THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Friday, April 30, 2021
The Standing Senate Committee on National Finance met by videoconference this day at 12 p.m. [ET] to study Bill C-14, An Act to implement certain provisions of the economic statement tabled in Parliament on November 30, 2020 and other measures.
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Honourable senators, before we begin, I’d like to remind senators and witnesses to please keep your microphones muted at all times, unless you’re recognized by the chair.
[English]
Honourable senators and witnesses, should any technical challenges arise, particularly in relation to interpretation, please signal this to the chair or the clerk and we will work to resolve the issue. If you experience other technical challenges, please contact the ISD service desk with the technical assistance number that was provided.
Honourable senators, the use of online platforms does not guarantee speech privacy or that eavesdropping won’t be conducted. As such, while conducting committee meetings, all participants should be aware of such limitations and restrict the possible disclosure of sensitive, private and privileged Senate information.
[Translation]
Participants should know to participate in a private area and to be mindful of their surroundings during discussions.
[English]
We will now begin, honourable senators and witnesses, with the official portion of our meeting.
My name is Percy Mockler, a senator from New Brunswick and chair of the committee. I would like to introduce the members of the Finance Committee who are participating in this meeting: Senator Boehm, Senator Downe, Senator Duncan, Senator Forest, Senator Galvez, Senator Klyne, Senator Lankin, Senator Loffreda, Senator Marshall, Senator Richards and Senator Smith.
I wish to welcome all of you and viewers across the country who may be watching on sencanada.ca.
Today, honourable senators, we continue our study of Bill C-14, An Act to implement certain provisions of the economic statement tabled in Parliament on November 30, 2020 and other measures, which was referred to this committee on April 20, 2021, by the Senate of Canada.
[Translation]
Honourable senators, for this first panel, we’re joined by representatives from the following businesses.
[English]
First, from the Hotel Association of Canada, we welcome the President and Chief Executive Officer, Ms. Susie Grynol; from the Canadian Council for Aboriginal Business, the President and Chief Executive Officer, Ms. Tabatha Bull; from the Canadian Federation of Independent Business, the President and Chief Executive Officer, Mr. Dan Kelly; and finally, from the Canadian Chamber of Commerce, Director, Parliamentary Affairs and SME policy, Ms. Alla Drigola.
Welcome to all of you, and thank you for accepting our invitation on behalf of the Finance Committee. We will hear your opening remarks, which will be followed by questions from the senators. Now I will recognize Ms. Grynol, to be followed by Ms. Bull, Mr. Kelly and Ms. Drigola. Ms. Grynol, you have the floor.
[Translation]
Susie Grynol, President and Chief Executive Officer, Hotel Association of Canada: Thank you for the invitation to speak to you today.
[English]
The tourism industry has been devastated by COVID-19. We were the first closed, the hardest hit, and we will be the last to recover. While there is optimism in the air that vaccines will bring our economy back to normalcy by the end of 2021, this will not happen in the hotel sector, not in 2021 and likely not before the fall of 2022. Canada’s summer tourism season attracts predominantly foreign visitors. They plan long-haul trips that take months of organization. These visitors will not be coming to Canada this summer.
With borders closed and with no sign of them reopening, our summer business will be driven by domestic tourism only. A domestic summer in Canada with public messaging that encourages care and caution will see Canadians flock to campsites, cottages and resort regions. Most summer vacations have already been planned close to home. Our downtown hotels will sit empty since there are no major festivals, fairs, attractions or sporting events planned from May to September. Our recovery will be minimal for any hotel outside a resort community this summer.
Business travel has effectively ground to a halt and is unlikely to rebound quickly. Zoom has changed our lives. Corporations have adopted no-travel policies as a matter of safety, and office buildings are sitting vacant across the country. In fact, the Government of Canada, in the federal budget, announced that it too would be cutting back on travel and saving $1 billion by doing so. In sum, the summer could see a brief recovery in resort communities but a protracted slump everywhere else.
Now let’s transition to the fall, when we will see two unfortunate realities. First, the border opening will coincide with colder weather. Canadians will go south in droves rather than spending their excess savings on domestic travel. Second, our business travellers will have no events to attend. There are no conventions or major business events scheduled for this fall. This double-whammy effect will leave our industry vulnerable to business failure at precisely the moment the CEWS and CERS programs are scheduled to terminate.
The recent federal budget did make some significant investments in tourism that will be helpful. There was investment into marketing dollars and specific funds to bring back our events business, as well as several other business support programs that may benefit hotels when the pandemic is over. However, these investments will not bring back the summer of 2021. They will not change the reality that fall will be our toughest quarter of the pandemic.
You might wonder how widespread this problem will be and how it will impact Canadians. According to our members’ survey from March, 70% of Canadian hotels will go out of business without an extension of CERS and CEWS to the end of 2021. That means we could lose the critical infrastructure that supports commerce, communities and essential services. It means our hotel owners — who operate predominantly small businesses, family-run in many cases — who operate the local hotel will lose their life savings. It means that the jobs of over 2 million employees in the travel and tourism industry will be at risk. It means that Canada will lose the ability to attract large international events. It means that our most vulnerable, remote communities could see their local hotel go out of business. This is not a small problem and it’s not one that will solve itself.
The broad-based sector-agnostic approach has worked until now, but it will fail distressed sectors in the fall. We need a tailored approach to deal with distressed sectors, like ours, that will have a protracted period before there is a true recovery. It is our strong recommendation that the government devote priority and attention to the recovery of hard-hit sectors, like the Highly Affected Sectors Credit Availability Program that was announced this winter. We believe we need an effective wage and fixed-cost relief program to survive the second year of COVID.
One thing is for sure, though. Travel will come back. Business events and conventions will resume. Festivals will be planned, Canadians will get married, and hockey tournaments will happen. There is no question about that. The only question is: When will those events come back, and will there be an industry left on the other side to support them? We thank you in advance for any support and leadership you can lend to this necessary effort.
Thank you.
Tabatha Bull, President and Chief Executive Officer, Canadian Council for Aboriginal Business: Aanii, Tabatha Bull n’indignikaaz, Nipissing n’indoonjibaa, Migizi dodem. I am Tabatha Bull from Nipissing First Nation and I belong to the Eagle Clan.
As president and CEO of the Canadian Council for Aboriginal Business, or CCAB, I want to thank you, Mr. Chair, and all distinguished members of the committee, for the opportunity to provide you with my testimony and to answer your questions.
I am speaking to you from my home office. I acknowledge the land as the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinaabe, the Chippewa, the Haudenosaunee and the Wendat peoples.
I am honoured to speak here again on behalf of our association regarding Bill C-14.
Indigenous businesses are represented in every region and every sector in Canada. Unlocking this potential can spur economic recovery and deliver increased prosperity and well-being for Indigenous communities and peoples.
Before the COVID-19 pandemic, the Indigenous economy underwent a period of sustained growth in recent years. As of 2016, it was estimated that Indigenous peoples contributed over $30 billion annually to Canada’s GDP. In Canada, the Indigenous private economy alone contributed roughly $12 billion annually, and these numbers only continued to increase until spring 2020.
Impressive gains were also being made in the growth of the number of Indigenous businesses. According to the 2016 census, there were over 60,000 self-employed Indigenous people, a 40% increase over what was reported in the 2011 National Household Survey. Additionally, there are over 250 Indigenous economic development corporations designed to generate wealth and jobs for community members. Development corporations employ approximately, on average, 300 people.
This leads us to the impact of the pandemic on Indigenous businesses and the economy.
CCAB, with our partners at the National Aboriginal Capital Corporations Association and the National Indigenous Economic Development Board, undertook two COVID-19 Indigenous Business Surveys supported by Indigenous Services Canada, or ISC. In our most recent survey, conducted from December 2020 to February 2021, we found that nearly three quarters of Indigenous businesses have experienced a negative impact from the COVID-19 pandemic. Almost half of Indigenous businesses laid off staff either temporarily or permanently. Only 17% of respondents reported they do not require additional financial assistance at this time. Over one third of businesses surveyed have no current lending relationships with banks, credit unions or government lenders. Many respondents specified they needed grants, not loans, and are unable to take on any other further debt. Of the respondents who required financial assistance, 58% did apply for government support and 52% received it. This left 6% who did not receive any government funding they applied for. However, 42% did not apply, which underlines the need for a navigator function to support Indigenous businesses to navigate the various programs. Nearly half of those Indigenous businesses reported that financial requirements were a significant barrier to accessing the COVID-19 Economic Response Plan.
If there is one suggestion that CCAB could provide pertaining to Bill C-14, it would be to remove the requirement for businesses to have a CRA number to qualify for the Canada Emergency Rent Subsidy.
