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Role and functions of the Parliamentary Budget Office

CHAIR (Senator Faulkner) —I declare open this hearing of the Joint Select Committee on the Parliamentary Budget Office. We very much welcome our three witnesses from Canada to be part of our deliberations and of the work of the committee. Gentlemen, we certainly appreciate you accommodating us not only at short notice but early in the morning in Canada. The only thing I can say to you is that it is 11 o’clock at night here in Australia, so we are burning the candle at both ends, so to speak.

Before we proceed to questions, I need to go to one or two formalities on behalf of the committee. Although the committee does not require you to give evidence under oath, I advise you that these hearings are formal proceedings of the Australian parliament. They warrant the same respect as the proceedings of the respective houses of the Australian parliament. The giving of false or misleading evidence is, as I am sure you would all understand, a serious matter and may be regarded as a contempt of the parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege.

Gentlemen, the committee has received a submission—technically, for us, an exhibit—from you. Before we proceed to questions from committee members, I invite you to present any additional submission or information to the committee. Would any of you care to do so?

Mr Page —We have no additional information to provide to you other than to say that it is an honour for us to be here to talk to you today about the Parliamentary Budget Office.

CHAIR —Thank you very much indeed, Mr Page. I will commence by turning to one element of the submission that you have provided to us, which goes to the issue of the budget for the Parliamentary Budget Office in Canada. You note, and I will use your words:

Unfortunately, the original planned budget of $2.8 million remained modest relative to the mandate and benchmarks including central agencies in Canada and in other budget offices across the world with broad mandates. In simple terms, authority to do the work was provided without commensurate resources.

These are all issues that are being examined, I can assure you, by this committee as we grapple with the establishment of a parliamentary budget office here in Australia. Mr Page, would you or any of your colleagues, care to indicate to the committee what, given the mandate of the Canadian Parliamentary Budget Office, you believe would be an appropriate level of funding.

Mr Page —With respect to budgets, when I originally took the job—I was appointed in March 2008—I was told to plan on a budget of roughly $2.8 million per year. Our mandate is legislated, so in the act of parliament of Canada it does say what our mandate should be. It talks about providing independent analysis on economic trends, on the nation’s finances, on scrutiny of the estimates and costings, so a fairly extensive mandate was provided to the Parliamentary Budget Officer. It also mentions that we would provide this information to three committees, our House of Commons finance committee, the Senate finance committee and the public accounts committee, and individual members of parliament could ask us for a specific costing within their jurisdiction.

In the context of the budget of $2.8 million, I should probably say that after we released our first two reports—in one report we provided a detailed methodology and costing of Canada’s engagement in Afghanistan and then there was a detailed report providing five-year economic and fiscal projections which stated that Canada would be in recession in 2009 and would be running our first deficit in more than 10 years; we provided this in late fall 2008—our budget was reduced to $1.8 million, but after a year parliament decided to return our budget to $2.8 million a year.

What should those resources be? I think $2.8 million, with a good business model, with an open, transparent model, can carry us a long way in terms of providing costing and economic and fiscal analysis. Where we do feel that it is weak, based on three years worth of experiences, is that we do not provide independent economic forecasts; we use average private-sector forecasts to prepare independent fiscal forecasts. If we were to provide an independent economic outlook for the next quarter out or the next six months out over the next five years, I think that would require additional resources relative to our $2.8 million budget. Canada spends roughly Can$250 million—we are roughly at parity as well with the US—or a billion dollars per year. We have 95 departments and agencies. Our mandate does include scrutiny of the estimates. It is very difficult for a team of roughly 12 to 15 people to provide detailed scrutiny on departments and agencies of that magnitude, that amount of money, so it is an aspect of our mandate which we really have not effectively dealt with in our first three years. We do provide some work that I guess could be called scrutiny of estimates per se. We certainly use estimates documents. We appear before committees. Last week I was before the operations and estimates committee dealing with an estimates related issue. But we are not systematically going through departments and agencies and scrutinising their estimates. So, even though that is legislated, if parliament wanted us to take that under our wing and do that in a systematic way, we would need an increase in our budget. We have not had that discussion with parliament yet, but we would need a bigger budget to deal with that.

CHAIR —Thank you for that. I assume that only a very small proportion of your budget really goes to corporate support and administration for the Parliamentary Budget Office. I have assumed that most of those support functions come more broadly from the parliament, but perhaps for the record you could indicate to us what the situation is.

