The Committee did not pose a question about federal finances, policy making or the public service when it launched its consultations in advance of the 2017 federal budget. That said, witnesses provided comments about each of these topics.

A. FEDERAL FINANCES

In relation to federal finances, the Committee’s witnesses made proposals related to the following topics: fiscal targets and policy development; transparency and scrutiny; tax review, reform and compliance; and transfers to the provinces/territories.

Canadian Federal Debt as a Proportion of Gross Domestic Product, 2011–2012 to 2020–2021 (%)

Notes: The federal debt – which is also known as the accumulated deficit – is equal to total liabilities less total financial and non-financial assets. Financial assets consist of cash and other accounts receivable, taxes receivable, foreign exchange accounts, loans, investments and advances, and public sector pension assets. Non-financial assets consist of tangible capital assets, such as land and buildings, inventories, and prepaid expenses and other assets.

Sources: Figure prepared using data obtained from: Department of Finance, Fiscal Reference Tables–2016, Table 2, September 2016; and Department of Finance, Fall Economic Statement 2016, 1 November 2016, p. 69.

1. Fiscal Targets and Policy Development

The Committee was informed about a variety of fiscal targets, with the Institute of Fiscal Studies and Democracy suggesting that the government have credible targets over the medium term, such as a stable debt-to-gross domestic product ratio; such targets should be supported by analysis demonstrating the sustainability of federal finances over the long term. The Business Council of Canada indicated that the government’s fiscal target for 2021 should be a federal debt-to-gross domestic product ratio of 25.0%, while the Board of Trade of Metropolitan Montreal advocated the current strategy of reducing that ratio over time.

Regarding budgetary balance, the Atlantic Provinces Economic Council, the Board of Trade of Metropolitan Montreal, the Business Council of Manitoba, the Canadian Federation of Independent Business, the Chartered Professional Accountants of Canada, the Conference Board of Canada, Financial Executives International Canada, the Macdonald-Laurier Institute, the Quebec Employers Council and the Regina and District Chamber of Commerce stated that the government should establish a plan to balance the budget.

According to the Conference Board of Canada and Financial Executives International Canada, a plan to balance the budget should indicate the manner in which – and the timeline by which – the government intends to eliminate the budgetary deficit. The Chartered Professional Accountants of Canada stated that the government should balance the budget by the end of its mandate, while the Canadian Federation of Independent Business said that budgetary balance should be achieved within the next three to five years. The Board of Trade of Metropolitan Montreal proposed the establishment of interim annual budgetary balance targets to reassure investors and financial institutions, and indicated that the government should continue to apply a downward adjustment of $3 billion to $6 billion to its budgetary balance projections. The Macdonald-Laurier Institute suggested that the government consider adopting fiscal rules, such as balanced budget legislation.

The C.D. Howe Institute urged the government to be cautious regarding budgetary balance and debt accumulation in order to ensure that it has sufficient capacity to respond to economic conditions that could be characterized as difficult. The Canadian Taxpayers Federation advocated caution in relation to additional stimulus spending.

The Quebec Employers Council highlighted a preference for measures that increase private-sector investment, rather than additional government spending, while the Atlantic Institute for Market Studies stated that the government should support economic growth by focusing on the removal of barriers to growth, rather than on spending initiatives. The Quebec Employers Council proposed an approach for limiting growth in spending that would be similar to that used in Quebec: when new spending measures are introduced, the government should determine whether spending on programs that are a lower priority can be reduced by a similar amount.

According to the Assembly of First Nations, the government should ensure that departmental budgetary surpluses, such as at Indigenous and Northern Affairs Canada, can be carried forward to subsequent years.

2. Transparency and Scrutiny

Regarding the transparency of federal finances, the Institute of Fiscal Studies and Democracy told the Committee that the government’s budgets should provide comprehensive information on major program spending over the next five years, as well as the estimated fiscal cost of any proposed legislation. According to Generation Squeeze, government spending should be reported in a manner that is disaggregated by age group; particular mention was made of the methodology developed at the University of British Columbia.

Financial Executives International Canada stated that the government should provide more detailed information about the proposed changes to the Canada Pension Plan, including about the cost, manner of funding and timetable for implementation.

