[Recorded by Electronic Apparatus]
Tuesday, May 30, 1995
.1010 
[English]
The Chairman: Good morning, everyone. I'd like to call the meeting of the Standing Committee on Human Resources Development to order. We're considering the main estimates for the department, and today we have the representatives from the Department of Human Resources Development to discuss that side of the Human Resources Development's mandate.
Before I turn the attention of our meeting to our witnesses, I would just like to ask committee members to please remain after our hearings are over this morning for about five minutes in camera. It will be an update of some future activities that I've been organizing on your behalf. I just want to give you an update on that, so perhaps you wouldn't mind staying behind after our discussions this morning. It will only take about five minutes.
[Translation]
We are going to hear some witnesses from the Department of Human Resources Development. If I'm not mistaken, they would like to make some preliminary remarks before entertaining questions.
[English]
Is there an order in which you would like to make your opening remarks, gentlemen?
Mr. David A. Good (Assistant Deputy Minister, Financial and Administrative Services, Department of Human Resources Development): Yes, Mr. Chairman. The order will be Hy Braiter, executive director of the unemployment insurance program, followed by Ian Green, who is the assistant deputy minister responsible for employment programs and social development and education.
The Chairman: Fine. Mr. Braiter, you may begin.
Mr. Hy Braiter (Executive Director, Insurance, Department of Human Resources Development): Thank you.
Once again we had a very busy year in unemployment insurance. We processed close to 3 million initial and renewal claims this past year. We issued over 31 million cheques; we call them warrants for unemployment insurance, and these are for two weeks at a time. We received over 40 million claimant report cards, and these are the ongoing claims for benefits. Every two weeks a claimant has to tell us what he or she has done, how much he or she has earned, if he or she is still unemployed and so on, and based on that we issue the next cheque. So we had 40 million of those types of continuing claimants' reports to process.
We processed close to 7 million records of employment, which gives a record of every separation in Canada. Some of them are used to support the unemployment insurance claims; some of them are never used but give us a basis on which to do some control and post-audit.
We paid out just a little over $15 billion in UI benefits, and that includes about $1.9 billion in what's called UI developmental uses. This is mostly in training, so the total of the expenditure was $15 billion.
We deliver our services through a little over 400 points of service offices across the country. We're quite decentralized in that respect and we have a total workforce of a little over 9,000 people administering unemployment insurance.
We have a very active investigation and control program. Their mandate is really to reduce abuse and deter abuse to the UI account. They have saved the UI account $480 million this past year. Our return on investment of that group of people is over $10 for every dollar we invest to the UI account, and this is up quite significantly over the past few years in terms of our return on investment and our total returns.
.1015
In fact the Treasury Board has approved an investment of another $40 million for this activity in the coming year. We have committed ourselves to returning another $200 million in abuse detection and deterrents. So we've put a very businesslike proposition to the board, and they've accepted it.
We look forward to saving the UI account close to $700 million next year, which incidentally is a little more than the total administrative costs of running the whole UI program, including the investigation program.
Given that we're such a decentralized organization, we rely quite heavily on performance measures to make sure our quality and speed of service is maintained at all our offices. We have a very sophisticated system that reports all the way up and down the line on a daily or weekly basis on how each of our offices are doing.
The standard for our agents who make a decision on a claim that comes in is that they have to make the decision within three weeks. We hope that 85% of those can be done within three weeks. We've achieved a 90% rate this past year. So people are getting paid on time. That's the key to getting people into the claim process and getting them paid on time.
We have achieved a 90% rate at board of referees hearings within 30 days; that's our standard. Should a client not get the decision they expected, they can go to a board of referees. Our standard is that we'll hear that appeal within 30 days. We're doing that.
As I mentioned, on the investigation side our return on investment has gone up from somewhere in the $9 range per dollar spent to over $10 per dollar spent. So that's quite a significant return on investment.
Our productivity and unit costs have remained stable, even though we've implemented two pieces of major legislation over the last two years and had to retrain all the staff and redo the systems. We've maintained stable or reducing unit costs.
We also measure our quality in terms of the quality of the decisions. Our error rate throughout the system has gone down by about 20% in the past year.
So on all the measures it seems it's been a successful year on the administration side of unemployment insurance.
With the need for finding new, streamlined ways of administering government programs, we have entered into what we refer to as a re-engineering project for UI delivery. We're piloting and implementing high technology. We answer 60% of our telephone calls using automated voice response. But a client can always get to a real person if they want to. We are taking those 40 million claimants' reports and we're going to give the clients the option of entering them through touch-tone telephones in their homes, so they don't have to mail it or bring it down to their offices.
We've implemented kiosks where clients could enter their claims for UI through a very user-friendly interactive voice and machine kiosk. They can come into our office, or we can locate the kiosks at other levels of government.
We are getting rid of all our paper, using what's called imaging technology. So all those files that you sometimes have seen in our offices will be disappearing.
In these ways we are looking at further reducing our costs and improving our service while still living within the more and more restrained financial operating budgets that we have to look forward to.
In the past year we've changed the system procedures forms and training of all our staff of 9,000 to coincide with Bill C-17, which was passed last June or July. That was done without any disruption to ongoing service, virtually without anybody hearing about it, which is a good way of doing it. No claims were delayed during the process. We had to administer two different sets of rules: the new rules for new claimants after July 1; the old rules continued for old claimants who were on claim at that moment in time. It's quite a complex process, but we did quite well. There were no disruptions in service.
The UI account ended 1994 with a cumulative deficit of $3.6 billion. It was close to $6 billion a few years ago, just at the end of the recession. We brought it down to $3.6 billion on December 31, 1994.
We're looking at eliminating that cumulative deficit by the end of this calendar year. In fact, we are forecasting a cumulative surplus of about $1.2 billion to $1.3 billion by the end of this calendar year. So some time in the next few months we'll be breaking even.
Next year we look forward to continuing the process of re-engineering, becoming more efficient and implementing a lot of those technologies I've mentioned. We also anticipate that we will be introducing new legislation pursuant to the budget of last February.
.1020
That's a wrap-up of where we are with unemployment insurance administration. Thank you.
The Chairman: Thank you very much, Mr. Braiter.
Next it's Mr. Green.
Mr. Ian Green (Assistant Deputy Minister, Employment, Social Development and Education, Department of Human Resources Development): Thank you, Mr. Chairman. It's a pleasure to appear in front of the committee once again. I was here, some of you will remember, about a year ago as the assistant deputy minister of social development and education.
A fair amount has changed since then. Indeed, as a number of you will know, a fair amount has changed since the main estimates document we're going to discuss today was prepared. If you'll allow me, I'd like to take just a few minutes to outline my responsibilities, some of which are new, in relation to the department and describe for you some of the changes that have taken place since February.
Shortly after the tabling of the budget in February, the deputy minister of our department asked me to take over the responsibility for employment programs in addition to my social development and education responsibilities. He also asked me to take on a significant role in respect of designing the newly announced human resources investment fund.
For the time being, we're continuing under the current operational planning framework, which includes social development and education and employment programming elements, but we anticipate moving to the new framework at some point in the not-too-distant future.
While the human resources investment fund is obviously in the foreground, it is obviously still business as usual and many of our programs are moving ahead and ongoing. I am still responsible for the social development and education activities, which include our social welfare activity, the education support activity, the social development activity and strategic initiatives activity; and as I said, the employment activity was transferred to me in early April.
Since the budget, we've had a number of things under way, which include the rationalizing, the wind-down process for the Canada Assistance Plan. We've been busy putting in place the Child Care Visions initiative and the first nations and Inuit child care initiative, to which the minister referred, I think, in his remarks the other day.
We're also moving forward on the implementation of Bill C-28, which is the student loans reform legislation, and are in the process of negotiating new financing arrangements with major lenders.
The minister pointed out the progress that we've made on the strategic initiatives activity, and I'd like to note that in spite of the fact that the budget-reduced funding to this program, provisions have been made to complete agreements in jurisdictions where there is not yet one in place.
