Proceedings of the Standing Senate Committee on
National Finance
Issue 3 - Evidence - Meeting of March 10, 2009
OTTAWA, Tuesday, March 10, 2009
The Standing Senate Committee on National Finance, to which was referred Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009, and related fiscal measures, met this day at 9:15 a.m. to give consideration to the bill.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Honourable senators, I call this meeting of the Standing Senate Committee on National Finance to order. This morning we begin our consideration of Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009 and related fiscal measures, referred to the Senate five days ago. We were expeditious in our handling of the bill at second reading and the bill has been referred to this committee.
We are pleased to welcome the Honourable Jim Flaherty, Minister of Finance, and his Parliamentary Secretary, Mr. Ted Menzies. Bill C-10 impacts a number of federal departments. There are 42 statutes impacted by this bill. For this reason, today we will be focusing our attention on those elements of the bill related to the Department of Finance, directly or indirectly, specifically Part 1 through Part 6 inclusive and Part 8 and Part 9 of the bill.
[Translation]
If the Senate gives its authorization, the committee will hold a meeting tomorrow afternoon. Members will have an opportunity to put questions to officials from other departments involved with the bill, namely Treasury Board, Industry Canada, Transport Canada, and so forth.
[English]
Minister Flaherty has other matters to which he must attend and will stay with us until approximately 10:15 a.m. The minister has agreed to be here on short notice. We are very fortunate to have Mr. Menzies and department officials with us and they will remain with the committee for the duration of the meeting.
I know we all have a number of questions to ask and I would appreciate your cooperation in keeping your questions as brief as possible to allow all honourable senators an opportunity to put their questions.
I will keep a list of honourable senators who wish to participate. There is one recurring question, Mr. Minister, in relation to this particular bill. As I indicated, it deals with 42 different statutes. I hope that you will consider the suggestions that have been made by a number of colleagues in the Senate and elsewhere as to whether you would be amenable, agreeable, to splitting this bill into the stimulus package and the other aspects of the bill that do not deal with the stimulus package. In that way, we could deal with the stimulus package quickly and deal with the other items in a secondary fashion. We all recognize the importance of the stimulus package and in getting these provisions out and working in society.
Mr. Minister, with those brief introductory words, I give you the floor.
Hon. James M. Flaherty, P.C., M.P., Minister of Finance: Thank you, senator, and I appreciate the opportunity to appear before honourable senators to discuss this bill.
I have some prepared remarks and I will not speak any longer than 10 or so minutes. I will be in England again on Thursday for a meeting of G20 finance ministers. I just came back from Washington on Thursday, having met with the senior economic advisers to the President, including the Secretary of the Treasury. I was in Rome three weeks ago for the meeting of the G8 finance ministers. The Prime Minister and the other G20 leaders, including then-President Bush, met in November in Washington. They will meet again on April 1 and April 2 in London.
These are extraordinary times; this is not business as usual. The International Monetary Fund and the World Bank are offering assessments of a global economic situation that are very concerning. Canada is not an island. We are not immune. I will urge you today to deal with this bill right away and I mean right away. I do not mean that you go on March break, come back after the break, and deal with it. Canadians are entitled to better than that. I say that in the world context.
With respect to dividing the bill, I do not want the bill divided. Senator Day, you will remember the Liberal bill in 1995. Bill C-43, proposed amendments to nearly 20 different pieces of legislation ranging from the Income Tax Act; the Auditor General Act; Asia-Pacific Foundation of Canada Act; the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act; the Canadian Environmental Protection Act; the Department of Public Works and Government Services Act; the Employment Insurance Act; the Department of Human Resources and Development Act and many more. This committee dealt with these items in two days without amendment and that was not at a time of crisis. This is a time of crisis for Canadians.
I have with me today over 2,000 emails and letters from Canadians. They are about Employment Insurance and needing the extra five weeks that is in this bill. That can start now. That can start before members of this committee go on March break. These are Canadians who have lost their jobs and who are entitled to another five weeks, according to this bill when it passes. That is almost $2,000 for an unemployed person.
I am not here today to have an academic discussion. This bill is provided for in the budget bill. The budget was delivered on January 27. The House of Commons dealt expeditiously with this bill, with the support of the Liberal opposition. The leader of the Liberal opposition has made it clear that this bill should pass quickly, as it was handled in the House of Commons.
As you have noted, my Parliamentary Secretary, Ted Menzies, is here. He has worked alongside me throughout the months of December and January listening to Canadians. We did not take Christmas holidays and we were able to deliver on January 27 the earliest and one of the largest budgets in Canadian history.
I urge you to pass the bill without delay. As I have said, we are in the middle of a synchronized global recession. Last Friday we saw the U.S. February job numbers. This Friday we will see the Canadian numbers. These numbers are not likely to be good. We know the American job losses have exceeded 600,000 per month for three months now. Unemployment is at its highest level in 25 years in the United States of America. Over the past 12 months, 5 million Americans have joined the ranks of the unemployed. This is the sobering economic reality facing our largest trading partner.
Canada entered the recession in a relatively strong position but we are facing a very difficult year in 2009. We will see our domestic economy deteriorate. It is deteriorating as we sit here today. The Canadian economy was in recession in the last quarter of 2008, as you know. It is in recession now and we are likely to see continuing deterioration, which is all the more reason that I say to you, honourable senators: Do not dally. It is imperative for the sake of Canadian families and businesses that we get on with passing this bill.
We can expect imports and exports to fall, industry sectors to weaken and Canadian job losses to grow. We will see further evidence of this when we see the employment reports later this week.
[Translation]
Clearly, today's challenges require extraordinary measures and action. Budget 2009's Economic Action Plan outlined the Government's extraordinary response. It lays out a plan to stimulate and protect Canada's economy. It is a plan that will ensure that when we come out of this recession — and we will — we will do so from the same position of strength from which we entered it. Now Parliament must respond accordingly by passing this legislation.
Bill C-10 implements key measures of that Action Plan, These measures will help shield Canadians from the current economic storm.
[English]
While this plan will not save every single job or single-handedly fix the global economy, it will take real action to protect those hardest hit and help create and maintain jobs for today and into the future.
Honourable senators, I say with respect that this bill is vitally important for Canada. For these measures to be most effective, they must be implemented in a timely manner. That is why we need Parliament to act and pass this legislation without delay.
Last year, Parliament took over 100 days, approximately 3 months, to pass the Budget 2008 implementation bill. We do not have that luxury this year. As I have said, this bill has been before Parliament since February 6. Parliamentarians have had over a month to read, review and discuss it. The elected House of Commons has overwhelmingly approved this legislation, so I urge the Senate to act without delay.
To those who may advocate for the delay of this bill and our Economic Action Plan in the Senate, I ask them to remember that we held the most comprehensive pre-budget consultations in history this past December and January. They were open to all Canadians. That was the time for input and full input was received from Canadians from coast to coast to coast. That time has passed. Now we must act.
We are in a global recession now. Canadians are feeling the effects of the global recession. That is the most important thing. As I say, this can be an academic discussion around this table or in the House of Commons but it is not an academic discussion for people who are not being paid by the government, who are losing their jobs and have lost their jobs. It is not an academic discussion for their families. This bill provides them with help.
We cannot wait weeks; they cannot wait weeks, months or a year for reaction to this situation. We need measures in place as quickly as possible.
[Translation]
Briefly, let me outline a few select measures from our Economic Action Plan being legislated in Bill C-10. These measures are vital to stimulating Canada's economy and should be passed quickly.
[English]
Bill C-10 deals with the various tax relief items. This is important tax relief that will help stimulate the economy. It will also remove 265,000 low-income Canadians from the federal tax rolls.
Among the tax relief measures are: raising the age credit for seniors by $1,000; increasing the amount that can be withdrawn under the Home Buyers' Plan to $25,000 to help first-time homebuyers; an extension of the temporary mineral exploration tax credit; raising the threshold from $400,000 to $500,000 to allow more job-creating businesses to qualify for the reduced 11 per cent small-business tax rate; increasing the basic personal amount that all Canadians can earn before paying federal income taxes; and increasing the two lowest personal income tax brackets allowing Canadians to keep more of their money before being subject to higher tax rates.
[Translation]
Bill C-10 would also improve access to financing and it would strengthen our financial system. We all recognize the impact the global recession is having on Canadian businesses, especially in so far as access to credit is concerned. In the past months, we have heard loud and clear that Canadian financial institutions have been less willing to lend to credit-worthy families and businesses.
This has made an already difficult economic situation much worse. To combat that, Budget 2009 announced measures to support the extension of financing to Canadians and Canadian businesses. With access to financing, Canadian families can continue to make the purchases that keep the economy moving. Businesses will be able to purchase new equipment, invest in their operations, create jobs and grow for the future.
[English]
Many of these measures are legislated through Bill C-10. For instance, the bill proposes to allow Export Development Canada, EDC, and the Business Development Bank of Canada, BDC, to extend additional financing to Canadian businesses. In December and January, Mr. Menzies and I heard repeatedly across Canada that the number one issue is access to financing, access to credit. Therefore, in this budget, we are moving forward with an extraordinary financing framework to provide up to $200 billion worth of credit.
Two of the prime participants are our federal Crown agencies, EDC and BDC. I have been working closely with the CEOs of both those organizations to make sure that they play the important role that we want them to play to help Canadians and Canadian businesses, particularly small- and medium-sized businesses that should survive this recession if they have adequate credit.
