THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
OTTAWA, Wednesday, May 16, 2012
The Standing Senate Committee on National Finance met this day at 4:00 p.m. to study the subject-matter of all of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures, introduced in the House of Commons on April 26, 2012.
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, today, we are going to resume our study of the subject-matter of all of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.
Honourable senators, as you are aware, we have been given an order of reference by the Senate to study the subject matter of Bill C-38, which is a budget implementation bill; the first one for this year. This is our fifth meeting on the subject matter of this bill, which covers many different areas of the budget as well as certain other measures, as is indicated in the title of the bill.
Yesterday afternoon, we were pleased to hear from the Honourable James Flaherty, Minister of Finance. Today we are equally pleased to have 70 departmental officials before us who are experts in various parts of the bill. They will take us on a clause-by-clause tour of this 424-page bill. As we have done in previous meetings, after an explanation of the specific sections by one of the witnesses, we will determine if there are any requirements for clarification or explanation. Otherwise we will move on to the next division.
We are pleased to have Mr. Gilles Moreau and Mr. Jonathan Roy. We will be dealing with Division 14, the Canada Health Act. There is only one section and it should not take you long to explain what this is about.
Chief Superintendent Gilles Moreau, Director General, HR Transformation, Royal Canadian Mounted Police: It will not. Thank you for inviting me and the RCMP to appear today.
In clause 377, it is proposed that paragraph (b) of the definition of insured person in section 2 of the Canada Health Act be repealed to enable the modernization of the Royal Canadian Mounted Police Health Service Program. The amendment to the a definition of an insured person within the Canada Health Act will allow members of the Royal Canadian Mounted Police to be included as insurable persons under the provincial, territorial health programs.
The RCMP would divest itself of the administrative function of providing basic health care services for its members and in turn eliminate the indirect costs related to the administration and management of this activity. Provinces and territories would assume the provision of the basic health care to RCMP members under the provincial-territorial health programs. The provincial-territorial health programs are currently funded to provide and administer basic health care services for the forces members; they receive federal transfer payments based on total population figures, which include RCMP members as part of their overall population base.
The amendments to the Canada Health Act would come into force upon Royal Assent of the proposed jobs, growth and long-term prosperity act. Again, thank you for inviting me today. I look forward to answering your questions.
The Chair: I have section 2 of the Canada Health Act. Are you are taking the entire definition of the insured person out?
Mr. Moreau: Paragraph (b) is the RCMP.
Jonathan Roy, Senior Policy Analyst, Social Policy, Health/Justice/Culture, Department of Finance Canada: It would be just paragraph (b).
The Chair: A member of the Royal Canadian Mounted Police who is appointed to the rank therein?
Mr. Roy: Yes, that is correct.
The Chair: That portion is being removed?
Mr. Roy: Yes.
The Chair: You have explained why. That is fine and I will now go to senators.
Senator Ringuette: Does that also include the members of your family?
Mr. Moreau: No, this is for regular members of the Royal Canadian Mounted Police.
Senator Ringuette: The members alone. I see that you estimate this is a cost of $40 million.
Mr. Moreau: The cost for basic health care the RCMP is currently responsible to manage is $40 million. The savings that is projected is $25 million to the federal government and $15 million to the provincial partners, the contracting partners.
Senator Ringuette: What do you mean by provincial partners?
Mr. Moreau: In eight provinces and three territories we have contracting partners where we are the police of jurisdiction, like in New Brunswick. The department of Solicitor General has a contract with the RCMP and we provide provincial police services. We do that except in Ontario and Quebec. There will be a reduction in the cost that we charge the RCMP. We charge back at 70 per cent to the provinces that have a contract with us for all the basic health care that we basically pay. That will no longer be charged by the RCMP and the federal government, so there will be a savings on the Solicitor General side of the provinces. Of course, they will have to look after our members under the provincial health care plans on the health side of the province.
Senator Ringuette: Is there any compensation for additional transfer to the Canada Health Act in order to compensate for these additional services?
Mr. Roy: No additional funding is provided. The transfer that the federal government already provides to all provinces and jurisdictions includes all citizens or residents of that province. They are already covered under the amount of funding that is provided by the federal government.
Senator Ringuette: For provinces where you do not provide services, they will not be affected because there will not be an additional number of health items to give to the RCMP.
Notwithstanding the provinces where you have contracts, if you are going to save $40 million in health care services, the RCMP is not going to require less health care. Actually, it will probably be more and more and we go on in years.
There is no compensation actually for the provinces to provide health care to the RCMP.
Mr. Roy: No, but the argument is that the members who are in a particular province pay their provincial taxes already, so in a sense the provinces are getting a benefit already from taxes that are paid to that particular province and then the federal government covers the health care on top of that. In addition, some provinces have health care premiums, so there is no benefit at the moment for that particular amount of money.
Senator Ringuette: I am sorry, but your argument does not hold water based on the fact that the RCMP has always resided in provinces, have always paid provincial tax. However, because of the structure and the benefits to the RCMP members, their health care was provided by the federal government, and now it will be solely the burden of the provinces.
There are no two ways to see this. You are going to be saving federal tax dollars to the tune of $40 million for health care that will now be provided by the provinces without any additional compensation for those services.
Senator Eaton: For clarification, the RCMP, when they are in the province, basically behaves like a provincial police force, does it not?
Mr. Moreau: We are the provincial police force everywhere in Canada except in Ontario and Quebec, and we are municipal police force in large.
Senator Eaton: You are basically working for the province in which you are stationed?
Mr. Moreau: Yes, we are.
Senator Callbeck: To continue on with that line of questioning, certainly it is downloading on to the provinces. Have the provinces been consulted?
Mr. Moreau: The proposal to change the act actually came as a result of the contract negotiation with contracting partners over the past 12 months and requests from them for the RCMP to look at the possibility of asking for a change to the Canada Health Act. We must understand that currently when we receive services for basic health care in provinces, we are charged as non-residents. Therefore, the cost that we pay, the RCMP, is billed from the doctors more than if we were residents.
That bill is then transmitted back to the provinces at the cost of 70 per cent of that bill. For example, in British Columbia, for an act that would cost $100, the RCMP would be charged $300. Of the $300, we charge back to the province $210, which is 70 per cent. The Royal Canadian Mounted Police stays with paying $90 and the province pays $210 for something that initially they should have paid $100 for.
There are some of the savings that will occur. Also, we are of the opinion that members of the RCMP are already counted in the population of the province and the transfer payments cover those members. We have just not been tapping into that money or being covered by that money in the past because the federal government was paying for it.
Senator Callbeck: To me, there is really an added expense here, for the provinces. Have the provinces been consulted?
Senator Eaton: They are working for the province.
The Chair: We will let the witness answer, not someone else.
Mr. Moreau: The provincial contracting partners on the Solicitor General side have been consulted because they are the ones who suggested to the RCMP in the contract negotiation to look at this in order to lower the escalating health costs for the organization for the members, and so we looked at it. We are meeting with officials of Health Canada and the health partners next week to go through and look at the implication of the act change that is proposed and, if adopted, legislative changes will have to occur in every province in order to allow members to obtain health cards and be covered.
Senator Callbeck: In other words, the meeting will be next week on this with the provinces.
Mr. Moreau: Yes. We could not discuss it prior to that because of cabinet confidence on the act change.
Senator Callbeck: You talk about basic services under the health program, which can differ from province to province. Are members of the RCMP happy with this? As I understand it, whether you are in B.C. or Prince Edward Island, you are covered for the same services. With this change, that will not be the same situation.
Mr. Moreau: With this change, members will be covered as resident of their province. We know that basic health care coverage is different from province to province. However, they will receive the exact same thing as what a resident of that province would receive.
Senator Ringuette: Some might receive fewer services.
Senator Callbeck: Right. Are they happy with that?
Mr. Moreau: They have expressed concerns. Any time we touch benefits, they are expressing concerns, so we are looking at that and what the supplemental health care will cover on top of the basic health care.
Senator Callbeck: Did you say “supplementary”?
Mr. Moreau: Supplemental health care.
Senator Callbeck: Above and beyond the basic service that the province provides, there will be another plan, supplementary?
Mr. Moreau: That is, for example, for massage, chiropractor, psychological visits that you may have. Basically, this is your insurance plan, your benefits that every government employee has. We have something similar in the RCMP right now. We are looking at that plan to ensure that it covers what we have currently. We also are looking to see what the impact will be because the provincial coverage is different in every province.
