[Recorded by Electronic Apparatus]
Thursday, May 30, 1996
.0934 
[English]
The Chair: We have enough members of our subcommittee. We are missing the representative from the Reform Party, which is unfortunate because Mr. Williams is the one who's been here since the beginning of the committee's work. However, I will now call the meeting to order.
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This is the meeting of the Sub-Committee on the Business of Supply. We're very fortunate to have with us as a witness today the Hon. Maurice McTigue, High Commissioner of New Zealand, who I have recently had reason to learn is very much an expert on the reforms New Zealand has undertaken with respect to its whole estimates process, the business of accountability and parliamentary involvement in holding the government accountable for expenditures.
I will ask the high commissioner to begin. I've asked him particularly to pay some attention in his comments to what improvements, if any, there have been in Parliament's dealing with financial matters and holding the government accountable and what suggestions he might have for us there.
Hon. Maurice McTigue (High Commissioner of New Zealand): Madam President, I thank you for the opportunity to be here before the committee this morning and give some evidence. I might start by just saying a little bit about myself so that you understand where I come from.
As a parliamentarian, I have been a whip of a caucus and a spokesman on a variety of different topics, and I have held seven different ministerial portfolios at different times. The one that is probably appropriate to your considerations is the role of being whip, because you have to work with Standing Orders. I think the way in which the whip is used to require conformity from members of Parliament is a matter of interest.
The other portfolio that's of interest is that I was Associate Minister of Finance. We have a Minister of Finance and two associates. One of the associates is responsible for revenue and the other for government spending. My job was that of controlling government expenditure.
That's a little bit of background. What I thought I might do now, Madam President, is just give a very brief précis of our budgetary process and then start to talk about how the different control mechanisms work.
New Zealand now works on a fiscal year from July 1 to June 30. During the period of about October to Christmas, cabinet begins to go through the process of developing what will be the budget strategy for the coming year. This is something that's done inside cabinet. It doesn't talk about figures, it doesn't talk about numbers. It talks about policy issues and what will be high priorities. For example, is expenditure in education and in trade development going to be more important than expenditure in some of the other areas of administration?
Finally, when cabinet has decided what will be the budget strategy, it's required by law to prepare a document called the The Budget and Fiscal Strategy Report. It is required by law to publish that at least three months before the beginning of the financial year. I have a copy of the one for this year here. It's not a very large document, but it goes through all of the policies the government intends to implement in the budget process.
The tradition over the last few years has been that this document is presented to Parliament in February. Our financial year begins in June, so this document is prepared and presented to Parliament well ahead of the three-month minimum requirement.
The budget is then required to be introduced before July 1, which is the beginning of our financial year. Governments since 1990 have consistently moved the presentation of the budget forward. I think the budget this year was presented on May 15 for the year beginning July 1. That's quite deliberate. It's to try to give Parliament a longer period of time before you move into the financial year when you have in your hands the proposals for spending during that financial year.
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The budget is presented in a very clearly set format. It is a strategy statement, and then it is the actual financial estimates for the year. Those have to marry up with the budget policy document that was issued in February. So they've given an indication of what policy will be, and what they bring down has to be consistent with what was in that policy document or they have to explain why it isn't consistent.
The presentation of the budget also brings the introduction of the appropriation bill. There is no first reading of the appropriation bill. It is taken as read.
We immediately go to the second reading, so you have the second reading debate in Parliament, and then the estimates are referred to select committees. In our case, that is now the finance and expenditures select committee, which has the overriding authority to pass estimates on to sectoral select committees for further examination, but also has the power to be able to retain any of those for examination by the finance and expenditure committee itself.
It will frequently give advice and sometimes instruction to sectoral committees to look at certain aspects and examine certain aspects of what's in the estimates. It also has the ability, after the select committee has considered the estimates of a particular sector, or at any time, to either give further instruction or to present an independent report to Parliament about that particular sector as well.
So it has an overriding or overarching responsibility that allows it always to be able to go to, say, the transport committee and say, we do not think you've gone far enough in your examination in this area and we want to register our concern about these particular issues.
Normally it will try to do that in cooperation with the committee, but sometimes it will feel that the issue is of sufficient importance to take those estimates back to itself, the finance and expenditure committee, and to do that work itself and to make a report to Parliament accordingly.
That doesn't happen frequently, but it has happened on occasion, particularly where the finance and expenditure committee sees that there may be high risk to some of the undertakings recommended in the budget and sees that they may have an impact upon other areas of the budget itself.
Under our Standing Orders there is a given period of time for select committees to consider the estimates. There is a date, and I think it's September 30, but I'm doing this from memory. They must report back to Parliament before September 30. That's for all of the estimates. They may be reported back earlier than that, but the last of them must have been reported back by September 30.
Under Standing Orders, Parliament has set aside a given period of time for Parliament itself to consider the estimates. It does that in the Committee of the Whole of the House. Thirteen sitting days used to be set aside, but it is now a specific amount of time, and I can't remember the number. Half of that time is devoted to the government, the other half to the opposition, and they can't use each other's time, so there's an equal sharing of time in there.
If the government decides not to use all of its time, the estimates are finished early, but the opposition can't use that time and the government cannot deny the opposition the full allocation of time available to it.
The minister is required to be in the House for the presentation of his estimates, and in nearly all cases the minister will be there for most of the period of time at the debate of those estimates. It's only in extraordinary circumstances that the minister will not be present, in which case another minister will sit in for him.
