Proceedings of the Standing Senate Committee on
National Finance
Issue 16 - Evidence - July 7, 2010 (afternoon meeting)
OTTAWA, Wednesday, July 7, 2010
The Standing Senate Committee on National Finance, to which was referred Bill C-9, An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures, met this day at 2 p.m. to give consideration to the bill (topic: Part 2).
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, honourable senators, ladies and gentlemen, is the twenty-third meeting of this committee in relation to Bill C-9, the proposed budget implementation act 2010, which consists of 24 different parts. One more meeting and we will have had one meeting for each part of this bill, which is interesting. Over previous meetings, the committee has heard from ministers, departmental officials and outside stakeholders who are interested in or impacted by this legislation.
Last week, this committee heard testimony in relation to Part 2 of the bill. This committee was left with a number of outstanding questions concerning the application of certain changes to the Goods and Services Tax, GST. When we had the government officials here earlier, some of these issues did not come up. Therefore, we asked some of the government officials to come back to help us sort out some of those outstanding issues.
Therefore, on behalf of honourable senators, I would like to welcome back, from the Department of Finance Canada, Brian Ernewein, General Director, Tax Policy Branch. You may be surprised to know we are still going on this bill; you were before us three weeks ago. We are getting close to concluding our work on this.
We also have Mr. Lalith Kottachchi, Legislative Chief, Sales Tax Division, Real Property and Financial Institutions, Tax Policy Branch. I do not believe you have been with us previously, so welcome, Mr. Kottachchi.
We have one hour, colleagues, and Mr. Ernewein will just touch on some of the points to get us focusing on Part 2, clause 55 of Bill C-9.
Brian Ernewein, General Director, Tax Policy Branch, Department of Finance Canada: Thank you, Mr. Chair. We are happy to be here today to explain and answer any questions committee members might have in relation to clause 55 of Bill C-9. Having looked at the transcripts of last week's hearings, as well as some material we have been copied on, we understand there may be one or two issues related to clause 55 that the committee may be hearing more about.
As the committee knows, the clause contains proposed GST and, where applicable, HST legislative amendments respecting the definition of "financial service." Specifically, the amendments clarify that investment management services, services that facilitate financial services, and credit management services are not exempt financial services under the GST.
It is important to note that these services were always intended to be taxable under the GST and that this is the way they have been treated by both the Canada Revenue Agency, CRA, and the vast majority of taxpayers since the GST was introduced in 1991. The legislative changes in clause 55 are simply intended to address the uncertainty arising from adverse court decisions that expanded the scope of the definition of "financial services" beyond what was intended.
As the Minister of Finance indicated in his March 26 news release, these changes are intended to confirm the long- standing policy intent and to restore the situation that existed prior to the court decisions. As the minister made clear, the measures are not intended to impose any new taxes.
Having said that, the government was aware that some financial industry groups had concerns about the scope of the proposed changes. To provide further clarification in this regard, the Department of Finance Canada issued last week revisions to the explanatory notes relating to clause 55. Also, the CRA on June 20 issued an expanded Notice 250, which is an interpretation bulletin of sorts by the Canada Revenue Agency, which provides more examples of the transactions that would and would not be "financial services" under the proposed law.
We believe the clarification provided in the explanatory notes, together with the release of CRA's notice, ought to reasonably address any grounds for concern that had previously been raised regarding the breadth or alleged over-breadth of the intended rules.
The other issue that came up last week, which I thought I would speak to in case it is also a matter the committee would like to hear about, relates to the application of the proposed amendments to transactions before the December 14, 2009, announcement date. It is important to note that these amendments would apply to pre-December 14 transactions only in cases where GST or HST had been charged by the service provider in respect of those transactions. The amendments do not apply to past services — those prior to December 14, 2009 — where the supplier did not charge GST or HST.
This does have potential retroactive effect. In relation to such retroactive changes, the House of Commons Standing Committee on Public Accounts in 1995 recommended that the government develop guidelines for the application of retroactive legislation. The government's response to that recommendation set forth a series of considerations to be taken into account when considering changes having retroactive effect.
It is our view that the effect of clause 55 of affirming that transactions are taxable when they were treated by taxpayers as being taxable properly accounts for those considerations put forward by the government some 15 years ago. It confirms the long-standing and well-understood policy. It is consistent with both taxpayers' and tax administrators' view of how the law worked as demonstrated by their actions. It prevents a windfall to taxpayers who are seeking a refund of tax by virtue of another taxpayer's success in challenging the law. It addresses a material revenue risk for the government; at least $100 million worth of refund claims had been received by the time the government acted last December to correct the law.
The Chair: How much was that?
Mr. Ernewein: The amount CRA tells us it had in tax paid in error or refund claims in by the time we acted was over $100 million.
These changes correct an ambiguous or deficient provision, evidently from the court decision, that are in accordance with the object of the act.
There are two other things I would add. First, there are potentially adverse tax consequences to suppliers of services if the decisions are not reversed. It is a bit involved to take you through that, so I will just mention it. We are happy to speak to that at greater length. Second, it is important to note that the proposed changes will not seek to recover tax paid by those who have previously challenged the law in court and have obtained a final judgment on their specific transactions establishing that, under the current law, they were not liable to tax under that law.
With that, I hope I have provided a bit of an explanation about the scope and the intent of proposed changes. My colleague and I are happy to answer questions.
The Chair: Thank you very much. We appreciate your coming. We had a discussion with you as to what the areas of concern were, and you have touched on them. You have gone through them rather quickly. This morning, we were selling Atomic Energy of Canada Limited. Now we must focus on GST and financial services. It will take us a bit of focusing here.
Could you help us with respect to the guidelines that have been in place for about 15 years now with respect to retroactivity in tax legislation so that we understand the guidelines?
Mr. Ernewein: Certainly. By way of history, around 1993 the Auditor General looked into some action, or perhaps some would say "inaction," by the government in relation to some tax changes.
In the resource taxation field, there was a case involving Gulf Oil, which is a matter of public record, that related to the calculation of the royalty or resource allowance under the Income Tax Act. Gulf Oil prevailed and won its decision, and other oil and gas companies sought the benefit of that victory by seeking refunds of their own taxes. The government issued changes to the legislation on a more or less prospective basis. The House of Commons Public Accounts Committee was concerned about the changes not being retroactive and, among other things, asked the government to develop guidelines for when a retroactive change might be put forward. The report came out from the Public Accounts Committee in 1995, and the government responded to it later that year.
The guidelines that the government put forward noted, first, that retroactive tightening changes — there does not seem to be as much of an issue with retroactive relieving changes — should be done only on an exceptional basis, or writ large. Having said that, the considerations, factors or guidelines set forward by the government in saying they would guide itself are that the amendments reflect a long-standing, well-known interpretation of the law by the tax administration; they reflect a policy that is clear, well-known and understood by taxpayers; and they are intended to prevent a windfall benefit to certain taxpayers.
I interrupt myself to say we are happy to provide the material from the Public Accounts Committee and the department's response. However, we do not have that with us today.
Senator Murray: Excuse me. Mr. Chair, the witness is reading from a prepared statement. I presume the reason it has not been distributed is that he has it only in one language. Nevertheless, if he would be willing to have it copied, I think I and others would be delighted to have it in front of us.
The Chair: If we borrow your written documents, are we taking away your notes from you?
Mr. Ernewein: In fact, what I am reading from now may sound a lot like my prepared remarks, but it is not; it is from some other notes. However, I do not see a difference between having our remarks said aloud and having them provided to the committee if committee members would like to have a copy.
The Chair: That would be helpful. You live this every day, but we are into a lot of different things with this bill. It takes us awhile to focus on tax policy evolution.
Mr. Ernewein: Just to conclude, it is necessary to preserve the stability of the government's revenue base — that is material, in revenue terms — and correct ambiguous or deficient provisions that are not in accordance with the object of the act.
The Chair: Do these guidelines contemplate an interpretation by a court somewhere in the middle of this?
Mr. Ernewein: Not as to their application. Parliament is supreme, subject to constitutional constraints only, in passing retroactive legislation if it sees fit. These are guidelines that the government seeks to consider before putting forward amendments, but the application of the guidelines is not justiciable itself.
The Chair: I was wondering, because one of the guidelines is that the policy is clear and unambiguous. The court interpreted this to be clear and unambiguous in a way that Revenue Canada had not interpreted it. The court was not out to make new law. They were out to interpret what they said was the law, which happens to be different from what the tax authorities felt.
Mr. Ernewein: That is a fair comment. If we took the view that the court's interpretation settled the point, there would never be any dissonance between the prior application or the administration of the rules and what the court said the law said.
These are a compression of the presentation found in the government's response back in 1995. However, I think the point to make is that the well-known interpretation and policy is that expressed by the government and by the Canada Revenue Agency. What we point to in that respect are a number of statements that have been made in our explanatory notes or by the Canada Revenue Agency in its interpretations or rulings, which make the point that these are treated as taxable and note they have not been challenged by taxpayers — except by one or a few more recently.
As I said earlier, I think some of the strongest evidence of what the government's and taxpayers' understanding and expectations were around the rules was the fact that some $100 million of refund claims came in after the court decision came down. That is to say, taxpayers were paying this or treating this as taxable and paying their tax. It supports the view that there was not an expectation that this was not taxable when the court decision came down.
Senator Baker: Did you pay the $100 million?
Mr. Ernewein: No. The effect of the announcement on December 14, 2009, was to say there are changes to make clear that what we represent to be the prior policy and interpretation is what applies. That applies to everyone going forward. Going backwards, it will depend on how you acted. If you acted to pay the tax, we keep it. If you acted not to pay the tax — if you were one of the people who operated on the view that the law did not have that result — then the tax would not be charged.
The Chair: We had a situation from 1991 forward, and then there were some individuals who challenged this. The court made an interpretation, which the minister did not accept. Therefore, on December 14, 2009, there was an announcement that some changes would be made. Legislation would be forthcoming, and this would be the new wording in due course. Then there was an interpretation put out to help taxpayers understand what the new legislation would be, which would be effective as of December 14.
Clearly, that attempt has not worked out, because there has been a subsequent clarification and a subsequent notice. The taxpayer is clearly having difficulties understanding what the government is trying to achieve here.
Mr. Ernewein: That is a fair encapsulation of the issue. In fact, there are two issues. One is simply the application of this legislation to a retroactive period. Then there is the question of whether the changes to try to restore the status quo ante have gone further and broadened the tax net. That second issue of broadening the tax net I do not believe is a concern prior to December 14. If people were not expecting that the tax applied in those circumstances, they were not paying the tax. If they were not paying the tax, our rules do not have retroactive effect.
It is on that second issue, in terms of the alleged over-breadth of the rules, that we have heard and I think you have heard some of the concerns. On that front, we are not of the view that the legislation does overshoot the mark, but there was a concern that it did.
