[Recorded by Electronic Apparatus]
Tuesday, October 29, 1996
.1605 
[English]
The Chairman: Pursuant to Standing Order 108(2), we will make an examination of the public service renewal initiatives.
We have before us this afternoon the Honourable Marcel Massé, President of the Treasury Board and Minister responsible for Infrastructure.
Mr. Minister, on behalf of my colleagues on the committee, I'd like to extend to you and your officials a very warm welcome. This is the first meeting in the current series of hearings on the public service renewal. As an aside, I'd also like to thank the Treasury Board for the additional information received yesterday as a follow-up to the committee briefing given by Mr. Harder. As is always the case with additional information, we now have further questions.
As a result of today's hearings, we would like to be able to be in a position to clearly identify the key issues for the renewal of the public service. Our committee would particularly like to know the course of action planned for the next few years. Perhaps I can ask the minister to introduce his officials.
I understand that you have a brief statement, Mr. Minister.
[Translation]
The Honourable Marcel Massé (President of the Treasury Board and Minister responsible for infrastructure): I'm very happy to be here today and to answer the many questions of committee members. Before I start, if I may, I would like to introduce to you my officials: Jean-Claude Bouchard, Chief, Human Resources Branch; David Miller, Assistant Secretary, Expenditure Management Sector and
[English]
on my extreme left - although not in ideology, I'm sure - David Watters, the assistant secretary of alternative service delivery in crown corporations.
[Translation]
I'm glad to have this opportunity today to speak to you about the changes, challenges and renewal taking place in the Canadian Public Service. Our general objective is to get government right. To achieve this, we have identified three areas where we are focusing our efforts: first, devoting our resources to the highest priorities; next, modernizing service delivery so that government services are more responsive, accessible and affordable; and finally, giving Canadian taxpayers a government they can afford.
[English]
A key tool in getting government right is program review, which questions the role of the federal government. It examines, for example, what our core lines of business should be, who our clients are, and how we can improve integrated delivery of services to our clients, the taxpayers, at a lower cost while increasing their level of satisfaction. The answers to these questions have far-reaching implications for all of us.
[Translation]
The fundamental role of government consists of understanding the constantly changing needs of Canadians and responding by implementing the appropriate strategic framework. This could be called the essential function of government. This requires decentralizing the decision-making process to those actually delivering government services because they are best able to respond quickly to our clients' needs. And we are moving in this direction.
For example, our country's largest and busiest airports are being transferred to locally-based airport authorities so they can operate in a more commercial and cost-effective manner. In the same vein, the government announced its intention to create three new agencies to manage national parks, inspect food, and collect revenue. While these agencies will operate within the public sector, they will have more autonomy and hence more flexibility.
The key characteristic of these agencies will be flexibility. The government needs this flexibility to fulfill its responsibilities and ensure its programs and services best meet the needs of Canadians.
.1610
[English]
The fundamental questions posed by program review have given us an instrument for assessing programs. We are eliminating those that no longer serve taxpayers well. By focusing on core activities we will restore our capacity to do the things that only government can do.
Departments are also adopting ways of operating that are closer to those of the private sector, instituting operating budgets, preparing business plans, and, where appropriate, establishing service standards. The government is focusing its attention on outputs instead of inputs. Where possible, we are measuring the results of our activities. Our aim is to make government more accountable by clearly showing Canadians what they are getting for their tax dollars.
Getting technology right is an integral part of getting government right. It is our goal to give Canadians access within the very near future to government information and services through a variety of electronic channels.
As the same time, we are getting our fiscal house in order. Between 1993-94 and 1998-99 we will have reduced the size of the federal government by 22%.
[Translation]
By 1998-99, we estimate that Program Review will have reduced programs spending excluding transfers, i.e. reduce the size of the federal government by a total of 22%
This estimate includes the one-year extension of Program Review announced in the budget last March. From 1999 onwards, we will save more than $9 billion per year, including $3 billion a year in government payroll costs.
[English]
This major reduction in the size of the federal public service does not translate, however, into equivalent job losses. In some situations service delivery has or will be transferred to the private sector. This is the case for the 6,400 employees of Transport Canada who are moving to Navigation Canada, NAVCAN, a new non-profit, non-governmental organization.
The government has taken a number of measures to reduce the impact of downsizing on employees. I'm pleased to be able to report that to date the government has rarely had to resort to laying employees off.
We are committed to a one-year payback on our investment in downsizing. That means, on average, we will save an employee's salary within the year he or she departs.
I would like before closing to assure you that we have made significant progress in getting government right over the last year.
[Translation]
The federal public service of the future will be smaller. Quasi-public organizations will deliver many of the services. We will enter more an more into partnership with other levels of government, non-governmental organizations, and the private sector.
Government activity will be more results-based and Canadians will have a much better idea of what they are receiving for their tax dollars.
[English]
Thank you for your attention.
The Chairman: Thank you, Mr. Minister.
Mr. Crête, you have 10 minutes.
[Translation]
Mr. Crête (Kamouraska - Rivière-du-Loup): Thank you for your presentation, Mr. Minister. In our constituencies, when reference is made to cuts and adjustments in the federal public service, at no time do people see more money in their pockets. The real impact is not felt in any positive way. I would like to get clarification from you on that.
