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Barton set to appear at committee as it studies eye-popping consultant contracts

News

If there was any doubt that the government’s penchant for expensive consultant contracts was going to dominate debate in the House of Commons, Conservative leader Pierre Poilievre put it to rest with his first words during question period this week.

“There’s been $15 billion spent on contracts. How many of them went to McKinsey?” said Poilievre, in French, during his first question of the new sitting.

The whopping price tag of $15 billion for the 2021-2022 fiscal year was uncovered by a research team at Carleton University which has been digging through hundreds of thousands of government contracts.

Dominic Barton, the government’s former ambassador to China who had previously served as the global managing director of McKinsey, the management consulting firm, has become a prime target for the opposition’s accusations of crony-ism. McKinsey has received more than $100 million in contracts since the Liberal government came to power in 2015, according to government documents.

Today, Barton will be the sole witness at a House of Commons committee hearing that is trying to make sense of the huge expenditure on consultants. While the committee grills Barton, opposition politicians will likely keep the issue in the spotlight down the road at the House of Commons as they have been doing all week.

“The (prime minister) has always had trouble defining the middle class, now we know his definition: It’s his friends who make $1,500 an hour as high-priced consultants over at McKinsey, where his personal friend Dominic Barton was the boss,” said Poilievre, during question period on Monday. “How much did his government give McKinsey? How much?”

Poilievre stuck with his line of questioning on McKinsey for his first five questions on Monday, while Prime Minister Justin Trudeau parried the interrogation by talking about the government’s signature initiatives, like the Canada Child Benefit and the recently unveiled dental benefit. On Tuesday, Poilievre kicked off question period with another two questions about contracts for McKinsey.

For the Conservative Party, it’s an issue that allows them to simultaneously hit the Liberals on the government’s fiscal largesse and make allegations of corruption, meaning it has the potential to dominate the current Parliamentary sitting while the committee studies the contracts.

Some experts say that it’s perfectly reasonable for a government to use consulting firms, but that it has to represent some kind of savings on the bottom line.

“There are legitimate situations where you’re going to need outside consultants,” said Aaron Wudrick, the director of the domestic policy program at the Macdonald-Laurier Institute.

“What is really kind of mind-blowing here is that we’re basically outsourcing decisions to experts, but then we’re also building capacity in-house at the same time,” said Wudrick, who referred to the massive hiring boom in the federal public service in the last two years. “What the government has to answer for is why they are doing both.”

At a previous committee hearing on the issue on Monday, Carleton University professor Amanda Clarke said by contracting work to non-government firms, it’s possible the public service will lack vital knowledge about programs the government is administering.

“Where we start to see the gutting of the state’s knowledge is the more that your relationship with service users or with stakeholders or with your program is mediated by a contracted party, the less you know about your own operations,” said Clarke. “So governments are actually becoming dumber the more they contract, which has this vicious cycle of needing to contract more because we don’t have the knowledge.”

One former Liberal staffer said the McKinsey controversy had the potential to grow into a big problem for the government.

“By not getting all the bad news out at once—comms 101—the government was put on the defensive,” wrote Eliot Hughes, who had previously worked as an adviser to former finance minister Bill Morneau before joining Summa Strategies. “If they don’t get control of these brush fires or better still, stop setting them in the first place, then they are the ones who will get burned.”

Wudrick agreed that it could be a politically damaging blindspot for the government.

“It’s a pattern. I’m not even accusing them of doing something deliberate, they’re just oblivious to the fact that an average person could look at this and say, ‘Oh, gee, your friends always seem to be getting favours,'” said Wudrick.

‘They’re clearly losing money’: Quebec slaps new taxes on vapes after drop in tobacco tax revenue

News

According to experts in Canada and the United Kingdom, you should only drink two alcoholic beverages per week to prevent cancer, and bringing cake to the office is as bad as second-hand smoke. Second-hand smoke, though, may be on the rise if new taxes on vape and electronic cigarette products continue to proliferate. 

Quebec is now set to implement a new provincial excise tax on vape and e-cigarette products next fall that is expected to charge $2 for every 2 ml of vaping liquid, or “juice”, for each liquid product’s first 10 ml. The existing federal excise duty charges $1 for every 2 ml of juice for any amount up to 10 ml, and then $1 for every 10 ml beyond that.  