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But it is the right of the opposition to be able to determine when different estimates will be debated. So this is very much in the hands of the opposition.
How it works is that the government will set aside estimate days in the parliamentary calendar, and then the opposition will inform the government whips of which of the estimates it wants to consider on which days. It is the right of the opposition to decide that it won't debate a particular estimate at all, in which case the government can't debate it either. So if they want to go straight across some estimates and concentrate more time on others, that is their choice. Quite frequently, maybe up to half of the estimates get no debate, but in other areas, particularly the areas that are considered to be controversial or big spending areas, the opposition might spend a considerable period of time in debating.
In the House it is also in the hands of the opposition to decide when the debate on any particular estimate will stop. So it ceases when they're prepared to move on to the next estimate. This is done very much by arrangements between the opposition and the government whips.
There has been a dramatic improvement at select committee level of the quality of the examination of the estimates. There are much better resources available to select committees now. The audit office - and our auditor is a creature of Parliament, not of the government, in the same way as yours is - always gives a report to the select committee examining the estimates on what it sees in the estimates as areas that should be scrutinized carefully.
A select committee have the ability to be able to seek additional resources if they should need them in order to complete this examination. They have to do it inside what is Parliament's budget and the budget that's allocated to select committees, but there is an allocation in there that allows expert counsel to be brought in. In some cases this may be people who are experts in tax law, it may be economists, or it may be somebody who is expert in social services, to look at whether the policy is appropriate and is going to produce the particular outcomes that the government is predicting.
Inside the House the quality of the debate on the estimates is improving, but it's still not good. A lot of it is still seeking political opportunities to embarrass ministers and government, rather than a profound review of whether the spending sought is appropriate or not.
If you were to ask me where there are weaknesses in the system at the moment, the review of spending, in my view, is now becoming very good. The quality of the review of revenue is not as good, and it's pretty much limited to an examination of the estimates for our inland revenue department. It does not get anything like equal time - and I'm not suggesting that it should have equal time - with spending, but the way in which you take money from the population and the quantity that you take from the population in my view is as important as how you spend it and is deserving of closer review than it currently gets.
That gives an overview of the process. I thought that I might stop there and see if members have some questions, and then I might go into some of the processes, the techniques, that we actually use and give an indication of some of the statutes that cover what we're trying to do.
.0950
The Chair: Thank you very much.
On the first section of the presentation Mr. Pagtakhan has some questions.
Mr. Pagtakhan (Winnipeg North): Thank you so much for your presentation.
You talked about the three-month period before the start of the financial year when the budget document is made available. What can happen at that time? Can the committee change it? To what extent can they change it in theory? In history, in actual practice, has it happened?
Mr. McTigue: The first document we see is the budget strategy document, and that is meant to be a public indication of where government's priorities will lie in bringing down its budget. It's meant to give people the opportunity to make some commentary about government strategy so that it might have some influence on the budget before it is brought down. If there is a difference between that strategy document and the budget when it's presented, government is required to explain why there is a difference.
The second part of your question is about the ability of Parliament to change what the government brings down in the budget. Parliament is all-powerful, and finally the government can do nothing unless Parliament approves. The reality, however, is that the government does not like to be embarrassed by having its budget document changed.
What has happened on a number of occasions is that the finance and expenditure committee has been able to say to the Minister of Finance that in their view what the minister is trying to do here is not going to achieve these particular results, and in some cases those things have been changed. It has been more in the area of revenue than it has been in spending.
For example, in the 1991 budget the government was introducing some additional gaming taxes, which were parts of gambling that were exempt from taxation. While I didn't do that, I finished up with the job of having to clean up the mess. We did it badly and what we had proposed in the budget would not work. It was Parliament and the select committee that pointed out that the tax we were going to impose upon the one-armed bandits that were in public places all around the countryside was going to be greater than the total revenue gathered by the machines. We got all the sums wrong.
In another case we were introducing charging to students for tertiary education. We were starting to charge them for part of the course costs. They were paying 5% of their course costs. We were putting in place a loan scheme and we got that wrong. We had to do it and it was the parliamentary process that showed us it was wrong. In that case, that was what we called budget night legislation, which we were going to pass the day the budget was introduced. We had to take it out of that process, send it to a select committee, fix it up, and bring it back again.
Mr. Pagtakhan: It leaves opportunities for change.
Mr. McTigue: The opportunities are there, yes.
Mr. Pagtakhan: Is the budget also a confidence vote in Parliament?
Mr. McTigue: Yes. The budget itself is a confidence vote issue, but there are things inside the budget that you can change without it becoming an issue of confidence.
Mr. Pagtakhan: You mentioned the finance and expenditure committee, the overarching committee. Did I hear correctly that the other committees also examine their own estimates?
Mr. McTigue: Yes, but at the will of the finance and expenditure committee.
Mr. Pagtakhan: How do you resolve that with the priorities of the membership of that committee as MPs versus the priorities of the MPs on the other committees who have a special interest in those particular disciplines? How do you resolve the human priorities and ego of membership? Has it happened?
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Mr. McTigue: We have thirteen standing committees that are mainly sectoral in nature. There's one on transport, one on social services, one on health and welfare, one on foreign affairs and so forth. They are required, under the Standing Orders, to examine the estimates sent to them, and that is determined by the finance and expenditure committee.
