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Third Reading - Bill C-19 - Budget Implementation Bill, 2022, No. 1

Honourable senators, I rise to speak to third reading of Bill C-19, the budget implementation act.

Honourable senators, Canada is facing many challenges. Inflation is at its highest in 40 years and is expected to increase. Interest rates are rising. Canadians are one of the most highly indebted people in the world, and increasing interest rates will make their mortgages and other debts more expensive.

Government has also increased its debt, which is now $1.6 trillion. Interest on this debt will now cost more. There is no commitment to return to a balanced budget. Our debt of $1.6 trillion will be transferred to our children, grandchildren and even great-grandchildren. Our debt will be their problem.

Canada’s GDP per capita grew by 0.8% annually from 2007 to 2020, ranking us in the third quartile among advanced economies. In other words, we were near the bottom of the rankings but not at the bottom.

As indicated in the government’s own budget document this year, the Organisation for Economic Co-operation and Development, or OECD, projects that Canada will be the worst‑performing advanced economy over the period 2020 to 2060. Our economy has waning competitiveness, weak private sector innovation and sluggish business investment. Our GDP per capita is 12% lower than the OECD’s best performers. Our productivity is 18% lower than the OECD’s best performers.

Our country needs a plan to address our economic problems and create the wealth we need to sustain our economic and social well-being.

Canadians and the Bank of Canada are coming to the realization that inflation, which remained at or below the Bank of Canada’s annual target of 2%, has now become a major economic problem. The Bank of Canada remained convinced that the inflation experienced in 2021 was transitory despite some economists sounding the alarm over the escalating inflation. In fact, in his recent press conference in early June, the Governor of the Bank of Canada warns us that inflation will probably go even higher, and it has.

Inflation has had a devastating impact on Canadians, especially low-income Canadians and those on a fixed income. Inflation in May was 7.7%, the highest since 1983. Food prices increased 8.8%. Canadians paid more in May for food compared to May 2021. Fresh fruit, vegetables, meat, bread and pasta all increased. Even a cup of coffee costs 13.7% more compared to last year. And consumers paid 48% more for gasoline in May than they did a year ago.

In April, average hourly wages for employees rose 3.3%, meaning that, on average, prices rose faster than wages and Canadians experienced a decline in purchasing power.

When this government came to power in 2015, they were focused on the middle class and those working to join it. Remember Budget 2016: Growing the Middle Class; Budget 2017: Building a Strong Middle Class; and Budget 2018: Equality and Growth for a Strong Middle Class, and so on?

We even had a minister of middle class prosperity. I don’t think anyone feels that “middle class prosperity” anymore with inflation now recorded at 7.7%.

Inflation is affecting many Canadians who have to choose between buying food, paying their bills and making their mortgage payments. There are numerous media reports of the dire circumstances of some Canadians and the increasing use of food banks.

To understand how inflation and rising prices are contributing to financial concerns or influencing the financial decisions of Canadians, Statistics Canada conducted the Portrait of Canadian Society survey from April 19 to May 1. The survey found that three in four Canadians report that increasing prices are affecting their ability to meet day-to-day expenses. Most Canadians are feeling the impact of inflation, but lower-income Canadians are more concerned about, and more affected by, rising prices. Canadians were most affected by rising food prices, which increased 9.7%.

When the finance minister was asked at our Finance Committee what initiatives were included in the budget to address the impact of inflation, she said inflation is very much a global phenomenon and referenced the recently announced items in the budget, including the dental program and the additional $500 payment for Canadians who are struggling with housing affordability.

While financial assistance provided to certain groups of Canadian society is certainly appreciated by those receiving the financial assistance, inflation affects almost all Canadians, and this is an issue which must be addressed by the government.

On June 8, the Bank of Canada released its Financial System Review focusing on inflation and rising interest rates, as well as existing and emerging vulnerabilities. In an effort to control inflation, the bank has increased interest rates and has indicated that they will continue to do so.

High household debt and high house prices are not new vulnerabilities. We have tracked household debt and house prices for years, and the Bank of Canada, the Canada Mortgage and Housing Corporation, and even the International Monetary Fund, have identified these as key vulnerabilities of the Canadian economy. However, households are now exposed to increasing interest rates, which will make their mortgages and other debts more expensive. For highly indebted Canadians, they may have difficulty servicing their debt. If the economy slows and unemployment increases, even more Canadians will have problems servicing their debt.