I should say, in fairness, that there was a concern also that the notice, the interpretation bulletin that the Canada Revenue Agency issued in February, suggested that the legislation was going further than we intended. To allay those concerns, first, the Minister of Finance issued a statement in March saying it is not intended to impose any new taxes. Second, we in the Department of Finance Canada, as drafters of the legislation and as those who prepare explanatory notes relating to the legislation, added some precision to the explanatory notes to try to further convey and nail down the intent. The Canada Revenue Agency also revised its interpretation bulletin, its notice, by providing more elaborate examples of the application of the rules, trying to make clear that in some of the examples where it was thought the rules might apply — to mortgage brokers, insurance agents and the like — the rules did not in fact apply.
The Chair: Rather than having two different interpretations and notices going out, is there something we can do to amend this legislation to make clear what the intent is?
Mr. Ernewein: In our view, it has been made clear by virtue of the legislation itself and by the Canada Revenue Agency's rather unusual step of issuing opinions or interpretations about the legislation before it is passed.
The Chair: We had two different groups before us representing professionals. Mr. Jack Millar and his group, GST Leaders Forum, have looked at the second notice that came out the day after the interpretation from Revenue Canada, and they still have concerns. The Canadian Bar Association has indicated that in spite of these latest changes, they have concerns about the interpretation of the breadth and the retroactivity.
Mr. Ernewein: I have only seen Mr. Millar's letter this afternoon, less than a couple of hours before the committee hearings.
My understanding on what I have termed the second issue, the breadth of the legislation, is that he seems to accept that what we and the Canada Revenue Agency say the legislation is intended to do is a fair result. He expresses a concern, however, that the legislation can be read as going further than that.
I am at a bit of a loss to understand that, if the administrator of the law is expressing a view that the law works as we believe it is intended to and if people accept that this is the reasonable policy result, there is more required to do.
The Chair: The point I am trying to make, and I will summarize with this, if we want to be supportive of what the minister is trying to achieve, is it better to try to achieve that by publishing a number of interpretation bulletins that do not have the force of law, or is it better to amend the legislation to make it clear what the minister is trying to achieve?
Mr. Ernewein: If it were necessary to amend the legislation to achieve that result and that clarity, then I think we would be supportive. However, we do not believe that is necessary.
Regarding the notices, as I said before, I think some concerns were raised around the examples in Notice 250 first issued by the Canada Revenue Agency in February. To the extent that those examples caused concern, we believe CRA's revised notice ought to allay that concern. It is not that there are two notices out there; there is a single notice, the last one, and it seems to correspond with people's understanding of our intent and their own view as to how the law might reasonably operate.
The Chair: I will now go to a list of senators who have expressed an interest in questions. I will start with the former chair of the committee, Senator Murray.
Senator Murray: I had not indicated I wanted to get into this. I will just say "nice try" to the witnesses.
Senator Baker: I must say to the witnesses my sympathies are with you because you are tackling a very difficult subject to explain. It is one of those things. It is the Income Tax Act and the interpretations given of that act by persons who work in the income tax department, and then the challenges in the Tax Court of Canada and further re- examinations in the Federal Court and the Federal Court of Appeal.
This is not to blame any politician or any government here, by the way. This is a matter of the way the tax department operates, but of course the government can make a decision if it wishes to be fair. Then I suppose it would have to try to be fair to everybody. Someone watching this would think this is funny, because what the witnesses have just said is that those persons who did not pay the tax will not have to pay the tax, but those persons who paid the tax will not be able to challenge their payment of it. Is that correct? You said a moment ago that a long-standing rule with the tax department is that you cannot use someone's success in a court case to ground an appeal. Is that correct?
Mr. Ernewein: Yes.
Senator Baker: That is the situation. A whole group of people will now not have to pay the tax just because they refused to pay the tax. Is that right?
Mr. Ernewein: I did say that people should not be able to rely on a court decision to obtain a windfall for themselves, but I would suggest that those taxpayers who have not paid the tax of their own volition before the court decision came down are not relying on the court decision; they are exercising an independent judgment about not paying the tax.
Senator Baker: It was not just a court decision. The decision was also adjudicated by the Federal Court of Appeal. The Federal Court of Appeal went back, as the Tax Court did, to the directions given by the tax department. It was not just one tax section. There were judgments made. I will not go over it all.
Someone else may perhaps ask a question, as I may not have the time and the chair will probably not allow me to get into it, but after hearing this now, the retroactivity of tax policy is rather disturbing. Certain sections here that concern what you are talking about date a decision back to 2005, five years ago, and another back to 2007 and so on.
Someone who now realizes what has happened does have a right, of course, to ask that their tax forms be reassessed within the rules of reassessment, and then the tax department will have to reassess it and perhaps go to a second level of reassessment. Is that correct?
Mr. Ernewein: Yes.
Senator Baker: It is. Therefore, you cannot base it on what a court decision was; you would have to find some other way of grounding your appeal in requesting the regional manager of the tax department where you live to reassess the income tax returns for those years. Is that right?
Mr. Ernewein: I am not sure I am clear on the point, but let me try to respond.
Senator Baker: People will want to become a part of this and get their money back.
Mr. Ernewein: People do have the right to object to their assessment. There are often, perhaps always, within the Canada Revenue Agency one or more or two or more levels of appeal, but it is always based on the application of the law as set by Parliament. The point here is whether the law should be to put in place what was thought by most to be the status quo ante.
Regarding retroactive taxation, it boils down to three choices: one, not to do it at all; two, to apply it to everyone going back; or three, to do it on the basis of taxpayers' own behaviour. If they are operating on the basis that the tax did apply by charging it — and we think there are a small minority of cases where they did not charge tax, and we would leave that alone as well — then it is the least disruptive way of going about it.
The argument you put forward I think goes to one or two ends of the spectrum, that is to not apply it at all or apply it to everyone, even if they operated on the basis that they were not taxable.
Senator Baker: Is a fourth choice that the Court of Appeal and all those tax court decisions since 2007 were right, and now you are correcting — you say you are illuminating — what was already there, but in effect you could be changing what was already there in order to negate the court decision? A fourth choice could have been to give people credit for the tax they paid in that they should not have paid in. That would have been the other option.
There are two levels of appeal to your regional tax office — first level, second level — and there is a third level with different decision makers if new circumstances arise. Then you go to the Federal Court. You tell the taxpayers who will now be asking for their money back that they have a right to appeal to the Federal Court of Canada. Do you expect to have many of those with this change in the tax policy?
Mr. Ernewein: We do not expect with the change in the legislation that people would litigate the point, but I return to what you said a moment ago and to my comment about it a little earlier. I think if the view is that everyone should be entitled to get their tax back, that is the equivalent of not making the change retroactive. The only consequence of that, I suppose, is monetary, but it matters monetarily.
Senator Baker: Natural justice.
Senator Ringuette: I am listening and I just cannot believe that you are opening up the Government of Canada, with respect to the equal treatment of Canadians, to a class action court challenge in regards to the Constitution of Canada, never mind the Income Tax Act. You are treating Canadian citizens in two different ways with regard to the same issue.
Now, I am not a lawyer. I am just talking about the experience of being a parliamentarian, and this is what you are opening up the federal government to.
You are looking at maybe a potential $100 million tax refund claim. How much did it cost your department to go through all the different steps of fighting the people who argued with you about this tax base? How much money did you spend against these Canadians?
Mr. Ernewein: The direct answer is that I do not know. It would not have been the Department of Finance Canada that was involved in the litigation. It would have been the Department of Justice with the Canada Revenue Agency. It would not have been against all these Canadians.
It would have been against the few taxpayers. I guess it is a matter of public record, but it was three or four cases.
Senator Ringuette: Cases that went through all the different steps of appeal, through the Tax Court and the Federal Court. We know what the costs are for litigation. From my perspective, this is completely absurd.
You are the general director for tax policy. How many measures in this budget speech that are related to your department are not in this 900-page omnibus budget bill?
Mr. Ernewein: I do not know the answer to that directly. A number are not, and the plan for them would be to come forward with a tax bill this fall. Perhaps half, but I do not know the number. We can certainly tell you which ones are in and which are not, but not today.
Senator Ringuette: Could you provide the clerk with that information, please?
I will give you at least two examples. On page 94 of the budget speech, there are at least two there — the disbursement quota reform in regard to charitable groups, and then the online notices. These are at least two of them.
Given all that was announced in the budget speech that is not in the budget bill, which is just like the situation we had last year at this time, are you working now on a second omnibus budget bill to be tabled in the fall to correct what was said in the budget speech but is not in this bill?
Mr. Ernewein: In relation to tax, there is —
Senator Ringuette: No, my question is whether you, as general manager of the Department of Finance's Tax Policy Branch, are working on a second budget bill, to be tabled in the fall, to add what you have not added in this 900-page budget bill that was stated in the budget speech.
Mr. Ernewein: I am not attempting to be difficult. My responsibilities —
Senator Ringuette: It is a yes or no question.
Mr. Ernewein: My responsibilities extend only to tax, and so that is all I can answer. It is not a correction, but our usual course of action for the past many years — certainly all the time I have been around — has been to try to issue tax legislation, or at least the more complicated bits of tax measures, in draft form and then to have them formally tabled with winter budgets. That has usually been to get draft legislation out sometime around now, and then to proceed with formal introduction of the tax bill in the fall, after we have had comments.
We are working on the tax measures that were part of the budget that are not in the first budget bill. The first budget bill has the tax measures that we were able to get done, that needed to be done at that time.
Senator Ringuette: Last year we had the issue in the budget speech about the tax credit for home renovation, which is not in the budget bill. In the fall we had a second budget bill with that tax credit measure that was under your direction. Will we have a second budget bill with your tax measures? If the tax measures announced in the budget speech are not in this bill, then the government can once again, this fall, take issues that have not been put forth in this budget bill and say, "Oh, we have a second omnibus budget bill." That bill would, again, have everything but the kitchen sink. It seems that everything but the kitchen sink that should be in here from this speech is not in here.
Mr. Ernewein: In relation to tax, it is following the normal course of action, which is to have a tax bill or a tax release with the more complicated parts of the tax measures out for consultation and then tabled in the fall. We are indeed working on that.
I can mention a couple of other measures. In addition to those, you have changes in relation to the non-resident trust provisions, which have been put forward before. The budget proposed a number of changes and indicated that we would be consulting on those and putting out draft legislation before moving forward. It is the same with the proposed regime for the reporting of aggressive tax transactions — again, a consultation regime.
In order to have consultation on that, on the proposal and on the draft legislation, it did not fit to go into the first budget bill. Those would be among the measures in a legislative package later this year, along with, I hope, every other remaining tax measure that is from Budget 2010.
