FINANCE COMMITTEE - PRE-BUDGET CONSULTATIONS: WASTED OPPORTUNITY
On December 12, 2012, the House of Commons Standing Committee on Finance tabled its pre-budget consultations report “Jobs, Growth, Productivity and Demographic Change: Challenges and Opportunities for Canada”. This “majority” report, primarily reflecting the views of the Government, is a waste of taxpayers’ time and dollars.
The Committee began its hearings on June 8, 2012. Canadians were asked to submit their views on five broad themes: economic recovery and growth; job creation; demographic change; productivity; and other challenges for the upcoming budget. The issues covered were much broader and less restrictive than those imposed by the Minister of Finance for his current round of pre-budget consultations. The majority report contained 60 recommendations. Both the NDP and Liberals issued minority reports.
Although the Committee set out five general issues for discussion, the report and its recommendations did not follow those five areas. Instead, the report focussed on: the economic and fiscal environment; people; business; and communities. As a result, there is considerable duplication of responses under these new headings. In most cases, the discussion in the chapters did not provide any rationale for the recommendations. This delink between the discussion and the recommendations undermines the credibility and usefulness of the report.
Under the previous Liberal Government, which first asked the Finance Committee to seek the views of Canadians in the planning for the upcoming budget, the Minister of Finance would appear before the Committee, presenting updated economic and fiscal projections and potential challenges for budget planning.
The last time Minister Flaherty presented an Update before the Committee was 2006. In both 2007 and 2008, he simply tabled the Update in the House of Commons. Since then, he has presented the Update to various Chambers of Commerce across the country, completely bypassing the Committee and Parliament.
As a result, the Committee has not had the opportunity to question the Minister on the Updates since 2006. Instead, the Committee has been forced to use the economic forecasts from the Bank of Canada, the International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) as the backdrop for its reports. By avoiding the Committee, the Minister has undermined the credibility and relevance of the Committee’s reports.
Although the sixty recommendations are not divided among the five issues subject to consultations, the first seven can be considered as pertaining to economic recovery and growth with most of the remainder related to job creation and productivity. Few of the recommendations pertain to demographic change and other challenges - the two more important issues for discussion.
Many of the recommendations reflect current Government policy. For example, Recommendation 5 states “That the federal government reaffirm is already strong commitment to keep taxes low and not impose on Canadians any form of carbon tax that would harm key sectors of the economy, while passing the costs on to Canadian families”. The discussion in the Energy Section of the Report does not provide supporting evidence that a carbon tax would harm key sectors of the economy. The Section on Taxation provides evidence that the government should be relying more on consumption taxes than on personal and corporate income taxes, but the recommendations are silent on this.
Recommendation 18 states “That the federal government continue to work towards improving financial literacy as outlined in Motion M-269, which was proposed by James Rajotte, M.P.”, the chair of the Committee. The two sentences contained in the Report on “Financial Literacy” make no reference to this Motion.
The first recommendation states “That the federal government, acknowledging the current fiscal situation, restrict new spending commitments in the upcoming budget and continue to reject new costly and irresponsible spending”. Although recommending restricting new spending commitments, many of the recommendations imply major new commitments. In the discussion on the Economic Environment, it is noted that, given Canada’s low debt-to-GDP ratio, it has “more policy options”. This is not reflected in the recommendations.
Recommendations 21 and 22 call on the Government to simplify and undertake a comprehensive review of the tax system. It is proposed that a royal commission be established. To date, the Government has ignored recommendations to simplify the tax system, preferring instead to continue to make the system more complex through new tax credits and expenditures.
As usual, the New Democratic Party and the Liberal Party presented their own minority reports, with recommendations that reflect the policy agenda of their respective parties.
The Finance Committee’s consultation report is primarily a political document, reflecting the priorities of their respective parties, loosely using the hearings to support their respective policy paradigm.
The upcoming budget will use selective quotes from this report to justify Government action or inaction. In the meantime, the Minister of Finance is conducting his own pre-budget consultations with many of the same groups that presented their views to the Finance Committee, resulting in considerable overlap and duplication.
These are expensive exercises, which do not seem to serve any useful purpose The Committee failed to abide by the last part of its first recommendation – “irresponsible spending”.