The Governor of the Bank of Canada has said that more Canadians have stretched their finances during the pandemic to buy a home, so they will be more sensitive to interest rate increases. In addition, Canadians who bought homes when prices were high may see the value of their homes decline. There is also the risk that the value of their homes may actually be less than their mortgage.

Last week, the Federal Reserve in the U.S. raised its benchmark interest rate by 75 basis points, its most aggressive hike in 25 years, as the U.S. central bank tries to rein in inflation in the United States.

The Bank of Canada is scheduled to make its next interest rate announcement on July 13, and some economists are predicting that the Bank of Canada will also move more aggressively to raise interest rates in Canada.

A recent debt survey by Manulife Bank of Canada found that 18% of homeowners polled are already at a stage where they can’t afford their homes. The survey also found that one in five Canadians expect rising interest rates to have a significant negative impact on their overall mortgage debt and financial situation.

But it is not just Canadians who will be facing increasing debt costs. The government is also carrying significant debt — in excess of $1.6 trillion — so the cost of servicing that debt will increase. While the government reported debt servicing costs in 2021 at $20 billion, they are projecting it to increase to $42.9 billion in 2026-27, and recent reports by the Parliamentary Budget Officer expect that increase to rise further.

Last May, Bill C-14 raised the government’s debt ceiling from $1.168 trillion to $1.831 trillion. While some parliamentarians were alarmed over this increase, the Minister of Finance told the House of Commons Finance Committee on March 11 last year:

We are saying that this is the upper limit to which the government may borrow.

We are not saying the government will undertake those borrowings. . . .

Now, just 15 months later, we are told that debt is now $1.6 trillion. We are well on our way to reaching that $1.8 trillion ceiling. In fact, it seems the government cannot reach that limit fast enough.

As the government takes on more and more debt, we have been assured by them that the cost of servicing this debt, or the “public debt charges,” remain low. However, we now know that interest rates are rising quickly and so is the cost of servicing the government’s debt. A review of the government’s financial documents over the past two and a half years shows that debt servicing costs are increasing significantly. Projections included in the last two budgets and the last two fall fiscal updates point to a rising concern over increasing interest costs.

The 2020 fall fiscal update released in December 2020 estimated that public debt charges for this year would be $22.4 billion. Four months later, this was increased to $25.7 billion in Budget 2021, and further increased to $26.9 billion in this year’s budget. Over a period of 18 months, the government’s estimate of debt servicing costs for this year increased $4.5 billion, or by 20%.

A second issue has surfaced over public debt charges. We all know that the government borrowed heavily during the pandemic, and a significant portion of this debt was acquired by the Bank of Canada. In fact, the bank’s purchases of government bonds were approaching half a trillion dollars before the bank ceased acquiring those bonds.

In 2021, the government reported debt servicing costs of $20.4 billion. However, the government also disclosed in the public accounts net losses totalling $19 billion in respect of the Bank of Canada’s purchases of Government of Canada bonds on the secondary market.

Why the $19 billion loss on the purchase of those bonds is recorded as negative revenue I do not know, but it is clearly a debt servicing cost. The debt servicing cost for 2021 is not the $20.4 billion being reported by government, but actually $39 billion.

As of June 1, 2022, the Bank of Canada continues to hold $397 billion of Government of Canada bonds. The Bank of Canada has indicated that it will not purchase any additional bonds but, rather, let the existing bonds mature, and they will essentially fall off the bank’s balance sheet. However, there are others who say that this passive shrinking of the bank’s balance sheet as the bonds mature strikes some observers as inadequate. Last month, the C.D. Howe Institute’s Monetary Policy Council urged the bank to accelerate the process by selling the bonds.

However, in a recent meeting of the Standing Senate Committee on Banking, Trade and Commerce, the governor of the bank testified that if the bank sold the existing government bonds it is holding, there would be a loss of $20 billion, which will be paid by the Government of Canada in accordance with the indemnity agreement between the government and the bank. This $20 billion would increase the government’s deficit by $20 billion.

Earlier this month, the World Bank said most countries are headed for a recession and warned of a possible return to stagflation: an economy characterized by high inflation and low growth. It said global economic growth is expected to slow down before the end of the year, and most countries should begin to prepare for a recession.