We have also set aside $25 million over a four-year period for aboriginal strategic initiatives. I note, Mr. Chairman, that there was some interest expressed by the committee in strategic initiatives, and the minister, I think, made a commitment to provide a report. We're at work on that and I hope to have it within two weeks to provide to the committee.
On the employment side, we're somewhat newer in terms of my background. We're continuing to deliver a wide range of employment programming. While we are going through, obviously, some difficult budget cuts and program design work in respect of the human resources investment fund, we will, however, continue to focus on a wide range of initiatives encompassing youth, partnerships and employment initiatives while we design the new human resources investment fund.
I should note that I know there will be obvious interest and perhaps questions around the issue of the regional allocations. In terms of some of the employment programming that were not in the main estimates, it's taken us a little bit of time to pull them together, but they are in play and I would be pleased, at the end of the meeting or later today, to table them so the committee members could have them at an early opportunity.
Since Mrs. Lalonde wanted to make sure I would do this, I thought I'd read it into the record just to make sure it's available to you. So we will have those available for you at the earliest opportunity.
I would like to briefly introduce you to some of my colleagues who are supporting me in the challenges that lie ahead. I have with me Marcel Nouvet, who is our senior director general of employment programs; Dean Moodie, who is a special adviser and director general of strategic initiatives; Jeannine Remy, who is the director of planning services; Martha Nixon, the director general of education support programs; and I think Lin Buckland, who's helping out on program design in terms of the human resources investment fund, is here. She may have left.
My colleagues and I stand by to answer any questions that you have. Thank you.
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The Chairman: Thank you very much, Mr. Green.
Mr. Good, do you have any opening remarks?
Mr. Good: I have a very brief opening remark simply to indicate that I'm the assistant deputy minister for finance and administration. As Mr. Axworthy indicated at the meeting on the 18th, I'm a recent arrival to the Department of Human Resources Development, having arrived some two months ago from Treasury Board Secretariat.
I should just indicate that one of the questions that was raised by Mr. Dubé at the last meeting concerned the question of the decrease in the forecast estimates for the post-secondary education program. I just want to indicate to members that that question will be forthcoming through the chair in a matter of days. We are just completing the answer to that question.
The Chairman: Thank you very much.
Mr. Lazar.
Mr. Harvey Lazar (Senior Assistant Deputy Minister, Strategic Policy, Department of Human Resources Development): No, Mr. Chairman, I have no opening remarks.
The Chairman: I'll now turn the floor over to questions from the committee members. We will begin in the usual fashion, with approximately ten-minute rounds, beginning with the official opposition. We'll try to organize this so that all members have an opportunity to ask questions as we move through the morning. We have until about 11:30 or 11:45 a.m. That's what I have in mind for the duration of this meeting, and we'll see how that goes.
[Translation]
Mrs. Lalonde (Mercier): I have so many questions to ask you and the time is so short. I will move quickly. First, I had asked the minister if an analyses had been done on the effects of the Bill C-17 on various clienteles, and I was told that I would have the figures shortly.
Your budget plan, the spending plan, contains the answering part. On page 2-60, we see that the number of warrants issued will be down 16.2% - in your words - and that this reduction is due to legislative amendments - Bill C-17 - which reduced the maximum number of weeks of entitlement.
I start by pointing this out, because I note that you are very happy with the administration of the insurance part of your department. The managers are quite satisfied, this is a fine thing. If I understand correctly, you forecast this year a surplus of contributions over benefits of approximately 5 billion dollars. Is this true? Would you confirm this for me?
[English]
Mr. Braiter: In terms of Bill C-17, there were four major areas of change.
[Translation]
Mrs. Lalonde: Do you have any figures on that? I would really like to see them, because we could ask questions on them.
[English]
Mr. Braiter: I'll give you the numbers verbally and then we could supply them in writing.
Mrs. Lalonde: Okay.
Mr. Braiter: On the dependency rate, which was a new feature where people at the low ends of the income scale and with dependents were able to get a 60% dependency rate as opposed to 57%, 255,000 claimants benefited from this particular feature. They got a higher benefit rate. That was 15% of all of the new claims established.
On the entrance requirement, the minimum went from ten weeks to twelve weeks. Most people were able to get the extra two weeks of work. In fact, the number of people with insufficient weeks to qualify increased by less than 1% compared to the previous year. So most people did get the weeks they needed.
.1030
In terms of duration, 133,000 claimants who exhausted their claims lost an average of eleven weeks as a result of Bill C-17. The duration was shortened, and the experience we have seen of those who take the full duration was a loss of an average of eleven weeks. However, only 30% of our claimants stay on claim until the whole claim runs out; 70% of them find work before their entitlement is used up. In summary, those who stayed on claim lost an average of eleven weeks, the majority actually do not stay on claim until the end, and 133,000 claimants were affected.
Just as an aside, the latest numbers show that the average number of weeks collected on a claim has gone down to about 23.5 weeks over this past year, compared to about 26 or 27 weeks the year before. People are really only staying on claim an average of 23 to 24 weeks, and that is usually less than what they are entitled to.
[Translation]
Mrs. Lalonde: What you cannot measure is the number of people who have no access to unemployment insurance. They receive welfare. In Quebec, we measure this each time, particularly among young people.
[English]
Mr. Braiter: We had estimated that there would be an increase in cost to welfare, to social assistance, by 2%. From what we understand, there was an increase in cost in Quebec of about 2.3%. We don't know how much of that is attributable to Bill C-17. Those are the numbers that I have.
[Translation]
Mrs. Lalonde: I will put the question to you in another way. You forecast a cost of 725 million dollars for Quebec alone. That is 725 million dollars less in benefits as the result of Bill C-17. This was your forecast. I had it confirmed and you prepared the document to explain it subsequently.
Are these forecasts accurate? Are they more or less?
[English]
Mr. Braiter: My information is that our estimates were fairly accurate and those figures are quite accurate. The effect of Bill C-17 in the long term was to reduce costs by $2.4 billion across the country.
In the mature situation, not every claimant was affected because old rules apply to old claims. It will take about a year before the full effect of Bill C-17 can be taken. The forecast for the first year and subsequent years are coming out as fairly accurate.
[Translation]
Mrs. Lalonde: Is this also the case for the 630 millions for the Maritimes?
[English]
Mr. Braiter: My understanding is that the estimates are unfolding, although the true evaluation can only be done several years afterwards. I don't know if my colleague Mr. Lazar has more information on that.
[Translation]
Mrs. Lalonde: You are aware that this is causing major problems. One of our colleagues, Gérard Asselin, member for Charlevoix was assailed a few days ago by a hoard of 500 people who were used to a certain number of weeks of benefits before they return to work. They are seasonal workers, and, because of Bill C-17, they have lost this. Now they are claiming welfare. Companies are not happy about it either, because they are afraid they will loose their employees.
This is a fairly exceptional situation, because the neighbouring riding has a higher rate of unemployment, and the people are therefore entitled to more weeks. This situation is distorting things very significantly. Did you look at the situation closely?
[English]
Mr. Braiter: We are aware of the situation with seasonal workers, and it is true that Bill C-17 probably reduced the maximum entitlement and duration to below what some seasonal workers would need to be able to carry them from one season to the other with unemployment insurance. This is a major policy issue that I think is being discussed right now, as to how to treat seasonal workers, what the disincentives and behaviours are, and how to approach the whole issue of seasonal workers.
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On the issue of economic regions, it is possible for people 50 miles away from each other to have different entitlements and durations. One of the factors of duration is the unemployment rate in the economic region where the person works. We have divided the country up into 62 economic regions. This was not Bill C-17; this pre-existed Bill C-17. They are 62 labour markets based on Statistics Canada census divisions.
We try to update those every five years to make sure we are looking at an integral labour market and using that labour market and the unemployment rate within that labour market to base our entrance requirements and our duration. That is one factor.
There is a study that has recently been completed and this five-year review would readjust some of the areas if the demographics have changed enough to warrant a readjustment to the boundaries. Any time you have a system that relies on boundaries, there is always somebody living close to the boundary.
[Translation]
Mrs. Lalonde: That wasn't my question. Can we have the study done by your department and Statistics Canada?
