FINA Committee Meeting

    I call this meeting to order. This is meeting 119 of the Standing Committee on Finance. Orders of the day, pursuant to Standing Order 81(4), we are dealing with the main estimates 2013-14, votes 1, 5, 10, L15, 25, 30, 35, 40, and 45 under Finance, referred to the committee on Monday, February 25, 2013.

    Colleagues, we have officials here from the Department of Finance. We want to welcome you back to the committee to discuss main estimates.

    We have Sherry Harrison, assistant deputy minister, corporate services branch. My understanding, Ms. Harrison, is that you'll be doing the opening statement for the officials, so if you could present the opening statement, and if you could introduce your colleagues at the table, then we'll have questions from the members for the officials.

    Thank you, Mr. Chair.

    My name is Sherry Harrison and I am the Assistant Deputy Minister responsible for Corporate Services at the Department of Finance. With me today are officials to assist in responding to your questions on the 2013-14 main estimates for the Department of Finance.

    The main estimates for 2013-14 total $87.6 billion. Over 99% of total departmental requirements, or $87.5 billion, relate to statutory items that have already been approved by Parliament through enabling legislation. The statutory items are displayed in the estimates document for information purposes and will not be included in the appropriation bill.

    Within the statutory forecast, there is a net increase of $2.4 billion over the 2012-13 main estimates, with the major contributing factors being: a $2.7-million increase in transfer payments to the provinces and territories resulting from the legislative funding formulae; a $1.5-billion increase as a result of transitional assistance payments provided for under the comprehensive integrated tax coordination agreements with Quebec and Prince Edward Island; a $1.3-billion decrease in interest on unmatured debt as a result of the interest estimate being revised to reflect the decrease in the average forecast of interest rates; a $0.4-billion decrease in other interest costs as a result of the interest estimates being revised to reflect the decrease in the average long-term bond rate; a $10-million increase for payment to the International Bank for Reconstruction and Development for the development and implementation of pilot projects to demonstrate the role of innovative market incentives in agricultural applied research; and a $6.5-million increase for the purchase of domestic coinage reflecting the savings identified as part of the spending review offset by net redemption and administration costs due to an accelerated profile at penny redemption rates, as well as increased cost estimates for demand and metal price increases reflective of recent growth projects for overall coinage.

    The voted grants and contributions include a decrease of $210 million resulting from the cessation of payments to Export Development Canada for debt relief by the Paris Club.

    The operating vote reflects a net increase of $9.4 million over the previous main estimates. The increases are mainly due to $10 million for the department's relocation to 90 Elgin Street in 2014-15, $6.8 million for government advertising programs, and $1.2 million for collective bargaining. The increases were offset by decreases of $4.2 million related to savings identified as part of the budget 2012 spending review, and $4.4 million for various sunsetting funding related to personal income tax initiatives, corporate finance and asset management, the G-20 framework working group, GST technical issues, and maintaining the strength of Canada's financial system.

    We would be pleased to address questions that the committee may have on these main estimates.

    Thank you.

    Thank you very much for your presentation.

    We will now continue with questions from members, starting with Ms. Nash.

    Thank you, Mr. Chair, and good morning everyone. Thank you for being here today.

    My first questions are generally on operating expenditures. The main estimates state that operating expenditures will be increasing by $9.4 million overall. Is that correct?

    That's correct.

    Looking at some of the details, budget 2012 meant a $4.2-million cut, but I noticed that advertising is up by $6.8 million. Is that $6.8-million figure correct?

    From main estimates to main estimates, that is correct. Last year, it was $3.2 million and this year it's $10 million in the main estimates.

    Okay, so it's a $6.8-million increase. Can you tell us more about that? Why does the Department of Finance feel the need to advertise itself in a way that we would see a $6.8-million increase in advertising?

    Mr. Chair, could I have my colleague Mr. Catta come up to talk about the specifics of the advertising item, please?

    Mr. Catta, go ahead please.

    The $6.8 million is for economic action plan advertising, which is essentially to inform Canadians about the measures that are contained in the economic action plan. It's also that they not just be informed, but that they can avail themselves of the benefits of these various measures.

    At this point in time, in terms of how the $10 million will be spent this year, decisions haven't yet been taken. This will be determined over the coming weeks and months. But the general purpose is economic action plan advertising.

    The estimates specified the following objective, “government spending is focused on results and delivers value for taxpayer dollars”.

    Do you feel that the so-called economic action plan advertising is delivering that value for taxpayer dollars?

    I think there's a couple of dimensions to this.

    The first is, as you well know, the economic action plan is at the heart of the government priorities. It is sort of a major instrument to generate economic growth, jobs, and so forth. It is a key piece and a key priority of the government's agenda. So from that perspective, it is legitimate that the government would want to communicate and would want to let Canadians know about these priorities.

    The second aspect is that through our own research that we've done—public opinion research, focus groups, surveys as well—Canadians have indicated they want the government to inform them about the government's priorities and programs.

    These two objectives, if you like, meet in some way through advertising, if I can say so. Advertising is part of a communications tool kit that is available to communicate with Canadians about the government priorities.

    Really? I mean, it's interesting. I've had a lot of feedback from Canadians who say there's nothing specific in those ads that tells them about specific programs or services that are of benefit to them, but they see it as government promotional advertising. The ads talk about good government, and that's certainly in the eye of the beholder. I have to say there's been tremendous backlash—and I'm speaking primarily of locally in my community—from folks who have said they feel the government is engaging in propaganda on their tax dime.