.1615
Wouldn't you say that cuts are much more massive at the base of the pyramid, I mean at the level of local delivery agencies.
You only have to look at what happened to the human resources development centres. This is inconsistent with the stated goal, which is to deliver services to clients. According to the ads you want to increase services to the unemployed, but counselling services have been cut drastically.
I would like to know if you have any numbers on the impact of cuts among civil servants as well as their impact on the front lines, that is civil servants who are closer to Canadian citizens. These numbers could show us if the system somewhat protects senior management jobs rather than those civil servants providing counselling services.
You said in your statement that there will be a decentralization of the decision-making process to those actually delivering government services. What do you think of the fact that the transitional jobs fund which was created by the human resources investment fund through the unemployment insurance reform specify that the minister's authority must be sought for a whole slew of decisions regarding budgets for the regions.
Don't you think that this kind of decision goes against the type of philosophy you are trying to instill? Since the implementation of the Act, has it not brought about an almost total paralysis?
Mr. Massé: On your first question, regarding the true impact of the cuts, it is true that it takes a certain time before these impacts are felt in the ridings.
There is a time lag and the first impact that we noticed is that less money is spent by the federal government, be it in salaries or services.
But the downsizing of government was necessary, because our deficit was much too high. Foreign investors had started wondering if the Canadian government would be able to reimburse its debt and they were charging us very high interest rates, 6%, 7% and in some case 8%.
As soon as the government had taken steps to downsize the government and, consequently, greatly reduce the deficit, foreign investors' confidence in Canada was renewed. Yesterday, if I'm not mistaken, the central bank decreased once again the prime rate which is now 3 percentage points lower than in the United States and almost 4.5 percentage points lower than 18 months ago.
The impact was felt immediately, especially in the investment community which obviously depends on the public's confidence but also, in a significant fashion, on interest rates. The impact was felt in several fields that have an automatic and immediate impact on citizens, such as the interest rates they pay for mortgages.
If you have a $50,000 mortgage at 10%, you would pay $5000 in interest per year. If your mortgage rate is 5%, you will only pay $2500 in interest per year.
[English]
I was sure the figures would fit.
[Translation]
Mr. Crête: I'm sorry to interrupt you. One must still have the means to buy a house and, for that, you need a job. I think that once more our government might very well be reacting too late to the problems. We must bring down the deficit, but today, a lot of people are without a job.
Mr. Massé: May I please complete my answer to your first question.
.1620
Considerable amounts of money have been reinvested in the economy simply because rather than paying interest on their mortgages... those who have mortgages are in the majority. A lot of Canadians have their own house and they pay interest every month. The fact that these people have more money available, because they pay less money on their mortgages, allow them to spend more on other things. This results, in part, in an increase in the demand which, in turn, should create more jobs.
It's obvious that not all Canadians will benefit in the same way from government's policies, and the problem that the member mentions must be taken into account. Rather than discuss now the impact of a budget that would involve a lot of differential measures for various segments of the population, I would rather answer more specifically the other questions that were asked. For example, you asked about the impact of cuts on senior management and on civil servants in the lower pay scale.
This is something we have checked and followed very closely. In the reports we have received so far, it is obvious that the number of senior management employees, from EX-1 to EX-5, has decreased faster than in the whole of the public service. In fact, data indicate that a number of employees in senior management position has decreased by 9% whereas the rate for the whole of the public service is only 7.9%.
Therefore, what has happened is quite the opposite of what you thought.
Mr. Crête: My question dealt with regional cuts. You just gave us the general numbers, but I would like us to deal now with regional cuts.
Mr. Massé: Obviously, this is quite different. We have also done comparisons by regions, by province and by job category. By region and by province, there are differences, but these disappear after a while. As for job categories, the latest figures mentioned in the House, if I'm not mistaken, indicated that there had been a reduction in term employees as opposed to indeterminate employees. But this is due to the fact that these statistics were collected at the same time when additional staff hired by the Department of National Revenue for the income tax season were let go. That's why it had such an impact on that job category.
As for the impact in the provinces, I don't know if you have the correct numbers exact statistics. We've compared the numbers. Essentially, if we study the reasons for the difference registered, we come to the conclusion that everything was done in a fair and equitable fashion among the provinces. We must remember, for example, that for national defense, some expenditures were made in 1995 and, consequently, this had a differential effect in 1996. This could bring about some differences. We looked at those differences and noticed that there was no significant difference among the regions.
Mr. Crête: I would like to ask a last question. I think that there is some inconsistency between the human resources fund and the decision-making process regarding the transitional job fund. I think that the government has opted for a very centralist policy regarding the decision-making process, and this is somewhat counter to the general philosophy that you seem to want to follow.
Mr. Massé: It is somewhat more difficult to answer that question. I can discuss the general impact of decentralization of the decision-making process, which was part of our philosophy and which we have implemented in the departments. Moreover, on the whole, ministers have implemented that policy in their programs.
It is one of the reasons why the number of senior officials has decreased at a higher rate than for the whole of the public service. The program we have mentioned is one that the minister responsible would know somewhat better. I don't know exactly what has happened, but we could try and get that information for you and send it to you in writing.
