The Conservatives talk constantly about ensuring taxpayers get value for money. But the reality is the politicians don’t control the spending process as tightly as they like to think they do. The bureaucracy is the real power in the land – and its interests are often best served by growing the size of government.
Take this example of bureaucratic empire-building: The federal government allocates funding for office accommodation according to a formula equivalent to 13% of total salary costs. As a result, any increase in salary costs also increases funding for office accommodation.
Think about that for a moment. If total wages for public servants go up – and they have risen from $25.5-billion in 2007 to $31.1-billion last year – then Ottawa increases spending on accommodation by a commensurate amount, even if there is no need for more space.
And there isn’t – the government already has millions of square metres of unused space and will have millions more once it completes new properties, reduces headcount and increases density in its existing buildings. The feds are in the process of building six new office towers in the Ottawa region, and the Department of National Defence is set to take over the former Nortel campus in nearby Nepean.
The Public Works department manages seven million square metres of property, more than half of which is in the National Capital Region. Sixteen buildings in the region have unoccupied space of 50% or more.
“That’s the stupidest thing I’ve ever heard,” said one veteran private sector real estate expert, when he heard about the funding formula. “Does a company like TD automatically pay 3% more for office space, if salary costs go up 3%? Categorically, no.”
The existence of the 13% formula is probably news to most members of the government. It certainly surprised Doug Finley, the Conservative senator, who unearthed the information at a Senate finance committee hearing into the supplementary estimates. The news went unreported – maybe because so few reporters cover the Senate these days; maybe because no one could quite believe what they were hearing.
Last November, Senator Finley asked Bill Matthews of Treasury Board’s expenditure management sector why Public Works was getting an extra $38-million. He was told it was because of the funding formula. “It’s a kind of proxy for inflation,” said Mr. Matthews.
When Mr. Matthews returned to the Senate committee with a colleague last March to defend an additional $54-million in request spending by Public Works, Senator Finley again badgered him on the formula. “Who determines what the percentage will be? Has it ever decreased?” he asked.
It has always been 13%, he was told. And, no review has been carried out in recent memory.
It’s almost beyond satire – a system where no one can effect change but everyone can stop it. A number was picked, apparently arbitrarily, at some point in a past so distant that no one can recall why it was chosen. It continues to dictate increased spending on office space on a seemingly inexorable trajectory, regardless of need.
The elimination of 19,000 public service jobs will reduce Ottawa’s wage bill and should reduce the $4-billion office accommodation budget. But the federal presence in the national capital region has not shrunk since the mid-1990s and there will, no doubt, be a host of convoluted reasons why Public Works is unable to unwind its portfolio.
Hard on the heels of the F-35 debacle, the office space funding formula ruse offers another example of where the real authority lies in government – with a system designed to outlast the itinerant politicians who wield the illusion of power.