OGGO Committee Meeting

     Good morning, everyone.

    Welcome to meeting number 29 of the House of Commons Standing Committee on Government Operations and Estimates, of course, widely known as the mighty OGGO, the only committee that matters.

    Welcome, Mr. Jacques, and welcome to your team.

    We have you here today for the supplementary estimates (C) and other recent reports.

    Do you have an opening statement for us, sir?

    I do, Mr. Chair.

     Colleagues, just briefly, after about an hour and a half, we'll suspend for a few minutes to set up for the OECD, and then we'll have probably five or six interventions for about 35 minutes with them.

    I'm sorry, Mr. Jacques. The floor is yours. Go ahead, please.

     Mr. Chair and distinguished members, thank you for the invitation to appear today.

    Earlier this week, we published a report on the supplementary estimates (C). These supplementary estimates outline $4 billion in new budgetary spending. Voted authorities, which require approval by Parliament, total $5.4 billion. Statutory authorities, which the government already has Parliament's approval to spend, are forecast to decrease by a total of $1.4 billion, mostly driven by a decrease in planned spending on elderly benefits.

    Including these supplementary estimates, the total proposed year-to-date budgetary authorities are $510 billion, which represents a $24-billion increase compared to the estimates to date last year. Major areas of planned spending include defence and the Canada Post Corporation. Roughly 12%, or close to $500 million, relates to 13 budget 2025 measures.

    Of note, as well as our report on supplementary estimates (C), was the first ever OECD review of Canada's parliamentary budget office, which was also published earlier this week. As noted in previous committee testimony, I commissioned the OECD to undertake this review on my very first day of appointment as interim PBO, in September of last year. It seems like so long ago. After almost 20 years, I thought that an external evaluation of the office was long overdue.

     In November, the Organisation for Economic Co-operation and Development, or OECD, review team met with parliamentarians, government officials, former parliamentary budget officers and other stakeholders as part of their study.

     As I have mentioned to some of you, when I asked the OECD to review the Office of the Parliamentary Budget Officer, I specifically requested that they provide a road map to sustain our institution as one of the best among OECD countries. I am pleased to say that they have done all that and more. Their recommendations lay out a clear path to safeguard the office's independence and sustain its top performance. We have already started to implement many of the OECD's recommendations. I look forward to continuing this work with whomever the Prime Minister nominates to be Canada's next Parliamentary Budget Officer.

    In closing, I would like to say that our office remains determined to provide Parliament with credible, timely and non-partisan analysis to support your work.

    We would be pleased to answer your questions.

     Thank you, Mr. Jacques.

    Before we start, I want to congratulate you and your predecessor, Mr. Giroux, as well as the rest of your team, for being identified by the OECD as the top in class among PBO-like peers for the entire OECD. Congratulations again to you and Mr. Giroux.

    Madame Block, you're up first, for six minutes, please.

     Thank you, Chair. While you stole my thunder, I will also go ahead and congratulate the PBO on being ranked number one in the world by the OECD. We recognize that this is the result of the PBO doing many things right.

    Having said that, there are recommendations in their report. We would expect this, because there is always room for improvement. They suggest that these would further cement your position as an international leader in fiscal oversight.

    One of the recommendations the OECD included was that there be a way to have parliamentary involvement in interim appointments. This could be “requiring secondary approval by a committee”.

    What a novel idea. In November, I put forward a motion, which was passed by this committee, that sought to do this very thing: have possible candidates for the PBO position interviewed by the OGGO subcommittee. In response to that motion, a spokesperson from the PMO said that they didn't feel bound by the direction from the committee. They offered, in their refusal to include us, that the Privy Council protects the confidentiality of applicants. We know parliamentarians often deal with very confidential information. We hold in camera meetings to do just that.

    I guess what I'm wondering is whether you would be willing to speak to this recommendation and any others that require action from parliamentarians.

     Certainly. Thank you for the question.

    Broadly speaking, of the five key recommendations identified by the OECD, I would say that two squarely fall in the lap of parliamentarians. Those relate to legislative amendments that the OECD recommends based upon their consultations with virtually all stakeholders, including the government. It represents a plurality of views. This is not exclusively an OECD perspective. It's important to understand that they heard this from many stakeholders.

    Also, as part of the review process around this report, it was circulated among many external reviewers and other jurisdictions, including the Committee of Senior Budget Officials, of which Canada's Department of Finance is a part. It's a recommendation that was not uniquely sent to us by the good folks in Paris.

    Regarding legislative amendments, again, the legislation is what the legislation is. Parliament has decided to provide the Prime Minister and the government with discretion around the interim appointment—more discretion than currently exists for the nominated permanent PBO. Should Parliament decide to change that, it would certainly be beneficial on the appointment side. That is something I believe I mentioned on September 15 as part of my first committee testimony here at the government operations committee.

    First and foremost, it would be beneficial with respect to the operating stability of the institution. When Mr. Giroux's term came to an end, he received a phone call on his final day indicating that he was not being renewed. About 24 hours before that, I received a request to step in. It's not a good way to manage the office, as a whole.

    More importantly, any shortcomings or additional challenges on our end result in lower-quality services for parliamentarians. As the Prime Minister and the government have pointed out on numerous occasions, budget 2025 is potentially the most important budget in a generation. Over the coming weeks, we're looking at, potentially, the most important aspect of the parliamentary financial cycle. The main estimates came down this morning, with departmental plans in the next two weeks. Shortly after that, we're looking at a spring update. All of this involves cuts of $60 billion, layoffs in 40,000 FTEs and substantial investments on the defence side.

    Parliamentarians need that support. We're certainly well placed to provide it. Providing additional stability to the parliamentary budget office, which serves parliamentarians, puts parliamentarians further ahead, overall.

    Thank you very much.

    With my one minute left, I would simply state that it's one thing to provide further discretion when it comes to appointing a budget officer on an interim basis, but even appointing someone on an interim basis is not a best practice, as noted in the OECD report. Would you agree?

     Yes, I would agree.

    Something I mentioned to the committee and many members in this room was that I was very surprised and somewhat taken aback, following my appointment, by the questions that were raised by parliamentarians and put to me directly with respect to my partisanship. The method of the appointment created a perception of partisanship very quickly out of the gate. I was asked by many parliamentarians and staffers how well I knew the Prime Minister, how many times I met the Prime Minister, if I was a member of the Liberal Party of Canada, if I had donated to the Liberal Party of Canada. No one should have to deal with that.

    More importantly, as the OECD points out, for an institution that is widely respected as being impartial and independent, having a nomination process for an interim appointment that leads to that specific outcome just makes no sense. It undermines the entire raison d'etre of having an independent parliamentary budget office.

     Thank you.

    Ms. Rochefort, go ahead, please.

     I'll expand a bit further on that particular issue. It is important to note that the OECD review concludes that Canada's Parliamentary Budget Officer is one of the strongest independent fiscal institutions internationally. Do you agree with that statement?

     I agree with the statement. I would say it's less about the officer, and it's more about the institution. I would also say, more broadly—and this is something that really stands out to me in comparison to other jurisdictions—that it is also about parliamentarians. In comparison to other jurisdictions, parliamentarians use our work to a much greater extent. This will be my 24th appearance at committee since September. I'm now at hour 39 of public testimony, going into hour 40 in a couple of minutes. That doesn't happen in other jurisdictions. We have close to six or seven committee requests with respect to analytical work.

     I do think that, on our end, the team certainly does a very good job. It really comes from the use of the work by parliamentarians, people such as yourself, and the fact that parliamentarians are interested in numbers. They're interested in facts. They're interested, as part of their policy debates, to have good numbers that they trust supporting those debates. It is very much a team effort. From my perspective, the institution wouldn't be recognized by the OECD as being one of the best in the world if we didn't have some of the best parliamentarians in the world.

    Thank you. That's a good statement.

    You weren't expecting that, were you?

    Exactly. We should applaud that as well actually.

    On that point, for many years your office and this committee have raised concerns about the disconnect between federal budgets and the estimates, as well as limited visibility, as you've pointed out, into frozen allotments that only become fully clear in the public accounts.

    We're acting on some of these comments and concerns that have been raised, so as we shift to a fall budget cycle and improved alignment in supplementary estimates, are you satisfied? Do you view this as progress? How would you comment on that?

     It certainly, to your point, responds to some of the observations that we've made in the past with respect to the lack of alignment between the budget and the estimates. Again, those observations that we made very much came from parliamentarians.

    I've been on the Hill for the past 20 years. There were observations made by parliamentarians with respect to the lack of coherence between the budget and the estimates. It's something that parliamentarians raised with the government—all flavours of government—and they raised it with us. The government has responded, and it's definitely a good step forward.

    I was just reading somewhere that parliamentarians are given five weeks to examine the supplementary estimates. Do you feel that this is now a sufficient amount of time?

     It's really not up to us to opine on how much time should be provided to parliamentarians. Again, when we reach conclusions with respect to the process, it's very much based upon the feedback from parliamentarians. If parliamentarians identify that they feel they're being rushed or they require additional time, that is something that we will then flag more broadly within a report.

