Sean Speer: Creeping politicization strengthens the need for PBO reform

Last week the Parliamentary Budget Office released a report that analysed the federal government’s Economic and Fiscal Update from late last year. It has since generated significant policy and political attention in a way that may tell us as much about the ill-defined and creeping mandate of the PBO as it does about Ottawa’s finances. 

The PBO’s analysis, which was produced to “assist parliamentarians in their budgetary deliberations”, provides insights into the government’s economic and fiscal projections, its spending plans, and its fiscal transparency, including the current timeliness of its financial reporting. This basic information should be valuable for parliamentarians as they carry out their responsibilities for legislative oversight and parliamentary appropriations in the lead up to the forthcoming federal budget. 

But the PBO’s report drew particular attention for its commentary on the weak justification for the government’s plans for a $100 billion fiscal stimulus over the next three years. The Parliamentary Budget Officer, Yves Giroux, indicated in the report (and accompanying media interviews) that it “appears to me that the rationale for the additional spending initially set aside as ‘stimulus’ no longer exists.” These comments set off a series of news stories about how the PBO had essentially rebuked the government’s profligate spending plans. The Prime Minister was even asked to respond in a subsequent news conference. 

I happen to agree with the PBO’s assessment. It was odd for the Trudeau government to commit to a specific stimulus plan in December 2020 before it had any idea on the timing and scope of the post-pandemic recovery. It’s now clear based on the government’s own economic projections that the size of its stimulus plan and its three-year duration are wholly unjustified and may even have negative inflationary effects.

Yet even though I share the PBO’s critique of Ottawa’s stimulus spending, I also think the PBO and its staff shouldn’t be offering its editorial opinions on government policy or accepting media interviews or generally injecting itself into politics. This recent case is merely another example of a longstanding issue of the PBO’s mission creep from a neutral research capacity on behalf of parliamentarians to a highly publicized and oppositional actor in federal politics. 

I should emphasize here that this isn’t a comment about Yves Giroux who I have had the privilege to work with in Ottawa. He’s smart and decent and well-qualified for the role. Instead it reflects a flaw in how the PBO’s role has been conceptualized since its creation in 2006 and the institutional incentives that have since exacerbated this initial mischaracterization.

It’s worth remembering that the PBO started as a Conservative Party policy promise in the 2006 election campaign. It was characterized at the time as part of a sweeping set of reforms to improve financial transparency in response to the Sponsorship Scandal.  

The campaign promise was subsequently effectuated in the omnibus legislation, the Federal Accountability Act, which created a number of new offices (including the Commissioner of Lobbying, Public Sector Integrity Commissioner, and the Conflict of Interest and Ethics Commissioner) and obligations (including post-employment restrictions and new party donation rules) to strengthen accountability and transparency within the federal government. 

Although the PBO was framed as part of this broader agenda, it was never quite a perfect fit. The real case for the new office was less about corruption and more about enhancing capacity for parliamentarians to carry out their roles including voting on budgetary estimates, advancing Private Member’s business, and generally fulfilling their responsibility for legislative oversight of the government. 

MPs have small office budgets and minimal capacity to understand and track appropriations bills or to be able to develop their own policy proposals independent of the government. This creates a powerful asymmetry that has contributed to the centralization of our political system and a smothering form of caucus discipline. The PBO should in theory empower parliamentarians to better scrutinize government legislation on one hand and enable greater policy entrepreneurship within parliament on the other hand. 

Yet its inclusion in the post-sponsorship response was in hindsight an impediment to this role. It necessarily led to an emphasis on “promoting greater budget transparency and accountability” and an underlying assumption that the government’s fiscal projections can’t be trusted and need to be challenged. This shifted the PBO’s focus away from acting as a neutral research capacity for MPs and contributed an adversarial ethos from its early beginnings. 