The Chair: Thank you, Senator Ringuette. Your time has expired. We will now proceed with the next senator.
For a point of clarification, when Mr. Millar was here, he indicated that with the December 14, 2009, announcement we are dealing with here there was no prior public consultation. He indicated there was no consultation, and you are saying there was.
Mr. Ernewein: No, the consultation items I was talking about were in relation to non-resident trusts and aggressive tax reporting, which were in the budget. There was nothing before the announcement on December 14 of the proposed changes, but they were announced by way of a press release, and then draft legislation followed that.
The Chair: Yes. You are confirming what he said, that there was no prior discussion.
Mr. Ernewein: Not prior to December 14, yes.
The Chair: Thank you.
Senator Mitchell: To follow up on Senator Baker's question, I would like to know why you would let go the past tax that people should have paid but did not. Is it just because it is hard to collect it, or is it because they were significant firms with significant batteries of lawyers and accountants who could fight you to a standstill?
Mr. Ernewein: No, on the contrary. There was not much expectation on our part that there would be a substantial number of cases where people would not have collected the tax. We think that in most cases people were observing the rules as we thought they were written and as the CRA applied them. In the event that somebody had not collected a tax and this was representing a change, that somebody had taken a position by their actions that was consistent with the position taken by the particular taxpayers who were before courts, then the proposals seek to respect that.
Senator Mitchell: How much money do you think should have been collected that was not and will not be collected? Do you have any idea?
Mr. Ernewein: Not definitively, by any stretch. I can say, as I have, that we know that refund claims that had come in by the point in time at which we did act were in excess of $100 million. If we are right that most people were paying the taxes and few people were not, then if you are asking about the did-nots, it would be a smallish sum in relation to that.
Senator Mitchell: The refund claim would not be presented by people who had not paid.
Mr. Ernewein: No, it would be presented by those who had paid and, having seen the court decision, are looking to get it back.
Senator Mitchell: You are using it as a proxy.
Mr. Ernewein: Yes. If we are right that most people were reading the law the way we were, then the did-not-pays would be a small fraction of that amount.
Senator Mitchell: Provided that the $100 million reflected most of the people who had actually been paying the tax.
Mr. Ernewein: Yes, whatever the absolute number is on the did-pays, the did-nots would be a small amount of that, but we do not know whether the refund claims represented everyone who had paid and would have been entitled to get it back, based on the court decision.
Senator Mitchell: It would be millions of dollars, probably?
Mr. Ernewein: I cannot say.
Senator Mitchell: Huge amounts of dollars.
What about for the future? I know it is not a situation of no tax being paid and then all of a sudden now everyone has to pay it, but do you have some idea of what the annual haul will be in the future from this kind of taxation? I am looking for an assessment of exactly how much the government has actually increased taxes.
Mr. Ernewein: I think our answer is not at all. The answer is to put the tax system back where it was thought to be, and neither to raise any additional revenues nor to expend any.
Senator Mitchell: How much did they raise from this particular feature of the tax?
Mr. Ernewein: I do not know that we have it broken down.
Lalith Kottachchi, Legislative Chief, Sales Tax Division, Real Property and Financial Institutions, Tax Policy Branch, Department of Finance Canada: We do not have that number broken down.
The Chair: We had a figure from Mr. Millar of $2 billion a year.
Mr. Ernewein: I believe that $2 billion was the figure thrown out, if I can use the term, by the press in this over- breadth issue — that if it applied to these many different things that we did not think it applied to, it would raise that amount of money.
The Chair: It is easy for the media to jump on a $2 billion figure; I agree with you.
Senator Mitchell: It sounds compelling to me.
Senator Callbeck: Thank you for your explanation. Certainly it is a confusing issue. As I understand, Canadians who did not pay tax on these services will not have to pay that tax, and Canadians who did pay tax will not be able to get it back. That is not showing equal treatment to Canadians.
Senator Ringuette: Exactly.
Mr. Ernewein: It is showing different treatment based on different actions; that is true.
Senator Callbeck: That does not make any sense to me.
Mr. Ernewein: I will ask my colleague to speak to the point that this is not unprecedented in the way changes of this sort have been made.
Mr. Kottachchi: I understand your reaction to the situation, but you have to put it in context. GST is a transaction tax. There are two parties involved. There is a supplier who charges, collects and sends the money to the government as an agent of the Crown. It is the supplier's duty. Then there is the taxpayer who pays the tax, the purchaser or the recipient. If we were to exempt the tax retroactively, that means CRA would have to go back to the supplier and say, "You were entitled to input tax credits because the transactions were taxable. You charged and collected tax."
Also, on the input side we allow input tax credits to the suppliers. It will disrupt the situation and send the wrong message to the suppliers that, as agents of the Crown, they may not have to collect tax, because if they have collected the tax, they may be hit retroactively.
We have to weigh all the implications when we go retroactively. At the outset, you may say there are two different treatments and it is not fair. The suppliers, acting as agents of the Crown, collect the tax, because they regard it as taxable. Purchasers pay the tax under an agreement. The suppliers have no way to retroactively say to the purchaser: "CRA has assessed me for input tax credits. Now I want to change the pricing arrangements because now I have to get it back from you, the customer." The suppliers have no mechanism to do that retroactively.
Those are the considerations that go into the analysis in making these kinds of retroactive arrangements to say that you acted in a particular way and that should stand.
Senator Callbeck: It is still very unfair. Let us say that Senator Moore has paid $5,000 in taxes on these services and I have not paid anything. He cannot get that back, and I do not have to pay a thing. There is something wrong here.
Senator Baker: There sure is.
The Chair: Senator Tkachuk, you would like a clarification?
Senator Tkachuk: Yes, I would. In other words, if there was a store in Saskatoon that did not charge the tax, say a Leon's store, and you wanted it to charge the tax, you would have to send the store a letter; the store would then have to go to the people to whom it sold the product, collect the tax from them, and then seek all their input as well, right? Is that what you mean, or is it the other way around?
Mr. Kottachchi: The way the GST system works is that at each distribution level, the suppliers, the vendors, claims input tax credits for the GST they pay for their inputs, and then they charge for their output tax and collect the tax from the purchasers. In the Leon's situation, Leon's will be claiming input tax credits and charging the tax to the customer.
If we were to change that situation, reverse that situation retroactively, that means the customer can get the refund. The government pays the refund to the customer and the government tells Leon's that the input tax credits it claimed are now at risk and must be given back. If Leon's has to pay back these input tax credits, that means it has to change the price, because the store has to recover its cost. Now there is no mechanism for the store to go back to the customer because it is an agreement.
Senator Tkachuk: That is very clear. Thank you.
Senator Callbeck: If that store was not charging GST, as the senator suggests, it would be charged, would it not?
Mr. Kottachchi: If it was not charging GST, that means it was treating it as exempt. Let us assume that the store treated the particular transaction as exempt. In that situation, the store will not be able to claim any input tax credits for its inputs — computers or paper or anything — and those tax costs will be built into the price charged to the customer.
Senator Callbeck: Right, but all I am saying is that if a store is supposed to collect GST and does not, it is charged. It is a violation of the law.
We can go on and talk about this item, but I still think it is unfair because not everyone is being treated equally under this tax.
Mr. Ernewein: May I make a point, please? I do not mean to be irreverent, but I think there are hard choices involved here. To solve your issue, there are two solutions. One is to go back and apply the tax to everyone, whether or not they paid it in the past. That has a lot of disruptive effects, but that would enhance the level of fairness you speak of.
The alternative is to apply the tax to no one for the past, and that would also sort of enhance the level of fairness, but at considerable revenue costs and disruption as well, given that this is a transaction-based tax.
As I say, I am not suggesting that any point of view is invalid. I am just saying that there are hard choices to make in all of this. We would be interested to know, for future reference, whether this committee is recommending that we go harder at it or less hard.
Senator Callbeck: You mentioned that $100 million in claims for refunds came in. Someone asked whether you paid that, and you said no, but did you pay any of it?
Mr. Ernewein: There is a specific provision made in the release of the legislation before you for judgments awarded, court decisions that finally awarded taxes to be refunded to the particular claimants. Whether or not the money had been paid out by the point in time at which the rules were announced, the taxpayers would still be entitled to the judgment they received.
Senator Callbeck: Right now, as it stands, those who paid the tax would not be able to get a refund unless they appeal to the Federal Court; is that what we are saying?
Mr. Ernewein: I am saying that post-announcement, it will not matter. If they had their judgment before December 14, that would be respected. They could have been caught in the general rule because in some cases they would have charged the tax up front, then objected to their assessment and received an award of judgment saying that the tax was not owing. Although we have talked at some length about the rule stating that if you have been charged the tax and paid the tax you are liable for the tax, that rule would not apply to cases where people went to court before the announcement and prevailed in court.
Senator Callbeck: I want to clarify one thing. Right now, those who paid the tax would not be able to get it back, but is there a possibility of appealing to the Federal Court?
Mr. Ernewein: Not the way the law is constructed. The law is constructed to provide relief only if you got a court decision before December 14.
Senator Baker: You can always appeal, sir, but you may not be successful in your appeal.
Mr. Ernewein: Well said.
Senator Moore: Thank you, witnesses, for being here. This is such a dog's breakfast; I do not know where to begin.
You talked about the interpretation and the definition. I do not know how Joe Citizen can find the definition of "financial service." I look clause 55 in the bill, and it refers to other sections. Nowhere is it set out between two covers exactly what "financial service" is. Mr. Ernewein, you mentioned some things at the start of your presentation regarding businesses that are included in it. Could you tell me what they are again? They are not listed here.
Mr. Ernewein: Certainly. To make a point, this is not the entire definition of "financial services." This is an amendment to that definition.
Senator Moore: I know. It is all over the place.
Mr. Ernewein: It amends select parts, so it does not reproduce the entire thing.
Senator Moore: The point is where does the taxpayer who is paying for this and paying for your salary find out where it is? He has to hire a lawyer or a tax accountant to go through this form. It is ridiculous.
Mr. Ernewein: There are probably not many Joe taxpayers who have to worry about these rules in terms of direct application.
To answer your earlier question, I said that the amendments clarify that investment management services, credit management services and services that facilitate financial services are not themselves treated as financial services.
Senator Moore: Therefore what?
The Chair: They are not exempt.
Mr. Ernewein: And therefore are taxable.
Senator Moore: "Therefore are taxable" is a backhanded way of saying that they are liable for tax. Does that mean that a stockbrokerage will now have to collect and remit GST?
Mr. Ernewein: No, but perhaps I will ask Mr. Kottachchi to fill that in.
Mr. Kottachchi: Stockbrokers' commissions would be exempt under the GST. CRA's expanded Notice 250, which was released soon after the explanatory notes were revised, was issued on June 30. I have an example with the full service brokers' commissions.