[English]
Mr. Braiter: No, this is a study done by people in our department in cooperation with Statistics Canada, I believe.
[Translation]
Mrs. Lalonde: Can we have a copy of it.
[English]
Mr. Lazar: Sometime in the coming six months, the minister will bring his proposed UI reform in front of the House, probably in the autumn. At that time he probably will be making recommendations to the House and to this committee regarding the issue of boundaries.
[Translation]
Mrs. Lalonde: But this is not what I was asking. I was asking whether we could have the study done by your department and Statistics Canada.
[English]
Mr. Lazar: Mr. Braiter made reference to a study. There is an ongoing process of re-examination. I'm not sure there is a formal document involved; at least, I haven't seen a formal document.
The Chairman: Would it be possible to have a written presentation that would outline the boundaries and the regions in Canada that we would work with to understand, first of all, the regions themselves, the boundaries, and the dimensions of the program as far as the UI economic regions is concerned? I think that's what Madame Lalonde would be looking for, and I think it would help the committee to have that.
Mr. Lazar: Mr. Chairman, the answer is yes, but I would beg the committee's indulgence here. The people who prepared this are flat out on many other things, including requests from the committee. We need a bit of time. The answer is obviously yes, this can be done and will be done, but I would request some indulgence in terms of timing.
[Translation]
Mrs. Lalonde: Now I would like to talk about the employment centres. You are preparing a country wide reform. The word «reform» must not be mentioned - a sense of humour is needed here a bit - in the Department of Human Resources Development. A whole administrative shake up is involved. We were given a fairly complete document. The only information we do not have is the name of the municipalities where Canada employment centres will remain and where the others will be located.
I asked Roxanne Dubé and the minister this question. I was told that a great shake up was underway, but that nothing had been decided.
However, what we hear - it must be the same thing for our colleagues opposite if the same concerns are arising in their ridings - is that people are already being moved. The announced layoffs and all seem to be about to take place, even though I am told that no decision has yet been made.
.1040
Basically, we want to know why this is happening. What are you basing it on, when the reform talked of making counselling available and, in our recommendation to the committee, we said that from the start, as soon as it became clear that someone needed it, counselling should be available.
Why is the reform centralizing the services in a few major centres thus making the people who live far away from them unable to get to them?
I find a contradiction between the intrinsic logic of the reform and this great upheaval now underway. We would also like to know whether you have studies to show that communications by telephone - like dialing 1, 2, 3, 4, 5, 6, *, start again, or give up - will unable people to find out about their rights, benefits they are entitled to or their appeals?
We have nothing against progress, but we want to make sure that progress permits people to continue to enjoy their rights. We want to know all about this, everything.
The Chairman: I will give this response to the Reform Party.
[English]
Mr. Braiter: First of all with respect to what is going on and why, in the February budget it was announced more or less that because of program reviews, as well as both financial and operational constraints, the government may reduce its workforce by 45,000 public servants over the next three years.
Our department is included amongst one of those departments that are most affected. Our share is 5,000 positions and the equivalent salaries. We have to accomplish a reduction of our expenditures on administration by the equivalent of 5,000 positions, or roughly $200 million in salaries. We have to do this, it says, within three years, but it's really at the beginning of the third year that the salaries will be taken out of the budgets. By April 1997 we have to reduce ourselves by approximately 5,000 people and $200 million.
The question is how we do this without affecting service to the clients. We are not the only department that has to go through this sort of exercise. We have, pursuant to the February budget, started studies to see and to ask all the program review type questions and functional review type questions regarding what services are important, what are needed, what can be done differently, where we can reduce and not affect service to clients, and so on.
In going through that process, if you are referring to studies, we have been going through a very serious process that questions everything, such as the programs we deliver and the different services we offer and how we offer them. We looked at everything from the people in our headquarters to see how many are needed to administer all our programs, to our ten regional offices, which are the management of the regions. We've tried to avoid touching the front offices, which give the service to the public.
Part of our studies is looking at our network of how we deliver service to the public. Our challenge is to reduce the costs but yet not reduce the service. What you're hearing about are a lot of studies in the regions, a lot of assessments, a lot of discussions, and certain models. They are being put forward up through a series of steering committees and headquarters and finally to the minister and his colleagues, to decide how we can go about reducing our costs and redesigning our programs.
It is what's called a functional review. It will culminate in a presentation to the program review ministers, Mr. Massé, and so on. It is not necessarily true that we are just closing up offices, or planning to, and reducing services. The kind of thinking we have is to say that we have to look at our offices, because these offices are there and they've grown up over the years without really a design.
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In the mid-1970s we merged Unemployment Insurance head offices with Manpower and Immigration, so we added those offices. A few years ago Immigration left, so they subtracted some offices. But other groups came to us, like labour, and Canada Pension Plan and Old Age Security - the ISP programs - and so we added some offices.
So we have all sorts of offices out there, and we have to rationalize and combine them, combine the overheads and management of those offices, combine the support for those offices. Yet we have to avoid touching the people who actually give the service - for example, the unemployment insurance agents. We have a certain volume of unemployment insurance claims, as I've mentioned before, to process. Based on the resourcing formulas and productivity rates, we have to have those people.
The same applies with counsellors. We will have certain designs coming out of the review of the employment programs - the new human resource investment fund, which isn't quite designed yet. That will dictate that a certain number of counsellors be out there and accessible to clients. Right now our accessibility rate is about 93% or 94%. In other words, a client can reach our office within approximately 30 minutes of travel 94% of the time. In any future design, we are not going to reduce that accessibility.
We may be reducing overhead in some offices. We may be leaving certain types of services in communities that don't necessarily do the back room work. We're considering all of these things, but one doesn't need to have all the machinery in the back room in every single office to make the unemployment insurance decision. As I mentioned, as long as that decision is made within three weeks and the person is paid on time, that's what the client needs. What the client needs at the front end is perhaps to be able to walk into an office, get the application form and get help in filling it out, and have their questions answered. From there on, they don't care where our computers are or where the processing happens.
We're looking at taking our structure now and collapsing it. We haven't designed it yet, but once it is designed and approved, we will be briefing all MPs and so on about the exact details. However, when you take 5,000 jobs out of a system - and we're trying to take it out of the overheads - there will be certain job and position movements between areas of the country.
We are keeping our eyes on service standards and accessibility. We intend to increase the accessibility beyond the 94% right now.
The Chairman: Thank you very much, Mr. Braiter.
I now turn it over to Mrs. Ablonczy of the Reform Party.
Mrs. Ablonczy (Calgary North): Thank you, Mr. Chairman.
I know we're all concerned about the diminished resources we have, particularly in such an important department that touches the lives of a lot of people. We want to make sure these resources are used as effectively and efficiently as possible.
So I would like to deal for a few moments with the following, and perhaps David or Ian might have this information. It has to do with the area of overpayment set out in 4-20 of the estimates. I wonder if you could, first of all, give us a dollar figure on overpayments. What kind of money are we looking at in this area?
Mr. Good: The question you're referring to, I believe, on page 4-20 deals with Old Age Security and the Canada Pension Plan overpayments.
Mrs. Ablonczy: Yes, I'm sorry, that's just in that one area. There are other areas I would be interested in as well.
Mr. Good: On that, this afternoon the assistant deputy minister responsible for that program will be with us and can address the OAS and CPP question. I don't have at my fingertips information on the overpayments with regard to CPP and OAS. I do, however, have information with regard to the overpayments on the unemployment insurance program.
In 1994-95 the overpayments established were $442 million. Recovered through collections and recoupment of benefits was $348 million with regard to those same years. The outstanding balance that exists on overpayments at this point and that has yet to be recovered, which I believe is your question, is $530 million. It's not easy to recover all the amounts.
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Mrs. Ablonczy: I appreciate that information. On more practical matters, I wondered whether you could help me understand so that I deal with this effectively. How do overpayments generally occur? What is the process, not just in UI but in OAS and CPP, just in general?