Its founding legislation did stipulate that the office should undertake economic and fiscal research on behalf of parliamentary committees and produce cost estimates for parliamentarians. But these activities were subordinated to “provid[ing] independent analysis to the Senate and to the House of Commons about the state of the nation’s finances, the estimates of the government and trends in the national economy.” 

Since 2017, the PBO has also had a role in helping federal political parties cost out some of their platform commitments. (As I’ve previously written for The Hub, I’m generally supportive of this new function, though the imperfect experience of the last federal election suggests that it’s still a work in progress.) 

The key point though is that the emphasis on the PBO’s role in producing analysis on “trends in the national economy” has granted the office tremendous scope to proactively weigh in on a range of policy issues. It has used this vague mandate to essentially inject itself into political debates by contributing editorial commentary on what amounts to a set of normative issues. 

Is the deficit too big? Are spending increases justified? Should Ottawa spend on X versus Y? These are fundamental questions for which there’s no shortage of opinion in Canadian life. It’s far from clear that there’s a market gap that requires filling by a taxpayer-funded institution. That successive Parliamentary Budget Officers have frequently sat for television and radio interviews is a sign that the office has come to see their role as extending beyond parliament and their audience as more than just parliamentarians. 

Legislative amendments in 2017 to bring greater clarity to the PBO’s mandate (which the office opposed), including a requirement that it produce an “annual work plan” which is reviewed and tabled by the Speakers of the House of Commons and the Senate, essentially left its broad and general mandate in place. 

These recent reforms have even arguably narrowed the scope for the PBO to support individual parliamentarians by limiting this work to when parliament is sitting. The net effect is to inadvertently double down on its adversarial role of second-guessing the government’s economic and fiscal projections rather than primarily serving as an external and independent policy development capacity for individual MPs.

Powerful incentives have also pushed in this direction. The parliamentary press gallery and opposition parties responded positively to the PBO’s early oppositionalism which only served to reinforce it. It’s notable, for instance, that the 2015 Liberal Party and NDP campaign platforms committed to strengthening the PBO’s independence in light of its conflicts with the previous Conservative government. There was perceived political upside to elevate the PBO and its work for the political parties and this, in turn, raised the profile of the PBO and encouraged its unique form of communications and media engagement. It was a virtuous (or perhaps vicious) cycle that essentially validated the PBO’s adversarial and public-facing model.  

The challenge, of course, is that the PBO’s highly publicized role creates a set of political economy conditions in which no government is prepared to assume the political risk of reforming its legislative mandate. There’s no upside to challenging one of the government’s highest-profile and well-researched critics. The risk though is that we end up with stasis in which everyone essentially agrees that the status quo is flawed but no one is prepared to say so. As the Parliamentary Budget Officer continues to be a high-profile political actor, the inevitable outcome is his or her oversized profile will make it even more challenging for parliament to enact sensible reforms to the office’s mandate, focus, and activities. 

There’s a strong case for a PBO that conceptualizes its role more narrowly as helping parliamentarians in evaluating the economic and fiscal costs of new and pending government legislation. There also ought to be a role in supporting individual MPs in their own policy work as well as providing analysis and cost estimates for party platform development. These are core functions that solve for a “market failure.” 

Such an office could be a key part of a broader agenda to rebalance the relative power of MPs and the government. The PBO can in short be a key institution in the renewal of Canada’s parliamentary democracy rather than another voice in the country’s acrimonious political debate. 

But the only way for such institutional reform to happen is if the different political parties represented in the House of Commons come together on a shared set of legislative changes to clarify and circumscribe the PBO’s role. A multi-partisan consensus is a crucial ingredient. Any meaningful reform is otherwise bound to devolve into partisan one-upmanship. The consequence will be that the PBO continues to operate as a primarily oppositional voice in federal politics and the policy capacity of parliamentarians is harmed as a result. 

Just because one agrees with the PBO’s criticism of the government doesn’t mean that it ought to be weighing into political issues. Both ideas can be right. So is the case for reform.