OGGO Committee Report

Dissenting Report from the New Democratic Party of Canada

The efforts to reform the estimates process undertaken by Hon. Scott Brison in his role as President of the Treasury Board during the life of the 42nd Parliament provide a cautionary tale to any would-be reformer of the basic systems of government, particularly where they intersect with the basic mechanisms of Parliament.

Early signs were promising. There is a wide-spread consensus that the estimates process is largely broken. Parliamentarians, as well as the public at large, struggle to understand how the financial authorities voted by Parliament relate to the policy agenda of the government.

This is partly because of the difference in accounting methods between the estimates on the one hand and the budget and public accounts on the other hand. It is also partly attributable to the fact that votes within the estimates are not categorized according to the purposes the money is meant to support.

The major problem, however, has to do with the misalignment between a given fiscal year’s budget and estimates documents. Typically, federal governments have chosen to present a budget in, or around, late February. The budget preparation process is highly secretive, even within government itself, and very little information about its contents is shared with anyone outside the Department of Finance.

This means that departments, including the Treasury Board, usually have no knowledge of what will be announced in the budget while they prepare their main estimates to be tabled in the House of Commons. Until the temporary changes implemented for this parliament, the Main Estimates had to be tabled by March 1.

Just before, or just after, the Main Estimates were tabled, the government’s new budget would reset the policy and financial priorities of government, but these changes would not be reflected in the Main Estimates that the House would then proceed to study for the duration of the spring sitting. Indeed, it would sometimes take up to 18 months or more for items announced in a budget to make it into the estimates process, causing significant delays between when the government announces a program and when it receives the funding needed to implement it.

In other words, problems in the interaction of the respective timelines for the budget and estimates processes were causing problems (1) for interpreting the estimates documents in relation to the government’s priorities, as delineated in the budget, and (2) by lengthening delays between program announcements and implementation.

The most obvious and promising way to solve this problem would be for the Department of Finance to share more information about what will be in the budget with the Treasury Board and relevant departments in the lead up to the release of the budget.

This would mean that departments could prepare Treasury Board submissions for their new budget items in advance of the budget’s release. Treasury Board could review and approve the detailed spending proposal prior to the release of the budget. This would allow for (1) the inclusion of new budget items in the main estimates for the year in which they are announced, and (2) a shorter delay between when a program is announced and when it receives the funding necessary for its implementation.

Of course, measures should be taken to safeguard the confidentiality of that information. This is not, however, a reason for that information not to be shared. Highly sensitive information is shared within government on other matters, so we can be confident that appropriate, effective safeguards can be implemented to protect the confidentiality of this information.

This solution would not have required changes to the Standing Orders or any other cooperation by Parliament. It also would not demand any tradeoff between Parliament’s role in scrutinizing government’s program budgets prior to granting spending authority on the one hand, and increased transparency in government’s financial record keeping on the other hand.

This kind of close cooperation exists in the jurisdictions that Minister Brison has pointed to as the gold standard in well-sequenced fiscal cycles; namely, Australia and the province of Ontario.

While this solution does not require the cooperation of Parliament, it does require the cooperation of the Minister of Finance and his department. Unfortunately for Minister Brison’s attempt at reform, that cooperation appears not to have been forthcoming.

Even with the deadline for tabling the Main Estimates pushed back to April 16, only $221 million of the over $7billion (3.1 percent) in new budget items were approved by Treasury Board prior to tabling the 2018-19 Main Estimates. That suggests departments had very little idea which of their proposals had made it into the budget prior to its release.

This is unfortunate because, as noted by the Parliamentary Budget Officer in his report on the 2018-2019 Main Estimates, entitled: The Government’s Expenditure Plan and Main Estimates 2018-19:

“As the President of the Treasury Board and PBO have noted previously, a significant part of Budget implementation delays stem from the Government’s own internal processes. Were these to be streamlined, the Government would be able to spend money more quickly, without the need for Parliament to cede information and control. It is unclear what the Government intends to do to address this issue. However, given that the Treasury Board Secretariat vetted fewer Budget 2018 measures (13, $221 million) compared to last year (19, $994 million), there is no evident progress.”[1]

It seems that in the absence of better cooperation from the Department of Finance, the President of the Treasury Board sought changes to the Standing Orders to allow more time between the release of the budget and the tabling of the Main Estimates. Presumably, this extra time, coupled with a modest increase in cooperation by the Department of Finance prior to the budget release, was intended to allow detailed spending proposals for a significant amount of new budget items to be approved by Treasury Board and included in the Main Estimates.

It therefore surprised many parliamentarians when, just weeks before tabling the Main Estimates, the President of the Treasury Board announced, through the media, that new budget items would not appear, as normal, in departmental estimates after being reviewed by Treasury Board. Instead, the plan was to create a new Treasury Board central vote, the “Budget Implementation Vote”, that would provide spending authority for all the new budget initiatives.

In addition to raising the specter of a giant spending authority with few constraints, the Budget Implementation Vote posed a challenge to Parliament’s role as a spending watchdog. It meant that the budget document would have to stand in for program descriptions in the departmental plans. It meant that that one committee, the Standing Committee on Government Operations and Estimates, would be responsible for reviewing all the new budget items of government, rather than having subject-expert committees review the new budget initiatives relevant to their subject area. The Committee’s report makes some recommendations that may help reduce the impact of these negative consequences.

Most importantly, however, it meant that parliamentarians would be expected to grant spending authority to programs before those programs went through Treasury Board’s rigorous costing process. It is through that process that many program details are decided. The fact that new budget items must no longer pass through that process before being presented to parliamentarians for spending authority means that certain questions about how money will be spent within the program may be unanswerable, in principle, prior to parliamentarians approving the funding. The questions are unanswerable because the answers have yet to be developed. As section 2.2 of the Committee report indicates, this was in fact the case with a number of departments during the 2018-2019 estimates process.