    I'd say, for my part, that I respect the fact that parliamentarians are very busy people. In addition, I think the parliamentary financial cycle is the most important thing that parliamentarians work on, but I am horribly biased. I do recognize that parliamentarians work on a lot of other really important things and they have to make tough trade-offs or tough decisions regarding how they actually spend their time.

     I'm not sure if I have much time. Do I have a minute left?

    You have two minutes.

    I want to zero in on vote 50.

    Certainly, as Canada accelerates our defence investments and works toward meeting its international security commitments, mechanisms like Treasury Board vote 50 are intended to provide flexibility within the supply process. I was wondering how you view this tool from a transparency perspective. Do you view it as a transparent contingency tool that can benefit Canada?

    Similar to the other central votes that the Treasury Board Secretariat has created—both those that are currently in place and those back over the past two decades—it certainly can be transparent, as long as the government is being clear with respect to how the money is being transferred and how it's being allocated.

     I would say that supplementing what's in the supplementary estimates (C) with additional reporting outside of them, potentially on a website, indicating how the money is being transferred to government departments without having to wait until the public accounts are tabled, is something that could definitely be a benefit.

     Again, on our end, we're unlike the Auditor General. The Auditor General has the privilege and challenge of working within a really clear framework of accounting standards. Things can be black and white. There's some grey, but things are a lot clearer. In our situation, in terms of things like Treasury Board vote 50, by which additional discretion would be provided by Parliament to the government around managing this $1-billion fund, it's really up to parliamentarians to decide if the operational benefits for government outweigh ceding additional control to the government and the Treasury Board Secretariat.

    Again, that's very much a question for parliamentarians.

     I appreciate that answer.

    That is actually it for me for now. Thank you.

    Go ahead, Madame Gaudreau.

    Thank you very much, Mr. Chair.

    First, I am pleased and proud to hear about the high level of compliance highlighted by the OECD. It is important to take note of this, as it demonstrates the credibility and effectiveness of your work. I am very grateful for this. It would be unacceptable if this impartiality were not deemed absolute. I will fight for this.

    I really do have a number of questions. If I understand correctly, the interim appointment ends in four days and you have not heard any news yet.

    No, we have not heard any news yet. It is true, there are still four days left. We are eager to hear the federal government's announcement about the next parliamentary budget officer.

    Not only did the committee propose an impartial process to ensure your office's legitimacy, but, also, there are four days left and you have not heard anything. I truly sympathize with the entire team. I wanted to make that clear. It's unacceptable.

    Let's talk about the $5.4 billion in voted authorities. Some 56 organizations identified additional needs. Is that number unusual? Is it a reflection of poor initial budget planning?

    Thank you for your question.

    In terms of the number of organizations, I must say I do not have the figures here to compare them to figures in other supplementary estimates (C). This year, the amount was relatively low compared to previous years. I tend to believe that, since the amount is slightly lower, the number of organizations is probably also lower than in the past.

    I imagine that, for a large organization like the government, good planning in real time is challenging.

    For my benefit, I would like to know if the parliamentary budget officer assesses how voted authorities are used compared to statutory authorities in a supplementary budget. Can a strategic shift occur?

    Are you talking about a transfer from one vote to another? We have found that, as in all estimates, there are also transfers in the supplementary estimates (B) and the supplementary estimates (A). Sometimes there are indeed reallocations from a vote 1 to a vote 5, for example, i.e., from capital to operating or vice versa. Again, I do not think there were any more than usual this year.

    In addition, organizations requesting these transfers must still get Parliament's approval first. They are then required to provide sufficient justification to the Treasury Board Secretariat before requesting the transfer in the supplementary estimates. Again, I think this is an opportunity for parliamentarians to ask officials and invited ministers to explain some of these transfers in more detail. We do not have all this information.

    I am quite concerned when we talk about fairness and impartiality in relation to regulatory sandboxes, so I would like to demystify this.

    We now know that the $1 billion allocated to Canada Post is a repayable loan. It's a shortfall. We have not managed to plug this giant leak.

    Based on your analysis, is this support temporary or rather a sign that this entity is unsustainable?

    Thank you for the question. I will respond in English.

     Under section 31 of the Canada Post Corporation Act, the Minister of Finance is able to “place at the disposal of the Corporation such amounts as may be required” for it to continue to operate. Subsection 32(1) of that same act requires Canada Post to reimburse the government, from its annual revenues, should there be sufficient funds available. If there are not, there is subsection 32(2) of that act, where, if revenues from the corporation are insufficient to pay back what was given under section 31, the Minister of Finance can “cause the amount of the insufficiency to be included, in the form of a deficit appropriation item, in the next estimates”.

    Okay. We are still waiting for answers. We do not have all of them yet. Basically, we are wondering about Canada Post's primary mandate and objective to serve the entire country. For example, I am going to the Îles de la Madeleine. If there's no Canada Post office, but we need medical supplies and other….

    I have 30 seconds left. Let's talk about defence and security. The creation of the central vote, vote 50, allows Treasury Board to supplement other votes. Is this a way to accelerate or circumvent normal budgetary processes?

    Give a really brief answer. I'm sorry.

    The Government of Canada has used the same approach in the past. In the next round of questions, I will be able to provide more details.

    Okay.

    Thank you, Mr. Chair.

    Thanks.

     Mr. Patzer, go ahead, please.

    Thank you very much.

    Thanks again for coming to committee. I really appreciate the good work that you do.

    I just want to start off quickly with the issue around the lapsed or frozen funding. I noticed that your report mentions that roughly 27% is all that's really been reported as a percentage. It's unclear what the other 73% are. I'm just wondering if you could elaborate on what that means, and if there's any clever accounting happening with these frozen allotments.

     Sure. Thank you for the question.

    This number was obtained by comparing the permanent frozen allotments in supplementary estimates (C) against the total permanent frozen allotments that you would find in the public accounts. What we wanted to highlight was that, theoretically, what you find in the supplementary estimates is technically a leading indicator of what you would find in the public accounts, and potentially what is about to lapse. Based on the figures that we've seen in the last few years, these don't really give you an indication of the permanent frozen allotment numbers that you would find in the public accounts. That's where that 26% average comes from.

     Right, but that would also indicate that there's a bit of a lack of transparency on what's happening there. Would that be correct?

    I would say it certainly doesn't inform you on how much the government will potentially lapse.

     When there weren't supplementary estimates (C) tabled last year, that didn't help either. Okay. Thank you.

    I'm wondering because, based on the graph that you have in the report, a lot of it will be carried forward into the next fiscal year. We've heard from you guys in the past that there's a lot of funding that is reannounced. It's not necessarily new funding but just reannounced funding. When you looked into this, did you see any things that were just reannouncements that were added in rather than new budgetary items? How much of it was carried forward versus actual new commitment?

     In line with what you're saying, we did notice that, in budget 2025 and supplementary estimates (C), there were measures that received appropriations from earlier estimates, and those measures were considered budget measures because they were reintroduced in the budget. For transparency, we did want to highlight that.

     Thank you.

    This is a little bit more on the issue around Canada Post. The Kaplan report said that, with last year's loan, that repayment would require “the complete suspension of disbelief.” They're getting another over $1 billion allotted in this update that we are seeing now. They are the same terms that are outlined in the Canada Post Corporation Act: that they may repay this if they are able to become solvent.

    In your research into this, do you have any indication that Canada Post will be able to get to a point where they could at least begin repaying the last loan, never mind the loan they are now asking for in this update?

     Looking at their annual reports for the last 10 years or so, they have not been profitable on an income basis since 2017. There has not been a profitable year on an operating basis since 2020; however, the operating margin was negative in 2018 and 0.1 in 2019, so it precedes the pandemic by a few years.

     Five years ago, there was a strategic plan submitted to the government, and nothing has been done on it. Do you think it is a little bit absurd that they can keep coming back asking for money without being afforded the ability to make the changes required to at least try to right the ship?

    I'd say that, on our end, it's outside of our mandate to comment on how the Government of Canada manages its decision-making processes around Crown corporations.

     It's just as a general practice, though. I understand that you're not going to get into the weeds of it, and I do appreciate that. When we look at how taxpayers' money is being spent, these are repayable loans, but there's basically an opt-out. There's no incentive, really, to repay it. I think that's the problem that Canadians see with this. They can keep coming back every year for $1 billion. They're not given the ability to make the changes, and this keeps happening over and over again. Is that not problematic?

    I'm sorry to interrupt you. There's no time left for a response. Perhaps we can get back to Mr. Patzer next time.

    Mr. Osborne, please go ahead, sir.

    It's Vince.

    Mr. Gasparro, go ahead.

    I was insulted there, Chair.

     This is what your party gave me.

    Go ahead. I'll start the clock.

     Thanks, Chair.

    Thank you again for coming, Mr. Jacques and team.

    I want to quickly start with the frozen allotments, and then we can go to the OECD report, if that's okay.

    This is coming from what my Conservative colleague was alluding to earlier. In your report, you note that the frozen allotments have been disclosed in the supplementary estimates (C) since 2015-16. My first question is, what was the practice before that, particularly during the decade when Prime Minister Stephen Harper's government was in power?

     The prior practice was that there was nothing disclosed. Being the people who wrote the analysis for supplementary estimates (C) the first time the government released the information around frozen allotments, we highlighted it as a good, positive step forward for transparency overall.

