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Second Reading, Appropriation Bill No. 4, 2018-19

Thank you for those remarks, Senator Bellemare. You mentioned our exhaustive work. I’m about to report on it.

I’d like to start by saying that Bill C-95 is requesting parliamentary approval of $2.5 billion for 48 federal organizations. This is the last supplementary supply for this fiscal year. It will bring the total budgetary expenditures for the year to $291 billion.

I’d like to speak now about the different departments and agencies that requested money and give you an idea as to what the money will be used for.

The Department of Veterans Affairs is requesting $323 million for programs and services to veterans. Officials informed the committee that additional funds are being requested because veterans’ programs and services are demand-driven. A 9 per cent increase in the number of veterans accessing benefits and services, as well as a 30 per cent increase in disability applications over the past three years, have led to increased funding requirements.

In addition, the first application approval rate is increasing. For example, in 2013 the first application approval rate was 73 per cent, while the current rate is 84 per cent.

There were two other issues raised by departmental officials when they testified. The first relates to the Parliamentary Budget Officer’s report, which was issued last month, which compared estimates of the fiscal costs of each of the three different regimes of veterans’ benefits since 2006.

Without getting into too much detail of the three different regimes, the Parliamentary Budget Officer found that the Pension Act regime, which was in effect up to 2006, is the most generous for the veterans and the most expensive for the federal government.

He also said that most, but not all, veterans will be financially better off under the new Pension for Life regime which takes effect April 1 of this year, compared to the veterans wellbeing act which was in effect prior to April 1 of this year.

Since the effective date of the new pension for life regime is April 1, I expect we will hear more about its impact on veterans over the coming months.

The second issue raised by officials is the compensation owed to approximately 270,000 veterans, survivors and members of the RCMP related to incorrect disability pension payments issued by Veterans Affairs between 2003 and 2010.

The estimated value of error is approximately $165 million, so, if the department’s estimates are correct, it is an average underpayment of $600.

However, the department indicated that they anticipate issuing payments before the end of 2020. That would be next year.

Some senators on our committee were surprised that retroactive payments were not expected to be made before 2020.

Officials indicated that the department staff working to implement the new “Pension for Life” program are the same staff who would be working on the calculation error, and, therefore, there is what they called a “capacity issue.”

However, some senators had difficulty reconciling the 2020 date with the department’s top priority, “to provide veterans with excellent service demonstrating care, compassion and respect.”

If the reverse were to happen and veterans were overpaid, government would not wait until 2020 to be compensated. Rather, I expect the overpayments would be deducted immediately from their benefits.

Of the 48 organizations requesting additional funding, the Department of National Defence is requesting the highest amount, $561 million.

Honourable senators, $383 million of the $561 million relates to Canada’s continued military contribution to global security initiatives in support of our NATO allies in Central and Eastern Europe, international security, stability in the Middle East and UN operations in Mali.

These include Operation IMPACT, Operation Reassurance, Operation ARTEMIS and the UN operation in Mali, which is called Operation Presence.

We recently learned that Operation Unifier, Canada’s military mission in the Ukraine, has been extended to March 2022; and Operation IMPACT, Canada’s military mission in Iraq, has been extended to March 2021. The mission in Mali will finish in July 2019.

Honourable senators, $159 million of the $561 million will provide funding for the Arctic and Offshore Patrol Ships. This program is for six ships, with three ships under construction and a fourth to start later this year, but $339 million has been paid previously for this project.

The contract for the six ships is for $3.2 billion while the total overall project budget is $4.3 billion.

The first ship, HMCS Harry De Wolf, is nearing completion and will be delivered to the navy this summer. It is anticipated that the remaining ships will be delivered at 12-month intervals.

In reviewing the funding request of the Department of National Defence, it is not possible to compare the funding being requested to that outlined in their 2017 defence policy.

What we know is that the defence policy indicated that $6 billion would be spent on capital projects last year — that’s the 2017-18 fiscal year — while the department actually spent $3.7 billion on capital projects, resulting in a shortfall of $2.3 billion last year.

Similarly, the government’s new defence policy indicated that $6.6 billion would be spent this fiscal year on capital projects, but the department has only requested $4.2 billion, again resulting in a shortfall of $2.4 billion.

Since we do not know which capital projects are included each year in the new defence policy, we cannot follow the money to determine which projects are behind schedule.

However, since the department’s capital spending is significantly less than that outlined in the defence strategy, we can conclude that at least some capital projects are behind schedule.

I have spoken on this issue before. I have to say again: The department needs to improve its transparency around capital projects.