Earlier this month, the media reported that the United Kingdom’s economy unexpectedly shrank in April, raising the risk that their economy will contract in the second quarter.

Canada is just emerging from the pandemic, which was a major financial shock to our economy. We should now get our spending under control and prepare for the next financial shock.

While no one can predict the future, the government supported our economy during the pandemic by borrowing and spending a substantial amount of money. It is time to get our fiscal house in order, yet the government continues to spend and borrow, seemingly unaware of the dark clouds forming.

Honourable senators, Bill C-19, similar to previous budget bills, proposes several amendments to the Income Tax Act, which is now over 3,000 pages long. The Income Tax Act is a complex and inefficient piece of legislation which has accumulated a patchwork of credits, incentives and narrow “fixes.” Governments use the tax system to help meet certain policy goals by adding credits or deductions, or to provide benefits to specific groups, making the Income Tax Act more complicated with each amendment.

The last time the government carried out a review of our tax system was 1967. Yes, that is 55 years ago. Much has changed in the past 55 years. The world has become more global, technology has changed the way we live, people are living longer and the nature of work has changed. It is time to review our tax system — actually, it is past time.

Numerous national and international organizations have recommended many times that the government update its tax system, including committees of the House of Commons and the Senate. The current system is riddled with problems and has become unnecessarily burdensome to the Canadian taxpayer, businesses and tax professionals. Even the Canada Revenue Agency, which administers the Income Tax Act, is challenged to provide correct answers to public inquiries.

We need a tax system that is simple and easy for taxpayers and businesses, encourages investment and job creation and enhances Canada’s global competitiveness. We need to be better positioned to compete for jobs, talent and investment with a fair, simple and efficient tax system.

Before I discuss certain sections of Bill C-19, I just want to make a comment on the omnibus nature of Bill C-19. First, Bill C-19 is an omnibus bill. It is 440 pages long. The proposed amendments to the Income Tax Act are highly technical and numerous. Given that these amendments will amend the very complicated Income Tax Act, which is itself 3,000 pages long, the study of Bill C-19 by any committee of the Senate is a very daunting task.

The “Select Luxury Items Tax Act” is a bill within a bill. It is 175 pages of the 440-page Bill C-19, and it should never have been included in this omnibus bill. The “Select Luxury Items Tax Act” should have been tabled in Parliament as a stand-alone bill to be properly studied and debated. It is shameful that the government has not studied the economic impacts of the proposed tax to determine how it will affect workers, businesses and the economy.

Part 5 of Bill C-19 proposes 32 measures and includes amendments to many other acts. Each of these 32 measures warrant detailed study. However, the breadth and depth of the measures contained in Part 5 of Bill C-19 alone required more time for study than the time provided.

While various parts of Bill C-19 were referred to a number of committees for study, the time provided was greatly limited. We are expected to make do with the time provided and rubber-stamp the bill.

Part 4 of the budget implementation act proposes to implement the “Select Luxury Items Tax Act,” which will impose an additional tax on some vehicles, aircraft and boats. It is complex legislation. As I said before, it is 175 pages long and contains 157 clauses. It should not have been included in the 440‑page omnibus budget implementation act. Rather, it should have been tabled as stand-alone legislation to be studied and debated separately by Parliament, as I indicated earlier.

The “Select Luxury Items Tax Act” imposes a tax on the retail, sale, lease or importation of certain luxury cars and personal aircraft priced over $100,000, as well as boats priced over $250,000. The tax will be calculated at the lesser of 10% of the full value of the item or 20% of the value above the established threshold, which is $100,000 for cars and personal aircraft and $250,000 for boats. The tax will come into effect September 1, 2022. The Parliamentary Budget Officer estimates that this tax will generate $87 million in revenue this year because there is only part of the year remaining, and $163 million next year.

Representatives of the aerospace industry do not support this “Select Luxury Items Tax Act,” and estimate the loss of 1,000 Canadian jobs and up to $1 billion in lost revenues to companies across the country. They indicated that the tax will affect not only large companies but companies of all sizes, in all regions throughout the Canadian supply chain. Some manufacturers are already experiencing order cancellations due to the pending tax.