Senator Moore: I see another part here. In addition to the definition, there is an "asset management service." What about someone who is looking after your RRSP or your Tax-Free Savings Account? Will that broker or company now have to pay tax?
Mr. Kottachchi: Investment management services, which include the mutual fund management fees, segregated fund of insurance companies' management fees, and RRSP administration fees, have been taxable since 1991. There is no change there; that policy continues.
Senator Moore: They have all been taxable, but some have not been paying it?
Mr. Kottachchi: No. In the case of RRSPs, we believe that they have been paying tax.
Senator Moore: Your interpretation is that they have been conforming to the law?
Mr. Kottachchi: Yes. I want to clarify the point. It is not the individual RRSP holder that pays tax, because it is not charged to the investors. It is the trust that holds the account that pays the tax.
Senator Moore: Yes, I understand.
Mr. Kottachchi: If a bank trust company is managing those funds, then they charge that fee to the trust.
Senator Moore: Okay. You mentioned the papers that were issued to clarify this situation. I am not sure what they did. In a newspaper article of March 26 of this year in The Globe and Mail, under the headline "No GST hit for financial sector," the Minister of Finance himself suggested that the proposed amendments were badly worded.
In a letter to the committee, Mr. Millar says, at the bottom of page 2:
Second, we continue to believe that the unclear wording of the proposed legislation leaves it open to interpretations that could cause more services to be excluded from the definition of "financial service" (and thus taxable) than the Minister of Finance intended when he gave his assurances that these amendments would not result in any new taxes.
You may have looked at this, Mr. Ernewein. The letter goes on to state:
For instance, Example 8 in the Revised Notice 250, which deals with an intermediation service in respect of the issuance of credit cards, is identical in all material respects to Example 2 in the CRA's former Policy Statement P- 239. However, whereas that former Policy Statement concludes that the service in question is exempt, Revised Notice 250 concludes that it is taxable.
Mr. Millar says there are other examples of conflict to guide to statements of policy between the CRA and the Department of Finance Canada. What do you have to say about that?
Mr. Ernewein: In a word, he is right that there is a conflict. The legislation would change the result in that notice P- 239.
Senator Moore: Change it how? Finish your statement. Change it in which way?
Mr. Ernewein: To take the transaction out of the exempt category and make it taxable. However, what he is not acknowledging is that that change to P-239, that example, is in response to one of the court decisions, and the press release is specifically about overturning some of those court decisions. With that, the result ought to change and does.
Senator Moore: Are there any other examples there? He alludes to the fact that there are other examples. Did you look at his letter and compare it with those two documents to see whether there are? I tried but could not follow it.
Mr. Kottachchi: I recognize they made a statement. We looked at it briefly. The letter says, "In our view, other examples in Revised Notice 250 also appear to conflict with former statements," but I am not sure what they are referring to. We are not aware of any situations as such.
Senator Moore: Regarding this coming into force for services paid for after December 14, 2009, Senator Baker asked about the retroactivity. How far back can and does the department intend to go? How many years? Is it one year? Is it back to 1991 when the GST came in? What is your thinking?
Mr. Ernewein: The legislation's coming into force does express this to apply back to the inception or the introduction of GST in 1991. However, that does not lead to the view that that requires a change or a reassessment by CRA of taxpayers' tax bills.
Put differently, taking the change back to 1991 safeguards any attempt by taxpayers to rely on any of the court decisions for any year to say that they are entitled to a refund when they have paid the tax. Because of the way the tax is proposed to apply to pre-December 14 periods — that is to say, if you paid the tax you are liable to pay the tax — there ought not to be any change required by CRA in its reassessments of earlier years.
Senator Moore: As a principle, retroactivity in law is repugnant and should not happen in a country where we believe in the rule of law. You cannot change the goal posts after the ball has been kicked off and the game is under way. I think it is terrible. We had the same thing a few years ago with the Quebec school bus issue. It is terrible law and it should not happen. I do not know how taxpayers will be able to keep track of what is going on in their own businesses if they have to keep facing such reviews. I do not think anyone around this table on either side could condone that. I do not think it is right.
The Chair: Senator Banks, our time is up, but you have an opportunity to ask one question.
Senator Banks: This is all beyond me, but I will go back to Senator Tkachuk's example of Leon's selling me a sofa and not charging me any GST. If Leon's sells me a sofa for $1,000 and does not charge me GST, then Leon's has to divide $1,000 by 105 and multiply that by 5 and send you the GST, does it not?
Mr. Ernewein: According to the example, yes, that is quite clear. Even if the store advertises GST-free items, that does not make the items GST-exempt. Leon's has to get it out of the net.
Senator Banks: That was my question. Thank you.
The Chair: I thank Mr. Ernewein and Mr. Kottachchi for appearing today. I hope we are better informed now. We know what the issues are. Our concern is that both Mr. Millar of the GST Leaders Forum and the Canadian Bar Association say this is not well thought out and recommend that we should not proceed because it is not clear. However, you still defend your position, and so we have to find a balance; that is our job.
Senator Baker: The witnesses have done an excellent job in a difficult situation. Policy that goes back for years is difficult to explain, and they have done an admirable job.
The Chair: On that note, I thank the witnesses for being here.
Over the past several weeks, we have heard testimony from ministers, departmental officials and interested stakeholders. For the bulk of that time, we have focused on the various parts of this bill separately. However, as one of our concluding sessions, we will look at the bill in the broadest sense as a whole as opposed to specific parts or clauses.
We are pleased to have with us this afternoon C.E.S. (Ned) Franks, Professor Emeritus, Department of Political Studies, Queen's University. Professor Franks knows this committee, and I know from other occasions that we can rely on him to help us with some of these issues. Professor, please proceed.
C.E.S. (Ned) Franks, Professor Emeritus, Department of Political Studies, Queen's University, as an individual: I am honoured to be here. I promise that I will not talk about any specific area of the bill in any detail whatsoever. From what I have seen of the records of the committee, you have an enormous amount of detail on many parts of it. I will look at the budget implementation bill as a bill before Parliament and what it implies for the parliamentary system.
To make my viewpoints open and clear at the beginning, I do not like omnibus bills. I have a great deal of sympathy with a government that introduces them. I consider Bill C-9 an omnibus bill to end all omnibus bills, although I would not claim, if I were in the government, that I would not introduce such a bill. The reasons lie in what has happened to Parliament over the last decade. I will try to introduce the committee to some of these problems in Parliament that lead to such a bill being tabled.
Senator Angus: Is it d-e-c-a-y-e-d?
The Chair: Do not be distracted by these comments. I will recognize him when he has the right to ask questions. I apologize for my colleague. Please proceed.
Mr. Franks: Budget implementation bills are, like prorogation, a normal, useful and even essential part of parliamentary procedure and, like prorogation, they can be abused. Budget implementation bills have changed profoundly in the last 16 years, which is as far back as I went, regardless of which party has been in power. They have changed from relatively short bills that dealt with minor items in the budget speech that required amendment to existing legislation to enormous omnibus bills that go way beyond minor items in the budget to profound changes in many and unrelated aspects of administration and policy. They have now reached, in my view, the state of abuse.
The title of Bill C-9 speaks for this. It is "An Act to implement certain provisions of the budget tabled in Parliament on March 4, 2010 and other measures," and some of the measure in it are not budget measures; they are other measures. I begin to wonder what is really happening here.
Let me offer some statistics. From 1995 to 2000 inclusive, the average budget implementation bill was 12 pages long. I have not gone back further than that, but the length has historically been 10 to 15 pages. The average budget bill between 2001 and 2007 was 139 pages. I cover that period because it was in 2001 that they began to increase in size, and we have seen both a Liberal and a Conservative government at work in this increase.
There was a truly huge jump in the last two years. The bill was 580 pages in total last year and is 883 pages this year, for an average of 730 pages. The bills have been completely transformed in the last 15 years, and we must ask what this implies, why it happened and where we should we go from here.
Bill C-9, an 883-page agglomeration of varied and unrelated pieces of legislation, is a symptom of an illness in our parliamentary system. It is a consequence of a Parliament that has become close to dysfunctional in its processes of examining and passing legislation over the past 40 and more years.
Bill C-9, as it now exists, is likely to be at least half the legislation, in terms of length, passed in 2010. I can give you statistics for 2009. Parliament passed bills that received Royal Assent that totalled 1,790 pages. The budget implementation acts totalled 580 pages, or 32.4 per cent. The appropriations acts, which are really not issues for discussion, were 280 pages, and ordinary, non-financial legislation totalled 930 pages.
If this budget goes through and the amount of legislation passed this year is the same as last year, at 883 pages it will be almost 50 per cent of the number of pages of legislation that receive Royal Assent in 2010. I suggest that that indicates an imbalance between it and the rest of the bills proposed in Parliament.
Further, Bill C-9 is not in accord with time-honoured principles of legislative drafting. It should be acknowledged, however, that these principles have often been violated in recent years as governments attempt to get their legislative programs through Parliament. In many ways, these omnibus budget implementation bills subvert the legislative process. They make it difficult to have careful study and scrutiny by Parliament and by the public. It is a bad road to go down, and it gets worse every year.
Bill C-9, the proposed budget implementation act now under consideration, is a logical, though not very attractive, response from successive governments to profound changes in Parliament in recent decades. For example, Parliament meets fewer days. In the period of 1945 to 1968, Parliament met roughly 154 days a year. From 1969 to 1973 it met approximately 163 days a year. The profound drops began in the years 1994 to 1998, when it met an average of 124 days a year. Sittings declined to 115 days per year in the next five years and to 105 days a year from 2004 to 2008. Last year it met for 130 days. I am talking about the House of Commons, of course. Even 130 days is less than the calendar suggests. The average from 2004 to 2009 was 113 days a year, which is down from an average of approximately 150 beforehand.
Parliament now also passes a smaller percentage of government bills. In the King-St. Laurent period of 1945 to 1957, almost 95 per cent of the bills that the government introduced received Royal Assent. In the Diefenbaker period, it was 90 per cent. Pearson, who, one must recall, only had minority Parliaments, got 86 per cent of his legislation through. Trudeau passed 68 per cent before 1979 and 77 per cent after. Mulroney succeeded in having 83 per cent passed, Chrétien 69 per cent, and only 45 per cent of Mr. Harper's legislation has received Royal Assent.
There has been a successive drop over a 50-plus-year period in the percentage of government legislation getting through, and that is a reality that governments must accept.
Parliament also passes fewer bills. For example, the average number of Royal Assents per year in the King-St. Laurent era was 67. In Diefenbaker's era it was 59 and in Pearson's era it was 52. Under Chrétien, the number was down to 38 and under Mr. Harper it has been 27. Again, there has been a profound drop over the years in the number of government public bills that have received Royal Assent.