Mr Page —We use corporate services from the Library of Parliament in Canada, so that effectively deals with human resources. We have had competitions to hire people, contracting services which we have used in some of our larger projects. For example, right now we are doing a financial analysis around the strategic fighter plane. We have entered into some contracts with some of our American and British colleagues. We have done something similar in other projects, but we needed additional expertise. But, for the most part, other than e-charge and contracting, almost all our other resources are dedicated towards wages and salaries and again, as I said, some additional contracting to provide additional expertise for parliamentarians.

CHAIR —Thank you for that. In the circumstances of concern from your office and from you as the Parliamentary Budget Officer about inadequacy in the budget, how does the office go about mounting a case to government or the parliament about an increase or change to the office’s budget?

Mr Page —In terms of dealing with issues around the size of the budget, whether it is adequate or inadequate, since our budget was returned to the planned amount of $2.8 million we have not raised concerns per se to parliamentarians about the size of our budget. Perhaps I could just leave it at that.

CHAIR —Thanks.

Mr PYNE —Thank you for your time today. In terms of the argument, for want of a better description, that you had with the parliament, which saw your budget reduced from $2.8 million to $1.8 million, was that a decision of the officers of the parliament? In our case it would be the President and the Speaker. I am sure you have similar titles in the House of Commons and the Senate. Or was that a decision of the government of the day? Could you explain the structure, how your funds are arrived at and how the figure was returned to $2.8 million. If you were advising us about setting up a Parliamentary Budget Office in Australia, how would you ensure that the Parliamentary Budget Office was not at the whim of the government of the day or the political exigencies of the time?

Mr Page —The decision to reduce our budget was taken by the Parliamentary Librarian. Our office, and my position as Parliamentary Budget Officer, resides within the Library of Parliament. That decision was taken in conjunction with the two Speakers, the Speaker of the House and the Speaker of the Senate. They have responsibility for the management and control of the Library of Parliament. The Joint Committee of the Library of Parliament was struck after the decision was taken to review our mandate and budget. They provided recommendations to return our budget to $2.8 million. I think that decision was supported by the two speakers and the librarian after a parliamentary committee review in the summer of 2009. In terms of advice that I could provide to parliamentarians in Australia about the size of the budget, again, I think all this conversation needs to start and end with is this question: what do you want the Parliamentary Budget Office to do in Australia? What do you want that mandate to be? How do you want it to carry out that mandate? Then you basically size and scope that mandate with respect to a budget.

Mr PYNE —You mentioned that you have 12 to 15 staff. Could you give us a description of the levels of those staff in terms of experience or undergraduate or postgraduate degrees.

Mr Page —With respect to the staff, we have a very senior staff. Again, we have a very large mandate, a very significant mandate, in dealing with financial issues, economic and fiscal issues, financial costing issues, so we are basically staffed with people who have significant experience in central agencies. I have close to 30 years of public service. I worked in the Department of Finance in Canada, the Privy Council Office of Canada, the Treasury Board Secretary’s office, plus some line departments. I refer to my colleagues who are here today. I would not have taken this job if they had not agreed to come and join with me so that we could take on this task. Dr Askari, for example, whom I used to mark papers with at university some 30 years ago, has taught at two universities in Canada. He ran the forecasting department of the Department of Finance and the research department at Health Canada. He has worked at the International Monetary Fund. Mr Sahir Khan, whom I worked with at both the Treasury and the Privy Counsel Office in senior positions, has also worked in the private sector. He spent many years in New York City looking at the turnaround business. Both are highly educated.

We all have graduate degrees. Dr Askari has a PhD in economics. Sahir Khan has an MBA from Columbia University. I have a master’s degree from Queen’s University here in Canada. But we have also hired staff that complement us. We have two sides to our shop. On one side, there are economic and fiscal projections. They all have experience in working with models and doing projections. They all have graduate-level degrees and there is one PhD. That side of the shop is led by Dr Askari. The other side of the shop looks at revenue and expenditure; now, this is effectively costing. They have MBAs and they are certified financial accountants, certified management accountants. They are definitely experts in finance and cost accounting.

