Opening Statement to the Standing Committee on Public Accounts

Department of Finance—Parliamentary oversight weakened in poorly targeted relief for heating expenses
(Chapter 13 - December 2001 Report of the Auditor General)

Mr. Chair, thank you for this opportunity to discuss our audit observation on relief for heating expenses. Joining me at the table are Jamie Hood and Richard Domingue, the Principal and Director responsible for the observation.

In December 2001, I reported my concern about the erosion of Parliament's control over the way the government raises and spends money. The examples I used included Employment Insurance premium rates, the creation of Downsview Park and the Canada Foundation for Sustainable Development Technology, and the initiative to provide relief for heating expenses.

In its October 2000 Economic Statement, the government announced that it would provide some relief for the higher heating expenses that many Canadians faced at that time. But it wanted to limit its relief to low- and modest-income Canadians. So the government proposed that it provide the relief to those eligible for the January 2001 payment of the goods and services tax credit. The relief provided for heating expenses was $125 to individuals or $250 to families. The total cost of the relief for the year ended 31 March 2001 was over $1.4 billion.

Mr. Chair, let me start by emphasizing that we are not commenting on the merits of the policy decision to provide this relief. However, we have two concerns about how the decision was implemented. First, the government used an approval and funding process that did not give members of Parliament an opportunity to review and approve $1.4 billion of public spending on a major initiative. Second, the mechanism chosen to identify recipients meant the relief was poorly targeted. As a result, less than a quarter of the payments went to low- and modest-income Canadian households that needed immediate assistance. Furthermore, at least 90,000 low- and modest-income Canadians facing higher heating costs were not eligible for the relief payments. I will comment on each of these concerns.

In the October 2000 Economic Statement, the government proposed to amend the Income Tax Act to obtain the parliamentary authority it needed to make the payments. After the Notice of Ways and Means motion was approved, however, Parliament was dissolved for the November 2000 election. Legislation to amend the Income Tax Act was never introduced, debated, or approved.

Instead, the government chose to give the relief in the form of ex gratia payments authorized by the Governor in Council. Ex gratia payments are made at the government's discretion as acts of benevolence in the public interest. It has been suggested that the government try to recover some of the relief payments it made, but recovering ex gratia payments is not feasible.

Although the government has the authority to make ex gratia payments, Parliament has to provide the funds. Since Parliament had been dissolved, the government chose to use special warrants. Parliament has approved the use of special warrants during dissolution when there is no appropriation for a payment that is urgently needed for the public good.

We are concerned that Parliament's role of providing scrutiny and oversight was weakened in this initiative by the government's choice of an approval process that, while legal, effectively bypassed Parliament.

Mr. Chair, let me now turn to the issue of identifying eligible recipients. In providing relief for heating expenses the government had three goals: one, to offset some of the impact of higher heating expenses; two, to limit the assistance to low- and modest-income Canadians; and three, to provide relief quickly. Achieving all three goals proved to be a significant challenge. The government lacked the information needed to identify low- and modest-income Canadians who were facing higher heating costs. It therefore chose to provide relief to all recipients of the goods and services tax credit.

Our analysis showed only a weak relationship between those who received the goods and services tax credit and those who needed help with higher heating expenses. We found that at least 40 percent of the payments went to higher-income households or to households that would not likely face the higher heating costs caused by the energy market conditions of 2000-01. Furthermore, because payment of the goods and services tax credit in January 2001 was based on 1999 income, at least 90,000 low- and modest-income Canadians facing higher heating costs did not get the relief.

We also noted a few anomalies created by giving relief for heating expenses to the recipients of the goods and services tax credit. These included multiple payments to some households and payments to Canadian taxpayers residing outside the country, to deceased people, and to some prisoners. The estimates we used of how many recipients were in these groups were made by the Department of Finance using reasonable assumptions.

In summary, I appreciate that the government wanted to act quickly to help Canadians who were facing big increases in their heating costs because of market conditions. However, I am concerned that Parliament was not given an opportunity to approve a $1.4 billion initiative. I am also concerned that over 40 percent of the households that received the relief did not need assistance or were not low- or modest-income households.

Mr Chair, I trust that the Committee shares my concern. I also hope the Committee will obtain the government's assurance that it will seek Parliament's approval for new initiatives in the future.

That concludes my opening statement. We would be pleased to answer any questions the Committee may have.