Bill C-10 also authorizes nearly $6 billion for initiatives ranging from infrastructure, community adjustment and housing to health care.
[Translation]
The Plan includes nearly $4 billion in investments to pave roads, improve our universities and colleges, fix sewers and repair bridges. These are investments that would have been required regardless, but that will help create jobs now by bringing them forward.
[English]
Bill C-10 also helps those Canadians among the hardest hit by the recession. It extends, for two years, all regular EI benefit entitlements by five extra weeks and increases the maximum benefit duration from 45 weeks to 50 weeks. This is important. I note that this urgent support cannot go forward until the Senate passes Bill C-10 and allows it to receive Royal Assent.
I want to underline the importance of this measure. When we talk about the current economic downturn, we often get lost in numbers and figures. However, what is really important is the reality behind those numbers and figures. Those are real Canadians in our provinces and communities, who worked hard and played by the rules to support themselves and their families and who have been caught in some of the consequences of this global recession, which did not start in this country but which is affecting Canada.
Some Canadians are seeing their jobs disappear because of these problems beyond our borders and beyond their control. We should be there, as the Parliament of Canada, to help them now.
Many of them are having difficulty finding new employment. They will be sitting at their kitchen tables tonight asking difficult questions, questions with no easy answers. The five extra weeks is not an academic matter. It is a day-to-day, bread and butter, food on the table item for many Canadians.
Along with all MPs, I am getting calls and emails from Canadians desperate to know when this provision will come into effect. I have with me a sampling of about 2,000 letters. These are not form letters; these are letters we have received from individual Canadians about their particular circumstances.
I will not divulge their names but I will share some of their pleas: a lady laid off in Ontario who is "worried sick"; a man from British Columbia who may be "forced to leave the country" if this does not happen soon; and an unemployed man who may have to sell his assets to pay for "rent and groceries" if this is delayed. This is not a parliamentary exercise for these people. This is day-to-day life for them. They really do not care about procedural and partisan arguments for further study and delay. For them, the consequences of delay are too great.
[Translation]
If for no other reason than to help those Canadians desperate for that extra five weeks of EI support, I ask senators to put their partisanship aside and allow this bill to pass — and to do so this week. This is not the time for politics as usual. This is among the most urgent bills ever before Parliament.
[English]
In the House of Commons, we saw substantial cooperation, not only in the house itself, but also in the House of Commons Standing Committee on Finance. The overwhelming majority of members from both the government and the official opposition understood the gravity of the situation, worked together, put partisanship aside and gave their overwhelming support to this bill — doing so without amendment or excessive delay. I simply ask the Senate to do the same thing.
[Translation]
I now invite questions from the committee.
[English]
The Chair: I expect that many of my colleagues will have questions in relation to the various aspects of this bill, including pay equity, the Navigable Waters Protection Act, the Competition Act, the securities regime and Air Canada. In those particular areas, do you want us to go ahead with questions or are you prepared to sever those off from this bill so that we can deal with the stimulus package immediately?
Mr. Flaherty: No, senator, you are assuming that the stimulus package is severable; it is not.
The Chair: Let us go on then. Honourable senators, we are dealing with the entire bill. It took the House of Commons over five weeks to deal with this, so let us begin.
Senator Mitchell: I am struck by how this government can only get its agenda through by tricks. I am struck by one of the first comments by this minister is fundamentally misleading and yet is the basis of one of his arguments for this bill.
The minister says we have to get these EI provisions right away because of the five additional weeks, which will help people now. No, it will not. It will help people in 45 weeks because it is tagged to the end.
In the pay equity provisions, we have a clear indication that this government can only jam its agenda through by tricks. The fact is that the pay equity provisions need not be and should not be in this bill. There is absolutely no urgency in those provisions.
In defending your pay equity changes, you are saying that if women cannot take their pay equity issues before the Human Rights Commission, they have another option; they can do it under the collective bargaining process. Why would anyone have any confidence in the collective bargaining process when the government is capping what can be negotiated? Just days after a public sector collective agreement was signed in the fall, the Prime Minister attempted, in his failed fiscal update, to cap pay at that time — he is still doing it — and to prohibit strikes. Why would anyone have any confidence in a collective bargaining process as the fallback position to defend their pay equity initiatives?
Mr. Flaherty: If I may address the pay equity issue, I will make every effort to be non-partisan about this issue. In Manitoba and Ontario, governments who are not Conservative governments dealt with this issue in a similar way. I know because I was the Minister of Finance in Ontario some eight or nine years ago. It works.
Is it appropriate for this issue of pay equity to be part of the collective bargaining process? Our view is, yes. It has worked in Manitoba and Ontario, and it works much more expeditiously for the people involved. The process does not take 10 or 15 years, as the federal process has historically taken.
It is important for senators to have accurate information about the consequences to EI in the bill. If I may, I would ask Mr. Giroux to speak to this issue.
Yves Giroux, Director, Social Policy, Federal-Provincial Relations and Fiscal Policy Branch, Department of Finance Canada: Senator, you mentioned that the 5 weeks would apply only at the end of 45 weeks. It would apply to all claims that are active as of the day of the budget implementation bill receiving Royal Assent. In fact, it would apply to all claims that are active a couple of days prior to the bill receiving Royal Assent. It would benefit all unemployed individuals depending on when the bill receives Royal Assent.
Senator Mitchell: The bulk of people who will be eligible for EI will likely lose their jobs in the next number of months as we trend down.
My second question is on the issue of collective bargaining as seen in the bill. Let us say that in order to achieve pay equity for a group within the public sector union structure, it is required that they get a 10 per cent pay increase. That pushes the average of the collective bargaining agreement cap above 1.5 per cent. In order to meet that 1.5 per cent cap for all employees in that collective bargaining unit, does it mean that some employees might have to receive a smaller pay increase or even a reduction in their pay?
Mr. Flaherty: Senator Mitchell, it would depend on the result of the collective bargaining between the representatives and the government. I cannot make that prediction. This relates to why we cannot sever the bill. I can say that the restraint in wage growth, the pay equity issue obviously relates to the public service, including members of Parliament and senators, exercising restraint in their wage increases. That restraint is entirely appropriate at a time when many Canadians are not looking at restraining their wage increases; rather, they are looking at keeping a wage. That is why I say that one cannot sever one part of the bill from the other part.
Senator Mitchell: There is an inherent contradiction. I would expect that women who need to advance a case for pay equity are relatively underpaid and, therefore, might not have the kinds of resources that are needed to make a case before the Human Rights Commission or the Labour Relations Board. How is it that you can justify a $50,000 penalty to a union that would actually help them? Would you penalize a union that decided to help non-union workers to advance their case before the Labour Relations Board?
Mr. Flaherty: There is no intention to penalize anyone. The intention is to continue to deal with this important issue of pay equity in an expeditious way. Surely, you are not advocating that we maintain a system that is so splendidly inefficient. In fact, the current system works better for the employer than for the employee because it takes so long. If that is what you are advocating, then okay, but we think we have a better idea.
Senator Mitchell: It took women decades and decades and it took Black people hundreds of years to be treated equally in any sense or to get the vote. In many ways, they are still not treated equally so 10 years does not seem to me to be too long in the face of a process where women will not be able to afford to do it effectively.
My final question concerns the deficit. The government has made the case that they will be able to do away with the deficit in four years. Why would anyone have any confidence in that prediction when the government was so fundamentally wrong as recently as the early fall in predicting that there would not be a deficit; that there would never be a deficit; that there was not a recession; and that the economy was strong? Why would we think that the government can predict four years out that there will not be a deficit?
Mr. Flaherty: At that time, I wish, senator, that I had a crystal ball as clear as yours. Nobody, I mean nobody, not one economist, not one, not one senator, predicted the global recession, senator.
Now, we are in a global recession. It is affecting Canada. This is not one year ago. This is not 1995 when this committee passed the Liberal omnibus budget bill in two days without amendment. This is a much more serious situation.
I will not sit here and debate with you about at what point in October or November or December did economists begin to realize that Canada was entering a recession. Different people saw it coming at different times.
The question is what is happening to Canadians families and what can we do to help? You have the bill in front of you, and I hope you deal with it this week. Do not go on holidays without dealing with it.
Senator Eggleton: Minister, if you want a stimulus package this week, I do not see that as a big problem. What I do see as a problem is what you have encumbered Bill C-10 with; you have thrown in the kitchen sink. In fact, most of this paper deals with things other than the stimulus package and yet you expect us to ram it right through. Well, there is a responsibility we have in terms of due diligence. We can wipe away all of the vacation times we want and work right through to get this done quickly, but you have encumbered this bill with items that are not necessary as part of the stimulus package. I can understand why you worked over the Christmas holidays because in your fall economic statement, you said that everything was rosy and that we would have four surplus budgets over the next years. The Prime Minister said during the election campaign that if there were to be a downturn, it would have already happened and there would not be any deficits.
You got it wrong then so what makes us confident that you can get it right now? We will examine this bill in pretty quick time. Do not throw up what previous governments have done. Rather, let us focus on what your government will do. Previous governments can take blame for things as well, but let us focus on the way ahead and how we get people out of this economic downturn.
