Well, a good guardrail that is widely used is a declining debt-to-GDP ratio with a specific target at a point in time.

The issue that we have — and we’ve raised it before — is that fiscal guardrails have evolved over time. It used to be debt servicing costs representing a low share of revenues. It has evolved to a declining debt-to-GDP ratio, which is not happening because it’s on the upward, so it’s increasing. Then, in the Fall Economic Statement, the government introduced three new measures — one of which is a deficit of 1% of the GDP or less.

What is a bit concerning when you have a fiscal anchor is changing it over time. Usually, an anchor is meant to be an anchor, so it’s something that guides your decisions over time. It’s not meant to change — otherwise it’s not an anchor.

[Translation]

Good evening, Mr. Giroux. The supplementary estimates call for an additional $10 billion for Indigenous affairs. Are these new measures that were impossible to include in the government’s main estimates? Is this new spending the result of new and unforeseeable events? In other words, is this a political strategy through accounting entries or a lack of foresight or vision?

It’s hard to answer that question. We’re dealing with two separate phenomena here. On the one hand, the government records a deficit amount for one year, which is intended to recognize its liability in the face of claims. For example, specific or global claims affect the deficit for the year in which the government determines that it has a 70% or greater risk of losing in court. There, we see the funds or money the government is asking for to pay the negotiated claims and settlements it has reached.

I don’t believe the numbers are being played with. It’s simply accrual accounting. There’s an impact on the deficit when the government acknowledges that it has a liability that it stands to lose, or a claim that’s been recognized in previous years. Once negotiations are complete, of the $10 billion, $5 billion is earmarked for a specific claim and $1.6 billion is for other claims. So there are a few details, but this settles claims that had been recognized in the deficit for previous years.

The problem is — I discussed this briefly with Ms. Giswold — we can’t pinpoint exactly which year this claim was included in the deficit or debt. Was it this year, last year or five years ago? We don’t have that information yet.

On another note, is the bad news about the cost of debt alarming? To what extent will government debt have an impact on future generations? People are saying that the interest rate may come down, but it’s still high for now and the cost of the debt isn’t the same.

I wouldn’t say it’s alarming if you look at it in a historical context. Debt service costs range from 10% to 11% of federal revenue right now. That’s far from low, but historically it’s much lower than it’s been in the past. When I finished university, costs were between 35% and 40%, which gave genuine cause for concern. However, if we look at right now or the years to come, we may spend more on interest than the federal government will transfer to the provinces and territories for health care. So this is a very, very significant expense item. Is it so big that it will choke public finances? No, but it’s obviously a weight we carry year after year that slows us down.

Are you worried about the state of public finances for taxpayers? Should taxpayers be worried? The government doesn’t have a penny and it spends the money taxpayers are giving it. Should they be concerned?

Worried? I’d say no. Can taxpayers wish the government would make different choices? They certainly can. You can ask 100 people and you’ll get 100 different answers about federal funds allocations, tax cuts and allocations in certain sectors or others. Am I worried about the sustainability of public finances? I’d have to say no. Would I personally make these choices? I won’t answer that question, because it’s not my role, but I recognize that some people have different preferences.

[English]

The last question is a very difficult one to answer.

I worked at the Department of Finance for years. I was in the social policy area, and it’s an issue that I wasn’t able to firmly grasp, because it’s very complex. However, I know that there’s a team of very dedicated lawyers and analysts at CIRNAC who could probably be in a very good position to explain to you the process they use. They might even have better suggestions than I could come up with as to how to improve the process.

As parliamentarians, I think the information that is lacking for you — and for me — is, as I was explaining before, a connection between this: We are settling this specific claim or comprehensive claim, but the liability was recognized in this budgetary exercise or that one. This is information that maybe exists, but I don’t have it.

Thank you for that.

Are there situations where the government has already set aside amounts? In terms of reconciliation, it strikes me that it’s beyond just anticipating what litigation is likely to happen; it’s about how we can avoid that litigation. Are you aware of any economic measures that are being taken?

When you were asked about the guardrail example, I just recently saw a boat that was anchored, but — because of a particular climate situation — it got thrown up on rocks. It strikes me that such an analogy or metaphor might apply in this case when we’re talking about Indigenous claims and lack of planning.

It’s not an area that I feel very comfortable commenting on because specific claims and comprehensive claims are very complex. They need to be looked at from a historical lens. I’m not a historian, and I don’t feel competent enough to answer that type of question, sadly.

Thank you, Mr. Giroux, Ms. Giswold and Ms. Vanderwees.

I have the impression that we have already discussed this same situation, which is the fact that we are increasing these budgets for these liabilities and the cost of core processes and compensation to Indigenous people. We seem not to have a grasp on how to predict.

Senator Smith and Senator Dagenais asked if we were in danger, and we are not in danger, but if we cannot predict anything, how can you be sure that we aren’t?

You said you compared it to the time when you started, which is when they were at that level. Because of what is happening these days with all the crises that we are living in, do you think there could be — I don’t want to say “a bubble,” but we don’t know. Is it possible?

It is possible. If interest rates were to continue to increase, then we’d be in a different situation. If they were to increase by 300 basis points or 3 percentage points, we would be in a very different situation.

When I say that I’m not overly concerned, it’s because I don’t think that’s a very likely scenario. It doesn’t mean it’s an impossible scenario, but not very likely.

With respect to the issue of specific claims and liabilities, it is a bit concerning that they have increased so much. It raises the question as to how firmly in control the government is with respect to these claims, if we keep discovering new claims, which are supposed to be based on historical facts. At a certain point, we should have a pretty good idea as to the extent of the government’s responsibilities toward Indigenous people. Things should have improved, and we should stop incurring these claims by correcting wrongs from the past. We should have a very good handle and a thorough knowledge on that.

I probably wasn’t very clear in my answer, or hadn’t thought it through well enough, but it’s a bit disconcerting to see these liabilities increasing so much when we’ve had so much time to figure them out.

I do remember that you strongly recommended that we bring the two ministers to explain the details, and we didn’t do that.

Chair, can we please invite the two ministers to hear more details on this ongoing process? We need to have an idea about how this will —

I’ve taken a note of it, and we’ll bring it over to the steering committee.

I think it’s important.

We will come back to the committee on that.

Mr. Giroux, thank you for joining us.

[English]

Budget 2023 announced a 15% or $500-million spending reduction in consulting, professional services and travel for the planned 2023-24 discretionary spending. We’ve already discussed how this would be done: by freezing $350 million in spending related to professional and special services, and $150 million in spending related to travel. Spending on professional and special services continues to increase despite the lapses — at the end of the year, the frozen amounts will lapse. Inclusive of Supplementary Estimates (B) for 2023-24, the total proposed authorities for professional and special services are at a record $21.6 billion.

Why do you think that, despite the $500-million spending freeze in consulting and travel, the planned spending in 2023-24 remains above previous years’ spending levels?

It is very surprising — when the government has clearly stated its intention to reduce the use of professional and special services — to see authorities having increased significantly. The process of granting authorities but freezing parts of them is a bit strange. I think it would have been more efficient to just not provide the authorities in the first place rather than bank on a lapse.

The government providing these authorities, which could be spent, when it wants to reduce spending in that area is unusual. Maybe the President of the Treasury Board has a better explanation.

What are the main subject matters on which the government uses consulting and professional services? Do you have that information?