     I'm glad you stated that for the record. The introduction of this reporting actually represents increased transparency rather than a lack of transparency. I just wanted to make sure that was stated for the record. I appreciate that.

    I'll move to the OECD report. In its review, the OECD placed strong emphasis on non-partisan communication. How does your office interpret this recommendation in a particularly highly charged political environment? Will the PBO consider formalizing a communication process, as was recommended?

    Yes, I'm very familiar with that recommendation. When the OECD shared a draft report with us prior to Christmas, it highlighted this. I was immediately struck by two things. The first was, “Holy cow, why haven't we done this before?” That was quickly followed by a slightly sickening feeling about the operational risk to the office of not having in place what you're mentioning.

    That's why, last month, we actually released our first-ever communications strategy for the office, our first-ever communication policy for the office and our first-ever errata policy for the office. I think many people in this room are probably good users of our website. When you look at a report on our website, you'll now see that there's a hyperlink for errata.

     The policies themselves, and the approach.... There are some new aspects to the approach. I would say that a recurring theme throughout the OECD report, in communications and in other areas, is that we were doing these things; we simply hadn't written them down. That created two issues. The first is that when we do have a situation where a very strong leader, like Mr. Giroux, moves on, it means that when there is a transition, there's a risk that there will be operating setbacks for the office if we don't have a good policy framework in place. The other issue is that it's not transparent. We were not walking the talk. As an organization with the legislative mandate to promote fiscal transparency, we ourselves were operating in a non-transparent way when it came to issues around communications. It certainly was not helpful.

    That's in place. I think it largely addresses most of the recommendations from the OECD report on the communications side. Certainly, we're going to see how those settle, and we're open to suggestions and feedback from parliamentarians if additional changes are needed.

    There are other administrative changes that we're in the midst of looking at. Again, we're waiting until the government appoints a new Parliamentary Budget Officer next week, so we can sit down with that individual and work through some of the additional administrative changes that the OECD has recommended.

     Thank you for that.

    That's basically our time.

    Madame Gaudreau, go ahead, please, for two and a half minutes.

    Thank you very much, Mr. Chair.

     Let me say right off the bat that establishing several such policies means everyone wins. Not only does this provide protection, but it also gives you the legitimacy to do your job properly in terms of communication policies. I really like that.

    I have a question about central votes, specifically central vote 50. It allows Treasury Board to supplement other votes.

    Is this a way to expedite funding or rather a routine budgetary workaround?

    As I started to explain earlier, in the past, the Government of Canada and the Treasury Board Secretariat have used the same approach for other central votes. This mechanism allows other departments to obtain support when the flow of resources in certain departments was affected. With regard to defence and security expenditures, the process is different from the current approach taken by the Government of Canada to manage money because, typically, each subsidy or transfer includes the obligation to explicitly identify the quantities, provide all the details and obtain Parliament's approval.

    As I indicated, it is up to parliamentarians and members to determine whether there is any latitude in this kind of situation, whether there is sufficient justification to share the control of Parliament with the Canadian government, in this instance.

    Are you getting the information you are asking for? Could you share it with us?

    Are you talking about information on vote 50c?

    Yes, exactly.

    No, we have not received it yet.

     After the meeting, we can put questions to the Treasury Board Secretariat.

    Mr. Chair, next time, I will talk about Cúram and CBC.

     Ms. Jansen, go ahead, please.

    Thank you very much.

     I want to talk about the defence spending report. I was trying to wrap my mind around this enormous number. What I kind of understand is that the federal government collects about 17¢ out of every dollar that the Canadian economy produces. Under this NATO framework, defence and security spending could rise to five cents. That would leave us with 12¢ for all our other spending.

    Now, if our revenue remains at about 17% of GDP, that means that close to one-third of our federal revenue would go to defence and security. It's not a marginal adjustment. It makes defence one of the dominant pillars of federal spending. It would represent a very different fiscal profile of Canada from what Canada historically had.

     I want to consider the industrial side. Large-scale defence manufacturing is capital-intensive. To sustain it efficiently, most countries rely on export markets. The United States does, as do France, Germany and the U.K. If Canada builds production capacity beyond what we need for our own security, then one of two things will happen: We will either permanently maintain elevated domestic military demand or participate meaningfully in global defence export markets.

    Given that Canada has long positioned itself as a middle power focused on multilateralism and peacekeeping, does expanding defence production at this scale represent a material shift in our fiscal priorities, and even in our national identity?

     Thank you for the very complicated question. We're always kept on our toes. I can certainly answer the fiscal component.

    From my own perspective, there are two interesting parts to the question you're asking. The first is well within our bailiwick with respect to the fiscal side. We published a report on the NATO 5% target and the potential fiscal implications. The numbers you cited in terms of the 17¢ on every dollar—17% of GDP—and getting to five cents of that with respect to NATO are correct. It would be a substantial increase. Within the NATO 5% report that we published, we pointed out that in going from 2% to 5%, the government has indicated that for about half of that, they believe they're already spending on other areas that are potentially of dual use or dual purpose. That said, it would be five cents out of the potential 17¢ if there are no other changes on the revenue side, which would be a substantial difference in the allocation of spending in comparison with what we've seen in the past.

    With respect to the question you raised about the change in the composition or the nature of the Canadian economy, it's something that has definitely caught my eye. Up to this point, we've been looking at this as a fiscal question, in terms of how much it will cost and over what period of time. The defence policy last week was interesting, because it indicated that it's also an economic question. In comparison with the past, when the government was focusing on spending the money to acquire military kit, now it's spending the money to acquire military kit and also substantially expand the defence industry within the country. In many situations, it's supporting the creation of firms that currently don't exist to get to a 70% domestic spending target.

    We currently have a bit of an output gap. There's currently some slack in the economy, which we expect to close over time. In the context where the government will be pushing very strongly around restructuring the Canadian economy in this area and expanding it, it will change the nature of how the economy operates overall.

    I have a follow-up question. Since we're increasing defence spending so dramatically, and apparently the Prime Minister is planning to sign a defence co-operation agreement on his trip to India this week, is defence becoming just a security function, or is it becoming a central economic strategy? I think that's the main question I have. I'm not sure you can answer it, but perhaps during your study of this issue you ran into some information you didn't include in your report.

    To answer your question, we did not include the changing economic context in our report, because we were waiting for the defence strategy, which was published subsequent to our NATO 5% report. Again, it is a substantial difference in comparison with the approach the government has taken in the past, including on the export side. It was very explicitly identified within that report that there would be a shift, in addition to creating domestic capacity to meet Canada's needs, to also supporting the exports of military equipment and hardware. That's certainly different.

     Now, Mr. Osborne, I turn to you.

     Thank you.

    To follow up on the last question, you said that the increase in defence spending would change the nature of our economy. I agree with that as well. In your opinion, increasing defence infrastructure spending to five cents of 17¢.... Canada has just signed on, I believe, to SAFE, which is a European group. As part of that group, we may be able to export components that are manufactured in Canada. They would rely on us, and we would rely on them. However, in terms of the defence industry as an expanded part of our economy, how would the five cents out of 17¢ look, in your opinion, as we move forward?

    Hopefully, I'll punt the question to the next PBO, and I will go back to the office and analyze it in detail.

    To your point, there are characteristics of the defence industry and the security industry that are different from other sectors in the economy. I'm thinking about the export orientation, the research and development intensity, and productivity levels. There's also a question of Canada's ability to execute on this strategy, because it's ambitious and it's definitely moving in a different direction. I'd say that, on our end, it's better that we go back and actually analyze it before we opine upon it.

    However, the next PBO will definitely have a very comprehensive answer. I'll put them on the hook right now. The next time they appear before this committee, they will have a comprehensive response.

     I appreciate that answer.

     I would anticipate that the ratio would change as the infrastructure component of national defence expands, but it would be nice to get some indication as to what that may look like.

    In our changing geopolitical world, I think it would be naive—and I'm not asking for an opinion, because you are non-political and unbiased—for our country not to increase defence spending, in addition to the fact that it would have huge benefits for the economy as we continue to grow. We are becoming less reliant on our neighbours to the south and more reliant on other, reliable trading partners.

    I'm just looking at some of the recommendations from the OECD. They put a strong emphasis on neutrality and non-partisan communication. How does your office interpret this recommendation, particularly in light of the highly charged political environment that the House of Commons is? Will you consider formalizing a process, as was recommended?

     Yes, a process needs to be formalized. Again, as I mentioned, in reference to my age, things were partisan 20 years ago, and they're certainly more partisan now and certainly more heated. For what reason, anyone could speculate.

     I would also say that, in addition to the policies themselves, something else that the OECD pointed out, which I think is worth mentioning, is that there should be.... I agree with the OECD's recommendation and observation that there's a benefit in having a shift away from the PBO as an individual, as the Parliamentary Budget Officer, to the parliamentary budget office.

    In particular, if you look at other jurisdictions, including our neighbours to the south, with their Congressional Budget Office, the Congressional Budget Office will also appear at committee hearings in their House and Senate. Often, it's not the director of the office. Most often, it's the analysts who appear. They appear for a short period of time, 30 minutes, and they answer technical questions with respect to the reports. Once parliamentarians or legislators are happy, they go away. I do think, in a highly partisan environment, it's a better way for us to meet the needs of parliamentarians.