    Has there been any consideration of that, given that surveys have shown very diminished returns for the effectiveness of this advertising?

    Just give a brief response please.

    No. Our own research shows...and in fact after each sort of advertising campaign, we are required to evaluate the results and the effectiveness. What's interesting is that over the last two or three years, the awareness of the economic action plan has risen from about 40% or 45% two or three years ago to close to 65%. That's what our results show, which is quite significant. So from that perspective, it shows that to some extent it resonates with—

    Okay, thank you. Thank you, Ms. Nash.

    We'll go to Ms. Glover, please.

    Thank you, Mr. Chair. Welcome to the officials, again.

    I have to say that I have the exact opposite happening in my riding. When I go places, people are thanking us for making them aware of what the government has done so that when they file their taxes, they can actually take advantage of things like the children's fitness credit, the hiring credit for small business, etc. Without the advertising, many of them say that they wouldn't know about it. The hiring credit just comes right off, so it's a wonderful tool to be able to advertise and teach people what it is they're going to be saving as a result of the measures taken by this government.

    Talking about savings, I note that in budget 2012 our government had outlined that it would be looking at some areas of savings. I believe there are some savings reflected in the main estimates from that. Could you tell us about the identified savings as a result of budget 2012?

    In response to that, maybe I'll focus on the voted operating reductions.

    The department has a reduction of $4.4 million reflected in the estimates with respect to operating savings. There are three areas within the operating vote that we have focused on.

    We are streamlining our internal services. We've taken a number of measures to consolidate some of the functions and to realign some of the activities. On the policy and research side, we're consolidating some of our research and analysis function on the policy side to generate savings. We also have some small savings in our operating costs related to better use of information technology. For example, in our recruitment programs there's a greater use of Skype, and online applications and such.

    Excellent. Thank you.

    I want to talk about the transfer payments to the provinces. I note that in the main estimates there's a $2.7-billion increase in transfer payments to the provinces and territories. I think this is as a result of the legislated funding formula. I'm wondering if you can explain to the committee how the funding formula has changed and how this change will affect the provinces.

    There aren't actually any changes this year with respect to the funding formula for major transfers to the provinces. There are some legislated growth rates with respect to the major transfers. First of all, in the equalization program, the total entitlement grows by a three-year moving average of the gross domestic product. The Canada health transfer grows at 6%. The CST grows at 3%. Territorial formula financing, which provides similar benefits to the territories as equalization recognizing their special circumstances, grows with respect to a legislated gap-filling formula between a proxy for the expenditures that the government needs to provide services and a proxy for its revenues. Those growth rates in those four major transfers are the lion's share of the growth in that transfer payment.

    That's very good. It's great to hear about the increases in transfers. How will that help our provinces and territories?

    These transfer payments provide significant funding to provinces and territories with respect to equalization. It's an unconditional grant whose objective is to enable provinces to provide relatively comparable services at relatively comparable levels of taxation. The CHT is funding for health care for provinces. The CST is for social programs with a focus on education, child care, and services such as those. TFF, territorial formula financing, is a lot like equalization, but in the territorial context. It is actually the vast majority of government revenues for the three northern territories.

    My province of Manitoba is one of the only provinces that still gets the total transfer protection. I must note that I've been flooded in my office because as we continue to increase funding for the provinces, we have an NDP government in the province of Manitoba which just raised the provincial sales tax. So there's lots of disappointment out there with regard to the NDP government in my province.

    Are there any comments on that from the officials?

    We'll go to Mr. Brison, please.

    Thank you very much.

    Mr. Catta, you were speaking of the public opinion research that the Department of Finance commissions to gauge the effectiveness of your advertising. You commissioned Ipsos Reid to conduct a survey on the effectiveness of the jobs and growth campaign using the Government of Canada's advertising campaign evaluation tool. The results were that more than two-thirds of Canadians did not see any economic action plan during the survey's timeframe. Of those who could remember the ads, 92% said they did nothing as a result of the ad. So how can you say they are effective when 92% of the people who actually remember the ads said they did nothing as a result of the ads?

     As I said previously, there are two dimensions to the research we do. There's the level of awareness of the economic action plan. In terms of the actual action, you're right to point out that the numbers are not necessarily high. At the same time, you will avail yourself of the benefit to receive more information on the basis that you are seeking that information. The fact that you're made aware of the economic action plan is one part, knowing that the government has a plan. The second aspect, which would make sense, is that there would be fewer people who would then take action to avail themselves.... They could also seek information through other means, for example, visiting the economic action plan website. Our research is one measure of the effectiveness of our campaign.

    Yes, but you said your research validated the effectiveness of the advertisements. I'm saying that the research you commissioned did not validate the effectiveness of the campaign; in fact, it was quite damning. More than two-thirds didn't recall it, and of those who did recall it, 92% said it did not affect their behaviour; it did not impact their decisions.

    Again, I go back to what I pointed out earlier. Our research has shown that Canadians do want the government to communicate about its priorities, and that's what the Department of Finance is doing. The economic action plan is an extremely important piece of the—

    Do you have a part of the survey where you ask Canadians questions such as, for instance: Do you want the government to communicate or advertise its priorities? Do you attach a price tag to that? Do you ask whether it's worth $100 million of tax revenue? Do you provide them with the opportunity to weigh it against the actual cost to the treasury?