Senator Callbeck: When you have the basic coverage plus the supplement, does that mean that it will be equal across the board as they have now under the federal plan?
Mr. Moreau: Not necessarily. That policy decision has not been made within the RCMP yet and with central agencies. We will be looking at that but, depending on the cost, the feasibility of doing this and the administration cost, we will evaluate that as we go forward over the next few months.
Senator Runciman: With the issue that Senator Callbeck was raising about the policing costs, is the RCMP approach to policing contracts a full cost recovery or could the suggestion be made that taxpayers, for example, in Ontario and Quebec, are subsidizing provincial policing in other jurisdictions?
Mr. Moreau: It is a good question. I know that the policing contracts have just been signed with all those that we have contracts with. They are more encompassing as far as going towards a true cost recovery basis, but I could not go into details. It is not my area of expertise. I would not be able to answer that precisely.
Senator Runciman: At some point in time, it would be an interesting issue to look at.
Senator Peterson: For clarification, prior to this act, an officer in Saskatchewan is paying his taxes there; he would be entitled to a Saskatchewan health care card but did not have it; they had a federal card?
Mr. Moreau: He was not entitled to it because we are not deemed to be insured, so he could not apply for it and could not get a health card in Saskatchewan. We had our own RCMP health card that we would present to the doctor and the doctor would bill as a non-resident and would bill either directly the RCMP or the company that administers our benefits for us, or the member would have to pay and get reimbursed by the RCMP.
Senator Peterson: Now the province will give you a card and allow you to have health care.
Mr. Moreau: Yes.
Senator Peterson: Why could you not get it before?
Mr. Moreau: It is because we were excluded.
Senator Peterson: I see. Was that because of the nature of your employment?
Mr. Moreau: It was because of the nature of the Canada Health Act.
Senator Peterson: If you get sick, you get sick.
Anyway, you are going to have a provincial card now. We are just shuffling. The provinces are stepping up; I guess they have agreed.
The Chair: We understand negotiations will start next week on this.
Mr. Moreau: Yes.
The Chair: Senator Peterson, under the Canada Health Act, an insured person who would be entitled to a card in a province is defined as a resident “other than” — and one of the “other thans” is what we are removing here — “other than a member of the Royal Canadian Mounted Police.” Even though they were resident, they were still excluded.
Senator Peterson: And paying taxes.
The Chair: That is right. On another point of clarification, you indicated that the doctor charged the member as a non-resident. Is that correct?
Mr. Moreau: Yes.
The Chair: Do you expect that will change?
Mr. Moreau: Yes, because if we have basic health care cards, we are residents.
The Chair: The person who will be losing is the physician. He charged $290 an hour, and now he charges $100 for the same procedure. I guess that will be negotiated next week.
Mr. Moreau: Well, not by me.
The Chair: That is interesting.
Senator Ringuette: I do not suppose you have the answer with you, but I would like to know how many RCMP are in the different provinces and the different territories so that we can see which province will be more affected by this measure.
Mr. Moreau: I can provide the committee with the table that has those numbers.
Senator Ringuette: Thank you.
The Chair: Seeing no other senators wishing to intervene, I thank you, Mr. Moreau and Mr. Roy. Thank you for your understanding. I know you have been patiently waiting to explain that, but it was worth the wait for us.
We will now go to Division 15, Canadian Security Intelligence Service Act amendments.
We have before us John Davies from Public Safety Canada, and he is accompanied by Darryl Hirsch.
Thank you very much for being here. Who will begin?
John Davies, Director General, National Security Policy, Public Safety Canada: In Division 15, Part 7 of the budget implementation bill, clauses 378 to 387 amend the Canadian Security Intelligence Service Act, the CSIS Act, to abolish the Inspector General of CSIS. Those 10 clauses are all legislative cleanup around the Inspector General, so I will run you through the 10 clauses, unless you want me to focus just on the ones that are most substantive.
The Chair: It could be helpful if you tell us what the Inspector General does, briefly, so everyone will be up to speed on what we are proposing to get rid of.
Mr. Davies: The primary task of the Inspector General is to issue what is called a “certificate” each year. The certificate is essentially an attestation by the Inspector General that the Canadian Security Intelligence Service is abiding by its legislated mandate, ministerial direction, and that the annual report of the director of the service is accurate. That is his primary function. It is attached to public safety; it is actually part of public safety and reports through to the minister. That is essentially the Inspector General.
The Chair: It is not to look into public complaints?
Mr. Davies: No. The Security Intelligence Review Committee of CSIS, which I will talk to as well, an independent arm's length legislated review body, deals with complaints.
The Chair: Just take us through the clauses.
Mr. Davies: I will go through each clause.
Clause 378 repeals the definition of the Inspector General in the CSIS Act, section 2.
Clause 379 repeals the requirement that the CSIS director provide a copy of his or her annual report to the Inspector General each year. Instead, it requires that that report be issued to the Security Intelligence Review Committee, SIRC. As I said, SIRC is another review body of the service.
Clause 380 repeals the functions and powers of the Inspector General, which are linked to sections 30 to 33 of the CSIS Act.
Clause 381 requires that SIRC assume the responsibility of reviewing the director's report and producing the certificate each year for the minister.
Clause 382 repeals reference to the Inspector General in section 39 of the CSIS Act. Section 39 of the CSIS Act deals with the responsibilities of SIRC. The reference in that section relates to the ability of SIRC to request any information that the Inspector General may have.
Similarly, clause 383 repeals reference to the Inspector General in section 40 of the CSIS Act; section 40 deals with the ability of SIRC to request the Inspector General to undertake reviews where appropriate.
Senator Hervieux-Payette: Mr. Chair, instead of giving English acronyms that are not the same in French—which means I do not know what he is talking about—, the witness should give us the full name of the organization. I know what the French acronyms SCRS and CSARS mean but when the witness says the English acronyms, I do not know what organization he is talking about. I do not use simultaneous translation and even if I did, I do not know the meaning of the French acronyms.
The Chair: What about division numbers?
Senator Hervieux-Payette: That is alright. It is only about acronyms. I simply do not know what they mean.
Mr. Davies: Clause 383 repeals reference to the Inspector General in section 40 of the Canadian Security Intelligence Service Act. Section 40 deals with the ability of the Security Intelligence Review Committee to the request the Inspector General to undertake reviews where appropriate. This clause also ensures that the minister is provided with all reviews that are undertaken by the Security Intelligence Review Committee.
Clause 384 requires the Security Intelligence Review Committee to brief the minister at least annually on any matters relating to the service or any other time at the minister's request.
Clauses 385, 386 and 387 are very similar. All essentially repeal reference to the Inspector General in the schedules of other acts, namely, the Access to Information Act, the Security of Information Act and the Privacy Act.
Those are the 10 clauses that form Division 15.
The Chair: Thank you. I will now go to senators.
Senator Hervieux-Payette: I understand you are reorganizing to transfer the responsibility for issuing the certificate. What budgetary reductions will this new structure bring about?
Mr. Davies: Regarding the resources, the Deficit Reduction Action Plan target for this initiative is approximately $800,000 annually once the initiative is fully implemented. Once the Royal Assent is given to the budget implementation bill, we are looking to target $800,000 per year in savings because of this initiative.
Does this mean the Office of the Inspector General will be eliminated? Actually, you can save $800,000 because the Inspector General and his staff will lose their jobs. Right?
Mr. Davies: That is right. It is not just the Inspector General position; staff are affected as well. There are nine employees of the Inspector General, and that is the initiative.
Senator Hervieux-Payette: Can these people be reintegrated within the CSIS organisation?
Mr. Davies: That is very much the intent now. We are working with our corporate service folks. These people have specialized expertise security classifications. We are looking at reintegrating them within the Department of Public Safety. We are also exploring the possibility that the Security Intelligence Review Committee will be able to take some of them on as well. We are exploring that.
Senator Callbeck: You said there will be a savings of $800,000 annually. What is the current cost of the Office of the Inspector General? How much is that in the budget?
Mr. Davies: The balance sheet of the OIG does not exist on its own because it is part of Public Safety Canada. It always exists, whether in the Public Accounts of Canada or the Main Estimates; it is always just part of Public Safety. That is not really kept as a separate number, but overall, it is about $1 million a year.
