Briefing binder created for the Deputy Minister of Finance on the occasion of his appearance before the House of Commons Standing Committee on Public Accounts on May 3, 2022 on the Public Accounts of Canada 2021

Table of contents

Meeting Scenario

Issue Notes

Extraordinary Borrowing Authority
Fiscal Anchor and Outlook
Hibernia Payments to Newfoundland and Labrador

Hot Issues (Including Budget 2022)

  1. Ban on Foreign Investment in Housing
  2. Canada Growth Fund
  3. Council of the Federation's Request to Increase the Canada Health Transfer
  4. Digitization of Money
  5. Financial Assistance to Ukraine
  6. Misalignment in Defence Spending

Inflation

  1. Economic impact
  2. Fiscal impact

Mortgage Insurance Fund
Overpayments of COVID-19 Measures
Pollution Pricing
Quantitative Easing – Impact on the Government's Financial Results
Subsequent Events
Trans Mountain Expansion

Key Figures and Statistics

Annual Financial Report 2020-21
Fiscal Reference Tables December 2021

Parliamentary and Media Environment

Committee Members Overview
Transcripts of Last Three PACP Meetings on the Public Accounts

Additional Reference Documents

Public Accounts of Canada 2021

Meeting Scenario

Committee mandate and study of the Public Accounts of Canada

Department and Deputy Minister of Finance role in preparing the Public Accounts

The May 3 PACP meeting – questions and answers

Duties of Deputy Heads and public servants appearing before parliamentary committees

Extraordinary Borrowing Authority

Issue

Given that the period of extraordinary circumstances from spring of 2021 has ended and that the Extraordinary Boworring Report has been tabled in Parliament, the Government announced in Budget 2022 that the $8.4 billion extraordinary borrowings will be treated as "regular" borrowings and be reported as such. This will provide greater transparency on the stock of the Government's debt and greater accountability to Parliament for the total amount borrowed.

Talking Points

Background

The Borrowing Authority Act (the BAA) authorizes the Minister of Finance to borrow money on behalf of the Crown and provides for the maximum amount of Government and agent Crown corporation borrowings. The Financial Administration Act (the FAA) authorizes the Minister to borrow funds under extraordinary circumstances, which are excluded from the calculation of the maximum amount.

To cover costs associated with COVID, in 2020, the Minister used the extraordinary borrowing power to cover the bulk of extra borrowings ($288B). The 2020 extraordinary borrowing authority period ended on September 30, 2020. Shortly after the government introduced amendments to start treating extraordinary borrowing as regular debt and counting toward the maximum amount limit. Accordingly, in December 2020, legislation was tabled to "roll in" the extraordinary borrowings into regular debt and increase the maximum borrowing amount, this legislation did not come into force until May 6, 2021.

In March 2021, the Minister again invoked extraordinary borrowing powers to avoid reaching the maximum borrowing limit. This extraordinary borrowing period ended when the higher maximum borrowing amount ($1,831 billion) came into force on May 6, 2021. The extraordinary borrowings that occurred between March 23, 2021, and May 6, 2021 totaled $8.4 billion. The proposed amendment would count this amount as regular borrowings.

The FAA also details annual reporting requirements in relation to extraordinary borrowings. Proposed amendments would require outstanding extraordinary borrowing to be reported in the annual Debt Management Report only as at the fiscal year-end. Currently, extraordinary borrowing is subject to separate reporting timelines compared to regular debt.

The government reported to Parliament on the most recent extraordinary borrowings through the Extraordinary Borrowing Authority Report, tabled in Parliament on May 25, 2021.   

Anticipated Areas of Questioning

1. What is the maximum borrowing amount and how close is the Government to this maximum?

2. Is the Government still borrowing under this extraordinary borrowing framework?

3. Why did the Government need to invoke extraordinary borrowing authority, and why is it now including these amounts as regular borrowings?

4. Why is a change needed to extraordinary borrowing reporting requirements?

Fiscal Anchor and Outlook

Talking Points

Fiscal Anchor

Public Debt Charges

International Standing

Fiscal Outlook

Table 1
Budget 2022 Fiscal Outlook
  2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
Budgetary Balance ($B) -327.7 -113.8 -52.8 -39.9 -27.8 -18.6 -8.4
  % GDP -14.9 -4.6 -2.0 -1.4 -0.9 -0.6 -0.3
Federal Debt (% GDP) 47.5 46.5 45.1 44.5 43.8 42.8 41.5

Hibernia Payments to Newfoundland and Labrador

Issue

The Public Accounts of Canada, 2021 includes a line item on the government's 2020 payment to Newfoundland and Labrador (NL) under the Hibernia Dividend Backed Annuity (HDBA) Agreement.