Mr PYNE —Terrific. Thank you for that. I know other people want to ask questions and it is about half past 11 here in Australia, so this will be my last question. In terms of the way the Canadian budgetary office has developed, do you find that you are more responsive to government policy or are you trying to pre-empt government policy? So do you analyse what the government is doing or do you try to get out in front of what the government is doing?

Mr Page —We have no policy role. We take policy as a given. We provide economic and fiscal projections and cost accounting on government policy decisions or legislation.

Mr PYNE —Okay. Thank you.

CHAIR —Thanks very much. I now give the call to Senator Joyce, who is the Leader of the Nationals in the Senate here, the Nationals being the junior coalition or opposition party in the Senate.

Senator JOYCE —Thank you very much, Chair. Parochially, we are known to represent the peasants! Dr Askari, Mr Page and Mr Khan, in life and in politics you get to do one thing once, and it was my brilliant suggestion that we come back here at midnight and talk to you! I am very proud that we are here and, more specifically, I am absolutely delighted that you are able to give us your  time. You are in a very powerful position, because you can say anything you like and it really is never going to affect you, but it will have an immense effect on the way we see things. Without fear or favour, I want you to answer this question: if you were starting the parliamentary budget office again, or the one in Australia, and you could do anything you wanted, what would you do? Tell me exactly how you would open it. Let your thoughts run free, because no-one is going to care what you say to us!

Mr Page —You are very kind, sir. Actually, we do not tend to get parliamentarians in Canada who speak to us quite like that.

CHAIR —Don’t worry. They are not often like that over here in Australia either!

Mr Page —I have seen the submission provided by the OECD, from Mr Blöndal, who has a senior position there. For a parliamentary budget office, he outlined what some of the key principles should be with respect to independence and how it releases documents, and budget and scope. I think those are good principles to start from for Australia if you are interested in creating a real parliamentary budget office.

Senator JOYCE —Okay. But say you start causing problems, Mr Page; they start hearing the stuff that you are saying and they think, ‘Gee, Mr Page is kicking up a stink and we need to shut him down,’ and so they start squeezing your money and shutting you down. What is the mechanism that you need to have so that you can keep that conduit of funds to your operation open, with sufficient funds to be able to provide information for the alternative government? Also, how do you stop political interference in that and how do you get yourself in a position where you are so confident of those funds that there is no fear or favour in what you say—you can actually provide information as you honestly believe it to be, rather than as how you would like to state it so as to keep yourself in a job?

Mr Page —Again, in the spirit of the OECD advice, with respect to independence it talked about the importance of the independence of this position. In Canada, under the original legislation and the legislation we have now, I am appointed by the Prime Minister. I work at the pleasure of the Prime Minister. I actually used to work for the Prime Minister in his Privy Council Office. When I first took this position, there were concerns from parliamentarians that I would not be unbiased—that I would perhaps be favourable towards the Prime Minister. I think it is important for Canada to rethink its legislation and look at the appointment procedure. I think all parliamentarians should play a role in appointing the parliamentary budgetary officer. I think the parliamentary budget officer should not work at the pleasure of the Prime Minister, as I do, where he can dismiss me at any point in time. I think the parliamentary budget officer should only be able to be dismissed for cause by parliamentarians. I think that would help significantly.

I also think positioning the office of the parliamentary budget officer with a direct reporting relationship to parliamentarians would be helpful in terms of freeing it from bureaucratic interference. I know some of the significant costing reports or some of the economic and fiscal projections that we provided were quite different for the government. It created a lot of bureaucratic angst amongst bureaucrats in parliament in Canada. If you really wanted to be free of that type of interference then creating an independent office would help as well.

Senator JOYCE —To be honest, Mr Page, being an accountant myself, I was encouraged by what you said about the expertise your PBO in that you gave reference to a number of accountants. Bearing that in mind—and obviously it being mutually understood that accountants are of great benefit across the globe!—what are the sort of skills that you think are required in the parliamentary budget office? Do we need a bevy of economists? It says ‘budgetary’ so one would expect you would need people who are expert in ascertaining the pros and cons of a budget. Do you need a number of accountants? What expertise do you need—modellers, statisticians? When you look at your staffing requirements, tell me the hierarchy of needs of the people you require to do the job?