Recently, CCAB engaged the Government of Ontario to remove a similar qualification requirement for the Ontario Small Business Support Grant, which they did. This allowed an estimated $2 to $4 million to flow to Indigenous businesses on reserve who would not have been able to access this support throughout the pandemic.
As always, CCAB is committed to working in collaboration with the government, our members and our partners to help rebuild and strengthen the path toward a healthy and prosperous Canada.
Thank you for your time. Meegwetch.
Daniel Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business: As always, we from the Canadian Federation of Independent Business, or CFIB are delighted to be with you. I want to build on the awesome presentations from my two colleagues from the business community. I certainly support everything the two previous speakers shared. Also, we sent a deck to the committee with some data from small business owners. I’ll be referring to that as I go.
Just to let you know, at this late stage in the pandemic, only 56% of small- and medium-sized businesses are fully open in Canada right now, over a year after the pandemic started. The fewest number of businesses that are open are those in Ontario. They have the most restrictive measures in place. The Atlantic provinces have looser rules although some new lockdowns in Nova Scotia were announced earlier this week.
By sector of the economy, I can tell you the impact is significant. The sectors that have been hardest hit are tourism, hospitality, the restaurant sector, arts and recreation and entertainment businesses, the services sector, including personal services like nail salons and hair salons, and the retail sector.
Staffing levels remain thin in small- and medium-sized firms. While it’s nice to see that employment numbers overall have been improving, that’s not the case for many small- and medium-sized firms. Only 41% of small firms have attracted back their staff at this stage, again, a year into the pandemic.
From a revenue perspective, it’s most worrisome of all. Less than a third of small businesses are at normal levels of revenue, with many of them reporting sales down 50% or more compared to normal levels. The economic ramifications are the number one concern of our members right now. Vaccine rollout is obviously very high, but the stress levels on business owners are massive at this moment.
Our data at CFIB shows that the average small firm has taken on $170,000 in new COVID-related debt. This is debt they would not have inherited had it not been for the pandemic. $170,000 is what the average small business across Canada will now have as a legacy of the last number of months, even with full utilization of many of the government support programs put in place. Many have been helpful, but even with that it shows this is just not enough.
Our data shows that one in six small businesses are at risk of closing their doors for good. We’re projecting 180,000 businesses will permanently close their doors before the end of the pandemic. That’s on top of the 60,000 that failed last year. If we do allow one in six small businesses and firms to close, that will take out 2.4 million jobs for Canadians.
The use of the government support programs in many cases has been high. Two thirds of our members — small business owners — have taken advantage of the CEBA loan program. That’s the most utilized program out there. The Canada Emergency Wage Subsidy was used by about 60% of small firms. However, other programs have just not been delivering what they should. The rent subsidy, while helpful to some, has been a real struggle. There are some major administrative issues. Only a quarter of businesses have used that. I can tell you, though, that three quarters of our members have told us that they would not have survived had government not put in place the programs that are there. The federal government did do a number of the right measures early in the pandemic.
Bill C-14 proposes several changes: raising the wage subsidy to 75%, which we support; extending the rent and wage subsidies until mid-March — a helpful measure which we’ve now passed; extension of the CEBA loan program until March, also good news; confirmation that the CEBA top-up will apply to the Regional Relief and Recovery Fund; and creating the HASCAP. All of those are helpful measures. One of the gaps in the HASCAP program is that it has no refundable component. It is a pure loan program. As previous speakers have said, we need some support to take away costs, not just delay costs for the future.
Of course, the budget built on some of the good news that is in Bill C-14: the extension of the wage and rent subsidies into the fall; the creation of the new Canada Recovery Hiring Program, a measure we favour; the immediate expensing of a variety of new capital expenses; and a plan to reduce credit card swipe fees. All of those are good-news elements for small firms.
In conclusion, I would like to leave you with a few recommendations for further changes to Bill C-14 and changes to the programs that have now been enhanced through the budget. There still is — Tabatha mentioned this — a variety of access issues for small firms to get a single dollar of federal help. The business number remains one of those obstacles. New businesses — those businesses that came on stream at some point in 2020 — remain excluded from every single one of the federal government programs. It’s just unacceptable.
There is no fix for the rent subsidy challenges that I spoke about, particularly for those with a holding and operating company. For the CEBA loan program, there are thousands of businesses that are still waiting for a second round of funding or who don’t qualify because they’re too small and they don’t meet the requirements of the non-deferrable expense route. There is no new fresh help for businesses to deal with the debt burden they’re facing, that $170,000 in debt. We’ve now recommended that CEBA be further expanded to $80,000 with 50% forgivable as well as adding a forgivable portion of HASCAP.
Of course, the budget has other worries for us. There’s no change to carbon taxes and the CPP premium augmentation that is expected later this year. The tax hikes are still planned for the months ahead. The new luxury tax will worry some selling cars, boats and aircraft. Also, there’s a dramatic ramp-up of spending in non-COVID-related expenses.
Senators, those are a few things I wish to share with you today, and I’m happy to take any questions during that period. Thank you.
Alla Drigola, Director, Parliamentary Affairs and SME Policy, Canadian Chamber of Commerce: Good afternoon, committee members. My name is Alla Drigola, and I’m the Director of Parliamentary Affairs and SME Policy at the Canadian Chamber of Commerce.
I will start off by thanking senators for their work over the last year in helping get much-needed supports to Canadians and businesses as quickly as possible. On the matter of Bill C-14, I advise senators to pass this legislation as quickly as possible. Today, I will focus on more current changes to critical business support programs and what improvements need to be made.
Thirteen months into the pandemic, it is long past the time to be treating all sectors as if they are facing exactly the same challenges. This is particularly true in what many describe as the hardest-hit sectors: tourism, travel, food services and accommodations, among others. Last week’s federal budget contained some good news items for businesses in these sectors, including the extension of the wage and rent subsidy programs into September, the new hiring program and the $1 billion tourism fund that will help support some segments of the hardest hit. However, these good-news items have been overshadowed by other more concerning inclusions and a number of exclusions. With that in mind, today I want to focus on three specific recommendations as they relate to the hardest-hit sectors.
First, the wage and rent subsidy programs need to be maintained at their current respective 75% and 65% maximum rates through the fall and likely even beyond. The rent subsidy program also needs to be expanded to work better for medium-sized businesses and for those with locations in high cost-of-living areas. Despite the good news that these critical programs have been extended, much of the feedback we have received from members has been their concern about the announcement that these programs will be gradually phased out starting in July. This change means that by September, businesses with more than 70% revenue losses will only receive a maximum of 20% subsidy for both wages and rent.
The issue with this change is that there is already a built-in sliding scale in both of these programs. As businesses see their revenues return, the amount of subsidy they receive decreases. Therefore, reducing the maximum rate is primarily going to hurt those businesses who are still down in revenues by 70% or more, usually due to ongoing public health restrictions. Businesses in the hardest-hit sectors will be the primary makeup of that group.
The Deputy Prime Minister has stated to the Canadian Chamber that the government is willing to be flexible on tailoring these programs should the situation on the ground differ from what is currently projected in the budget. We appreciate this openness to work with the business community. Keeping rates as they are must be part of that flexibility.
Second, the Canadian Chamber applauds the government for introducing the new Canada Recovery Hiring Program. The caveat is that we hope it is not wrapped up too soon. For the hardest hit sectors, we need to ensure that this good, useful program is not underutilized because it was exclusively available too early in the recovery process.
Finally, we need a plan to restart travel. Canada cannot afford to wait until after the pandemic is over to develop a travel restart plan, given the lead time required for implementation and for businesses to plan and prepare. This does not mean setting a date today. Instead, the government should publish a plan that includes clear metrics that we need to reach in order to safely start rolling back border restrictions and quarantine measures and what our approach will be for digital health credentials, including the use of vaccine passports.
As I close out my opening remarks, I want to reiterate that even if the economy does begin to open up in the next four to eight weeks, the reality is that the hardest-hit sectors will still require a longer runway for recovery. People do not typically plan a vacation on Monday and depart for it on Tuesday. Conventions and trade shows are often planned several years in advance. Businesses in these sectors require lengthy lead time, with much of the work being done in advance of payment. In the meantime, wages, rent and other fixed expenses still need to be paid, and that is before you add the payments on the significant amount of debt that has been acquired by businesses over the last 13 months. While some restrictions may ease in the summer, many of the businesses in these sectors will not see the revenues come back in a meaningful way until 2022 at the earliest, and that is what makes them unique. We need to start supporting their recovery process in a more focused and tailored way.
Through the Canadian Chamber’s Business-led Recovery initiative, we have put forward numerous resources on how businesses can safely reopen and guidance on rapid testing and how to talk to employees about vaccines. Canada is currently not utilizing all of the tools in our toolbox, and the hardest-hit sectors are the ones that stand to benefit the most from Canada pivoting and starting to look at how we can do things safely. Consumer-facing rapid screening, for example, is something that is being done in other countries around the world, and there is no reason Canada cannot follow suit. While supports for the hardest-hit sectors need to continue, the best thing we can do to help today is to have a plan about how they can safely reopen as quickly as possible.