In relation to scrutiny of federal finances, the Institute of Fiscal Studies and Democracy advocated reform of the estimates process in a manner that would be consistent with the 2012 recommendations of the House of Commons Standing Committee on Government Operations and Estimates. According to it, such a reform would provide parliamentarians with improved financial and performance information to support their examination of the estimates, and would allow them to vote on program activities, rather than on highly aggregated amounts. It also suggested that this approach would ensure that transfers of funds across programs are reported to Parliament, and that variations in amounts requested and performance standards are explained to parliamentary committees.

3. Tax Review, Reform and Compliance

In focusing on federal tax expenditures, the Canadian Chamber of Commerce informed the Committee that these expenditures should be reviewed; those that are ineffective should be eliminated, with resulting amounts allocated to reduce corporate income taxes. The Board of Trade of Metropolitan Montreal also supported such a review, and said that tax measures assisting specific sectors and businesses should be predictable, targeted, adapted to their needs and reviewed on an ongoing basis.

The Chartered Professional Accountants of Canada called for a comprehensive review of the tax system in advance of tax reform. According to it and the Business Council of Canada, any tax reform should broaden the tax base, ensure low tax rates, eliminate inefficient or ineffective tax measures, and support economic growth. The Chartered Professional Accountants of Canada also indicated that taxation of personal savings should be avoided. The Board of Trade of Metropolitan Montreal urged the government to reduce payroll taxes, as well as personal and corporate income tax rates.

As well, the Board of Trade of Metropolitan Montreal and the Chartered Professional Accountants of Canada said that consideration should be given to altering the mix of income and consumption taxes, with increased use of tax measures that have fewer negative impacts on economic growth. The Board of Trade of Metropolitan Montreal also advocated a greater reliance on sales taxes and tariffs.

The Canadian Association of Petroleum Producers supported modernization of the tax system with a view to supporting investment in the oil and gas sector. As well, it proposed a review of the tax rules that apply to large corporations, and changes to make them more transparent and efficient.

The Business Council of Canada said that tax reform should include efforts to reduce the costs of administering the tax system, including through the adoption of digital platforms to collect and analyze tax information in real time. The Chartered Professional Accountants of Canada indicated that the government should work with the provinces/territories on a coordinated approach to tax administration.

Witnesses also focused on tax compliance. The Cooper Institute stated that some businesses are not paying the taxes that they should, and urged an end to corporate offshore tax avoidance and evasion. Similarly, the Canadian Union of Public Employees suggested that large corporations should pay what might be characterized as their fair share of taxes.

Regarding tax-related reporting, the Association of Canadian Financial Officers supported implementation of the Organisation for Economic Co-operation and Development’s country-by-country reporting standard at a lower financial activity threshold, vetting of all tax products by – and registration of them with – the Canada Revenue Agency, the disclosure of beneficial ownership of all entities incorporated in Canada, and enforcement – by the Canada Revenue Agency – of existing penalties in situations of tax evasion. The Quebec Employers Council proposed that Canada adopt deferred prosecution agreements to ease the burden on the justice system, and to encourage self-reporting and compliance.

In mentioning the United Nations as one possible forum for dialogue, the Association of Canadian Financial Officers called on the government to provide international leadership in ensuring that discussions about international tax reform include developing countries.

Oxfam Canada supported additional funding for the Canada Revenue Agency to address the use of tax havens, and that any unpaid tax amounts thereby collected be allocated to gender equality initiatives.

Supporting Employment & Economic Development Winnipeg Inc. identified a need for more support for low-income Canadians to help them prepare their taxes and apply for benefits for which they are eligible. It suggested that this increased support include year-round operation of the Community Volunteer Income Tax Program. 

4. Transfers to the Provinces/Territories

The Committee was told about federal transfers to the provinces/territories, with the Newfoundland and Labrador Federation of Labour advocating review of the Equalization program with the goal of making it more responsive to commodity price fluctuations and recessions.

According to the Board of Trade of Metropolitan Montreal, the government should maintain existing provincial transfers, review the Canada Health Transfer and change the way in which that transfer is calculated in order to consider each province’s age structure.

5. The Committee’s Recommendations

Recognizing that federal tax and program spending needs to occur within a sound fiscal framework, the Committee recommends:

RECOMMENDATION 76

That the Government of Canada, at the earliest opportunity, undertake a comprehensive tax review with the objective of simplifying the Income Tax Act.

RECOMMENDATION 77

That the Government of Canada work within a fiscal framework that ensures a debt-to-gross domestic product ratio that is stable or declining.