Mr Page —The nature of the skills and experience are linked directly to the legislative mandate. Again, ours is legislated, so: advice on economic trends and the nation’s finances, costings and scrutiny of the estimates. We divided up our shop a little bit into apples and oranges. On one side of the shop we do economic and fiscal projections, so we have economists that are trained in doing these types of projections and doing analysis around projections. In addition to independent fiscal projections, we quantify risk. We look at the nature of those fiscal balances: is it cyclical, is it structural? We look at fiscal sustainability 75 years out—what is the impact of ageing demographics, productivity on Canada’s fiscal sustainability position? You need economists who have experience in doing these types of projections and working with models.

On the other side of the shop we have people with a strong accounting and financial background. We provide costings; we build models; we build methodologies; we publish papers and those papers will be peer reviewed on those methodologies. So we need people that have strong financial skills who are comfortable building those models and working with limited data—in some cases, top-down data—and have had experience doing so.

Senator JOYCE —I imagine Mr Page—Mr Khan and Dr Askari, do not be scared to jump in; any time you want to say, ‘G’day’ you do so. I imagine that people would come up to you and say, ‘Look, I am of party A and I want to build a new fast train from Vancouver to Montréal and I am going to do it for $5 billion and that is what is in my costing for the policy of party A.’ Obviously, party B would say, ‘I don’t think they can do it,’ or party A would actually submit that to you for costing. That is a pretty substantial task. You were talking about your staffing levels and you are not flush with staff. You have some pretty substantial costings there that you would have had to get your head around at a rate of knots. The fate of the Canadian nation and the way that people would vote would be determined about what you say, so you would have a very serious job in front of you. If you cannot rely on do that within, how do you outsource that information? How does that actually work? Correct me if I am wrong if that is not a request that is made you. But if it is a request, how do you go about it?

Mr Page —We have undertaken some significant costings. We costed Canada’s engagement in Afghanistan. We looked at it not only from the point of view of the military—operations and capital—but looked at it from the point of view of veterans benefits and some of the economic development work on the ground. We have done costing on aboriginal educational infrastructure in our country. We have 800 structures across the country. We have done costing on changes to crime legislation which involved federal and provincial issues. We have many structures. Now we are also doing financial analysis on the F35 strategic fighter plane.

Senator JOYCE —So are we; it is the Joint Strike Fighter.

Mr Page —When we start these major projects we often will deal with the departments. We try to get a sense of what their methodologies are to provide their costing. In many cases we have not received very much in terms of cooperation or information. Quickly we will take our expertise and go elsewhere, if need be, to build a methodology to do the proper costing. Then we will go back to the department and ask for information to deal with their methodology. We will create a peer review panel of experts in the field to look at our methodology—is it solid; do we have sufficient data to do a costing; have our assumptions been clear?—and when we release the paper we put on it our names and those of our peer review panel.

Mr Khan —One of the benefits of an open and transparent operating model, particularly when you have a small group, is that you need leverage. We cannot simply outsource a piece of work to another organisation because, according to the legislation, it has to be the advice of the Parliamentary Budget Officer to parliament. That means we have to be deeply involved, whether we are building a model, renting a model or driving those models. But because we are working in an open and transparent manner we can collaborate with governments, legislatures, private companies, individuals and academics around the world. On the F35 project we are collaborating with individuals and organisations in the UK, the US and Australia. It means that there is a breadth of understanding that can be brought to bear on a complex topic like an F35 fighter jet, but it also requires that open and transparent approach. That means that you can provide drafts and your methodology, other pieces of the product, out to those parties so that by the time it comes back to you it is considered rigorous and you are confident enough that the PBO can put his stamp on it before it goes back to parliament as our advice and not simply something that we outsource.

Senator JOYCE —I am encouraged by what you say about peer review. You talk about the F35; I imagine that is the JSF, the Joint Strike Fighter, and that is why you are talking to people in Australia as well. That is a very topical issue here, just as it is topical there. You are going to peer review that. How do you find an external peer review for an issue like that, because you would just about say that any person who has competent knowledge in the subject would be in-house and therefore would be under some form of oversight or implied duress by the people who employ them? How do you go and find an external peer review? Do you go to KPMG? I imagine that is in Canada as well as everywhere else. Is that how you go about it? How do you do it?