Thank you, and I look forward to our discussion.
[Translation]
The Chair: I want to thank all the witnesses for their comments. We’ll now move on to the question period.
[English]
Honourable senators, for this panel, you will have a maximum of five minutes each for the first round. Therefore, please ask your questions directly. Witnesses, please respond concisely. The clerk will make a hand signal to show that the time is over and for us to move on to the next senator.
Senator Marshall: Thank you for all of your presentations. They were excellent.
All of you spoke about the future and the challenges that businesses are going to face in the future. However, we’re still in the middle of the pandemic, and I don’t think we’re going to be out of this by the fall. It sounds like you’re saying that you’re going to need support for quite a while. You’ve seen the budget. You know what the government has provided in support so far. How long do you see recovery taking? It looks like it won’t be this year, and maybe not even next year; it will be a long-term project.
I live in Newfoundland and Labrador, and we’re probably in the best situation now of all the provinces. We have very few cases. But going around to the various businesses — the restaurants, retail shops — even though the number of cases are low, I don’t get a sense that recovery is just around the corner.
I’d like to know your views on where you think we’re going in the long-term, where we should go with regard to government supports and what your views are on whether your members will survive this in the long term. I’d like to hear from each of you. We can start with Ms. Grynol, as yours was the first presentation. I’d like to hear your views regarding the long term.
Ms. Grynol: That’s a fantastic question. Thank you for it.
It will not be a flip of the switch. It might be for some segments of the economy. We’ve seen this where you move from one zone to next, and there’s a lineup outside of stores and you can’t get a reservation. There is some immediacy that will happen for some sectors.
But I can only speak for my own, which is the hotel industry. To Alla’s point earlier, lead time is required for planning. For us, we will experience lingering restrictions. Having 1,000 people in a convention room today is not even being contemplated. Public health officials will have to develop the metrics around how that can happen and how it can happen safely. If you just do a work-back schedule, by the time we figure out how to hold major events, and given how long it takes to plan those events, we’re not seeing a major business event in this country until spring, and even that’s optimistic.
I think we will see small groups coming back first. We will see domestic travel come back. The saddest part for us is that because we’re a seasonal business, all the revenue that we have to generate during the summer season that helps us survive the back half of the year is not within reach. There is no universe in which we see enough of a recovery in the travel sector domestically — because we’re not seeing international visitors this summer. There just won’t be enough.
For us, it means a layering of restrictions. That’s unfortunately compounded around the international border opening up and Canadians going south. They’re not spending that money in Canada; they will pack up their suitcases, get the heck out of Canada and go south.
If you layer in all of those factors, for us, it means we are dealing with a much longer-term recovery. However, I want to be clear that it’s not because these are failing businesses. This is critical infrastructure. We actually came off the highest peak performance in the hotel industry in the three years leading up to the pandemic. These are businesses that will bounce back the moment they are allowed to. That’s the difference. We won’t be allowed to recover for a long time. Our recovery will take, at earliest, 2022, but many project that our real recovery will not be until 2024 or 2025.
Ms. Bull: Thank you for the question.
Across our sector, we see about 8% of Indigenous businesses in arts, entertainment and recreation, and then another approximately 8% who are in food, so it will definitely depend upon the sector across our association, depending where those businesses are.
Similarly, we’ve seen a real hit to Indigenous tourism, which was one of our strongest-growing sectors. There are over 2,000 businesses in that sector, employing close to 30,000 people. For that sector, we have already lost a number of businesses that will not recover. I think that’s the same across all of our sectors.
The time required for recovery will be dependent upon us being able to close those gaps and ensure that the programs are inclusive for all businesses.
Mr. Kelly: Senator, your instincts are absolutely right that the recovery is likely to be quite long. Step one is getting rid of business restrictions. Let’s hope that will happen in the next number of weeks. Until governments, both federal and provincial, can tell consumers that it’s time to go back to the offices, it’s time to take a trip, that the border is open, theatres are open — yes, many Canadians are anxious and will leave their basements as soon as possible, but many others will stay at home much longer.
Then for other businesses, as Tabatha and Susie have both mentioned, it will be years before they can climb their way out. Even businesses that see their customers return will face the legacy of the COVID-related debt that they will have to deal with. For example, restaurants said they believe the economic harm will be solved over eight to ten years. That’s how significant the damage is to so many businesses before they find themselves back to a pathway to profitability.
Ms. Drigola: It’s an excellent question. It depends upon how you define recovery and recovery for whom. We need a plan to open up the border, but what does that look like? It’s not going to look like having the border open for every single international traveller to come to Canada. There will likely be rolling measures put into place, and businesses need to know that in advance so they can plan for such things. Segments of the hardest-hit sectors will take longer to recover than others. Convention centres will take longer, and restaurants will perhaps come back faster.
The Chair: Thank you very much. Well done.
[Translation]
Senator Forest: I want to thank all the witnesses for helping us with our discussions.
I’m taking this opportunity and trying to get some perspective... When we consider the impact of September 2001 on travel, clearly the tourism industry has been affected, particularly business tourism, meaning business conventions and meetings. Do you have an idea of the impact?
We hear that there won’t be a recovery, maybe not until 2022. However, we know very well that a national or international convention is planned several years in advance. For example, for your members who had booked conventions and events, is everything cancelled or postponed?
What’s the short-term or medium-term outlook?
My question is mainly for Ms. Grynol.
[English]
Ms. Grynol: There is so much pent-up demand out there that I can’t even tell you. People will be getting married every single day of the week when this thing is done. The issue is that we’re nowhere near a place in which that planning can start. It takes lead time, first starting with small events and then working their way up to larger events. We won’t see those major events come back for some time. I can tell you we won’t have a major business event in this country until the spring. None of these events are guaranteed. They are events that want to take place in spring, including my own conference, but they are waiting for the green light to know if they can plan those events. There is a lot of pent-up demand out there, but no framework for when we can start planning and have those events. We know that we will probably start with 50 people with a bunch of small weddings, hopefully in the fall if the virus is under control and we get regional restrictions to ease. It will look like smaller events building up to larger events in two to three years’ time. Those events will come back, but it will require an opening. We are still in a restrictive state today and will be for some time.
[Translation]
Senator Forest: Thank you. I gather that we need a tailored response plan, as you said at the start, with respect to the tourism sector in particular.
Mr. Kelly, you spoke about access issues for small businesses. What are your thoughts on the new luxury tax? We know that, in the current situation, public funds are in high demand to help the most vulnerable, the businesses facing the greatest challenges. However, other businesses are making huge profits depending on the sector, such as the softwood lumber and renovation sectors. There are stock shortages.
I want to know what you think about having a luxury tax. This tax would make it possible for people to buy luxury goods, if they have the means to do so.
[English]
Mr. Kelly: We are already getting feedback on the luxury tax. If you can imagine you’re in the industry of supplying boats to Canadians, you’re worried about the impact of the luxury tax. If you are a car dealer, that could be a concern to you. All of the businesses that serve the marinas and others are quite worried about what this is going to do and the unintended consequences of some of the measures that this may bring.
On the issue of access problems, that is one where I have a long list. I think we’ve got a list of about 30 or 40 major access problems to each of the government support programs. There are some consistent themes, though, and those are the ones I will share.
Ms. Bull mentioned the requirement for a business number in many of the programs. There are all sorts of businesses that don’t have a business number. Unincorporated businesses, some that are GST or HST exempt, don’t have a business number and are not able to access many of the government supports. New businesses, anyone who does not have a track record from 2019 or before, or in some cases have not filed tax returns in 2019 or before, are excluded from all of the government support programs. I have a lot of restaurant owners, for example, that started and spent $400,000 to open a restaurant, planned to open in March, delayed until June, opened for a couple of months and shut down again. They have not received one nickel of federal support despite the fact that this is a business on the books and planned for months, in some cases years. That’s another major access issue.
For micro-sized businesses, accessing the CEBA loan program has been an absolute impossibility. There are changes needed on that. The rent support program, while better than the earlier version, has problems for those who have a holding or operating company and can’t afford to pay their full rent. I have a full list that I would be happy to share with all of the access problems associated with each government program: CEBA, the wage subsidy, the rent subsidy, HASCAP, et cetera.
[Translation]
Senator Forest: Can you send the clerk the list of 30 major access issues?
[English]
The Chair: Mr. Kelly, if you could provide that through the clerk, it would be appreciated.
Mr. Kelly: Absolutely.