I want to talk about Employment Insurance. You talked about adding on the five weeks, but what about the people who are not eligible for EI benefit in the first place. The figure can vary depending on geographic location, but about 40 per cent of Canadians are eligible to receive the benefit but the vast majority of people who pay EI premiums are not receiving it. In Ontario, where we come from, the situation is even worse. I would bet that many people sending you emails are saying that five weeks might be added on but it does not matter when they cannot qualify for the benefit in the first place. People are suffering and the unemployment rate is going up. Why not expand the eligibility criteria and get rid of the geographic location criteria. Whether workers are unemployed in Oshawa or in any other part of the country, the pain is just as bad. Why not make improvements to the Employment Insurance program to support people at this difficult time.
Mr. Flaherty: Senator, I am heartened to hear that you will be working next week; that this committee will be working next week; that this committee has made the commitment to get this bill through, and that you will continue to work and not go on vacation next week. That is important for Canadians.
With respect to the issue of the first two weeks or adding on five weeks, that is a matter that has been discussed. The reality is that many Canadians who lose their jobs find another job quickly within the couple of weeks, depending on where they live in the country. The policy decision was made that it was more important to add the time at the end rather than at the beginning because there was better social benefit for Canadians, in particular with respect to having more time to retrain.
You mentioned the figure of 40 per cent, which needs to be clarified so that you have a more complete understanding of the system.
Mr. Giroux: The figure of 40 per cent is often quoted but it is misleading because it includes people who have never paid premiums to the EI program. For example, some people have never worked and are looking for a job for the first time. Others have not worked in the last year and, therefore, have not paid into the program. Some people have quit their jobs without just cause. Therefore, they are ineligible for EI. There are also people who are self-employed and have never paid in the EI program; they are not eligible. You have to pay into EI to be eligible for it.
Senator Eggleton: You will let all these people fall through the cracks because they do not have enough weeks. They will suffer in this terrible economy. You say everything is urgent to get this moving, but people are suffering and you are giving excuses why the government will not help people that are in desperate need.
Mr. Flaherty: Honourable senator, the official is giving you the facts about the way the system works. It is not a welfare system; it is an insurance system.
Senator Eggleton: It does not work for people who pay into it.
Mr. Flaherty: You are a former mayor and you are aware of the provincial systems with respect to social assistance. This is an employment insurance system and the official has only given you the parameters of the system.
Senator Eggleton: What system do you know where most people pay into and do not get anything out of it?
Mr. Flaherty: Excuse me, senator.
Senator Eggleton: That is the case. It is the case in Ontario and it is the case in the city I come from.
Mr. Flaherty: Senator, you just heard it is not so.
Senator Eggleton: Tell it to the people who are suffering.
Mr. Giroux: If you want to hear the last part of my remarks senator, I was going to say that for those who pay EI premiums, over 80 per cent receive EI benefits. The 40 per cent figure includes many people who have never paid into the program and are obviously not eligible.
Senator Eggleton: What about the amount of money you are paying them, 55 per cent of average earnings over the previous 26 weeks to a maximum of $447. This is a big reduction for many of these people. Why not increase the allowance to those people who are eligible EI.
Mr. Flaherty: These are policy decisions. What we heard — senator, you were not there; was that it is more important to give people more time. This is largely because we have industries in Canada like forestry and the auto sector, amongst others, that are going through a substantial transformation. Some of the workers in those industries will have to train for other jobs in other industries and the more time they have available with EI, the better they will be.
Senator Eggleton: Will you put more money into retraining?
Mr. Flaherty: Yes, we are. It is in the budget.
Senator Eggleton: We will see what it produces.
Senator Ringuette: I am happy that you received and are paying attention to letters from Canadians. With your permission, I will bring you some of the letters I have received and hopefully they will get the same kind of attention.
My first question concerns a $25-million expenditure. When officials attended this committee, I asked them to locate in your budget plan and the 2009-10 estimates the new $25-million program to benefit foreign artists. Can you tell me where it is? It is not in your Economic Action Plan and it is not in the 2009-10 estimates.
Mr. Flaherty: It is in the budget. If it is not in the first budget bill, then it will be in the second bill. As you know, there are two budget bills every year.
It is on page 175 of the budget, Canada Prizes for the Arts and Creativity. It is to celebrate the world's best artists and also Canadian artists. The prize's endowment proposed in the budget is similar to the endowment that the government and Parliament chose to give to the Gairdner Foundation last year, which presents the Canada Gairdner awards for medical science research. These include awards won by Canadians who have gone on to become Nobel laureates. We should be celebrating excellence in Canada and internationally. We are a global economy with people who can perform and create at an international level of excellence and we should celebrate that.
Senator Ringuette: It is funny to hear you say that because last year you were cutting off Canadian artists and now you have a $25-million program to recognize foreign artists.
My second question concerns a meeting we had three weeks ago with officials from Transport Canada regarding infrastructure spending. At that time, I asked them to submit to this committee a list of projects, amounts and locations that had received money. That meeting was three weeks ago and we still have not received the information.
Minister, if you have similar problems getting information from the department then I think that you will have many problems administering the budget stimulus. Can you request to the officials administering the different infrastructure funds to provide us with that information?
It is difficult when you come to us asking for all this money — $7 billion for infrastructure — and we cannot get the information.
Mr. Flaherty: I am not certain what information you are seeking. Are you seeking information about past expenditures?
Senator Ringuette: Yes, I asked that question concerning an article in the paper indicating that 75 per cent of the infrastructure funds had been spent in federal Tory ridings. If that is the case, we want to know. You are banking a lot of your economic stimulus plan on the infrastructure programs and spending. Yet, we cannot get the information on funding that has been approved on different infrastructure programs. I hope that you will undertake to get this information as soon as possible for the members of this committee.
Mr. Flaherty: The more specific you can be and for what period of time you would like to cover, the better it is. However, I am sure that information can be provided by Infrastructure Canada.
Let me say, that is not what this bill is about. This bill is about stimulus spending for our economy. There is more than $6 billion in this bill, which is unusual for a budget bill. As you know, a budget bill usually deals primarily with tax measures, not spending measures. Both are in this bill and there is an additional $3 billion in Main Estimates for Treasury Board vote 35. This is vitally important. This is incremental spending. We committed in the G20 to do this. Our G20 partners are all doing the same thing, including China, Japan and the United Kingdom. We are working together to provide stimulus among our trading partners. This is a global situation and vitally important in that sense. I invite you, please, to look at the wider global context and not be parochial in your assessment of this information.
Senator Ringuette: I am not being parochial. I think you are being very aggressive without reason. I am asking for information and it is reasonable information for a member of the Senate Finance Committee to request. You are asking us to expedite approval. Give us the information that we have requested.
My third question relates to the Navigable Waters Protection Act. I will give you the following scenario if you will bear with me. We have a situation where our neighbour to the south is not very receptive in regards to what they call "dirty oil," and I know it is a problem. The following scenario is that we have a short visit from a very important person. There are concerns about the "dirty oil." If Canada could supply a higher percentage of clean energy via the Mackenzie pipeline, it would help the acceptance level of our neighbour to the south and a side deal concerning labour mobility between Canada and the U.S. would be possible.
There is a question concerning the $3 billion in additional funds and nobody knows where they are going. Now, we are asked to give a minister total and complete authority regarding navigable waters, removing native rights, and probably major environmental assessment for these projects. What do you think of this scenario, Minister Flaherty?
Mr. Flaherty: I look at the purpose. We have a great deal of duplication in environmental assessments. We all believe in environmental assessments with both the provinces and the federal government doing them.
This bill will reduce the duplication in a dramatic way. It has the support of the provinces and certainly has the support of the federal government. What we have is a Navigable Waters Protection Act that was drafted in the 1880s that treats a nearly-dry stream the same way as the Northumberland Strait.
We need to get rational about this and spend the resources on environmental situations that significantly matter to the people of Canada. That is what this is designed to accomplish.
I will say a word about process. Nowhere in this bill are we giving any minister the opportunity to spend money willy-nilly. The federal public service has been working extremely hard over the past weeks to be both responsive to the crisis in Canada, for Canadians, and to be responsible. I have been witness to this.
We have a strong public service in this country. Treasury Board, in particular, has been working very hard to work on a process that will help expedite matters in a responsible way. Why are they doing so? It is so that the money can be spent in April, May and June. That is the construction season; that is the start of the season. That is when we need to act to help Canadians.
Senator Ringuette: Are you telling me that the different issues that I just highlighted for you have nothing to do with the Mackenzie pipeline?
Mr. Flaherty: It has nothing to do with the Mackenzie pipeline as far as the budget is concerned. The Mackenzie pipeline is an important project for this country but it is not dealt with in the budget.
Senator Ringuette: Thank you.
Senator Di Nino: Minister, let me congratulate you on the very eloquent and compelling statement you made at the beginning of your speech. I am not quite sure everyone around this room understands the unprecedented and devastating situation that the world is facing and the fact that Canada is not immune from it. I think it is important that we, as Senator Eggleton said, talk to the people out there and tell them what this bill is really all about.
The issue that we are dealing with is, if I understand it correctly, the passage of a bill that will help to reduce the pain for Canadians. The additional provisions and measures you have included in the budget implementation bill are quite normal, as you have said in reference to Bill C-43. I think that bill contained a measure dealing with environmental changes, as an example. It is in the wisdom of governments to sometimes do that.
I would like you to highlight how the Navigable Waters Protection Act and the Competition Act will allow us to spend some of the money contained in this bill and other budget bills, as well as create the kind of environment that will allow businesses to become more efficient, effective and competitive, which will help Canadians weather the storm. I think my colleagues have missed that important issue.
