Yes, I can do that.

Do you have any comments in closing, for yourself, Professor Green?

I would just say that I appreciate the conversation. I appreciate how much everybody here is engaged in these questions that I think we all care about. I have great respect for basic income as an approach. I just think it’s not the most effective one. But I really appreciate the conversation and being included in it.

On behalf of the chair, it’s not December 23, but December 6, 2023.

Senators, we will move immediately to the next panel with the Office of the Parliamentary Budget Officer.

[Translation]

Today, we will begin our study on the expenditures set out in the Supplementary Estimates (B) for the fiscal year ending March 31, 2024, which was referred to this committee on November 21, 2023, by the Senate of Canada. We are very pleased to welcome you today, Mr. Giroux, as always. Thank you for joining us. Whenever we ask you to testify, you are always ready and available for the Standing Senate Committee on National Finance.

[English]

Mr. Giroux is accompanied by Jill Giswold, Senior Analyst; and Kaitlyn Vanderwees, Analyst. Welcome, and thank you very much for being here.

Mr. Giroux, your testimony and remarks always help us — on behalf of all Canadians — to focus on our four main objectives that we share in common, which are the transparency, accountability, reliability and predictability of budgets.

That said, the floor is yours. Your remarks will be followed by questions from senators.

Thank you, Mr. Chair. Honourable senators and committee members, thank you for inviting me to appear before you today; it’s always a pleasure.

We are delighted to be here to discuss a report on Supplementary Estimates (B) for 2023-24, which was released a little under a week ago on November 16. With me are Jill Giswold and Kaitlyn Vanderwees, two analysts who helped draft the report.

The 2023-24 Supplementary Estimates (B) call for $24.6 billion in additional spending.

Parliament must approve $20.7 billion of those expenditures. Statutory expenditures for which the government has already received parliamentary approval through other bills are expected to increase by $3.9 billion.

Nearly 50% of the proposed voted expenditures in these supplementary estimates involve the Indigenous affairs portfolio; a large portion of that amount is earmarked for negotiations and claims settlement.

With respect to the planned increase in statutory authorities, it can largely be attributed to a $2-billion supplement to the Canada Health Transfer, or CHT, which is earmarked for provinces and territories to help reduce backlogs and respond to immediate pressures, as announced by the government in June 2023.

[English]

Approximately 11%, or $2.8 billion, of the spending in these supplementary estimates is for 74 different measures of the 2023 budget. This brings a total of around $10 billion in proposed spending to date on Budget 2023 initiatives for the current fiscal year. Including these supplementary estimates, the proposed authorities since the beginning of the fiscal year — 2023-24 — reached a total of $480.5 billion. This represents an increase of $37.2 billion, or 8.4%, over the last fiscal year’s estimates.

To support parliamentarians in their review of the implementation of Budget 2023, we have prepared and published tracking tables that list all budget initiatives, planned spending amounts and corresponding legislative funding authority. These tables, which are available on our website, will be updated throughout the year as the government presents its legislative agenda.

That being said, we would be happy to answer any questions you might have about the estimates analysis or other studies produced by the Office of the Parliamentary Budget Officer.

Thank you, Mr. Giroux. Thank you, Ms. Giswold and Ms. Vanderwees, for being here today.

I’m using as a guide your report on Supplementary Estimates (B). On page 5, you’re talking about the government and how reluctant they are to bring the money into the budget measures — the estimates and the supplementary estimates. You’re saying that they’re doing it very slowly compared to last year.

I notice now that in the budget, they had forecasted a $40-billion deficit. That amount is staying firm.

I want you to confirm whether you can control the bottom line by slowing down the bringing in of the measures so that you actually hit the bottom line right on the nose. It’s my suspicious nature. I was a legislative auditor. I’m wondering if you could confirm whether my thinking has any merit to it, or if I’m out to lunch.

Thank you, Senator Marshall. You would be a great Deputy Minister of Finance, because I think that’s exactly what can happen if a government wants to hit its deficit target.

One way of doing it is to reduce the pace of the implementation of specific measures — that can reduce a bigger lapse, reducing the deficit that would otherwise have to be registered. That is a trend that we have seen recently, where the percentage of authorities that do lapse at the end of the fiscal year is increasing.

It’s traditionally been around 10%, but it’s increased to close to 24% in 2022-23. That’s for voted budgetary authorities.

I don’t know exactly what’s happening in the current case for Budget 2023 measures, but, generally speaking, a couple of things can happen: It could be that budget measures were developed but not fully developed, so there still needs to be work after the budget, which may slow down implementation. It could be that when the inclusion of measures in the budget was done, there were unforeseen events that subsequently delayed the implementation of budget measures. It could also be the decisions made by the executive that, in order to meet certain targets, there’s an implicit decision to take it easy on the pace of implementation.

I will ask a question on professional services. I was looking at your comments on the reduction. I know that the $500 million is not a significant amount of money. It’s split into $350 million for professional services and $150 million for travel.

When I looked at the actual numbers for the reduction of $350 million, I wasn’t really impressed. The government has taken the $20 billion that they had last year up to this point in time, and they gave the departments an extra $1 billion. Then, they said that out of that extra $1 billion, they’re going to ask the departments to save $350 million. So really, the departments have $750 million more than what they had this time last year.

I couldn’t find the numbers for the travel. It’s $150 million for the travel. I was talking to some of your people about how you go about finding that.