The tax comes at a time when the aerospace industry is still recovering from the pandemic. It is asking government to undertake an economic impact assessment to determine what effect the tax will have on the aerospace industry, its employees and the economy. The International Association of Machinists and Aerospace Workers also expressed concern over this luxury tax, indicating that the tax is misdirected toward manufacturing. The tax will adversely affect jobs, and the negative impact on jobs will far outweigh any benefits that would come from this tax. The association also took issue with the fact that there has been no assessment of the impact on jobs and stressed that such an assessment must be done.

In summary, witnesses testified that the luxury tax will put Canadian aerospace companies at a disadvantage globally compared to their competitors, and will cause a loss in sales that will translate into job losses. They said that other countries have implemented similar taxes but have had to repeal or modify them.

In its testimony on this luxury tax, the National Marine Manufacturers Association Canada indicated that an economic impact study carried out by Ernst & Young and economist Dr. Jack Mintz on the proposed tax would result in a minimum $90 million decrease in revenues for boat dealers and potential job losses of at least 900 full-time equivalent employees. The study concluded that the select luxury items tax act would largely fall on middle-income workers who would no longer service or manufacture high-end boats in Canada. The tax also threatens the survival of Canada’s domestic boat manufacturing base, which has already been negatively affected by years of competition from other jurisdictions. The tax will also cause job losses at marinas and service shops.

In 1991, the U.S. Congress passed a 10% luxury tax on all new boats sold in the U.S. that cost more than $100,000. Within the first quarter of the year, sales of new boats over $100,000 plummeted 89%, resulting in massive job losses and multiple bankruptcies. The tax was eventually abandoned.

The select luxury items tax act was studied by the Standing Senate Committee on National Finance, and the committee report was tabled in the Senate yesterday. The following is an excerpt from the committee’s report:

After hearing from groups, notably the Aerospace Industries Association of Canada and the National Marine Manufacturers Association, our committee was surprised to learn that the government has not studied the economic impacts of the proposed tax, including on business activity and employment in these sectors.

Our committee therefore recommends that, prior to implementing this tax, the Department of Finance conduct such a study and that it inform our committee of the results, including its consultations with the impacted sectors.

In addition, should this tax be found to have a negative impact on business activity and/or employment in these sectors, we would urge the government to react quickly and take mitigating measures including, if necessary, doing away with the tax altogether.

Division 6 of Part 5 of Bill C-19 is proposing to amend the Federal-Provincial Fiscal Arrangements Act to authorize a $2‑billion payment to the provinces and territories through the Canada Health Transfer, allocated on an equal per capita basis to help reduce the surgical and other medical procedure backlogs caused by the pandemic. In addition to the $2 billion proposed in this bill, an additional $500 million was provided in 2019-20 and another $4 billion in 2020-21 to address the pressures that COVID-19 have put on the health care system, including backlogs of medical procedures.

The Canada Health Transfer is the largest federal transfer to the provinces and territories, and helps pay for health care. It is expected to cost $45 billion this year, increasing to $56 billion in 2026-27. Provincial and territorial premiers are asking for another $28 billion increase, which is significantly more than the $11 billion increase projected over the next four years.

Provinces and territories are not required to report to the federal government on how the monies are disbursed, although the conditions of the Canada Health Act are to be respected.

In addition, our briefing note on this portion of the bill indicated that the Prime Minister has committed to discussing with the provinces and territories the long-term strength, sustainability — which is an interesting word — and resilience of the health care system after the pandemic. The cost and sustainability of our universal health care system is often raised.

Using data from the Organisation for Economic Co-operation and Development, or OECD, the Fraser Institute recently compared the performance of 28 high-income OECD countries with universal health care systems to determine how well Canada’s system is performing relative to its peers. They used 40 indicators representing four broad categories: availability of resources, use of resources, access to resources, and quality and clinical performance.

The study concluded that Canada spends more on health care than the majority of high-income OECD countries with a universal health care system. After adjusting for age — those over age 65 — Canada ranked second highest of the 28 countries for health care expenditures as a percentage of GDP and eighth highest for health care expenditures per capita. Although Canada ranks among the most expensive universal health care systems in the OECD, its performance for two of the four categories — that is, availability and access to resources — is generally below that of the average OECD country, while its performance for the other two categories — the use of resources and quality and clinical performance — is mixed.

The study concluded that there is an imbalance between the value of health care that Canadians receive and the relatively high amount of money they spend on their health care system. This is surely an issue that will be addressed by the Prime Minister and the premiers when they meet.