This represents a significant departure from the norm and a serious challenge to the idea of meaningful parliamentary oversight; a challenge necessitated only by the fact that Minister Brison’s zeal for estimates reform is apparently not shared by his colleagues in government, particularly the Minister of Finance and the Prime Minister.

The new Budget Implementation Vote clashes with the existing parliamentary supply process and needlessly undermines Parliament’s role as the ultimate arbiter of the public purse. While the Committee’s report makes several good recommendations, it is a significant failing of the report that it does not recommend the immediate discontinuation of this mechanism.

Therefore, it is recommended that:

The Treasury Board Secretariat discontinue the use of a central vote to fund new budget initiatives

Given the clear, multi-partisan support for better aligning the information in the budget and the estimates, the report could also have recommended that the budget finally be officially incorporated into the supply process by fixing a date, or period, for its introduction in the House of Commons.

Despite the government’s steadfast refusal to consider a fixed budget date in the near term, their arguments for changing the deadline for tabling the Main Estimates implicitly support a fixed budget date. One can only change the date for tabling the Main Estimates to better synchronize with the budget if one has some certainty as to when the budget will be presented.

The Committee heard from Mr. Alex Smith, Financial Analyst, Office of the Parliamentary Budget Officer, that OECD best practice is to ensure that the budget is presented and voted on by parliament prior to the beginning of the fiscal year:

“The current practice and quite frankly the OECD best budgeting principles dictate presenting the budget prior to the fiscal year. Parliament should vote prior to the fiscal year, because afterwards spending is already taking place. Plans are already in place. It's really difficult to make any changes or commentary on things that are already taking place.”[2]

In fact, the OECD recommendation goes further, stating that:

“The government’s draft budget should be submitted to Parliament far enough in advance to allow Parliament to review it properly. In no case should this be less than three months prior to the start of the fiscal year. The budget should be approved by Parliament prior to the start of the fiscal year.” [3]

Rather than moving toward a system that sees more of the fiscal year’s financial planning concluded before the fiscal year, the temporary Standing Order changes push consideration of the Main Estimates further in to the fiscal year and provide no guarantee as to when, or even whether, the budget will be considered by Parliament. At the very least, requiring that a budget be tabled prior to the beginning of the fiscal year would (i) move Canada closer to the OECD standard, (ii) ensure Parliamentarians see a budget before considering the Main Estimates and (iii) allow for an assessment of whether the deadline for tabling the Main Estimates makes sense in relation to the date for the presentation of the budget for the purpose of aligning the two documents.

Therefore, it is recommended that:

The House of Commons amend its Standing Orders to require the tabling of a budget prior the beginning of the fiscal year and, further, consider setting the deadline for some time in February in order to allow the House to dispense with consideration of the budget prior to the beginning of the fiscal year.

The estimates process is meant to allow Parliament to appropriate funds proposed by Government to meet its obligations. However, the Committee heard in testimony from both Mr. Michael Ferguson, Auditor General of Canada, that the scope of information currently provided in the Estimates omits information vital to the government’s total financial picture:

“Fundamentally we were concerned that there are some types of tax measures that, while they are appropriately accounted for as reductions of tax revenue, have the characteristics of programs that could have been issued as a grant program, for example. We felt that parliamentarians should be aware of those types of programs.”[4]

Ms. Martha Denning, Principal, Public Sector Accounting, Chartered Professional Accountants of Canada, provided testimony along a similar vein:

“Arguably, all expenditures of government, whether they're done through the tax system or done directly, should receive parliamentary scrutiny. If tax expenditures receive less, and it's a way to get around the process by which Parliament provides scrutiny of spending, then there's an issue.

Unfortunately, I haven't seen examples of where they've been incorporated into the estimates, but I wasn't looking for that in my research. The whole idea of tax expenditures is a tax policy question, and the simplifying of the tax act, and that's beyond what we look at. Certainly, if you're going to be looking at the estimates process, it would be an appropriate question to ask, because why wouldn't you have the same level of scrutiny?” [5]

Therefore, it is recommended that:

The Treasury Board Secretariat expand the scope of information provided on non-voted authorities in the estimates documents to include tax expenditures and projections of revenue to be raised by departments, agencies and Crown corporations over the course of the year.

In our opinion, the dysfunction of the current estimates process has more to do with the government’s failure to coordinate within itself to present a budget and Main Estimates that reflect the same policy objectives and financial information. The alignment of these two documents could occur without any changes to the parliamentary estimates process, as such.

An effective reform of the estimates process would seek to provide parliamentarians with better information before they vote on the estimates, in order that they can make better decisions about which spending authorities to grant, and which to deny. The problem with the current government’s attempt at reform is that parliamentarians are now being asked to approve funds for programs that have not yet been developed.

While the main estimates nominally have more information, in that all the new budget initiatives are mentioned, there is no more information about how the money will be spent than already appears in the budget. Moreover, departmental officials are less prepared to answer questions about new initiatives than they would be if the money were requested later in a supplementary estimates.

The worth of any reform to the estimates process must be judged according to the extent to which it enables parliamentarians to better discharge their duty as keepers of the public purse. Estimates should provide timely, relevant information to parliamentarians that helps them to understand the relationship between the government’s spending requests and its policy objectives. We believe that, in distinction to the current government’s attempt at reform, our proposals would allow the government to increase transparency without compromising the oversight role of Parliament.