Mr Page —Again, it does depend on the project, the nature of peer review and the subject matter. In the case of our F35 fighter plane study, which we will release in a couple of weeks, we went to people who have actually published work on this issue. In the case of our American colleagues we have seen studies come out of both their general accounting officer and the Congressional Budget Office, so we will start from there and follow the expertise. In previous studies around, say, the costing of our mission in Afghanistan, we went to a combination of people who have testified in the US on the costing of the Iraq war and to academics who have provided costings of other wars, both in Canada and the United States. On aboriginal infrastructure we went to infrastructure experts in different domains. When we costed crime legislation we went to some degree to academics and to people who run prison systems at our provincial level of government. The initial foray is with the department. If we realise we need a methodology to do costing, then we go from there. Perhaps Sahir Khan would like to add to that.

Mr Khan —On any given topic you can easily find people with strong views. Even choosing peer reviewers has to be done carefully. Very often, once we start our exploration with other independent legislative budget offices and supreme audit authorities, they can also point us in the direction—either they themselves as institutions or their analysts have served as panellists. We have had the Congressional Budget Office and Congressional Research Service in the United States serve as panellists. We also find that these organisations can point us to academics that they view as independent or who have done work for them.

We have consulted extensively with the UK National Audit Office, for example, and they have not only provided advice on papers but also referred us to contractors, consultants, who have done work for them or for the executive branch in the UK. We have similar relationships that we leverage in Australia, the United States and indeed across Canada. Also, in picking whether they are consultants or reviewers, we end up doing a lot of research ourselves to ensure that the work that these institutions or individuals are doing is also perceived to be unbiased, because ultimately when it integrates into our product the work not only has to be unbiased but has to have the perception that it is not biased.

Mr Page —I want to add two points. When we publish our work we make it available to all parliamentarians and Canadians. We are very clear on what our assumptions are and what the impact of those assumptions will be. We realise that is very important. We tend to avoid point estimates; we will deal with ranges and we do sensitivity analysis around changing our assumptions. I think that helps us to manage the issue of bias.

Senator JOYCE —In relation to being honest, or in our colloquialism being fair dinkum, does anyone ever put the heavy on you and say, ‘Be careful what you say next because it might affect your job’?

Mr Page —For all kinds of reasons I am not particularly worried about my own personal job security.

Senator JOYCE —But does that ever come into your office? What I want to do is make sure we quarantine the Australian PBO from that ever happening. Is there any mechanism where they come to you and say, ‘You can say that if you like, but boy oh boy I don’t know what you’re going to be doing for a job next week’?

Mr Page —Certainly the way our legislation is struck currently in Canada, working for the Prime Minister at pleasure, I think there is an element of risk. I think if I were appointed by all parliamentarians and I would be dismissed by cause, I think that would provide greater job security for the next Parliamentary Budget Officer.

Senator JOYCE —That is very good information. You talked about a triage framework to prioritise requests. Does this work well? Have there been any complaints about the priority you give to the work? Do you routinely review your triage guidelines?

Mr Page —Our triage mechanism is very similar to what our Auditor-General uses. We look at risk and materiality. We have a small shop. We tend to focus on big issues that are facing parliamentarians. Obviously the F35 is a big issue in Canada. We have had changes to crime legislation which produces great cost. There has been no issue that those were material kinds of issues that we have taken on. I think as well there has been a lack of transparency in Canada on some of those files. I think people have realised there is systemic risk when parliamentarians do not have access to financial information.

It is almost a daily procedure for us to look at what we are working on. When we take on a major costing, for example, we will probably spend a month or two months using our significant resources. When we are doing economic and fiscal projections—and we will be in front of committees next week—we will spend a number of weeks preparing those projections and analysis around those projections. We have not really faced much criticism.

We also do a lot of work on private members’ bills. We have one officer pretty much dedicated to looking at private members’ bills for parliamentarians. We also publish that work on our website.

Senator JOYCE —In your triage arrangements how do you organise Independent members’ bills, government bills if they come to you—I imagine they go to Treasury—and opposition members’ bills? All these people would be knocking on your door saying, ‘Can you look after us first?’

Mr Page —We are economists and we are supposed to be able to allocate resources that are scarce. I say that humorously, I apologise. It is always going to be an issue in terms of what those priorities are. In our legislation we have three committees: the House and Senate finance committees and the public accounts committee. We also appear quite often in front of the operations and estimates committee. When they ask us to undertake a project and it is the view of that committee, we put that to the top of our priority list. Dealing with costings of individual parliamentarians, we have a long queue so it will take us a long while to finish that queue. Probably it will take many months.