.1625
The Chairman: Mr. Bellemare.
Mr. Bellemare (Carleton - Gloucester): Welcome to our committee, Mr. Massé.
As you very well know, I am a member of Parliament for the national capital region, and I am quite concerned about our civil servants. I must admit that I am not quite as concerned about those in the contracting out business.
Public servants in the National Capital Region account for a third of the whole public service.
You said in your introduction that the government would be downsized by 22%. If I worked for The Citizen or The Sun, I would automatically say: "Good God! Just a few days ago we still had 250,000 public servants. Twenty-two percent of that number amounts to close to 60,000 employees." If we include members of the Armed Forces and employees of various government organizations and agencies, such as the National Research Council of Canada, it might represent as many as 350,000 public servants. If you eliminate 22% of these jobs it would amount to some 85,000 civil servants.
Does that mean that all of a sudden, we will lose not only 45,000 jobs but possibly as many as 85,000?
Mr. Massé: No. The reason is that when the programs are downsized, there is no direct link between the number of jobs and the decrease in expenditures.
There are some programs where you have more employees by hundreds of thousands of dollars spent and other programs which are quite simply subsidy programs. In those cases, you have very few person-years.
The numbers that were mentioned earlier in my statement were amounts of money, that is the decrease in expenditures. We had stated in the 1995 budget that the reduction in expenditures for the first three years of the Program Review, that is 1995-1996, 1996-1997, and 1997-1998, would be of the order of $7.2 billion.
We have come to the conclusion that a reduction in expenditure of $7.2 billion would represent the elimination of some 45,000 jobs. But when you talk about jobs...
Mr. Bellemare: Can I interrupt you for a moment?
[English]
You could expand on this question, because this was really an introduction to my main question.
Again, I make reference to The Ottawa Citizen. It was a very horrible morning for our public servants to wake up and read in The Ottawa Citizen that it wasn't just 45,000 jobs that were going to be cut off but another 10,000, for a total of 55,000. Obviously the reaction was ``Oh my gosh, I haven't been designated during these two or three years of great apprehension. Some of my colleagues have now been designated. Am I going to be designated within the next year, the next two years, or whatever?''
You understand the impact on the economy. Housing sales have come to a stop. People don't purchase huge items, because they feel insecure.
What is your reaction to this business of the extra 10,000 jobs all of a sudden? Is it going to end?
[Translation]
Mr. Massé: Between us, I must admit that my personal reaction would be to say Whoa there, let's not panic, because we're not talking here about new cuts. In fact, that number of 10,000 jobs, does not represent new cuts in other programs.
The downsizing of the government was announced in the 1995 and 1996 budgets. I was trying to say that in 1995, we had announced cuts of $7.2 billion in terms of funding, of budgets for programs.
.1630
In the March 1996 budget, we announced a fourth year for the Program Review for the following year, that is 1998-1999, and that cut represents $2 billion. It is an additional cut of $2 billion that was announced to the department, and it is included in their business plans and in fact the departments have already started taking it into account when they were preparing their budget for 1996.
You must remember the new rules that the government introduced for departmental budgets. We promised the departments that we would have a three-year plan, that is the current year plus the two following years, to allow them to plan their own downsizing. That is why you have in every budget, since Mr. Martin has been ?? Finance Minister, numbers for the current year and the two following years.
The reason why the Program Review was extended for a fourth year, until 1998-1999, is that this would allow us for that year to eliminate borrowing requirements, which is the current goal of the government, because a new minister for Finance could, in two or three years, decide to look at the worst case scenario. After all the goal of the government was to eliminate the borrowing requirements.
In 1998-1999 or after that year, we will have, according to our plans, eliminated the borrowing requirements. That is the scope of the program. When we decided that we would have to reduce our programs by $7.2 billion, to take the example of the first three years of the Program Review, according to the departments this will have the result of eliminating 45,000 jobs in the public service.
These are not necessarily people who will no longer have a job. A good number of these jobs are in fact transferred to the private sector. Let's take for example NAVCAN that I've mentioned earlier where 6200 people used to work. These people will not lose their jobs. These jobs will be transferred to a private organization that will employ those who previously worked for NAVCAN. These people will have the same salary and the same working conditions as before. There is therefore a decrease in the number of jobs in the public sector, but that does not necessarily equate to a loss of jobs.
[English]
The Chairman: Mr. Massé, one last question.
Mr. Bellemare: Your answer was very eloquent, but I wonder what it means to the individual public servant.
If you're planning on saving $9 billion from the government coffers, are we not spending possibly much more in subcontracting, therefore eliminating any benefits that we're gaining?
Mr. Massé: Your question about what is the effect on individuals will of course vary according to what happens to them. A number of them have taken advantage of the early retirement program, and in fact the demand for the program was much larger than we expected. A number of them will take the early departure incentive and will get money they can then invest into creating a new job for themselves.
You were talking about the national capital region. The national capital region has about one-third of the employment in the public service. Therefore, in this region we would expect to suffer one-third of the decrease in public sector jobs. I have 20,000 civil servants in my riding; therefore, I'm very careful and vigilant about that aspect.