In terms of how we deal with the interests of members, we have relatively small select committees. Most of the select committees have five permanent members, three from the government and two from the opposition. The finance and expenditure committee has seven - four from the government and three from the opposition. Those committees can be no bigger than that, but if somebody has a particular interest, the whips can change the membership.
Let me try to do this more clearly.
The members of the standing committees are determined by Parliament itself. The whip puts up a list of permanent members of the committee, but because of the requirements of other business and things like that, they are changed from time to time. The whip must inform the secretary of the committee that there is a change of personnel. That's always accepted.
So we manage that by allowing people to change, but they also have to accept that they can't be on every committee and that some of their interests are going to have to be looked after by their colleagues.
Mr. Pagtakhan: On the question of the Committee of the Whole of the House, the allocation of the fixed dates is a very interesting concept, and then the opposition has a fixed time that each group may or may not use.
In your Parliament, what constitutes the official opposition versus the so-called third party, not really the official opposition and yet with standing in the House, versus another group, the so-called independents, because they could not get a minimum number? How are they treated in relation to these committees? From your knowledge of the Canadian system, are they the same?
Mr. McTigue: It's a recent problem for us. In the Standing Orders, the government is the government and everybody else is the opposition. In terms of managing that, until recently there were really just two main parties in our Parliament. Now we have representatives from four parties in our Parliament and it is becoming more difficult. As we go to our next election, which is going to be on proportional representation, it will be more difficult still.
The Labour Party is the major opposition at the moment. They will have two of the opposition members on the committee and the other parties will tend to have one. On some of the important committees, we make certain that each of the parties has a member.
Mr. Pagtakhan: Is that done by negotiation?
Mr. McTigue: It's done by negotiation and agreement, yes.
Mr. Pagtakhan: You mentioned that the quality of debate on the estimates has improved but is not good enough. A natural question would be: what are the criteria, from your perspective, of a good-quality debate?
Mr. McTigue: That the debate be on the substance rather than the frivolities. We have too much on the frivolities and not enough on the substance. I don't know any parliament that doesn't have that problem.
Mr. Pagtakhan: That's just a friendly suggestion to my colleague.
Some hon. members: Oh, oh!
Mr. McTigue: I'm not getting into those arguments.
Mr. Pagtakhan: No, I'm just taking a light vein.
Mr. McTigue: Where I see the change really having occurred is we now have a Parliament that is much better informed. A number of acts now require the government to report in certain ways. That means it is impossible now for government to cover up some of the things it was able to do previously.
For example, all accounting is done on an accrual basis. The government is required by law to report under generally accepted accounting principles. It is required to make all of its documentation available on a monthly basis to the public in general. All of this is able to be examined under the Freedom of Information Act. It is also required to extrapolate out a long way into the future what it intends to do.
.1000
The Chairman: How far into the future? That's a big issue.
Mr. Pagtakhan: I'm excusing myself for another committee meeting. The chair was good enough to give me the first round.
I thank you, Madam Chair. Thank you so much, Mr. McTigue.
Mr. McTigue: The Fiscal Responsibility Act now requires that the government gives its figures for the coming financial year, plus the next two years, plus a forecast for the fifth year out and a prediction for the tenth year out. We are looking a long way into the future. That has involved a major change in principle, which we had always resisted in the past, and that was that a government shouldn't be seen to be committing successive governments.
We have set that aside in this area and said, if successive governments want to change what is currently being proposed, then it is fair and reasonable that they should have to justify their change against the status quo. We argued that in that form, it was quite acceptable to go as long as ten years out in predicting where this particular policy would take you.
Because we now how a continuum of where the government accounts will take us, that has meant that minor changes have been much easier to manage. For example, there may be more economic growth than you had predicted and consequently more revenue, so deficits or surpluses will change accordingly and maybe provide an opportunity for some judicious additional spending.
Every time the government reports, which is quarterly, it adjusts all of those out figures according to whatever change there has been in the reality. That way, you get a continual picture going. For example, an oil shock doesn't become a major event with costs all of a sudden going up dramatically inside the economy and you having to adjust other things. That becomes something that you can manage, and it is seen to be managed in an open and transparent way and becomes much more acceptable.
For those reasons, I think we're getting better quality, we're getting better information, the public is better informed, the financial markets react much better to government proposals, and the budget is no longer an exciting secret document.
Pretty much all of what is going to be in the budget is known well beforehand, to the extent that the Prime Minister said the other day when the budget was presented that he could see a situation in the future where budgets might actually disappear as documents of a particular event in time, and that it would be more of a continuum of change rather than a particular document coming at one stage where it was very much unknown to people until such time as the Minister of Finance presented it.
Now, there will always be something, because there has to be in the government's spending proposals, but I think the fact that it will be something that brings no surprises will be the way in which governments will go in the future, rather than it being something that holds a lot of new policy that won't be known until the moment the Minister of Finance reads it out in Parliament. I see that as being a good thing rather than a bad thing.
[Translation]
The Chair: Mr. Laurin.
Mr. Laurin (Joliette): Thank you, High Commissioner. May I speak in French?
We see from your remarks that senior public servants in New Zealand have been given greater control over resources and that decision-making authority has been delegated to lower levels of management. Does that mean that senior managers are accountable for their decisions or their actions to the House?
.1005
[English]
Mr. McTigue: It's going to take me a few moments to explain exactly what's happened.