    Actually, the research that we do is accessible through the National Archives site. Within six months of the research that we do, it has to be posted and made public. You can track the evolution over four to five years, and it includes the data information questionnaire.

    To your question, and I don't have the exact wording with me, it's more of a generic question as to something like, do you believe it is important for the government to communicate?

    Have you ever considered the idea of asking a question such as, for instance: Which would be a priority for you in terms of government investment—government advertising to promote its message, or investments in food safety?

    I'm just curious. Have you considered maybe bringing Canadians into the tent a little bit and giving them an opportunity to opine more granularly?

    No, we haven't asked that question specifically.

    Again, our research focuses specifically on the advertising campaign itself. There's a bit of a set formula to those kinds of evaluations. The other research is, for example, pre-budget research that we do in terms of gauging people's sense of priorities for the upcoming budget. They are pretty big-picture types of questions.

    One minute, Mr. Brison.

    I'd like to ask a question on OSFI's funding. OSFI's requested funding in the 2013-14 main estimates is the same as that requested in 2012-13. At the same time, the RPP indicates that there will be a need for new resources, or ought to be, due to staffing, technology demands, or changes to the Basel capital framework.

    How do you expect OSFI to meet these increased challenges and responsibilities without any increase to its resources?

    I believe we have somebody from OSFI here who can speak to their main estimates.

    I'll ask you for a brief response, please.

    OSFI is mainly funded through assessments that we get from the financial institutions and the private pension plans that we regulate. The fact that the amount in the main estimates is flat is the Office of the Chief Actuary is actually using that appropriation. So, the increase that you see in the other parts of the main estimates is funded through our base assessment in the financial institutions and the private pension plans we regulate.

    Thank you.

    Thank you, Mr. Brison.

    We'll go to Mr. Adler.

    Thank you, Chair, and I thank the officials for being here today.

    I want to begin by saying that we on this side believe in transparency and accountability, and so we are in favour of informing the Canadian people of the government services we offer so they can take advantage of them, unlike the members on the other side, who clearly do not believe in such a concept.

     I would like also to mention that in terms of provincial spending on government advertising, it's the governments of Ontario and Manitoba that lead the way on the provincial side. It's a Liberal government in Ontario and an NDP government in Manitoba.

    I've noticed that the main estimates are presented in a little different way this year. Could you explain the difference, and why they are different from previous years?

    There are some changes in format. The organizations, for example, are listed alphabetically rather than by portfolio, just for ease in trying to find an organization, but within this there is a little bit more graphical information.

    For all departments, the statutory items, which as I indicated in my opening remarks have been previously approved by Parliament through the enabling legislation, are summarized in the text. There is more information given on the voted appropriations, which for the Department of Finance are our operating costs and our grants and contributions costs.

    You have more information. You have the 2011-12 actual expenditures, as well as last year's main estimates, plus what was approved in the supplementary estimates, which is new this year. You can see last year's full picture of the estimates year compared with where we are this year in the main estimates. There's a little bit more information on the voted portion. The statutory information is still there, but most of it is online on the Treasury Board site.

    This would help with transparency and being more open to the Canadian people.

    I would say there is certainly much more estimates and expenditure data in these estimates than in prior years.

    I also see there is a decrease in interest costs in a few of the items, such as unmatured debt. Could you comment a bit on that?

    Perhaps my colleague could do that.

    The interest costs on unmatured debt are lower because, as we do an average of the private sector forecast, their interest rate forecast has been lower compared with what was in the last estimates.

    What would you say has caused these lower rates?

    I deal with these. I can't speak for the private sector economists, but their expectations for interest rates going forward are generally lower, both in the short term and the long term.

    These are an aggregate of the—

    We take an average.

    Do you take this from private sector economists?

    Yes, the Department of Finance surveys for the budget and for the fall update a number of private sector forecasts for their expectations on interest rates, gross domestic product growth, etc. We take an average of those results and use that as our baseline forecast for public debt charges, which in turn affect the statutory estimate here.

    I see.

    Just switching gears a bit—

    You have only one minute.

    One minute, okay.

    We all know the penny went out of circulation recently. There are some planned savings with respect to that. How much would the savings be?

    Let's hear about that first, then if there's time, we'll move on.

    Thank you for that question.

    Yes, the government stopped producing the penny last May 4, and on February 4 of this year we made the transition to essentially stop circulation of pennies and start withdrawing them from circulation.

    As committee members may know, it was costing the government 1.6¢ to produce every penny, so there was a net loss. As a result of not producing the penny, they will be saving $11 million each year.

    What we're seeing here in the estimates is that there is an up-front cost. As people bring back their pennies, they're compensated for the full value of the pennies. What we've seen is that people have been returning their pennies faster than anticipated, so we're seeing a bit of a blip on the front end. That's in part due to the success of many charitable campaigns that have been mounted in response to the penny elimination. That will tail off over the coming months and years.

    Is there any salvage recovery from the pennies?

    Yes. The pennies, when they come back, are destroyed and melted, and there's salvage value for that.

    Thank you, Mr. Adler.

    Mr. Caron, you have the floor.

    Thank you very much, Mr. Chair.

    I will continue along the same lines as Ms. Nash and Mr. Brison's questions.

    You talked about evaluation documents and the effectiveness of advertising. Could you forward those documents and the evaluation of advertising costs to date to the committee? If you have an effectiveness or quality report for costs, we would also appreciate receiving a copy.