Mr. Braiter: I'll speak about UI first because it is quite a significant amount outstanding, over half a billion dollars. I mentioned our investigation programs. That is one very large source of overpayment identification. This is where people have been working and collecting UI, or people have not been available and yet collecting UI, and so on. We have a whole series of tools. We compare with files of Revenue Canada, Workers' Compensation, our own record of employment files, and so on, to try to zero in on people trying to abuse the accounts.
As I mentioned before, $480 million worth of overpayments, penalties, and indirect savings were identified by investigators last year. Much of that results in an overpayment, which we then have to collect back from the individual.
We are quite successful on the UI account; although there's $530 million outstanding, we write off less than 5% at the end of it all. So we collect 95% of it, either through offsets to future UI benefits or through collection efforts by about 200 or 300 collection agents across the country. We also have automatic set-offs against income tax returns. For people who have defrauded us, we'll take it right off their income tax if they have any due.
So we have this process in the unemployment insurance account. Some of it is not abuse. Some of it is people coming in without records of employment, their employers are bankrupt, and so on. What we do is estimate what they earned and put them into UI pay. Later we figure it out and it could be that we've overpaid some. In those cases, we just have an agreed deduction of a small amount per week and so on. There's a combination of abuse and administrative situations where we do pay them in advance or decide to go ahead.
Mrs. Ablonczy: One of the questions I have for you, Hy, is this. You said the UI program amounts to about $15 billion, or it did last year.
Mr. Braiter: It did last year.
Mrs. Ablonczy: You've identified overpayments of $442 million. How close is that to the real level, I suppose you could say, of abuse or overpayment in the system? Realistically, that's a very tiny percentage of $15 billion.
Mr. Braiter: It's about 3%.
We've had quite a few studies done by consultants. The question is how much effort you continue to put in through your investigation activities. We're getting a ten-to-one return right now on an incremental basis. The board has given us resources and they'll be satisfied with a five-to-one return. As you add, there's less and less to catch. You catch the obvious, matching files and so on, and then it becomes more and more difficult.
We've had all kinds of studies; the maximum out there may be 6% and we're catching maybe 4% to 5%. These studies are difficult to validate. What we are doing is to continue to add resources, year by year, until the return on investment is so low that it doesn't pay.
I think the starting assumption is that people are not cheating us, that there's only a small percentage who would out and out lie to us about working and collecting UI. Some of them are a little confused at the beginning of a job as to when they've actually earned money if they don't get paid until the end of month, so they say no and so on and so forth. So at the margins they're not really cheating, but we do identify them and collect it back.
Your question is difficult to answer. If you're asking whether there is a 20% or a 3% abuse in the system.... I've been around the program for about 25 years. My own gut feeling is we're probably not there yet, but it isn't rampant. It's maybe another couple of percentage points.
Mrs. Ablonczy: That's interesting, because that's not the perception the public has.
Mr. Braiter: Well, the public sometimes mixes unemployment insurance together with welfare and social assistance and so on. The public also maybe disagrees with the law as it is, so they may mix that up too. We've seen a lot of television programs on fishermen collecting UI and not working, but the law is such that they're entitled to. Then there's the off season, and they are entitled to collect UI. If people disagree with it, they sometimes say there's abuse. But the abuse we're after is what is legally an overpayment. Whether everybody likes the way the law is or not is a matter for public policy.
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Mrs. Ablonczy: Can I pursue this, David, with the gentlemen who will be here this afternoon as far as OAS and CPP goes, then?
Mr. Good: Yes, that's correct. I can make a few comments on the CPP and the OAS.
With regard to the OAS, any overpayments are deducted off the next estimate of the cheque going out. The difficulty is with inactive accounts. I should indicate we are now undertaking some major work to review, against the backdrop of the Auditor General's report - which you are well familiar with - some 27,000 inactive accounts that are outstanding to $32 million, and further looking at some 28 active accounts with outstanding amounts of $13 million.
We are hiring some specialized collectors to work on the inactive accounts. The critical thing we've found here is that those who are in the service delivery have had precious little time to deal with the inactive accounts in the past. So we are increasingly putting on special effort with additional people. In fact, we decided to put in place 15 new positions with regard to the collection of inactive income security payment accounts.
Mr. Green: Just so you have a complete picture, not that I want to expand the subject area, but we also have over awards in the student loans program. Last year we had about $70 million. These are usually due to changes in circumstances - a student making more money in the course of the summer or dropping out of a course. Traditionally we recover it from the next disbursement. In fact, we are carrying on discussions now with the provinces about how we can work together more effectively in terms of reducing overload.
Mrs. Ablonczy: You anticipated me, Ian. That's good. I was just going to say maybe we could explore the same sort of thing in the student loans program.
The main estimates, of course, indicate that the payback or the insurance for loans that the government will have to cover because the banks cannot recover it from the students themselves is $220 million. That's up $17 million from the year before. Interestingly enough, the number of students has fallen. So we have a larger amount in default from a smaller number of students. As I understand it, the less money you recover from students who have graduated and owe student loan money, the smaller the pool is, to some degree at least, for current students and future students. So it is important that we don't have, so to speak, dead-beat students who aren't paying back their student loans and thereby diminishing the resources we have for students who need the money now.
What can we do to increase the record on this? I understand the total amount owing the government as of March 11, 1994, is over $1 billion that students have received to fund their education but haven't bothered to pay back. So I'd like a little bit more explanation about what we can do to recover those moneys and use them for the benefits of students who need them.
Mr. Green: Martha may want to help me out if she has anything to add.
The defaults in terms of student loans is a very serious issue. I don't have the numbers in front of me, but I know the numbers you are putting in play are essentially correct. We deploy a whole arsenal of means to try to get the money back, including an extensive use of collection agencies that pursue defaulted students. One of the surprising issues is that we have significant numbers of students who default on reasonably limited loans. So we have a fair range of students who are defaulting.
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Mrs. Ablonczy: So you're saying that just limiting the amount students can borrow isn't really the full answer.
Mr. Green: I don't think so. Many of them default fairly early in their cycle. We don't have answers to these, but these are a few interesting statistics in terms of the process. Martha may want to provide more detail on how we go about the collections, but the largest point to put on the table is that we are currently putting in place a series of reforms with respect to student loans. These reforms are based, in significant measure, on the banks or the lenders becoming more involved in the process of collections. In fact, the whole point of the discussions with the banks that we're having at the moment is to have the banks take over the collection process, because our sense is that we have had a large problem in the past. We think ultimately the banks are probably going to be far more effective for a range of reasons in terms of pursuing collections from students.
Mrs. Ablonczy: What would be the incentive for them?
Mr. Green: They would not have a guarantee any longer in exchange. At the current time, one of the problems that is a disincentive for the banks to pursue it is that they have in effect a guarantee for the loan and they come and collect it from us. Under the new arrangements we're negotiating with the banks - and Martha can fill us in with a little more detail - we are in fact taking away the guarantee. So they have every reason to pursue it, and we're exchanging the guarantee for a risk premium that would be a limited amount of money that we would provide. I think it's in the order of about 5%, which we discussed with the banks. It would be just that - a risk premium for which they would take over responsibility for the collections.
Clearly, given what they do and their interest in maintaining people as customers, my sense is they will probably be more efficient, and we trust they will be, than the current arrangements we have in play. That's very much a centrepiece of the reforms we're putting in place.
Ms Martha Nixon (Director General, Education Support, Department of Human Resources Development): Perhaps I could just add that one of the things we're also trying to do is to make sure we have enough information in the hands of students at the beginning of the year about their responsibilities to manage the debt. We haven't been very good at that in the past. We're trying to make sure we give them the assistance they need. They may in fact have some counselling from the banks, and we give them written material on what they need to do to manage this money.
We're also looking at having an awareness campaign of some kind that says to parents and families that they should be planning for debt way back when their children are quite young, and that looks at the cost of education to see if we can't be better at making people aware that this is something they should take into account. So that's one of the things we're looking at.
We've also worked with the Department of Industry and taken a look at the Bankruptcy Act to try, in a sense, to close that loophole. It's becoming increasingly obvious that students are turning to bankruptcy as a way of saying they've got through their studies, they don't have any money and they don't have a job, so why not declare bankruptcy. We expect there will be changes in the Bankruptcy and Insolvency Act that will in fact close that loophole and will give us a two-year window, at which time the students have both six months after they finish studying to begin paying back and also access to eighteen months of interest relief if they are experiencing difficulties.