In 1988 the New Zealand Parliament passed a piece of legislation called the State Sector Act, which for the first time ever addressed the relationship between the government and the public service. In simplest terms, it said that the role of the government was to develop public policy and the role of the civil service was to deliver that public policy. The government should be held responsible for the policy itself and whether or not it worked, and the public service was responsible for the delivery.
That meant a very substantial change. Instead of the public service being employed collectively right across the government sector, each department is now the employer of all its staff and the controller of all its resources. The deputy minister is now a chief executive with a contract of employment for five years on the basis of having been chosen from a worldwide search for a chief executive. So it's not necessarily a New Zealander or a civil servant. That person is then responsible for the performance of the department on a day-to-day basis.
The government buys from that department, by contract, a series of outputs that are very specifically defined in a purchase agreement. By September of each year the chief executive of the department must report to Parliament the performance of his or her department during the last year and is held accountable and responsible for that. If the department has delivered all of the things the government bought from it at the right time and to the right quality, and it is not producing the right results, then the government is responsible because that is a policy failure. That's where ministerial accountability comes in. Civil service accountability comes from being given a job to do and not doing it well. So a minister can't interfere in what the department is doing on a day-to-day basis. If he wants to change what his department is doing, he must do it through a change in the purchase agreement.
A very substantial difference has occurred there. I have to say it was very controversial when we did it and the civil service was very nervous about it. Today it is extremely well supported. It has allowed for a very different kind of culture to develop inside the public service, and it has certainly led to a much higher level of performance in the public service.
So we now have chief executives in the public service who have a quite real public accountability for what they do on a day-to-day basis. No minister can come along and say, if it were the minister of works, I want this road built in this riding, or I want this bridge repaired before that one. That's all decided by a formula that says that the cost-benefit analysis says this particular project goes first. The minister can't change that. If the minister wants to build more roads, then he changes the purchase agreement and allows more money to build more roads. If the ministry of works puts all the roads in the wrong place, then it's the chief executive who has to answer for the fact that he's built roads where the traffic flows are very low.
[Translation]
Mr. Laurin: I must tell you, Mr. McTigue, that I find your comments both very interesting and very surprising. You say that the Deputy Minister is a CEO, but you also say that he is hired by the department, not by the government. Is that correct?
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[English]
Mr. McTigue: I'll go through the process. If there is a vacancy for a deputy minister position, the position is advertised worldwide. A panel of people -
[Translation]
Mr. Laurin: I understood this part of your statement very well, but I would like to know whom the CEO, the Deputy Minister, must try to please.
If he is hired by the Minister, I could understand that during his three, four or five-year mandate, the minister would not impose his will. However, I think that as the end of his term of office gets closer, the harder he will have to try to please the minister if he wants to be rehired.
That's why I asked whether he was hired by the minister or by the government, and even whether there was a public competition. Who pays his salary? Usually we have considerable respect for the person who gives us our pay cheque.
[English]
Mr. McTigue: What happens is that after the review panel has chosen the candidate, the minister takes the name of that person to cabinet. Cabinet can only say yes or no to that particular person. If they say no, then it goes back to the review panel and they come up with another candidate until the position is filled. So the deputy minister is actually chosen by the government.
He is actually employed by an organization called the State Services Commission, which employs the senior staff so there's not actually a contract with the minister, which would be inappropriate. It's a contract with the State Services Commission. But he works very much to that minister.
Alongside his purchase agreement he has a performance agreement where he has agreed with the minister that he will meet this purchase agreement to this quality and this timeliness and all of those sorts of things. His ability to stay in his job is dependent upon how well he performs according to that performance agreement. He is reviewed by the minister, the head of the State Services Commission, and by two other independent people in terms of his performance. Each year he is judged on that, and it also affects the way in which he is paid. But it also can affect him to the extent that if he was not performing well his position could be terminated. The only ground for a person not serving out their five years is non-performance.
[Translation]
Mr. Laurin: I have another question along the same lines, Mr. McTigue. In our committees here in Canada, we often question deputy ministers about things that have gone on within the department. Very often, in our system here in Canada, a deputy minister appearing as a witness before a committee can say that he will not answer the question, even though he made the decision. He can always say that the question is political in nature and that the minister should answer it. Since we have had trouble getting ministers to appear before committees, it often happens that we do not get an answer to our question.
In your system, can the CEO hide behind the ministers' authority to avoid answering some questions about his department.
[English]
Mr. McTigue: Let me break the role of the deputy minister up into two functions. The first is providing policy advice to the minister and the second is running his particular department.
In terms of running his department, he is accountable for everything that happens in there and he is obliged to answer your questions. There may be one or two things where for good reason it should remain confidential. It might be a matter of how much he paid for such-and-such a site or how much he expects to get for what he is selling, and it would be inappropriate and not in the best interests of anybody if that became public knowledge. That's often dealt with by excluding everybody else from the room and the committee going into committee, and then confidential information will be given.
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If you think, for example, the deputy minister has been subjected to political pressure to do something in a particular riding, then you can ask him and he's obliged to answer, because he is responsible for that. He does not, under the law, take directions from his minister.
In terms of policy advice, then, that's free and frank policy advice to the minister. The deputy minister does not have to answer your questions on what policy advice he gave to the minister. That's up to the minister. You question the minister on that. That's so the role of the public servant can be preserved and they can give free and frank advice to their minister.