When we went into program review, we indicated that in our view the effect on the public sector and public sector employment would be important enough that it would more than compensate for the reduction in public sector jobs. In the first two years there was a decrease in the national capital region of probably 6,000 jobs, but in the last month alone 6,000 jobs were created in the private sector in the Ottawa-Hull area. You will remember that the unemployment rate in the national capital region went down last month, from 7.7% to 7.4%. If you look at the last 12 months, from September 1995 to September 1996, 13,000 net new jobs were created in this area.
.1635
The answer to your question is that we have softened the impact of the transition on individuals through very generous programs such as ERI and EDI. We have retrained a number of them to take the jobs coming up. We have used attrition to get rid of jobs that were part of the program review. We've had to fire very few people.
Also, because we have reduced expenditures in general and reduced interest rates, we have managed to create more investment and more jobs in the private sector in the capital region than we wasted in the public sector.
You have to look at all of this to answer your question. I'd say the problems for individuals are always problems we must be aware of and we must treat them with equity and with fairness, but I think in the process we have done extremely well in taking care of the problems of individuals.
The Chairman: Mr. Williams.
Mr. Williams (St. Albert): Welcome, Mr. Minister.
I see in your opening comments here, if I may quote, ``First, devoting our resources to the highest priorities'' and ``What our core lines of business should be''. I was quite impressed when I read that. Reading further on, you've managed a 12% downsizing in five years, and I thought that was fairly pathetic. If you're going to be aggressive and focusing on what we should be doing, 12% downsizing, five years, 2.5% is fairly pathetic. Can you tell us why?
Mr. Massé: First I will of course question your premise. I've been in government all my life, which so far means 26 years. I was involved with the World Bank for four years and with the International Monetary Fund for four years. A decrease in government expenditures, in the size of government programs as I've described them, by 22% -
Mr. Williams: 12%.
Mr. Massé: Yes, the 12% that was mentioned looks - unfortunately, this is technical - at the $120 billion that is the expenditures of government on everything except interest. We applied program review to the programs carried out by federal government departments, and that includes transfers to provinces.
Mr. Williams: Perhaps I can interrupt, if I may, Mr. Minister, with your indulgence.
Again, I'm quoting from your own report. You say that between 1993-94 and 1998-99 we will have reduced program spending by 12%. Those are your numbers. I'm saying that over five years, 12% is not an aggressive attack on reducing programs or government spending.
Mr. Massé: Okay, I will not use the 12%, because other measures could be used that tell more.
In terms of reductions in government size, this is the best result for 50 years. In terms of other countries, in the view of the International Monetary Fund, what we have done in reducing the deficit from 6% of GNP to zero net borrowing in 1998-99 is held by them to be the best performance of any OECD country. When you say that it's pitiful, you have to be careful about comparing apples with apples and about international experience as reported by those who act as the standard.
Mr. Williams: Thank you, I'll stand by my pitiful words.
NAVCAN - 6,400 people off the civil service, but not a job lost. The key is that nothing really changed other than the fact they got a new name on their pay cheque. Yet you're taking claim for that. You paid them $200 million in severance pay. You took the severance pay out of the contingency fund. Why? Why did you set it up in the estimates as being an amount to be paid?
Mr. David W. Miller (Assistant Secretary, Expenditure Management Sector, Treasury Board): Mr. Chairman, perhaps I can address that in an accounting sense.
What these severance payments represented was that for every year of service for every public servant we have to set up a liability that results at the time these people depart, either through taking another job or through retiring. What the money did in the payments to NAVCAN was simply eliminate that liability from the accounts of Canada. There was no impact on the deficit, for example, through those payments. They are cash payments to the employees. An agreement wasn't set up at that time, but it was a liability that was recognized through years of service.
.1640
Mr. Williams: Thank you, Mr. Miller, we know that. But the point is, as you've pointed out, the government isn't planning to take these types of things out of the contingency fund and put them in the estimates, where we can see them before we vote for them.
With respect to NAVCAN, the employer that didn't cost you any jobs because the jobs just got transferred, why did you prevent the Auditor General from looking at NAVCAN when you set up the legislation? The Auditor General cannot look at NAVCAN. Why?
Mr. Miller: Unfortunately, that's news to me in that sense, but it is a non-governmental organization, non-profit, so I'm not sure the Auditor General has jurisdiction in that case. We can look into it, but I wasn't aware it was an issue.
Mr. Williams: It is a cost-plus organization that basically has the power of taxation to pay its own way. Therefore, if this government is concerned about setting up NAVCAN as that type of organization, I can't imagine why they wouldn't have some kind of scrutiny over it, such as the Auditor General.
The Chairman: For the record, Mr. Miller, you are going to investigate who has jurisdiction - is that correct?
Mr. Miller: It's certainly an area I'm not familiar with, but we can find it out for the committee.
The Chairman: Thank you.
Mr. Williams: I'm also concerned, Mr. Minister, about the fact that I believe the union contract in essence went with the people when they moved over as well. Now of course this high-cost contract with all kinds of benefits that really aren't available in the public sector has gone with these people, and it's locked in.
I'm thinking of the U.K. model of privatization. When they do the transfer of the existing employees, the contract remains for existing employees but doesn't apply to new employees hired by the organization. Why didn't you build that into the NAVCAN contract so that we could build in merit and efficiencies and true market cost for the market sector?