Division 7 of Part 5 of Bill C-19 is proposing to amend the Borrowing Authority Act and the Financial Administration Act to include the extraordinary borrowings of 2021 in the borrowing authority maximum amount and no longer treat this amount as extraordinary borrowings for reporting requirements.

Division 7 also proposes to amend the Financial Administration Act to change the reporting requirements for extraordinary borrowing amounts so that these amounts are no longer required to be tabled separately in the House of Commons within a 30-day time frame, but rather be reported in the annual Debt Management Report. Under current legislation, extraordinary borrowings must be reported within 30 sitting days of Governor-in-Council approval. There were extraordinary borrowings of $288 billion in 2020 and $8.4 billion in 2021. Both reports were tabled on a timely basis within the 30-day time frame stipulated by legislation.

The government is now proposing that extraordinary borrowings be reported in Finance Canada’s Debt Management Report. This is the same report we waited one full year to see. The government pushed back the tabling of its March 2021 Debt Management Report to March 2022. In essence, the government has concluded that the tabling of extraordinary borrowings is too timely, and that this information should be included in a report that can be delayed for up to a year, as they did this year.

The government is proposing this amendment under the pretext of improving accountability. However, if the government were truly sincere in improving accountability, they should have amended the Financial Administration Act to require the Debt Management Report to be tabled earlier rather than the one-year time limit currently stipulated.

Bill C-19 also proposes to amend the Borrowing Authority Act. This act focuses on the consolidated borrowings of government and its Crown agencies. However, reporting is only required once every three years. It is a triennial report — I think it’s the only triennial report required in government; all the other reports are annual. The consolidated borrowings of government is an amount not readily available, and I know because I went looking for it.

Since reporting is once every three years, to determine the consolidated borrowings, information is gleaned from the government’s public accounts, the financial statements and other financial information of Crown agencies themselves. You have to look through a lot of information, which I did before Christmas, and come up with the dollar amount yourself, and usually, it’s an estimate.

When we had the finance officials at the National Finance Committee, I asked them what the consolidated debt was, and they said $1.6 trillion. The $1.6 trillion I mentioned earlier in my speech, that came from finance officials. It was in a government document somewhere. I don’t know where. I checked with the Parliamentary Budget Officer and the Library of Parliament, but I don’t think that number is published anywhere.

If the government were truly interested in improving accountability, it should have amended the Borrowing Authority Act to require an annual report on consolidated debt rather than the triennial report currently required.

Division 12 of Part 5 of the budget implementation act enacts the prohibition on the purchase of residential property by non‑Canadians act. It prohibits the purchase of residential property by non-Canadians for a period of two years, and there are some exceptions defined under the proposed section 4 of the act.

The cost of homes in Canada has increased significantly over the past number of years, supported by low interest rates, a shortage of residential dwellings and high inflation. Both the federal and provincial governments have struggled to keep housing prices at an affordable rate.

The bill defines prohibition in section 4 of the act, stating that, “ . . . it is prohibited for a non-Canadian to purchase, directly or indirectly, any residential property.” The penalty for doing so is a fine of not more than $10,000 and, on application by the minister, a court order for the property to be sold. If sold, the owners are not to receive more than the price they paid for the property.

There was insufficient time to thoroughly study the proposed bill and its implications. However, of concern to me is the discretion afforded to the minister to prescribe matters by regulation. For example, the minister can exempt certain classes of individuals from the ban and can change the definition of certain key terms. As a result, regulations can change how the ban will actually work in practice.

There is also concern that the ban on the purchase of residential properties infringes on provincial jurisdiction or discriminates based on nationality. It remains to be seen whether this ban will actually increase the residential properties available for Canadian occupancy or moderate housing prices. Inflation and increasing interest rates may be the biggest factor in moderating prices in the housing sector.

Division 3 of Part 5 of the bill proposes to repeal the Safe Drinking Water for First Nations Act. This part of the bill was referred to the Standing Senate Committee on Aboriginal Peoples for examination. The committee tabled its report in the Senate on June 10. Like Senator Moncion, I was very much struck by the report.

In its report, the committee expressed alarm about the unacceptable water crisis that continues to plague First Nations across Canada, causing serious illnesses, mental health issues and unnecessary suffering. It went on to say:

Canadians would be shocked, and ashamed if they knew how the Government of Canada has treated First Nations on water issues.