    There might have been a justification, 20 years ago, for having a lot of emphasis on a single individual who is called the PBO. The context has changed, and we've moved well beyond that. Certainly, from my perspective—and, I think, the OECD's perspective—we need to shift to an environment where it's the parliamentary budget office meeting the needs of parliamentarians, as opposed to the officer representing the officer's work, because everything we do should be supporting your needs.

     Thank you.

    Thank you very much, Mr. Jacques.

     You promised to have the new PBO follow up on Mr. Osborne's request. Why don't we just consider it an official request from the committee, just so we can set priorities?

    We'll now go to Mrs. Block.

    I believe Mr. Gill should be on the list.

     Mr. Gill.

     Thank you, sir.

     Thank you, Mr. Jacques, for being here. I appreciate your candidness and honest answers, as always.

     Canadians were promised fiscal guardrails, including a declining deficit-to-GDP ratio. Given your estimate of only about 7.5% probability of meeting the target, do these supplementary estimates move us closer to that path or farther away, and are the pressures largely structural or temporary?

    Thank you for the question.

    The numbers you're seeing in the supplementary estimates (C) were largely reflected in budget 2025. In terms of the government's spending path and fiscal guardrails, nothing would be substantially changed based on what's in budget 2025 and our observations around the probability of the government being able to respect its fiscal anchors.

     In terms of the structural versus the cyclical components, it's a little bit of column A and a little bit of column B. Certainly, there are structural components. When you look out over the next five years and see that, even after the output gap—which is a nerdy, technical economics term—when the economy, three or four years from now, is firing on all cylinders and everyone who wants a job can get a job and everything is going great, we still have a fairly sizable federal deficit, based upon our last outlook and the outlook from the government, it means there's a structural deficit.

     There are cyclical components, and the government has highlighted that.... Especially as part of their new economic strategy, the government is doubling down on additional capital investment at this point, which of course they need to borrow the money for. That will be offset to a certain extent as they implement the cuts to the operating budget. Over time, hopefully we're going to see things improve.

     Well, hope springs eternal, as we all know, but we have to have some concrete measures. There are structural issues that need to be corrected.

    With that in mind, the growth we often see.... It's given to us in Parliament that we are the fastest-growing economy, and yet the OECD analysis shows weak GDP per capita growth. Some studies from the banks have indicated that we have been in a recession in terms of our GDP growth over the past three to four years.

     Is Canada's revenue growth driven only by population increase, or do we expect some productivity gains? Do you see anything on the horizon that tells you we might be pulling ourselves out of the population growth scenario as opposed to actual GDP growth?

    That's a very pertinent question, because this morning we actually published our updated demographic outlook for Canada. In that publication, to your point, we highlight that, effectively, population growth in the country—probably flat in 2025 and probably flat in 2026—is going to start growing again from 2027 onward at a rate most people would be familiar with from prior to the pandemic.

    Notwithstanding that, the Canadian economy is continuing to grow. Something I've highlighted in the past is that there continues to be productivity growth in the Canadian economy, because the Canadian economy is Canadian people, and Canadians work hard, learn and work more efficiently and more effectively over time. We've seen that. If you look back over the history from StatCan over the past 40 or 50 years, notwithstanding recessions, trade wars or other hiccups in the economy and global affairs, the Canadian economy and Canadian workers always come back.

    On the debt trajectory we have, compared to other OECD countries, are we underperforming or over-performing? What can Canadians expect going forward, especially with the inflationary pressures we are facing right now? Affordability is a huge issue. We have seniors resorting to having to shoplift just to feed themselves. Where is all that going?

     I'm afraid your time is up, so your answer can perhaps be in your next round.

    We'll go to Ms. Khalid, please.

     Thank you very much, Chair.

    Thank you to the witnesses for being here today.

    I want to explore a little bit about frozen allotments and the variance between frozen allotments reported in the supplementary estimates (C) and in public accounts. How much of that is due to timing, and how does that impact frozen allotments as a leading indicator of the total frozen and lapsed funds that appear in the public accounts?

    By timing, do you mean the timing of the implementation of programs?

     That's right.

    That would be reflected in permanent frozen allotments that are categorized as re-profiles. As you can see in the supplementary estimates (C) of this year, they make up the bulk of the $7.4 billion. I think it's about $5 billion in re-profiled funds.

    I wouldn't be able to speak to how that indicates how much the government will lapse overall by the end of this year, but if you take a look at the document about frozen allotments that is tabled along with the supplementary estimates, you can find details per organization and the reason the department is seeking to re-profile the funds, as well as the specific amount.

     How does that impact your work in the PBO? Does the timing of the two different reports with the frozen allotments have any impact in terms of the discrepancy with the public accounts?

    We would call it less a question of a discrepancy and more a question of a timing difference with respect to when it's reported.

    Going back to a response I provided to one of your colleagues, prior to 2015 we were only waiting on the public accounts, so there was nothing. In 2015, the government ultimately decided to share additional information. It's not perfect and comprehensive, but they're sharing something. Ultimately, it reconciles with what's in the public accounts, but it doesn't give us a perfect line of sight to what's published eight months later. It's a good problem to have.

    Something I mentioned to this committee and to other parliamentarians in the past is that when a public servant comes to a committee hearing and is asked, “Oh, could you release additional non-confidential information? Could you put it on a website? Could you incorporate it as part of the existing financial reporting cycle?”, I've never seen a public servant say no. I've only seen public servants say, “Sure”. They're producing these documents for you so you can make better decisions. If this is what you want and parliamentarians find it helpful, then they'll do it.

    I know I'm eating up your time. I apologize.

    The last thing is that it's important to always remember that with additional reporting, there's an associated cost to the government. That's why, on our end, even though it might not be perfect information, we're always very cognizant that public servants have full-time jobs, and their job isn't to respond to PBO requests: It's responding to ministers implementing the government's agenda and responding to parliamentarians. Even though the information they provide around frozen allotments might not be perfect, before we ask for more information, we would have to think long and hard about whether spending an additional $10,000 in taxpayer money to collect that information would be justified.

     Just on that, one of the recommendations in the OECD report was about formalizing the process of collecting data from different departments. Canada has a more informal process of getting that information to you. What are your views on that, especially in terms of cost-effectiveness?

     It's a great idea. It works in other jurisdictions.

    From my perspective—and I think my colleagues in the public service would agree with me—it works during election campaigns. One of the aspects of our mandate is to support political parties in the costing of electoral platforms. During that costing period, we do have memoranda of understanding with various government departments, and the collaboration works very well. It eliminates overlap and duplication. There's a free flow of information, and everything is kept in a confidential way.

    From my own perspective, I think it should be done. I think there would be a real benefit, not only for us but also for you and for taxpayers. Mr. Gill mentioned the affordability crisis when he asked his question. It's a really challenging time. Certainly from our perspective, right now there's no need for our organization to come back and ask for additional taxpayer money to implement any of these recommendations. We'll see if the new PBO agrees.

     I think there's a great opportunity for better collaboration with the public service at this point.

     Thanks very much.

    Madame Gaudreau.

    Thank you, Mr. Chair.

    Let's talk about Cúram.

    Some 85,000 seniors are experiencing or did experience onboarding problems during the transition to the new software. Did the Office of the Parliamentary Budget Officer assess the potential impact on the budget as a result of these delays?

    No, not yet.

    Okay.

    Could a long-term administrative delay temporarily reduce planned expenditures without reflecting a real reduction in need? We are talking about 85,000 seniors, which is a considerable number.

    Yes, absolutely, and we will be happy to analyze this issue if your committee passes a motion to that effect.

    Okay.

    I have one last question for you on this topic.

    Can we exclude the possibility that the lower projection is due, in part, to bureaucratic failures rather than demographics?

    I have not seen the report, but the population must clearly be aging, even if it is stable.

    Can this possibility be excluded?

    It is indeed a possibility.

    Another factor also needs to be considered, which is how wealthy seniors are. Given the annual increase in household income, transfers from the Government of Canada have decreased. This might be the case here: Given the decline in poverty among older Canadians, transfers would decrease.

    We must examine the data in greater detail.

    Thank you.

    I am concerned about the announcement of $150 million for the CBC. We know that the CBC will get a portion of this to improve the digital experience.

    Do you know how much of it will go to English-language services and how much to French-language services at CBC?

    We do not have this information. We asked the Treasury Board Secretariat for it, but they were not able to provide it to us.

    Did they tell you when they would provide it to you? Or did they say that you would never get it?

    They simply told us that they did not have this information. We can always do a follow-up to see whether we can get it later.

    Seriously, we need to know this information. I am thinking of the francophone community outside Quebec.

     That's our time, I'm afraid.

    Thank you, Mr. Chair.

    Mrs. Block.

     Thank you, Chair.

    Mr. Jacques, I want to ask you a question in regard to the International Monetary Fund's report that was released on Canada, specifically on article IV. It had two findings that I feel are important to mention, given the fact that you have faced criticism from our counterparts across the room over stances you've taken on the new capital and operating definitions, as well as their choice to abandon the long-standing fiscal anchor of debt-to-GDP.