Mr. Massé: Mr. Chairman, let me go back to the purpose of privatization.
First, we take a long-term view of what we're doing, not a short-term view, and therefore helping employees in the private sector to get a guarantee that their benefits and salaries over three years will continue is a transition measure to us. We privatized NAVCAN because we came to the conclusion that in the field of transport the role of government was laws, regulations, security, and safety and that the various institutions and parts of the system, including the airports, the railways, and the ports, that could be better managed by the private sector should be managed by the private sector.
Mr. Williams: My question, Mr. Chairman -
Mr. Massé: If I may continue.... In the case of NAVCAN, we came to that conclusion. We therefore transferred the responsibilities of NAVCAN to a private corporation.
By the way, as a private corporation they can choose their auditors. We'll look at your question, but at first sight I do not see any reason why the Auditor General would audit their books. We will, however, look at that question.
The second, in terms of the question you asked about their employees, what we were concerned about as the previous employer of the people who transferred was once again guaranteeing to them as a good employer that their transition period would be somewhat stable. There is no doubt that if they employ new people, like any private employer they can choose whatever system they want to have for their new employees. We are not there to guarantee any type of relationship between a private employer and their employees.
Mr. Williams: Mr. Chairman, NAVCAN is a monopoly with quasi-taxing powers, if I can use that terminology, which has been set up by this government. They account to nobody. An auditor appointed by them would look only at the financial statements. They wouldn't look at value for money, as would the Auditor General. I therefore think the minister is quite remiss in the way this thing has been set up.
.1645
It's by and large off-balance-sheet financing of the type of situation in which the role NAV CANADA plays in society continues, although it just disappeared off the government payroll and showed up somewhere else with the power to tax travellers to pay for it. It's just this type of smoke and mirrors that this government has been noted for all the way along.
I will now get to the question Mr. Bellemare was asking. How many times do you announce the same cuts? You said that the 10,000 cuts Mr. Bellemare was talking about were not new cuts, but just a reannouncement of the same cuts. This is the type of smoke and mirrors that Canadians can't understand. They can't understand government. So we wonder just how on earth you're going to communicate these things to them and balance the budget at the same time.
My question now, Mr. Minister, relates to your mention of ERI and EDI, which of course we've been critical of because they're very generous. The Auditor General is now investigating the ERI and EDI in relation to the military, because it seems that people have collected more than one package. Why would that happen if the people get laid off, get rehired, get laid off again, receive a package, and get hired again? How many times can it happen?
Mr. Massé: To answer the first question, Mr. Chairman, the member indicated that he would try to give me a lively time. I see he's trying. The 10,000 cuts were of course the newspapers' interpretation of what was contained in the publication of the estimates. What the estimates indicated for 1998-99 is that there would be an additional $700 million that would be needed in order to pay for the ERI and EDI costs, which are the result of the announcements made in the 1996 budget. Therefore, this was not an announcement or reannouncement. This was the latest estimate - I'm sure it will change over time - of the cost of implementing the human resources part of the cuts that had been announced in the March 1996 budget. So we have to be careful with these words.
With respect to ERI and EDI, I, like everybody else, have seen anecdotal examples of somebody who could benefit twice from that same program. What I'm much more worried about is whether in each department the person satisified the criteria when we applied the program, got the benefit of the program and left and that the department got the benefit of that reduced position.
If in any case there has been abuse.... There may have been, because when you're dealing with a public service of 210,000 people, you are going to have cases in which the rules don't work, the rules are misused, or the rules are misapplied. In these cases, we have indicated to the department that we wanted to have reports to see whether the rules were followed. As you said, the Auditor General is investigating these cases. The normal processes will be brought down to bear to see that if our rules are misapplied, they be applied properly, if they've been misused, we try to prevent any further misuse, and if they're incomplete, we complete them.
The Chairman: Mr. Harvard. You have five minutes.
Mr. Harvard (Winnipeg St. James): Thank you, Mr. Chairman.
Mr. Minister, I think it would be safe to say that most federal public servants won't have fond memories of the 1990s. For some their careers were cut short, and for all of them their salary increments were stopped and their salaries were frozen for a number of years. But things are changing slowly. I understand that the salary increments have already been resumed as of July of this year. The salary freeze will be lifted in February of next year.
.1650
I have a couple of questions based on that. One relates to the resumption of the salary increments. Is that a large-cost item for the government? My second question is on the lifting of the salary freeze. I would think that the public service unions will be going to the bargaining table with.... I'm sure they'll be bargaining very hard, and perhaps they will be trying to make up for some lost time. What would be your message to the unions? Are they going to be able to make up for lost time? Is the bargaining going to be very tough? What would you say to the public service unions?
Mr. Massé: First, I think your opening remarks were quite right. The public service has gone through difficult times. By the way, a lot of them understand what was going on: that they were sitting on a time bomb and that at some point government would have to readjust. Yes, they have been frozen for six years, and in some cases there are now difficulties with the markets that will have to be corrected.
The salary increments, to answer your specific question, will cost us $50 million in the first year and $100 million in the years thereafter.