Senator Callbeck: It is $1 million. Will the $200,000 go to the Security Intelligence Review Committee?
Mr. Davies: We are looking at the difference between what is not part of the deficit reduction action plan target and the full time equivalent transfer to the Security Intelligence Review Committee. That is one issue we are exploring.
Senator Callbeck: It is strange that the government is cutting this position because in December 2010, the Minister of Public Safety said, when he was reappointing the Inspector General, that the Inspector General performs an important review function, supports him in his role as minister, ensures that CSIS is operating within the law and complying with current policies.
There has been quite a change in government's thinking. Do you have any idea why that is?
Mr. Davies: Again, two thirds of the CSIS Act deals with reporting accountability and review. We are not changing that proportion in the CSIS Act. We are transferring a function of one review body to an independent arm's-length review body with similar skills and functions.
Senator Callbeck: In December 2010, which was not that long ago, a minister of the Crown was talking about how important this position is, and yet we are axing it in this bill.
Mr. Davies: We are exploring resource transfer to the Security Intelligence Review Committee to ensure that they are adequately resourced to take on these functions. Another important issue is the role of Public Safety Canada and how it has evolved over the years and is well-positioned to be the eyes and ears of the minister.
Senator Buth: Can you describe the review committee and its responsibilities? You commented that they are similar in terms of review and functions.
Mr. Davies: The Security Intelligence Review Committee is an arm's-length independent legislated body. There are about 20 employees. They put out an annual report that summarizes, in a non-classified way, the activities and reviews that they have undertaken during the year. They also report on the titles on the classified versions. Part of their time is spent dealing with complaints linked to the services activities. Their website is a wealth of information of the kinds of reviews that they have done. I can run over a couple of examples if you are interested: a review of CSIS investigations of cyberthreats; CSIS intelligence to evidence process; the service's use of the Internet; how CSIS evaluates and accredits human sources; and involvement in Afghan detainee issues and so on.
Each year the members of SIRC set out a work plan matched with the resources that they have and undertake a variety of reviews that range from the operational side of things to broader policy reviews.
Senator Buth: There would be no concerns in terms of their ability to issue a certificate.
Mr. Davies: We do not think there are any concerns at all. Much of what they do is operational review. They are well placed, as I said, and have similar skill sets to those of the Office of the Inspector General. Many have worked in both places in the past.
Senator Peterson: It is my understanding of the past that CSIS and the RCMP have had difficulty sharing information. Has this been corrected?
Mr. Davies: I would say that they are working very well together. I have heard that in the past as well, but there are many protocols in place to ensure that the service and the RCMP work well together. They share information, attend meetings regularly to ensure that on de-confliction or separation and clarifying of information on threats they are each targeting and ensuring that other is well informed of what they are doing.
It would be a good question to ask the service and the RCMP directly; but from our point of view, things are improving greatly.
Senator Peterson: Would the Office of the Inspector General have played a role in that in the past?
Mr. Davies: Whether it is the OIG or SIRC, both would have the ability to look at that issue if they felt it was of concern for comment.
Darryl Hirsch, Senior Policy Analyst, Intelligence Policy and Coordination, Public Safety Canada: That is an issue that SIRC looks at periodically. In the report last year, they looked at collaboration with domestic partners. Over the years, they have looked at the CSIS/RCMP collaboration. It is an important issue for them, so we expect that to continue with this change.
Senator Peterson: It is good to look at it but I was hoping they would have done something, because they had a fairly significant problem. I take it they have not only looked at but have done something about it.
The Chair: Is there any comment you wish to make on that?
Mr. Davies: As I said, we are in meetings every day with everyone in the room and everyone gets along well. We do not work at the operational level. Much of the real cooperation happens closer to the ground, but we have not come across any major issues.
Senator Runciman: I do not have any problem with what is being proposed, but I am curious about the original thinking when the Office of the Inspector General is an employee of Public Safety Canada and connected directly to the minister's office. Now, he is going to be with an arm's-length independent body.
There must have been some rationale at the outset with respect to having this approach where the individual would be working out of the minister's office and providing his views with respect to how CSIS was operating. In follow-up to Senator Callbeck's question, what changed their thinking? What do other jurisdictions do, for example the United States, with a cabinet member who has this area of responsibility? Does a person with comparable responsibilities work out of his or her office? Is there an appropriate comparison?
Mr. Davies: Over 30 years ago, the Canadian Security Intelligence Services Act came into being. It was a very different time, and there was a very different threat following the McDonald commission and so on. I cannot speak to the rationale of how the act came about and why the inspector general was attached to the Office of the Solicitor General, at the time, versus the Security Intelligence Review Committee.
However, from our point of view, the important thing that has happened over the last 30 years is the evolution of the department — I am talking about the national security policy branch in particular — to also contribute a lot in terms of the eyes and ears function for the minister. Certainly in the last five years, to us that is quite a big growth in the capacity department to undertake that kind of role. I think this is the first time that the CSIS Act has ever been amended. There may be some history and evolution.
I cannot speak to the structure of the U.S. system, which is very different. The U.K. and Australia are better comparatives. They have hybrid approaches and independent review bodies. They have parliamentary committees. They have staff that sort of go between them. Those are probably better comparatives and we can get more information if you are interested.
Senator Runciman: Personally, I would be.
The Chair: If you provide that to the clerk I will see that we all get it.
Mr. Davies: Sure.
Senator Ringuette: Mr. Davies, since I believe that this committee will not have the opportunity to question the Minister of Public Safety Canada, I have the following four questions to the direct to you. I understand that you can provide the information to the clerk of the committee. That would be for the entire operation of Public Safety, RCMP, CSIS, and Canada Border Services.
They are as follows: How many employees in your department got a notice letter of layoff by province and by classification? How many EXs and DMs? How many staffers in your department are not under the Public Service Employment Act and under what classification?
Last but not least, what is the cost in your department for program management i.e. what is the total for salaries, expenses, bonuses et cetera for the management level of your department and programs?
Senator Eaton: I was wondering about the intelligence leak in the Maritimes; I think the young man is on trial. Would that have come under the Inspector General's supervision or would he report on that? If not, now that he is gone who would look at repairing that leak? Who would go over and debrief and find out what we are doing wrong?
Mr. Davies: That case in particular is before the courts. However, for cases like that what would normally happen at a review of after the fact analysis — if the Inspector General or the Security Intelligence Review Committee thought there was merit in it — they would look at issues around what happened, whether policies were followed, lessons learned, that kind of an approach. It is kind of a retrospective; if there was merit that it would be replicated. It is a decision of either the Inspector General or the Security Intelligence Review Committee if they thought something like that could happen again.
Senator Eaton: It goes to SIRC or it will be an internal debrief.
Mr. Davies: Yes, that is right.
Senator Buth: Following up on Senator Ringuette's questions, when you provide the numbers could you also provide the percentage of the total workforce?
Mr. Davies: Yes.
The Chair: Thank you very much Mr. Davies and Mr. Hirsch. We appreciate your for being here and helping us with that. We will look forward to receiving the items which you will provide us.
We are into Division 16 and the heading currency law and I believe it reflects on a report our committee previously did with respect to the one-cent piece.
Mr. Wright, you have the floor to tell us what else might be hidden away in these particular two sections.
Ian Wright, Chief, Financial Markets Division, Department of Finance Canada: Thank you for having me here.
In Economic Action Plan 2012, the government announced it would modernize Canada's currency set by eliminating the penny from Canada's coinage system. Amendments to the Currency Act are required to implement this decision. The proposed amendments clarify that the government can redeem coins from the public without calling in the coin. The calling in of a coin would have the effect of removing its legal status, which is inconsistent with the government's announcement that the penny will retain its value indefinitely and continue to be used in payments.
The proposed amendments also clarify that where Governor-in-Council makes regulations for the redemption of the coin, payments for the redemption — including related costs — shall be paid out of the Consolidated Revenue Fund on the authorization of the Minister of Finance.
If we turn to the bill itself, the purpose of clause 388 of the current act is to repeal subsection 8(4) of the current Currency Act. Subsection 8(4) deals with a coin that has been called in and is not considered legal tender any longer. That would now be a redundant section because we will be dealing with that issue in the new section 9 of the Currency Act.