Mr. Flaherty: Thank you, senator. I referred earlier to Bill C-43 and I said it was in 1995. It is actually 2005, so it is much more recent than that. It was an omnibus bill presented by a previous government that was passed without amendment by this committee in two days at a time when we were not in an economic crisis.
In Budget 2009, we provide $37.6 million in support of environmental assessments, regulatory coordination, science and Aboriginal consultations related to the Mackenzie Gas Project. I need to say that because I said we did not have in the budget spending on the project but we do have the money in the budget for environmental assessments relating to it. I need to say that so that we are complete in what we say.
With respect to the environmental issues in the Navigable Waters Protection Act, I had a meeting with the finance ministers from the provinces in Saskatoon in December. I must say that the degree of collaboration among the provinces is heartening. This was also evident when the Prime Minister and premiers met in Ottawa in the middle of January. There is a clear recognition by the provinces and territories that we are in a urgent time and that it is vitally important that not only for the federal government take the lead by doing the first budget early — which we did — running a substantial deficit and creating substantial stimuli but also to implement in a practical way. As we have see the budgets of the provinces coming through, we expect to see incremental spending by each province, which will get us to a point where we will have 3.2 per cent of Canada's GDP by way of Canada's stimulus over the first two years. British Columbia has already acted and Quebec and Ontario will do so this month. Our agreement in the G20 is 2 per cent, so we are ahead of the curve there in terms of our international obligations.
The process is important. We must be able to get the money working for Canadians. One of the inhibitors to that is duplication of environmental assessments, where we get the federal government or the province — depending on who acts first — doing an assessment that takes six-to-nine months and everything else stops again while the other government does it again.
It does not add value, help Canadians or improve the protection of the environment. It does cause substantial delays and we are addressing that issue now with the support of the provinces and the territories.
Senator Di Nino: That particular act was passed in 1887. That is older than you and I put together, minister.
Mr. Flaherty: I have to add that up.
Senator Di Nino: It is close, anyway. My understanding is that, without some changes in that act, there will be some impediment to the expenditure of funds, particularly of some infrastructure money that could be "shovel ready" for a number of projects. This would have an effect on some of the environmental and the other components; it would be impediment to that. Is my understanding correct?
Mr. Flaherty: It is. Canadians need to know that environmental assessments will take place. We just will not have them duplicated.
Senator Di Nino: The Competition Act is another act whose necessity is being questioned. If I read this correctly, we have a number of provisions that will improve competitiveness and the efficiency of business, which means we can move ahead quicker in tackle willing some of the economic issues we have. It will do so by giving business some additional tools and a better opportunity for them to compete and do business.
Mr. Flaherty: That is right. The Competition Act provisions contained in the bill are based primarily on the work of Red Wilson and his committee. Mr. Wilson and his committee are generally viewed as doing superior work and provide expert advice to the Government of Canada.
We have been criticized in some quarters for a budget that is short-sighted and does not take the longer view. The Competition Act changes do take the medium and longer view, as recommended by Mr. Wilson and his committee. It is not only important that we act for the medium term to stimulate the economy and help Canadians who are losing their jobs, but also that we build for the future. We have done that with provisions like the Competition Act provisions to create more competition and jobs, and by the broadband provisions in the budget and the Infoway electronic health record provisions. These are all capacity building items that we can do during a time of recession so that when the monetary stimulus and the fiscal stimulus gain traction, Canada will accelerate sharply out of recession and will come out of it stronger than ever.
Senator Murray: It takes a lot of nerve for you to come in here and lecture us about timing after you wasted two months with prorogation, digging yourself out of the hole that you got yourself into with the November statement. However, that is history.
I am interested in your substantive arguments with respect to pay equity, the Navigable Waters Protection Act and the Competition Act. Those are substantive arguments. I do not know where I would come down if I had to vote on those separately. There are substantive arguments that deserve to be heard but so, too, do the opposing arguments.
It is well and good to point to Red Wilson's panel and their recommendations, but this is a parliamentary democracy. Where does Parliament come into this? Where does the public come into it? Important as these subjects are, I would say you do not need the money for April 1, but you do need your stimulus package on April 1.
On that point, Mr. Chair, I am not a member of this committee — my own choice, no one kept my off it — but if I were a member, I would make a motion as soon as the minister has completed his testimony that we proceed immediately to clause-by-clause consideration of the bill.
I have had the procedural experts that we employ draft the motions that would make it possible for us to pass the stimulus measures this morning, report them this afternoon to the Senate and send them off to the House of Commons for debate and Royal Assent. I have also had drafted separate bills dealing with the Navigable Waters Protection Act, the Public Sector Equitable Compensation Act, the Investment Canada Act and the Competition Act. These could be presented by the government at the appropriate time and we could debate them. They are "shovel ready," as the saying goes.
Mr. Chair, I am not in a position to make those motions, but if anybody wants to make the motions I have the script for them.
Minister, I have one question, in addition to the comments I have just made. Did the Economic Advisory Council that you appointed, headed by Carole Taylor, send in a written report? Is it accessible to the public? I cannot find it on your website.
Mr. Flaherty: No, there was no written report by the Economic Advisory Council. We had a series of meeting. I attended each meeting in different parts of the country. I thank Ms. Taylor for her continuing work and I thank the members of the committee. They had a significant influence on this very large economic action plan, and we are continuing to meet. We have met since the budget and we are meeting again this month. This is a very strong group of Canadians who are giving of their time voluntarily and I appreciate it.
Senator Murray: They made recommendations, obviously.
Mr. Flaherty: We had discussions. There were some things everyone agreed on and some things people did not. This is to be expected around the table.
Senator Murray: Someone has notes.
Mr. Flaherty: There was no written report.
Senator Murray: Did someone keep notes?
Mr. Flaherty: Some people at the table may have kept notes; that is their business.
Senator Murray: We will try, through the Access to Information Act, to obtain the notes from the department. You appointed these people with great fanfare; they are serious, well-reputed people and I do not think their advice should be kept secret.
Mr. Flaherty: You can ask them to share their views with you, senator.
Senator Murray: I will ask the department to produce the documents.
Mr. Flaherty: With respect to the other comments you made, senator, this is not a piecemeal plan. This is an economic action plan for Canada. It has been approved by the House of Commons, on the ways and means motion, by the elected people of Canada. I daresay the people of Canada expect it to be implemented as a plan, pursuant to our international commitments in the G20.
I do not agree that we wasted two months. It is never a waste of time to consult intensively, in the broadest pre-budget consultation in the history of this country, with Canadians from coast to coast to coast. I do not consider that a waste of time.
The House of Commons has approved this bill and the public has been involved in very extensive consultations.
Senator Gerstein: Mr. Minister, we function in a global economy and we are facing a global recession. We are not an island insulated from the rest of the world and we recognize the economy is not unlike a balloon, in that if you press it in one place, it might bulge out in another. It is all interconnected.
Are there any further comments you would like to make with regard to the necessity of passing this bill immediately?
Mr. Flaherty: Thank you, senator. May I compliment you on your tie, given that St. Patrick's Day is upon us next week?
Senator Gerstein: I wanted you to feel at home.
Mr. Flaherty: Let me go back to the international discussions on this issue. The serious discussions go back to early October 2008, when the G8 ministers met in Washington. That was a very important weekend. It was one of those meetings in the afternoon of the Friday where the script was thrown away. These communiqués tend to be written beforehand, but that script was thrown away and the ministers spoke directly — as did central bankers — about their concerns on what was happening.
That resulted in a five-point plan that afternoon, which was presented the next day to the IMF, and also to the G20 ministers and to the Council of the Finance Ministers of the Americas, all of whom approved the plan. It was an intense weekend, but it resulted in important steps being taken around the world, particularly among our G20 colleagues, to create the stimulus packages and to build stimulus on stimulus as traders around the world.
There is a concern about protectionism, which I need to raise because it is difficult to have these discussions in international fora without some members being inclined to take protectionist measures. We are doing the opposite in this bill. We are removing some tariffs, which is a recognition by Canada not only that we are against protectionism, but also that we are prepared to do even more, to knock down more tariffs to increase international trade.
To come out of this global recession, we need the emerging economies to grow and we need to continue to trade. We must avoid the clear lessons that history taught us from the 1930s, that the downward spiral of protectionism will lead to a more dire situation.
Senator Gerstein: I might add that Conservative members of this committee have their sleeping bags packed and are ready to focus on the work ahead of us. I am sure that I am as delighted as you were to hear Senator Eggleton mention that the Liberal members are just as ready.
The Chair: We will not be using sleeping bags. Minister, it is 10:20 a.m. You indicated that you had another function to attend but that Mr. Menzies would stay to answer questions. If there are some points for which we need to call you back, then I am sure you will be available on short notice to help us out.
Mr. Flaherty: Certainly, senator, if you need me back in the next day or two I am happy to do so on short notice, if I am able. Obviously, I have other obligations in my job but the important thing is to get the bill to Royal Assent.
The Chair: Minister, you appreciate that this committee is entitled to meet only on two different occasions for two hours each week without permission from the Senate as a whole. We have taken your comments and we will take those to the Senate to ask for permission to meet out of our normal time. As yet, we have not received that permission. We estimate that there are at least 40 hours worth of preliminary work to do with witnesses for the thousands and thousands of letters that we have received on these various aspects.
Senator Neufeld: I have listened to the discussion around the table and, although I have never been involved with a federal government budget, I have been involved in 17 or so provincial budgets. Every time there is a provincial budget, there happens to be some effect on the statutes of the province. It is quite normal for that to take place.