During that two-year timeframe there will be a prohibition against them declaring bankruptcy. We are also working to try to ensure that the courts are aware of the kinds of difficulties students are facing. So we hope some of the judgments that are coming down are going to be a little more balanced in terms of the bankruptcy situation.
Mrs. Ablonczy: Martha, have you been looking at income-contingent loan repayment schedules at all?
Ms Nixon: Certainly that's one of the things that are very much part of the debate we're having around debt management. We are looking at the various ways of approaching debt remission and interest relief and whether income contingency is one of the avenues that should be available to students to allow a better staging of payments. In a sense, we still expect that some of the provinces may be interested in coming forward with pilot projects around that kind of repayment system. At the moment we're still working too in terms of the costing aspects of income contingency and trying to look at the advantages and disadvantages. It's still there, but it's not the only option we're looking at.
Mrs. Ablonczy: I sure appreciate that. Mr. Chairman, my time is probably pretty well up but I have more questions.
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The Chairman: You'd have about three more minutes if we based ourselves on the previous questioner. You can save them for later.
Mrs. Ablonczy: Just a quick one if I may, then, Mr. Chairman.
Turning to this CPP communications strategy on 4-19 of the estimates, part III, I wondered.... It seems to me that if we're looking for savings, at least on the surface it looks as though we could make some savings there. I think the budget item for that is $4.4 million. It looks as though it's just hard on trees and not as cost-effective as it could or should be. I wonder if one of you could comment on that observation and whether we could in fact achieve maybe at least some savings in that area.
Mr. Lazar: Mr. Chairman, the assistant deputy minister in charge of that program will be here this afternoon, so it may be best to just pose the question to her.
Mrs. Ablonczy: Okay, that will be fine, then.
The Chairman: For the benefit of members, I should clarify that we are dealing with the employment and insurance programs this morning, corporate services as it concerns those programs, and the social development and education parts of Human Resources Development. Income security will be the subject of this afternoon's hearing.
Mrs. Ablonczy: Thank you, Mr. Chairman. I actually should have known that, because this is later on in my notes.
The Chairman: Thank you, Mrs. Ablonczy.
We now turn to the Liberals, and I will begin the questioning with Andy Scott.
Mr. Scott (Fredericton - York - Sunbury): I'd like to hit on a couple of things. First of all, Mr. Braiter, you referred to disincentives in passing in response to questions from Madame Lalonde. We hear about it all the time, yet it's one of those words that gets used very broadly. When you talk about disincentives in UI, what do you mean?
Mr. Braiter: Harvey could be more expert at this type of analysis than I am. My responsibility is to administer the laws and the regulations.
I suppose what we mean is that at some point it becomes more attractive to collect unemployment insurance than to find a job, or at some point the laws are such that it is not attractive to find some work because it could have the effect of reducing your benefit rate should you find an extra half-week or a few days of work.
In other words, if a person works for the 12 weeks they need in an area of high unemployment and they've made a lot of money in those twelve weeks, they know they're going to get their maximum benefit rate. They may then hesitate to take on work outside of their seasonal work or their speciality because the next week they may not earn that much and the week after that they may only get two or three days work. The effect of this would be to lower the average of their earnings. When we then take 55% of that, they get a lower UI benefit rate. A disincentive to find some sorts of work may creep in because they know they're going to be going on unemployment insurance and they'd like to keep their benefit rate at the maximum.
So there are built-in sorts of things in the law that over the years have perhaps resulted in behaviours that aren't what was anticipated. I guess the trick is to identify those and not hurt certain groups of people, and to adjust the laws and the regulations so that everybody will have the maximum incentive to work and it won't hurt whatever they anticipate in terms of UI collection.
Mr. Scott: I'm glad to hear you say that, because on the issue you mentioned, it's been my experience - I think you may be aware of this - that the committee recommended that the way to measures weeks or eligibility should be based on best weeks or a combined number of weeks rather than last weeks just by virtue of dealing with this particular problem.
The reason I ask the question is that I think it's been the case that we have a very general definition of disincentive. I think we all agree that in the system there are places we tried to identify in a very specific way so that we didn't in fact have the effect you're alluding to, where you would take a general remedy to a specific problem and capture in the remedy a whole bunch of people you really didn't intend to capture.
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Seasonal workers might in fact be identified as potential victims of that in the case where you use duration and entry as the ways to get at the disincentive, which is why I'm wondering what ``disincentive'' is. I would suggest that there are those who would maintain that disincentive to labour force movement. As an Atlantic Canadian, it concerns me very much if the thinking that ultimately we have to make UI less attractive so that people will be more likely to move is creeping in. So I'm glad you didn't offer that as part of the definition of disincentive. That's probably wise.
You mentioned that 133,000 claimants lost an average of eleven weeks because of Bill C-17. Regionally, do you know where those people came from? Do you have those regional statistics? I have to believe our part of the country disproportionately felt the effect of that.
Mr. Braiter: I don't have them with me, sorry.
Mr. Scott: That's not a regional analysis. I assume it must exist.
Mr. Lazar: I would imagine so, Mr. Chairman.
Mr. Scott: For the purposes of the committee's work, I think it's appropriate to know exactly what parts of the country were affected. I think that if you apply this disincentive argument and also apply the savings objective, there might be another consideration in terms of a sort of national balance. I would wonder how that fits relative to the objective and if in fact national fairness or a balance might be one.
Finally, has anyone actually tried to determine what savings might be accrued if we actually went after the kinds of abuses? The word that's been used is ``abuses''. I'm not particularly comfortable with that, but everyone uses it.
For instance, when the minister speaks of unemployment insurance reform, he generally speaks about school board offices laying off employees for the summer, or about large companies laying off people for a couple of weeks while they retool to make adjustments for next year's models of cars or whatever.
This seems to be what we're talking about when we talk about unemployment insurance reform. But when we actually do it, we end up making it harder to get and we decrease the duration of benefits, so we sort of squeeze it this way. I don't know if the translators can do ``this way'' justice, but I think we get the point.
By taking this approach, it seems to me we have to go a long way to get at the school board in Winnipeg to which the minister is so fond of referring. These people work most of the year and have a very short period of benefits.
My fear is that what happens in identifying the need to change the system and improve it - and I think there are in fact savings in making those improvements - we end up doing something that affects an entirely different community that we would less willingly define as misusing the system, and I'm thinking now of seasonal workers.
Is there any reaction to that? Has anyone tried to figure out how much money could be saved if we actually took the examples we used when speaking of this and tried to figure out surgically how we might get at that?
Mr. Lazar: We'll try to comment, Mr. Scott.
First, I think when the minister was here he made reference to the fact that while he'd clearly dropped the so-called two-tier system, he nonetheless was looking at a serious reform effort. In the process of doing that, he is now examining ways in which the types of situations you've described can be reasonably - and I underline the word ``reasonably'' - tackled.
However, you've also defined - let me use the word ``misuse'' as opposed to ``abuse'' - in your own mind, certain examples of what some people would call misuse, and others where you don't think there is misuse.
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I think one of the broad guidelines influencing the minister is the notion of trying to improve the overall relationship between work effort and entitlement, to the extent that now it is very substantially easier to access a certain level of benefits in one part of the country than it is in the other. That is in no way, shape or form a misuse of the system because in fact that's the way Parliament has defined it.
At the same time, if one believes that an insurance system should get a better relationship between work effort and entitlement, that probably would imply it. Over time the differences would be smaller in one part of the country than in the other. That is not abuse. That is not misuse. That's simply an effort to improve that particular relationship. So one aspect of reform is focused there.
On the assumption that it does proceed - and that's not a decision yet - that is not adding up areas of misuse or abuse. That's simply forming an overall view about the relationship that should exist.
The specific examples you cited of the contract educational worker or the company that annually or regularly asks their workers to take some time off while they retool is probably not misuse in the view of the companies or the employers involved. Parliament has to make the judgement as to whether that's an appropriate use of the system or not.