RECOMMENDATION 78

That the Government of Canada follow through on its commitment to increase funding for palliative care in accordance with provincial need.

B. POLICY MAKING

The Committee’s witnesses highlighted a number of initiatives in relation to federal policy making. In particular, they commented on federal procurement decisions, the integration of specific considerations into policy making and labour-related policies.

Federal Contracts Awarded, by Contract Type and Size, 2014

Note: The number of contracts awarded is for federal entities defined as contracting authorities in the Financial Administration Act and in the Government Contracts Regulations, and for the Canada Revenue Agency.

Source: Figure prepared using data obtained from: Treasury Board of Canada Secretariat, 2014 Purchasing Activity Report, 17 March 2016.

1. Federal Procurement

With a focus on infrastructure-related procurement, Canadian Manufacturers & Exporters and Unifor Local 2182 informed the Committee that the government should adopt a procurement policy that maximizes domestic economic benefits. The Alberta Federation of Labour said that procurement rules related to infrastructure projects should create employment opportunities for Canadians in the construction, manufacturing and maintenance phases.

The Canadian Association of Defence and Security Industries proposed the creation of a “made in Canada” defence industrial policy that would encourage intellectual property and product information transfers to Canadian equipment manufacturers.

In procuring goods and services, General Motors of Canada Limited urged the government to give preference to businesses that are starting up or scaling up.

According to the Canadian Community Economic Development Network, the government should integrate social value weighting into its procurement activities in order to improve consideration of social, environmental and economic impacts. It also said that community benefits agreements should be integrated into federal development projects, and – in that regard – supported the adoption of Bill C-227, An Act to amend the Department of Public Works and Government Services Act (community benefit).

In mentioning federal procurement as a way in which to support people with disabilities, the Conseil québécois des entreprises adaptées indicated that the government should encourage its procurement officers to purchase more goods and services from entities that are members of its organization.

The Canadian Community Economic Development Network and Oxfam Canada stated that government contracts should include a requirement for employers to provide their employees with a wage that is sufficient to maintain a certain standard of living.

Alberta-Pacific Forest Industries Inc. encouraged the government to integrate the “carbon first” principle into its procurement decisions as a means of selecting the least carbon-intensive option.

2. Specific Considerations in Policy Marking

The St. John's Status of Women Council told the Committee that the government should integrate gender-based analysis into its policy development in order to reduce gender inequality and poverty among women, and to ensure consistency with Article 3 of the Convention on the Elimination of all Forms of Discrimination Against Women. Oxfam Canada indicated that legislation should be adopted to make gender-based analysis mandatory in all departments and agencies, and for proposals submitted to Cabinet, the Privy Council Office, the Treasury Board and the Department of Finance. It requested that funding be provided to Status of Women Canada to assist in achieving that goal.

The Cooper Institute said that all government decisions should be subject to a “climate test.”

3. Labour-Related Policies

The Committee was informed about a number of labour-related issues. For example, the St. John's Status of Women Council identified pay equity legislation as a measure that would recognize women’s contribution to the economy. Similarly, Oxfam Canada and the Public Service Alliance of Canada supported the adoption of proactive pay equity legislation that would apply to the federal public service and federally regulated employers. Oxfam Canada also proposed repeal of the Public Service Equitable Compensation Act.

The Newfoundland and Labrador Federation of Labour and Oxfam Canada advocated the establishment of a federal minimum wage of $15 per hour, which Oxfam Canada said should be indexed to inflation. It also suggested that the government work with the provinces to ensure that Canadian workers earn a wage that is sufficient to maintain a certain standard of living. The St. John's Status of Women Council supported the adoption of a federal minimum wage as a way to reduce poverty among women, noting that it would provide a standard that provinces could follow.

Because a number of federal and provincial benefits are available only to individuals who are Employment Insurance claimants, the Quebec Employers Council indicated that assistance should be provided to those who are not claimants, such as recent immigrants and people with disabilities.

4.  The Committee’s Recommendation

Believing that the varying interests of groups of Canadians, sectors of the economy and regions of the country should be considered as federal policies are developed, the Committee recommends:

RECOMMENDATION 79

That the Government of Canada consider the effects of federal policy decisions on particular groups, sectors and communities, including women, seniors and rural regions.

C. GOVERNMENT

The Committee’s witnesses commented on two aspects of the federal government: the federal public service; and the activities of specific departments and other federal organizations.