Senator Klyne: Welcome to our panel of experts here. We greatly appreciate your presentations and your participation. I have two questions for Tabatha Bull, the CEO of the Canadian Council for Aboriginal Business, and one question for the Hotel Association of Canada, which may have to wait until the second round.
Bill C-14 looks to amend the Canada Emergency Rent Subsidy in an effort to improve the uptake by allowing tenants to apply for the subsidy and access support when it’s needed before the rent is due so that it can be paid on or around the due date. First Nations businesses, especially those on reserves, face unique challenges stemming from the Indian Act to many available response and support programs requiring a CRA business number, while many of the businesses being deemed a small supplier not requiring a CRA business number. I note that many of the on-reserve businesses, as do all small businesses, create employment for the proprietor and three or four employees. Many of those businesses, as you already indicated, are overrepresented in the hardest-hit sectors.
Regarding Bill C-14, can you provide this committee with any pertinent information about on-reserve business’s experiences accessing CERS or other response and support programs, and in that regard, what suggestions has CCAB heard from stakeholders about recommendations to better overcome any unique barriers to Indigenous businesses?
Ms. Bull: Thank you, Senator Klyne.
As I said in my opening remarks regarding the lack of a business number or a CRA number, particularly for on-reserve businesses, we know that about 56% of First Nation businesses are established on reserve, so it is a high number of businesses that are impacted and have been unable to access a number of supports for not having a business number, including the wage subsidy support or for the wage subsidy if they did not have the payroll amounts that were required. That was another significant barrier.
There have been other programs developed, including the Indigenous Community Business Fund, in order to ensure that there is some money that can flow to those small microbusinesses. However, our request is that all programs that are developed with the unique circumstances of Indigenous businesses in mind. As I said, we did work with the Province of Ontario on their emergency business account to ensure that there was an intake process for Indigenous businesses directly into that same program that didn’t have a business number. We saw about 96 businesses receive funding through that program in Ontario. It was not a lot of effort for us to work with the province and for them to be able to accommodate. I think this is important because those businesses can then go directly to the same economic recovery programs versus having to find another avenue to access the same funding.
Senator Klyne: Thank you.
You had referenced the Indigenous Community Business Fund, which was provided with $117 million to assist collectively- or community-owned Indigenous businesses which were rejected from support funds, with some having to demonstrate rejection more than once. Can you help the committee understand how this fund is different from sources available to mainstream support and the unique reasons that they might be rejected by the general support programs?
Ms. Bull: When the wage subsidy program was initially rolled out, there were a number of Indigenous businesses that could not access that program. We were able to work with the Government of Canada to make changes to that program, first so that the economic development corporations could access the program. I spoke to the large number of those businesses and the significant number of people that they employ, all Canadian, Indigenous and non-Indigenous. We were able to have changes made to that program so that it was accessible. However, small businesses and microbusinesses in communities are still unable to access that program, in addition to the emergency business account.
The emergency business account required that businesses already had a relationship with a financial institution, and we know that only about 33% of Indigenous businesses have those relationships, and more so for women-owned businesses. About 50% of women-owned businesses are actually financed through private lenders, private relationships or private savings, so those businesses were not able to access the CEBA. There was additional money put out through AFIs in order for them to be able to access a similar program to the CEBA. However, there are still microbusinesses that have had no access to programming in terms of financial support. There are also, as Dan has said, a number of businesses didn’t apply to those programs just because they cannot take on any further debt.
Senator Richards: Thank you to all the witnesses for coming today.
My question has already been asked by Senator Forest, but I will ask it again and direct it to Mr. Kelly. How do we streamline government assistance for businesses that fall through the cracks and continually seem to fall through the cracks in these assistance programs? How do we get them to be able to participate in these monies? As a by-product of that, I feel that the way this is set up, millions of dollars are going to be wasted in one form or another. Maybe Mr. Kelly could address that as well if he agrees with that statement. I certainly fear that’s what is going to happen.
Mr. Kelly: Thank you, senator.
Look, there are a variety of gaps, but many of the programs have been reasonably well designed. We have, right now, a huge number of businesses — over 800,000 — that have taken on a CEBA loan. Many of them are grateful for the fact that they are able to access that lending.
There are a couple of themes that are relevant here, and Tabatha has mentioned several of them. There are a whole bunch of criteria you must meet before you can gain access. You have to have a business number in place before a certain date. You have to have a payroll of a certain amount and a payroll account opened before a certain date. You have to have tax returns to file. I understand why the government wants documentation. We need to make sure these programs aren’t exposed to a massive amount of fraud. Unfortunately, there are tens of thousand of businesses that were structured in different ways — completely legal ways — prior to the pandemic and aren’t able to access those programs because of it. Tabatha noted that we’ve taken the design flaws of the federal program and raised them with the provinces, who have been more flexible in fixing some of the gaps than our federal counterparts. That experience needs to be taken into account.
New businesses have been excluded right from the beginning. There are tens of thousands of businesses that came on stream in 2020 that have not accessed financial support. My top suggestion for the design phase — and we gave the feds several recommendations — is, if you’re a restaurant and you came on stream in Manitoba in the middle of June 2020, you don’t have access to the wage or rent subsidy. You don’t have revenue from 2019 to compare. However, you should at least be allowed to compare to the industry average. The average restaurant in Manitoba saw a sales decline of 30%. Therefore, that new restaurant would be able to access the subsidy at that level.
These are some of the practical recommendations we’ve made to the government. Unfortunately, it seems like the energy to fix the government support programs, which was there in 2020, has disappeared. The government seems to have moved on to other areas. It’s not focused on helping to shore up some of the programs, and it’s leaving out businesses.
If you look at this from a gender lens or a diversity lens, the very businesses that are the smallest, most vulnerable and don’t have all the credentials to be able to access the program are disproportionately representative of Indigenous people, people of colour, Black entrepreneurs and female entrepreneurs. These are the businesses that have been excluded. I find it quite shameful that the government has not moved quickly to fix many of these problems as a result.
Senator Richards: I just have a follow-up, if I may. You said the government has moved on to other areas. What are those areas, and why do they preclude the areas that we need to be concerned about?
Mr. Kelly: It’s a very good question, senator.
One of our criticisms of the budget is that there is a lot of focus and spending on non-COVID-related areas. I’m not suggesting for a second there aren’t other priorities, for example the climate, that we do need to think about. But right now, businesses are burning. Unfortunately, we’ve been struggling to get the attention of the government to fix some of the problems.
The Deputy Prime Minister said it would be monstrous to not provide support to small businesses. The Prime Minister himself made a promise on May 19, 2020, to extend the business support programs to new businesses. We are very close to May 19, 2021, and not a single finger has been lifted in the federal government to fix the problem.
Senator Richards: Yes, I agree with you. Thank you very much.
Senator Smith: Thank you to the witnesses for participating.
In listening to your testimony, I appreciate the feedback that you’ve given to our committee. My question is: Have we received a budget, or have we just received an extension of the COVID relief program that was initiated earlier?
We all recognize the importance of supporting various businesses. We recognize the businesses that are hardest hit. If you had to put together all of the heads of our witnesses today — and maybe I’ll ask Mr. Kelly to take the leadership on this — is there a way that we could do a joint submission? I’m sure you’ve done all sorts of submissions individually, but collectively, could we get together and have a document that has three or four basic principles, the key principles for all of you, whether it’s access or fewer regulatory issues or challenges? What are the key issues that need to be addressed from a global perspective? Then, focusing on those four or five key sectors that are having major problems, what do we need to get this thing going again? You all mentioned one thing: Has the government really developed a program, a plan of action, to reboot the economy? Maybe, Mr. Kelly, you could take the leadership in responding.
Mr. Kelly: Senator, you rightly raise something that really has been happening. Many of the business associations have been working extremely closely together, closer than ever. Most of the time we hate each other, but this year we’ve come together to work together. I am joking.
The Canadian Council for Aboriginal Business, the Canadian Chamber of Commerce, CFIB, Restaurants Canada and a number of others have gathered fairly regularly to talk about the shortcomings of the programs, and the themes are consistent. They include extending the programs, as Susie mentioned, and making them more substantive for a longer period of time, particularly for those most deeply affected, as well as fixing the access issues. Tabatha mentioned several of those issues.
Additionally, we’re all echoing similar ideas on rapid testing, plans to reopen the economy and getting the border open at some stage. We can certainly share with this committee many of those recommendations we’ve been making, both individually and collectively. Thank you for your question.
Senator Smith: It would appear in listening to the feedback, as a citizen, for me, like many of you, the number one issue is getting vaccines into the arms of all Canadians. That’s got to be step number one in the program. I recognize the government is trying its best. Between the federal government and the provincial governments, there are large impediments and challenges. After we get vaccines in the arms of people, what is the plan going to be in terms of focus, and how would you synthesize that plan into action steps so that there can be a timeline? If you look at the U.S., it looks like they’re setting up a recovery plan and rolling it out now. How can the group of you folks influence our political leaders to take that step and really get going? Do you have any suggestions on what needs to be done? Can you fly into town? Of course you can’t because you’re not allowed. But can you get together with the government people and the Minister of Finance and the key ministers to break the logjam and get it going?