Talking Points

If pressed:

Background

Anticipated Areas of Questioning

1. Why is there over $7 million of lapsed funding for the 2020 HDBA payment to NL?

2. Is this payment related to the Prime Minister's announcement in 2021 that the government will transfer its annual net revenues from the Hibernia offshore oil project Net Profits Interest (NPI) and Incidental Net Profits Interest (INPI)?

If pressed:

3. Why did Canada enter into the HDBA Agreement with NL?

Ban on Foreign Investment in Housing

Issue

Budget 2022 announced the government’s intent to implement a ban on foreign investment in Canadian housing.

Budget Implementation Act, 2022, No. 1, tabled in Parliament on April 28, 2022, proposes legislation to implement the ban.

Talking Points

If pressed:

Anticipated Areas of Questioning

1. What are the final details and when will they be released?

2. How will the government enforce the ban?

3. What real impact will the ban have on affordability?

Canada Growth Fund

Issue

Members of the Standing Committee on Public Accounts may ask questions related to the announcement of the government’s intention to stand up a Canada Growth Fund in Budget 2022.

Talking Points

Background

Budget 2022 proposes to establish the Canada Growth Fund to attract substantial private sector investment to help meet important national economic policy goals:

  1. To reduce emissions and contribute to achieving Canada’s climate goals;
  2. To diversify our economy and bolster our exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada’s industrial base; and
  3. To support the restructuring of critical supply chains in areas important to Canada’s future prosperity—including our natural resources sector.

The Canada Growth Fund will be a new public investment vehicle that will operate at arms-length from the federal government. It will invest using a broad suite of financial instruments including all forms of debt, equity, guarantees, and specialized contracts. The fund will be initially capitalized at $15 billion over the next five years. It will invest on a concessionary basis, with the goal that for every dollar invested by the fund, it will aim to attract at least three dollars of private capital.

In standing up the Canada Growth Fund, the government intends to seek expert advice from within Canada and abroad. Following these consultations, details about the launch of the fund will be included in the 2022 fall economic and fiscal update. Funding for the Canada Growth Fund will be sourced from the existing fiscal framework.

Anticipated Areas of Questioning

1. The government has announced that funding for the Canada Growth Fund will be drawn from the existing fiscal framework. From where will these sources of funds be drawn?

2. Budget 2022 announces that the Canada Growth Fund will be capitalized with $15 billion over five years, but there is only $1.5 billion provisioned. What explains this discrepancy?

3. Budget 2022 states that the Canada Growth Fund will be initially capitalized with $15 billion. Does the government expect to provide future incremental funding to the Canada Growth Fund?

The Council of the Federation’s Request to Increase the Canada Health Transfer

Issue

Since September 2020, provincial and territorial premiers have been calling on the federal government to increase the Canada Health Transfer to cover 35 per cent of their health expenditures and to maintain this level over time (i.e., an injection of $28 billion and annual growth of at least 5 per cent). In the lead up to the federal Budget 2022, the premiers launched an online awareness campaign to engage Canadians on this matter. 

Talking Points

Background

The Canada Health and Social Transfer (CHST) was restructured into two separate transfers – the Canada Health Transfer and the Canada Social Transfer, effective April 1, 2004. Since 2004, the Canada Health Transfer, on average, has covered 33 per cent of provincial and territorial health expenditures when accounting for the federal tax point transfer.