Clause 389 of this bill is replacing section 9 of the Currency Act in order to clarify, as we mentioned earlier, the difference between the calling in of a coin and the redemption of a coin.
Proposed subsection 9(1) provides the Governor-in-Council may by order call in coins of any date or denomination and 9(2) declares that any coin being called in is not current.
The significance there being a current coin is what is considered legal tender. Once you call it in it is no longer considered current and no longer legal tender. The new section 9.01 of the Currency Act we are proposing to put in place will clarify that the Governor-in-Council may make regulations for the redemption of a coin by the minister of the currency of Canada.
Proposed subsection 9.01(2) provides for the minister to pay for redeemed coins and any associated costs for on the authorization of the Minister of Finance. It is really just a clarification and tidying up to ensure the distinction between the redemption and the calling in of a coin.
The Chair: Thank you very much for your explanation.
Senator Runciman: When do you expect to see diminishing numbers of pennies in circulation?
Mr. Wright: Our minister participated in the production of last penny on May 4. The mint currently holds 400 million pennies in inventory and will continue to recirculate coins being brought in through the recycling programs. We will not start actively redeeming coins from the circulation until sometime in the fall. We are in consultations to address some of the questions that have come up to ensure a smooth transition as possible to the new penniless society. We are expecting sometime in the fall; September through December. We are going to work with a number of other parties to ensure it fits well for everyone.
Senator Runciman: In terms of real impact out there in the commercial sector, when will that start to show up?
Mr. Wright: That will not be until the fall.
Senator Runciman: That soon it will start to show up?
Mr. Wright: We would expect that once there is a decision and a date to start the redemption of the coins, the withdrawal of the coins, it could happen fairly soon after that. The mint puts roughly 1.1 to 1.2 billion pennies a year back into circulation. It does not take very long for the coins out there to quickly be pulled down.
Senator Runciman: We did not hear a lot of concerns during that hearing process looking at that issue, but one of them was rounding up or down. Are you assuming that this is going to be done in a fair and transparent manner? Do you have feedback from business organizations, whomever, with respect to how this will be approached?
Mr. Wright: We have had some ongoing discussions with some of the associations representing some of the business community. It is more looking for certainty and looking for a date. Once we are able to sort out the issues and establish a date, then people can begin to work toward that. We have not had much feedback yet on the fact that we have not legislated the rounding. We went with the route that was consistent with your report as well, to establish some guidelines but let the market sort itself out, let business sort itself out. That was consistent with the experience in Australia, New Zealand and other countries.
Senator L. Smith: The coin that is called in is not current. How does it maintain its value moving forward if it is not?
Mr. Wright: It would not, so that would be the point. That is the difference between what the government is proposing to do with the penny versus what you would be doing if you are calling in. When you are redeeming a penny, it is still considered a current coin as defined in the Currency Act and therefore still legal tender. If you call in a coin, you are saying it is no longer legal tender and you would run a redemption process alongside that to give people the opportunity to get their value for the coins they have.
Senator L. Smith: Do you suggest that it will maintain its value?
Mr. Wright: The penny, because it is not being called in, will retain its value, yes.
Senator L. Smith: Do you anticipate the clearing of the system and if so, how long will that take? If there have been a billion printed per year, there must be a huge number.
Mr. Wright: Yes, there have been 30 billion-plus pennies printed over the last 80 years. As long as someone produces that penny, it is still legal tender.
Senator L. Smith: Is there any anticipation of confusion in the marketplace with pricing with $1.99 versus $2 in rounding?
Mr. Wright: You have to remember that we are only dealing with cash transactions. The intent was to keep the penny as a unit of currency. If you are paying electronically, debit cards, cheques, those forms of payments, everything will still be priced to the penny. We are looking at the situation where you have a series of items that you purchased that will all be priced 99 cents or whatever the number is. Tax is applied, and it is just the final total to which you would apply rounding. As I say, the experience in other countries has been that there have not been a lot of issues or problems.
The Chair: Can the vendor demand a full payment to the penny and if you do not have the penny then you will have to go out and buy some pennies, which will push the price up when they are not in supply?
Mr. Wright: With commercial transaction between two individuals, if you do not like the terms of that transaction you are free to go somewhere else.
The Chair: There will not be any regulation in relation to the marketplace; you are just reducing the supply and expecting the marketplace to react?
Mr. Wright: Rounding will become a natural part of business going forward.
The Chair: Senator Gerstein was instrumental in us following through and learning all about currency and withdrawing and legal tender.
Senator Gerstein: I need one more thing explained, if you could. A word that we heard when we were having the hearings was the word “demonetize.” Is “demonetize” the same as using the words “calling in”? Is that what calling in does, it demonetizes the coin?
Mr. Wright: Generally, when we think of the word “demonetize,” there are provisions in the acts that say if a coin has been damaged or altered, you can demonetize it. Effectively, they stamp it, crimp it, damage it in some way so that it is no longer legal tender. It is a particular coin itself that you demonetize. It is not the unit.
Senator Gerstein: In Canada has any coin ever been called in?
Mr. Wright: No, not that I am aware of it. The fifty-cent coin is a good example. It is not in general circulation any longer but it is still a current coin and is still part of the currency set for Canada.
The Chair: Thank you, Mr. Wright. You have made it clear for us. We wish you well in this venture. Will you be following through with the implementation of this?
Mr. Wright: Yes. My unit is responsible for working with the Royal Canadian Mint. We started some discussions with a number of the agencies that have appeared as witnesses before your group in 2010, to try to make sure we have a smooth transition.
The Chair: As I mentioned to the minister yesterday, our committee made recommendations with respect to not-for-profit organizations being able to participate and we are glad to see that initiative being implemented as well.
Mr. Wright: We are working with Imagine Canada, which is an umbrella group, and seeing what we can do to help them out.
The Chair: Senators, we will go to Division 17, which is at page 285 of the bill. It is dealing with the Federal-Provincial Fiscal Arrangements Act. We have Mr. Daniel MacDonald from Department of Finance to tell us all about the Federal-Provincial Fiscal Arrangements Act amendments.
Daniel MacDonald, Chief, CHT/CST and Northern Policy, Federal-Provincial Relations Division, Department of Finance Canada: Part 4, Division 17 amendments to the Federal-Provincial Fiscal Arrangements Act are set out in clauses 390 to 410. I would like to break it into three functions, the three different things we are doing in those amendments.
The first thing is that they allow the additional fiscal equalization payments to be made to provinces in 2012-13, and that is done in clause 390.
The next thing that I will speak about will be the legislation, the elements of the major transfer renewal that was announced at finance ministers' meeting in December 2011, and again on page 191 of the budget, in five clauses, 393 through to 395, 397 and 399.
The remaining 15 clauses make consequential and housekeeping amendments to the Federal-Provincial Fiscal Arrangements Act and the Canada Health Act. I propose to go through and break it up in that way, but I will cover all of the clauses.
To begin with clause 390, this is protection payments against declines in major transfers. This section is being modified to set out additional transfer protection payments that will be paid to the provinces in 2012-13, this fiscal year. These protection payments take the form of additional equalization payments. They are designed to ensure that no province receives less in 2012-13 through the combination of equalization, Canada Health Transfer and Canada Social Transfer relative to what it received in 2011-12. As set out in the bill, the protection yields an additional $362,127,000 to Quebec, $13,471,000 to Nova Scotia, $102,767,000 to New Brunswick and $201,295,000 for Manitoba.
Moving to the second group of clauses, starting with clause 393, this clause sets the growth rate for the Canada Health Transfer. Paragraph 24.1.1(a) of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of the total, the overall amount of Canada Health Transfer cash contribution. The cash contribution refers to the total amount of Canada Health Transfer cash that is paid in a year to all provinces.
As announced in December 2011 and confirmed in Budget 2012, the amendment extends the calculation of the total Canada Health Transfer cash contribution beyond its current expiry in 2014 and does that in two stages.
The first, the 6 per cent annual growth, is extended by changing the date, March 31, 2014, to read March 31, 2017 in section 24.1(1)(a)(iv) and then a new 24.1(1)(a)(v) is added. That provides that, starting in 2017-18, annual growth will be aligned with the three-year moving average of the gross domestic product growth, so it is estimated for the fiscal year for which the payment is to be made and the two prior fiscal years, minimum annual growth will be 3 per cent. The average gross domestic product growth approach will be the same approach as is used in equalization.