Ms. Grynol: I’ll jump in on that one. Dan is right. There have been a lot of historic levels of collaboration. I would also point to another coalition that has been organized called the Coalition of Hardest Hit Businesses. This is a group that my association and the hotel industry were key architects of, and more than 100 associations are now a part of it. These are predominantly businesses in the travel and tourism industry whose job and function is to bring people together face-to-face, which is specifically what we’re being asked not to do. These are the live festivals, fairs and events. This group has been in existence for more than a year now and represents more than 2 million employees. We have been working very closely with Finance, ISED and PMO and have been providing data and key recommendations all the way through.
I will say the government has been responsive. The only criticism that we have at this point is they’ve really resisted tailoring these programs to the sectors that really need them. There is tailoring built in because there is a sliding scale, but right now we have these programs ending for everybody in September. That just fundamentally cannot be because we will see a complete collapse of the hotel industry and of the broader travel industry as well. Our next recommendations are going to be that they are going to need to address that in a tailored manner.
Senator Downe: My question is for Mr. Kelly. In your presentation, you indicated some concern about spending not related to the pandemic. Do your members currently support the child-care initiative that was funded in the budget?
Mr. Kelly: We have mixed data from our membership about additional federal public funding for child care. I don’t think there’s any disagreement among small business owners about the importance of child care and providing affordable child care to Canadians in general.
Typically, as you can imagine at committees like yours, I am here asking for government to spend less, to balance budgets and to end subsidies to businesses as most subsidy programs are garbage and should be done away with. However, this past year has been very different. We’ve needed subsidy programs because provincial governments have dictated that businesses must close to serve societal goals, and therefore it’s deeply unfair to push those pressures onto the backs of business owners alone.
This year, we have not been critical of the government for spending huge amounts of money to help guide the economy out of the COVID recession. Our view, though, is that we should be pressing pause at this very moment on non-COVID-related expenditures. All of the tax increases that come along with it should also be paused. That would include both the additional ramp up of the carbon tax in the provinces with the carbon backstop and the CPP premium increase that is expected, and also the liquor tax increase and the automatic escalation of those costs and pressing pause on additional spending on non-COVID-related expenditures.
I understand that some have drawn the link between a recovery and the need for additional child care, and there may be some temporary measures we wish to put in place until such time as the pandemic is behind us and we can review all spending priorities against each other again.
Senator Downe: There seems to be all kinds of evidence, though, that reduction in child care expenditures for parents is helpful for getting more people into the workforce, particularly women who still have the majority of the child-care responsibilities. I’m surprised your association is not enthusiastic about this because it would create a bigger pool of individuals for businesses to hire, and it would particularly mean more women in the workforce. Is your association’s view that it’s better that parents pay additional funds than the government pays it? Is that correct?
Mr. Kelly: No, I wouldn’t say that’s correct, senator. What I will say, as I said earlier, is that I don’t think anybody objects to the goal that we’re talking about in providing more affordable child care. The question is about who is going to pay for it and how is that going to happen.
In a pandemic year, when we’re having giant deficits, we’re essentially passing the bill of any new spending that we’re putting on the federal system — including COVID-related support — to future generations. My 12-year-old son will be paying his share of that to support the economy today. We haven’t answered the question: If the federal child care subsidy program costs X billion, who is going to pick up the tab for that in ordinary times? What we worry about with pharmacare and child care is whether there will be a chunk of that imposed on business taxpayers coming out of the pandemic who are not going to be in the position to take on some giant additional costs. If there’s a pathway to pay for this that isn’t going to throw it on the backs of individual business owners, it’s a very different perspective. Right now, we don’t have the answer to that question because we’re just adding it to the deficits.
Senator Galvez: My question is for Ms. Drigola and Mr. Kelly.
In general, all of you have talked about the urgent need for planning and to extend as much as we can of this financial support to the hardest-hit businesses, including small businesses. I don’t think we have a choice; we will pass this bill. We want to understand more what the real needs of your sectors are.
With that perspective, I want to ask this question: If you’re planning to see business as usual in the recovery, isn’t that a little bit unrealistic? Everybody knows that things won’t come back as they used to be. We are all scared of the debt that we are incurring. We have to realize that it is reality, and we have to think of ways to recoup this money. I hear people saying child care maybe should or should not have been, but there are many other places where we can cut. The oil and gas sector receives millions of dollars per year in subsidies. We are not here to choose sectors. There are other ways to cut.
My question is the following: Are you participating actively in this planning and in seeing what form your businesses will take when we finally can recuperate? Because travel is not going to happen. The United States is not going to open any time soon. We have to be in a small bubble like Australia and New Zealand. There’s what is happening in India and the fourth wave in Europe. I just signed support for conventions to be taken in Zoom because the big conventions are being taken remotely. The Olympics and major sporting events have been cancelled.
What are you planning to do to be participating with the government for the planification of this transition? Will admin continue to be done remotely? I am sure part of the job could still be done remotely. What are your visions of your participation in the planification of coming out of the pandemic?
Ms. Drigola: Thank you very much for the question. That’s an excellent question.
One of the things I wanted to point out is that businesses in these sectors aren’t doing poorly out of traditional market economic factors. They cannot operate. They are not allowed to operate. There are restrictions on their operations. When we talk about a plan and recovery, it’s such a broad term that we need to talk about the stages of the recovery. At stage one, what is allowed to be open? Stage two, who can be open? Stage three, that’s maybe when we’re at full recovery. What metrics do we need to hit when we get there?
Obviously there are many challenges that come with this. There are cross-jurisdictional issues, some issues that lay with the provinces and other issues with the federal government. They need to work in lockstep. Over the past 13 months, we’ve seen a patchwork of restrictions, programs and quarantine measures across the country, where case numbers in one province can mean different restrictions than equivalent case numbers in a different province.
The Canadian Chamber of Commerce recognizes that businesses have a role to play in the reopening and the planning process. We have convened a business-led recovery initiative that looks at a number of issues, such as how can workplaces open safely? Even with some restrictions open, what guidelines do businesses need to take when it comes to masking? How can they use rapid testing in the workplace? What responsibilities do they have with respect to contact tracing, whether a customer-facing business or amongst employees? How do vaccine conversations happen in the workplace? What does a travel restart program look like? What does government need to do in order to help businesses plan and prepare for reopening of the borders, whether it’s a bubble with the U.S. and Mexico or whether that’s travel corridors, as we’ve seen in Europe over the last year?
We can’t have an overnight switch. We can’t have the Prime Minister saying we’re opening the borders tomorrow and expect businesses to be ready to go the next day. Similarly with restaurants, you can’t tell them on Thursday that they’re opening up Friday and expect them to have enough food stocked for the mass of reservations they will have for the weekend. They need lead time to plan. Therefore, we’re taking that leadership role and working with government on what this will look like and how we can help, and we’ve been doing that over the last year.
Senator Boehm: I’d like to thank our witnesses for appearing today. This is a very interesting and important discussion. Usually at this point in the proceedings I say that my questions have all been asked and answered very well. However, I do have a few more following on what was just being discussed as posed by Senator Galvez, which is borders.
We have more than one border. We have one big border. As Ms. Drigola just mentioned, of course, we have corridors and other things. In the planning, you, as association representatives, are looking at the issues medium term, longer term, and I would say you also have to look at them much longer term, and that goes to Ms. Grynol’s opening statement.
Let me offer an example: In Toronto every year, there is a big conference on mining and industry called PDAC. It’s huge, with 25,000 people all in hotels. It was handled virtually last year and probably being handled virtually again this year. There is the Toronto Film Festival and there are other events like that. I don’t think they’re ever going to be the same again, looking ahead. If you look at PDAC, you have people coming from all over the world. It’s just not going to happen that way.
My question to Ms. Grynol and then maybe to Ms. Drigola is this: Are you talking to other associations in other jurisdictions around the world? We’re not just here in North America. We have competitors in other countries. The Europeans are looking at tourism, and there is tourism in other places further afield, Australia, for example. The issues are the same. They are competitors, but for global tourism to continue, and global mobility to continue, there have to be some similarities and there have to be some points of intersection. I was speaking with the ambassador of the EU this morning, and she told me there is avid consideration about vaccine passports. Are you figuring that into your planning, for example? That’s a bit of a general question, but looking really far ahead.
Ms. Grynol: Most other G7 countries are going to be ahead of Canada because of the restrictive measures that we’ve taken in Canada and our access to vaccines. The combination of those two things means our neighbour to the south is already seeing a boom in their travel industry. There is already a significant recovery happening. People travelled the next day.