Chart 1
Statutory Federal Health Transfer (as % of PT Health Expenditures)
Chart 1: Statutory Federal Health Transfer (as % of PT Health Expenditures)
Text version
  Cash as a share of PT expenditures Cash and tax points as a share of PT expenditures
2004-05 20% 33%
2005-06 22% 35%
2006-07 20% 33%
2007-08 21% 33%
2008-09 20% 31%
2009-10 20% 32%
2010-11 20% 30%
2011-12 20% 31%
2012-13 21% 31%
2013-14 21% 32%
2014-15 22% 33%
2015-16 22% 34%
2016-17 23% 34%
2017-18 23% 34%
2018-19 23% 34%
2019-20 23% 34%
2020-21 21% 30%
2021-22 21% 32%
Table 2
Cash and Tax Points as a Share of PT Health Expenditures
  Cash ($M) Tax points ($M) PT health expenditure ($M) Cash as a share of PT expenditures Cash and tax points as a share of PT expenditures
2004-05 16,770 11,206 85,738 20% 33%
2005-06 20,310 11,969 91,789 22% 35%
2006-07 20,140 12,713 98,713 20% 33%
2007-08 21,729 13,140 105,204 21% 33%
2008-09 22,768 12,670 113,552 20% 31%
2009-10 24,476 13,962 120,325 20% 32%
2010-11 25,672 13,086 127,716 20% 30%
2011-12 26,952 13,691 131,794 20% 31%
2012-13 28,569 14,399 137,632 21% 31%
2013-14 30,283 15,253 140,921 21% 32%
2014-15 32,113 16,098 144,792 22% 33%
2015-16 34,026 17,005 151,999 22% 34%
2016-17 36,068 16,593 154,516 23% 34%
2017-18 37,150 17,403 161,000 23% 34%
2018-19 38,584 18,298 167,507 23% 34%
2019-20 40,373 19,026 175,055 23% 34%
2020-21 41,870 19,944 203,573 21% 30%
2021-22 43,126 20,969 201,598 21% 32%
    Average 21% 33%

Anticipated Areas of Questioning

1. Provinces and territories have been asking for a permanent increase to the Canada Health Transfer. Why has the Government not addressed this request?  

Digitalization of Money

Issue

The digitalization of money and financial services are transforming financial systems and challenging democratic institutions around the world.

Talking Points

Background

Digital money and financial services innovations create a number of risks and challenges that need to be addressed. For instance, cryptocurrencies that have the potential to become more readily accepted as a means of payment and store of value might pose significant risks to financial stability and national security. They could also facilitate illicit activities while exposing consumers to financial risks.

The first phase of the review announced in Budget 2022 will focus on the digitalization of money, including digital currencies such as cryptocurrencies, stablecoins and Central Bank Digital Currency.

The legislative review will examine, among other factors: how to adapt the financial sector regulatory framework and toolbox to manage new digitalization risks; how to maintain the security and stability of the financial system in light of these evolving business models and technological capabilities; and the potential need for a central bank digital currency in Canada.

Federal and provincial regulators are collaborating and discussing regulatory approaches for stablecoins. The Bank of Canada has also been researching a CBDC.

Canada is engaged in several international fora that are examining the impact of crypto assets on the global financial system. This work across jurisdictions is important due to the globally integrated nature of financial markets and the transborder design of the technology underpinning crypto assets.

A Private Member’s Bill (Bill C-249, An Act respecting the encouragement of the growth of the cryptoasset sector)was introduced on February 9, 2022 by a Conservative Party MP and has been debated for one hour. This Bill focuses on encouraging the growth of the crypto-asset sector.

The Government has yet to publicly announce its position on Bill C-249.

Anticipated Areas of Questioning (Responsive)

1. When will consultations for the legislative review be launched and when will key policy decisions be implemented?

2. Is the government planning to regulate stablecoins? When?

3. Has Canada fallen behind the curve in terms of crypto regulation, given movement in the US and elsewhere?

4. Is the government planning to issue a Central Bank Digital Currency?

5. What is the Government’s position on Private Members Bill C-249 (An Act respecting the encouragement of the growth of the cryptoasset sector)?

Financial Assistance Provided to Ukraine

Issue

Canada has moved quickly to provide direct, substantial and meaningful financial assistance to Ukraine, to meet its urgent short-term financing needs, strengthen its economic resilience and respond to the ongoing humanitarian crisis.

Talking Points  

Background

In addition to the C$500 million BWRAA loan and the C$1 billion IMF Administered Account loan, Canada has also offered a C$120 million bilateral loan to support Ukraine’s economic resilience and governance reforms. Canada has also committed C$245 million in humanitarian assistance to help experienced partners in Ukraine and neighboring countries provide emergency health services, protection, support to displaced populations and essential life-saving services. An additional C$35 million in development assistance funding was provided to address emerging priorities, including supporting the resilience of Ukraine's government institutions and civil society organisations so they are able to meet the needs of Ukrainians – in particular women and vulnerable groups.