The Department of Indigenous Services Canada is requesting additional funding of $318 million; $100 million is for the Emergency Management Assistance Program.

The department will use this money to cover costs associated with the 2008 spring flooding, wildfires such as those in British Columbia last summer, and other emergencies, including the repair and restoration of critical infrastructure.

Of the $318 million being requested by Indigenous Services Canada, $70 million will be used to reform First Nations Child and Family Services. This is in addition to the $293 million provided by Budget 2018 through the use of vote 40. It will be used to accelerate reform of the First Nations Child and Family Services programs by investing in agencies and other service providers. Funding will be used for both First Nations children and their families. The objective is to address child protection but also to keep children in their own families and within their own communities. To address these issues, support is provided families to prevent children from coming into care.

Departmental officials indicated that there are approximately 9,000 First Nations children in care. Given the concern over the number of Indigenous children in care, the department has committed to providing the committee with statistics indicating what has happened with First Nations children over the past 10 years.

Indigenous Services Canada is also requesting $37 million for the transformation of First Nations elementary and secondary education programs. The objective is to increase the capacity of First Nations in education.

Officials indicated that over the past few years, the department has entered into agreements for First Nations school boards — one in Manitoba and one in Alberta — where First Nations have assumed control and instituted their own school boards.

The department has also invested in programs, such as the First Nation Student Success Program, which addresses literacy.

Of particular interest to some senators was the $31 million requested for internal support services. This funding will be used to hire approximately 100 new full-time positions, and will pay for other costs associated with support programs such as finance, human resources and information technology.

Departmental officials indicated that prior to the creation of the two Indigenous departments, internal services represented 3.2 per cent of total program funding. With the new funding, the new department has allocated 2.3 per cent of program funding to internal support services.

However, some senators were interested in ensuring that incremental funding, including the funding to be provided as part of Supplementary Estimates (B), be used for the most part to fund programs rather than support services. Some senators also sought clarification on the mandates of the two new Indigenous departments, as there appear to be some overlaps.

As senators are aware, the creation of the two new departments was announced in August 2017, and they were subsequently created in November 2017 by an order-in-council. However, we were informed again that the legislation for the two new departments is still in progress and no estimated completion date could be provided.

This is problematic in reviewing the funding for the two new departments as mandates would be defined in their departmental legislation. In some cases, as I mentioned, it appears that some programs do overlap. Departmental legislation would clarify the roles and mandates of the two new departments.

The Department of Citizenship and Immigration is requesting additional funding of $192 million, of which $114 million is being requested to support the increased volume of asylum seekers. This is in addition to the $118 million included in Budget 2018 and the $50 million approved in Supplementary Estimates (A).

Of the $114 million being requested, $14 million is related to the federal government’s provision of temporary interim lodging sites near the Canada-U.S. border, as well as the procurement of hotels in the Greater Toronto Area. Senators, $100 million will be used to assist provinces and municipalities in providing temporary lodgings for the increased asylum seekers.

Officials informed us that the government has not yet determined how much will be paid to each province and municipality impacted by the increased asylum seekers. Department officials were also unable to provide us with a cost to date of the asylum seekers for this fiscal year, indicating that the total amount should be available by mid-June.

However, given the cost of the program, I would have expected the department to know what the actual costs are to date and to have estimated costs to year-end, or at least provide us a cost with regard to third quarter financial information.

The Department of Finance is requesting $3 million for seven projects, the largest being $900,000 for a review of open banking. Funds will be used to hire personnel to work with the open banking review team to support an advisory council and to cover costs associated with consultations, fact-finding trips and stakeholder meetings. The Standing Senate Committee on Banking, Trade and Commerce is currently conducting a study of open banking, and I expect to see additional requests for funding of this initiative in Budget 2019.

Honourable senators, last month the National Energy Board delivered to the Government of Canada it’s Reconsideration Report on the Trans Mountain Expansion Project. During committee hearings, officials of the National Energy Board informed us that in carrying out the reconsiderations, the board held a public hearing, which included the participation of 118 interveners, including 52 Indigenous interveners and eight federal government department interveners. Interveners could file evidence, ask questions about the evidence of other parties and submit argument.

The National Energy Board is requesting funding of $6 million for the cost of that reconsideration. Approximately $4 million of this will be used to provide financial assistance for the reimbursement of costs to individuals, Indigenous groups, landowners and non-industry not-for-profit groups so they could participate in the reconsideration.