I do think the world is changed. I believe there will be, as we call them in the industry now, hybrid meetings, where you’ll see people on screen and some people in an event. However, I don’t think we’re going to be in the electronic universe forever either. I do think people want to go and see their favourite sports team. They want to get together in a concert hall and they want to experience theatre. They want to go to a concert and see their favourite band play again. There is something magical that happens when you have a big political convention and ideas are formed. That stuff just can’t be replaced by digital. Some of that will happen in the immediate future, but I do envision a world in which Canadians and the rest of the world are going to want to be together in the same place again.
What we’re saying is we, as a Canadian society, need to be prepared for when that day comes. We can’t lose all of the critical infrastructure that would support the movement of people again, whether that’s commerce across the border or people gathering at large events, and that is what is at risk if we don’t have a tailored approach. We’re not suggesting that we go against the grain, but what I am suggesting is that our data suggests 70% of the hotels in this country will fail before the end of the year. That’s not a small thing. That will fundamentally impede our ability to do commerce again and attract events again. In the rural communities, where some of you live in tourism ridings where you only have the local three or four hotels, that’s the first thing you do when you book a trip.
There will be some carnage, and there already has been, but there will need to be some strategic investments. We saw it in the airline sector. We need to make sure people can get from point A to point B, and we need to make sure that for industries like ours, which serve as critical infrastructure, at least a solid portion of us make it to the other side. That’s where we see a need for government to continue to appreciate that there will be fixed costs that will have to be paid to keep some of these businesses alive while they wait for their chance to recover. And I do think that recovery on the other side will involve some element of face-to-face meetings again. We have to hope.
Senator Duncan: Thank you to the witnesses. I apologize for the delay in my transition over from the chamber to this meeting. I appreciate the information you have shared.
All of the witnesses have clearly identified and my colleagues on this committee have identified that one size does not fit all in the programs that are put forward by government to assist small business, to assist business, to assist Canadians. You’ve identified providing access and issue barriers, and I heard that these would be identified and submitted in writing to the committee. I also heard — and perhaps this could be confirmed — that we are going to have some recommendations also provided in writing.
The point that concerns me is that there has been discussion about corridors and the borders. There was also mention that the provinces and territories have made significant investments in conjunction with the federal government. My concern is where all of these discussions all come together, is there a view to an inclusivity of rural Canada? For example, when we talk about borders and travel corridors, the governor of Alaska has offered vaccines to northern British Columbia and Yukon and suggested that we have a travel bubble. Our cases are similar to Newfoundland in that we currently, touch wood, do not have active cases. I’m wondering if the Atlantic bubble considers the northeast coast, such as Boston. My concern is rural Canada. Are we encouraging Canadians to see our own country first? When we’re considering our borders, let’s not forget about the rural parts of Canada that share borders. It is a broad-ranging statement/question.
Mr. Kelly: This has been the reverse of a whole bunch of negative trends for much of rural Canada in that the impact of the pandemic on some swaths of rural Canada has been less. It has had a disproportionately significant impact on cities and businesses in cities. The larger the urban area, the deeper the impact of COVID due to population density.
This has been the year where many people are returning to rural Canada, reassessing their lives, and saying, “I have to get the heck out of the big city in which I live and move back to the small rural community from which I am from or a new one.” That has been a positive trend line.
From a tourism perspective, Susie said it very well at the beginning. Many of the resorts and rural and remote communities and campgrounds have been filled, or at least filled to their new COVID capacity. It’s the urban areas that have been hardest hit.
Can we do more to support some of those trend lines for rural Canada? I shared this with the Nova Scotia government the other day. For some of the smaller provinces, areas with rural and remote communities, this is an opportunity to promote the quality of life that can exist in some of these areas. It would be that, senator, I would recommend we use as a COVID opportunity to share some of the wonderful parts about living and working in rural and remote communities that so often get overlooked under normal circumstances.
Ms. Grynol: Dan is right. We have seen some of our rural areas have a slight recovery last year, and I suspect we will see something similar this year. People will stay off the grid. They will visit their families. Where I will say I am worried is that in some of these rural regions, where there are one or two hotels and they go out of business permanently, that will have a significant impact. We’re at the apex of both of those things coming together, because people will want to move around. Maybe they move around for a short period of time and there is some activity, but then those hotels will see no activity for the better part of eight months after that period, and they won’t be there for the following summer. These hotels are not owned by Marriott and Hilton; they are owned by people in your communities. These are predominantly small businesses.
Ms. Drigola: There is about $100 million in the budget allocated for domestic tourism marketing that could help support urban and rural communities across the country. We’re getting into May, as hard as it may be to believe, and this is around the time when folks are planning their family’s summer vacation. Right now, no one knows what June or July will look like. We don’t know what the rules will be. It’s hard to make those plans, whether you will go to an urban or rural community.
To Susie’s point, there is more comfort to going to a rural setting versus, well, let’s plan a vacation in downtown Toronto. It’s just that mind set, regardless of what will be happening on the ground in eight or ten weeks from now. We have seen other jurisdictions that have opened up very rapidly with the acceleration of the vaccine rollouts, but we don’t have metrics to base our rolling back of restrictions on. We don’t know what restrictions will be rolled back. It makes it hard to plan and make decisions for Canadian families today. That’s another reason to your point about why we need a concrete plan.
Ms. Bull: I just want to note again about broadband infrastructure and that impact on rural Canada. There was money in the budget for that, but in Indigenous infrastructure, $4.3 billion, which includes broadband, but for those communities and businesses that have been — not just rural, but even communities like Six Nations, which are really not that remote, their infrastructure for broadband is seriously lacking, and that has had an impact on businesses. As people move into the rural areas, we need to ensure that that money starts to flow in terms of infrastructure.
The Chair: Thank you, Ms. Bull. That is a very good point.
Senator Loffreda: Thank you to our panellists for being here. It has been very informative and insightful. Thank you to my colleagues for all the great questions.
One area of the population that is so important, and we have not discussed, is the student population. My question is for any of the four witnesses, but I would appreciate hearing from the Canadian Federation of Independent Business and the Hotel Association of Canada in particular.
As you know, Parts 2, 3, and 4 of Bill C-14 temporarily suspend interest and interest payments on loans to students and apprentices. We all know that our youth and young adults, many of them students, were disproportionately affected by the pandemic and the lockdowns. We know that internships, apprenticeships and summer jobs became scarce last year and remain a scarcity today in some sectors, including your sector. I assume many of your members — I think of hotels who usually increase staff for the busy tourist season, or businesses that hire full-time summer students — have struggled to hire students, and rightfully so. Many of these students are in a precarious financial situation. Do you have data to share with us on student employment in your respective sectors? What were the numbers last summer? What are your projections in terms of student jobs for summer 2021 and beyond?
Additionally, have your organizations, or its members, taken steps to offer training or mentorship opportunities or introduced new programs targeted to students to protect and nurture the important relationship you have with that segment of the population and avoid further harm to the students?
My concern is eventually seeing a spike in the default of student loans, and they’re an important part of the population, and they rely so much on your businesses.
Mr. Kelly: Senator, your question was an excellent one. The answer will be a bit of a mix.
There’s no question about the impact on employees in some of the key sectors — tourism and hospitality, retail, the entertainment and arts businesses and personal services. Those sectors represent a huge percentage of work opportunities for young Canadians, for students. They often offer part-time or temporary jobs, which is what students often need as well. Those were the sectors hardest hit by the pandemic, and we had to see business owners lay off staff, and then when they were open for a period of time, rehire them, and then lay them off again through another round of lockdowns. It was head-spinning for the business owner, heartbreaking for them, and the impact on their employees, students or young Canadians getting a first foot in the door of the labour force, has been dramatic.
Balancing that has been some other phenomena, and let’s assume we get on a steady pathway to reopening in May and into June, we pray, but if we can get on a permanent pathway to reopening, we are likely to see the other phenomena of a shortage of labour. We were seeing signs of this in the summer of last year, in part because some of the subsidy programs that were oriented at workers, particularly part-time workers, were super generous and often created scenarios where the laid-off worker was making more under the CERB program than while they were working. I know it’s a controversial thing to say, but this is particularly true of part-time workers. Workers who may have earned $50 a week by working one three-hour shift were making $500 a week instead. As soon as the government announced some student financial help over the summer, employers called us and said that their students called to quit their jobs in order to shift on to the government benefit rather than continue to work.
So it is a mixed bag. There’s no question that if we do remain locked down, we will dry up opportunities. It will create long-term damage for those potential workers, but at the same time, during recovery, we will need those workers to return to their workplaces. We need to make sure that the benefits are targeted. I do believe the budget has dropped the CERB stream from $500 a week to $300 a week, with the view of ensuring that there is no impediment for workers to return to the workplace.