We do have ministers appear before our select committees from time to time. But say, for example, I as a minister am sitting beside my deputy minister and you are asking me questions, there would be some things to which I would say, that's the chief executor's responsibility and he will answer that question. If it's something political or on policy, it's my responsibility. I will answer that question.
Whether you can get the minister to answer it as frankly as you'd like is a moot question. We have some difficulties getting ministers to answer things as frankly as we would like, and that's part of the political process.
The Chair: One more question, Mr. Laurin.
[Translation]
Mr. Laurin: In New Zealand, you have a finance committee which examines the budget and financial statements. So the same committee is at the beginning and at the end of the cycle.
Here, we have two committees: the Finance Committee and the Public Accounts Committee. Have you ever had a second committee that studied almost all the same issues? If so, why did you abolish it? If not, do you think it would be a good idea to merge the two committees we have here into a single committee?
[English]
Mr. McTigue: Parliament used to take a very fragmented approach to examining what was in the budget. Each of the sectoral committees, as of right, got their section of the estimates to look at. The public finance committee could have an overview but was very limited in what it could do.
The decision to go to the overarching committee was so we had a continuum of knowledge and developed some people with real expertise at being able to look at and interpret what government was doing. Therefore the level of accountability became much better.
The quality and performance of the public finance committee is certainly far superior to that of any of its predecessors. Any financial legislation that comes into the House will also go to that committee. It deals with everything that involves spending and revenue raising right throughout the year.
If you ask my opinion on whether you should merge the two, the answer is yes, I think you should. You then have a basis of expert critique of what is happening in the public accounts, which I think Parliament is deserving of if it's going to finally give authority to government to spend moneys in this particular way.
[Translation]
Mr. Laurin: Is there a majority of government members on all these committees?
[English]
Mr. McTigue: Yes, the government has majority on every committee except for one. The regulations review committee of Parliament, which deals with delegated legislation-making authorities, is different in that it is always chaired by a member of the opposition and has an opposition majority. Its main role is to look at regulations and see whether or not the authority delegated by Parliament has been properly used. It shouldn't be possible for the government to hide in that process, where you've delegated authority to somebody else.
In addition to that, we have now moved very significantly towards user-charging for many of the services we provide. Under our regulations no department is allowed to charge more than the cost of delivering the service. They're not allowed to take any profits from it. They're not allowed to have any surpluses from their charging regime. They fully allocate the full cost for their administration and everything to the licensing, whatever it might be. It is the role of that regulations review committee to see that they do not infringe that rule, and therefore it's dominated by the opposition. Otherwise, all the others are dominated by the government.
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[Translation]
Mr. Laurin: Mr. McTigue, is that the committee...?
The Chair: I'm sorry, but that was your last question. I will now give the floor to Mr. Fewchuk.
[English]
Then we can return to you again.
Mr. Fewchuk (Selkirk - Red River): I just want to follow up on your thirteen committees. Those committees are all responsible to the CEOs of each department?
Mr. McTigue: No. The CEO's performance will be reviewed by those committees when the CEO tables in Parliament their report for the previous year's activities. So it's pretty much the other way around.
Mr. Fewchuk: Okay.
You mentioned the finance department. We have a Department of Finance and one for revenue here. Is your finance department just one system, or is it two systems like we have? Do you just have one finance department that is responsible for all the funds and everything that happens in Parliament? They're the boss, in other words. Can you clarify that aspect of your system? In my opinion, we have duplication here.
Mr. McTigue: Our finance department is the treasury, and the treasury is responsible for everything except revenue. We have a revenue department, and it's responsible for administering all the tax and revenue acts. The treasury is the control agency that has overarching responsibility for all spending and all financing.
Mr. Fewchuk: You keep talking about deputy ministers. I thought there were no more deputy ministers, that they're called CEOs.
Mr. McTigue: Yes. I've done that so that I don't create confusion in front of the committee. I'm talking about CEOs in our case, but they are the equal of your deputy ministers. We do not use the terminology ``deputy minister''.
Mr. Fewchuk: That was my impression when I was in New Zealand.
You mentioned that you advertise all over the world, no matter where they come from.
Mr. McTigue: Yes.
Mr. Fewchuk: There is a committee of four that looks at hiring those gentlemen. Who has the final say on this committee?
Mr. McTigue: They have to arrive at either a unanimous or a consensus decision on the candidate to recommend. The final say lies with government, because government finally says yes or no, but what it can't do is choose who the person will be, and that's a substantial difference. That was really to make certain that with all of this authority and accountability that was going to be placed upon chief executives, they had to be competent to do the job.
At the moment probably somewhere between 55% and 60% of the people who have those roles are career civil servants, and the others have come from some other places. Some of them are civil servants who have come from other countries. At one stage, four of them were Canadians. So we do get them from other countries, but in the main they are New Zealanders and in the main they have been civil servants.
Mr. Fewchuk: You also mentioned that you had a little bit of a problem with the employees when you were changing over to the system in 1990. Were your employees all unionized?
Mr. McTigue: In the public sector, everybody belongs to the Public Service Association, which is the union. In 1990 we repealed compulsory unionism in New Zealand. The public service was one of the areas where there had never been compulsory unionism, but everybody belonged to the Public Service Association.
Yes, there was some very real concern among the public service about this dramatic change, because that dramatic change also saw the guarantee of a job for life as a public servant being removed. As the civil servants had experience of the new regime, they became more and more comfortable with it, and my view is that the public service would be strongly opposed to changing back.
