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Second Reading of Bill S-204, An Act to amend the Financial Administration Act (borrowing of money)

 

Honourable senators, I rise today to speak to Bill S-204.

I listened with great interest to Senator Moore when he spoke to this bill before us today. I also read the speeches of our colleagues who have spoken on Bill S-204 and to the many other versions of this bill and reviewed the testimony of expert witnesses who have appeared before the Standing Senate Committee on National Finance.

As Senator Moore points out, there is an historic role for parliamentarians to set limits on how much the government goes into debt, and to approve how much the government can borrow to keep the government operating even if it is incapable at times of avoiding debt.

That responsibility was perhaps unknowingly cut out from under us in 2007 when an amendment to the Financial Administration Act transferred the authority to borrow money from Parliament to the cabinet, where they now use an order-in- council severely restricting, as Senator Moore argues, Parliament's power to conduct oversight.

Prior to 2007, the Financial Administration Act gave the government standing authority to refinance its market debt, while specific authority had to be granted by Parliament to undertake additional borrowing beyond an existing $4 billion of non-lapsing borrowing authority, as per the Borrowing Authority Act.

The Budget Implementation Act of 2007 changed all of this so that the government no longer required the approval of Parliament to borrow.

Rather, annual borrowing limits would be approved by the Governor-in-Council, and Parliament no longer had to approve the borrowing limits of the government before it borrowed.

The Minister of Finance was, and still is, required to report on the Debt Management Strategy of the government on an annual basis and to disclose in advance the projected borrowings of the government. This Debt Management Strategy is tabled as an annex to the budget document.

There was an annex with this information attached to the budget document that was tabled on March 22.

The Minister of Finance is also required to table annually in Parliament the Debt Management Report which discloses the actual borrowings of the government after the fact.

An attempt was made in 2007 to reverse the amendment in the 2007 Budget Implementation Bill by introducing Bill S-236. However, this bill died on the Order Paper in 2008, when Parliament was dissolved.

A second attempt to reverse the 2007 amendment was made in 2009 as Bill S-221. This bill also died on the Order Paper when Parliament was prorogued in 2009.

A third attempt was made in 2011 with Bill S-229. Again, this bill died on the Order Paper when Parliament was dissolved in 2011. A fourth attempt was made in 2013, with Bill S-217, which was identical to the three predecessor bills. This was also Senator's Moore's predecessor bill. Bill S-217 did make some progress as it was sent to the Standing Senate Committee on National Finance and was reported back to the Senate in 2013.

The committee report recommended that the bill not be proceeded with further in the Senate for several reasons. I will outline a couple of them.

First, officials from the Department of Finance testified that, in comparison to the previous legal framework, the new borrowing regime, under the 2007 Budget Implementation Act, provided for a more efficient, flexible, responsive and prudent financial management and greater transparency and accountability.

In addition, Bill S-217, as drafted, did not have a coming-into- force provision, which was a significant structural concern for some members of the committee.

I would like to note that this has been rectified in the version before us now, which is Bill S-204.

Bill S-217 also died on the Order Paper in 2013, when Parliament was prorogued.

This brings us to Bill S-204, which is before us today.

Prior to 2007, the Financial Administration Act gave the government standing authority to refinance its market debt, while specific authority was to be granted by Parliament to undertake additional borrowing beyond an existing $4 billion of non-lapsing borrowing authority. If additional borrowing was required, a borrowing authority act had to be introduced in Parliament and approved.

Accordingly, Parliament enacted Borrowing Authority Acts from 1991 to 1996 and there was no borrowing authority legislation after 1996.

Interestingly, Canada's Auditor General, in his spring 2012 report, established that for 11 fiscal years, from 1997 to 2007, government recorded budgetary surpluses and did not require a borrowing authority act.

The Auditor General also referred to the 2007 amendments to the Financial Administration Act in his 2012 report, establishing them as a fact but providing neither negative nor positive comments on the amendments.

We now have to decide whether we will support Bill S-204.

The current Liberal government, in its election platform last year, committed to a deficit of $9.9 billion in the current fiscal year. We now know that the budget tabled on March 22 projects much larger deficits of $29.4 billion. The Liberal government also committed in its election platform to deficits of $9.5 billion and $5.7 billion in the following two years, and a $1 billion surplus in 2019-20. Clearly, Canadians were told we would be back to balanced budgets in 2019-20. We now know that the deficits for next year and the following year will be much larger than originally committed in their election platform, and that the election commitment to return to a balanced budget in 2019-20 will no longer be honoured. In fact, there is no plan to return to a balanced budget.

All of these deficits are projected numbers. We should be aware that actual deficits may be higher — they may be lower, too, but they will probably be higher. And these deficits will be funded by debts.

While the budget provides a contingency of $6 billion, it does not include anticipated expenditures. For example, the Minister of Agriculture recently said that a compensation package for Canada's dairy industry, with respect to the impact of CETA, is not in the budget. In addition, interest rates are low now, but if they rise, debt charges can escalate quickly, further increasing the deficit. If deficits increase, so will our debt.

Honourable senators, in its election platform, this government clearly indicated:

We have two fiscal anchors that guide our overall fiscal framework.

The first one is:

In 2019-20, we will:

•              Reduce the federal debt-to-GDP ratio to 27 per cent.

The net debt-to-GDP ratio compares what a government owes to what it produces and indicates the government's abilities to pay back its debt. We now know this is another commitment that will not be honoured. The net debt-to-GDP ratio is projected to be higher in 2019-20 than it is now.

The question posed by Bill S-204 is the following: Do we want to be told what the new borrowings are likely to be and then have the actual amount disclosed after the fact, or do we want the government to ask Parliament for its approval to borrow before it actually borrows?

Honourable senators, we have entered an era of deficit spending, financed by debt. For this reason, Senator Moore's Bill S-204 makes perfect sense to me. I would like to indicate that I will be supporting the bill.