    Yes, absolutely.

    We could certainly submit those documents to the committee.

    Thank you very much.

    I am not sure if you are the right person to answer the next question.

    Since 2006, there has also been a huge effort to rebrand the government's trademark, if you want to use commercial terms. It has been quite significant in terms of websites and the overall image.

    Could you provide us with an estimate of how much this rebranding has cost since 2006, or any recent figures at least? We still hear about websites and various materials that are being changed, but only in terms of appearance, not substance.

    I can only talk about what the Department of Finance is doing.

    Clearly, I cannot speak for all the departments. In terms of rebranding, as part of those ad campaigns and together with the Privy Council, we did indeed develop a trademark around the economic action plan.

    From a communications point of view, I could tell you that there is a logic behind that. Given the climate, whether it be from the media or from outside, it is important for the government to be able to communicate clearly and effectively about the economic action plan or any other issues.

    My time is limited.

    So please submit the documents on costs as well and, if you have them, the assessment documents on the effectiveness of rebranding, especially for the Department of Finance.

    Sure.

    I would also like to have information on the transition of the budgets in the economic action plan.

    Okay.

    Thank you very much.

    My next questions will deal with infrastructure. I am not sure if the people around this table can answer them.

    I believe we have someone here from EDCF, or is this a PPP Canada question?

    No.

    In fact, it has to do with the Parliamentary Budget Officer's conclusions about the infrastructure programs and the investments that have been made.

    You have no doubt become familiar with the Parliamentary Budget Officer's report on infrastructure investments. One of the conclusions in the report is that, since 2007, for most infrastructure programs, specifically Building Canada, $6 billion of the amount earmarked in the various budgets was never spent and now they have expired,

they were lapsed.

    Could you confirm the Parliamentary Budget Officer's conclusion?

    I don't have the report in front of me. It might be a better question to pose to Infrastructure Canada. I could say that is something you normally see with infrastructure programming and infrastructure funding. Very often there are delays either in reaching agreements with provinces to commit funds to specific projects or, if you're dealing with large complex projects, in the environmental assessment front-end design phase as well as in project execution.

    I think a good example is the way in which funds under the 2007 Building Canada plan are being used to pay for the Ottawa light-rail project. As you're aware, the final agreements with the proponent for that project were signed this year.

    I can understand it might be normal to some extent, but we're talking about 35% of all the funds that were allocated in the budgets not actually being spent. Is that normal or is that over and above what we usually see in terms of lapsed funds?

    It's a question you would want to pose to Infrastructure Canada officials. At the beginning of the previous plan there was roughly $4 billion that belonged to the previous generation of programming, so to the Canada strategic infrastructure fund and other infrastructure funds, which had not been spent in those prior periods and wound up being spent in the period that followed.

    Mr. Caron, you have 30 seconds left.

    I understand that this question might be more appropriate for Infrastructure Canada officials, but the fact remains that those investments are a major part of the economic action plan.

    How can we get the government to be accountable for its promises with respect to investments that were intended to stimulate the economy but did not actually do so? We now see that the government announced the $6 billion once again. That amount was actually never invested in previous budgets.

    I guess the only thing I can say is that when you have a large number of complex projects for which the federal government doesn't control the timelines, particularly for the execution of those projects, it's not surprising that you would see amounts at that scale. A lot of them may be dependent on a small number of large projects being delayed, and so forth.

    Certainly, I think every dollar that's ever been committed by the federal government that has been allocated through those programs eventually has been spent.

    Okay. Thank you.

    Thank you, Mr. Caron.

    Mr. Hoback, go ahead, please.

    Welcome, witnesses. It's great to see you here this morning.

    I'm going to ask you about some of our international funding that's included in these estimates. You stated that there's a $10-million increase for the World Bank, which is to help private investment in agricultural research.

    I'm curious. Could you give us some details of what that research may be and basically how the taxpayer can make sure that money is being used properly?

    Thanks for the question.

    I had this question at the Senate last night. I don't know if I hit a home run, so I'll try to explain it a little bit better.

    This is a payment to the World Bank, so the International Bank for Reconstruction and Development. Essentially we're calling it a pull mechanism. We're working with other governments, specifically the U.K. and Australian governments, essentially to create a prize structure to incent the private sector to play a part in addressing some of the agricultural productivity challenges in the developing world.

    I have a good example for you. Right now we're working with these partners to structure a prize to incent private sector players to come up with a new drought-resistant seed variety for east Africa. Where a normal push mechanism would put money into research and development and we would hope these researchers and developers would come up with a solution, this essentially is going a priori a prize structure and then crowding in private sector investment to come up with a solution to essentially unlock or unleash the prize in the event they come up with such a solution.

    So, in the example, if they do come up with a seed variety that works and has a demonstration effect, then the prize would effectively unleash itself.

    How do you go about deciding who wins the prize? Is a set of criteria laid out?

    We're working with experts like the UN Food and Agriculture Organization, essentially global experts in this space, to construct the prize, to go through a design phase. Right now were in that indicative period. That will be put out for tender globally, and with set criteria and benchmarks and certain adoption benchmarks to be able to demonstrate the effectiveness of the product.

    Is it too early to see what the uptake is from the private sector in looking at this type of program?