Federal Public Servants, Canada, 2007–2016 (#)

Note: A description of the entities included in the population of “federal public servants” is available at: Treasury Board of Canada Secretariat, Population of the Federal Public Service by Department, accessed on 16 November 2016.

Source:   Figure prepared using data obtained from: Treasury Board of Canada Secretariat, Population of the Federal Public Service by Department, accessed on 16 November 2016.

1. Public Service

In mentioning the federal public service, the Association of Canadian Financial Officers told the Committee that the Public Servants Disclosure Protection Act should be reviewed with the goal of both improving the disclosure of wrongdoing and protecting public servants against reprisal when they report wrongdoing. It also suggested that the Act be expanded to the private sector in an effort to help combat white-collar crime involving government contracts.

Noting that public servants’ hourly compensation exceeds that for employees in most of Canada’s other sectors, the C.D. Howe Institute urged a limit on the growth in their compensation. It made particular mention of limiting future benefits, such as pensions and sick leave.

Regarding the government’s intention to eliminate ineffective, inefficient and obsolete programs, the Public Service Alliance of Canada advocated the use of a transparent process that would involve the unions that represent federal public servants.

As well, the Public Service Alliance of Canada requested a comprehensive review of the government’s outsourcing activities, particularly regarding the use of temporary staffing agencies; it proposed that the use of such agencies should be reduced.

2. Activities of Departments and Other Federal Organizations

The Committee was informed about specific departments and other federal organizations. For example, the Chartered Professional Accountants of Canada stated that departments and agencies should adopt new technologies to enhance their responsiveness and efficiency, and to reduce the administrative burden imposed on businesses; it specifically mentioned standardized business reporting based on the eXtensible Business Reporting Language. Recognizing the challenges that were encountered when the Phoenix pay system was deployed, the Public Service Alliance of Canada urged the establishment of procedures for implementing technologies that affect program delivery.

Universities Canada proposed an enhanced role – and greater funding – for Statistics Canada in relation to labour market information collection, analysis and dissemination. Polytechnics Canada, Colleges and Institutes Canada and the Canadian Chamber of Commerce also urged more funding for Statistics Canada in order to provide better information about labour markets and education.

According to Economic Development Winnipeg Inc., data gaps are preventing Canadian communities from competing effectively against the United States for investment. It said that the government should examine Statistics Canada’s data collection practices in order to identify the gaps.

Imagine Canada proposed extension of the Minister of Canadian Heritage’s recently announced grant and contribution measures to other federal departments and agencies.

The Canadian Climate Forum requested funding to allow it to help departments with knowledge integration and dissemination regarding the implementation of an integrated climate strategy across departments, and with the delivery of independent and objective climate- and energy-related information when interacting with stakeholders, other levels of government and the public. It indicated that this funding could also be used to advise the Chief Science Officer, support Canada's Platform for Disaster Risk Reduction, and engage with businesses in order to involve them in the development of climate change policy; this engagement could include roundtables and the creation of a secretariat to host the Canadian activities of the United Nations–led Private Sector Alliance for Disaster Resilient Societies.

The Canadian Labour Congress highlighted the need for Service Canada to have sufficient staffing and other resources, and the Inter-Provincial EI Working Group asked the government to implement the recommendations contained in a report regarding Service Canada’s quality of service.

The Public Service Alliance of Canada called on the government to increase departmental budgets in order to support the provision of public programs and services.

The Quebec Employers Council urged the government to consider combining the Canada Revenue Agency and Revenu Québec in order to reduce tax administration costs.

The Dairy Farmers of Canada requested the government increase funding for the Canada Border Services Agency and for the Canadian Food Inspection Agency. Similarly, the Canadian Airports Council and the Greater Toronto Airports Authority advocated more funding for the Canada Border Services Agency.

The Canadian Credit Union Association stated that the government should not permit postal banking.

3.  The Committee’s Recommendations

Feeling that Canadians expect the taxes that they pay will lead to high-quality federal services and spending in areas that they identify as priorities, the Committee recommends:

RECOMMENDATION 80

That the Government of Canada ensure that financially vulnerable Canadians have access to the government benefits to which they are entitled. As well, the Government should reinstate in-person Canada Revenue Agency services so that these individuals have more individualized supports.

RECOMMENDATION 81

That the Government of Canada increase its investments in official development assistance with the goal of investing 0.35% of gross domestic product within the next three to four years.