To make a comparison with Britain, the average number of bills that get through there is about 37 per year. The British house sits, on average, over 160 days per year. In terms of hours of sittings per year, the British House of Commons sits roughly double what the Canadian House of Commons does.
There are more fundamental system differences that affect those factors, but it is an indication of what is happening to our Parliament, because 50 years ago our Parliament sat nearly as many hours as the British House of Commons.
This is, of course, partly a problem of minority Parliaments and partly a problem of attitude and expectations of members and parties. Parliament has almost forgotten about consensus, and far too often, in my view, the House of Commons is more concerned with partisan dog fighting and scandals than serving as our national legislature.
The understandable response to these changes by a government desiring to get its legislative program through Parliament is to reduce the need to go Parliament for legislation by, first, making its legislation more permissive and general so that the government's need to go to Parliament for legislation is reduced and, second, packaging legislation into larger units so that bills encompass more, the so-called omnibus bills.
The changes to budget implementation acts over the years show both these strategies at work. Budget implementation bills have grown much longer. They now contain many varied topics. They contain provisions that give government greater freedom to operate without reference to Parliament. The most interesting of those to me was the part of the 2007 budget bill that was to modernize the borrowing of the Crown and eliminated the need of the government to go to Parliament for borrowing, which took about two days' debate per year, or more in some years. That one, if I remember correctly, was not noticed by anybody in either the Senate or the House of Commons and it got through Parliament. Afterwards, someone said, "Oh my goodness." It was two senators. No one from the House of Commons noticed what happened. They said, "Oh dear, we are losing control of the public purse." Well, fine, but that to me is a symptom of the challenge that faces Parliament in dealing with a bill like a budget implementation bill of more than 800 pages. Parliament has to be very careful in looking at omnibus bills to determine whether we really need this and whether there is a better way of doing things. I will leave that at that.
These bills have grown longer and contain many topics. They have another advantage, and I believe this is correct, and I have done as careful looking as I could. They also have the advantage to a government of being matters of confidence, even though some of the items in them would not under normal circumstances necessarily be matters of confidence. The government can claim that a bill is a matter of confidence and that they simply need to get it through.
Let me conclude this by offering some thoughts about legislation and what makes a good piece of legislation from a technical, drafting, parliamentary point of view rather than from a question of its administration and how the law courts will view it, et cetera.
Legislation governs the activities of government by identifying for both citizens and government what government may and may not do. Once passed and become law, acts of Parliament are the basic control documents that prevent democracy from deteriorating into despotism. Legislation is so fundamental and important to our system of rule of law and democracy that it needs close and careful scrutiny by Parliament and public.
The principles of good legislation drafting demand that bills should deal with a single topic or theme, and they should be presented to Parliament in a form that allows a focused debate on and committee examination of this topic or theme. They should permit a coherent debate on and examination of a specific policy or set of related policies. Bills should be in a readily digestible form that can be understood, analyzed and discussed by Parliament, parliamentary committees, the public and groups interested in and affected by the legislation.
Bills should not force Parliament to make an all-encompassing vote on a collection of unrelated policies where Parliament might wish to support some of these measures but would want to reject others.
In my view, recent budget implementation acts violate these principles.
I ask at the end why something has not been done about budget implementation acts before now. It seems to me we have one obvious answer. The problem has grown slowly. It is a product of creeping incrementalism that the budget implementation acts have grown slowly bigger and bigger over the past 15 years to a point where I think we have to look at them and ask whether this is really the way we want to go as a parliamentary democracy.
I would emphasize that this is not necessarily a Senate problem. It is a House of Commons problem primarily. However, I am not satisfied that our House of Commons has a legislative process that really meets the requirements and expectations of what a parliamentary system should achieve.
Those are my opening remarks.
The Chair: Thank you, Professor Franks. You mentioned that one strategy is that the government declares a piece of legislation to be a matter of confidence. What, if any, impact should that have on the manner in which the Senate handles such a bill?
Mr. Franks: Mr. Chair, you ask a loaded question. On the one hand, the Senate is not a confidence chamber. On the other hand, the House of Commons agreed a few years ago that if the Senate did not pass a bill by a certain date, this would be considered a want of confidence. You are the only non-confidence confidence chamber in the whole world.
My view to you, and I think it is implicit in my remarks, is that you as a Senate committee are free to do whatever you want with the bill in front of you, and then the Senate itself will have to make a decision to do what it wants. If it decides to refer it back to the House of Commons, that, to my view, is a procedural motion, not a motion of substance, and should not be a vote of confidence. The house can then rethink its excesses of legislative superfluity.
The Chair: Thank you. I was interested in your comment on that regard.
Senator Runciman: Thank you, professor, for being here. It is an interesting subject, although your approach here today is a bit ironic since the justification for these extended hearings has been really to deal with specific parts of the bill, and of course that is not what you are dealing with today. It is an interesting subject, and the operation of Parliament today is a concern shared by many Canadians.
I am sure you appreciate that over 50 per cent of this bill dealt with the one issue related to tariffs. I believe 52 percent of the bill dealt with that one issue. You cited some statistics with respect to the difficulty of getting legislation through governments and the declining success rates — 86 per cent in the Pearson minority government and down to around 50 per cent currently, I guess, or as of 2009. I gather that was the number you were talking about. I think I saw an article in perhaps The Hill Times where you expressed some sympathy for the government's challenges in this regard but still did not alter your view.
I have used this example before, but I think it is a good one, given this conversation. The Colombia free trade agreement took a little over two years to get through Parliament, and I think it only managed passage into the Senate by catching one of the opposition parties off balance. I cannot recall the details. However, that gives you an indication of the challenges in this minority government to govern and to govern with some degree of effectiveness. Up until a few weeks before the closure of Parliament, no legislation whatsoever had been finalized in the House of Commons. These are real challenges that the government has to face. The political reality is that if it wants to make headway and deal with the challenges facing this country, the government has to look at what options are available.
With respect to this legislation, a former colleague of yours, Tom Courchene, whom I am sure you know well, wrote an article for Policy Options, in which he said the following:
When economic historians look back at Finance Minister Jim Flaherty's 2010 budget, it may well be that the creative and enduring legacy will be that the budget began, at long last, to address Canada's persistent innovation and productivity deficits.
He goes on to talk about the budget bill we are talking about being widely praised and so well received that it became an immediate non-story. That is the reaction of Canadians generally.
Individuals and groups have appeared before us who have concerns about particular sections of it, and you and others are concerned about the number of issues that are wrapped into this bill. However, you talked about governing and governing effectively, but I am not sure how you accomplish that given the current climate in the House of Commons. I share that concern, and I am not sure how you turn that ship around other than by having a majority government. Hopefully, from our perspective, we are looking forward to that day in the not-too-distant future.
You talked about parliamentary sitting days and fewer bills. As measurement tools, I am not sure bills are the best tools to utilize to measure effectiveness. I and Senator Baker, and perhaps others in this room, have served in elected office. Extended sitting days are not necessarily productive in terms of serving the public of a province or the country. Some would argue that having fewer bills is probably a positive situation in many respects, given one's partisan view of the government of the day, I suppose.
Those are considerations you might want to reflect on when you are looking at these issues in the future.
The Chair: Do you want him to comment on any of these, or do you want to use all your time with statements?
Senator Runciman: I will reiterate and reinforce something you said earlier with respect to this being a continuing problem. There was a finance minister who appeared before this very Senate committee. He was asked by former Senator Ferretti Barth whether it was really a good idea to further encumber the bill by making all the changes and whether it was customary to proceed in this manner. This was the finance minister's answer regarding the tradition with respect to budget legislation:
Instead of presenting one bill for each individual item, we have grouped them together in an omnibus bill because that is just the most efficient way to bring matters before Parliament. However, it does mean that a broad spectrum of items is encompassed in one bill.
Former Finance Minister Ralph Goodale said that in 2005.
The Chair: You can respond to any of those, or not, as you will.
Mr. Franks: I have a lot of sympathy with the government, and I tried to make that very clear in my remarks. What I do not like is the end product of governments having to deal with Parliament over the last 50 years and winding up with something like Bill C-9.
I have seen omnibus bills in the past. I thought some of them were pretty reasonable, such as the Conservative government's Federal Accountability Act. It was an omnibus bill; it was about five bills, and it was logical to put them together. I am happy with that.
One of the largest bills before Parliament was the tax amendments back in 1971 or so, after the Carter report. That was over 400 pages. I do not believe that Parliament handled that in detail, but there was reason for it to be an omnibus bill.
To use the vernacular, the problem I have is that this is a dog's breakfast, really. On the one hand, you are dealing with the question of possibly selling off parts of AECL. I think the House of Commons already expressed a view on that one way or the other, but now it is lumped in with everything else as a vote of confidence on the whole thing. There are the changes to the Canadian Environmental Protection Act. I will not comment on their merits, but they are things that will change the role of the government and the public in environmental issues.
Last year's omnibus bill had one on navigable rivers that did not get much discussion. I am a whitewater canoeist; I love non-navigable rivers for my own purposes. Will this harm my canoeing in the future? I will get too old for it pretty soon, but what about my children? What will happen to them?
I worry about putting so many things together that you do not separate out enough for a good discussion.
On the other hand, I look at an awful lot of the opposition in Parliament purely as cussed oppositionists. I do not believe you could introduce a bill in Parliament, except something with saintly objectives, that someone would not object to if he or she wanted.
I think one of the problems in the House of Commons, which is less true in the Senate, is that the House of Commons does not make a distinction between bills on which there is a fundamental political difference between the two sides, which should really get a lot of debate, and housekeeping bills, bills that any government would introduce, or something very much along the same lines.
For example, the first bill that got through Royal Assent in this current session was Bill C-2, I believe, on free trade with Colombia. That one has an enormous number of tables and lists of things at the end of it. I think either government could have introduced it in very much the same form and it should not have been terribly contentious. I feel the same way about other bills.
However, I do not find the House of Commons making a distinction between bills that it wants to spend a lot of time on and those it does not. That shows that something is going wrong in our Parliament, that the parties perhaps do not know where they stand. Therefore, they object to everything on the opposition side.
I will stop there.
Senator Baker: I have a couple of brief questions. Professor Franks, your analysis dealt with the passing of legislation by successive governments down through the years. When you were giving your analysis, I was thinking that the amount of legislation passed is the standard sometimes used by the public, political parties and commentators for the success of a particular government. It is the same analysis if you look at municipal or provincial governments.
Do you think the time will ever come when a political party would be successful advocating a reduction in the number of laws that we pass?
Mr. Franks: We do not pass very many compared with other legislatures. My memory is that the national legislature in France passes something like 600 bills a year.
Senator Tkachuk: I would not have guessed that. Who would have guessed that?