The next section is dealt with in clauses 394 and 395 deals with the equal per capita transition for the Canada Health Transfer.
Subsection 24.2(1) of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of provincial shares of the Canada Health Transfer cash contributions. “Provincial shares” refers to the allocation of the total cash amongst provinces and territories.
The amendment limits the current calculation, which includes tax transfers in the provincial shares calculation to the period ending in 2014. Where this paragraph used to read “. . . in that paragraph . . .” to refer to the calculation that was set out that incorporated both tax and cash, it will now provide for the date between April 1, 2004, and ending on March 31, 2014. The effect of that amendment is to move the Canada Health Transfer to an equal per capita cash allocation afterwards.
The Chair: What is the effect?
Mr. MacDonald: It is to move to an equal per capita cash allocation, so we will introduce a new section in clause 395. It is moving to a cash allocation beginning in 2014-15, as announced in Budget 2007. It was committed to legislation in 2007 in the current section 24.21 of the Federal-Provincial Fiscal Arrangements Act and reconfirmed in Budget 2012.
Regarding clause 395, section 24.21 of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of the provincial shares of the Canada Health Transfer cash contribution for the fiscal years 2014-15 and after. The amendment replaces the legislated commitment to equal per capita cash beginning in 2014-15 that is currently represented in section 24.21 with the actual equal per capita cash calculations. This legislated commitment was introduced after Budget 2007.
Clause 397 sets the growth rate for the Canada Social Transfer. Section 24.4(1)(a) of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of the total Canada Social Transfer cash contribution, and it is a straightforward one. The amendment removes the existing end date to the 3 per cent growth rate of March 31, 2014. It makes it indefinite. This was as announced in December 2011 and confirmed in the budget.
The final clause in this bundle, clause 399, deals with the Canada Health Transfer transition protection. Section 24.701 sets out the authority for the calculation of transition protection payments. This amendment adds a new subsection 24.701(1.1). It sets out the calculation of payments to protect provinces against a decline in their Canada Health Transfer cash allocations from their 2013-14 levels. It is protection for the transition to an equal per capita cash allocation in 2014-15 as was confirmed in Budget 2012. Only for the purpose of determining protection amounts to provide to provinces and territories, the clause sets a protection floor at what we call the second official estimate of the 2013-14 provincial territorial allocations of the Canada Health Transfer. This is an estimate that will be calculated as represented in the legislation in September-October 2013. This is the last official estimate for the 2013-14 payments before we move into the 2014-15 year. As we are making that calculation before we move into the 2014-15 year, this provides a stable and predictable floor protection to provinces and territories. They know what it is before we go into that year.
I will now turn to the 15 housekeeping and consequential amendment clauses, and I will also bundle these together into the various clauses that are all related to the same subject matter. I will skip around, and I will try to be clear.
Clauses 391, 404 and 406 repeal references to the spent Canada Health and Social Transfer. This is the predecessor transfer to the current Canada Health Transfer and the Canada Social Transfer. The Canada Health and Social Transfer, or the CHST as we called it, was replaced by the separate health and social transfers in 2004-05. All of the payments from the CHST have now been finalized so we may now repeal the spent provision.
Beginning with clause 391, Part V was the part of the Federal-Provincial Fiscal Arrangements Act which set out the calculations for the Canada Health and Social Transfer. It set out the purposes, calculations and payment mechanisms. It is to be repealed in its entirety as all the payments have been finalized.
Clause 404 refers to section 25.7 of the Federal-Provincial Fiscal Arrangements Act, which sets out how references in other acts to the Canada Health and Social Transfer were to be read. The amendment changes the rule so that those references are read as references to the Canada Health Transfer and the Canada Social Transfer.
Finally, clause 406, section 40 of the Federal-Provincial Fiscal Arrangements Act, sets out the regulation making powers under the act. Contained in there is a reference to Part V, which is for the Canada Health and Social Transfer, so it may be repealed as well. We are just removing the reference to Part V.
That is the first bundle.
The second bundle of amendments I will refer to are clauses 407, 408, 409 and 410. These will change references to the Canada Health and Social Transfer in the Canada Health Act. I want to be clear that nothing about the operation of the Canada Health Act is changing, and when I walk through the clauses I hope that becomes clear.
In clause 407, we are looking at section 2 of the Canada Health Act, which provides definitions. The reference to the Canada Health and Social Transfer is in the definition of a cash contribution, so we are amending it to refer to the Canada Health Transfer.
Other references in that definition refer to sections of the Federal-Provincial Fiscal Arrangements Act, and they refer to the calculation of the Canada Health and Social Transfer. We are amending those to refer to sections 24.2 and 24.21, which are the calculation of the Canada Health Transfer, so it is just updating.
I will deal with clauses 408, 409 and 410 all together. They change references to the Canada Health and Social Transfer in sections 5, 13 and 22 of the Canada Health Act, and the amendment is simply to refer to the Canada Health Transfer.
The next bundle is clauses 392, 398 and 400. Here we are repealing references to the spent Health Reform Transfer and the Early Learning and Child Care Transfer.
Beginning with clause 392, this is a heading and contains a reference to Health Reform Transfer and the Early Learning and Child Care Transfer, under the heading of Part V.1 of the Federal-Provincial Fiscal Relations Act.
I refer to clauses 398 and 400, which will repeal each of these two; and we will remove them from the header as well.
Clause 398 references section 24.6 of the Federal-Provincial Fiscal Arrangements Act, which sets out the purposes and calculations of the Health Reform Transfer. The section is repealed as all payments are finalized. As background, the Health Reform Transfer was begun in 2003 as part of the accord on health care renewal. It was rolled into the Canada Health Transfer beginning in 2005-06, so all payments under the Health Reform Transfer have now been finalized.
Clause 400 refers to section 24.71 of the Federal-Provincial Fiscal Arrangements Act and sets out purposes and calculations of the Early Learning and Child Care Transfer. This section is repealed as all payments under that section are finalized. The Early Learning and Child Care Transfer, in 2004-05 and 2005-06, was phased out when a transition payment was made in 2006-07 as part of Budget 2006. It has been paid out for some time.
Clauses 396, 401, 402 and 403 refer to eligibility requirements for the Canada Health Transfer and the Canada Social Transfer. By way of background, the Canada health and social transfers were the transfers against which we had withholding provisions for the five principles under the Canada Health Act, extra billing, user charges and the minimum residency requirement on social assistance. All of them were applied against the same transfer. Beginning in 2004, we broke those transfers apart. The Canada Health Transfer is intended to enforce the conditions on the Canada Health Act, and extra billing and user charges; and minimum residency requirements are intended to be tied to the Canada Social Transfer. The amendments that will I talk to now clarify exactly that point. I will make all the references to the Canada Health Act to the Canada Health Transfer and pull out and ensure that the minimum residency requirement on social assistance applies only to the Canada Social Transfer. As I go through that, we will be pulling it apart.
With respect to clause 396, section 24.3(1)(b) of the Federal-Provincial Fiscal Arrangements Act sets out the eligibility requirements for the Canada Social Transfer. It includes a reference to section 25.1, which prohibits provinces from imposing a minimum residency requirement for social assistance. I will skip ahead a bit. We are repealing 25.1(2), which refers to an exemption from that for minimum residency with respect to health insurance plans. Since all of the requirements with respect to the Canada Health Act will be applied against the Canada Health Transfer, and we are trying to isolate so that only the social assistance requirements are applied against the Canada Social Transfer, we do not need that exclusion any more. By drafting convention, if you have removed 25.1(2), and there is no (2), then you do not need the 25.1(1). In clause 396, this is a drafting convention.
In clauses 401, 402 and 403, we are referring to sections 24.9 through to 25.5 of the Federal-Provincial Fiscal Arrangements Act setting out the reduction or withholding conditions for the Canada Health Transfer and the Canada Social Transfer. I will go through in order.
Clauses 401 and 402 together are removing a reference to 24.63 from section 25 of the FPFAA, which set out the calculation of the provincial shares for the Health Reform Transfer. We have repealed that one, so we do not need a reference to it any more.