I think the proposals the minister is contemplating at the moment - they have not worked their way through cabinet yet - would make it less attractive for people in those particular types of circumstances to do that. For the employer to engage in that type of behaviour would probably be less tolerable or acceptable to the employees.
I guess what I'm saying is that it's hard to add it up, because misuse in one person's eyes is not misuse in another person's eyes, and at the end of the day there is no technical substitution for a political judgement by Parliament as to what is ultimately acceptable or not acceptable.
Mr. Scott: I freely admit to plagiarizing the examples. They're not mine. I'm not as familiar with the school board operation in Winnipeg as the minister is. These are his examples.
I asked the question about whether there are regional statistics to demonstrate this. You and I assume there are. It concerns me a little bit. If we're talking about something that has as fundamental an effect on a particular region of the country as duration of UI benefits being the measure by which savings would be accrued, it scares me that it wouldn't be in the top of your mind what the impact of that would be, because I have to assume there's an overwhelming impact on Atlantic Canada and Quebec.
Mr. Lazar: I must have misunderstood your question. I believe we made a technical paper available to the committee earlier this year that demonstrated any number of options with quite detailed specifics on regional impact, gender impact and income distribution impact. That is absolutely available to us and can be made available to you any time.
Mr. Scott: I'm speaking specifically now of the 133,000 claimants.
Mr. Lazar: I took a note. I don't have this data in front of me. That will be made available to you.
Mr. Scott: I would assume the duration limitations were part of a strategy that deals with this question of disincentives, and I guess my question would be -
Mr. Lazar: My response, Mr. Scott, was to say...I didn't use the word ``disincentive''. I phrased it differently, but you may choose to interpret it that way. Yes, I think there's an overall desire on the part of the government to improve the relationship between work effort and entitlement.
To the extent it impacts on durations in some regions of the country, that type of approach has had, and is likely to have, a larger impact on a plant in Canada and on rural areas more generally than is the case with some other measures. So I agree, I don't think that's in dispute at all.
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Ms Minna (Beaches - Woodbine): I want to pick up a little bit on where Mr. Scott was with respect to the 133,000. Is that an absolute number for the whole country or is it by sector? The 133,000 is actually the number of people who actually lost 11 weeks across the country. Am I right?
Mr. Lazar: Yes, on average.
Ms Minna: On average. Have there been any studies done on the demographics, in addition to the region? Have you done gender analysis as to what the effects of that shrinking were on women as compared to men, apart from the regional and industrial sectors? Have you also done studies by industry and industrial sectors, as well as on which industries were hit the hardest?
Mr. Lazar: I don't have it in front of me, but I think that can be made available.
Ms Minna: Okay, I'd appreciate that.
Mr. Lazar: I'm not sure, but I would suspect so. Our databases are pretty good. I'll add that to the list.
Ms Minna: Okay. If that information is available, I'd appreciate receiving it. Thank you.
I want to go back to Mr. Braiter just very briefly. You mentioned imaging technology. This is a curiosity of mine only because I dealt with it in another institution, the Workers' Compensation Board in Ontario, where it turned out to be a bit of a disaster because of how it was implemented.
Were proper pilot projects done? Was the hardware the piloting was done on in fact what was bought? I guess what I'm saying is that in the other institution they piloted the Cadillac and then bought a Volkswagen. Did we pilot and buy the same thing?
It's an issue that has me concerned, because what happens when it doesn't work is that the backlog is huge. It causes all kinds of problems, not to mention the proper training of staff, as well as the health effects associated with vision and the need for staff to be away from the systems. Could you give me an indication of the pilots?
Mr. Braiter: With all of the technological items I've mentioned, the first phase is a very detailed pilot.
The specific imaging can be seen in our Montreal centre office. It has been operating for about eight or nine months. We were worried because it's relatively new technology in terms of using it in an operating delivery process as opposed to using it in an archival process. We have retrained all of the staff and have had to reorganize the processes around the use of this technology. Our productivity is now up.
The Quebec region wants to implement it as soon as possible throughout Quebec and we're looking at the funding issues surrounding that.
Our pilot was slow. We worked with the staff and the manufacturers and we think we have a product that operates in real mode, in a real office, a busy office, and it's operating quite well. We're now ready to take it to the next stage of implementation in one region, and once that's proven out we'll go across the country on a bigger scale.
Ms Minna: You're moving on it.
Mr. Braiter: Yes, with the pilot first. It has to prove itself.
Ms Minna: Very good, thank you.
I'd like to go to Mr. Green for a moment. I'm trying to understand how the changes the budget has brought in are affecting program delivery.
You mentioned the human resources investment fund. I know that's a new responsibility. You're also dealing with the social development programs, education and employment programs that were existing in the department.
I'm trying to understand how those two are not coming together, because the current cuts from the recent budget affect the job training programs. We're getting responses from local offices everywhere in terms of job strategy. There's a tremendous amount cut this year, and next year there will be a much larger one.
That area of your responsibility seems to be almost disappearing. I'm trying to understand. Is the fund being replaced going to be reintroduced through some of those programs in a different way, and where will the money come from? I'm trying to understand what's happening in that whole area of social development, education, child care, employment and what have you.
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That's one question. I'll go to the other in a minute. Could you just try to help me understand what is going on? I'm having an awfully difficult time getting a handle on it.
Mr. Green: The human resources investment fund encompasses a number of programs at the moment. It includes the UIDU portion. It includes the unemployment insurance developmental uses portion. It includes the remaining employment CRF dollars. It includes as well the funding that was allocated for strategic initiatives, the vocational rehabilitation of disabled persons, and also the Canada student loans program.
That's the pool of money that in theory is in play in terms of looking at the human resources investment fund. At the moment, we are a few weeks away from the minister going to cabinet, so I can't get into enormous detail in terms of the directions that the fund might or might not take because there are a number of options to play with. But one of the key aspects of the fund is to look at consolidating the funds that are available from current programs and looking at them in the sense of what's the best possible use of those funds.
We're going to go through a fairly major exercise of assessing the range of programs that we have now in terms of whether they work or not, making judgments as to whether they should be redesigned or refocused. Some of them may be left essentially as is because they're clear programs, they have clear client groups. That whole redesign and refocusing is going to be a central element of the human resources investment fund.
Clearly, one of the questions that's going to be on the table, and I think it will take some time to answer, is the question...obviously the unemployment insurance developmental uses fund is available; CRF funding is being somewhat restricted. Obviously there is the question in the context of starting to look at UI reform as to whether or not there would be better uses for unemployment insurance, developing the UIDU fund.
Could one look at different possible uses of that fund? I think that will be part of the debate as we look at the human resources investment fund. I can't tell which way it'll go, but I think it will be an important element in terms of how that fund gets structured.
Maybe I'm not helping you a lot, but I'm saying there is a pool of funds now that is available. This is essentially the UIDU, the CRF employment and most of the social development and education programming that I had. We are looking at all of that programming from the point of view of what makes sense into the future.
I think the minister has alluded to the fact that he has a particular interest from an employment perspective in issues such as labour market information; for example, how do we collaborate in a range of partnerships in terms of building service capacity in the employment area.
He's indicated, I think, an interest in terms of what kinds of personal supports make sense. All of that will have to be looked at in the sense of putting together what constitutes the fund with some discussions around whether or not, for example, in terms of UIDU we have the right definitions around the use of the funding.
Ms Minna: Then the money is being pulled into this fund, in essence, and there will be new criteria and priorities set as to what the priorities for the uses of this money are, probably more in one area than another.
Mr. Green: Yes.
Ms Minna: That's something we'll be discussing as we go in terms of priorities that are set and why they're being set that way and so on.
My last question, just very quickly, is a clarification. You refer to the wind-down of CAP. I understand very clearly what the budget does in terms of putting it as part of block funding and eliminating some of the conditions under CAP, but when you say wind-down, what do you mean? Will it be administered now under a different department?