I cannot imagine how you could even think about saying that we should put out only the stimulus package and hold back the rest of the bill. I can tell you, the Navigable Waters Protection Act has hardly been amended since 1876 or so when British Columbia was barely a province. Since then we have counted about 300,000 plus streams and rivers. It was a much different province back then than it is today. We need to move forward with some of the things that this infrastructure money can initiate to stimulate employment in the province and across every province and territory in Canada.
I firmly believe that this is a needed package and should be dealt with in an expeditious fashion. I understand from reading newspaper articles and from listening to the President of the United States, our largest trading partner, that there are huge problems in economies worldwide. Anyone who has not noticed that has not been listening or reading. In Canada, we need to deal with these things in an expeditious fashion. I fully understand that we have a responsibility to ask questions. Those things are fine with me but this is not the time to play games. Games are used sometimes but at this time we need to get on with it.
Mr. Menzies, could you explain a little bit more about tax breaks for both business and individuals and about moving the tax brackets and what that will mean to people? I have always been an advocate of cutting personal taxes and business taxes to encourage the economy in good times, so I cannot imagine why we would not want to do the same in tougher times. Canadians can better make a decision about where those funds should be spent than can a large government in Ottawa.
I would like you to explain the tax breaks and how the Navigable Waters Protection Act holds up all kinds of projects. Today in British Columbia, just under $2 billion in projects could go ahead if we started dealing effectively with that act and with the Environmental Assessment Act. Taking it a bit further, there is an additional $125 billion in B.C. of which I am aware. I am sure that it is much the same in the province you come from and right across the Canada.
Maybe you could explain about the tax breaks and how they will help the economy. As well, could you give us some examples across Canada of how the Navigable Waters Protection Act is impeding growth and has been doing so since long before this economic downturn, which has caused us to look seriously at these issues?
Ted Menzies, Parliamentary Secretary to the Minister of Finance: Senator Neufeld, from the wording of your question, it is obvious that you bring an incredible wealth of knowledge to these discussions. That is the great thing about the Senate. We can tap into the knowledge that senators bring from their provincial experience. Welcome to the Senate.
I am happy to talk about the tax implications as the fundamentals, which we usually deal with in a budget bill. As much as we are criticized for not predicting the magnitude of this economic crisis, I need to remind everyone that in the economic statement put forward by the Minister of Finance in the fall of 2007, we recognized trouble on the horizon and therefore, we reduced taxes significantly and continued to pay down the debt. We reduced the debt by $37 billion, which has put Canada in the enviable position where we can put in place short-term deficit budgets that we are capable of paying off.
I would assume from your comments that you and I agree Canadians are better stewards of their own dollars if they are left in their own pockets. We did that in the fall economic statement of 2007 and we continue to do that. We reduced taxes for Canadians. I am trying to remember the exact number; I believe it is 690,000 people that we have taken off the tax roll by raising the basic personal exemption rate. Those people have more money in their pockets to help stimulate the economy and to spend as they see fit.
We have reduced taxes for businesses. Last year, we raised the small business rate to $400,000. We raised it to $500,000 in this budget. Those businesses will pay taxes at 11 per cent. We are attempting to equalize the average across the country in conjunction with the provinces. We see the provinces moving towards this in their consecutive budgets. We are trying to get to a 25 per cent overall tax rate, which will put us in good stead with the rest of the world.
The Canadian ability to be able to attract business is very important. If we lower the overall business tax rate in this country, we will be able to attract businesses. Therefore, reducing taxes is very important.
On the second part of your question regarding navigable waters, I also understand that we will have a separate hearing on navigable waters. Mr. Osbaldeston from the Navigable Waters Protection Program will provide you with the details of what is necessary and what we are laying out in the changes to the Navigable Waters Protection Act. We are improving it. It is a piece of legislation that is very outdated; it is from 1882 and there were not many cars around in 1882. It was a time when people travelled by water all across this country.
We have a completely different environment in the 21st century. Water is now used for the movement of freight and for recreation. We will improve some of that. In this new legislation, we will suggest that there should be lights on docks protruding into a river so canoeists do not hit them at night. There were no lights in 1882. The changes in are simple.
Let me give you one example. In my riding we have a 25,000 head feedlot feeding cattle. During a flood in 2005, a culvert was washed out. To replace that culvert took approximately eight months because Navigable Waters would not accept that this culvert should be replaced without a complete study of the impact on canoeing on an intermittent stream. The farmer feeding those cattle had to travel about 40 kilometres each day with about eight 40-tonne truckloads of grain because he could not make the 10-kilometre trek he normally takes. He had to wait for the assessment.
We are trying to put a bridge over Mosquito Creek. It is a very small tributary in the Oldman River basin. The municipality was attempting to resurface the bridge. It was approved on October 2, except for the Navigable Waters. Unless it has taken place in the last week, we are still waiting for approval of a simple resurfacing of a bridge.
Those are things I see on a day-to-day basis. We are not trying to short-circuit it. There will still be environmental assessments, but we are improving an old act to synchronize it with the 21st century.
The Chair: If I could ask you to keep your reply as succinct as possible. You have taken 10 minutes and Senator Neufeld had eight minutes. Now we have a supplementary question.
Senator Stratton: I have a point of order. You had stated as chair that you needed permission of the Senate to extend the sitting hours of the committee.
The Chair: Yes.
Senator Stratton: That was done last Friday. I have the email here. I wanted to check it to be sure. I would ask you to check through Heather Lank, Principal Clerk of the Committees Directorate who requested permission. I gave permission from our side on Friday March 6 at about 1 p.m. You should do a little verification. I have the emails from our side on record from that date saying that you wanted to extend the hours of this committee on Wednesday.
The Chair: My clerk advises me that — this is upon which I had based my earlier statement — that the approval of the whips has been received. You are one whip.
Senator Stratton: That is all you need.
The Chair: While the Senate is sitting, we need the approval of the Senate as a whole.
Senator Stratton: Have fun. You have mine.
The Chair: I am trying to clarify my earlier statement. Do you understand now?
Senator Stratton: If you want to deal with this bill seriously, would you not want to extend the sittings beyond only Wednesday, that you would sit while the Senate is sitting this week to make sure the appropriate witnesses are heard? As you said, there are over 40 witnesses. Why would you not ask for permission to sit all week?
The Chair: It is not only all this week, but for the next ten weeks. That is our intention.
Senator Stratton: Thank you very much.
The Chair: Thank you. We are finished with that point of order. You cannot have a supplementary on a point of order.
I would like to get on with the questions at hand. There were two points that I think are important to clarify for the record. Mr. Menzies, you referred to the economic update statement of 2007. Is that the economic statement you meant and not 2008?
Mr. Menzies: Yes.
The Chair: All right. . The second point — we did not have time to clarify this when the minister was here — he held up the budget. The question by Senator Neufeld was that the budget should be dealt with as one piece of legislation. The minister made the point that there could be two budget implementation bills flowing from the budget. There is also the supply process. Before the end of this month, this committee has two supply bills to deal with, all flowing from the budget.
Mr. Menzies: You will only have one budget implementation act to deal with immediately. It was put in the first budget implementation act because of the need to get the stimulus that is part of this budget implementation act through Parliament. I do not need to explain to you; traditionally there are two budget implementation acts.
The Chair: I wanted simply to make the point that it is not the budget we are dealing with as one piece. The argument is to deal with Bill C-10, which we are addressing now.
Mr. Menzies: Perhaps he should have held up the bill. That is the budget; this is the bill.
The Chair: Exactly.
Senator Neufeld: Mr. Menzies, will you confirm that the opposition party voted in favour of Bill C-10 in the House of Commons? Will you confirm that the opposition agreed that we should get on with this bill, pass it to get this money out the door and start getting things done?
That may seem funny to some people. It is not funny to me because I think there are a lot of people out there that are expecting us to do the right thing. They are totally in favour of it, at least from what I hear from the Leader of the Opposition and it is, in fact, what I read in Hansard. I should not say "totally in favour of it;" they have some problems with it but they know the best thing to do for Canadians today is to get on with it and not dilly-dally around.
I would think that is probably what they would have said. Would you agree with me?
Mr. Menzies: I absolutely do Senator Neufeld and I will try to be concise, Mr. Chair. My apologies for carrying on like a politician.
The Chair: While you are thinking of your concise answer, I would ask all honourable senators to keep the second and third reading speeches to second and third reading in the Senate. We are here to question witnesses.
Mr. Menzies: The Leader of the Official Opposition made the public statement that the Liberal Party would not put forward any amendments. To give him full credit, he and most members of his party recognizes the importance of getting this done. I will give full credit to John McCallum, the finance critic. He and I have spoken on a very regular basis. In fact, I suggested to him one day that I spent more time with him than I did with my wife over January and February. However, that should not be on the record.
Mr. McCallum understands that. He is an economist and he understands that, so we worked well together. He had his criticisms and he said, "Ted, I do not totally agree with you on this but I agree that it needs to be done." Accolades must be given to him and his leader to get it to this point.
Senator Nancy Ruth: Some people have said that most of the tax cuts for personal income tax have benefited the top 10 per cent of Canadians, which are those earning over $106,000 a year. It actually surprised me. I have to admit that was what the cut-off was for the top 10 per cent. However, I am actually impressed with the number of measures that will impact the poor or those who will be poor. I refer to items such as the Wage Earner Protection Program, so people get their severance pays; all the housing things, whether it is social housing, disabled housing, Northern housing, et cetera. There is a list of them. I think that is great on the part of the government. I am delighted to see those measures, as well as the income tax benefits that will accrue.