The remaining funding will cover the additional expenses associated with the reconsideration, including a marine expert to provide advice to the board during the review. Officials indicated that it is not clear what their involvement would be with regard to the 16 recommendations now that they have been made to government. However, they will continue to regulate the Trans Mountain Expansion Project through its pre-construction, construction and operations.

While the $6 million being requested by the National Energy Board, along with the $11 million being requested by five other departments, is not significant in relation to the total amount being requested in Supplementary Estimates (B), the project to which it relates, the Trans Mountain Expansion Project, does represent a significant investment by the Government of Canada.

To finance the purchase of entities related to Trans Mountain, $5.2 billion was borrowed from the government’s Canada Account administered by Export Development Canada, of which $4.4 billion was used to purchase the Trans Mountain pipeline, the Trans Mountain Expansion Project and related assets. The $5.2 billion does not include the construction cost of the new pipeline, although estimates for the new pipeline are in the $7 billion to $9 billion range, and therefore it would be my intention to continue to ask questions about this project.

In previous years, governments requested Supplementary Estimates (C). However, this year the government eliminated the need for Supplementary Estimates (C) as part of its reform to the estimates process. Prior to this year, monies for each new budget initiative would be requested in Main Estimates or Supplementary Estimates (A), (B) or (C) as each new initiative was developed and approved by government. This gave parliamentarians the opportunity to question departmental officials about these new initiatives before the monies were approved by Parliament.

With the reforming of the estimates last year, this has now changed. All of the funding for the new budget initiatives, which totalled $7 billion for this year, is now included in one line in the Main Estimates, entitled “Vote 40,” with $7 billion in it. Parliamentarians no longer individually approve the funding for each new budget initiative. Rather, the $7 billion was approved by parliamentarians as one line item, and Treasury Board, rather than parliamentarians, approves each new budget initiative and transfers the money from vote 40 to the department or agency.

Some parliamentarians said the government was undermining democracy with the creation of vote 40, weakening Parliament and its responsibility for answering government spending decisions by having parliamentarians vote on $7 billion of budget measures as one vote and without detailed information on the measure.

Because the funding for new budget initiatives is no longer included in a supply bill under the respective departments, parliamentarians do not have an opportunity to question departmental officials about this funding. Treasury Board now includes on its website a schedule entitled “Allocation of Vote 40,” which shows when funding is transferred to a department or agency for the new program. One of the objectives of vote 40 was to increase the speed of implementing budget initiatives. However, the Parliamentary Budget Officer, in his February 7 report on these estimates, indicated that the speed of implementing Budget 2018 measures compared to 2017 has actually slowed.

This fiscal year is almost over, so we are beginning to see how vote 40 has worked. As of March 6, the government website indicates that $4.8 billion has been allocated, $1.8 billion has been withheld and $427 million remains in the vote 40 account.

I expect the Parliamentary Budget Officer will review vote 40 and tell us, among other things, how much of the $7 billion has lapsed, why $1.8 billion was withheld, whether vote 40 actually sped up the implementation of the 2018 budget initiatives, and the extent to which vote 40 diminished parliamentary oversight.

From my perspective, vote 40 has made it more difficult to track new budget initiatives. Since funding for new budget initiatives was included in vote 40, one would not expect supplementary supply bills to include money for 2018 budget initiatives. However, this bill did include 13 items related to Budget 2018. It was a challenge to relate each of these items to vote 40 and to determine why funding appears in both vote 40 and also in the supply bill. It looks like the funding was provided twice.

In closing, I would like to indicate that many, if not most, programs that we study at the National Finance Committee span several years and sometimes it involves more than one department or agency. This would include some of the programs I have mentioned today, including the cost of irregular migrants, which affects about five departments and agencies; the shipbuilding program, which covered a number of years; and the Trans Mountain expansion project.

I’ve mentioned this previously when I’ve spoken on supply bills, but it remains a challenge to follow the cost of the programs through the various departments and agencies, especially when they are over multiple years. I find quite often, when witnesses come before us to testify, they’ll be looking for money for a certain project and you will ask how much has been spent to date and they don’t know. Then you might ask how much they think it will cost to finish the project and they don’t have an estimate. Sometimes that makes it very challenging to find out the costs of the programs, as well as the progress of these programs as to whether they’re having an impact or even whether they conclude.

Before I sit down, I would like to thank my colleagues on the National Finance Committee for their commitment to the work that we’ve done over the past year. I find that the committee is very cohesive. While I appreciate that all committees of the Senate are important, I find that the National Finance Committee gives you the opportunity to study every department and agency in the federal government. Thank you very much.

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