With respect to bargaining and making up of lost time, this of course is a major point. My view on this, and the one I intend to apply as President of Treasury Board, is that except when we clearly have a divergence with the market that should be corrected to give us access to the good people we need, there will not be any making up for lost time. There will not be a catch-up. We will negotiate with our employees on the basis of money available in the public sector, but also on the basis of the level of inflation and the level of salary increases in the private sector. There will not be a place in our accounts to catch up for lost advantages.
Mr. Harvard: So they can just forget about those lost years - they're lost. If you didn't have dinner yesterday, it's lost forever.
Mr. Massé: The basic answer is yes. I have to be careful in saying yes, because there may be exceptions when we compare to the ongoing market. If you need, for a specific type of employee in a specific classification, to adjust the salaries, obviously we will have to do that, because in some areas, whether for lawyers or people from National Revenue - auditors or something like that - we may need to have a salary that permits us to compete for the very good average employees. Apart from cases like that in which we should adapt to the market in order to make sure that our workforce is of good quality, we do not intend to have a catch-up.
Mr. Harvard: My guess is that some of the union representatives will just take that as a very tough opening bargaining position, but after a few days of bargaining the minister will soften up.
Mr. Massé: I think as employers we are held in check by the actual fiscal condition of the government. We also have to remember that every time you give $1 billion in salary increases, you have to reduce by $1 billion by reducing the number of employees or the amounts spent on programs. In other words, for the government there is a very difficult decision to be made, and that's a trade-off. There are costs to either losing employees or reducing employees and to not being able to fund programs that people want. We will have to make a judgment between these parts of the trade-off.
The Chairman: There is one last question.
Mr. Harvard: It's short. It's really on the downsizing - on the job numbers. When do the job numbers bottom out, as it were, Mr. Minister? Surely there will be a day when the public service will increase in size. We may have 40 to 50 million people to serve sometime. When do you foresee the public service growing again, even if it is modest?
.1655
Mr. Massé: My answer now would be after 1998-99. In other words, we have to bring down the size of government expenditures and therefore the number of jobs until we have reached that plateau you're talking about - that bottom. My guess would be 1998-99, with the present policies and programs we have in place.
The Chairman: Mr. Crête.
[Translation]
Mr. Crête: You pointed out that the fundamental role of government is to understand the constantly changing needs of Canadians and to respond to them. When we mentioned unemployment, you answered that the government did not intend to create jobs. Given the fact that 95% of the cuts were made to transfer payments to provinces and to the surplus of the unemployment insurance fund, do you not think that a short-term decision, that could have a major impact on employment, would be a significant decrease in the premiums paid by employers to the UI fund, which would ease somewhat the pressure on the private sector which in turn would allow it to create new jobs? Currently, by choice, the public sector does not create jobs and we do not ease in any fashion the pressure on the private sector because we maintain the premium rates paid by the employers which in turn create an artificial surplus in the unemployment insurance fund. Do you not think that a decrease in premiums would be a good idea?
Mr. Massé: As for a decrease in payroll taxes, the government has already indicated that it intended to do so. In fact, we have already done something in that regard. When we came to power, payroll taxes were scheduled to go up to $3.30 if I am not mistaken.
Mr. Crête: Yes, but the number handed around is 5¢ whereas the Chamber of Commerce is talking about a decrease of 60¢.
Mr. Massé: We have reduced this amount every year. We have indicated, in the last budget, that the premium should be at $2.95. It is obvious that if we reduce the payroll taxes for the private sector, through this program or any other, this could have a positive impact on the industry. But if we decrease the sources of revenue for the government, it will take us longer to bring down our deficit or we'll have to make other cuts somewhere and these cuts will cost jobs or services.
Mr. Crête: As for the pay system for the Department of National Defense.
Mr. Massé: In government you always have to make choices. I must point out that I disagree with your statement that 95% of the cuts were made in one sector or another. As I've pointed out, I participated in the Program Review where every program was cut. We reduced our expenditures in our departments, over a five-year period, from 50 to $40 billion. We have eliminated 45,000 jobs. Unfortunately, I am perfectly aware of where the cuts were made.
This being said, we can come up with all sorts of calculations for all sorts of reasons. Essentially, the federal government downsized more than it reduced transfer payments to the provinces. In the numbers used in the 1996 budget, there was a reduction of 12% for programs but the reduction for transfers was only 4%. I don't know the exact numbers, but it is quite obvious that the reduction in our transfer payments, more specifically for social expenditures, was not as high than the reductions in our programs and in the economic activities of the government.
You're asking what is the best way to create jobs. We believe that it was essential, especially for interest rates which are a significant determining factor in terms of investments, to once again make government fiscally responsible thus greatly reducing interest rates in all sectors. I think this is the best way to create jobs.
Mr. Crête: Therefore, you intend to stay the course. Your priority is first and foremost to reduce the deficit, job creation taking second place.
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Mr. Massé: No. To create long lasting jobs we had to downsize the public sector. That's what we have done. We had to reduce our borrowing requirements to give more room to the private sector and to bring down interest rates. That's what we have done. We now have to change the microeconomic environment, which includes taxes, to facilitate the creation of jobs by the private sector. That is what we are currently doing.
