Transport Committee on April 16th, 2018

[Jason Jacques]

To the crux of your question, with respect to whether there's a plan in place or whether you need to have a plan, I think, if we look at any other federal government program, there's absolutely an internal requirement consistent with government policies to actually have a plan in place for the spending of any significant sums of money.

As well, and this is something that we focused on in the past, in addition to having a plan with respect to the spending of the money, it also actually needs to be linked to results. That's something, going back to budget 2016, that the government focused on. The idea is that it is a considerable sum of money, which they indicated would be clearly linked to results both in the short term around economic stimulus and in the long term around other productivity benefits and social benefits across the economy.

From our perspective, up to this point we have focused on the potentially boring aspect of how much was budgeted and, in comparison to what was budgeted, how much is actually being spent and then potentially getting at the questions around why there is a gap or a delta between the two.

Another really good question the committee could look at, again looking at the experience of other jurisdictions, is the issue of what a 10-year or a 12-year plan actually looks like and what the data look like around the anticipated results that are actually going to be achieved by the government.

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

On March 19, your office asked the Canada Infrastructure Bank to provide a list of federal infrastructure projects by March 31, 2018. According to budget 2018, those projects totalled $149 million for the 2017-18 fiscal year.

We checked your website just before the committee meeting, and it seems that you haven't received a response. How do you explain the Canada Infrastructure Bank's silence?

[Jason Jacques]

We followed up with the infrastructure bank earlier today, and we're still waiting for an explanation from it on the delay in responding to us. I can commit to the committee that, once we do have an explanation on the delay in the response, we can certainly provide an update to the committee.

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

We really appreciate receiving this information.

The purpose of the Liberal promise to invest heavily in infrastructure was to stimulate the economy. However, as you said earlier, your analysis revealed that the GDP has increased by only 0.1%, which is very little. What is the explanation for the fact that the money that has already been invested in infrastructure hasn't stimulated the economy more?

[Chris Matier, Senior Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer]

The main reason those impacts are so much lower than initially presented in budget 2016 is simply that less than half of that money—it looks like—actually appeared in the time frame that it was planned for, so in 2016–17 and in 2017–18.

Another reason is that, at the time of budget 2016, the economy was operating well below its capacity, and at the time interest rates were lower and, therefore, if the planned amount of money had been spent, those impacts would have been larger and would have been in line both with estimates that Finance Canada presented in budget 2016 and with our estimates that we had at that time too.

So the situation changed economically, and also the funds that were spent were less than expected.

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

Okay.

The government was committed to giving more information to the parliamentary budget officer. What specific measures should the government take to ensure better communication of data to the parliamentary budget officer?

[Jason Jacques]

Very recently we have had an opportunity to have several additional meetings and conversations with the office of Infrastructure Canada. We have received an undertaking and a commitment from the Minister of Infrastructure that they will be furnishing us with more comprehensive information in a more timely way.

[Brigitte Sansoucy, NDP, Saint-Hyacinthe—Bagot, QC]

It has committed—

[The Chair, Liberal, Judy Sgro]

I'm afraid your time is up, Madame Sansoucy.

Go ahead, Mr. Hardie.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Thank you, Madam Chair.

How often does the PBO look into, say, an infrastructure program and do the kind of analysis that you've done?

[Jason Jacques]

This is the second time over the past two years, and for us it ends up being very much a function of the interest of the committee and of parliamentarians, as well as the extent to which, from our own fiscal forecasting perspective and our own view of the Canadian economy, the context has changed.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

I see.

When you undertook this study, what question were you trying to answer?

[Jason Jacques]

It was one that came to us squarely from your counterparts in the Senate at the national finance committee. Their question was about the impact on the federal fiscal plan of federal infrastructure investment from phase one, both in the current term and over the medium term—so over the next five years or so—as well as the overall impact on the Canadian economy, taking into account the potential related effects or additional contributions made by provincial and municipal governments.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

This may be an unfair question, but I'll ask it. Do you think the Senate really understood enough about how infrastructure programs actually work? A federal government can make an announcement of x number of dollars, but then that money will be looking for projects to fund. That transaction takes place between, say, a municipality and a provincial government, so they have to come to a landing on what their priorities are. I used to work in the provincial/municipal realm, so I've had some experience with this. That has to take a little while. Then you have to have bilateral agreements wherein everybody agrees what their share is going to be—and you've seen, of course, that the share balance has shifted a little more in favour of the provinces and the municipalities here.

For the Senate to be asking this question two years into a mandate, were they asking too soon?

[Jason Jacques]

For our purposes, it's not for me to opine upon what the Senate or members should or shouldn't be asking. What I will say is that we do have a standing request from the House of Commons finance committee. Every six months, on request by that committee, from 2011 we have been expected to produce an economic and fiscal outlook. As part of that, a key input is public sector infrastructure investment.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Why do you cast a delay in spending as a risk?

[Jason Jacques]

As we indicated in the note, the delay in spending ends up being a risk with respect to the government's forecasts, both on the fiscal side and on the economic growth side.

As well, something new that we pointed out in this note in more detail and from a more technical perspective is the idea that it matters when you spend the money. From an economic stimulus perspective, when you spend the money and also the amount of slack in the economy will directly determine or have a direct influence on the amount of stimulus affecting growth and affecting the economy.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

It could be just as easily an opportunity and not a risk, depending on what happens when the money is spent, correct?

[Jason Jacques]

It could be.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Okay.

[Jason Jacques]

Again, “risk” is a term we use with respect to our or anyone's forecast being slightly higher or slightly lower.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Ah. So the risk is in the forecast, and in the stars, perhaps.

Given that a lot of what the federal government money is used for depends greatly on what municipalities and provincial governments want to do with it, how granular would you like to see a federal government plan? I mean, your report has surfaced complaints and criticisms that the federal government plan isn't robust enough. Well, how granular would you like to see that federal government plan, given that so much depends on the funding partners that we work with?

[Jason Jacques]

I think it's not up to the parliamentary budget office to opine about. It's not up to us to opine upon the granularity of the plan. It's obviously up to parliamentarians to decide whether they're comfortable with the plan that's being brought forward.

Certainly, to go to back to a point you raised earlier, when you're looking at $186 billion being spent over 12 years with the dual objectives of economic stimulus and productivity improvements, and recognizing that those productivity improvements are directly linked to the nature of infrastructure investments that are being made—for example, a hockey rink potentially doesn't provide the same type of productivity benefit as a new border crossing does—it would behoove the government to provide to parliamentarians more of a comprehensive plan around that for their decision-making.

It's certainly not up to us to opine upon that. It's up to parliamentarians to decide what the adequate level of decision support information is that should be provided before they appropriate the money.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

The issue of lapsed funding is one that every government deals with. In this case, though, it's my understanding that this funding won't lapse. It's committed. It's there. In a particular cycle, unspent money would go to the gas tax fund. In that scenario, what's your assessment, then, of the utility of that particular strategy of putting the money into the gas tax fund?

[Jason Jacques]

The PBO did publish a report with respect to the precedents of lapses and the nature of lapses in the past. Again, for us, the focus isn't necessarily on whether lapses are good or bad or the instrument choice; it becomes a question simply around timing. Something we've pointed out in the past is that, again, the timing of when the money flows ends up being important. In terms of the stimulus effects, when you spend the money will have an impact.

As well, with respect to the lapsing of the funds, the point you've made is one that we've made in the past. It's not necessarily a good or a bad thing. It's simply that what was originally budgeted—and what Parliament originally appropriated—has not come to pass. There might be good reasons for that and there might be bad reasons, but a lapse in and of itself is not an indication of anything untoward.