    Yes, generally, right now we're in a fundraising period. We're trying to compel other donors to participate, and right now we're working with the Government of the U.K. and the Australian government and the World Bank and other UN institutions to essentially go through a fundraising period. So it's a little too early; we're still in a pilot phase and constructing these different program proposals.

    If I understand this right, then you'll lay out the criteria of what you want to see for a result.

    Exactly.

    Then you'll lay that criteria out there and say that if X, Y, Z can go about doing the research to meet that criteria, whoever gets there first, there's a monetary reward for doing that. Is that the way to sum it up?

    Exactly. The tangible example, again, with this seed variety technology is that we're looking for so many hectares of planted seed varieties in east Africa—so it's Sudan and Somalia-type geography—that would actually demonstrate effectiveness, and then we would pay out the prize based on some independent assessment that this actually worked.

    That's really bright. It's a great idea.

    Yes, it's innovative financing in the official development space. So, again, contradictory to the general pull mechanism, this is actually trying to crowd in private sector financing to leverage its innovation and expertise.

    That's excellent. That's really good.

    The main estimates have a reference to statutory payments to the IDB for reconstruction and development. I'm curious about what that includes and what that's going to be used for.

    Thank you again for the question.

    The Minister of Finance is the Governor of the World Bank and by virtue of that, we're going to a general capital increase of that institution. All 180 contributing members to the World Bank are now asked to contribute share capital to grow the size of the bank.

    The current portfolio of lending of the bank is about $200 billion, and that will be growing to nearly $300 billion over the next five years.

    That growth is based on requirements for just having a bigger capital pool to distribute, or inflation, or....

    Exactly. This is the World Bank. It acts as a banking institution. We contribute share capital. It's able to leverage that share capital with a triple-A standing in capital markets, raise more money, and on-lend to developing world countries at favourable rates.

    Canada is the eighth largest donor in the World Bank, so we're doing our share to contribute this capital base.

    Do you have any examples of programs it would do, just to give us an example?

    Well, World Bank programming is very diverse—

    I guess maybe I'll leave that there.

    Well, in a continent like Africa, sometimes it can compose up to 90% of a sovereign's budget, and that's across infrastructure, health care, and education. The World Bank programming is exceptionally diverse and important.

    Okay, I think I'll leave it there, Chair.

    Okay, thank you, Mr. Hoback.

    Mr. Côté, you have the floor.

    Thank you very much, Mr. Chair.

    I would like to thank our witnesses today for answering our questions.

    It is deplorable that it has been nearly a year since the Minister of Finance appeared before the committee. Last time he was here was on May 15, 2012, discussing Bill C-38. That is really deplorable. That was an omnibus bill and now we are faced with another omnibus bill. It is not as broad, but it is still headed in the same unfortunate direction that the government has taken.

    Let me repeat. I would have liked to see the Minister of Finance or at least the Minister of State for Finance here with us because, after all, those individuals are accountable to Canadians.

    For your part, you must account for the more technical aspects. You clearly cannot be accountable for the government's motivations. That is completely normal.

    First, could you tell me what kind of latitude you have to discuss the figures in the main estimates? Ultimately, how much can you disclose?

    My response to that is we would do our best to respond at the table to inquiries we're receiving from members on the estimates.

    I think we should try to put specific questions and let the officials answer.

    Yes. Absolutely.

    I will certainly address those questions, Mr. Chair.

    In terms of the Department of Finance expenditures in the main estimates 2013-14, the department is asking $5 million in grants and contributions. That is a drop from the main estimates 2012-13. It is a drop of $210 million. Clearly, the drop is the result of stopping debt-relief payments to countries with large debts.

    This is what I would like to know. In main estimates 2012-13 and, by comparison with 2013-2014, which countries have benefited from debt relief payments from Canada?

     I can try to answer that question. Just to position these payments in context, the Government of Canada provides debt relief to heavily indebted and poor countries in the context of our engagement in the Paris Club. We negotiate this debt relief agreement, but our exposures are held by EDC, the Canadian Wheat Board, and the Canadian International Development Agency.

    While the Department of Finance is negotiating the debt relief, we then compensate these organizations because we've just written off their exposure. However, we're now essentially cancelling these payments because the reality is that EDC, the Wheat Board, or CIDA had written down these payments long ago because there was a default or non-performing situation. The writedown was 10 years ago, so essentially the federal government is paying itself to do business, and we thought this was inefficient.

    More directly to your question, last year we provided debt relief to the Democratic Republic of Congo and the Ivory Coast.

    I only have one minute left.

    Is that a move on the Government of Canada's part that is comparable to other creditor countries that are members of the Paris Club or are we the only ones to do so?

    No, it's completely comparable. The Paris Club, which is effectively G-20 representation, has a comparability of treatment for all countries. The Paris Club goes in unison to provide debt relief in the same terms to all countries, and that's effectively at 90%. The Government of Canada chooses to top it up by the additional 10% under the Canadian debt relief initiative. So we're effectively writing off 100% of debts to these heavily indebted and poor countries.

    Okay.

    I will come back to that later.

    Thank you, Mr. Côté.

    Mr. Van Kesteren, please.

    Thank you, Mr. Chair.

    Thank you all for being here this morning. You've provided us with some excellent testimony. We want to thank you for the work you do. Often we don't do that. We fail to realize just how much work is being done behind the scenes. It's very apparent this morning.

     I know Mr. Brison wanted to ask another question but he ran out of time, so I'll do it for him. I'll ask three questions. We're going to have to get Mr. Catta, as I have a quick question for him as well.