Financial Assistance from Canada to Ukraine
Financial Assistance Administered Amount
Previously announced military aid $93.5 million
Additional military aid (lethal and non lethal) $500 million
Humanitarian assistance $245 million
Development assistance $35 million
Immigration measures $117 million
Operation UNIFIER $338 million
Sub-total direct support: $1.3 billion
Bilateral loans $620 million
IMF Administered Account for Ukraine $1 billion
Sub-total loan support: $1.6 billion

Anticipated Areas of Questioning

1. How will the Administered Account for Ukraine work?

2. What are the advantages of the Administered Account, relative to direct bilateral lending to Ukraine?

3. What is the purpose of the bilateral loan to Ukraine?

4. Is Canada providing financial support to Ukraine?

Budget 2022: Misalignment in Defence Spending

Issue

On April 22, 2022, the Parliamentary Budget Office highlighted a misalignment between funding figures for the Department of National Defence (DND) illustrated in a chart in Budget 2022 and those reported by DND in its 2022 Departmental Plan.

A Globe and Mail article subsequently characterized this difference as $15 billion in “unexplained” and “unaccounted for” military spending in Budget 2022.

Talking Points

Background

The difference is largely driven by major capital projects that were approved under Strong, Secure, Engaged, but that have not yet received Treasury Board approval, and as such are not captured  in DND’s Departmental Plan. In addition, forecasted Canadian Armed Forces operations costs are not included in DND’s Departmental Plan as associated incremental funding is only accessed in-year. These would include Operations IMPACT, REASSURANCE, UNIFIER, and ARTEMIS, and peace support operations.

Chart 5.1
Funding for the Department of National Defence
Chart 5.1: Funding for the Department of National Defence

Sources: Strong, Secure, Engaged, Public Accounts of Canada, and the Department of National Defence. 2016-17 through 2020-21 reflect actual expenditures. 2021-22 and later reflect estimated expenditures

Text versionThe budget of the Department of National Defence on a cash basis is growing steadily from $18.6 billion in 2016-17 to approximately $41 billion in 2026-27. Most of this growth is consistent with the forecast published under Canada's 2017 defence policy, Strong, Secure, Engaged. Funding approvals and other revisions prior to Budget 2022 added an average of $2.4 billion since 2017-18. Measures announced in Budget 2022 add a further $1.7 billion on average from 2022-23 through 2026-27.
Table 4
Forecasted spending reported by the Department of National Defence
$ billions
  Pre-Budget 2022 funding levels as shown in Chart 5.1 of Budget 2022 DND Departmental Plan 2022-23 Difference
2022-23 28.599 25.950 2.649
2023-24 32.450 25.945 6.505
2024-25 34.632 24.963 9.669

Anticipated Areas of Questioning

1. Does Budget 2022 present larger figures for defence spending in order to boost Canada’s defence-to-GDP ratio and bring it closer to the 2 per cent NATO target?

2. The PBO has separately reported on delays in implementing capital projects. Given this, what certainty is there that defence funding will be spent as forecast in the Budget?

Inflation (Economic Impacts)

Issue

Consumer price inflation has risen significantly in recent months.

Talking Points

Background

Total CPI inflation accelerated to 6.7% year-over-year in March 2022, a 31-year high and a full percentage point higher than February (Table 1). Inflation has been above the 3% upper end of the Bank of Canada’s inflation control range for twelve consecutive months – the longest period since the introduction of inflation targeting. CPI inflation excluding volatile energy and food components reached 4.6% in March.

Table 1
Total and Core Measures of Consumer Price Inflation, Canada
  2021-Q4 2022-Q1 2022-Q2 Jan-22 Feb-22 Mar-22
Total CPI Inflation
Year-over-year, not seasonally adjusted 4.7 5.8   5.1 5.7 6.7
Bank of Canada April MPR Outlook
4.7 5.6 5.8      
Period-over-period, seasonally adjusted 1.4 1.8   0.6 0.8 0.9
Core Inflation
CPI-common* 2.1 2.7   2.5 2.7 2.8
CPI-median* 3.0 3.5   3.3 3.5 3.8
CPI-trim* 3.6 4.4   4.1 4.4 4.7

Sources: Statistics Canada; Department of Finance calculations.
*CPI-common (common component) is an estimated measure of core inflation that tracks common price changes across categories in the CPI basket. CPI-median is based on a single component, the component with the monthly inflation rate at the 50th percentile of the distribution. CPI-trim excludes the 20% slowest- and fastest-growing components of the CPI (by weight).
** All-items CPI inflation excluding 8 of the most volatile components and the effects of indirect taxes.

The acceleration of consumer prices is not unique to Canada as inflation in most of the largest OECD economies has increased sharply since early 2021 and reached record highs in March 2022. Nevertheless, current inflation levels differ across countries. Outside Japan, inflation ranges from 4.5% in France to 8.5% in the United States (see International Comparisons section for more detail) in March 2022.