Ms. Grynol: There are a couple of concerning trends that we are seeing.
First, the hospitality management programs writ across this country have been increasingly moving away from domestic to foreign students. To the tune of 90/10, they are predominantly students coming from abroad, getting into Canada. There was a real labour crisis before this pandemic for domestic students to move into our industry, which was an issue that we were working to address. Now, what we’ve seen is, frankly, so many of those students are being stuck in their home countries, not able to get across the border with some of the quarantine restrictions and access challenges, so we actually don’t have a broad base of students to even welcome into our hotels as we’re hiring back.
I will also say, of those who are engaged in the program, we’ve seen a mass exodus of them from hospitality management programs because they are moving to other sectors that are a lot more stable and more reliable right now.
The students that we are able to get our hands on, we will welcome with open arms and invest in them as we always have. I don’t have data today on what that will look like this summer. I don’t even know what two weeks from now will look like and whether we will see any sort of a domestic rebound, but I will be very happy to follow up with this committee and track that issue because I think it’s important.
Senator Lankin: Mr. Chair, I actually don’t have questions. I have been monitoring the presentations on ParlVu while participating. I do want to say thank you to these witnesses. I hear general support for the kinds of measures that are being taken but a lot of great advice for what has to be extended and continued and the ongoing supports that will be required. Thank you very much.
The Chair: To the witnesses, Senator Lankin is the sponsor of the bill.
Senator Pate: Thank you to the witnesses.
To pick up on the last point raised, we have also been hearing about small businesses whose workers were eligible for CERB and then were volunteering back to support. I’d be interested in how much of that is happening in the business as well.
I have two questions, one for Ms. Drigola and one for Ms. Bull.
For Ms. Bull: The Fall Economic Statement, parts of which implement Bill C-14, included a commitment to the National Action Plan in response to the National Inquiry into Missing and Murdered Indigenous Women and Girls. Call for Justice 4.5 is for the establishment of a national guaranteed liveable income program. Have Indigenous women who own businesses or who may be in need of economic support to start businesses been able to access COVID-19 emergency supports? Can you give examples of women falling through the cracks in these measures who might benefit from a guaranteed liveable income measure that is accessible, without conditions, to those in need, as recommended by the inquiry?
And for Ms. Drigola: In October 2020, the Canadian Chamber of Commerce passed a policy resolution in support of basic income. The National Finance Committee — this committee — has recommended this summer that the federal government give urgent consideration to a guaranteed liveable basic income. Bill C-14, in the government’s Fall Economic Statement, did not include this type of measure, nor does the federal budget. Can you describe the beneficial effects, from your perspective, of a guaranteed liveable income and what additional value it would provide in the context of the government’s COVID-19 response and recovery? Thank you.
Ms. Bull: First, I will say that we were really pleased, although we’re a business association, to see a commitment toward missing and murdered Indigenous women and girls, both in the economic statement and in the budget.
From the perspective of Indigenous women entrepreneurs, they have definitely faced the same type of barriers that we have been discussing today, except we know that Indigenous women and women across the country are still seen as a riskier investment by financial institutions. The access to financing is definitely, first as a woman and then as an Indigenous person, almost like two strikes against entrepreneurs. Definitely there is a greater need, I think, from the perspective of how we’ve seen Indigenous women pivot and be resilient. That has been quite remarkable, and I think that just speaks to Indigenous women in general.
From the perspective of the basic income amount, Indigenous women entrepreneurs have been saying to us that they want to grow their business more so than be dependent on basic income assistance.
Ms. Drigola: I will address the question regarding the universal basic income. I want to clarify that the resolution that was approved last October at our AGM was to pursue a pilot and research on universal basic income. It was not commenting on UBI in and of itself. The rationale behind the resolution is to have data-driven research to assess potential costs, benefits, pitfalls, challenges and outcomes of a nationwide basic income program.
On that, our focus has been and will continue to be getting Canadians back to work and keeping Canadians tied to the workforce. Part of that is a comprehensive review of the EI system.
We do have several concerns about UBI, including jurisdictional issues, financial issues and making sure that it’s not a one-size-fits-all approach. We know people face different realities, different circumstances. From the Canadian Chamber’s perspective, the most important thing is keeping that employer-employee relationship alive.
Senator Marshall: My question is specific to Mr. Kelly, and it’s to do with his presentation where he is talking about the rental subsidy program. He says there is no fix for challenges for businesses that have both a holding and operating company and the requirement that businesses pay full rent within 60 days. Then Bill C-14 has an amendment so that the subsidy can be paid when the rent becomes due rather than after it’s paid. We heard from the Canada Revenue Agency people last week who said they have already implemented that part of the bill. Is there still a problem? Is there a disconnect there?
Mr. Kelly: Yes. In fact, senator, the good news is — and you’re quite right — that we at CFIB did identify that gap just as the bill was being introduced some months ago. The government took quick action to try to fix that gap. The problem was that businesses were going to have paid the rent already before receiving the subsidy. The change was made and is already in place, prior to this legislation passing, that a business can apply for the subsidy and will have 60 days to pay the rent after the fact. So it has some time to get the subsidy from which then to pay the rent. So that problem has been fixed.
The new problem that I’m referring to is that, still, to use the subsidy, you have to show that you are paying the entire rent. For example, if your bill for your restaurant is $5,000 a month in rent and you are counting on the subsidy, the subsidy you would get would perhaps cover 50% of that, so you get $2,500 from government. You have to agree to pay the remaining $2,500 at the same time before you’re able to use the subsidy. It’s not a timing issue. If you, as a business owner, don’t have the money to pay the rent, the landlord may be quite willing to reduce that by 50%, to have you owe that later down the road when you’re in a position to repay, and you’re getting the $2,500 to use, the government subsidy. That’s not allowed. You have to have the money to pay your full rent. We have suggested that the government change that to allow the subsidy to be used and have the other rents deferred.
[Translation]
Senator Forest: Thank you again for your very enlightening testimonies.
My question is for Ms. Drigola.
You said in your testimony — based on the example of other countries — that Canada wasn’t using all the available tools to mitigate the impact of the COVID-19 crisis. You gave rapid testing as an example.
Are there other tools, since you said that we aren’t using all of them? In your opinion, what other tools should Canada be using to deal with the pandemic?
[English]
Ms. Drigola: Thank you for the question, and it’s an important one to consider.
Canada is unique in our geographic size. We are one of the largest countries in the world. We have a spread-out population. The patchwork of restrictions that have been rolled out has been problematic. Rapid testing is definitely one of those issues we see as not being taken advantage of as much as it could be.
In addition, we don’t have any metrics about what reopening looks like, what the travel situation looks like, and it’s about making sure businesses are prepared and there is a plan in place. We don’t have one for businesses to be able to plan.
Rapid testing is definitely underutilized. There are millions of rapid tests sitting in warehouses across the country. Provinces are not rolling them out as quickly as they could be. There are lots of regulations and restrictions around that, and that is something we definitely think needs to be looked at.
[Translation]
Senator Forest: In short, we have a fundamental need for relatively long-term planning, especially for vulnerable sectors such as tourism.
Thank you.
[English]
Senator Klyne: As referenced earlier, I wanted to direct this question to the Hotel Association of Canada. If you feel the need and you have the data, you can follow up with the clerk. I’ll leave that to the chair.
Senator Duncan had mentioned one size does not fit all, and Ms. Drigola just referenced the vast geographic area of Canada. I’m wondering what effect the pandemic restrictions have had on all hotels, large and small alike, international chains and/or local independents. Do you have any data that identifies unique differences or disparities by size, region or business models? Are there any indications that some may rebound faster than others, while others may recover but at a much slower rate, and some will not make the recovery?
Regarding Bill C-14 — and you might be able to answer this one now — what incremental suggestions or recommendations do you have for this committee regarding those that will have a protracted recovery period?
Ms. Grynol: We can base the recovery we’re seeing on last summer, because we only had six weeks of recovery in this sector in July and the first couple of weeks of August last year. We’ve been sitting dormant for that entire period. I will reference that period because it will give an indication of what we will likely see this summer as well.
We saw resort properties do reasonably well at half capacity. We saw the rural segment do reasonably well. Our downtown cores still sat at about 90% revenue loss because there is nothing happening in the downtown core. There are no events or commerce. Nothing is happening. The downtown cores have been hollowed out. That’s the hardest hit segment.