    There was a change in the main estimates in the Nova Scotia additional equalization payments. Can you explain how this relates to the new formula for equalization introduced in 2007? That's question number one.

    With the second question, maybe we can just wrap up this important issue about government advertising. Mr. Catta, you've provided us with some excellent information here. I think you've demonstrated the importance well, but are we going overboard? Does this government spend more or less than previous governments in percentage of spending, because I also understand the budget numbers change.

    I don't know whom I can direct my third question to, but this is in relation to the new bridge. Of course the new bridge is so important to my riding but to the rest of Canada too. I think 30% of trade goes across the Michigan border there, and anybody who has travelled there knows that the old bridge is in a state of total disrepair and there's so much congestion. There has been some tremendous movement on that, but I see that $25 million is being allocated to the bridge construction. Maybe somebody could fill us in as to what those dollars are being used for.

    Could you answer those three questions for us, please.

    Thank you for the questions.

    I can answer the first one with respect to the additional fiscal equalization offset payment to Nova Scotia and the changes to that.

     These offset payments are based on the 2005 offshore agreements with Nova Scotia. They compare the equalization that the province would receive with their offshore resources included in the formula with the equalization they would receive without those included in the formula, and it pays the difference between them.

    It protects their offshore revenues from counting against the equalization formula, and changes in those formulas are a function of changes in Nova Scotia's offshore revenues. So as those revenues change, there will be an impact on that amount.

    That's a real good-news story for Nova Scotia.

    On the second question about the advertising, if you don't mind, perhaps Mr. Catta could answer that question.

    On the total government advertising, I would suggest that you direct your question to the Privy Council Office, because I cannot speak on the total picture. I'm sure my colleagues at the Privy Council could do so.

    In terms of Finance, it is true that in terms of advertising there's been an increase, particularly since 2008 with the economic crisis and the government's response, which is the economic action plan. We were clearly in an economic crisis mode and the government had to respond. One of the tools, again, was through economic action plan advertising, of which a part was provided to the Department of Finance as the overarching...or chapeau, if I can say that, of the economic action plan writ large.

    Thank you.

    You have one minute, sir, for the bridge story.

    Sure, I can give a brief answer.

    Transport Canada could provide more details in terms of the activities associated with that investment. As some of you may be aware, they have a dedicated team that has been working for a number of years to advance the Windsor-Detroit international crossing. This funding is primarily to maintain the activities of that team as the project moves further into the procurement process. There's still a lot of planning and logistical work to do, and also legal work and so forth. As I think people are aware, it's a multi-jurisdictional, large, complex project. This funding is to advance that. It is not to support directly the financing of the construction per se. That would be another step in the process in the future.

    It's to keep the ball rolling.

    Exactly.

    As some people are aware, there has been recent good news. A presidential permit has been issued to advance the project in the U.S. That's been welcome news.

    Thank you, Mr. Van Kesteren.

    Mr. Rankin, please.

    Thank you, Chair.

    Thank you to the witnesses from the department for being here. Like Mr. Van Kesteren, I want to thank you for the work you do for Canadians.

    I'd like to take you to the Parliamentary Budget Officer's report that was released this year, in 2013, entitled “Economic and Fiscal Outlook”. It provides that office's current and medium-term outlook for the Canadian government's finances. It includes updated estimates of the structural budget balance and presents estimates of the economic impacts of measures and revisions to spending levels in the 2013 budget, as well as comparisons to Finance Canada's projections.

    In that report, the PBO has pointed to what it considers the real impact of budget 2013: eliminating thousands of jobs, cutting direct program spending, and weakening GDP growth. I'd like to talk about each of those, if I could.

    First of all, the 2013 “Economic and Fiscal Outlook” report references $9.1 billion in cuts to direct program spending in the current budget. Is that assessment accurate in your judgment?

    With respect to the $9.1 billion, that's a total over five years. It's the revision to direct program spending between the updated economic projections in the fall, in November 2012, and the budget. There were a number of factors that led to that.

    I wouldn't necessarily consider them cuts, but more as forecast revisions for a number of areas. Whether that be expected costs for essential services due to lower inflation, revisions to payments to provinces for resource royalties—they just flowed through the government budgetary balance—this is all affecting the budgetary balance. It's a revenue that has offset an expenditure.

    At the same time there's also a similar thing for our crown corporations. Some of their revenues are on the revenue side but they can also be reported as an expense.

    So...[Inaudible—Editor]...both your items there.

    Okay. Thank you.

    It also said, I think, that 14,000 jobs would be eliminated as a result of the 2013 budget. When taken together with the last budget and fiscal update, it would look like the total number of jobs eliminated by the Conservatives is 67,000. Is that consistent with your measures?

     I'm certainly not an expert on the job estimate itself. That would be some of my colleagues. What I would say is that I understand from the report that what the PBO did was take half of that $9.1 billion that you're referring to. That's a judgment call on their part as to whether that should be flowing through. As I explained, a number of those items are not directly there.

    Mr. Chair, on a point of order, these officials are clearly hear to talk about the main estimates, which is what the opposition and this committee decided we wished to discuss. It's obvious these officials are not here to and are not prepared to discuss something entirely outside of the main estimates, such as job projections, etc.

    I would ask the chair to rule on whether or not these are relevant types of questions, given that we're here on main estimates.