Mr. Franks: We are on the lean and meagre side as opposed to the legislative profligacy of the French and some others.
You have to ask what legislation is for, to begin with. One, legislation gives government powers. The one you were looking at before is the power to take money away from people, which is the taxing power. When it is passed by Parliament in whatever form, that legislation will be subjected to the courts because there are many people and businesses with a lot of money who are affected by it, and they can go through the court procedures.
A huge number of changes in tax legislation are demanded because of court decisions. If I remember rightly, the Auditor General reported on this a few years ago and said there were thousands of amendments to the Income Tax Act that had not been passed as amendments but were issued as orders or directives by CRA. That is the kind of legislation I think Parliament should pass and pass quickly.
It seems to me the problem comes in when there are issues that tread on a few toes, such as Senate reform or the so- called crime bills where there are differences of opinion between the parties. I would expect Parliament would want to spend more time on those.
However, a parliament that cannot change the laws relating to income tax simply because it does not want to deal with that amount of legislation seems to be avoiding the responsibility of a parliament.
Senator Baker: The present bill we are passing involves many government departments. If you were to ask a question in the House of Commons regarding an aspect of the proposed legislation, you would have to ask the minister to whom the particular provision relates.
Once upon a time, a minister would stand or fall on the performance of his or her department; if a mistake were made by the department, the minister would sometimes be compelled to resign. That is not so today because ministers are not expected to know everything that goes on, because of the complexity of our legislation and so on.
Do you think it unfortunate in the evolution of our parliamentary democracy that a minister is not expected to know exactly what is happening in his department because of the multiplicity of legislation?
Mr. Franks: One would have to go in so many different directions to answer a question like that. Have we really moved to prime ministerial government rather than ministerial government? Who actually answers the questions in the house? Is it the minister or the person whose duty that day it is to answer questions regardless of what they are on?
Senator Baker: You should visit the Senate. One person answers everyone's questions. Anyway, go ahead.
Senator Duffy: And does it very well.
Senator Baker: Go ahead, professor.
Mr. Franks: Sorry, I was speechless.
It is a good question. I used to get — and still can, if I work at it — fairly excited about the rapid turnover of deputy ministers. The normal deputy minister in Canada lasts about three and a half years, which means that at any given time, about half the deputy ministers have served for less than a year and a half or so.
Even accepting the word of the current Clerk of the Privy Council, Wayne Wouters, it takes two years for a deputy minister to become fully in charge of his portfolio. My view is it is closer to three, which was Gordon Robertson's view.
Then look at ministers. I did a table of the number of ministers in the house in the last 20 years, and the average department of government had 11 ministers in 20 years, and that does not include prime ministers. I might be very cynical, but I do not believe that any minister could get up to snuff on a department in less than two years, and they last less than two years.
Senator Baker: Yes.
Mr. Franks: I think this needs examining. I do not know how you change the system. My understanding is that in Britain, the ministerial turnover is roughly similar. The reason they look so competent during Question Period is that all the questions in Britain are written. They have them available. They have staff who tell them what the likely supplementaries are and what they should say, so they stand up and look like they know what they are talking about. It is just that they can read very well in public, as far as I can see.
Senator Baker: There is a cabinet meeting, of course, usually three days a week, and another meeting takes place just prior to the cabinet meeting. This is a meeting of the deputy ministers and representatives from the Privy Council Office. They are called "the centre." Has anyone ever written a book or done a thesis on the centre?
Mr. Franks: I understand you invited my friend Donald Savoie here and he could not appear, but I believe he wrote a book called Governing from the Centre. It is quite a good one, actually.
Senator Baker: Is it about "the centre," though?
Mr. Franks: It is pretty good — the centre and the periphery.
Senator Baker: But is it about "the" centre?
Mr. Franks: The king and the courtiers? Which centre are you thinking of?
Senator Baker: The deputy ministers and the Privy Council Office. Perhaps I am getting off subject, Mr. Chair.
Mr. Franks: No, no.
Senator Baker: I am.
Mr. Franks: I just want to make a comment. I tried to find out, looking through the Privy Council Office website, how frequently the cabinet meets, and I could not find out. I would think that three times a week is pretty optimistic for 35 people to get together. A committee is different.
Senator Baker: There are three committees. That is normal.
I have one final question.
The Chair: I thought your last one was your final one. Do you have a real one this time?
Senator Baker: Yes, a real one. Professor Franks, you are talking about the amount of legislation we are passing. There is a law in the Criminal Code that Senator Angus can quote word for word. It is commonly referred to as "ignorance of the law is no excuse." In other words, you cannot use it as a defence if you violate anything that is in the Criminal Code.
Do you think that with the complexity of all of our laws and the number of laws we are passing, perhaps we should strike down that provision and, in fact, ignorance of all these laws should perhaps be an excuse?
Mr. Franks: Absolutely not. Just shorten the length of the budget implementation acts; that would do a lot to solve the problem.
Senator Gerstein: Professor Franks, welcome to our committee. It is a delight to see you in person and to hear your comments. You are a professor at Queen's University, one of Canada's great universities. I must say I am very proud when I look back that my daughter graduated from that university and that my mother received an honorary doctor of laws.
I see you have written a number of books. You have been an academic and a commentator for most of your life. How many books have you written?
Mr. Franks: There is a collection of books and monographs. A book, like my one on the Parliament of Canada, has hard covers and you open it. A monograph is a published study of some sort. Adding those together, there are about 13 of them, and there are over 100 academic articles. I do not keep track of newspaper stuff.
Senator Gerstein: How long have you been writing about the Parliament of Canada?
Mr. Franks: Actually, I started writing about the Legislative Assembly of Saskatchewan. I did my first article on that in, I think, 1967; so you can call that the start of my academic publishing career.
Senator Gerstein: The reason I am asking you this is because I have done a pretty extensive media scan, and I cannot seem to find anything that you have written, until our current government, on the subject of omnibus bills. I will ask the indulgence of a number of my colleagues here on both sides, because I will subject them to a couple of the introductory comments I made when Bill C-9 was introduced into the Senate.
My media scan went back 250 years. It went back to King George III. Chapter 29 of the British Act in the third regnal year of King George III, price of bread, et cetera, was the omnibus budget bill — 250 years ago, professor. It dealt with bankruptcy; it dealt with papist wills; it dealt with Protestant lessees and poor law settlements.
Then we went to 1859, Viscount Palmerston. Gladstone was his Chancellor of the Exchequer, and he had problems getting a bill through that sought the abolishment of duties on paper. Sure enough, he just put her through the next year in the budget omnibus bill.
I got up to Asquith's government in 1909. What did they do? The famous finance act, people's budget, radical social reform, served as the basis for the foundation of the welfare state. Then you can move up to, as has been mentioned, the recent governments — Liberal and Conservative.
I must say I was very taken yesterday. Senator Banks said that, in his opinion, the use of omnibus budget bills was wrong when Liberal governments did it and it is wrong when Conservative governments do it. I do not agree with him, but I must tell you, I give him great credit for at least being consistent in his criticism. He has mentioned it on many occasions.
However, I come back to my question: For some reason, I just cannot find anything that you have ever stated, during your lengthy career, about omnibus bills until our government came to power. I have to ask you, do you have something really against us — notwithstanding that you said you had sympathy for the government? I mean, how do you explain this?
Mr. Franks: It is sort of like with a disease; you do not feel good for a few days, and then you begin to feel a bit worse, and then you feel awful and you do not get up, and then you go to a doctor and you realize you are really sick. What I was trying to suggest in my description of the fungoid growth of omnibus bills —
Senator Gerstein: Over 250 years.
Mr. Franks: No, no. I just took 15 years, because I did not want to go back to your lifetime, sir, just mine.
I found there they were averaging 12 pages or so back then. That is fine. There is a legitimate use for them. Then I find them averaging well over 700 pages, and this one is 880.
I use a basic rule in looking at politics. If there is an order of magnitude change or difference in size then there is a pretty profound system change, and 800 pages is almost two orders of magnitude bigger than 12, so I think there is a profound change in their use and their content. I think it is worth looking at.
Regarding the history, I do want to point out to you that going back 250 years, what we understood as public bills, apart from the bills relating to the budget, were very rare, infrequent events; and the main function of Parliament was what we would now call private bills. It was not until the last half of the 19th century that public bills became more important than private bills.
Budget implementation acts back then existed, certainly — as I suggested, they are a necessary component of our government — but they were relatively small and rare, and they would have been a major part of a government's legislative program in a year. However, we live in a different age now where we have massive amounts of public legislation. Taxation legislation, which you were looking at earlier, affects every citizen of Canada. I will leave that one aside.
When I find a budget implementation bill that says it is to implement not only measures related to the budget but also other measures as well, I begin to scratch my head and wonder what we are getting here. What sort of dog's breakfast is this? Are we tossing in the kitchen sink along with yesterday's meal? I think it is worth looking at; I certainly do. We are in a different world with budget implementation acts today than we were 20 years ago. I think that needs looking at.
Senator Gerstein: Professor, I do want to again express how much I appreciate your answer. I want you to know how much I appreciate your appearing before us today. It is wonderful for all of us. Thank you.
Mr. Franks: I consider it an honour.
Senator Banks: It is hard to formulate a specific question, so I will just start talking and see if one comes up.
I will comment on a couple of things that were said earlier. With respect to the standing back and looking at things from a great height that the professor is doing, it does not do us any good to argue about the details of who did what when over the last couple of years, but I cannot forebear but to talk about this. Senator Runciman referred to a letter. I have to refer to another letter, in which a Conservative senator at the time, speaking about what was then regarded as an omnibus bill and complaining that it contained too many pages, said it was egregious because it had 56 pages in it. That occurred while I was actually here, as did Finance Minister Goodale's bill, about which we complained bitterly in this committee. The difference was that all the matters that were addressed in that supposed omnibus bill — that is how we referred to it at the time — had some umbilical connection with the budget. There was some, however tenuous, connection with the budget. That, I argue, is not the case with Bill C-9. There are elements in Bill C-9 that have nothing to do with budget implementation whatsoever.
However, I think the professor's point, and I think that he was too kind to say it, is that this is our fault. This is Parliament's fault. I think you sort of did say that, but it is Parliament's fault. We have abdicated our responsibility. I am boring my friends because I have said this before. It is not just the House of Commons' fault, but it is our fault, the Senate's fault.
When Sir Clifford Sifton was the Minister of the Interior, he made the observation, speaking about the role of the Senate, that it was the Senate's job not to oppose or to hold into account the House of Commons but to be a guard against the excesses of the government, of the cabinet, whether they wear red and blue or both red and blue or whatever. That was the job of the Senate. It is a job that I have to say I think we used to do, but the one place that we have failed is in these kinds of bills.