Senator JOYCE —I want to thank you very much for your participation. It says something about where the world is: we can communicate with you and get a better outcome because we have the capacity to communicate, even in the middle of the night! Thank you very much for that. In concluding I note that, on page 19 of your submission, you state: ‘The legislation did not provide for an independent authority as was the political commitment. Instead, the Parliamentary Budget Office is an officer in the library of the parliament.’ Are you implying there that a Parliamentary Budget Office located in the library of the parliament cannot be independent or is it not sufficiently independent? If so, why is that the case?

Mr Page —I think the issue is one of sufficient independence. Again, in my brief tenure—three years into a five-year mandate—we have had a budget cut and a committee has been set up to look at our mandate and deal with issues of confidentiality. We have argued strenuously that we need to be seen to be independent, we need to be seen to be transparent and that there is no accountability without transparency. I think the relationship with the next Parliamentary Budget Officer in Canada should be directly with parliamentarians, without a bureaucratic interface. The mandate in Canada is afforded to the Parliamentary Budget Officer, not to the Parliamentary Librarian, who is a very good person. So I think that relationship should be directly with parliamentarians. Administrative tools can be used to inhibit the work of a Parliamentary Budget Officer if he is not able to hire the people that he needs or if contracting is delayed. That affects the timing, the authority and the relevance of the work that we do.

Senator JOYCE —Thank you.

CHAIR —Thank you. I now invite Senator Cameron, who is a government senator, to ask you some questions.

Senator CAMERON —I am looking at your submission. Under your bill, access to financial and economic data comes under section 79.3. I wonder what your experience has been with Treasury in accessing financial data that comprises advice to the Treasurer? There is a convention here that that is advice to the Treasurer and it is not then to be made public. It goes to cabinet and it should not be made public. What are the rules in Canada on this issue?

Mr Page —I think access to information and expertise is an important issue with respect to the functioning of the Parliamentary Budget Office. As you note, there is provision in the legislation for us to get free and timely access to information. I think overall we have had mixed experience over the first three years in dealing not just with Treasury but with other departments in getting access to that information. Specifically with the Treasury, we are now engaged in issues that parliamentarians are examining. As Canada is now moving from kind of a stimulus to austerity we have been asked to look at some of our austerity programs. We have asked for five-year reference level information so that we can look at the impact of operational restraint. We have been told that that is a cabinet confidence. As you know, under the legislation we are not allowed to get information that is cabinet-in-confidence or is personal in nature. The three of us sitting here before you today have had a lot of experience working for governments, providing information to presidents of the Treasury boards, Prime Ministers and finance ministers. Our own view is that, unfortunately, in Canada perhaps this line has shifted somewhat and we tend to use cabinet confidence perhaps too frequently as a way to not provide information to parliamentarians to carry out their fiduciary responsibilities.

Senator CAMERON —Dr David Gruen, Executive Director, Macroeconomic Group, Australian Treasury, has said that econometric modelling is better than asking your uncle. I think the point he was making is that it is not a fine art. Treasury have said to us that you need professional judgment, you need assumptions, you need to deal with behavioural effects, you have to have a highly iterative process and you have to have close links to the policymakers to make these judgments. I think Treasury are arguing their position as to why their econometric modelling and analysis is good. How do you deal with that process when you are facing Treasury? I suppose you could easily put different assumptions into the same model—as Senator Joyce has said—to make the PBO relevant. How do you deal with that sort of critique?

Mr Page —I would probably start with a quote from John Kenneth Galbraith, who said that economists provide projections not because they want to but because they are asked to do so. In that kind of context, I think when we are providing this information, either medium-term or longer term economic and fiscal frameworks, we want parliamentarians to have a rich planning framework. We do not look at projections as a sport per se. We do not think economists are mystics, clairvoyants or mediums who have any deep understanding of what the future is going to hold. So—and perhaps I will ask Dr Askari to provide some additional analysis information for you—in the context of providing a rich framework, we provide our projections; we provide detailed assumptions behind those projections; we do risk analysis based on track records of forecasting one, two and five years out; and we analyse the structural and cyclical nature of these fiscal balances. We are legislative budget officers, so we focus on their fiscal nature. And we will do longer term sustainability analysis, but we are very clear on our assumptions. So again, in that context, our view is to give them a rich framework. But I will ask Dr Askari to add to that.