The global concern over inflation comes after decades during which inflation was relatively low. Several global factors have driven inflation up in Canada, including higher energy and food prices, strains in supply chains, and unprecedented demand for goods (Figure 1). The Russian invasion of Ukraine has exacerbated these pressures more recently. Overall, unusually high inflation in Canada has been concentrated in traded goods prices.

Figure 1
Contribution to Year-Over-Year Consumer Price Inflation, Canada
Figure 1: Contribution to Year-Over-Year Consumer Price Inflation, Canada

Last data point is March 2022.

Source: Statistics Canada

Text version
  Jan
2020
Feb-2020 Mar-2020 Apr
2020
May-2020 Jun-2020 Jul
2020
Aug-2020 Sep-2020 Oct
2020
Nov-2020 Dec-2020 Jan
2021
Feb-2021 Mar
2021
Apr
2021
May
2021
Jun-2021 Jul
2021
Aug-2021 Sep
2021
Oct
2021
Nov
2021
Dec
2021
Jan
2022
Feb
2022
Mar
2022
Food from stores/Energy 0.86 0.57 -0.5 -1.24 -0.96 -0.25 -0.3 -0.24 -0.25 -0.15 -0.19 -0.21 -0.17 0.3 1.29 1.8 1.64 1.29 1.36 1.59 1.74 2.02 2.16 1.98 2.21 2.42 2.86
Shelter 0.54 0.55 0.56 0.56 0.48 0.5 0.42 0.42 0.47 0.45 0.5 0.42 0.43 0.39 0.47 0.54 0.78 0.95 1.07 1.06 1.11 1.07 1.08 1.29 1.4 1.48 1.63
Other goods 0.53 0.37 0.25 -0.04 -0.12 0.15 0.18 0.16 0.05 0.1 0.13 0.2 0.19 0.15 0.22 0.6 0.87 0.71 0.9 1.02 0.98 0.98 1.01 1.08 1.13 1.2 1.57
Other services 0.44 0.68 0.54 0.55 0.23 0.24 -0.13 -0.16 0.26 0.24 0.48 0.32 0.63 0.25 0.2 0.4 0.31 0.14 0.32 0.43 0.55 0.62 0.46 0.49 0.39 0.53 0.61
Total 2.38 2.16 0.85 -0.16 -0.37 0.64 0.17 0.18 0.53 0.64 0.92 0.74 1.08 1.09 2.17 3.34 3.59 3.09 3.65 4.1 4.38 4.69 4.71 4.84 5.13 5.63 6.67

More recently, price of services has also strengthened, mainly attributable to the shelter services components, which accounted for more than two-thirds of service prices growth. Low interest rates and a desire for more housing space, combined with limited supply and higher inputs costs for construction, resulted in strong house price appreciation. Other services prices, however, are rising at a slower pace. For example, child care and personal care services are growing at less than 2% and 3%, respectively, because price developments in these categories primarily reflect pressures on domestic wages. Moreover, some categories, such as communications, have seen prices fall. 

Prior to the war in Ukraine, there was some evidence that the supply-side issues in the global economy were gradually being resolved. Delivery times had shortened a bit, global car production was increasing again and the prices of semiconductors had come off their peaks. Combined with an expected rebalancing of global demand towards services, these developments were providing a basis for expecting that inflationary pressures would ease over time, both globally and here in Canada.

Overall, in its most recent Monetary Policy Report, the Bank of Canada expects inflation to stay higher for longer than previously projected. CPI inflation is expected to average just below 6% through the first half of 2022, averaging 5.3% in 2022 (up from 4.2% expected in January) before slowing to 2.8% in 2023 (up from 2.3% previously) (Table 2). The upward revision reflects higher food and energy costs due to the Russian invasion of Ukraine, as well as ongoing impacts from supply chain disruptions.

Table 2
Bank of Canada and Private Sector Outlook for All-Items CPI Inflation
per cent, year-over-year
  2022Q1 2022Q2 2023Q3 2022 2023
Bank of Canada MPR – April 2022 5.6 5.8 5.3 5.3 2.8
February Survey (Finance Canada) 5.0 4.3 3.6 3.9 2.4

International Comparisons

Inflation in Canada is elevated but comparatively lower than in some other countries and regions. Canada (6.7%) currently has the fourth highest rate of headline inflation in the G7, surpassed by the U.S. (8.5%), Germany (7.3%) and U.K. (7.0%).

