the year 2022-23, they should disappear given that we will be providing climate action incentive payments on a quarterly basis, which will resolve some of these timing differences.

The second thing is that will over time resolve itself and, I think, in the very near term. As you know, the vast bulk of those payments are made and that gets you very close to the issue of revenue-neutral. There are some payments to be made to small and medium businesses, to farmers and to indigenous Canadians. They are in the works. They need to be done. As those payments are made and we resolve these timing differences, then members of Parliament will see that this is operating on a purely revenue-neutral basis.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you for that answer. Timing is everything, as they say.

I want to move toward the question of interest rates. I think there's more than one of us here who remembers when interest rates were 10%, 12%, 14%, 16%. The OAG has stated that the total unmatured debt on the government's statement of financial position rose from approximately $784 billion to $1.125 trillion in the 2020-21 fiscal year. The public debt charges related to unmatured debt decreased for the reasons that you mentioned earlier because of the low cost of borrowing.

What are the department's projections for the coming years with regard to public debt charges related to unmatured debt?

[Michael Sabia]

You can see those laid out, not in the public accounts, but in the recently tabled budget, actually in annex 1 on page 226. It lays out all of that.

By way of short summary, we do see interest rates are expected to go up. As you know, the projections that we use in the budget are based on a survey of private sector economists and those private sector economists do assume that rates are going to go up. You will also see in the budget that we have stress-tested that for moderately better circumstances or moderately worse circumstances where we see incremental increases in interest rates. We've also laid out in the budget what the fiscal consequences of that would be.

I would say that even in those stress cases where circumstances are leading to higher and more rapid increases in interest rates, the country continues to be in a very strong and favourable position with respect to the overall percentage of expenses that are allocated to the public debt charges. We continue to be in a strong position.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you.

Chair, how much time do I have?

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you.

I'd like to switch gears here and ask about cybersecurity, so this question is for Mr. Huppé with the Treasury Board.

In the commentary from the OAG, the OAG notes that five organizations were subject to a cyber-attack in 2021. Which organizations were targeted? What personal information was stolen? What measures had been put in place to prevent cyber-attacks?

[Roch Huppé]

Actually, the Auditor General did that audit, so they're probably in a better position to divulge or not the organizations they've been to and what kinds of observations they made.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Very good.

Go ahead, Ms. Hogan.

[Karen Hogan]

We didn't list the names of the organizations in order to not further expose them to any risks or vulnerabilities, but two of them have been very public in the media: the Canada Revenue Agency and Employment and Social Development Canada. The knowledge about what personal information might have been compromised is already out in the public domain in those two instances.

In all of these cases, we outlined, in our commentary, how they had an impact on lost information or on systems being shut down, but these were all things that were overcome by the cyber-policies and cyber-response of the entities. They did have an impact on our audit, so it is about maintaining that cyber-awareness and being vigilant across the entire federal public service. That's important to remember here.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much. We are out of time.

For our fourth and final round, I'll turn to Mr. Lawrence.

You have the floor for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

I want to pick up my colleagues' lines of questioning. The first is with respect to the climate action incentive payments and the supposed neutrality of the carbon tax.

William Shakespeare wrote that “a rose by any other name would smell as sweet.” When we look on page 18, we see that the 2020 proceed used for federal programming, as of March 31, 2021, was $98 million. I think supporting federal programming can be translated into spending, and $98 million represents more than tiny to me.

Could the Department of Finance please comment on that?