Mr. Green: No. Mr. Lazar and I are going to have some discussions about precisely how we're going to do this. There are two issues in the wind-down of CAP. One is that we have approximately 100 staff who are involved in the administration of the Canada Assistance Plan, 50 in Ottawa and 50 in the regions. We have to make provisions over the next two to three years for a wind-down of that group. I think it's pretty clear that we're not going to need 100 staff to continue to administer the Canada Assistance Plan per se. We're going to have to make a decision as to what component of that staff remains in terms of the Canada health and social transfer. So when I talk about wind-down there's an important human management dimension to it.
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Second, in terms of the Canada Assistance Plan itself, there has been legislation on the books for almost 30 years, since 1966. The legislation provides in some cases for a two- or three-year lag in terms of settling accounts with provinces, because it's a cost-share program. In the legislation - Harvey, correct me if I'm wrong - we have provision for the finalization of settlements by, in effect, the year 2000.
Ms Minna: That's right.
Mr. Green: We would envisage over the next two to three years that we would be achieving final settlements with provinces for a range of prior years in terms of the operation of the Canada Assistance Plan, and that would be part of the wind-down. We obviously want to do that in an orderly way that both in fiscal and accountability terms enables us to live up to the requirements of the legislation, even though the new CHEST comes into effect March 1 next year.
Ms Minna: Who is administering the new CHEST, then? I'm just trying to understand what's happening here. Since health is part of this funding now, which department administers the CHEST?
Mr. Green: Harvey can correct me if I'm wrong, but I believe it's split between the Department of Finance, us, and the Department of Health.
Mr. Lazar: For example, the five principles that surround the health provisions would be administered by that particular department.
Ms Minna: Okay. I'll leave that for now.
The Chairman: At 11:30 a.m. I'm going to allow for three short rounds of about five minutes each. I invite those who have not had an opportunity to ask a question to use up that time. I might have a question myself if there's time remaining.
[Translation]
Mr. Crête (Kamouraska - Rivière-du-Loup): I have a brief comment to make. I would urge the senior officials of the ministry to read carefully the report of the Committee on Seasonal Workers and the minister's statement in front of the House, as well the evaluation on unemployment insurance, because I feel as if I'm hearing the same speech that was made a year ago, although it was clearly establish that seasonal workers would not be allowed to abuse the system. I am very surprised to hear exactly the same comments today.
As far as I know, 90% of the costs occurred for the unemployment insurance staff are paid from that fund. So, it is extremeley important to understand the link that may exist between the employment centre rationalisation program and the emphasis on counselling. To me, there seems to be an obvious contradiction between the two.
Today, you talked a lot about money, about fund recovery, but you neglected to talk about another aspect, on the question of help to unemployed who need money to find a job and employment itself.
I would like to know if that indicates a change of direction by the ministry. In some employment centres, when a newly unemployed person came in to make a claim, he was immediately met by a counsellor to help him to return to the work force as quickly as possible. However, the system that you are implementing will have the opposite effect. It will encourage people who function within the system as if one was simply dealing with numbers and the whole issue of the chronicly unemployed will be ignored.
Are we dealing with a change of direction within the department or is it because of the budget cuts that you wanted, although ultimately, it is the people who pay themselves. Eighty or 90% of the funds come from the unemployment insurance fund, that is from the contributions of the people themselves.
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[English]
Mr. Braiter: I'll try to go first, because your question covers all of us at the table.
In terms of the unemployment insurance account administration, those things that relate to unemployment insurance and the employment programs are chargeable to the UI account. All told, of the whole new HRD, 64% of all of our administrative costs, the costs of running the department, the people, and so on, is chargeable to the UI account. On the employment and the unemployment insurance side, it goes up to well over 90%. When you include the corporate headquarters services, it runs around 80%.
So there is a portion. The Auditor General and Treasury Board audit us as to what's spent out of the UI account and what's spent out of Consolidated Revenue. But a dollar is considered a dollar because the UI account is consolidated with the government accounts. So if you spend a dollar out of the UI account, it is a dollar that's added to the deficit of Canada. It is totally consolidated.
In terms of your question as to whether we've changed direction in helping people go off unemployment insurance and find work or become trained to enable them to find work or to re-enter the labour force, I don't think there's any change in philosophy. It's a very important aspect of our business. Those are the questions that are being reviewed as part of the employment program review and the HRIF, the human resources investment fund, and as part of the changes to unemployment insurance that are being contemplated and the rules around what you can spend unemployment insurance moneys on and for whom you can spend unemployment insurance.
I'll turn it over to Ian to elaborate.
Mr. Green: After two months on the job I don't claim to be an expert in counselling, but I do know that the budget cuts and some of the staff downsizing we're looking at are obviously going to put pressure on our counselling resources. That's a major concern.
At the same time, in terms of looking at the human resources investment fund, I do know Minister Axworthy is extremely concerned about ensuring that the fund is built on a continuing focus in terms of assessment and capacity to do counselling.
In looking at the fund and looking at where we're going with counselling in the future, though, I think we're going to have to look very carefully at a range of issues, such as contracting out, working with community agencies, and priorizing planning in terms of who gets it. I don't think there's any question we're going to be squeezed in terms of how we go about counselling, but on the other hand I don't think there's any question that we see it remaining as an extremely important point in terms of any overall employment programming we put in place.
The Chairman: Now I'm going to turn the attention to the Reform Party. Mr. Johnston, do you have any additional questions?
Mr. Johnston (Wetaskiwin): I'll defer to Mrs. Ablonczy.
Mrs. Ablonczy: Under the TAGS program, seats are reserved in training institutions for individuals registered under the program. However, I note that not all of the seats reserved are being taken up by actual clients. In the interests of cost saving, I'm questioning why we're paying for seats that aren't being filled under the TAGS program.
Mr. Green: I'm going to invite my colleague Mr. Nouvet to answer that.
Mr. Marcel Nouvet (Senior Director General, Employment and TAGS, Department of Human Resources Development): I'm not aware of any seats that have been reserved and are not being filled. We had 3,000 clients involved in adjustment measures last December; we now have 15,000. Our own planning for this current fiscal year would suggest that every seat we have will be filled. We have gone up from 3,000 to 15,000 over the three months following December.
Mrs. Ablonczy: So if there were empty seats, there are not now, you're saying.
Mr. Nouvet: That's right.
Mrs. Ablonczy: I have another question. It relates to page 2-62 of the estimates. It talks about payments to facilitate the efficient functioning of the Canadian labour market. We're spending over $1 billion on that, and I'm quite curious to know how that breaks down and what we're getting for that $1 billion plus.
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Mr. Green: I'm looking at a table that has been prepared for me. Is it all of the CJS fund? Okay, I assume therefore it encompasses all of our employment program funds, which cover employability improvement, labour market adjustment, community development information, and special initiatives, which include our project-based training and general training programs. So it's a catch-all line that encompasses all four of the key elements of the employment programming.
Mrs. Ablonczy: I'd be interested in having that breakdown, if that were available.
Mr. Green: Sure.
Mrs. Ablonczy: I know you probably hear this as well. I hear a lot of complaints about the training programs, first of all, being of poor quality and, secondly, not leading to any real jobs. I wonder what you're doing to address those complaints, which I assume you've heard as well.
Mr. Green: As the minister mentioned the other day, there have been mixed results in terms of some of the programs. I can tell you as someone who's been here for two months, though, it is very difficult to find a clean evaluation in terms of any program; I mean in the sense that one program is all bad. It very much depends on programs working, I think, to the needs of individual clients, and the success of programs ranges considerably.
The deputy also alluded the other day to the fact that some of the evaluation data we have, which is being produced in Mr. Lazar's area and which I think will be available in a few weeks, is very positive when you look at the impacts of the range of the programs. I think they are particularly in the employment improvement program.
Mrs. Ablonczy: Then do you have objective evaluation criteria you're using?
Mr. Green: In the case of these evaluations, they're primarily employability and earnings. These are the two criteria.
Are they in a job and is there significant impact in terms of their earnings? There are control groups that they're compared to, and the results have been quite positive.
Without wanting to reject the argument - there is a debate around the effectiveness and efficiency of some of our programs - I want to underline two things. One is that I think it depends very much on the clients and their impact on certain kinds of client. Secondly, some of the information we have is very positive in terms of the programs.