However, I want to ask a question the infrastructure items. One billion dollars is going to colleges and universities for renewing buildings and building new ones. My understanding is that they have been supportive of this money but there has been criticism from the research community that the government is not doing enough.
I wondered if you could connect the two; namely that, if a university is building new buildings to house students and research, how this does, in fact, impact the future of Canada in terms of research and other things that might be in the budget for them.
Mr. Menzies: Thank you, senator. Indeed, to refer to your first comment about the lower-income people gaining benefits from this, we have doubled the Working Income Tax Benefit that was put in place in Budget 2008. That has been well-supported for helping those people get over the "welfare wall" — for lack of a better term.
We dealt with that in Calgary on a major basis. In Calgary, we had many people who were making minimum wage. In fact, a third of the people living in a particular homeless shelter were actually employed. One-third of the people there were employed but did not have enough money to either meet mortgage or rent payments.
This Working Income Tax Benefit helps them get to that stage; it is a supplement to that. The Home Renovation Tax Credit will help people of all ages. That will stimulate families. If you renovate your bathroom, it promotes a good feeling and that is what we need to increase consumer confidence.
There are many of those things that deal with issues like that. We heard from the Association of Universities and Colleges of Canada. James Knight from the Association of Canadian Community Colleges gave a good presentation at one of our pre-budget consultations. Both the minister and I picked up on the fact and we both asked him, "Do you have adequate capacity?"
This is a time when students should be staying in school perhaps one more year rather than coming out and trying to find a job along with the other people who have been laid off. They should instead spend one more year in college or university to improve or add to their degree. One more year of study will enable them to be better prepared when we start coming out of the recession.
They said that they needed assistance for plain and simple maintenance on universities and colleges. The actual facilities were not adequate to add more classes. That money came through by asking Canadians what was needed and this is what the association said was needed.
In terms of research and development, we have added to Genome Canada. There is some discrepancy about the folks in Genome Canada. Some think it is great and some have criticized it. There could always be more.
We think that supporting research study in this country, whether at a university level or where ever it may be — even within the industries themselves — is the future of this country. That includes providing higher-educated students and developing and getting our models from the university out to actually being applied to the industries. That is important. That is why we continue to fund that sector.
The Chair: Senator Nancy Ruth, to ensure colleagues are with you here, are you are talking about clause 309 of Bill C-10? I believe it is page 389 of our copy. It is entitled Improving Infrastructure at Universities and Colleges. It reads:
There may be paid out of the Consolidated Revenue Fund, on the requisition of the Minister of Industry, in accordance with terms and conditions approved by the Treasury Board, a sum not exceeding one billion dollars. . . .
That is "may" and not "shall." Therefore, there are quite a few qualifiers in there and could we have the terms and conditions? What terms and conditions would be applied?
Mr. Menzies: I do not have all terms and conditions. I do not know if any of the resource people that I have with me at this point have them, but we can get someone here to discuss this point with the committee.
The Chair: Thank you. This is our one shot at this, so we had better understand what we are expected to vote on.
Mr. Menzies: We will try to get you the answers.
Erin O'Brien, Chief, Microeconomic Policy Analysis, Policy Analysis and Coordination, Department of Finance Canada: I am here from the Department of Finance.
The Chair: Thank you for being here.
Ms. O'Brien: It is my pleasure. In essence this is a program that will be run out of Industry Canada and the terms and conditions are currently underway.
These are normal program terms and conditions that will be negotiated with the Treasury Board that will outline the specific design parameters for this program.
The Chair: I do not mean to be asking all the questions but Senator Nancy Ruth raised this issue as if it is a fait accompli. When do you anticipate having the terms and conditions negotiated so the minister may possibly do something?
Ms. O'Brien: The government is currently working on this. I believe we are aiming for the spring or early summer.
The Chair: Therefore nothing will be flowing on this until spring or summer at the earliest?
Ms. O'Brien: That is correct.
The Chair: Do any questions flow from that clarification?
[Translation]
Senator Chaput: Thank you, Mr. Chair. Before us for our consideration is Bill C-10 which will or should help the economy, or so we have been told.
My question is for Mr. Menzies and concerns Part 9 of the Bill, or more specifically, equalization and the proposed changes to the way in which equalization payments are calculated.
In 2007, our government announced a new way of calculating equalization based on the O'Brien report. This formula was endorsed by the majority of provinces at the time. Some compromises were made, but the majority accepted it.
In November 2008, your government announced a new change in the formula for calculating equalization. This change is reflected in Bill C-10 which is now before the committee. Under the new formula, transfers to the provinces will be reduced over a four-year period, from 2009 to 2013.
[English]
Over four years, there is a total reduction of $12 million transferred to the provinces.
[Translation]
My first question, Mr. Menzies, is as follows: did the government consult with the provinces prior to announcing this new change? If so, how did the provinces react to the news?
For my second question, I would like to know why you singled out this program for cuts. How will reducing equalization payments spur the national and provincial economies?
[English]
Mr. Menzies: To answer your first question, all of the provinces were consulted last year in early December. We shared the process with them.
I have to disagree with your comment about reductions. There were no reductions. In fact, all equalizations and transfers continue to increase.
We put in place the recommendations from the O'Brien report — that the transfers would continue to increase. To put it simply, if we had continued to increase on that line that was recommended by the O'Brien report, it would have been unsustainable.
Taxes are taxes. They all come from one source and that is from Canadians' pockets. We said we would not do what was done in a previous regime, which was to reduce transfers to the provinces. During the last economic recession, that is what happened and we said we would not do that. We continue to increase health transfers at 6 per cent across the board, and social transfers at 3 per cent across the board.
I will not criticize the O'Brien formula. We cannot criticize that the report had not factored in something that we had never seen before. We had never seen oil go to $147 a barrel and then drop down under $40 a barrel within a six-month period. They could not have projected that into their formula. However, if we had stayed with that formula, the federal government would not be able to sustain that sort of equalization, so it would have been the reverse. The federal government would have been handicapped because of the commitment to provide an excessive amount of money to the provinces.
We continue to increase; we are at $54 billion in transfers right now. We have some fundamental changes. Newfoundland is now a have province and we are happy for them; but, unfortunately, Ontario has slipped the other way. Therefore, we need to remember that we treat all provinces and territories with the same respect, and try to ensure that the people who live in each one of those provinces have the same fundamental rights and access to the same services.
Senator Chaput: If I understand correctly, when we talk about the total equalization transfers to provinces, 2009-10 going to 2013 for four years, there is no reduction?
Mr. Menzies: They continue to increase — not at the level recommended by the O'Brien formula because that was unsustainable. All provinces were informed of that last December.
Senator Stratton: I will give you a little background. About three weeks ago, the chair of the committee, Senator Day, along with myself and a few others had a dinner with the Chinese ambassador. We talked about the impact of the recession in China.
He put it in a very interesting way. He said that China has 10 million graduates out of schools each year, 5 million of which are university or college graduates. In order for those people to obtain jobs, the GDP growth rate in China would have to be 8 per cent each year. They are putting forward incentive packages to try and ensure that happens, and they are worried this recession will continue longer than expected.
In the media yesterday, Warren Buffett, the guru of investing in the United States, said he never saw this coming. The economy literally fell off a cliff. That is how fast it happened. Mr. Buffett believes that the incentives have to be done quickly to move things along as quickly as possible.
China is becoming a driving force in the world economy. I expect that China would make sure, because of the way their government works that their economy turns out jobs. If not, there would likely be social unrest if the recession goes much beyond two years.
Do you anticipate that the economy will turn around fairly quickly? Although the minister said it, I want to hear from you to assure the folks out there that this is the expectation not only of this government, but of others.
Mr. Menzies: I will start out by addressing some of the comments that we have heard from individuals, members of Parliament and even senators, that the present government did not see this coming. We talked about the good news and never talked about the bad news. We all know the story about the sky falling. Personally, I do not feel it is the role of the Prime Minister to go out and scare Canadians. We all know that consumer confidence is a big part of the turn around in this economy. It is not helpful for the leader of a country to go out and say it is all doom and gloom.
The Prime Minister was realistic. He spoke about this early on in his year-end messages broadcast across the country, that there are difficult economic times ahead. That is all he needed to say because he was warning people that there are tough times ahead.
I am certainly not going to predict when we will come out of this. We hope that we have four short deficit years. However, we can handle a deficit right now because we paid off $37 billion in debt leading into this, just in the time we were in power. The Liberals paid off debt before that, so that put us in a good position. Even the projected deficits that we are going to run will take us only from a 28.6 per cent debt to GDP ratio up to a 30 per cent debt to GDP ratio.
Canada's debt to GDP ratio will climb only 1.4 per cent. You have all done the math in respect of the figures in the United States and some other countries at 60 per cent to 100 per cent. We are in a good, strong position, and we think we will come out of this in a stronger position because we are putting in initiatives, training people and expanding the educational capacities of our colleges and universities. We think we will come out of this stronger, but we need the help of all Canadians.
Senator Mitchell: Mr. Menzies, the minister did not answer my first question. Is it not mathematically impossible for one group of people within a collective bargaining unit to receive 5 per cent to settle pay equity issues and for the entire group to average only 1.5 per cent? How will that work without the rest of the group receiving less than 1.5 per cent?