     The IMF came to the exact same conclusion that you did in finding that the Government of Canada's definition of capital is too expansive and should be brought in line “with national accounts and GFS standards”, and in finding that the Liberals were wrong to abandon the debt-to-GDP ratio. Can you comment on these findings?

    Going back, I believe, to the last time I was testifying before this committee, I highlighted the IMF findings and, in particular, the recommendation to return the debt-to-GDP anchor to a “central” role. I believe that's a direct quote from the IMF article IV consultation report. It's certainly something that stood out to us within the office because, again, the government made the changes to its fiscal anchors in the budget, and then this report was published roughly two months later. The IMF came out and said, “Notwithstanding what you've done in terms of the budget and your fiscal anchors, we think you should actually go back to what you were doing before with respect to the debt-to-GDP anchor.” That definitely stood out.

    On our end, we're certainly watching and waiting to see whether the government takes it into account. I noticed that the deputy minister of finance was before the public accounts committee a couple of weeks ago, and he indicated that he takes the IMF recommendations “with a grain of salt.” From my perspective, we certainly take them a lot more seriously, and given the prominence the International Monetary Fund had within budget 2025 and various quotes about it and references to it, there's potentially somebody else in Finance, maybe his predecessor, who also took the IMF recommendations more seriously.

     Thank you very much for that.

    I want to link that to your report on the supplementary estimates, specifically in regard to frozen allotments. Your report speaks about frozen allotments being used for four principal purposes. One of those is transferring or reallocating funds, which allows departments to trade authorities across votes, such as, for example, moving capital authorities to operating.

     Does this create an issue, especially given the new definitions that the Government of Canada has created when it comes to operating and capital?

     I don't think so.

    I'll answer quickly, because I can see the chair giving me the stink eye.

    The first thing I'd say is that the definitions of operating and capital within the estimates differ from the definitions of operating and capital used in the budget and the new definitions of operating and capital, which again speaks to the point that we and the International Monetary Fund have raised in the past of having consistent definitions that are widely acknowledged.

    The Auditor General was also before the public accounts committee and indicated that, from her perspective, the government's new definitions of operating and capital should not be appearing in the public accounts, because there's a risk that it would create confusion for parliamentarians—as it does in this situation, with the same name for a different concept overall.

    In terms of the transfers between operating and capital, I would say, again, the reason it's in there is that parliamentarians initially approved those allocations, so legally, that money was restricted under an operating vote or a capital vote. Hence, when the government wants to make changes, they need to come back to seek Parliament's permission and your permission to move the money around.

     I would say that parliamentarians, by and large, have been happy with that approach. If potentially they wanted to go in a different direction or if they had suggestions, I think that's something the government would certainly be open to.

    Thanks very much.

    Madame Rochefort, go ahead.

     Monsieur Jacques, thank you for mentioning the communications framework that you've developed.

    I was wondering if you might expand on some of the major elements of that particular framework.

     The first and most important element is something that I mentioned to you at this committee several months ago, and that's a shift in the office to identifying who the primary audience is of our communications. The term that I used was a “parliamentarians first” approach.

    There are obviously multiple stakeholders who have interest in the work of our office, starting with our primary and most important clients, who are identified under the Parliament of Canada Act. The reason we exist is for you parliamentarians, the broader public, who obviously have an interest in the work we're doing, the media and other academic stakeholders. First and foremost, we knew that we had all of these stakeholders, and it was never written down who the most important stakeholder was and where we should be focusing our attention. That's the first and biggest change. We'll see if whoever the government appoints next week agrees with this, but it's the biggest change over the past 20 years.

    I worked in the office under Kevin Page, Jean-Denis Fréchette and Yves Giroux. Parliamentarians were there. I can't say that they were first. For myself, I take a very strict interpretation of the law, and the law says that parliamentarians are our clients, so parliamentarians come first in the communication strategy. Descending out of that, once you determine that parliamentarians are the most important target audience for communications, when you look at the policies, everything else cascades into place because, in terms of what we are producing, how we are producing it, how we're presenting the information and how we're communicating and transferring that information, everything is focused on what your schedule looks like and how you want to receive it.

    There's some critique, and there's always critique from academics that there are not enough details in the annex with respect to our code. I take that under consideration. I've never had an experience where a parliamentarian says that they want our 600 lines of code published, or they want our detailed annex. On our end, if doing that for an external academic who's not a parliamentarian means that we're producing a report for a parliamentarian more slowly, or it means that one of the 60 reports that we publish in a year will not get done because instead we're focusing on another stakeholder, that's certainly problematic. Again, operationally within the office, you see a lot of additional administrative changes.

    The last thing regarding the communication side is that we're very much trying to codify everything we're doing. I know parliamentarians aren't interested, necessarily. They might be interested, but they probably don't have time for the administrative details of how we manage things. However, at the very least, we're putting it out there so if you do have questions, if one of your staffers has questions or if you want to know how we're operating and you don't like it, you can go on the website, find it, look through it, critique it and get back to us. That's a major change in comparison to how we operated in the past.

    In the past, we showed up for the reports, and we answered technical questions: “Please appropriate our $8 million a year, and don't ask questions.” Now, it's the inverse. It's very much, “This is what we propose to give to you over the course of the year as our primary clients. Is it meeting your needs? This is how we propose to operate, and if you have suggestions, we're all ears.” As we've learned with respect to the legislation around the appointment process, there is a lot of flexibility in terms of how we can operate.

    Am I still okay?

    You have 30 seconds.

     The OECD report touches on communication. Do you see a need to update the framework following the report?

     The framework will always need to be updated. We'll see how things go.

    The framework is now six weeks old, the official version on the website. We've been using something implicit for a far longer period of time. For my part, it's new to us. It's new to parliamentarians. We'll see what you think about it. We'll see what we think about it. I can say that, within the office, it's definitely new. I definitely had some push-back with respect to making things more transparent, putting them out there and having the office held to a higher standard of accountability.

    Again, things will change over time, depending on the demands of clients.

     Sorry, we're past our time.

    Mr. Patzer.

    Thanks again.

     Mr. Jacques, can you just explain to people watching here today the difference between the $5.4 billion that's voted in the supplementaries versus the $7.8 billion in frozen allotments? Obviously, the frozen allotments aren't showing up in the voted total of the supplementaries, so can you just explain a little more how that works?

    Sure.

    Funds that are in permanent frozen allotments were already appropriated, but then the TBS restricted those funds and access to those funds, whereas the $5.4 billion are sought authorities, so voted appropriations that you must vote on.

    Okay.

    The report says that it's about 27% that you basically know of, so that $7.8-billion total could actually be a lot higher. Is that correct?

     It could be higher as part of total frozen allotments, but we won't know until the public accounts are tabled.

     Right, but if it's only 27%.... I know, Mr. Jacques, that you alluded earlier to how you're not going to be harassing public servants to get that information—to your point, they have another job to do as well—but that could potentially be a lot of money. For Canadians trying to get clarity and understanding around how the budget is going to work, and following up on what Mrs. Block was saying about capital and expenditure, if there's $7.8 billion frozen there and it's not even the total amount of what we know there is, as far as transparency goes there are questions that remain.

    Is this a standard practice? Is this something that it's advised to try not to do, or is this just a widely accepted practice, that money can be shuffled across departments or frozen and bumped year over year? We hear a lot of reannouncements. We hear a lot of funding announcements that are, again, reannouncements of old funding. This is a regular thing that happens, and yet we see $7.8 billion in frozen allotments.

    Are you getting my drift with what I'm trying to ask around transparency here? I think Canadians have some concern about that. Do you have that concern?

    I definitely take your point with respect to the frozen allotments and the ultimate number being higher in the public accounts. I spent the first 10 years of my career, for sins that my father committed probably, inside the core federal public service, including at the Treasury Board Secretariat. Based upon what I saw at that point, there are really good justifications for establishing frozen allotments, especially in situations where there is an announcement made potentially in the budget. Ultimately, when a detailed proposal is submitted to the Treasury Board, potentially it's not fully cooked and potentially ministers kick it back and want to look at it in greater detail. It actually demonstrates a sign of overall prudence and care in the management of taxpayer resources.

    In terms of additional transparency, on our end it really comes down to our priorities. Again, our mandate is to promote fiscal transparency. In order to have infinite fiscal transparency, the government wouldn't get anything done. You'd have too many public servants running around trying to generate information for us to analyze. The trade-off really becomes one of what's a priority for parliamentarians. There are only so many hours in the day, and if it's a priority for this committee to dig deep and go into detail around frozen allotments and there's a motion passed by this committee—and I've mentioned this at least five or six times during the 24 committee appearances since September—it's a priority for us.

    We have about 40 things on the go on the work plan at any given time, and our ability to trade off and determine whether something is going to take longer or whether we're going to move it ahead and address it more quickly is based upon the interests of parliamentarians. Again, if it's a really bad itch that you need to scratch at this point and your colleagues agree, then that's something we'd be happy to look at.

    In your report and in the research you did, do you know what the breakdown would be by department of what those frozen allotments are? Is there one department for which this is a bigger thing than for others? I know it's all through the Treasury Board, but if ministers are sending money back or not spending the money, is there one that's a greater offender than the others?

     Give a brief answer.

     I may not have the numbers on hand, but we can definitely take a look at frozen allotments per organization and figure out which departments make up the bulk of what's being re-profiled.