Dr Askari —You are absolutely right; econometric models are not precise. Projections are not precise. That is why you need multiple data points and different approaches to be able to assess the validity of the projections. As Mr Page said, we provide a risk analysis for our projections which provides a probability of achieving certain levels in fiscal balance. You have to have the same kind of analysis from the Treasury—in our case, from the Department of Finance—in order to compare the two, and probably with other data points and projections out there from the private sector, to be able to assess and provide a planning environment that is useful for the government. So you are absolutely right there: you cannot really have point estimates. Unfortunately, most governments in their budget projections provide only a point estimate, and that is where I think the usefulness of a Parliamentary Budget Officer comes in, because we can do that risk analysis and scenario analysis that does not exist in formal budget documents.

Senator CAMERON —I have lots more questions, but other participants need to ask questions.

CHAIR —I have questions from Mr Oakeshott and then Ms O’Dwyer, gentlemen—just a few more questions before we let you go. First of all I will give the call to Mr Oakeshott, who is on the crossbenches of the House of Representatives here. That is a very significant position to be in, given that we have a minority government in Australia.

Mr OAKESHOTT —My question is very quick. It is in regard to dispute management. What would your strike rate be of members of parliament who have approached you where you have just said no, either because it is outside scope for resources or just because of the absurdity of the request? In your tenure, what sort of number have you had? Do you have reporting requirements on that? Is that a tabling requirement, or just how do you report on the knock-backs that you make, to keep it as transparent as possible?

Mr Page —That is a very good question which I am going to do my best to respond to. I think we have found in the first three years of creating this officer that it has been a big education not only for us as parliamentary budget officers but for parliamentarians in how to use us. When I first took the job, people said that only a small number of parliamentarians may actually be comfortable asking us questions to provide detailed costings or projections.

We find that on a lot of major projects we need to spend a fair bit of time with parliamentarians in the context of preparing a terms of reference for a major project. Part of it is a sharing of information on what tools we have available and what we can provide. Again, because we need to be non-partisan, that needs to come out in that kind of context of the request from a parliamentarian. For example, when we were asked to cost of Canada’s engagement in Afghanistan we spent a fair bit of time with the parliamentarian on the role of the parliamentary budget officer in that context. So we are not looking for a big number per se, a total cost, but for the fiscal impact, for the cost in Canada’s fiscal framework going forward. In most of the conversations we have to explain to parliamentarians: here are the tools that we will need and here is the information we will need to take your project. In fact, at the beginning we will even talk about how we will need to release the project in terms of the eventual paper, which perhaps would involve review.

In terms of the number of projects to date for which we have had to say no, I do not think there are very many that we have actually said no to that are of major consequence. Typically, when we take projects, we need to work with departments and we put up on our website the information that we need from the department. When we get a response from the department, in some cases it is positive, we also post that. But the conversations at the beginning with parliamentarians, such as ‘Can you do this? Can you do that?’ we tend to treat in a confidential manner. It is only when we both agree that this is a go—again, in taking up a project with an individual parliamentarian, people will become aware of it and we will post our information needs on our website.

Dr Askari —One of the things that happens when they come to us for a costing, for example, and we sit down with them and provide a terms of reference and a timeframe for when we will finish the project and when it will published, in some cases they decide not to pursue it because the timeframe was not suitable for them or they were not comfortable with the result being published.

Mr Khan —I want to add that each political party to some extent has a different practice in how they engage with us. It is not radically different but it can be the case that a leader’s office likes to vet the nature of questions coming to the PBL. This is done mostly through informal dialogue. But knowing that we have very limited resources—it is not universal but I think there tends to be a focus on the types of questions they are going to ask. When we engage in something like a costing, we know now with three years of experience that we are looking at a month to three months, as Mr Page said, to put that together. That means that you have one or two analysts out of a pool of four or five on each side that are now fully engaged in that project, which means that everything else has to wait. So there tends to be some prioritisation either among members in a caucus or through the party leaders that tends to triage the work a little. Again, this is quite informal and it is not universal.

Mr OAKESHOTT —Just so that I am clear: you will have reporting requirements on the end product of the number of private members bills or research which you help with but you do not have reporting requirements on the front-end, on those initial conversations and strike rates of what work you do take on and what work you do not?

Mr Page —That is correct. Usually the initial dialogue that we have with parliamentarians we treat in confidence. Often the question is: ‘Can you do this? What would it take to do this? How much time would you need to do this?’ We treat that as a confidential discussion with the member of parliament.