Soaring energy and food prices are a global phenomenon currently pushing up inflation in most countries. Among the G7 economies, they are large contributors to inflation, explaining around 65% of the price increase over the last year in Germany and France and 80% in Italy.  

Underlying inflation, defined as inflation excluding food and energy, is also a key driver. These underlying pressures have been more pronounced in the U.S., the U.K., and Canada. In Canada as well as in the U.S., shelter costs have made larger contribution to inflation than in most other countries amid strength in the housing market. Supply-chain disruptions, including bottlenecks in the supply of semiconductors weighing on the productive capacity of the automotive sector, and pent-up consumer demand due to COVID-19 have contributed to high inflation in most countries but particularly so in the U.S. and the U.K. Tight labour markets, as well as reductions in labour supply due to health concerns and restrictions to cross-border movements, likely contributed more to price pressures for services in the U.K. and the U.S.

Table 3
CPI All items Inflation
per cent, year-over-year
  March 2022
(Year-over-year)
U.S. 8.5
OECD* 7.7
Euro Area 7.5
Germany 7.3
U.K. 7.0
G20* 6.8
Canada 6.7
Italy 6.5
G7* 6.3
France 4.5
Japan* 0.9

Source: Haver Analytics, OECD.
*Data for March non-available. Last data point is February 2022.

Inflation (Fiscal Impact)

Issue

What is the impact of inflation on the budgetary balance?

Talking Points

Background

More than half of federal transfer payment dollars are indexed to inflation – whether the Consumer Price Index (CPI) or nominal GDP – sometimes with a lag. This share is forecasted at 60 per cent in 2023-24 (an indicative year), based on Economic and Fiscal Update (EFU) 2021.

EFU 2021 forecast for 2023-24
  ($B)
Transfer payments indexed to CPI or nominal GDP 178.2
Seniors benefits 73.0
Canada Health Transfer 48.7
Canada Child Benefit 25.8
Equalization 23.6
Other* 7.1
Transfer payments not directly indexed to CPI or nominal GDP 118.7
Total transfer payments** 296.9

*Other includes refundable tax credits for individuals (e.g. Canada Workers Benefit), and certain escalators for Indigenous transfer payments.
**Total transfer payments in EFU 2021, excluding pollution pricing proceeds returned which is offset by revenue.

Question 1: For the transfer payments linked to CPI or nominal GDP, how are they indexed?

Seniors benefits: Payments are indexed quarterly for CPI increases. Payments do not decrease if CPI decreases.

Canada Health Transfer: Grows in line with a three-year moving average of nominal GDP (the projection for that  fiscal year as determined by the Minister of Finance no later than 3 months before the start of the fiscal year, and the previous 2 years), with funding guaranteed to increase by at least 3 per cent per year. 

Equalization: Grows in line with a three-year moving average of nominal GDP (current year forecast, and previous 2 years).

Personal income tax refundable tax credits, e.g. Canada Child Benefit and Canada Workers Benefit: Inflation protected with a one-year lag. Payments are calculated based on CPI inflation adjusted net family incomes from the previous year (e.g. payments for benefit year 2022-23 will be based on incomes and inflation in 2021). The benefit year begins in July.

10-year grant funding for First Nations: Grows with CPI inflation and beneficiary population growth, with floor of 2 per cent per year.

The CMHC’s Mortgage Insurance Fund

Issue

The term ‘Mortgage Insurance Fund’ in the Public Accounts refers to the government’s public mortgage insurance, provided through Canada Mortgage and Housing Corporation.  In the past, Parlimantarians have asked questions about the Government’s exposure to the housing market in general.

Talking Points

Background

Government-guaranteed mortgage insurance
$ Billions
As at March 31, 2021 CMHC
(Vol 1 – Table 11.8)
(pg. 397, English)
(pg. 404, French)
Private mortgage insurers
(Vol 1 – Table 11.6)
(pg. 392, English)
(pg. 398, French)
Total
Legislative limit 750 350 1,050
Insurance-in-force 422 255 677

N.B. CMHC legislative limit was temporarily increased at outset of the pandemic and reverts back to pre-COVID level of $600B in 2025.

Anticipated Areas of Questioning

1. Why does the government guarantee the contracts of private mortgage insurers?

2. Is the Mortgage Insurance Fund solvent?

Overpayments of COVID-19 Measures

Issue

What overpayments were recorded in the Public Accounts 2021 due to COVID-19?