    On that point of order, we are dealing with votes 1, 5, 10, L15, 25, 30, 35, 40, and 45, so we should have members stick to those particular votes and particular subject areas. The questions are valid, but they are outside the gamut in terms of these specific areas. We did invite the officials here today to address these specific votes.

    Could I ask, Chair, if FINTRAC, the Financial Transactions and Reports Analysis Centre, in the 2013-14 estimates is legitimate, fair ball, as far as you're concerned?

    Yes.

    Could we have a FINTRAC representative?

    Is there somebody from FINTRAC who might be able to assist?

    Thank you, Mr. Rankin.

    Thank you. Good morning.

    I think I understand that FINTRAC is requesting in the estimates a net funding decrease; however, it's requesting a funding increase of half a million for an economic increase for personnel expenditures. If that's correct, what operations are going to be affected by the net decrease in the amount of funding requested?

    The economic impact is small on personnel, small on trips and professional contracts.

    Okay.

    There was a report out last month from the Standing Senate Committee on Banking, Trade and Commerce about combatting money laundering, essentially. In that report, the committee recommends the elimination of the $10,000 threshold for international electronic fund transfers.

    If that recommendation were implemented, would FINTRAC require more resources—human resources or money—to address the increased number of reports that would be submitted to FINTRAC?

    First of all, the government is welcoming that report. We are currently assessing all the recommendations, so I don't know if Finance can answer that question. Until there is an answer on the recommendation, I cannot talk about it.

    The government is currently assessing the totality of the recommendations. There are a number of interesting recommendations that came out of that report. Part of that assessment is also assessing any potential cost implications of the recommendations, so that will factor in to the decision-making.

    You have 30 seconds.

    That's fine, thank you.

    Okay. Thank you, Mr. Rankin.

    Go ahead, Mr. Jean, please, for your round.

    Thank you, Mr. Chair.

    Thank you, witnesses, for coming today.

    I just want to set the record straight, Mr. Chair. As far as I recall, we actually had Minister Flaherty here on November 7 on BIA two, and Minister Menzieson March 5. I thought I heard my colleague mention that we haven't had Minister Flaherty here in over a year, I think he said. I just wanted to make sure we set the record straight on that, because obviously, we have had two appearances by ministers of finance here over the last six or seven months.

    Thank you.

    Thank you.

    First of all, if the marketing man could come back, that would be very helpful.

    Meanwhile, I'd like to talk a little bit about inflation targeting.

    I know it's more of a discussion for the Bank of Canada, but I noticed in your introductory remarks that you talked a little bit about inflation targeting. I know in 1991, for instance, when inflation was at 5%, there was a 2% target introduced. It was met in 1998, and since that time it's been consistent as a target.

    First of all, on the issue of price-level targeting versus inflation targeting and the real effects of inflation on economic growth, why do we have a 2% target instead of a 0% target? I guess that's my main question. What effect will inflation targeting have on economic growth generally on a macro basis?

    Again, that's a bit beyond my area. I think that's a question more for the Bank of Canada.

    I thought you were going to say that.

    Do you use any of the Keynesian methods, such as the new Keynesian Phillips curve or any of that methodology to deal with your financial projections, or is that more of a Bank of Canada issue? You deal with the numbers and report them in the main estimates, and then the supplementary estimates, etc. Do you use any of this modelling, the new Keynesian Phillips curve, and things like that, in your analysis of what's happening?

    Again, that would be more of a Bank of Canada question.

    Would that be no, you don't use it?

    I'm from the fiscal side, so on the economic side they use.... I know they have models but I don't know exactly what they use.

    Mr. Catta, I know we've had an opportunity to hear from you many times before and your understanding of marketing is quite impressive. What is top-of-mind awareness in marketing? Do you know?

    I'll respond again from the finance perspective. When we're talking about economic issues, or what's on people's minds more generally, it would be public policy issues, concerns about the economy. We've seen this particularly over the past two or three years: concerns about the economy, concerns about their jobs, concerns about their financial well-being, particularly given the current economic circumstances.

    But in marketing, top-of-mind awareness is a marketing idea that suggests the first brand that comes to your mind is top-of-mind awareness. In essence, when you think of soft drinks, most people think of Coca Cola; when you think of Mexican restaurants, Taco Bell usually comes to mind. It depends on the marketing, and that's what top-of-mind awareness is.

    In this particular case, I'm asking this question, but isn't it true that people don't even recognize from time to time that they see advertising? In fact, the marketing experts and research proves that many times people don't see marketing, but in their mind it's there because they hear the jingle, or they inadvertently see things as they pass by on highways, such as billboards, without even recognizing it consciously, but subconsciously it's there. That's why many mega-billions of dollars are spent every year in North America on top-of-mind awareness, consistently using that same jingle, that same ad. In fact, I would suggest that's why Coca Cola for the most part only advertises as Coca Cola. They don't advertise the other sweetened drinks they have because they're trying to distribute that and trying to make sure people think of Coca Cola products always. Is that fair to say?

    I would agree with your assessment, and if I link it to the economic action plan advertising, it's the reason the advertising, particularly in terms of the messaging and the nature of it, has been fairly consistent over the past two or three years, to your very point about being consistent on what this plan is about. So again, from the messaging standpoint, it is effective.

    Last question.

    In fact, it's all about confidence in the economy, confidence in the market, confidence in Canada. As we see the stock market, it's basically 100% driven by consumer confidence, so it's fair to say that the marketing is working. We've heard from you that the marketing is working and, in fact, the top-of-mind awareness campaign is very successful because it's making Canadians believe positively in the economy. Wouldn't that be fair to say?