[English]
The Chairman: Thank you, Mr. Crête. Ms Beaumier.
Ms Beaumier (Brampton): Thank you, Mr. Minister. Forgive me, but I just joined this committee, and my question is probably about three years too late. I seem for the last three years to have been marching to the beat of a different drummer, and perhaps if we can turn up the volume I can get in step.
I understand in many cases the need for privatization, and I understand that private industry can be more efficient economically than government. I also believe that government should not compete with private enterprise. What I do not understand, though, is the wisdom of selling off monopolies. I'm not sure why the government can be in only businesses that lose money and not those that can make money. That's my statement so that we don't have to natter.
We've given our airports away to non-profit organizations. What does non-profit mean? Does it mean that after they have done all the improvements and done them again, their salaries go up to $2 million or $3 million per year to keep the profits down? We're talking about some privatization in universities. The only way universities can become independent or privatized is to compete with private business in the areas of accounting and legal services. We already have a school of dentistry, although that's not.... Laboratory services, catering, technology - they can compete with private industry every which way. So how are we going to see that universities aren't going to be able to compete with private businesses?
I'd like to know what great wisdom it was that decided we should be selling off monopoly services, I'd like to know what we define as non-profit, and I'd like to know what we're doing about the privatization of universities.
Mr. Massé: By the way, these questions are complex and difficult. They are going to be with us for a long while, and they cannot be dealt with in 30 seconds. I'll just try to give a few markers.
Our basic feeling is that there is nothing absolute in privatization, as there is nothing absolute in ownership or control by the private sector. The question to be discussed - and it's a question to which the answer will vary over time - is what sector, given its characteristics, is the most efficient to manage and/or deliver a given service to the people. If it's canning mashed potatoes, this is a service that is given to people and for which they are ready to pay. The public service would not, at least at present, think of getting involved in this, although some countries in the last century have gotten involved in that type of activity through the public sector.
Our criterion is one of efficiency at the time the choice is made so that we will not either privatize for ideological reasons or make something belong to the public sector for ideological reasons.
In terms of shedding off monopolies, unfortunately monopolies are not beasts that are homogeneous. You have some monopolies that are better off in the private sector and others that are better off in the public sector.
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Take telephone services. It's a group in evolution because the monopolies are slowly disintegrating, but telephone services at one point were monopolies. It was held that the management of these should be on a commercial basis, although because they would in part be national monopolies they had to be regulated by the state. In other words, they were mixed enterprises.
We have created a large number of crown corporations in Canada, including Air Canada, in the belief that because they were monopolies they'd be better run by the private sector. CNR is another example. Then we realized that the public sector has certain characteristics as a manager that are not really well made for managing certain of these services, and that we are better off with mixed enterprises, like telephones, that are regulated but run in a more commercial way.
In the last few years in transport it has become clear that even though you may have either a monopoly or a quasi-monopoly within one field like railways, you now have enough competition among modes of transport that it's better to go towards a more commercial or even a totally commercial way of managing these sectors, although you need very complex laws to deal with certain aspects of their management, as we do with the Railway Act.
With NAVCAN our conclusion was that this is now a field where you need quick adaptation to technology, perhaps quite a lot of investment, and salaries that are dictated by the quick changes in the private sector. You remember these air controller strikes, and so on, and how difficult it is to recruit the type of people for it. The public sector had difficulty not only in managing these jobs, but also training sufficiently and so on.
We came to the conclusion that if the stakeholders had much more of a hand in running that type of enterprise it would be more flexible and would deliver better services. By the way, if we're wrong on these things, a future government can look at them again and say the mix between private sector and public sector is wrong, and make other changes in regard to it.
So we're doing this in what we hope is a practical way, an efficient way, which delivers the best services at the best price.
The Chairman: Thank you. Mr. Williams.
Mr. Williams: I thought we were listening to a conversion on the road to Damascus - if I can quote the Prime Minister at Question Period today - when we're talking about this new-found enthusiasm for privatization. But I think the last comment by the minister suggested that when circumstances improve they will revert back to their old ways of big government, and that's perhaps why at the convention this past weekend they voted to continue to keep on raising taxes even after the budget is balanced, rather than reducing them.
However, that being said, on a smaller issue, an MP, Ethel Blondin-Andrew, has filed incorrect expense accounts, signed statements that were obviously incorrect, and presumably she knew that at the time. I believe I can quote what you said yesterday, Mr. Minister. You said they were wrong; she made a mistake and they did not conform to the ethics.
The Chairman: Mr. Williams, I don't really think your question is in line with what the committee is looking at doing here in terms of public service renewal.
Mr. Williams: My point, if I may make my point, Mr. Chairman, is that if the MPs can get away with these types of things, how are you going to hold civil servants accountable if they do the same thing?
Mr. Massé: The rules of Treasury Board on this are pretty clear: that a government travel card should be used only for government expenditures, that if they are used for personal expenditures then these expenditures must be reimbursed. I'll give some concrete examples that I used to see when I was a civil servant.
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For instance, you're travelling for the government and in the evening you start looking at a war movie and of course it gets charged to your hotel bill. You pay your hotel bill and when you come back you say fine, the government will pay for the bill and I will reimburse you for that personal expenditure. It's the same thing as for a beer you pay for in the fridge in your room. To me the rules are clear, the rules make sense; the rules imply that in cases such as this the personal expenditures must be fully repaid, quickly and so on.