The report outlines some specific examples of problems encountered by First Nations in accessing safe drinking water, including references to legal actions taken against the Government of Canada in relation to clean drinking water in First Nations communities. While the committee said it recognizes that the federal government is taking important steps to address long-term drinking water advisories, it said that it remains deeply concerned that First Nations had to resort to litigation to obtain federal funding for safe drinking water in some communities.

The committee concluded its examination of this part of the bill by saying it believes that:

. . . with respect to First Nations water, the Government of Canada has breached the honour of the Crown and its treaty and nation to nation relationships.

It was the committee’s view that the minister should report publicly on the solution to the First Nations water crisis, and further, “the implementation of any solution needs to be measured or the status quo is unlikely to change.”

Honourable senators, Division 30 of Part 5 of the bill proposes to implement the first series of changes required to meet the government’s commitment to create a publicly searchable corporate beneficial ownership registry by 2023. At the present time, anonymous Canadian shell companies can be used to conceal the true ownership of businesses. This makes them vulnerable to misuse for illegal activities such as money laundering and tax evasion. To counter this, authorities need access to timely and accurate information about the true ownership of these entities.

Specifically, the proposed amendments to the Canada Business Corporations Act will require private federal corporations to send information on their beneficial owners to Corporations Canada on an annual basis when a change in ownership occurs. This will allow Corporations Canada to provide that information to an investigative body or authorized entity.

Government has, for several years, been talking about a publicly accessible beneficial ownership registry. The information in such a registry would be invaluable in pursuing money laundering and tax evasion and would assist the government in collecting, according to some estimates, billions of dollars in tax revenues.

Last year’s budget provided $2 million for the implementation of a publicly accessible corporate beneficial ownership registry by 2025. The Banking Committee at that time expressed concern that the changes being proposed and the $2 million being provided were insufficient to implement the registry by 2025. This year, government is accelerating its targeted implementation date of a beneficial ownership registry to the end of 2023, a mere 18 months away.

Government has also indicated that the registry will now be implemented using a two-phased approach in which phase one includes these amendments and phase two will include other amendments, which will be disclosed in a future budget implementation bill in the fall of this year.

Government has further indicated this two-phased approach will allow for necessary consultations with stakeholders. Although consultations were held in 2020, there are several unresolved issues surrounding the government’s new commitment to implement the registry before the end of next year. Specifically, they have moved to what they call a two‑phased approach without providing detailed information on the plans and the objectives of each phase, and no funding has been provided for the implementation of the registry. While $2 million was included in last year’s budget, it was not enough to implement the registry and none of this money had been spent. While implementation of the registry by the end of next year is a laudable objective, this is only 18 months away. Government has many challenges to overcome before this deadline.

The Standing Senate Committee on Banking, Trade and Commerce was tasked with reviewing this part of the bill and also expressed concern over the two-phased approach. The committee also suggested that the government take complementary action to ensure the success of the registry by collaborating with provinces and territories, allocating adequate financial and human resources to ensure the success of the registry and continuing to examine the potential use of lawyers as nominee shareholders to shield the identity of beneficial owners.

Of particular interest was the release last week of the report of the Cullen Commission, which held a public inquiry into money laundering in British Columbia. The Cullen Commission said that the federal anti-money laundering regime is not effective and the Province of British Columbia needs to go its own way. Commissioner Cullen said that the agency tasked by the federal government to identify money threats, the Financial Transactions and Reports Analysis Centre, which we know as FINTRAC, is ineffective. He said that FINTRAC’s results compare poorly to other nations with comparable systems. Given the deadline established by government to implement phase one, we will be able to assess progress of the system during our study of the 2023 budget.

This year’s budget announced two spending reviews that are supposed to save the government and the taxpayer $9 billion over five years. The objective of the first review is to reduce planned spending in the context of a stronger recovery. Government estimates this review will save $750 million a year for four years, beginning next year, for a total savings of $3 billion. Government has said that the 2022 fall economic and fiscal update will inform us of the progress of this review.

The second initiative will be a strategic policy review led by the President of the Treasury Board. This initiative will assess program effectiveness in meeting government’s key priorities. It is also supposed to identify opportunities to save and reallocate resources. This second review is estimated to save $6 billion over three years beginning in 2025. Next year’s budget is supposed to provide an update on these savings. My primary concern relates to the $9 billion in potential savings since it is being used to reduce the five-year cost of new programs as disclosed in the budget. If the $9 billion in savings does not materialize in whole or in part, any shortfall will have to be funded by the government, thus increasing the projected deficit.