According to some advocates, the new taxes are a sign that following the science of public health sometimes gets trumped by the hard realities of provincial balance sheets.

It is no coincidence that the drop in tobacco tax revenue preceded the province implementing an excise tax on vapour and e-cigarette products, says Valerie Gallant, a spokesperson for Coalition des droits des vapoteurs du Québec.

“They’re clearly losing money because of the people that switched from tobacco to vaping, so they’re trying to get that money back,” says Gallant. “It’s totally counterproductive to do that because the more you pay for it, the less attractive it gets for customers.”

MTL Blog reported that vape users in Quebec could pay up to 80 percent of the original product’s cost in taxes. A 2020 study from the University of Waterloo indicated that the province is one of the biggest consumers of tobacco in Canada, with over 12 percent of the population being smokers. 

According to data from Physicians for a Smoke-Free Canada, the amount of provincial and federal tobacco tax revenue has remained largely static since 1995, hovering between 3 and 4 billion dollars when adjusted for inflation. Nonetheless, the same study also estimated every province saw a drop in tobacco tax revenue in 2022. 

Smoking-related illnesses claim the lives of almost 50,000 Canadians annually.

The Government of Canada, the United States Centers for Disease Control and Prevention, and private entities like Johns Hopkins Medicine are united in agreement that vaping and e-cigarettes are safer alternatives to smoking, but also note neither is a completely safe alternative and that they sustain a person’s addiction to nicotine. 

Ian Irvine is a professor of economics at Concordia University who has conducted research into tobacco and alcohol for over two decades. He has worked or consulted for both the federal government of Canada and private entities like the Canadian Vaping Association. 

Regarding the modest data available in Canada regarding the connection, Irvine says there were reported crossover effects between higher prices and taxes on tobacco alternatives and the increased use of combustible cigarettes. 

Irvine says research in the U.S. in this area is more thorough and also indicates there is indeed a correlation, even if the cheaper cost of tobacco down south likely results in a more noticeable crossover effect. 

“That’s a negative for public health, obviously,” says Irvine. 

Research published by the National Library of Medicine, a U.S. government entity, found that increased taxes on vapour and e-cigarette products caused a rise in tobacco sales, as well as vice versa. 

“The reason why people who believe in harm reduction, like myself, argue against high taxes is that what we need to do for public health is to convince people to use less toxic products and cigarettes,” says Irvine. “If you can use a product that’s at most 5 percent as bad as cigarettes, then you’re onto a winner.” 

Maria Papaioannoy is the owner of the Ecig Flavourium chain, which operates in Ontario, and an advocate for vape users. She says the arms of government that deal with vaping from a health perspective and those in charge of taxing it are not on the same page. 

Papaioannoy praises Health Canada’s language when it publicly states vaping is a way to stop smoking cigarettes. 

“They put it in a type of language that is not marginalizing addiction, especially tobacco addiction and addiction to nicotine,” says Papaioannoy. “Then at the same time, you have the other arm of the government, finance, using a common sin tax to further marginalize, and further create a negative stigma of people.” 

The Government of Canada could not be reached for comment in time for publication.

Harm reduction is in vogue within Canada’s federal and provincial governments, with calls to destigmatize the use of hard drugs like opioids, and provide a non-toxic “safe supply” of these narcotics to cut down on often fatal drug poisonings. 

Nicotine addiction, particularly among underage people, is usually one of the key reasons cited by provincial governments for taxes and flavour bans on vapour and e-cigarette products. This was the case in Nova Scotia, British Columbia, and now Quebec.

When asked for comment, Quebec’s Ministry of Finance provided an extract from a December financial update, stating the incoming taxation was meant to help deter youth from vaping, and generate $40 million for the province.

In 2020, Nova Scotia’s provincial government implemented a flavour ban on vapour products, which was followed by shop owners reporting a rise in cigarette sales. The shop owners also cited the effects of altered cross-border shopping habits during the pandemic as another reason for changes to the sales.

Like vaping products, Nicorette chewing gums are sold in a variety of flavours including spearmint and fruit. Papaioannoy questions why vapour and e-cigarettes are the only non-tobacco nicotine products being hit with new taxes even though nicotine addiction is cited as the issue. 

“Vaping helps people who smoke stop smoking…if it was all about nicotine, why are we not taxing gums and lozenges and nicotine sprays?” asks Papaioannoy.