    Would that be pretty simple with the data that you have available?

     Yes. We wouldn't be able to—

     That's our time. If you can send that to the clerk, that would be appreciated.

    Mr. Gasparro, go ahead, please.

     Thank you, Chair.

    Statistics Canada reported this today, and it was reported more widely by Bloomberg that “Foreign direct investment into Canada jumped in the fourth quarter...to the highest level in 18 years”—that's since approximately 2007—totalling $25.1 billion between October and December 2025.

     I want to pivot off that foreign direct investment figure and relate it to a comment you made earlier, sir, in regard to the Canadian economy growing, with our population staying flat in 2025 and 2026. Can you drill down a bit on our productivity growth?

    I would then like to follow up with a forward-looking view from you in regard to where you see productivity gains coming from within our economy.

     In terms of today's foreign direct investment release, obviously it's good news, and all of us should take what we can get at this point. We are definitely thankful for any greenery we can see poking up through the snow, especially in cold Ottawa.

    More broadly speaking, in terms of the economy itself, I always like to think of the economy in this way. You have people who work. If you count the number of people between the ages of 18 and 64 within the working-age population, that's been pretty much flat over the past year. We expect it's going to be flat in 2026, at least based upon our estimates from this morning. Then, for the people who are working, there is the level of effort they're engaging in, presuming they have jobs. Then you have the final component, which you highlighted, which is productivity.

    Productivity growth in Canada has been uneven since the pandemic, so it's been pretty volatile. It wasn't particularly strong. We saw a reduction of growth in productivity over the previous decade or so, which I believe led the deputy governor of the Bank of Canada to highlight that as a significant challenge for Canadians and for the Canadian economy.

    In terms of our economic modelling, I would say that in the short term, looking at our most recent economic and fiscal outlook, we do continue to have some unevenness in growth in the Canadian economy. There's a lot going on in terms of changes. On the demographic side, we had substantial increases in the size of the population. It's now flat and returning to something more normal.

    There's a lot of uncertainty with respect to trade agreements. The trade data has been particularly volatile at this point. We do have what I would characterize as a very defensible assumption that, over the medium term, looking at year three and year four, we would start to return to productivity growth and economic growth that looks like something more akin to what we saw prior to the pandemic. Again, the underlying assumption is that growth in the economy and productivity growth are driven by the people in the Canadian economy who work, who start businesses and who operate those businesses.

    We still have the same people in the economy. They've demonstrated their resilience in responding to shocks in the past, with various types of supports at the federal level and at the provincial level. At this point, there's no reason to assume that the same will not continue once we get through the sticky period we're currently in.

     Thank you for that. I agree that our economy is based around our men and women within the Canadian economy.

    I'll stick to the foreign direct investment and attracting capital into our economy. I'm making the natural assumption, sir, that you agree with our new government's view that strengthening trade relationships with reliable trading partners and allowing our businesses to get their goods and services into foreign markets is incredibly positive, and it is a prerequisite for us to have sustainable growth within our economy in the long term.

     I'm afraid we're past our time, but maybe, Mr. Jacques, you can get back to your opinion in writing, if you so wish.

    We'll have Madame Gaudreau for two and a half minutes, please.

    Thank you, Mr. Chair.

    Let's talk about old age security and the guaranteed income supplement.

    The department is reducing its forecasts by $1.6 billion for old age security benefits and $773 million for the guaranteed income supplement. I can count, however, and the number of seniors is rising. Statistically, there is a discrepancy.

    What can the discrepancy between the forecast and demographics tell us?

     I would like to mention that this is a revision of the forecast made at the beginning of the year. At the beginning of the year, the main estimates committed $84 billion, if I remember correctly, for all three types of OAS payments combined. This is then a $1.5 billion readjustment.

    The Treasury Board Secretariat gave the following explanation: ultimately, some seniors had higher incomes. We know that when a certain threshold is exceeded, OAS is clawed back. It is the same with the GIS, which is really for lower-income seniors.

    This represents a little more than 1%, or perhaps 2%, of the estimate made at the beginning of the year. However, the budget already provides $88 billion for next year. The following year, the amount will rise to $94 billion or $95 billion. Clearly, this population is increasing, which will account for the significant increase in costs.

    I would really like to make the correlation and see if the curve stays the same or not.

    I do not know whether there was a review of the $1.5 billion. Maybe the estimates were miscalculated at the beginning of the year or perhaps it happened out of an abundance of caution and ultimately it was determined that it would cost less.

    In any case, I feel uneasy about the purchasing power of seniors.

    I have 30 seconds left. I would like to know why the budgeted amounts for national defence are in the supplementary estimates, and not in the main estimates. I would like your reply to be very brief, unfortunately for you.

     Sometimes programs evolve in such a way that they identify the need for money at this point in the year, whereas they didn't at the start of the year when the main estimates were being crafted.

    Thank you, Mr. Chair.

    Thank you very much.

     We're going to suspend in a moment. We also just have to approve a couple of quick budgets at the end.

    Before we suspend to bring in our OECD guest, can I just ask quickly about vote 50 for $1 billion? It looks to me a lot like the old vote 40 slush fund from 2017-18, I think it was, when the government was asking Parliament to approve money without telling us what it was for. Do you have any thoughts on our inability to provide oversight of or actually even to know what we're voting on for that $1 billion?

    I do recall the short-lived Treasury Board vote 40. I would go back to a point that I made earlier, that it is really up to parliamentarians to decide whether the government's justification for requesting additional flexibility through these central votes outweighs parliamentarians' ceding authority and control around the spending. Again, in the case of vote 40, the vote wording, to the best of my knowledge or recall, was quite similar.

    Again, parliamentarians decide how they want to approve the money and how much discretion they want to provide to the government and whether that discretion is appropriate or not.

     I recall the vote 40 debate, where government officials said it was presumptuous, on MPs' behalf, to know what they were voting on before the money.... This seems like another case of that. Considering that it takes five to 10 years to get anything to project basis with defence spending, I find it bizarre that they need $1 billion.

    Can I just ask quickly, what happens on March 3 if we don't yet have a new PBO announced in that role?

     Pursuant to the Parliament of Canada Act, there are several specific responsibilities tied directly to the individual who is the Parliamentary Budget Officer. That includes publishing reports, taking requests from parliamentarians and committees, and sending for or requesting information from government departments.

    The office will still exist. We will still be doing work, but we will only be doing work on projects or requests that we've already received. All new requests submitted by parliamentarians will need to wait for a Parliamentary Budget Officer to officially receive them.

     Such as a brief on the estimates, which just came in today—

    That's correct. It's reports. Parliamentarians can still request—

     We wouldn't have a public report on the estimates.

     There would be no legal ability to publish a report from the office, because of the way the legislation is structured.

    Okay.

    I have one last, quick question, Mr. Creighton, about subsection 32(2) of the Canada Post Corporation Act and this $2 billion. It's very clear, when you look at the Canada Post strategic report, that it has no ability to repay this money. It says the writeoff has to appear “in the next estimates”, which should have been the mains.

    Should they not be putting in a provision for the bad debt for this? At what point do they...? The money will never be repaid. Canada Post seems pretty clear. The Kaplan report says that. Why do you think the government would be delaying recording that writeoff?

     I don't have an answer for why they would be doing it. Our understanding is that it would appear in supplementary estimates (C) of 2026-27.

    The act says “in the next estimates,” not “in the next estimates at the end of the year, when the government gets around to it”. Would they not be required under the Canada Post act to actually show it earlier, in your opinion?

    That's a legal question. It's not a PBO question.

    Perfect. You can get back to us, Mr. Creighton. Thanks very much.

    We're going to suspend very quickly to bring in our next witness.

     Good afternoon. Thank you for your patience, everyone. We are back.

     We welcome a very special guest from the OECD—all the way from Paris. Maybe we can try to pass a motion for us to do our next meeting there in person.

    Ms. Nicol, welcome. Thank you for joining us today. We appreciate it.

    I understand you have an opening statement. The floor is yours for five minutes, please.

     Thank you very much, Mr. Chair. It's good to see you again and also to meet the other members of your committee.

    Thank you, indeed, for inviting me to appear before you today. As the lead author of this report, I'm pleased to present and discuss the “OECD review of the Canadian Parliamentary Budget Office”, published just earlier this week.

    I have followed the parliamentary budget office very closely since its creation in 2006, from the early days under Kevin Page through to the tenures of Jean-Denis Fréchette, Yves Giroux and now Jason Jacques. The institution has remained effective from the outset while steadily growing in stature. It's now one of the strongest institutions of its kind and ranks at the top of the OECD's fiscal advocacy index. Despite its small size, it has an outsized impact both in Canada and internationally, strengthening fiscal transparency at home and contributing to the development of peers internationally.

    The parliamentary budget office is not alone; it is part of a growing trend. In fact, we have seen independent fiscal institutions like the parliamentary budget office become a core part of the fiscal architecture across many OECD countries. In fact, today, 33 of the 38 OECD countries are supported by an independent fiscal institution, and we outline principles for these institutions in the OECD recommendations for independent fiscal institutions. One of these principles is, of course, periodic external examination, and this first review of the Canadian parliamentary budget office was commissioned by the interim Parliamentary Budget Officer last September. A change of leadership indeed provides an opportune moment to reflect on the office, what is going well and how it could be further improved.