Mr. Menzies: I am not sure that I can answer that question but perhaps I have someone behind me who can respond. I am here to answer the political questions.
We are trying to ensure that there is fair compensation to all people in this country. As the minister said, many people are very upset because they are receiving no pay cheque at all. We have talked about the numbers of people who do not qualify for EI, such as the self-employed. We are arguing over something that is miniscule in the overall picture. People are losing their jobs and their homes, and they do not know where their next paycheque will come from or whether they will receive an EI cheque. I do not think we should spend so much time focusing on this debate about 5 per cent, but with all due respect, we have an answer.
Hélène Laurendeau, Assistant Secretary, Labour Relations and Compensation Operations, Treasury Board of Canada Secretariat: The 1.5 per cent restraint covers the period to 2011. The public sector equitable compensation act is meant to come into force and be applicable on the next round of collective bargaining when the current agreements are up for renewal. In terms of timing, the issue of having to square-fit equitable compensation payments within the restrained confinements will not happen. Equitable compensation under the new regime will come under the next round of collective bargaining.
I do not have the exact clause but if there were a future restraint bills, equitable compensation would have to be achieved within the confinement before any other increases could occur.
Senator Mitchell: My point still stands. First, you have just contradicted the urgency expressed by the minister because this would not occur under Bill C-10 for a couple of years. Second, the government speaks all the time about family values. Well, women are disproportionately disadvantaged in their access to EI because they tend to work less time. Their working lives for money can be broken up when they work at home to look after family. As well, women are often limited to part time jobs. Why is it that, given this chance, you would not have augmented the criteria for access to Employment Insurance in support of women who need to support their families in difficult times? Why did you not create a greater equality for women and the strength of their families given your government's mantra of family values?
Mr. Menzies: Well, I am sorry, senator, it is not a mantra; it is a fundamental belief that families are important and all of us around this table share that belief. I might suggest that there have been many opportunities for previous governments to amend this, had it been raised as a concern, in previous proposed legislation. If it is a concern, then perhaps we should look at it in future proposed legislation. We are dealing with what is in place today. Perhaps I could have some explanation from Ms. Laurendeau.
Ms. Laurendeau: On the issue of urgency, the effect of the bargaining process for equitable compensation will happen at the next round of collective bargaining because of the timing of the agreements. I may have been unclear that the legislation will come into force prior to that but will allow for the preparatory work for the next round of collective bargaining to be ready. Therefore, the use of those years during the restraint period will be invested in preparatory work.
Senator Mitchell: Math is math so someone will have to be averaged down if one group is to receive more.
Why have you changed "pay equity" to "equitable compensation" in Bill C-10? What does "equitable compensation" mean? Does it include equal pay plus equal pay for work of equal value? If that is so, why not call it what it is — pay equity? "Equitable compensation" has no clear definition and no precedent, and it is not defined in the bill. Rather, the bill simply says that there will be an "equitable compensation" issue if a tribunal determines that there is an equitable compensation issue. That remark is completely tautological.
Ms. Laurendeau: The reason for using equitable compensation as opposed to equal pay for work of equal value is to be more inclusive in terms of what compensation covers. It is meant to capture all kinds of benefits beyond wages. It encapsulates equal pay for work of equal value and, in fact, is meant to address it. It also brings it to the centre of the compensation setting by bringing it into the process of collective bargaining, which is the intent of the proposed legislation.
Senator Mitchell: Why not specify that? Bear in mind that many public sector employees do not belong to a union and, therefore, are without the benefit of collective bargaining processes.
Senator Eggleton: I want to clarify a point raised by Senator Nancy Ruth on the question of the workers' income tax benefit, which proposes to help low income people, in particular those who have been trying to get over the welfare wall. I believe that the benefit is not included in Bill C-10.
Mr. Menzies: It was in the ways and means motion.
Senator Eggleton: When will it take effect?
Mr. Menzies: The Working Income Tax Benefit is already in existence.
Senator Eggleton: I am asking about the increase.
Mr. Menzies: The ways and means motion has passed the house.
Senator Eggleton: Was it at the first of the year?
Mr. Menzies: I am not sure of the actual date. We have someone here who knows the actual date.
Gérard Lalonde, Director, Tax Legislation Division, Tax Policy Branch, Department of Finance Canada: In response to the question, it is stated in the budget that the parameters of the Working Income Tax Benefit will be expanded, in essence, to double the amount contributed to the program. The details of how that expansion will be put in place will be worked out with the provinces, which we are doing. Letters have been sent to the provinces, and we hope to have everything wrapped up before the summer.
Senator Eggleton: Therefore, it does not have the same sense of urgency as some of these other items.
I want to ask about infrastructure. In the 2007 Budget, over $4.5 billion was allocated to infrastructure. If you remove the money that goes automatically through the Gas Tax Fund or the GST rebate, that brings you down to $2.9 billion. Less than one-half of that has gone out the door. Yet, we are talking about another $7 billion over the next two years.
How can we be confident about shovels in the ground with that kind of a record? What is changing in terms of the machinery of government's ability to deliver on these programs? What is changing that we can be confident that there will be those kinds of investments?
The other aspect that also comes into play is municipalities since they are a key part. They have put their capital budgets to bed for the year. How will they come up with additional money? They do not have a lot of money to start. They are dependent largely on the property tax. They cannot deficit Finance like the federal government. Yet, they are a key part of implementing this program and have a considerable need as the Federation of Canadian Municipalities has pointed out. How will they suddenly come up with additional money?
There is a track record of not getting past money out the door. How can we have confidence in this infrastructure spending actually occurring?
Mr. Menzies: Thank you. Let me clarify. I misspoke when I said the Working Income Tax Benefit was in the ways and means motion. It will be in the second budget implementation bill. It is simply because of what Mr. Lalonde referred to wherein we have to get agreement with the provinces since it impacts them too. My apologies.
That segues nicely into the issue you asked about — getting infrastructure money out. My province — and I should not comment too much — was one of the last ones to sign on to the agreements. Our province wanted input into where the infrastructure money was spent. They wanted a great deal of input. I believe Ontario signed on in the summer and Alberta signed on even later. We could not flow money until the provinces agreed where the projects would be. We had expectations that this $33-billion fund would be PPP projects — private public partnerships — in order to triple the $33 billion. We were hoping to get $100 billion of stimulus. We may get that, we may not. However, to get it out of door, we had to have agreements with the provinces. The reality we face in Quebec is that we cannot deliver money to any community. We have to go through the province.
We now have those agreements in place. We can move forward more quickly because we no longer have to negotiate for almost a year with the provinces. We have $1 billion available for municipalities through a lending facility so they can come up with their portion of the projects. Municipalities are not involved in all of them. The municipalities do not have to participate in the rink project, but a number of programs require all three levels of government.
Let me give you an anecdotal incident in my constituency. We were trying to get waste water systems funded that are not part of the provincial plan. I have a boil water order in a community that I would like to see funded to get it fixed. It is a great spot for infrastructure money to get people working and fix a 12-year old problem. It was not a priority for the province so we have to go back to renegotiate that project. We need to have all partners on side.
The minister referred to his meeting in December with the provinces. I have never heard the provinces being so conciliatory saying this is important, urgent and we will work with the federal government to make sure these projects go ahead. I am heartened by that. We are hoping to get it working.
The Chair: Mr. Menzies, if you can keep your answers as succinct as possible. We are running out of time and you used more than your five minutes I have allowed you.
Mr. Menzies: My apologies.
Senator Ringuette: In the last two months, 216,000 Canadians have lost their jobs. However, there is only provision for 10,000 training positions for EI recipients, which is about 0.5 per cent. It is not even 1 per cent of the Canadians who lost their jobs in the last two months. Do you think that is sufficient?
Mr. Menzies: Not every person requires retraining. Many people have varied skills. Many of these people will be seasonal workers who will be able to go back into their field without retraining or who may be able to adapt into another field. In Alberta, I was talking to a housing contractor this weekend. He is rehiring already because housing in our region is starting to increase. That may not be the case all across the country. There are people who will be re-employed. We are not suggesting that we are going to retrain every individual. I do not think that was ever the intent.
Senator Ringuette: Do you think that retraining 0.5 per cent of unemployed Canadians is sufficient?
Mr. Menzies: We did not predict all of the job losses. We have created a plan to retrain some Canadians. We may find that we will have to go back again and increase this number. We will keep that option open.
Senator Ringuette: As a francophone, I am always intrigued by the use of the word "re-gifting" in the English language. That expression is not in the French vocabulary.
Mr. Menzies: What do you do with your Christmas presents?
Senator Ringuette: I would like to refer to the Main Estimates 2009-10. In section 14, on page 6 under Human Resources and Skill Development Department, item workplace skills. There used to be $229 million. There is nothing for this fiscal year under workplace skills. Under apprenticeship incentive grants, Main Estimates were $99 million last year and this year, it has been reduced to $62 million. On grants to voluntary sector organizations for adult literacy and essential skills, Main Estimates last year provided $24,000,800. This year it was reduced by $4 million. In the same department, under efficient functioning of the Canadian labour market, there is a reduction of $23 million. In sectoral counsel and cross-sectoral counsel to support and enhance productivity and competitiveness in Canadian workplaces by supporting investment in and recognition and utilization of skill, support used to be $77 million and has been reduced to $49 million.