Talking Points

Background

Carbon Pollution Pricing

Issue

The Government publishes an annual accounting of pollution pricing proceeds assessed and returned in each jurisdiction where the federal system applies. Members of Parliament and the public continue to take an interest in understanding the financial flows.

Talking Points

If pressed:

Background

Proceeds

The Greenhouse Gas Pollution Pricing Act (the Act) establishes the framework for the federal carbon pollution pricing system (the “backstop”) and is comprised of two components:

The benchmark carbon price is set at $50/tonne of CO2-equivalent emissions ($50/t) in 2022-23. The Government confirmed that the price will rise to $65 in 2023-24, increasing by $15 annually until it reaches $170 in 2030-31.

The federal backstop system applies, in whole or in part, in provinces and territories that request it and in those that do not have a system in place that meets certain minimum requirements. Specifically, the federal fuel charge applies, in Ontario, Manitoba, Saskatchewan, Alberta, Yukon and Nunavut (with the latter two being ‘voluntary’). The federal output-based pricing system applies in Prince Edward Island, Manitoba, partially in Saskatchewan, Yukon and Nunavut (with all but Manitoba and Saskatchewan being ‘voluntary’).

Return of Proceeds from the Federal Carbon Pollution Pricing System

By law, the Government must distribute the net fuel charge proceeds in respect of a given province or territory to either the provincial/territorial government, prescribed persons in that province/territory, or a combination of both. Similar provisions are in place regarding the excess emissions charge under the OBPS.

With respect to the return of OBPS proceeds, in February 2022, ECCC announced that all proceeds collected under the OBPS would be returned to the jurisdiction of origin via two programs: the Decarbonization Incentive Program and the Future Electricity Fund.

CAI Payments for 2022-23

On March 21, 2022, the Government released the following CAI payment amounts for the 2022-23 fuel charge year (carbon price of $50/t), to be delivered via quarterly benefit payments beginning in July 2022.

Total annual CAI payments for a family of four in 2022-23
Family Member Ontario Manitoba Saskatchewan Alberta
First adult $373 $416 $550 $539
Second adult $186 $208 $275 $270
First child $93 $104 $138 $135
Second child $93 $104 $138 $135
Total $745 $832 $1,101 $1,079

Amounts do not reflect the 10 per cent supplement for residents of small and rural communities.

Anticipated Areas of Questioning

1. Why are the aggregate amounts in the Public Accounts different from the aggregate amounts in the GGPPA Annual Report (the “Report”) for the year 2020-21? 

2. Why has the Government not returned all proceeds assessed to-date?

3. Please explain the amounts related to carbon pollution pricing in the 2020-21 Public Accounts and in the Report.

Quantitative Easing – Impact on the Government's Financial Results

Contingent Liabilities Subsequent Event

Issue

Why was a transaction/event from October 2021 booked in the prior year?

Talking Points

Background

Trans Mountain Expansion

Issue

The Government of Canada has provided financing in support of the Trans Mountain Expansion Project (the Project).

Talking Points

If pressed:

Background

In 2017, Kinder Morgan published a cost estimate of $7.4 billion that did not include a detailed engineering assessment or all of the detailed work plans. In August 2018, the Government of Canada purchased the Trans Mountain Pipeline (TMP), the Trans Mountain Expansion Project (TMEP) and related assets for $4.4 billion.

In 2020, TMC revised the cost estimate to $12.6 billion to reflect improvements to the Project as well as the approximately one-year delay due to the Federal Court of Appeal’s 2018 decision to quash the Project’s original certificate.

As announced on February 18, 2022, the newly revised cost estimate of $21.4 billion and in-service date of late 2023 provides a more comprehensive accounting of additional Project enhancements as well as schedule pressures including delays arising from COVID, BC floods and other factors, cost overruns, safety enhancements, and financing costs.

To date, the acquisition of TMC and the construction of the Project has been funded with loans from the Government of Canada, via the Canada Account. The Canada Account is used to support export transactions which are determined by the Minister for International Trade to be in Canada's national interest.

On February 18, 2022, the government committed that no more public money would be used to complete the Project. Instead, TMC will finance the Project from capital markets and financial institutions. A third-party financing is expected to close by early May 2022.

Indigenous Economic Participation

Since 2019, Finance Canada has been leading the Government’s engagement with Indigenous communities on the Crown consultation list for the project on economic participation in Trans Mountain. 