Clauses 401, 402 and 403 add a reference to section 24.51, which defines the Canada Social Transfer allocation for the years after 2006-07. This is the transition to equal per capita cash allocation for the Canada Social Transfer. We are adding 24.51 to every occurrence in the section of reference to 24.5, which was defining the Canada Social Transfer allocations for the years up to 2006-07. We have ensured that we are always applying the withholding through time; it did not stop.
Clause 401 adds reference to section 24.21, defining the Canada Health Transfer allocation for the years after 2014-15 to every occurrence in the legislation of section 24.2, which defined the Canada Health Transfer allocation for the years up to 2014-15. Again, we are ensuring continuity across the transition to equal per capita cash.
Clauses 402 and 403 remove references to section 24.2 and 24.21, which define the Canada Health Transfer before and after 2013-14 from sections 25.1 and 25.3, which pertain to the prohibition of minimum residency periods for social assistance. Again, we are trying to keep the social assistance link to the Canada Social Transfer so that it is clarifying.
Clause 402(2) repeals that exception for health insurance that I spoke about earlier in subsection 25.1(2).
Clause 405 references a program called the Alternative Payments to Standing Programs. This represents a recovery from Quebec of a tax point transfer that was instituted in the 1960s. These amendments do not change the calculation as it is currently made. The amendments instead reflect what is actually done, including updating for the fact that we now have the Canada Health Transfer and the Canada Social Transfer.
The existing section 28 sets out the adjustment methodology that compares the value of the additional tax abatement of 13.5 per cent to Quebec and the value of the contribution for social programs under Part 5 — the old Canada Health and Social Transfer — of the Federal-Provincial Fiscal Arrangements Act and authorizes payment to or recovery from a province for the difference. We are amending this section to confirm that the province is to receive payments from the Canada Health Transfer, the Canada Social Transfer and other social programs and to clarify that the amount of the additional tax abatement must be recovered from the province from any payments under the FPFAA. That simply reflects what we already do.
The existing section 29 states that the Government of Canada has no obligation except as provided in this part to finance social programs under Part V of the act — the old Canada Health and Social Transfer. The existing section 29 is being repealed to confirm that amounts for the Canada Health Transfer and the Canada Social Transfer and other social programs shall be paid. This reflects what actually happens.
Proposed sections 29 and 29.1 are added to ensure that the Federal-Provincial Fiscal Arrangements Act contains appropriate provisions for under-recoveries and over-recoveries since we are amending it to reflect that we are recovering.
Section 30 authorizes amounts payable under the Part to be paid by the Minister out of the Consolidated Revenue Fund. An amendment modifies the section to refer to the whole of Part VI instead of referring to section 28 only.
That concludes an overview of everything that we are doing in Division 17. I would be pleased to take questions.
The Chair: Thank you very much Mr. MacDonald.
Senator Hervieux-Payette: If there is a single Canadian who was able to follow and understand all this, with all references to legislation, I do salute him or her.
About clause 392, I would like some information on one point. Apart from the Canadian Transfer for health and social programs, there was an additional amount for early learning and child care. It was a third element that was not previously included in social transfers. Is this why this section is repealed?
I have here the French version which says that the Health Reform Transfer and the Early Learning and Child Care Transfer are removed from the heading of Part V.1 because their corresponding sections are repealed under clauses 312 and 314.
My question is clear. Was there previously a third transfer apart from the social and the health transfers? If there was, has this third transfer been included in the social transfers? Have early learning and child care disappeared forever?
Mr. MacDonald: There are two things that went on. First, with respect to the Early Learning and Child Care Transfer, this began as a $700 million trust paid out over two years in 2004-05 and 2005-06. It was replaced by the Universal Child Care Plan in March 2007. A transition payment of $650 million was paid in 2006-07 as part of Budget 2006, and that was consistent with the terms of the agreements at the time.
The Canada Social Transfer now contains a notional allocation within the total transfer for child care. That was intended to be part of a successor to, so it was a movement from the original arrangements, so you find it within the Canada Social Transfer now.
Senator Hervieux-Payette: So there were two changes, from 2004 to 2006 and after 2007. Now, it is included in the overall social envelope. This is unbelievable: I think I got it.
Clause 393 provides for a minimum 3 per cent annual growth. This means that if the GDP grows only by 2 per cent or 2.5 per cent, provinces would still get 3 per cent after 2017. They would receive 6 per cent until 2017, and after that the minimum is 3 per cent. If we have a huge 5 per cent growth, would the provinces get a 5 per cent increase?
Mr. MacDonald: The minimum is no less than 3 per cent and if GDP growth of three year moving average is higher, then that is what it grows at.
Senator Hervieux-Payette: Clause 405 deals with the recovery from Quebec of a tax point transfer that was instituted before the tax point transfer under the health and social transfers. I am not sure whether Quebec will keep the tax points, will only get a cash transfer or will receive a combination of cash and tax points.
Mr. MacDonald: Under the arrangements here, the Government of Canada reduced or abated personal income tax by 13.5 per cent, while Quebec increased its personal taxes by an equivalent amount. Quebec continues to receive the value of these extra tax points through its own income tax system in lieu of cash, while other provinces receive the corresponding amounts in cash. Transfers to Quebec for the CHT and CST and equalization are shown on the same basis as transfers to other provinces, however, since part of the Quebec transfer is made through lower federal taxes, it nets out of the transfer amount.
Senator Hervieux-Payette: In dollar terms, is the final amount still the same? I mean if Quebec were to receive only cash and no tax points, would the amounts paid out be exactly the same as those of other provinces?
Mr. MacDonald: This arrangement has no net impact on federal transfers, your receipts or other province's receipts, so it is netted out to the same.
Senator Hervieux-Payette: So it is neutral. About the private sector in clause 407, I am wondering if the general principles of the Canada Health Act, which seemed to be the same in the social services legislation, are still applicable after the changes made to the titles of these acts.
In other words, will universality and the five principles still apply with the new definitions of the social and health transfers and will these transfers have the same eligibility requirements?
Mr. MacDonald: I want to be very clear that nothing in the operation of the Canada Health Act or the conditionality assigned to the Canada Health Transfer with respect to it is changing. We are just updating the references to refer to the correct transfers within the Canada Health Act. All the five principles are the same, extra billing and user charges; no changes.
Senator Ringuette: In clause 395, can you explain in more detail what the difference is between the equal per capita cash and the actual equal per capita cash, which is the impact of clause 395? The difference here is the word “actual.”
Mr. MacDonald: The difference in section 24.21 of the Federal-Provincial Fiscal Arrangements Act is that a few words changed. The original clause referred to that any — I am going by memory — transfer following 2014-15, which was the expiry date of the Federal-Provincial Fiscal Arrangements Act transfers; any transfer for these purposes after this date would be done on an equal per capita basis. That is what 24.21 did after Budget 2007. It put in legislation that this is what will happen after 2014-15, but it did not explicitly refer to the Canada Health Transfer. The Federal-Provincial Fiscal Arrangements Act terminated that as of March 31, 2013-14. We have updated the language now to reflect the Canada Health Transfer is going to continue past March 31, 2014. We have updated the language to marry up to everything so it is more than one word, but it is translating a statement of what was going to happen to now it mechanically does it.
Senator Ringuette: Okay.
In clause 396, which refers to paragraph 24.3(1)(b) and section 25.1(1) — Canada Social Transfer — you are removing the ability of the prohibition of a province from imposing a minimum residency requirement for social assistance. That could have drastic effects for Canadians who will have to move from one province to another.
Mr. MacDonald: We are not repealing that requirement.
Senator Ringuette: You say in here that —
Mr. MacDonald: We repealed an exception to the global prohibition against having minimum residency requirement.
Senator Ringuette: What is that exception?
Mr. MacDonald: The exception described that this did not apply to the minimum period for waiting to get your health insurance. I do not have the exact wording here, but that is what it referred to. Given that we have streamlined this — or applied the CHA principles to the Canada Health Transfer and we are ensuring that minimum residency requirements apply to the Canada Social Transfer — we do not need to be worried about crosswalks between the two. We do not need to describe an exception to something that would not come because it will be applied to the Canada Health Transfer, not the Canada Social Transfer.
Senator Ringuette: Hold on. To impose a minimum residency, a province will here after — when this bill is passed through Parliament — only apply to social programs?