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The thing that's been different about it is that there are now very real career opportunities for public servants to be able to move in and out of the private sector and to allow their careers to develop in that way. There is considerable headhunting from the private sector into the public service, because they are now beginning to realize that there are people there with very good managerial skills.
Mr. Fewchuk: That's very interesting. Thank you very much.
[Translation]
The Chair: Do you have another question, Mr. Laurin?
Mr. Laurin: Yes, madam Chair.
Mr. McTigue, do committees have the power to reduce the estimates set out in the budget, or to transfer amounts from one budget item to another?
[English]
Mr. McTigue: The committee could recommend to Parliament that they make that change. I'm not aware of it having happened. It's finally up to Parliament as to whether or not Parliament will accept that recommendation from the committee, because it's Parliament that finally passes the appropriation bill.
Normally, some negotiations can go on with the government, and if some expenditure is considered to be inappropriate it might be changed. That's relatively rare, but the negotiations can go on.
What does happen from time to time is that the opposition may produce a minority report recommending significant changes as a result of its examination of the estimates. That report is tabled in Parliament at the same time as the majority report of the select committee. It's not a common procedure, but it is a procedure that is used reasonably frequently. A few times a year we will see minority reports coming through. A minority report can be from all of the opposition or from any individual. Any person who feels very strongly about something can bring down a minority report.
In a Westminster system, it's really built around whether or not the Parliament has confidence in the government being able to govern. An integral part of that is the authority to spend. If you take that authority away from the government, you are really saying that the Parliament no longer has confidence in the government and its proposals. It's always a very serious issue when you're going to materially change a policy that a government has brought down inside a budget.
So apart from the examples that I gave before - which have occurred maybe by accident in the revenue side but also I think perhaps because it's easier to get things wrong on the revenue side than it is on the spending side - the answer to your question really is... When you do revenue you really have to interpret how people are going to react once you put that particular mechanism in place. You often find, with the wisdom of a few other people, that what you had interpreted as the reaction was quite wrong and that people will react in a different way. And you have to change it accordingly.
We had another fiasco in revenue over what we called ``entertainment tax''. That was a budget measure and we had to materially change it. We had set out to capture a significant level of spending that was being exempted from taxation, particularly in the corporate sector where people would have sporting venues, promotional boxes, yachts, houses and things that they used for entertainment purposes. We decided that these should not be tax deductible and we wanted to catch them.
But what we did that was unwise was to take that far too far down the line in terms of starting to say that it was inappropriate for an employer to provide free morning and afternoon teas and that it should really be taxable. I have to say that politically that was an awfully dumb thing to do, and we paid the price for having tried to do it.
Some hon. members: Oh, oh!
Mr. McTigue: But the original intention was to catch that big spending, which we did in the end. That really came from the select committee. It did a lot of work on readjusting that measure so that it captured very large spending that was being inappropriately exempted from taxation.
[Translation]
Mr. Laurin: My final question, Madam Chair, is about the power of committee members with respect to a witness.
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First of all, do all committee members have parliamentary immunity when they sit as a committee? Are all witnesses who appear before the committee required to answer committee members' questions?
[English]
Mr. McTigue: Parliamentary privilege does apply to members of Parliament sitting in committee, so they are protected. Witnesses don't have that protection. They are subject to the law. They are required to answer. They can be held in contempt of the committee, in which case Parliament will deal with them. They can be subpoenaed to appear before a committee, but you can't require somebody to incriminate themselves. If they were involved in something that was a fraudulent activity, you can't make them confess to it in front of your committee.
So within those constraints, yes, we have enormous powers to be able to require people to answer questions and to produce documentation for the committee. In most cases it is exercised very responsibly. We don't ask corporations for commercially sensitive material. We don't subject any of their commercially sensitive material to public scrutiny so that their competitors are aware of it. But we do have extraordinary powers, as do our commissions of inquiry in exactly the same way.
The Chair: Mr. Fewchuk.
Mr. Fewchuk: To follow up on that, if there is a leak to a committee member about a big company from one of the executives, to do with a product or competition, what can be done to the member in the committee who released this and should not have?
Mr. McTigue: You really get down to the hard text of it. Nothing. It happens very, very seldom. If you were seen to have used, for your own financial advantage or for the financial advantage of somebody else, information that came to you in a committee, you could be required to resign from Parliament. In that area, of course, the sanction is very large indeed.
I'm not aware of our committees having intentionally leaked sensitive information. They've been very good. We don't go into committee very often. It's considered very inappropriate to go into committee, and it's only under extraordinary circumstances that the chairman will allow that to happen.
Mr. Fewchuk: Obviously I'm curious. We all have opposition, so they always want to make some excitement for the newspaper. I'm just wondering what protection there is. If it's supposed to be confidential, it's supposed to be confidential. Do they follow the line?
Mr. McTigue: The answer is yes. What we tended to do, if it was something that was politically very sensitive...let me see.
At one stage New Zealand built a large power station that was designed to provide electricity to an aluminum smelter. A very favourable arrangement was made in terms of what they would sell the energy to the aluminum smelter for. That has always been highly controversial. If that were an issue that came before a committee - and it has - government would tend to agree not to go into committee. In that case the people giving evidence know that what they're giving evidence on is public and they amend their comments accordingly.
In other circumstances, for example, the security intelligence service might report to a committee. In those cases we will go into committee and listen to what they have to say. Those things have always been respected. I've never known them to be breached.