To ensure that these Indigenous groups have sufficient financial resources to participate meaningfully in the engagement process, Finance Canada is providing contribution funding to these groups through the Indigenous Participant Funding Program. Contribution funding supports costs related securing financial, legal, scientific, technical and other expertise, building internal capacity, and accessing professional services.

129 Indigenous communities were invited to participate in an engagement process about economic participation in the Project and what that participation could look like. About 100 Indigenous groups have participated in the engagement process. This engagement process has yielded rich and valuable feedback.

The government will announce the next step toward Indigenous economic participation later in 2022.

Anticipated Areas of Questioning

1. Why did the Government of Canada provide $3.7 billion in financing to fund the construction of the Trans Mountain Expansion Project in fiscal year 2020-2021? 

2. Has the Government provided additional financing to support the construction of the Trans Mountain Expansion Project following the February 18, 2022 announcement that no more public money would be used to complete the Project?

3. What is the government doing to ensure the economic participation of Indigenous communities in the Trans Mountain Expansion Project?

4. Why did the Government lapse nearly all of the $10 million in 2020-21 in funding for contributions to support Indigenous economic participation?

Committee Overview - Standing Committee on Public Accounts (PACP)

Mandate of the Committee

When the Speaker tables a report by the Auditor General in the House of Commons, it is automatically referred to the Public Accounts Committee. The Committee selects the chapters of the report it wants to study and calls the Auditor General and senior public servants from the audited organizations to appear before it to respond to the Office of the Auditor General’s findings. The Committee also reviews the federal government’s consolidated financial statements – the Public Accounts of Canada – and examines financial and/or accounting shortcomings raised by the Auditor General. At the conclusion of a study, the Committee may present a report to the House of Commons that includes recommendations to the government for improvements in administrative and financial practices and controls of federal departments and agencies.

Government policy, and the extent to which policy objectives are achieved, are generally not examined by the Public Accounts Committee. Instead, the Committee focuses on government administration – the economy and efficiency of program delivery as well as the adherence to government policies, directives and standards. The Committee seeks to hold the government to account for effective public administration and due regard for public funds.

Pursuant to Standing Order 108(3) of the House of Commons, the mandate of the Standing Committee on Public Accounts is to review and report on:

Committee Composition and Governance

PACP Members
Name and Role Party Riding PACP Member Since
CHAIR
John Williamson CPC New Brunswick Southwest Feb 2022
VICE-CHAIRS
Jean Yip Lib Scarborough—Agincourt Jan 2018
Nathalie Sinclair-Desgagné
Critic for Public Accounts; Pandemic Programs; Economic Development Agencies
BQ Terrbonne Dec 2021
MEMBERS
Eric Duncan CPC Stormont—Dundas—South Glengarry Feb 2022
Jeremy Patzer CPC Cypress Hill—Grasslands Feb 2022
Phillip Lawrence
Critic for Federal Economic Development Agency for Eastern, Central and Southern Ontario
CPC Northumberland—Peterborough South Oct 2020
Blake Desjarlais
Critic for TBS; Diversity and Inclusion; Youth; Sport and PSE
NDP Edmonton Greisbach Dec 2021
Valerie Bradford Lib Kitchener South – Hespeler Dec 2021
Han Dong Lib Don Valley North Dec 2021
Peter Fragiskatos
Parliamentary Secretary National Revenue
Lib London North Centre Dec 2021
Brenda Shanahan Lib Châteauguay—Lacolle Dec 2021; Jan 2016 – Jan 2018

Bios of the Committee Members

John Williamson (New-Brunswick South-West)
Conservative
Chair

Jean Yip (Scarborough—Agincourt)
Liberal Party
First Vice-Chair

Nathalie Sinclair-Desgagné (Terrebonne)
Bloc Québécois
Second vice-chair

Eric Duncan (Stormont—Dundas—South Glengarry)
Conservative
Member

Jeremy Patzer (Cypress Hills—Grasslands)
Conservative
Member

Phillip Lawrence (Northumberland—Peterborough-South)
Conservative
Member

Blake Desjarlais (Edmonton Greisbach)
NDP
Member

 

 

 

Valerie Bradford (Kitchener South—Hespeler)
Liberal
Member

 

 

 

Han Dong (Don Valley-North)
Liberal
Member

Peter Fragiskatos (London North Centre)
Liberal
Member
Parliamentary Secretary to the Minister of National Revenue

Brenda Shanahan (Châteauguay—Lacolle)
Liberal
Member

Page details

2022-08-31