Mrs. Ablonczy: Yes, I'm being provided with that information, so I won't pursue that. I have one last quick question, and that's on the student loans business. I'm sorry to skip around, but this arises out of earlier discussions.
I'm a little puzzled still about the banks collecting on these loans. They're being more of an agent of collection. I do not quite understand. Is the bank providing the money for these loans or is the government?
Following up on that, if it's the bank's money, won't they be a lot more reluctant to loan it out? Won't they start being a lot tighter on the loans they give out? If it's the government's money, why should the bank worry about collecting it?
Mr. Green: It is the bank's money, although we pay, as I mentioned, a risk premium. Also, we provide an interest subsidization in terms of the loan. Obviously if the bank sees it as their money, they are going to be a lot tougher in terms of how they operate.
In terms of their credit risk judgments, in terms of individual students, which was the second part of your question, we have basically worked out an arrangement with the banks - and Martha may be able to explain in greater detail - that if we determine someone as being eligible for a student loan, the bank will issue the loan. So we have not handed over to the banks the responsibility to determine eligibility; we retain that.
Ms Nixon: The assessment we do is called a needs assessment, and that will remain the same. The whole front-end processing will be handled, as it is now, by the appropriate authority, which is the province, who often gives it to the student financial aid administrators, but that is based on an assessed need process, which we recently completely overhauled so that we think we have a consistency now in terms of how that's done.
That will not change; the student will be given a certificate of eligibility for a loan, which will be presented to the bank. The bank only has to check to make sure that student doesn't show up on a list indicating he or she might be in default of a loan previously or has somehow offended against the Canada Student Loans Act. If the student is in good standing the bank must pay, given a certificate of eligibility.
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Mr. Scott: There was a reference to the fact that 30% of the people actually draw benefits for the duration of their eligible claims. Is that correct? That was the number, I think.
Mr. Braiter: Yes.
Mr. Scott: Do you have any regional statistics for that?
Mr. Braiter: I don't have them with me, but I'm sure -
Mr. Scott: Do you have any idea?
Mr. Braiter: No.
Mr. Scott: Again, it concerns me a little bit, and I think you can understand, that the population represented in Atlantic Canada doesn't really impact in large measure on the national statistics, just because of mathematics.
As a consequence, when policy decisions are taken based on those national statistics, I'm not sure whether the impact of those policy decisions on Atlantic Canada is considered as much as it might be. Someone may imagine that only 30% of claimants actually draw for the entire period they're eligible to draw and in some way that may represent some sort of equal distribution of claimants, and I'm sure it doesn't.
Mr. Lazar: I can assure you, Mr. Scott, that every policy option that goes in front of cabinet or the minister, in terms of UI changes, looks at urban versus rural, Atlantic Canada versus Quebec versus Ontario versus the west, gender, and every conceivable impact our database enables us to examine. It certainly enables us to look at regional things, so whenever the cabinet takes a decision it is aware of the assumed regional impacts. That information is available.
Mr. Scott: I'm certain it is. That's why it would be helpful for us, in terms of our role in this whole exercise, to have access to that same information so we can also apply that kind of background to our work, which we also take quite seriously. Thanks.
The Chairman: I have just one question of my own. It's a general one that refers to the distinction between what is statutory and what is votable in the estimates, and what is prior to the February 27 budget and what is post February 27 budget. Perhaps Mr. Good would be the best person to explain this to me.
Do the estimates - and I'm referring to the human resources development estimates in part II as well as what is elaborated on in part III - incorporate the financial requirements that come out of the February 27 budget, or do they reflect what was prior to the February 27 budget? In other words, when the department is looking for money for the human resources investment fund, and also the reorganization that has to take place inside the department, are we looking at reorganization of the dollars in the budget we have before us, or do these budget totals reflect what is after the budget? Are we looking at ex post or ex ante in terms of the budgetary requirements as they are reflected in the estimates?
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Mr. Good: There are two parts to your question. The first part is on the statutory question with regard to appropriate expenditures. What you see in the estimates of the Department of Human Resources and Development is a significant amount of statutory ongoing programs - old age security, guaranteed income supplement, unemployment, etc. - which have a statutory basis in law and which are thereby not appropriated on an annual basis. They have a regular statutory basis.
What you then see in the estimates are two provisions, one of the statutory, which I've just indicated, and then the non-statutory, which are voted. These are the operations of the department and other non-statutory programs. That's for clarification with regard to that very important distinction you've made.
Secondly, to the extent possible, the estimates reflect the budget decisions that have been taken. You'll find over the years that to the extent possible and to the extent that the final work can be done in time, recognizing that a budget comes down on a Tuesday and the main estimates are then tabled usually a day or two later, and the extent to which all the decisions made in the budget can be reflected in the main estimates, they are done so.
You will see a number of cases, certainly in part III, where it was not possible, particularly in the employment programs, to indicate precisely what the allocations breakdown would normally be. Therefore those were not reflected in the main estimates indicated there in terms of the detailed breakdown, but the overall figures are by and large contained in the main estimates as reflected in the decisions coming out of the budget.
The precise details are not there because there was not sufficient time to complete all the work. As we indicated earlier, some of the work is ongoing to determine precisely where those further savings will be made.
The Chairman: To follow up, with the requirement in the budget for unemployment insurance - for example, to generate a savings of 10% as of July 1, 1996, which I understand to be the targets that were set forth in the budget - and the spending reductions for the Department of Human Resources Development, would the end result of that...? That's not what's reflected in the estimates here.
Mr. Good: To my understanding, the amount of the $700 million reduction in the unemployment insurance program is reflected in these main estimates.
I would like to correct the record, if I may, Mr. Chairman. The $700 million is not reflected. That reduction is not reflected in the numbers in the main estimates. That was indicated as a reduction to be made in the budget, but is not reflected in these main estimates.
The Chairman: For the benefit of the committee members, I think this is quite important. Next year's estimates would then reflect a $700 million statutory reduction in unemployment insurance, in the unemployment insurance part of the estimates, even though unemployment insurance is a separate, stand-alone program of its own as far as the benefits are concerned.
Mr. Good: That's correct.
The Chairman: The administrations of unemployment insurance and of all the other aspects of running the program in the employment services are, to a large degree, votable items. They're not statutory items. Is that not correct?
Mr. Good: That's right, the administration. So the extent to which there are further reductions in the administration would be reflected in next year's estimates.
The Chairman: As votable items?
Mr. Good: Yes.
The Chairman: Those votable items are not incorporated in the totals that are on the votable side of the ledger in these estimates.
Mr. Good: These estimates do not include a provision for the reduction in the statutory amount in the unemployment insurance, nor do I believe they would therefore also include a reduction for the votable items in the administration.
Mr. Lazar: If I could just add one point, the $700 million includes up to $200 million in administrative improvements.
The Chairman: So we're talking about a combination of a statutory reduction and a reduction in non-statutory spending?
Mr. Good: That's correct.
The Chairman: That's helpful to our understanding.
On that final note, I would like to thank our witnesses for their help this morning.
I'd like the committee members to stay for a few minutes. We're just going to go over a few things before -
[Translation]
Mrs. Lalonde: We have many other questions to ask, Mr. Chairman.
The Chairman: I know, but it's already noon.
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Mrs. Lalonde: Could they come back?
The Chairman: We can discuss that between ourselves.
[English]
Before we go in camera, do you have something you wanted to ask? Well, now we're opening up the questions.
Mr. Johnston: I wonder if there would be time allocated for me. I have some amendments to the estimates.
The Chairman: I want to talk about it in camera.
Mr. Johnston: Okay.
[Translation]
Mr. Crête: Mr. Chairman, if we wanted to make a motion in relation to the weeks of employment, for instance, in order to make it possible for the committee to be apprised of the details and to be consulted the minister makes a decision, shouldn't we do it right away?
The Chairman: I will be talking about it and as soon as people...
[English]
We will suspend this committee sitting for five minutes to allow our witnesses to leave, and then we will come back at noon for a short in camera meeting.
[Proceedings continue in camera]