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Mr. Fewchuk: Thank you very much.
The Chair: I have a couple of quick questions, and then I think you want to explore another area with the committee.
As you may recall, I'm interested in parliamentarians having the ability to influence future expenditures. One of the things that was started at the beginning of the mandate of this government was to start open budget consultation processes early in the fall, with our budget being tabled in late February or early March, usually. Do the committees have the capacity to have input to the budget strategy document, and do they use that capacity if they have it?
Mr. McTigue: The answer is indirectly.
We look at the process of spending in two segments. The reports of the departments look at history - everything that has occurred previously. When we're looking at the appropriation now, we're looking at the future. The fact that the government is required to give out-year indications means it is factoring in spending intentions two and three years out, five years out, ten years out.
Therefore there is an indication - and it can be examined - of what's happening in terms of changing policy that will provide for these changing figures. Those are what we call the baselines. Each department has its baseline, and that's constant policy, no change, or if there's going to be a change, then that has to be factored into the out-year.
Anything that is known by government at the time it prepares documents must be put into the out-years. You can't say ``That's policy we haven't actually implemented yet, so we don't have to declare it'', because everything is done under accrual accounting and everything is required to be reported according to generally accepted accounting standards.
If you know there is something you're going to do in two years' time that will affect those out figures, it must be recorded in the out figures, and you can be queried on why they are different. In fact, you actually have to explain why they are different when you are bringing together your strategy documents and your budget statements.
The finance and expenditure committee, of its own volition, can decide to hold inquiries or look at certain things. For example, it might decide to look at public debt and where it's going to be funded from, what kind of impact that's going to have on the rest of the economy, what it will do to interest rates over time, whether or not it's wise for government to be issuing paper internally in, say, Canadian-denominated dollars instead of selling in the international market, what the risk will be of currency fluctuations and things like that. Government takes very considerable note of that kind of work when it brings down its strategy documents.
Of course the members of government do have the opportunity of talking directly to their ministers, but the preparation of the budget strategy document is not a public process; it involves really no more than the cabinet and the officials who advise the cabinet ministers.
The Chair: You mentioned that the auditor is available to the committees as they go through the budgets. That's not something we have tended to do. How did that come about and how helpful is it to the committees?
Mr. McTigue: It's extremely helpful, because our auditors, like your auditors, are very frank, and when it's necessary to be critical they will be very critical. Our auditors do quite a lot of not only effectual auditing but compliance auditing and qualitative auditing. How well is the money being spent on outputs achieving the policy that the government put in place? In some cases, even to say to government that the policy is inappropriate and is not achieving the goals...
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So the role of the auditor can be very valuable. The fact that the auditor is totally independent from the government gives that role a real authority that's not held by many others.
In our case, the auditor will go through all of the estimates and give to each of the sectoral committees a report on his findings. In practice, when the committee starts to consider the estimates in front of it, the first person to give evidence will be the auditor general. He will come to the committee at the very beginning and say which things he has concerns about and which things he thinks the committee should make inquiries about. He will normally provide them with a document that runs from three to six or eight full pages of advice on different things that should be examined. If the committee has difficulty, it can always go back to the auditor and ask for special assistance, which he will provide.
The Chair: We have less than ten minutes before most of us have to be at another committee meeting. I wonder if there are any additional areas that you felt would be helpful to us.
Mr. McTigue: One thing that I believe is successful in our circumstance is that much of the change has been written into statute. I think that's important for two reasons. One, it gives certainty to the people who have to comply with that, like the public servants, and certainty to the committee that it is going to get documents on time, ahead of events. It knows that it has a certain timeframe in which to examine them and also that it can't be denied those things. I think that is quite important.
Mr. Fewchuk: Is this the employees?
Mr. McTigue: No, this is the committees.
The other side is that the legislation exposes the government and governing processes to a great deal of transparency. Because that is written into statute, it is not possible for the government to avoid or fudge on that issue.
In a time of quite considerable difficulty for government in terms of its finances, we found that this provided for much more confidence by the financial markets in what government was doing. No longer were they factoring in the worst possible situation. They were factoring in the facts, because they were known. That meant we didn't get the fluctuations we used to get preceding budgets, when people weren't too sure exactly what the government was going to do. We were taking a lot of that uncertainty away.
Mr. Fewchuk: In other words, it's upfront and they see it.
Mr. McTigue: It's upfront and they see it.
I have in front of me a copy of the Fiscal Responsibility Act, and I'll read the prelude to it, which gives an indication of the requirements put in place. This legislation was passed in 1994, the last of a whole series of accountability acts that were passed. It is entitled:
- An Act to improve the conduct of fiscal policy by specifying principles of responsible fiscal
management and by strengthening the reporting requirements of the Crown and, in
particular, -
- so in that case they can't do anything that's different without making it public -
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(b) By requiring all the Crown's financial reporting to be in accordance with generally accepted accounting practice;
- so you can't move embarrassing items below the line or shift them around so that things look better; it has to be very upfront -
(c) By requiring the Minister of Finance -
(i) To publish, at least 3 months before the start of each financial year, a budget policy statement containing the Government's long-term objectives for fiscal policy, its broad strategic priorities for the Budget for that financial year, and its fiscal intentions for that...and the next 2 financial years; and
(ii) To lay before the House of Representatives, on the day on which the first Appropriation Bill relating to a financial year is introduced, a fiscal strategy report assessing the consistency of the Budget with the budget policy statement and providing progress outlooks for the next 10 years, and an economic and fiscal update prepared by the Treasury for the next 3 years; and
(iii) To publish, in December of each financial year, an economic and fiscal update prepared by the Treasury for the next 3 years; and
- this is so you don't go to just annual, but you get a half-yearly financial balance as well -
(iv) To publish, before each general election, an economic and fiscal update prepared by the Treasury for the next 3 years; and
(v) To lay before the House of Representatives, towards the end of each financial year, a fiscal update prepared by the Treasury for that year, including forecast estimated actual financial statements for the Crown.