Moving on, I am looking at contributions to assist unemployed older workers in communities with ongoing high unemployment and/or affected by downsizing, support used to be $37 million and has been reduced to $7.8 million. Human resource planning and adjustment measure used to be $7.7 million. It is down to $6.8 million. The voluntary sector and non-profit organization to deliver outreach program used to be $6.7 million and is now down to $4.5 million. The Labour-Management Partnerships Program used to be $1.6 million. It is down to $1.2 million. Canada's international labour initiative was $300,000 and it is down to $200,000. The list goes on and on.
Are these issues of re-gifting into your economic stimulus plan or are these formal decreases in potential training programs for Canadians?
Mr. Menzies: My understanding is that I am here to speak to the budget, so I will refer to training and employment stimulus in the budget. That is $1.5 billion for EI training programs, $55 million over two years for youth employment, $60 million for targeted initiatives for older workers, $40 million to launch the $2,000 apprenticeship grant and $87.5 million for the Canada Graduate Scholarships program.
However, there are a few things I think that are very important to get on the record: We are increasing training on First Nations — $100 million for the Aboriginal Skills and Employment Partnership and $75 million for Aboriginal Skills and Training Strategic Investment Fund.
I would love to come back sometime to talk about the estimates but I think we are talking about the budget implementation act.
The Chair: Your department wants us to pass the interim supply before the end of this month, so we may well see you back before too long.
Senator Ringuette: I guess the answer to that question was exactly that: It is a question of re-gifting.
The Chair: Thank you for helping us illustrate the definition of the term "re-gifting."
Senator Di Nino: Mr. Menzies, the issue appears to be that some of our colleagues would like to see us carve out certain components from Bill C-10. I think they are wrong and I think there have been some good comments made on the navigable waters component of it. The other one they are talking about is the competition reform, which includes the Competition Act, which really stems from the review of the Competition Policy Review Panel.
We should also put on the record that many of the suggested changes, particularly in the Competition Act, go back to Bill C-19, which was a Liberal bill in 2004.
You know my Liberal friends put those changes in there. You cannot pick and choose, my friend.
The issue really is we need to re-emphasize the interconnectivity — the way these things will help to increase economic activity and make the business component of this a little more effective. It is worth repeating. Could you put on the record what your thoughts are on that issue?
Mr. Menzies: Thank you, senator. Indeed, we are acting on previous recommendations with regards to the Competition Act and we all can recall last spring when we were getting phone calls — and I am sure senators were getting phone calls, also — that consisted of: "Why am I paying so much for gas? Are these guys not colluding over the prices of gas?" We did not have the proper tools in place to even investigate that, let alone to lay charges if we did find collusion.
That is part of this. That is what Canadians asked for; "Can you prove to us that there is no collusion in gas prices?" We have all forgotten about that because the prices have come down. I am sure the oil companies still think it is not high enough while we think it is too high.
I will try to keep this short. Canada is a trading nation and that cannot be emphasized enough. We are dependent on exports. We are still building cars as well as we ever have; we are still growing wheat that is as good as ever it was; we still are producing beef that is as tasty as we have ever produced. However, our consuming neighbours cannot afford it. They are not buying like they used to buy. The number of container vessels going out of ports in Canada has diminished immensely.
That impacts everyone. We still have to provide whatever tools we can to our industries that are still building cars, growing wheat, producing cows, producing whatever product or service. We need to be able to give the tools to those individuals that operate within our regulations so they may compete internationally. We are in a very competitive market. People are slashing their business costs and we need to do that, too. Therefore, this whole Economic Action Plan is to provide the most competitive environment for our Canadian companies and provide an environment where new companies will want to come to Canada to set up a business, whether because of lower taxes or good regulations.
The Chair: The Economic Action Plan is the budget and the budget implementation bill, Bill C-10, is one portion of the implementation of that budget.
Mr. Menzies: It is all part of our Economic Action Plan.
Senator Murray: I had not intended to ask a question of Mr. Menzies but I will comment about the Navigable Waters Protection Act, as you spoke on the basis of some personal or constituency experience.
I do not think you need it. I said that to the minister on April 1. Quite apart from that, one of the objectionable features about the amendments is that it increases the amount of regulatory authority that is being given to the minister and then exempts large parts of that regulatory authority from parliamentary review. You will find they say in several places that these "regulations will not be considered a statutory instrument," which means it does not go to the Standing Joint Committee for the Scrutiny of Regulations.
Once again, I am sure there are arguments on both sides of the issue but I am also sure that both sides of the argument ought to be heard. That is why we have a Parliament. That is why we have public consultations and that sort of thing. Many people want to be heard. You must be receiving emails from every canoe and kayak enthusiast in the country and people associated with watersheds from British Columbia to the Atlantic provinces who feel that these amendments will deny them access to waterways that they have enjoyed for generations.
It comes back to my point that the stimulus package could be passed this morning if we chose to do so. The rest of it, which is not that urgent, could be held over and dealt with as these matters are usually dealt with in a bill that proceeds properly and hears representation and debate on both sides of the issue.
Mr. Menzies: I have a quick comment. I partially agree with you, senator. To be very fair, Senator Murray did come to our briefing we provided for all senators and members of Parliament. It was a long session and lasted until 11:30 p.m. one night. Therefore, thank you.
Senator Murray: It was past my bedtime.
Mr. Menzies: I suggest that there is no reason that this entire budget implementation act could not be passed this morning. To expand on what you have said and, in fact, going back to what the minister was referring to in 2005, there were two meetings held. There were government officials and witnesses and the bill was passed without amendment. There was only one witness that was not one of our public servants. As the minister said, that bill was comprised of many pieces — nearly 20 different pieces of legislation were impacted by that act. You are not setting any precedent here.
As the minister also said, these are unprecedented times. We need to get this out to Canadians. We will have budget implementation act 2, which perhaps we can study in a little more depth, but what we need to do now is get these people the extension of their EI and get this stimulus money out to Canadians.
We have a six-month window of construction in this country. You cannot get a shovel in the ground after October 1. We need to get the money out now and get construction projects going.
The Chair: Did you indicate to us when we might anticipate budget implementation act number 2?
Mr. Menzies: That is above my wage scale, senator.
The Chair: Some of your colleagues, who are among the officials here, have already told us that we should anticipate a Supplementary Estimates (A) sometime in April or early May, which has a lot of the implementation of budget initiatives as well — just to give honourable senators a bit of a spirit of what we will be dealing with over the next two or three months.
Senator Nancy Ruth: My comments are about gender-based analysis are addressed to you and to all people from the Department of Finance, as well as the public. I know that a GPA study has been done of the budget and that it will be made public to the status committee on women. I am hoping it will be tabled here before this committee as well, and I am assuming it applies to the entire budget.
Budget 2009 contains a number of charts showing who is affected by budget measures and to what degree. I would like to see the gender data on the charts in this book — that is table 85.2, the total personal income tax savings for individuals and families. The charts are on pages 308-311.
The Chair: Are you holding up the budget document?
Senator Nancy Ruth: I am; it is the budget plan. I want to know who the single-headed families in this are. I want to know which are the women-headed families. I want to know who is in those statistics for the lower income tax brackets, who are in the higher tax brackets, and I want to know that by gender.
I want to see these tables revised so that I get the gender breakout for them. I know this means more work for the officials here but they should have done it to begin with. I would like to see it sent back to committee and distributed to all of us.
The Chair: Would you anticipate the committee would have this information before we go to clause-by-clause?
Senator Nancy Ruth: I would ask that it be returned to this committee.
Mr. Menzies: I will take that recommendation back. If I could make one comment before I turn it over, each one of our recommendations for the minister to sign off on has a gender analysis on it.
Senator Nancy Ruth: If I do not see it, it does not mean anything to me. I have to see it.
Mr. Menzies: I guess you do not trust my word. It means something to us. We look at that every time. An observation I might make is that the one-half of the minister's policy advisers are women.
Senator Nancy Ruth: Many men are concerned about this subject. The good senator from Alberta certainly is.
Alison McDermott, Senior Chief, Revenue and Expenditure Policy, Fiscal Policy Division, Department of Finance Canada: I work in the fiscal policy division at the Department of Finance and we responsible for coordinating the overall budget process at Finance. I want to clarify, as Mr. Menzies has said, we do conduct a gender analysis on all components of the budget to the extent we are able to get that information.
For the components that relate to areas that our minister has specific responsibility for —tax policy and financial sector policy — we are, in most cases, able to do a more detailed analysis of those types of gender impacts. We rely heavily on the information that departments provide us about the budget proposals that they are bringing forward.
In some cases, it is hard to conduct gender-based analysis. Many of the budget proposals we are looking at would have impacts that are relatively neutral from a gender perspective.
Senator Nancy Ruth: I understand that. I understand the Auditor General will report the first week of May, hopefully, on GPA. However, the tables I have asked for are from tax filers. You know who is male and who is female. Do it, please.
The Chair: Thank you, Senator Nancy Ruth. I do not think our witnesses need comment any further on that. At this stage we have run out of the allotted time. I thank all honourable senators for their understanding. There were quite a few outstanding questions that senators would like to have posed, but I remind senators we will be dealing with this bill for some time as it is a very extensive bill.
Senator Murray: If someone wanted to move that we proceed immediately to clause-by-clause consideration of the bill, we could have the stimulus package voted by the end of the morning. I am here to help.
The Chair: Senator Murray, we very much appreciate your help, but unfortunately we have run out of the allotted time for this particular matter. You have made your point very forcefully and we thank you for doing so. This meeting is now adjourned.
(The committee adjourned.)