Ms O’DWYER —I join my colleagues in thanking you for your time this evening. I have a question regarding the open and transparent model that we have been discussing. I am particularly interested in understanding how you initiate your own work vis-a-vis the requests that come to you. I want to clarify a couple of issues. Firstly, if, for instance, one political party came to you and requested policy costings for a particular policy and you went ahead and did that—and I understand the process because you have explained it—what if another party came to you and said ‘we want you to cost that other party’s policy document’? Are there limitations on who can request policy costings? I am keen to explore how that operates. Do you understand my question?

Mr Page —Yes, we do understand your question. With respect to policy costings, we have not really dealt much with the issue of one party asking us to cost an initiative of another party. Have we actually had one example?

Mr Khan —Yes, we have heard of a couple from the House finance committee.

Mr Page —I am going to let Sahir Khan talk to you about this.

Mr Khan —It is a good question. We have had a couple of cases where the request has come through a committee—and these are all public—where a government member initiated a request to have us cost a private members’ bill that was being advanced by an opposition member. In that case, we do it in an open and transparent manner—so we work on a terms of reference with the requesting member of parliament—but, given that it is a committee request, we will not consult with every member of that committee who has an interest in that particular file, including the opposition member who initiated the private members’ bill, and this means that we have an opportunity to understand legislative intent.

To the extent that the request and the process has a risk of being politicised, we do our best to try to stay neutral on the political issues, to do our work in a very transparent manner and to make sure that we understand all the points of view that are involved, given that these two cases are committee requests. Then we publish our findings, and in both cases we have done this for a committee where we have testified to the committee. So the work process is transparent, the final product is transparent and, hopefully, it is seen as authoritative by both the member that requested it and, potentially, by the member who sponsored the bill originally. Hopefully, everyone’s views are ultimately reflected in the methodology if not the result. So yes—it can be a contentious issue, and we really have to work hard to make sure that the final product is a non-partisan and unbiased product. We also do that by ensuring that the entire process, including publication, is done in an open and transparent manner.

Dr Askari —I add that it is important to note that we do not cost platforms for different parties. The costing is normally done for private members’ bills or the government programs that are already working. Also, if the government is proposing to introduce a new program, then we may be asked to do that. But there is no political platform costing.

Mr Page —As an addendum to this, in the context of openness and transparency as being the best insurance for a parliamentary budget officer’s behaving in a non-partisan and non-politicised way, I would say that often the more complicated issue that we face is that, particularly with private members bills, we lack the specificity to do the costing. The legislation may not be sufficiently well detailed that it allows us to do costing, so that adds a fair bit of time and complexity to the process.

Ms O’DWYER —I have one final question. We have been grappling with the issue around where a parliamentary budget office should be situated—whether it should be situated in our Parliamentary Library—and obviously your experience is highly relevant there. One of the questions that has come up is the potential for duplication of services between people who currently work within the Parliamentary Library vis-a-vis people who are currently in the parliamentary budget office, and I want to ask you about your experience in relation to that. Is there any duplication?

Mr Page —In terms of where you may want to decide to situate your parliamentary budget office—should you want a parliamentary budget office—whether it should be in the library or be independent, fundamentally the key question is: what do you want the parliamentary budget officer to do for you in terms of that mandate? That is probably the most important thing. In relation to duplication of services, with respect to your research folks who work in the library, it tends to be more an issue of breadth versus depth. We tend to go very deep on issues: we provide costings, we provide projections—it is a very different skill set. We are three years into the experience in this office in Canada now, and people see overlap between the work that we do and the work that is done by the research service. We tend to stay away from policy issues, whereas our colleagues in the Library of Parliament have to deal with policy issues, particularly in the context of private member bills. We take policy as a given when we do our work.

CHAIR —Gentlemen, thank you very much indeed for assisting our committee with its inquiry. There might be one or two other matters we would like to raise with you and, if so, our plan would be to send those in writing through our secretariat here. We very much appreciate your time this morning; it has been of very great use to the committee. I can assure you we will certainly be taking very significant account of both your submission and the evidence that you have given to us this morning.

Mr Page —Thank you.

Resolved (on motion by Senator Faulkner):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at this evening’s public hearing.

Committee adjourned at 12.02 am