The second to last one there is quite interesting in that there is no way now that any government can go to an election having confused the fiscal situation of the country. That report before an election is required to be done within six weeks of the polling date. So it must be extremely current. That was because we got stuck with some things that we didn't know about.
The Chair: But it also means no party can get elected from opposition into government and say that they didn't know.
Mr. McTigue: Exactly.
Mr. Fewchuk: That reminds me of when I was in charge of the municipal area where I was the reeve and the mayor. We had to do our estimates every twelve months. We were responsible. We couldn't go over. Well, we could, but it would be an order through council.
We had a five-year program. We had to live within it. If we wanted to buy fire trucks or expand our police, everybody knew of our five-year plan. So if there was an adjustment, we had to take it back to council. Then we would make it publicly known that we were going to transfer the money. Instead of buying three graders for $2 million, we were going to use it for something else. I'm familiar with this.
When I came here, I tried to tell some of them in Finance that this is how you should be accountable so we wouldn't have this problem.
The Chair: I agree with Ron. I think those of us who have some good municipal experience are going to revolutionize this place eventually.
Mr. McTigue: My advice to you, then, is to try to put it in a statute.
The Chair: Interesting.
Mr. McTigue: If it's policy, it's very easy to back away from. If it's statute, you have to do it in a very public way.
Mr. Fewchuk: By mentioning that, you had that problem and you corrected it by doing that?
Mr. McTigue: Yes, it was put down as statute.
Mr. Fewchuk: I wouldn't mind a copy of that.
Mr. McTigue: Yes, there's a copy available. Perhaps the clerk could make it available to everybody else.
Mr. Fewchuk: Thank you.
The Chair: I think it might be helpful and I would certainly appreciate it if our researcher were to get a package of information, legislation in particular, that relates to this, and anything else that you feel might be useful to us.
Mr. Brian O'Neal (Committee Researcher): Our library already has copies of some of these statutes in its collection. The ones that we don't have, I will arrange with Mr. McTigue's office to get copies of them.
Mr. McTigue: I think that perhaps something like a copy of our Standing Orders might be helpful.
The Chair: It may be a bit peripheral, but perhaps the policy - I don't know if it's policy, legislation, or Standing Orders - on the conduct of meetings in public as opposed to in committee...
Mr. McTigue: Yes, I think that's included in our Standing Orders. But yes, we can get that.
Madam, our budget was presented the other day. I will to get the current years. They haven't arrived yet, but I'll get a set of those so they will be available to you so you can see the form of the way in which things are presented.
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We have spent a lot of effort in trying to present them in a form that is very usable for parliamentarians, which is always one of the problems. Understanding the complexity of the accounts means that an enormous number of parliamentarians are eliminated from the process, because they can't really understand what's in the documentation.
The Chair: That would be very helpful.
You have another question, Mr. Fewchuk.
Mr. Fewchuk: Is that your total budget in all those papers you have there in front of you?
Mr. McTigue: There's the book with the fiscal estimates.
Mr. Fewchuk: And that's it?
Mr. McTigue: There's one other book that goes with it.
Mr. Fewchuk: How large is it? Is it higher than that?
Mr. McTigue: It's about that.
Mr. Fewchuk: I'm just kidding. You mentioned that was your budget document, and I figured that was it.
The Chair: I want to take this opportunity to thank you very much.
The high commissioner is interested in this issue and in sharing the experiences of New Zealand with other countries. He participated in a seminar that was held recently that looked at the pilot projects we discussed in this committee that Treasury Board is doing. He offered what input he could on that in terms of improving the information to Parliament as well. He is very aware that these two processes are going on in parallel.
I thank you very much for this contribution to try to move our government a little bit forward. Thank you.
Mr. McTigue: Thank you, Madam Chairman. If there is anything else I can help with in any stage or if you'd like me to come back, I'm very willing to do that. As you say, it's certainly an area in which I have interest. Having been there and made lots of mistakes, if you can learn from our mistakes, then I'd be very happy to help you not get into the problems we got into.
The Chair: We didn't get into what mistakes we should avoid.
Mr. Laurin has a question.
[Translation]
Mr. Laurin: It's a question of scheduling, Madam Chair. We have a meeting scheduled for Monday at 5:30 p.m. However, I think we will have difficulty, because all of this week's votes have been deferred until Monday at the same hour. Should we plan to sit after the votes?
The Chair: I believe the votes begin at 6:30 p.m.
Mr. Laurin: Yes, but our meeting is scheduled for 5:30 p.m. So we would have just one hour?
The Chair: I will discuss this with our clerk, and we will find a solution that suits everyone.
Mr. Laurin: Fine.
The Chair: Thank you very much.
[English]
I thank all of you very much for your interest, attention and good questions.
I now adjourn this meeting.