A government auditor’s questions about the policy rationale for interest-free cash advances drew a sharp political rebuke from some Liberal MPs last week.
In a report to Parliament last autumn, federal auditor general Denis Desautels said the government has not made clear whether the program is meant to be a marketing tool or income support.
While noting the cost in foregone interest and loan defaults can be as much as $30 million per year, he said Agriculture Canada has done a poor job making public assessments that show the program is effective.
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Last week, when Desautels appeared before the House of Commons agriculture committee to answer questions, he faced a political blast from two Liberals.
Ontario MP Murray Calder said it is clear why the program was created and what it does. It was created as a Liberal 1993 election promise to restore the interest-free feature removed by the previous Conservative government, and it exists to help farmers.
And farmers support it.
“I wonder if you haven’t put yourself in a difficult position here by not taking that into account,” said Calder, a chicken farmer. “It was an election promise made and kept.”
He said interest-free money helps younger farmers facing hard times because of low prices and high input costs and user fees.
Joe McGuire from Prince Edward Island, parliamentary secretary to the agriculture minister, said it is a small expenditure, a program that goes back originally to the Diefenbaker government and it is popular.
“It is an innocuous program and it helps farmers,” he said. “Why would you investigate this?”
Taken aback
Desautels, employed by Parliament to check government books and to assess value for spending, seemed startled by the line of attack.
“I’m surprised by the questions,” he said. “It should not be exempt because it is a popular program. It costs taxpayers money. I don’t see any reason not to look at it.”
Calder read several paragraphs that said some analysts question the value of the interest-free program. “I find that offensive.”
Desautels said those portions simply were quoting from internal assessments done by Agriculture Canada.
Officials told MPs that in the current fiscal year, $800 million will be loaned under the program to approximately 38,000 farmers. Up to $1.6 billion could be loaned by private lenders, guaranteed by the government.
Agriculture Canada manager Gilles Lavoie said it represents approximately 30 percent of eligible farmers.
That led Progressive Conservative agriculture critic Rick Borotsik to wonder what was wrong with the program that would deter others from borrowing free money.
He said it sounds attractive for farmers in a year when they had low incomes. “It amazes me they wouldn’t do that.”
Government officials said it depends on how much unsold crop is stored to be used as collateral, what interest rates are available privately and what other financial arrangements farmers have made.
The program is due for a review in 2001 and Lavoie said the auditor general’s criticisms will be part of the review, including the issue of what is the program goal.
Committee chair and Winnipeg Liberal John Harvard noted that while cash advances are described in government documents as a marketing tool, funding comes from the safety net budget.
Desautels said that symbolizes the problem of not being able to assess a program’s effectiveness if its goals are not clear. “I think it goes beyond the sensitivities of an accountant.”