    To inform the review, the OECD convened an international team with deep practical experience. We had Anthony Close, the inaugural parliamentary budget officer of Victoria, Australia; Jeffrey Novak, the financial accountability officer for Ontario; and Bert Smid, the program leader for macro finance at the Netherlands Bureau for Economic Policy Analysis, one of the oldest independent fiscal institutions in the OECD.

    The team interviewed a wide range of parliamentary, governmental and non-governmental stakeholders in Ottawa. Our discussions benefited greatly from the insights shared by these stakeholders—including you, Mr. Chair—and the contributions of many others we met. I would like to express my sincere thanks to all of those who gave us their time and expertise. Their perspectives have been invaluable in shaping our recommendations.

    What did we find? Well, the parliamentary budget office is indeed a cornerstone of Canada's fiscal accountability framework. The 2017 legislative reforms helped strengthen its independence and access to information, and the organization's analytical depth and active leadership have further enhanced its impact and credibility. These strengths underpin the parliamentary budget office's strong international standing atop the OECD's fiscal advocacy index.

    As Canada's fiscal environment becomes more complex, with ambitious spending reviews, rising fiscal pressures and heightened geopolitical uncertainty, the demands placed on the budget—and also, thus, on the parliamentary budget office—continue to grow. These developments reinforce the need for a strong and independent institution that can help Parliament and the public understand fiscal choices.

    To support the parliamentary budget office's continued resilience and effectiveness, the review identifies five priority areas for focused improvement. These relate to leadership appointments, access to information, quality assurance, communications, and prioritization and productivity. The parliamentary budget office has already begun taking steps in several of these areas. Advancing this work will help ensure that it continues to deliver high-quality, trusted analysis that empowers understanding, supports informed debate and strengthens confidence in Canada's fiscal governance.

    The PBO has indeed been influential since its inception, but its most important contribution is likely to lie ahead. Further strengthening it now will equip Parliament and the public with the independent analysis they need to navigate the fiscal choices that will shape the years to come.

     I look forward to your questions.

     Thank you very much. We appreciate that.

    We'll start with Mrs. Jansen for six minutes, please.

     I hope you don't mind, but I want to go back to the esteemed PBO for a question.

    If we permanently increase defence spending by tens of billions of dollars, that money comes from the same pool of tax dollars that fund health transfers, seniors' benefits and support for families. That spending comes out of the same pot as every other federal priority. If we choose to borrow to finance it, then, on top of that spending itself, interest costs will rise as well. That further reduces the room available for everything else. Could you explain how borrowing for such an enormously risky project will impact affordability for Canadians?

     In terms of increasing defence spending—more broadly, you mentioned additional deficit financing—there are other options available to the government as well. They include finding additional revenue sources, as well as potentially transferring or reducing spending in other areas and reallocating that money to additional defence spending. That's obviously something that we see now as part of the CER, the government's review, targeting $60 billion in existing operating spending and redeploying a good part of that to other areas, of which a good part ends up being defence.

    In terms of the impact of additional or increased borrowing on affordability, the path would be, potentially, primarily through interest rates. To the extent that the Government of Canada needs to, or chooses to, substantially increase its borrowing, potentially there's an increased cost associated with borrowing that money, and interest rates end up being higher. As a consequence of that, the government itself potentially needs to.... Obviously, it takes money away from other areas of spending. It also competes with other people in financial markets, so to the extent to which the government is out and needs to pay more, it pushes up borrowing costs for everyone. As those borrowing costs increase—for your mortgage, for your auto loan, for your line of credit—it definitely places pressure on affordability.

     I have another question, in regard to the way in which this money is requested. As I understand it, they haven't explained where they're going to spend all this money over the next however many years. It's just not clear. What are you getting? What are you buying?

    I was thinking that it's kind of like a business, such as a farm, going to the bank. I go to the bank and say, “Hey, by the way, over the next 10 years, I'm going to spend this many millions of dollars. I don't know exactly where I'm going to spend it. I can't tell you yet, but it's going to be transformative and it's going to catalyze growth.” I don't think my bank will give me money without a bit more detail.

    How is it that we as Canadians actually have to accept this way of doing business?

     What I'd say is that we do have some detail. To give National Defence credit, they do share with us, every six months, a very comprehensive Excel workbook with all their planned capital spending over the next 20 years. It certainly does not reconcile up to the full NATO 5% commitment, but whatever information the government has available on the defence acquisition side, they are sharing it with us and have shared it with us in the past.

    To speak to the gap you identified—that we have some information but not everything—ultimately, everything needs to go through Parliament. While the government did table a defence policy document last week that does not provide all the underlying details, not a cent of public money can be spent in these areas unless they come through you. They come through this committee. It's appropriated by Parliament.

    And yet, today I think we're kind of hearing that there are things we won't know and will have to vote for before we actually get those details.

     In the case of vote 50, that is the case. If parliamentarians are comfortable with providing additional discretion in vote 50, appropriating the $1 billion that will be managed by the Treasury Board Secretariat for defence and security, and then reported back on at some future date—

     It's kind of like the farmer going to the bank and saying, “I need this much money, and I'll let you know later what it is I'm buying.”

    Well, if you're going to the bank as a farmer and you've been farming for 30 years and you know your banker—you have a good relationship with them and your kids have gone to school together—potentially there's a bit more discretion provided by the bank. Again, I'm not paid to defend the government's structure.

    You did sound a little skeptical, though, about the size of what they're trying to do and the scope of what they're trying to do.

    I think it's a dynamic environment and we don't have all the details.

    I would also say that, in the specific case of vote 50, there's a reason why it stands out. It's because the rest of the approval process looks very different. So—

    You did mention there was something like this before and it didn't last very long.

     The Parliament of the day and parliamentarians at the time were not comfortable previously with Treasury Board vote 40. The context was different. Parliamentarians were different. There was a different composition.

    I will look forward to seeing what the reaction is in Parliament this time.

    I know this parliamentarian loves transparency. We like to know what we're voting on. It's very painful for things to be hidden from us and to vote for something we perhaps will really disagree with.

    I'm wondering about the re-profiling.

    I'm sorry, but that is our time.

    We'll go to Mr. Osborne.

    Go ahead for six minutes, please.

     I will share my time with my colleagues. I have two questions and if—

    I'm sorry, but Ms. Khalid told me Mr. Osborne is up.

    Okay, go ahead.

    I apologize to the official from OECD. I intended to ask her some questions, but based on the last line of questions, I've changed my mind. This question is for the Parliamentary Budget Officer.

    Vote 50 is a contingency fund. Do you trust the officials at Treasury Board? They have to approve any of these allotments. They have to analyze any requests out of this fund. In the changing geopolitical world that we are in and with the need to expand our national defence, I understand why we have a contingency fund, vote 50. I absolutely understand.

    Based on the actions of this government.... As one of our members identified previously, we have the largest foreign direct investment in Canada in 18 years. That foreign direct investment, in large part, is attributed to breaking down interprovincial trade barriers, building new trade corridors and national defence spending, I would think.

    Going back to my question, Treasury Board officials have to analyze any requests out of vote 50. Is that correct?

    To the best of my knowledge, yes.

     Treasury Board officials will determine and justify whether or not a request for this funding is justified.

     To the best of my knowledge, yes.

    I think this is a transparent process, because this funding will eventually go to estimates and be viewed by you, be viewed by parliamentarians, be viewed by the Auditor General. This is not something that we're hiding behind closed doors, saying we're going to make decisions without anybody knowing. Is that correct?

     I would say, looking at vote 50, that the legislative language looks very similar to Treasury Board vote 5, which has been there for a very long time. In that context, in that situation, parliamentarians have determined that they're comfortable providing the government with discretion around $1 billion in Treasury Board vote 5 to deal with urgent and unforeseen circumstances, ceding some of their legislative control and authority to the government in that specific area. It's up to parliamentarians to determine whether they're comfortable doing the same thing with respect to Treasury Board vote 50.

    The transparency is there. One bead of the string of pearls leads to the next. This is all reported. It will be reviewed by you, by the Auditor General and by parliamentarians.

    Yes, and there are additional ways outside of the estimates process to further enhance transparency. I seem to recall that in the past, going back about a decade, when the government used similar centralized votes previously.... They can report on the actual allocation outside of the estimates process as they see fit. If there are concerns around transparency, obviously there are further options.

    As I mentioned earlier, I've never seen a government official come to the table, after receiving a recommendation from a parliamentarian to enhance transparency around financial reporting, and say no.

     Thank you. I appreciate that.

     I will now go to the OECD with my questions.

    You have a minute and a bit.

     Please go ahead.

    Thank you.

     Can you briefly explain the methodology used by the OECD to evaluate independent fiscal institutions and how consistency is maintained across country reviews with different political and institutional contexts?

     Thank you for that question.

     Indeed, we do have a framework that we use for each and every one of these reviews. It is guided by the OECD's principles for independent fiscal institutions, and that forms the core of our review framework. We look at our principles and the way in which the institutions align with these principles, and that allows us to have a common assessment framework. We have a database that shows how all of the institutions perform across different aspects of these principles, which we can use to compare the institutions internationally.