I had the honour of serving on this committee when Senator Murray was its chair and subsequently with Senator Day, and they have both admonished us. They have both tried to do things to address those things that you have talked about, Professor Franks. We have to find some way to stop this happening simply because if Parliament does not have the job and if the Senate does not have the job of holding the government to account specifically with respect to the purse strings, then we have no job at all. That is the purpose of Parliament. That is what happened at Runnymede in 1215; it had all to do with collecting and spending money. To the extent that we have left the field, as Senator Angus said, we have decayed; that is what we have done. We have allowed our responsibility to decay.
You referred often to the House of Commons, its not having done its job and the difficulties faced there by minority Parliaments, but this is supposed to be a different kind of place.
Would you agree or argue with me that when it comes down to it, we can only talk about our job here, and our job is to try to be distanced from the partisan politics of these kinds of things and to do something about it here that maybe cannot or is not done in the other place, and that Sir Clifford Sifton was right, that this malaise in which we find ourselves is our fault when it comes down to it? We did not at any point say, "Do not do that again; do not send these things to us."
Mr. Franks: Truthfully, I would have liked to have seen this stopped in the House of Commons, this one bill, but you are our court of last resort here, the chamber of sober second thought, which as I have often said is not always sober, not always thoughtful, but usually second. You are the backstop on this.
From my point of view, as a witness before parliamentary committees, I take Senate committees very seriously because I find the questioning comes from a basis of knowledge and experience that is lacking in the House of Commons. There is also a sense of putting country first and party second, usually. I have a very high regard for the Senate. I have made that very clear, I believe, in much of what I have written. I often claim, with some pride, that I believe I am the only Canadian political scientist, as I do not like being called, who has written more about what the Senate does than about how to reform it.
Senator Angus: Give us a list.
Mr. Franks: For most of my colleagues, I maintain that reforming the Senate is akin to the medieval question of how many angels can dance on the head of a pin; you can give many different convincing answers, but it does not get you anywhere no matter what answer you come up with.
For all its strengths and weaknesses and everything else, I have a high regard for the Senate. I do hope that you can reach a consensus on what you think of this bill as a kind of legislation, not the specific things in it. You will recall that I did not talk about that. It is just the question of whether we should have something masquerading as a budget implementation act that covers an enormous number of different topics, some not in the budget, and that all of these are to be dealt with together as a matter of confidence. Also, not to be rude to this committee or to the House of Commons Committee on Finance, but they are being dealt with by committees whose focus is finance rather than the specific areas like the environment and so on.
I have not looked at the Senate's dealing with this bill, I confess, but I have looked at the House of Commons', and the Finance Committee spent 17 hours, 10 meetings, looking at it. That is a lot for that committee, and it did a good job insofar as it went. I am sure the Senate has too, but it is not like having people experienced in the field looking at each of those bills closely. Some of them are politically sensitive, like the environmental act ones or the provisions relating to Atomic Energy of Canada Limited, and would be better dealt with by specialist committees rather than by finance committees.
I have all these concerns that come up. Again, I emphasize that I am not saying that any particular piece of legislation in this bill is, by itself, good or bad. I am saying that when you aggregate them all together and treat it as one bill, it creates problems both for Parliament and for the public in trying to deal with it. That is as far as I am going.
Senator Tkachuk: Welcome, Mr. Franks. It has been an interesting discussion here.
Senator Banks, one man's excess is another man's good legislation. We are all getting religion here. I notice that politicians always get religion in opposition. I am just telling you this.
Senator Banks: And in July.
Senator Tkachuk: The idea of the omnibus bill is not new. Just help me separate this, because I think the Finance Committee should have a look at omnibus bills as a separated vehicle, just from a theoretical point of view and in principle.
Is your concern that it is an omnibus bill, or is your concern that it is a budget bill that is an omnibus bill?
Mr. Franks: Before I answer, let me just pay homage to Saskatchewan. Many years ago, I served as clerk assistant to the legislature there in the early 1960s. I have enormous debt and respect for Saskatchewan.
Senator Tkachuk: It is a great province.
Mr. Franks: Yes. Quite flat in spots, too.
To get on to your question, it is the omnibus bill side, but then there is a part that is also a budget bill. As far as I can tell, and I have asked many people on this, it is a vote of confidence because it relates to the budget. A normal omnibus bill, that was not automatically a matter of confidence, you could break into pieces happily and no one would get excited because that is a procedural motion, really. That question of confidence bothers me there.
To find appropriation bills in the budget speech or in the Speech from the Throne as questions of confidence is fine, but when we get to ordinary legislation I think a government should have to say whether it considers changing the Canadian Environmental Assessment Act or changing the position of AECL, for example, is a matter of confidence or is not. When you make something a matter of confidence, you increase the partisan aspects of it and diminish the pan- parliamentary aspects, if I could express it that way.
I do feel that agglomerating them together and calling them the budget implementation act has problems.
Senator Tkachuk: Would it be matters of principle? A government sets out a budget, and an opposition in a minority Parliament can defeat that budget. They could have defeated this budget.
The principle of whether it was an omnibus bill — they could have split it. They could have done that in the house. All three opposition political parties chose not to do that.
As a matter of principle, if they wished and were so opposed to it, they could have defeated the government and we would have gone to the polls and let the people decide. It seems to me, when you are in a minority government, it is less an abusive power than if you were in a majority government and doing omnibus bills because then the opposition does not have as much say about how the bills are dealt with.
Mr. Franks: There is a logical ploy played philosophers, which is reductio ad absurdum. I have suggested to you that this omnibus bill, which covers these many different things — some of which were in the budget and some which were not, which I think we are all agreed on — is likely to represent half of the pages of legislation passed by Parliament in this year.
My question then is, fine, if we are going to go that way why not have two omnibus bills in a year and then Parliament would not have to meet most of the time. You could have 10 days on one bill and 10 on the other and then get them through and everybody could go home.
Senator Tkachuk: That would be absurd.
Mr. Franks: I told you it was going that way.
Senator Tkachuk: That is not what the government is doing. Just to get the numbers straight, in this Parliament we have quite a number of government bills in the Senate. Were those included in your 50 per cent or 40 per cent, whatever the number was? That is government legislation that has now passed the Senate and gone over to the House of Commons.
Mr. Franks: I was dealing with one calendar year, which happened to be a year with a session, and that is 2009. Three Senate government public bills, Bill S-2, Bill S-3 and Bill S-4, received Royal Assent. The remainder of the bills that received Royal Assent were ones the House of Commons introduced, Bill C-2 to Bill C-64. I included both the Senate and the house there.
Senator Tkachuk: It was not the bills that are in the Senate chamber and the House of Commons in total, because we have Senate bills that have not yet received Royal Assent that are drifting around. Most of them have been sent over, but we still hold a couple in the chamber. The rest are going to the House of Commons, which should be part of the number, I would think.
Mr. Franks: This is 2009, so that was a session in itself. It was the Second Session of the Fortieth Parliament.
We are now into the Third Session of the Fortieth Parliament. You have a very real problem, at least from my point of view, because there are, as you say, a large number of bills that went through the House of Commons and came to the Senate that have not yet even received third reading but have certainly had second reading and so on.
I have kept a running total of the bills that have received Royal Assent this year so far, but it will not be accurate even before the summer break until the Senate adjourns after the next Royal Assent.
Senator Banks: Just so we know what we are talking about, in the third session so far, the Senate has passed 16 government bills. They have not all yet received Royal Assent.
Senator Tkachuk: That is right.
Senator Banks: Six of them were Senate bills and ten of them were bills that had already been passed by the House of Commons and were sent to the Senate, and we have now passed them. That is a total of 16 so far, not all of which have received Royal Assent.
Mr. Franks: There will be some more. Last year, by the time the Senate adjourned for the summer, my memory — and I could be wrong here — was that 24 bills had received Royal Assent. That was 24 out of a total of, I think, 34 last year.
Senator Tkachuk: I want to get back to the budget bill and your objection, just so that it is clear. If an omnibus budget bill is wrong in principle, then a budget bill should simply be the budget and any related amendments thereto, and nothing else; right? Is it the volume that creates the problem? You can have a 1,000-page bill that does not really say anything in it. We have 270 pages of tariffs and custom duties listed that could have been appended to the bill.
What is the problem? Is it the principle that Parliament should be careful of and study this, or is it principle of an omnibus bill, or is it the volume of the omnibus bill? Then we have a different problem, because is the volume 200, 500 or 1,500 pages?
Mr. Franks: I do not want to be black and white on this, but what I have pointed out to you is that it is quite likely that this single bill will be a number of pages, half the legislation passed by Parliament in this year.
Senator Tkachuk: So what?
Mr. Franks: Well, why not put all the rest in another bill and then just have two bills?
It seems to me that the issues of AECL and the environmental assessment are important enough that they deserve separate pieces of legislation and going to the specialist committees rather than here. This is not black and white.
Senator Tkachuk: Who judges that, Mr. Franks?
The Chair: You are running down on your time, Senator Tkachuk. Would you like to wind up with a final question?
Mr. Franks: I will answer the question about who judges this. The government makes the first decision of how it will introduce legislation, and then Parliament decides what to do with it. Government proposes; Parliament disposes. However, I would suggest that omnibus bills are not bad in themselves. It is just like alcohol: One drink is very good, but 20 drinks, do not go driving.
Senator Tkachuk: It is not the omnibus bill, then. Is it the page numbers?
Mr. Franks: No, it is more than the page numbers. It is the variety of items and the fact that some of them were not in the budget but crept in here. It is that some items are potentially very contentious and are not getting the attention that, in my view, they should.
It is also that in the past, it has been shown that putting items in an omnibus bill like this — and I used the example of the borrowing powers of the Crown, but I am sure I could find others — and when you get a bill this big, the details of the bill do not receive the attention that they receive in separate bills.
There is a place for omnibus bills, but my question — to which I gave the answer "no" — is whether this is an appropriate kind of omnibus bill for our Parliament to be dealing with now, and I think not.
Senator Mitchell: Thank you, Professor Franks. I was a master's student in the Department of Political Studies at Queen's University in 1973, when you were there. I did not have the occasion to take your course. After this afternoon, I regret that I did not.
I was intrigued by your analysis of this trajectory down to the amount of work this government has been doing. This government in particular has produced very little legislation. The government has explained — quite aggressively by Senator Runciman, moments ago — and more generally that the reason for that is that it has this problem of being a minority government and cannot seem to get anything done. The government also uses that explanation for why it needed an omnibus bill.
However, there is lots of evidence in history of minority governments that have done tremendous work. I think of Pearson, who did CPP, EI, medicare and the flag all under a minority government structure.