I'll make just a few more comments. In this case, I'm informed that the government had no additional expenses in terms of either interest, because these enRoute cards do not charge interest, or administrative expenses, and that the amounts were fully reimbursed in this case. The ethics counsellor indicated to the member in question that it wasn't proper to use the government cards or reminded her of this and as a result this has ended.
As far as I'm concerned, this was a mistake in the sense that something that should not have been done was done, but I can see no evidence of any intention to not do what was right. I see complete repayment of the government in all cases except one payment before the access to information request was done, and I see the member having been told that this is incorrect and the matter being solved.
Mr. Chairman, I'm sorry, but I had indicated I had a limited time for the meeting and I hope I've been able to answer most of your questions.
The Chairman: Thank you, Mr. Minister. We have one more questioner who hasn't been on as of yet. I would ask Mr. Bryden to put the question very quickly and perhaps get a quick response, and then we can thank the minister.
Mr. Bryden (Hamilton - Wentworth): I have a couple of questions, but I'll try to keep it within a few minutes. Mr. Minister, after two years here as a government MP struggling to get the flaws out of legislation and out of proposed legislation - I do this in caucus, I do it in the Commons and I do it in committee - I've more and more come to the conclusion that my problems in trying to do this don't rest with the minister or even with cabinet policy. Often it rests with the bureaucracy.
I find that the origin of the flaws is with the ministers or cabinet receiving bad advice based on a poor understanding of the information that exists already in their department. The reason I know this is because sometimes in order to make changes I go directly to the junior bureaucrats, get good information, get it to the minister and get changes. What this suggests is that the minister himself or herself is not getting good information from the senior bureaucrats who are surrounding them.
I've had this experience specifically with Justice, Revenue, Indian and Northern Affairs, and Health. My question to you is do we have a problem of senior leadership within the civil service? Do we have something like what we see in Defence, or often in the military, where in peacetime you have too many generals doing too little and not giving good advice to the leader of the department? Do we have a crisis in leadership across the civil service similar to what we suspect we have in Defence?
Mr. Massé: My considered answer to that, based not only on my time as a minister but also, and more, on my own time as a senior civil servant, is that we do not have a crisis in leadership in the public service and that we continue to have one of the best if not the best in the world. Having stated that, I have to go to the reasons why I believe it.
When I was in the International Monetary Fund it was part of my role to review for that board - and I was there for four years in Washington - the performance of public sectors, especially, in countries all over the world. My constituency went from developed countries to undeveloped and I had to travel in order to understand the countries I was working for, which included Canada. I had to defend their positions and policies, public service and governance policies, in the board. And of course I had to comment on those of the rest of the world.
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In other words, I'm not saying it as a kind of gratuitous statement, I'm saying it based on a certain experience of what other countries in fact do and what leadership means in other public services.
In the Canadian public service, we have had in a few years some very difficult times to go through, and this has been because we have had difficulty between 1980 and 1990 with how to control the size of the public sector and the types of programs that were really the government's responsibilities. After 1993 we started putting into place what is in world terms a very fast five-year transition through program review that reduced considerably the size of government and forced the senior managers to go through a reorientation and a rethinking of their own departments and of the government as a whole. That is a very difficult change in attitude, and so far they have gone through it with flying colours.
Mr. Bryden: In the corporate world when you have a senior manager who's not performing very well or when a new administration comes in, say with Conrad Black taking over a bunch of companies, the senior personnel are often fired or let go. Do you have any similar way of getting rid of senior dead wood in the civil service? Can you fire them? Can you get rid of them if they're not doing their job?
Mr. Massé: Yes, although it's done in very diplomatic and nice ways. However, if you look at the turnover in senior ranks, including among deputy ministers, you'll see that it's surprisingly fast, and there are methods of checking the performance of the senior managers. There is what we call COSO, or Committee of Senior Officials, which is chaired by the secretary to the cabinet and includes the deputy ministers of all what we call the horizontal or central departments and a number of the other important departments, which reviews every year the performance of the other deputy ministers plus two or three categories of the senior civil servants below them to judge performance, to try to find the high flyers, to try to determine the kinds of experiences and training they need and so on.
Mr. Bryden: And you can give them the chop if they're very poor. In the corporate world, if you have a non-performing senior manager, he gets the boot. Can we do that in the civil service?
Mr. Massé: The answer is yes.
Mr. Bryden: One last question. Would you ever consider, or has it been considered, to have an exchange of senior managers in the civil service with the corporate world? I think Japan does this, where -
Mr. Massé: We do it too. We have...I wouldn't say a considerable number, but a significant number of our senior civil servants who go through that business-government exchange program and vice versa.
Mr. Bryden: Thank you.
The Chairman: Thank you very much, Mr. Minister. We appreciate the time you spent here. There are a number of questions that perhaps the members have not been able to pose today, because as you said earlier, time doesn't always permit in committee. I'm going to ask the researcher to submit those questions to your department for response. It would really assist us in the completion of our report. Thank you.
The meeting is adjourned.