     Thank you, Mr. Chair.

    You have 20 seconds.

    Please pass it on to my colleague Pauline when her turn comes.

    Okay.

    Madame Gaudreau, go ahead.

    Thank you very much, Mr. Chair.

    I have a question for Ms. Nicol.

    Since you are in Paris, I will speak French.

    I just want to verify that you can hear the interpretation. I will take a moment so you can make any adjustments. Is it working? Yes. Great.

    I would like to discuss the recommendations and findings in the report. I would like to know more about transparency. First, I want to hear from you and then we can have a discussion.

    What about transparency at the Office of the Parliamentary Budget Officer?

    Thank you for the question. I will respond in English.

     Transparency is one of the nine areas where we have principles for independent fiscal institutions. As these institutions are promoters of transparency, they have a strong duty to act as transparently as possible.

     In fact, we find the Canadian parliamentary budget office to be very transparent by international measures. These sorts of measures include having all the reports published on their website, having their own website, making sure they are open to questions about their methods and models, and presenting their work to Parliament. By these headline measures, the parliamentary budget office in Canada stands as one of the more transparent institutions across the OECD.

    Of course, there are always areas that can be improved, and some of these were highlighted in our report. We felt there could be greater transparency on the peer review process, for example, the quality assurance process, which, as mentioned earlier by the interim Parliamentary Budget Officer, was something that was very much in practice in the office but hadn't been formalized on paper and, in terms of transparency, communicated with different stakeholders.

    There are always ways in which these institutions can further improve their transparency. Indeed, we've highlighted ways in which we hope the parliamentary budget office will take this forward in the coming years.

    Thank you very much.

    Granted, transparency can always be improved, but what about the OECD's assessments of the disclosure of the information the Parliamentary Budget Officer needs to do his job properly and provide the information that parliamentarians want to obtain?

     Do you mean access to information?

    Yes.

    I will take the time required to tell you what I mean. Transparency refers to the disclosure of information that will be presented once the data has been compiled, but it also includes the disclosure of work tools used to produce reports.

    However, we do not always have the information the Office of the Parliamentary Budget Officer needs to provide information. That is why I think it is important to define transparency. Do you have any analyses regarding data collection?

     There are different areas in which we had analysis as part of this review. One of the areas we looked at was the way the office is able to access information. The other side of the coin, as you rightly pointed out, is the extent to which it promotes transparency in its work. On the information-gathering side, we found that, in this area, the institution has been strengthened in recent years. We found, in particular, that the 2017 legislation helped strengthen access to information. However, there is still some way to go, particularly in access to tax microdata, which doesn't enable the PBO to do timely and transparent analysis in this area. We also felt there was some space to improve access to information by establishing memoranda of understanding with government departments on a routine and consistent basis.

    In terms of how it presents the information, we felt there could be greater consistency in the way methods are documented by the institution. There is no question that if anyone asks something of the institution, it is open with its methods and models. It's never trying to hide the way it's done the work. However, it's certainly best practice among such institutions to ensure that there is consistent presentation of methodology across different outputs. That's something we'd like to see continue to improve in the coming years.

    Thank you very much, Ms. Nicol.

    Thank you, Mr. Chair.

    Thanks.

    We'll do a three-minute round and then finish up with one minute for Madame Gaudreau.

    Mrs. Block.

     Thank you, Chair.

    Thank you, Ms. Nicol, for joining us today.

     I want to express my gratitude to the Conservative government that, back in 2006, thought it was very necessary to create the Office of the Parliamentary Budget Officer. I recognize that there were reforms in 2017 that strengthened the office.

    I want to thank Mr. Jacques for calling for a review of his own office in order to get a good sense of where, perhaps, improvements need to be made.

     I want to turn to the recommendations you provided that require legislators to take a look. Your targeted recommendations are in regard to safeguarding the independence of the Parliamentary Budget Officer, as well as sustaining performance. We're all pretty proud of the fact that our parliamentary budget office is ranked number one in the world when it comes to being an international leader in fiscal oversight.

    I want to ask about leadership appointments. Could you elaborate on what we could do here in Canada to ensure that we set clear arrangements for timely appointments, remove reappointment options and introduce structured interim arrangements with cross-party backing?

     Indeed, I think that in order to strengthen the leadership appointment process, it is likely that there would need to be legislative amendments. The challenges we're talking about have really arisen because we've seen persistent delays in permanent leadership appointments in recent history. This presents risks for the PBO's independence and stability.

    We would like to see changes to the legislation that, for example, stipulate that the appointment must be made within a certain period in advance of the outgoing Parliamentary Budget Officer. For example, for Portugal's Public Finance Council, it's in legislation that the appointment of their leadership must take place up to 60 days before the end of the current term.

    There is a precedent for this timeliness to be put in legislation. Indeed, within the Canadian government's own guidance on Governor in Council appointments, it says that only in exceptional circumstances should there be interim appointments. Have something within the legislation that sets out that it should be timely, and then also stipulate some criteria for any interim arrangements. What sort of qualifications would you look for anyone to have if they are going to fulfill that interim role?

    Something that could be quite interesting for you to consider would be—

    I apologize. I have to interrupt. We're past our time. Can I get you to wrap up the response?

    We'll then go over to Ms. Rochefort.

    Thanks, Ms. Nicol.

     No worries.

    It could be interesting to look at the Ontario office, where they have someone within the office who steps up as the parliamentary budget officer if there is no appointment in time. That's an interesting model that you can look at, at the national level in Canada.

     Ms. Rochefort.

    Thank you so much.

     Your review noted that the PBO's impact is closely tied to media engagement, and it recommended a more formal communications strategy. I would welcome your views on when visibility becomes a risk to the perceived neutrality of the PBO. Our PBO mentioned that they've released a communications framework. I was wondering if you had seen it or reviewed it, and if you felt that it addressed this particular issue of visibility versus neutrality. That's my first question.

    Here is my second question. I'm not sure, Mr. Jacques, how many times you've come before our committee, but I counted 14. I don't know if that's correct. I would welcome our guest's view on whether she views that as a concern vis-à-vis the recommendation in the report related to independence. Is there any risk of that contravening the issue of independence?

    I turn that back to you. Thank you.

    In terms of visibility and neutrality, it is true that when you are very visible as an institution, you are increasingly in the political crossfire. This makes it increasingly difficult to be seen as neutral, particularly if you have a government that is in power for a number of years and you're not able to show that you're applying the same scrutiny, regardless of the party that is in power.

    We see that when these institutions are very visible, it's important that they are strong institutions and that their independence is highly guarded. That means having a robust and strong legislative framework. That's one of the reasons why we feel it's so important that these chinks in the armour of the parliamentary budget office in Canada are addressed. The ones we have pointed out in our review are particularly important to address, given that the parliamentary budget office in Canada is so exposed in the media.

    Nobody we spoke to ever doubted the neutrality of the office and the fact that the office is non-partisan. That's something that came across very clearly in the review. That shows us that they've been able to walk that line between visibility and neutrality very well in recent years.

    I've forgotten what your second question was.

     It was concerning the 14 appearances before this committee.

    Give a brief response, if you can.

    It's fantastic that the Parliamentary Budget Officer is engaging so well with parliamentary committees. This enables really informing the debates and for parliamentarians to meet in a way that is only helpful for Canada writ large.

     Thanks.

    Next is Madame Gaudreau for one minute.

    Ms. Nicol, I feel quite fortunate and I want to thank you for joining us. You have provided valuable information.

    I would now like to give my remaining seconds to Mr. Jacques, so he can continue the discussion we had in the last 30 minutes.

    I think that, here in Canada, we are fortunate to have parliamentarians who are very interested in facts and figures. I think Canadians are well served by you, the members of Parliament. Debates and policies are always linked to facts and figures. This makes me very confident about Canada's future. I am also proud to be Canadian.

    Thank you very much, Mr. Chair.

     Thank you very much.

    Ms. Nicol, we will excuse you. Thank you for joining us today. It's greatly appreciated. Thank you for your report and the affirmation of the great work our PBO does. It's greatly appreciated.

    Mr. Jacques, thanks again for being with us. I think this is your 30th appearance this week with us, and your final one as interim PBO. We truly appreciate all of the work that you've done for Parliament, especially for this committee. You truly are a great friend of this committee. We sincerely appreciate it. We look forward to seeing you again in whatever capacity follows you next.

    Colleagues, don't go. We need to approve two budgets, please.

    There's the one for our briefing with our interim PBO on the supplementaries today, which was for $500. Is that approved?

    Some hon. members: Agreed.

    The Chair: Thank you.

    The other one is for supplementary estimates (C), vote 5c for Canada Post last week. Is that approved?

    Some hon. members: Agreed.

    The Chair: That's wonderful.

    Mr. Jacques, before you go, I just want to follow up on vote 50. My favourite quote is from King Edward I, when he called the model Parliament and said, “what touches all should be approved by all”. It's not “what touches all will be looked at later in the public accounts”, so I think vote 50 should be approved with full information provided to parliamentarians first, not “give us $1 billion and we'll get back to you”. I wanted to put that out there toward you and everyone else watching online.

    Again, you have my sincere appreciation for everything you've done. I greatly appreciate it.

    We are adjourned.