First of all, do you have any commentary on the $350-million reduction? Also, is there any way to see if they treated the $150-million reduction the same way — giving the departments more money and telling them to take their $150 million out of that extra money?

That’s an interesting question. If you look at voted authorities in 2016-17, it was about $103 billion. Last year — in 2022-23 — it was $225 billion. It has more than doubled over a span of seven years. The lapse rate has gone from 10% to 24%. It’s money that departments cannot spend. It went from $10 billion to $54 billion. Identifying $350 million or $500 million when departments have lapsed — without being forced — they’ve lapsed $38 billion in 2021-22, and $54 billion. It’s a statement of good intentions, but they are lapses that would have taken place anyway.

That’s right; it’s not inflicting any pain on the departments.

I would be hard pressed to find any pain on anyone at that rate. For example, CBC/Radio-Canada suffered a reduction of $127,000 out of a budget of $1.4 billion. It’s not something that is likely to be felt harshly. That is one example that comes to mind.

Thank you.

[Translation]

Mr. Giroux, welcome, and thank you for joining us on such short notice. We always appreciate it. I must take advantage of your presence here the day after the Fall Economic Statement was presented to ask you my first question on that subject. I will come back to the subject of our meeting, the Supplementary Estimates (B), when I ask my second question.

Were you surprised by the deficit figures yesterday? The economists were all expecting something on the order of $45 billion to $46 billion, which is the magnitude you had predicted; yet here we are with $40 billion. I’ve covered public finance for years, if not decades. Sometimes there are accounting entries or things that are somewhat unusual. Have you noticed anything out of the ordinary, or is it just that we’re working with different economic assumptions?

That’s an interesting point. The deficit for the current year surprised us. In the absence of new measures, we were expecting a deficit of around $46 billion, but the government is forecasting a deficit of $40 billion instead. This is due in part to a slower pace of spending. Spending is happening at a slightly slower pace, but revenue is also coming in a little better than expected. The combination of those two factors means that the deficit for the current year is lower.

On the other hand, what didn’t surprise us was an upward revision of the deficits for subsequent years. We’re talking about approximately $10 billion per year for each subsequent year. We were somewhat expecting that. However, the fact that deficits are rising before major measures are announced, such as a national pharmacare program or Bill C-22 to establish a Canada Disability Benefit, suggest that if those two measures go ahead, either deficits will rise further or taxes will have to be raised.

I was thinking about one thing in particular: I’m talking about the $5.2 billion reduction in expenditures attributable to accelerated recovery by the Canada Revenue Agency. That’s $5 billion more than forecast in the spring. Until your next meeting or release, I’d like to know more about the Canada Revenue Agency, which is suddenly going to collect $5 billion more than forecast five months ago.

My next question is about Supplementary Estimates (B). You can see that 40% of the proposed spending in Supplementary Estimates (B) is for the Crown-Indigenous Relations and Northern Affairs portfolio. That’s really quite significant.

However, in all the economic statements that we have looked at, this is the first time I’ve seen what last year’s deficit would have been if we hadn’t made all these investments. I’m not questioning the merits of this portfolio, but I read in the appendix that the deficit for 2022-23 would have been $9 billion rather than $35 billion. That’s quite considerable.

Is it a five-year time frame? Would we have a balanced budget if we did this exercise? Now they’re saying that the liability is about $76 billion for investments in truth and reconciliation. In your future analyses, could you shed some light on the impact of all this? I’m trying to see what’s recurring and what’s not. That would help us understand the underlying deficit.

When we saw the public accounts, we saw an additional provision for contingencies or lawsuits. I think we’re talking about an additional $20 billion, even though several tens of billions of dollars were identified as spending for contingencies and lawsuits in the previous public accounts. That came as a big surprise to us.

We made an inquiry with Crown-Indigenous Relations and Northern Affairs Canada and Indigenous Services Canada. We have received the information and are in the process of analyzing it. This will enable us to determine whether these are mainly new claims or an upward revision of existing claims. It may be a combination of both. We’re in the process of analyzing these issues and will be able to get back to you on the makeup of these claims, these liabilities.

Would this bring us closer to a balanced budget? This suggests that it would, but it depends on what the government would have done if it hadn’t set aside so much money to address Indigenous issues. With a return to balanced budgets, would the government have more willingly brought in programs that have yet to be introduced? We can’t know for sure.

Thank you for being here.

[English]

In your analysis, you found that, to date, total government spending is $37.2 billion more compared to this point in 2022. You highlighted that the supplementary estimates do not suggest there are any spending restraints by the government. In addition to that, the Fall Economic Statement includes an additional $20 billion in new spending. Canada’s debt servicing is at record levels.

Are you concerned the government is running out of room to manœuvre fiscally? In general, what are your concerns about the lack of fiscal restraint by the federal government given the economic environment we’re in today?

When we released our Fiscal Sustainability Report last summer, we indicated that there was still some fiscal room available at the federal level. However, with the debt servicing costs that are increasing and with the remaining commitments that have not yet been implemented or factored into the fiscal framework, that severely diminishes the fiscal flexibility available for the government to withstand another economic shock.

It’s not a worrying factor yet, but it depends on what the government will do, if anything, with respect to Bill C-22, or the Canada Disability Benefit, as well as national pharmacare, investments or spending on national defence or any other spending areas that the government may wish to target, especially in light of the debt servicing costs that have risen sharply over the last few years.