Good morning, Mr. Chair, Mr. Deputy Chair and committee members.
Thank you for this opportunity to share with you information on Statistics Canada's pilot project on using financial transaction records to provide timely and quality data on our economy and society.
Before I begin my remarks, I would like to immediately dispel three major inaccuracies of the pilot project to enhance the statistical system using payments data. First, no data has been collected by Statistics Canada as it pertains to this pilot project. I repeat, nothing has been collected. Second, trust is the foundation of how Statistics Canada operates, and we will continue to earn the trust of Canadians. Third, I can assure you that this project will not proceed until we have addressed the privacy concerns of Canadians and the Privacy Commissioner has done his work.
As you may be aware, Statistics Canada, like many national statistical organizations around the world, is undertaking a comprehensive modernization effort. This modernization effort will redefine how we gather and deliver data by using leading-edge methods, by leveraging existing administrative sources, by excelling at our core competencies of data integration, e-collection and big data processing. Continuous evolution and innovation has made the agency a world leader in the field of statistics.
In all of this, of course, I want to underline that Statistics Canada respects the rightful privacy of Canadians and has always devoted itself to doing so. We understand and respect the concerns being expressed by Canadians about accessing their personal information.
The modernization of Statistics Canada began in earnest in the summer of 2017, when the vision for modernizing the organization was publicly announced. This was followed by a budget 2018 announcement of funding in the amount of $51.3 million to support Statistics Canada's modernization.
I want to stress that the issue in front of us today is not simply an academic one. Statistics have far-reaching implications for all Canadians. Diminished quality will have direct impacts on Canadians.
For example, estimates of household spending are used in part to drive the consumer price index. The CPI is in turn used to index pensions and old age security, directly impacting the income of seniors. It is also used to help establish wage rates and labour contracts, employment insurance and policies designed to address things like poverty. Provinces and territories also depend on quality data to apportion HST revenue that funds necessary public sector services such as health care and infrastructure.
The allocation of these funds is in large part determined by the level of household spending on taxable goods in each province and territory. The Bank of Canada uses our statistics to set interest rates and monitor inflation.
The methods by which Statistics Canada traditionally collects data from Canadians are falling short of what Canadians demand of us today. Home phones have been replaced by smart phones, taxis compete with ride-sharing apps and withdrawal and deposit slips that used to be filled out at banks have been replaced with online financial transactions.
The pace at which Canadians are adopting digital services has accelerated rapidly. Today we email money, and we get our food delivered through the use of an app. Eighty per cent of all financial transactions are done electronically, some 21 billion of them in 2016 alone.
As a matter of fact, following the global financial crisis in 2008-09, there has been an increased demand for more timely and detailed data to better understand how income, wealth and consumption are distributed in Canada, which segments are more vulnerable, and how resilient these groups are to changing economic conditions.
The Governor of the Bank of Canada, Stephen Poloz, said recently:
We know that cross-border supply chains have complicated the task of gathering accurate data on trade. Digital technologies are making it even easier to fragment production globally. And digital ordering, payments and service delivery are making it easier for transactions to occur that fall below customs reporting thresholds or are missed altogether.
In today's digital world, Canadians can order goods at any time from anywhere, so a simple question such as, “What did you spend on clothing?” becomes very complex to answer.
As household purchases become increasingly complex and the volume of transactions multiplies, the burden on citizens to explain, track and report these activities and transactions via surveys is becoming unsustainable.
Over the last year, we've been actively engaging Canadians about the type of data they need from Statistics Canada. We've consulted Canadians at 176 different sessions over the past year, and they told us there's an overwhelming need and demand for the work Statistics Canada undertakes. In fact, we recently completed a week-long national consultation in every corner of this country, with a full range of stakeholders.
Users of Statistics Canada were very clear. Canadians want more data from us, not less. They're seeking data at the city and neighbourhood levels. They expect Statistics Canada to be able to tell them whether single parents, senior citizens and low-income households in their cities have the necessary resources to meet their basic needs for shelter at a time of increasing interest rates. Businesses need better data on consumer spending patterns to grow and serve their customers.
While our traditional methods are becoming more challenging, fortunately the information we require to develop precise income and spending measures exists in administrative records.
In that context, I'd like to move on to the second part of my remarks, to briefly describe the pilot project and outline our discussions with the Canadian Bankers Association and financial institutions over the course of this last year. Let me be clear. This is a pilot. It was still under discussion. It has not been implemented yet and no data has been received by Statistics Canada.
Early in 2018, Statistics Canada initiated a pilot project to determine if the financial information held by financial institutions could be used to help address data quality concerns and data gaps. An important part of this work was to determine if the digital information captured by the payment system had statistical value, and if it could be used to address these emerging data gaps while protecting privacy and confidentiality.
Statistics Canada met and corresponded with the Canadian Bankers Association and financial institutions on multiple occasions—12 times since April 2018—to outline a high-level pilot project and determine the conditions under which the required data could be obtained.
Statistics Canada, the CBA and the financial institutions have been committed to a process that would protect the privacy of Canadians right from the onset.
The project is designed to follow rigorous methodological principles and privacy by design elements. Selected households would be assigned an anonymized statistical number developed by Statistics Canada. The bank would then be asked to go through its payment information and extract records from a statistical sample of selected dwellings or addresses.
The current design proposes that the institution create two files. One file contains the anonymized statistical number and the personal information, and a second file would contain the anonymized statistical number and the financial information without the personal information. The current design proposes that these two separate files would be transferred to Statistics Canada.
Statistics Canada would process the two files separately. Once the demographic information, such as type of household or age of the head of the household, is added, the personal information received from the banks would be deleted. We would take the second file containing the financial transaction data and code them to expenditure categories. We would then join the household demographic information with the coded financial transaction data using the anonymized statistical number I talked about.
Let me be clear. It would be impossible to associate the financial records and transactions with a given individual or household from this joined file. We have been clear on the need to be fully transparent with Canadians that information was to be provided to Statistics Canada, and we've explained the reason for doing so. We asked that the banks inform their customers that Statistics Canada was requesting this information in August of this year.
While the notion of data for 500,000 addresses may seem large, there are over 14 million households in Canada. The chance that a given address is selected as part of our sample is one in 28. The chance that the dwelling is used in the actual sample is one in 40. The long-form census by comparison has a one in four sample. We will rotate this sample from year to year so that a history of information for any one household is not possible.
The sophisticated design has been guided by the very helpful input of the Office of the Privacy Commissioner.
To put this in perspective, in 2016, as I said, the Canadian payment system processed over 21 billion transactions. Our pilot project sample proposes to access less than 2% of these transactions, each of which has been anonymized and stripped of any personal identifiers.
My third and final point is around the current status of the pilot, and next steps.
Mr. Chair, as I said at the outset, Statistics Canada takes the privacy of Canadians very seriously. We have a strong record and reputation on privacy and we understand the concerns of Canadians. Statistics Canada has worked hard to build the trust of Canadians for 100 years, as they provide us with some of their most personal information.
We have heard the concerns of the Canadian Bankers Association and the banks and the Office of the Privacy Commissioner as well as parliamentarians, Canadians and Quebeckers.
The result of the investigation of the complaints received by the Office of the Privacy Commissioner will further guide the design of this project. We continue to engage with the CBA and financial institutions, and their advice will further help strengthen the privacy protections of this project.
I can assure you that we will not proceed with this project until we have addressed the privacy concerns expressed by Canadians.
Thank you, Mr. Chair.