It is not necessarily the minority government structure that has limited the government's ability to bring in effective legislation. There are many explanations — for example, prorogation. We have had unprecedented prorogations that have cut into the work of this government. We have a government that I would argue is incapable, or almost incapable, of compromising on anything, so it is difficult to get the benefit of all sides of the house working together with the leadership that a minority government could in fact provide. It could be that the government simply just hates government and does not know what to do with it. I would happily argue that, in many ways.
I want to ask this almost rhetorical question: Is it not true that there could be many explanations other than simply the minority government situation to explain why this government in particular has been so unproductive, and many of those explanations, in turn, could be not particularly flattering of this government?
The Chair: Would you like to comment on that?
Mr. Franks: Ignoring the question.
The Chair: That is all right. Everyone else is ignoring the subject matter. Professor Franks, you have the floor.
Mr. Franks: I have former students in the House of Commons, including the Speaker, but I do not believe any senator around this table was a student of mine. I am sorry; they would have been very good students, I am sure.
I did not give you all the statistics, but they show that there has been a steady decline from the King-St. Laurent period of 1945-57, when 95 per cent of the legislation the government introduced reached Royal Assent, down to Chrétien, who was at 70 per cent, Martin, who was under 60 — his period is almost too short to count — and down to the current Prime Minister, at 45 per cent.
As you suggested, part of the problem is that the government ideology is not in sympathy with those of the opposition parties. If you want to explain Pearson, you could say he had a natural ally, especially for the social program legislation, in the NDP. However, there is something else going on there, because even majority governments pass less of their legislation. I gave you the Chrétien 69 per cent as opposed to the King-St. Laurent 94 per cent.
In Britain, almost 90 per cent of the government legislation gets through. If you add in the legislation that is introduced and passed in the next session, it is closer to 90 per cent.
What I believe has happened here — and I have been non-denominational and non-partisan here — is that we have reached a Parliament where the opposition has carried Lord Randolph Churchill's dictum — that the duty of the opposition is to oppose — to an extreme that I think handicaps how Parliament works. If I was blaming someone here, I would start with the opposition. The opposition has a duty to identify the things that it fundamentally disagrees with and wants to oppose and the things it does not.
As I also suggested, roughly 80 per cent of the legislation that comes before the House of Commons either party would introduce. Almost every one of these tax reforms that are so much of this omnibus bill should have been introduced by either party. As I say, the Auditor General has pointed out there is a huge backlog of needed amendments to tax acts that we are simply not doing because Parliament does not pass things.
I think that is an error on Parliament's collective part, and I blame the opposition. Then the government finds some way of getting around it, which the budget implementation acts are a good example of. If I were working towards a solution, I would not begin by saying the government is pigheaded and the opposition is mule-headed or anything like that. I would say, "Guys, you have a problem. Now let us try to identify it. Is this problem worth solving? Is it big enough to require solving?"
My view is we have reached a point where there is a problem in the legislative process that needs looking at. I have been trying today to point out that it has taken 50 years to get us where we are now, and I do not like the trajectory.
Senator Mitchell: I think you can also argue that there is a fundamental difference in values that we have not seen before, the kind of much more right of centre versus centre and left of centre. You could make that argument.
Mr. Franks: It is the first minority Parliament that I have seen in Canada where the government did not have a natural ally of some sort. Often governments can resolve that by having allies of convenience on specific issues. I am not convinced that this government has pursued that route, either.
Politics is not a matter for philosophers to decide; it is a matter for politicians, and politicians choose their own fate. I find it an interesting Parliament when I stand back and look at it. However, I do have this concern when I look at the legislative process, which I wanted to share with you today.
The Chair: I remind honourable senators that we have six to eight minutes left and we are dealing with Bill C-9.
Senator Murray: Let me say a word about the confidence convention first. For many years when the Minister of Finance stood up on budget night to deliver the speech, the motion that he made would be that the house resolve itself into Committee of Ways and Means. That was the rubric under which the budget debate took place. In more recent years, when the minister stands up to deliver the speech he moves that the house approve in general the budgetary policy of the government. Mr. Flaherty made that motion, as his predecessors have done. The motion was passed a while later. The confidence issue in this budget was resolved. If it had not been resolved, we would be at an election.
What we have before us in Bill C-9 is implementation. Just a word on that. You would know that Dr. Forsey wrote extensively about the confidence convention as it relates to budget bills, tax bills, and so. He was able to show, going back to the time of Sir John A. Macdonald, though not of Viscount Palmerston, that budget bills, tax bills, the rest of them, had been amended hundreds of times, defeated sometimes, and the government and the Parliament of the day went on.
Now, this government — and I will come to this in a minute — attaches the confidence convention to everything. There is nothing one can do about that. If there is a motion to adjourn, they will say that it is a confidence matter. There is nothing the house can do about that, I think.
The problem with this bill, Senator Tkachuk, is not the volume — I guess perhaps it is a problem — but the real problem here is that there are so many issues that are important and, I put in parentheses, virtually unrelated to the budget and virtually unrelated to each other, such as the sale of AECL, the environmental stuff, even the pension benefits standard stuff, the banking and credit union stuff and other things, and that, on their merits, are important enough to have been presented as stand-alone bills to be debated and examined on that basis. Putting them all into one bill and asking us to vote one vote of approval in principle is an absolute piece of nonsense. There is no principle to the bill, none.
With respect to this government, I hear what you are saying about the fact that there are no natural allies, and so on, and what others are saying about the difficulties of minority governments. I appreciate that. However, in my memory, no government has had such a compliant opposition as the present one does. It does not matter what the issue is, once the government attaches the confidence label to it, the opposition has never failed to cave in — never once since 2006, when the present government was first elected.
I think the government has shot itself in the foot with this bill. If this bill had been presented, say, as five or six separate bills, a number of things would have happened. First, those bills would have gone to the appropriate committee, different committees. Second, if the House of Commons members of those committees had been even half awake, they would have identified some of the flaws — not necessarily matters of great political controversy, but flaws — that have come to our attention and unintended consequences that have been drawn to our attention in our detailed study of the bill here, in clauses where we never expected them. Parts of the bill that I thought were, in the modern jargon, no-brainer and that we could pass — all of a sudden someone comes in and identifies a flaw in respect of which this government or some future government will be back again to fix it in another session of Parliament; I guarantee it.
The first thing that would have happened is that there would have been better study of all these bills that are now within two covers. Corrections would have been made before they ever left the House of Commons. They would have all gone through because Mr. Harper would have attached the confidence convention to them. They would have come here, and our job would have been far less onerous and detailed than it is, and I am certain that every one of them would have had Royal Assent by now. That is my view of the whole thing.
On the business of omnibus bills, on several occasions this committee has reported and protested the practice, and so on. The last time, in 2009 — and you will correct me on this, Mr. Chair — the committee put forward four possible options that the Senate might adopt when faced with a situation like this. One was to defeat the bill at second reading as an affront to Parliament. That would be rather extreme, but it is possible; we could do it. I think the second was to take it upon ourselves to split the bill. The committee could not, but the Senate could.
One of the options was to draft a new rule for the House of Commons. I do not know quite how the rule would read, but we would draft a rule that would say, "This is enough. We will not allow omnibus bills," or something of that kind.
What was the fourth option?
The Chair: I think your third option was the fourth one; I cannot remember the third one.
Senator Angus: It was an agreement to pass it, but a study would be done of the various elements.
Senator Murray: That is what they did the last time. That is editorial comment. That is absolutely useless, senator. They did that but it was useless, as we have seen.
Senator Angus: You mean all those months of the Navigable Waters Protection Act study were useless? They are all in this bill, now.
Senator Murray: Once it is through, it is through. Royal Assent covers a multitude of sins.
Mr. Franks: There once was a professor at Oxford who asked on an exam: Is that a question? He was a philosophy professor. My response to you is this: Is this an answer? In other words, all options are open to this committee and to the Senate. My devout wishes are that the Senate consider it seriously — not just that either you pass it or you do not pass it, but that you look at the other possibilities and express, once again, the concerns that were expressed last year.
The Chair: Honourable senators, Professor Franks had committed an hour and half of his time to us. I have four senators who want to make a statement. Could I be assured the statements would be short, succinct and on point?
Senator Duffy: I am okay, Mr. Chair.
Senator Neufeld: It will be very short. I appreciate what you have said and I appreciate that you are here. I do listen and respect your opinion very much.
I would suggest that I can find that umbilical cord in almost all of the things in here. In some way, it depends on who is designing the umbilical cord, Senator Banks, to something that has to do with money, budgets and taxpayers' money.
It is pretty difficult for a Conservative government to have a natural ally in a house of Liberals, Conservatives, NDP and separatists. When you have a Liberal government, a natural ally is the NDP. They are kind of the same farm team. Would you agree that it is easier for a Liberal government to find an ally in the house than it is for the Conservatives to find an ally?
Mr. Franks: Senator, I would be cautious on that because there are different kinds of conservatism. For example, in England there used to be a political strategy called Butskellism, which was a combination of R.A. Butler on the Conservative side and Hugh Gaitskell on the Labour side. They both had a common element of traditional conservatism with a concern for the traditions and preservation of society and for the welfare of all its members. It seems to me that Ms. Thatcher was the one who went to the hard-nosed American kind of conservatism from there. They have reverted, as far as I can see, closer to the Butskellism tradition.
The conservatism that I see in Canada now is closer to the Margaret Thatcher kind than to Butskellism. To say there are no natural allies to Conservatives does a disservice to the Conservative tradition or to the variety of opinions on the opposition side of the house. In fact, it has worked out that on most of its program, this minority government in the House of Commons has lasted longer than any other minority government and has been quite successful on a great many things.
The Chair: Thank you, Professor Franks.
Senator Angus: We have had a good academic discussion invigilated by the learned political scientist, Professor Franks. I thought it could have ended appropriately when Senator Banks said that we have ourselves to blame.
I first observed that practice when I came to this place. Senator John Stewart, from Nova Scotia, had a great academic background and held a beautiful belief in the traditions of Parliament. He used to harangue us 18 years ago about omnibus bills, not just in budget implementation but in any respect. It is our fault. I do not think the abuse of Parliament is happening with Bill C-9. There is something rotten in the state of this kind of work that we can fix, but I do not think this is the time and the place. As long as the debate was on the academic side, I was anxious to participate. When it became partisan at the end, I passed to the next speaker. Thank you, sir.
The Chair: Senator Banks, did you have a point of clarification?
Senator Banks: No, I am okay.
The Chair: Honourable senators, on your behalf I thank Professor Franks for sharing with us his views with respect to Bill C-9, budget implementation and other matters. We see that terminology in Bill C-9. It is most appropriate to this afternoon's discussion. We look forward to having the opportunity to continue some of the more esoteric academic discussions at another time.
Mr. Franks: Thank you, Mr. Chair. I am honoured to have been asked.
(The committee adjourned.)