    Absolutely.

    Thank you, Mr. Jean.

    As the Chair, I wanted to follow up on a couple of items.

    First of all, Ms. Harrison, in your opening statement you talk about decreases of $4.2 million related to savings identified as part of the budget 2012 spending review and $4.4 million for various sunsetting measures. Can you explain some of those measures for us in terms of the savings identified?

    On the budget 2012 spending reductions for the department, there are three main areas in the department that we're seeking efficiencies.

    The first is in our internal services corporate groups. We've done some restructuring and some realignment of responsibilities to drive out some efficiencies.

    On the policy research side of the department, we've reorganized to embed stand-alone research analytics in the policy advice function, as opposed to having them stand alone. We've also made greater use of information technology in things like our staffing and recruitment processes.

    With respect to the decrease of $4.4 million, this is the sunsetting of some previously approved, time-limited items, including the corporate asset review, which was the review of government assets, and some funding related to the department's role as co-chair of the G-20 framework working group. It also includes some work on GST technical issues and personal income tax issues, such as, for example, a review of the registered disability savings plan, employee profit-sharing plans and such, and some sunsetting resources in the financial sector area related to specific legislative and policy drafting requirements.

    Okay. I appreciate that.

    I'm going to ask a second question about estimates generally. My third is going to be about OSFI; that's just a hint for the OSFI individual to come to the table for the third question.

    For the second one on the estimates, as parliamentarians we deal with estimates and we deal with public accounts. It's an awful lot of information. Frankly, I find the three-year comparison very helpful for me. I find the explanations in the estimates this year much better than they were last year. I certainly compliment the department on that.

    Could you perhaps explain to Canadians watching this that in terms of estimates we have the main estimates and then the (A)s and (B)s and so on? Sometimes that is a little confusing to your average Canadian. Could you explain the challenges for your department, not on the statutory side, perhaps, but in terms of trying to forecast what the department will spend in the upcoming year?

     I think the challenge is the various financial exercises throughout the calendar or fiscal year and the timing and such.

    The production of the main estimates, which you have before you, you can see by the size of that document that we have to put it to bed, so to speak, from an input perspective, in late January, which is well before the federal budget has been tabled. As a matter of course, the main estimates do not reflect any new funding initiatives that will be announced subsequent to this document’s being finalized.

    Our opportunity to get those funding initiatives in front of committees and Parliament is through the supplementary estimates processes. There are three opportunities to do that.

    First, supplementary estimates (A) we typically try to get out as soon as possible after the budget, for any very high-profile items that we can get through the approval process, and for officials. Just because it has been announced in the budget doesn't mean it's automatic. There is a challenge and review process that we go through with Treasury Board ministers.

    Second, supplementary estimates (B) traditionally is where you'll see, for Finance Canada, should we get any voted resources, those appear in our supplementary estimates (B), normally around October or November, because that has given us time to do the due diligence and process through Treasury Board.

    Then, the final supplementary estimates, supplementary estimates (C), just before the year closes, traditionally for us is just updating our statutory forecast. Should there be any need to realign resources between votes, that's our last opportunity to come before committee and Parliament to seek those approvals.

     I understand that it's a snapshot of a bit of a moving picture. There are the mains, and then the three supplementary estimates.

    I appreciate that. I think people following these hearings would find that to be very helpful.

    I have a brief final question on OSFI. It's a very well-regarded institution, both domestically and internationally.

    On the increased responsibilities for OSFI, if you look at increased oversight with respect to CMHC, can you address any issues with respect to budgeting within OSFI in terms of these increased responsibilities?

    Yes, sure. The increased responsibilities were given to OSFI as part of the budget last year, so we did increase our staffing to provide these services to CMHC, but I have to say that these services are cost-recovery based. They're done through a cost-recovery model with CMHC, so they are not affected by the appropriation funding we get through the vote.

    I thank you for that clarification.

     I want to thank our officials for being here.

    There was a request for a document.

    Monsieur Caron, you wanted to request a document.

    Yes.

    Clearly, we have now come to the end of questions, but there is one additional piece of information I would like to get from the department and I would like it to be forwarded to the committee.

    In terms of the Canadian Securities Regulation Regime Transition Office, the Supreme Court made a ruling in December 2011. We knew that $27 million had already been spent for this office and for the transition to a national organization.

    Could you simply tell me how much money has since been spent on this transition office, which the government wants to keep open based on Budget 2013? Since December 2011, how much money has been invested in or spent on this transition office in order to have a Canadian securities regulation agency?

    I would appreciate it if you could provide us with a detailed description of the expenses, as detailed as possible.

     I'll inform members that at any time they can submit questions to the chair and I will happily provide them to department officials for a response.

    Is it clear in terms of the request that was made?

    Yes.

    Okay, I want to thank all of our officials for being here.

    Colleagues, do you want to deal with the votes in these estimates today, or do you want to deal with all the votes after we deal with CRA officials?

    An hon. member: All together.

    The Chair: Okay, we will deal with all the votes together after CRA.

    If I could ask the members of the subcommittee to stay, we're going to adjourn this meeting but I need some advice on the calendar. Other members are welcome to stay if they like, but I do need some help as the chair with respect to the calendar.

    Thank you. The meeting is adjourned.