Mr. MacDonald: I have the subsections here, 25.1(1) and (2), which is what we are speaking to. The act states that “In order that a province may qualify for a full cash contribution under sections 24.2 and 24.5 and subsection 24.6(3),” which we have repealed, “the laws of the province must not” — this is where it sets things out — “(a) require or allow a period of residence in the province or Canada to be set as a condition of eligibility for social assistance or for the receipt or continued receipt of social assistance; or (b) make or allow the amount, form or manner of social assistance to be contingent on a period of such residence.” That is remaining. That is a part we are leaving.
The part being removed is the subsequent subsection 2: “The criteria in subsection (1) are not contravened by a requirement of a health insurance plan of a province of a minimum period of residence in a province or a waiting period that does not contravene,” and it sets out a reference to the Canada Health Act.
The general intention here is that all of the provisions with respect to the Canada Health Act are applied to the Canada Health Transfer. This arrangement dates from when we had a common transfer that we applied all of the conditions against. When you had a single transfer that you were applying those several conditions against, you had to be clear that when I set out in 25.1(1), this is what I mean by minimum residency for social assistance. I do not mean to catch these other things which I am also applying as conditions but under a different authority. Given that we are being very clear about which conditions apply to which transfer, we do not have to worry about that any more. The only thing that is being removed is that clarification, if you will. We are not removing or changing the prohibition against imposing minimum residency requirements for social assistance.
Senator Callbeck: In the bill there are additional transfer payments to four provinces. That is protection, in other words, that no province will receive less than they received in their social, their health, equalization, if you add the three together.
Mr. MacDonald: That is correct.
Senator Callbeck: How long has the government made that commitment for?
Mr. MacDonald: For this year.
Senator Callbeck: Is it a year-by-year thing?
Mr. MacDonald: The decision was made for this year, yes.
Senator Callbeck: When do the provinces know that? You say that now the provinces will know at the beginning of the year how much money they will get?
Mr. MacDonald: When I spoke to provinces knowing what they were going to get, I was speaking in terms of what the floor protection level for the Canada Health Transfer would be for that year 2013-14, going into 2014-15 in equal per capita cash. I made that reference there. In terms of when provinces knew a decision on this protection payment, that was made at the December finance ministers' meeting.
Senator Callbeck: Do you mean this last December?
Mr. MacDonald: That is correct.
Senator Callbeck: In other words, this year they have no idea whether that protection will be there or not then?
Mr. MacDonald: The announcement was made, and I am referring to the press release that was issued December 19, 2011. There were backgrounders attached, one of which set out the transfer payments to provinces and territories for this year 2012-13.
Senator Callbeck: That is for this year?
Mr. MacDonald: That is correct.
Senator Callbeck: They knew a few months ahead.
Mr. MacDonald: They did.
Senator Callbeck: The Universal Child Care Program, when was the last year that the provinces received money from the federal government for that?
Mr. MacDonald: It was 2006-07, transition payment out.
Senator Callbeck: When was the social transfer formula changed?
Mr. MacDonald: That was subsequent to Budget 2007.
Senator Callbeck: You say that includes any money for child care. Can you tell us what that social transfer is supposed to include? I know it has civil legal aid and a number of things. Maybe you can later send a list to the committee.
Mr. MacDonald: I can speak to the Canada Social Transfer. This was set out in Budget 2007. It contains notional allocations, which provide support for children, for post-secondary education and for social programs. Those are the broad contents of the Canada Social Transfer.
Senator Callbeck: The provinces can spend the money however they want?
Mr. MacDonald: That is correct. It is a block transfer.
Senator Callbeck: The change that is being made in the health contribution from the 6 per cent, you are moving to 2017-18, you are moving to an average of three years. How much does the federal government expect to save that year?
Mr. MacDonald: What the federal government has done is committed to what the growth of the transfer from years 2014-15 and on will be. It was a point of uncertainty for provinces because there was no certainty, because there was no description as to what the transfer was going to be after 2013-14. By moving to this formula, what the announcement has done has provided certainty for planning purposes for provinces and territories that there will be growth after that point.
Senator Callbeck: They are getting 6 per cent and that was extended to 2017-18. If you had committed to extending the 6 per cent and you did not do that, you have gone to this three-year average, so because of that, how much less money does the federal government plan to spend on health?
Mr. MacDonald: That is a comparison against an alternative, but I repeat that what was done at the December finance ministers' meeting was to extend transfers and to provide a growth rate for it. Past the assurance of 6 per cent, you are going to a minimum of 3 per cent after that, but I cannot state what GDP growth will be at that point so I could not offer figures of comparison.
Senator Callbeck: You must have some figures. You must have analyzed this to come up with an average of three years. Why not four years or two years?
Mr. MacDonald: The comparative here is the growth path that is applied to equalization now. The three-year moving average of nominal GDP growth is actually taken from the equalization program, so it is an existing parameter used within federal-provincial transfers.
Senator Callbeck: Obviously, the federal government is not going to be putting out as much money to the provinces. That average is not going to be anywhere near 6 per cent, and here we heard today of another unloading to the provinces with the RCMP.
The Chair: You do not need to reply to any questions that you do not feel comfortable replying to, but you do have the floor if you wish to reply to the last one.
Mr. MacDonald: I do not have anything to add.
Senator Buth: The first question is a follow-up to Senator Callbeck's question on the fiscal equalization payments. When were those first put into place?
Mr. MacDonald: The first announcement of such a transfer protection payment was 2010-11, so this will be the third year.
Senator Buth: Does this guarantee provinces going forward past this year?
Mr. MacDonald: No, it does not.
Senator Buth: I followed you most of the way through this but I did get lost. I understand for the Canada Health Transfer, clause 393 sets out essentially the calculations we have just been talking about with the 6 per cent up until 2017 and then the floor of 3 moving forward. Does that also apply to the social transfer or is this just the health transfer?
Mr. MacDonald: The Canada Social Transfer grows at a 3 per cent rate. All we have done is remove the end date of the transfer, so it grows at 3.
Senator Buth: Which clause covered that?
Mr. MacDonald: That was clause 397.
Senator Buth: Since 1996, what has happened to transfer payments to the provinces?
Mr. MacDonald: Do you mean structurally?
Senator Buth: Since 1996, can you tell me what has happened in terms of transfer payments to provinces in terms of percentages?
Mr. MacDonald: I do not have figures going back to 1996.
Senator Buth: Yes, I flipped a decade. I meant 2006.
Mr. MacDonald: I do not have percentages readily available before me, but I can refer you to the website of the department, which does contain a reference to federal support to provinces and territories. It includes all transfer payments to provinces and territories dating from 2005-06, and that is available both on a total transfer basis and also by province.
Senator Buth: You essentially have indicated that the website includes information on what has happened to actual transfer payments and percentages since 2005-06.
Mr. MacDonald: That is right.
Senator Runciman: I do have a number on that, and I thought I should put it on the record, given Senator Callbeck's suggestion with respect to reducing cash transfers. The number I have is an increase over that period of time that Senator Buth was referencing from $20 billion to $28 billion this year and growing.
Unlike the previous government, we have not cut or slashed transfers to the provinces for health care. I happened to be part of a provincial government that dealt with those dramatic arbitrary reductions. You can perhaps agree with part of what I am suggesting here, and you may not wish to comment on others, but I think the approach here is to see transfers grow in a sensible and sustainable way. All provincial governments have faced real pressures with respect to restraining the growth of health care spending.
The Chair: You are close to argument or evidence. Do you want to go down and we will swear you in, or hold that for argument?
Senator Runciman: This is an appropriate approach. That is my view.
The Chair: We understand that.
Senator Runciman: Do you agree with the transfers and the fact that there is no reduction in transfers and they have seen significant growth in the past six years?
Mr. MacDonald: The website refers to a change from 2005-06 to 2012-13 of $18.2 billion. That is total transfers.
The Chair: Thank you, Mr. MacDonald. We appreciate your being here. It was not an easy walk through those numbers, but luckily we have done some work in the past in this particular area, so we understood some of the terms. Thank you for persevering with us.
We are now on to Division 18 which is the Fisheries Act.
Thank you for being here, Mr. Nigel Harrison. We are dealing with Division 18, page 290, and we will try to understand the amendments and keep our arguments for another forum.
Nigel Harrison, Manager, Legislative and Parliamentary Affairs, Fisheries and Oceans Canada: We are speaking to Division 18, Part 4, and specifically clause 411. It introduces new subsections 10(1) and 10(2) of the Fisheries Act, which would grant the Minister of Fisheries and Oceans the authority to allocate fish for the purpose of financing scientific and fisheries management activities in the context of joint project agreements.