Given that previous expenditure reviews were unsuccessful, such as those in Budget 2017 and the 2019 fall fiscal update, government will be challenged to actually realize these savings. The initiative launched in 2017 actually resulted in increased spending while no information could be found on the 2019 initiative.

The Parliamentary Budget Officer has questioned these initiatives, indicating severe fiscal restraint will be required to achieve these savings. In addition, our review of departmental performance reports in the Finance Committee indicates that the quality of performance information provided by departments and agencies will make it much more difficult to carry out the review.

Given the invasion of Ukraine, government has signalled that there will be a significant increase in the budget for military spending. Budget 2022 allocates $6 billion over five years to reinforce our defence priorities with another $2 billion going toward supporting a culture change in the Canadian Armed Forces, enhancing cybersecurity and supporting Ukraine. The budget does not provide details on what the $6 billion over five years will provide, but the budget document frames it as funding that will strengthen Canada’s contributions to our core alliances and bolster the capabilities of the Canadian Armed Forces.

In 2017, the government released its defence policy and earmarked $164 billion over the 20-year period from 2017 to 2037 for capital expenditures for the Department of National Defence. However, financial information indicates that, for its capital spending, there was a shortfall or underspending of $10 billion on capital projects between 2017 and 2021 between what the defence policy had projected and what was actually spent. Revised departmental plans show that this $10 billion shortfall will now be shifted to future years, notably 2023 to 2028. That’s the background. This is my point.

Earlier this week, the government announced it would spend $4.9 billion over the next six years to modernize NORAD and upgrade our continental defence system, and there is a commitment by government to invest $40 billion over the next two decades on NORAD. Government must clarify whether the 2017 to 2021 spending shortfall of $10 billion, which is now shifted to future years, will be the source of funding for the NORAD initiative, or whether the NORAD initiative requires new funding. These issues are important because we need to know how post-budget initiatives will affect government-projected deficits as disclosed in Budget 2022.

It is not only NORAD which requires significant funding. The Canadian Armed Forces has old planes, old ships, second-hand submarines that are often not operational and a shortage of recruits. In addition, in order for Canada to reach NATO’s 2% of GDP defence spending benchmark, government will need to spend between $13 billion and $18 billion more per year over the next five years. Suffice to say the Canadian Armed Forces and the Government of Canada have their challenges in protecting our country.

Each year, government launches new billion-dollar programs or significantly increases existing programs. These include multi-billion-dollar infrastructure programs, such as the $187 billion Investing in Canada Infrastructure Program and the $30 billion Federal Secretariat on Early Learning and Child Care launched last year, promising reduced child care fees, 250,000 new child care spaces and about 55,000 new early childhood educator positions by 2026.

Last year, $1.5 billion was allocated in the budget for the Rapid Housing Initiative, promising 4,500 new affordable units that would be constructed within 12 months. The program is extended this year to create at least 6,000 new affordable housing units at an estimated cost of $1.5 billion. This year government is also committing $10 billion for the making housing more affordable initiative, targeting the creation of 100,000 new housing units over the next five years. However, all these numbers are projections. They are estimates. And we never see the report cards which tell us what has actually happened. Did the infrastructure projects actually get built? And where are those projects actually located? In what communities? Were the housing units actually constructed? In what communities? Are those units occupied? How many child care spaces have been created so far?

Honourable senators, these are the questions we should be asking, and this is the information we should be looking for. This is accountability. The easiest part is saying that we plan to do something. The difficult part is delivering results.

Each year, government departments and organizations release their departmental results reports. However, the information provided in many of these reports do not provide sufficient information to indicate what results they actually achieved with the funding provided. Quite simply, the departmental results reports are not providing the information they are supposed to provide. Government, its departments and agencies should provide report cards on its programs and demonstrate that the money provided has actually achieved its purpose. The departmental results reports no longer demonstrate accountability.

Honourable senators, in closing, I would like to thank Senator Moncion for two speeches on the budget bill. I would also like to thank all of my colleagues on the National Finance Committee, the chair, the deputy chair and all the staff who supported us in our many meetings while we studied the budget. Thank you, honourable senators.

 

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