The proposed legislative amendments would authorize the minister to allocate fish for financing in the context of these joint project agreements. Additional amendments to the Fisheries Act contained in other sections of this bill would provide the department with the ability to use monies that flow from agreement powers in those sections for agreements that contain use of fish aspects for the purposes of defraying incremental and operating costs attributable to activities set out in this agreement, such as scientific activities.
That is a general overview of what we are proposing.
The Chair: This was a reaction to a court case that suggested the minister might be acting outside his authority, so we are giving him the authority.
Mr. Harrison: Yes. In 2006, the Federal Court of Appeal in a case called Larocque said that the Minister of Fisheries and Oceans did not have the authority to use fish for financing purposes. Among other things, the court held that the minister, by deciding to pay a contracting party with the proceeds of the sale of fish, was expropriating the fisheries resource, which did not belong to him for the purposes of funding fisheries and oceans undertakings. The court found that the federal Crown could not perform unless he was authorized by statute, and that was one of the reasons this amendment was brought in.
Senator Eaton: Please explain to me how you pay someone in fish.
Sean Landry, Director, Fish Population Science, Fisheries and Oceans Canada: To give you an example, this approach here relies on setting aside part of the allocation of fish. Let us say you could have a given quota in a given fishery.
Senator Eaton: It is fishermen doing research for you, or where do you get the fish from? Who fishes the fish you pay with?
Mr. Landry: It can be fishermen who are part of the commercial fishery. Let us say you have a group of fishermen who would be willing to initiate monitoring activities — scientific activities — to increase our knowledge of the stock, so they would like to enter into an agreement with us to collaborate on those activities. Then those fish would be used to give them some financial resources to finance those activities.
Senator Eaton: So in performing their research, they catch some fish that is part of their project, and you let them keep the fish?
Mr. Landry: Yes, they get part of the catch that they can sell in order to generate revenues to finance their research activities.
Senator Ringuette: I assume that if the minister ever decides to do any kind of fishing to finance any kind of scientific research in the fishing industry, it will certainly not bring forth an addition of quotas in an endangered species.
Where in these proposed changes would I see that protection? You talk about any fish. You do not specify fish that are not protected. There is nothing in here that specifies protection of these endangered species.
Mr. Landry: If I may, this is a very important point. It is important to establish that if this use-of-fish provision is approved, department officials will certainly have to put in place the relevant guidelines and mechanisms to make sure the use-of-fish provision would be used correctly.
You raised a point regarding conservation. The approach is not to increase the quota compared to what would have been done normally just to generate this revenue. The decision to establish a quota is based on a series of information, such as science and social economic considerations. The intent is not to increase the pressure on the resource just to generate those revenues. If there is any use of fish set aside, it would be as part of the allocation that would have been given with or without the use-of-fish provision.
Senator Ringuette: Well, sir, with all due respect, I do not see that protection in these clauses, and I do not see any provision for regulation with regard to those two clauses. I suspect that your minister will not appear before us; therefore, I am asking both of you as representatives of the department to please provide the clerk with the answers to the following questions:
How many employees in your department got a notice letter of layoff, by province and by classification?
How many were EXs and how many were DMs?
How many staffers in your department are not under the Public Service Employment Act and under what classifications?
What is the cost to your department for program management, i.e. what is the total for salaries, expenses, bonuses, et cetera, for the management level of your department and programs?
I hope that concerns for the protection of endangered species will be flagged high in your department.
Senator Buth: As a follow-up to Senator Ringuette's questions, can you please provide that information also in terms of percentage of your total workforce?
Senator Callbeck: You mentioned two court cases between 2006 and 2008. Have there been any joint projects since 2008? We are putting this legislation through, or it is here, to legalize what had been taking place before the court cases. Is that right?
Mr. Harrison: Yes.
Senator Callbeck: The decision, I assume, came down in 2008. What has been going on since 2008?
Mr. Landry: There have been joint projects, but the key aspect is that none of them were making use of fish because after the release of the court decision, it was established that the minister was not permitted to do that. However, there may be other types of joint projects and agreements ongoing.
Mr. Harrison: I will add that in Budget 2007, $58 million was provided over five years to allow for priority scientific activities previously funded through the use-of-fish provision, while the minister pursued long-term solutions. In Budget 2012, an additional $10.5 million was provided for such activities in 2012-13. By granting the minister this authority for the funding, the — would no longer be required.
Senator Callbeck: What did you say about granting the minister authority?
Mr. Harrison: Providing this provision in the bill passes, then additional funding of this nature in future years would not be required.
Senator Callbeck: Before these court cases in 2008, were there many joint projects?
Mr. Landry: Yes, there were many projects. I may not have the precise number but there were many. Some of them made the use of fish and others did not involve the use of fish. When the court decision was released, the first thing that department officials did was to look at those projects and made sure that the one making use of fish stopped because it was not legal. As my colleague referred to, in addition to that, before that decision, many of those collaborations became an important component of the scientific monitoring to track the status of resources. At the time, it became not possible to conduct that. We have had access to an interim funding, to which my colleague referred, of $58 million over five years. That ended in March 2012. We have additional funding of $10.5 million. Essentially, all the use-of-fish projects were stopped. Some that were previously funded by the use-of-fish provision were maintained through this interim funding. We still have those projects this year with this new $10.5 million that we are planning for.
Senator Peterson: I might have another go at a fish allocation. I am a fisherman and I have 100 pounds, but you tell me I can catch 120 pounds. I come back and give you 20 pounds and keep the 100. You sell the 20 pounds and make some money. What is the deal here?
The Chair: A senator from Saskatchewan would like to know.
Senator Peterson: I need help.
Mr. Landry: It is important, as I mentioned previously, to keep in mind that the precise mechanics around how it would work would have to be defined precisely to make sure there is a rigorous process associated with that provision. Unless I misunderstood you, I believe you referred to an initial allocation of 100 pounds.
Senator Peterson: As an example. How do you get the money? You want the money, not the fish. You want the money to do the research, but it is still money. This is fish allocated for financing purposes. Is financing not money?
The Chair: You should explain it. We probably do not understand it either.
Mr. Landry: I will explain one possible approach taking your example of an allocation of 1,000 tonnes of fish. Let us say that this is just for you, but it could be an association of fishermen. You consider it appropriate and would benefit if you were to set aside 100 tonnes of your 1,000 tonnes to generate revenue.
You catch the fish and sell 100 tonnes. The revenue you generate from that fish could be invested in monitoring of the stock. You want to monitor this resource and maintain it for the future because you make a living with it. You could consider this 100 tonnes is a good investment to increase the scientific information or the activities that will support the sustainable management of that fishery. It is an apolitical example. I am not sure if it helps you.
Senator Peterson: Yes, I am trying to figure this out, because you could catch your own fish, sell it, and get the money. I think I am getting it now. You make a deal and they help, because that is their industry; they give you the money. They probably agree with all this scientific work you are doing; is that the gist of it?
Mr. Harrison: Yes, this is a benefit drawn by the industry. There will be more science, a better shared approach and a stronger role for industry. As well, some of the data that would be received — generated through these joint agreements — would help with things such as supporting eco-certification of fisheries, which will help with their marketing.
Senator Peterson: Prior to this you were funding this yourself?
Mr. Landry: Pardon me?
Senator Peterson: Fisheries came up with the money before? In order to save money you are doing it this way? I got it now.
The Chair: Actually, I believe there was a lawsuit; you were doing a similar thing before the lawsuit said “Stop doing that.” Now you are getting the legislation in place so you can continue to do what you were doing before. That is the way I understood your evidence.
Mr. Landry: Yes, essentially, maybe differently and in a more rigorous approach.
The Chair: That is fine. You do not want to get caught in another lawsuit, so be rigorous. We understand.
Senator Peterson, you understand they were doing this previously. The lawsuit came along and said you should not do this and now we are making the amendments to allow them to continue to do what they were doing previously.
Senator Peterson: I have it now, yes.
The Chair: Do you want to correct me on that? I do not want to give any more evidence than Senator Runciman does.
Thank you very much, Mr. Landry and Mr. Harrison. We appreciate your understanding. Good fishing.
(The committee adjourned.)