If you happen to have a hotel located on a major highway and you are located in a region where there is a lot of essential travel going back and forth, or you are a hotel that is located next to a hospital and you have had to house front-line workers, or you’re a quarantine hotel, some of those micro — I wouldn’t even call them segments because it is mostly about where they are positioned and why people are moving around today. They’re moving around because of essential reasons. There are not many people moving around this country. Those who are moving because they are going to northern and remote regions because they have to get services and vaccines up there. Those hotels are still seeing some movement. Limited service versus luxury, limited service is doing much better. If people are moving around, they are not on vacation. It is suggestive of what people are doing. They want a hotel with no frills, very cheap, in and out, and that explains why some of the luxury and upper-end hotels are not seeing anyone in them. That was for six weeks. What we’ve seen since then for most of the industry is between 50% and 90% revenue loss.
Senator Klyne: These are great observations. If you have empirical data that supports those observations, we would greatly appreciate it if you could provide that to the clerk.
Senator Loffreda: Let’s be positive. COVID is behind us. How are your industries adjusting and adapting to the changing environment? Are the businesses ready to welcome and accommodate an influx of tourists and patrons in a safe and secure manner once the border opens? How quickly can you do that? Has there been any transformational damage done to your businesses? Is it permanent? What measures have been taken in anticipation of greater traffic in your stores, restaurants, hotels and shops? What more can be done to prepare for when it does happen?
Mr. Kelly: That is a wide-ranging question, senator. There is lots to unpack there, and we have just a couple of minutes; I will keep my remarks short.
The impacts are very different depending on the sector of the economy, and I think this is where Senator Galvez was going in her questions as well. There are some structural changes, permanent or semi-permanent, that will come along that will affect many small- and medium-sized businesses, my members, things like increased e-commerce and the increased use of Amazon during the pandemic. How quickly will retailers be able to resume in-store traffic, and will that come back anywhere close to where it was today?
I, like Susie, am generally optimistic that businesses will figure it out and adapt and find ways to do that. Many will not see things returned to the way it was. They will find new normals. Working from home will be used in increasing number, and that will put pressure on downtown business cores. Businesses will start to figure things out as the months and years go on.
We are going to need that transitional support to help make that happen, and we cannot have a hollowing out of the business community in the meantime.
Ms. Grynol: We are ready. Hotels are an essential service, so we have had to adapt on the fly. We have been welcoming guests, not very many of them, for the last 13 months. There have been millions of dollars spent on improving systems, training, personal protective equipment and high-touch surfaces. You will go into a hotel and see that the lobby doesn’t look the same. All the high-touch surfaces have been removed, the bedspread is gone, the remote has been packaged up, and all the things that made you nervous before, if ever they did, about travelling have been addressed. It’s never been safer and cleaner. We are ready. The structural challenge for us will be labour, and it is the issue we talked about earlier. We are already trying to ramp up for the summer and having a difficult time finding employees.
Ms. Bull: On the let’s-be-positive note, and it is always good to end that way, we have increased the number of Indigenous businesses that are participating in e-commerce, a lot in ways from the support of corporate members. A number of those businesses who would have sold their goods at gatherings or powwows have been able to quickly get online, and their businesses are thriving there, which has been a positive.
Also, small businesses and small, rural Indigenous businesses now have opportunity, provided they have broadband, to be able to participate in large conferences. Normally, they wouldn’t have had the budget to be able to do so. That opportunity for them to gain access to networks that they would have had to travel a significant amount to be able to garner has also been a positive. As Susie noted, there will be a benefit to the potential hybrid that we’re going to see in the future.
Ms. Drigola: Thank you for the question. There are many steps that have to take place before we can get to the new normal. That’s why it’s so critical that this process and planning start to happen now before the reopening happens. As Susie mentioned, the hotels have already done the work in terms of making them safe and removing the high-touch points. Restaurants have invested millions of dollars in implementing barriers, PPE and additional safety measures. Airports have never been cleaner. These businesses have done the work, and they will move mountains to do whatever else needs to be done to be ready to welcome back visitors and customers when the time is right. However, they need that lead time to ensure all the pieces are in place. It can’t just be done overnight. There needs to be time to do it. Much of it has been done. We can borrow best practices from around the world — we don’t need to recreate the wheel — but it’s critical that it happens in advance and not all at once so that we don’t miss out on the opportunity to welcome visitors, whether they’re business travellers or here for leisure travel.
The Chair: Thank you, honourable senators and witnesses. This brings an end to our meeting. I want to thank you, witnesses, for your presence here with us and accepting our invitation. You have been very informative.
Honourable senators, we will take a break before we move on to our second panel. We will resume at 3:00 p.m. Eastern Time, when we will have the honour of having as a witness the Deputy Prime Minister of Canada, Minister Freeland, who is also Minister of Finance.
[Translation]
The Chair: Honourable senators, for our second panel, we’re joined by the Deputy Prime Minister and Minister of Finance, the Honourable Chrystia Freeland.
[English]
Minister, thank you for accepting our invitation and for being here with us today. We understand you have officials from various departments with you who will be available to speak during the question period following your opening comments and remarks.
Honourable Deputy Prime Minister and Minister of Finance, before I turn the floor over to you, as chair, I would like to point out that we have heard from officials from several departments, all of whom were coordinated by your department, last Thursday, April 22, and several written responses were promised to us by April 28. We have received all the responses from your department. Minister, we thank you and your officials for that.
As we all understand, it is imperative that officials respond to the committee’s questions and provide information in a timely manner so that we as parliamentarians can meet our responsibilities given to us by the Senate of Canada. Yes, written responses are acceptable if they are provided in a manner that meets the deadlines imposed on the committee. We look forward to your continued cooperation to allow us to properly study the bills that are proposed by the government and that we do receive the answers as per the time frame required.
Deputy Prime Minister of Canada and Minister of Finance, the floor is yours for your comments, please.
[Translation]
The Honourable Chrystia Freeland, P.C., M.P., Minister of Finance: I would like to thank all the senators for inviting me today. I also want to thank the public servants who are with me. They work very, very hard and I appreciate the work that they do for Canadians.
I’m pleased to talk about Bill C-14, which would implement important and urgent measures from the Fall Economic Statement, and about the budget, which builds on the measures in Bill C-14 and which will be presented to you in due course.
Since the start of this pandemic, the Government of Canada has done everything in its power to control the virus and reduce its economic impact. To date, $8 of every $10 spent in Canada to fight COVID-19 and support Canadians has been spent by the federal government. This support will enable a full and robust economic recovery once the virus is fully contained.
[English]
The measures in Bill C-14 are the foundation of the strategy articulated at much greater lengths in the budget. The latter builds on the former. I’m here today to discuss Bill C-14, of course, but I know senators will be aware that earlier today I tabled the Budget Implementation Act, the legislation needed to implement the budget. I hope this committee will receive that bill with time to study it, and I hope senators will work with us in the spirit of team Canada to get these supports to Canadians. Therefore, I hope you will allow me to take a moment to tell you about the budget more broadly, given that it builds on the work that Bill C-14 began. It’s designed to meet three fundamental challenges.
The first is to finish the fight against COVID. That means buying vaccines and supporting our health care systems. It also means continuing to provide Canadians and Canadian businesses with the support they need to get through the third wave.
Second, we must punch our way out of the COVID recession. We are in the midst of a virulent third wave in many parts of the country, and more than 500,000 Canadians are still laid off or working less than they were before the pandemic. We need to ensure that those lost jobs are brought back as quickly as possible.
Third, this is a budget about long-term jobs and growth. It’s about building a more resilient, fairer, better and greener Canada. It does that by investing ambitiously in the green transition, in social infrastructure, in early learning and child care, student grants and income top-ups for low-wage workers. All of that builds on the foundation that the Fall Economic Statement and Bill C-14 are laying.
Let me highlight a few key measures. The budget will create, in total, nearly 500,000 new training and work opportunities. We will hit our target of adding 1 million new jobs by the end of the year.
The budget makes a commitment to early learning and child care of $30 billion over five years, reaching $9.2 billion annually in permanent investment.
I think all of us know that Canada’s youth has paid a high price during the fight against COVID. They’ve made a big sacrifice for us, their parents and grandparents. That’s why the budget sets aside $5.7 billion to make a five-year investment in Canada’s youth.
[Translation]
Low-wage workers in Canada work harder than anyone else in this country, for less pay. This is unacceptable. We’re therefore proposing to expand the Canada workers benefit and to invest $8.9 billion over six years in additional support for low-wage workers. This will extend income top-ups to about one million more Canadians and lift nearly 7,000 people out of poverty.
The budget will also introduce a federal minimum wage of $15 an hour. Our priority, whether it concerns the budget or Bill C-14, is to ensure that Canadians can get back to work. I hate to think that it will take 10 years before things get better. This is how long it took to recover from 2009.
However, this all starts with preventing economic scarring, which means providing emergency support to people and businesses that need it. That’s where Bill C-14 comes in. It’s critically important.
[English]
Bill C-14 provides for immediate support for low- and middle-income families with young children who are entitled to the Canada Child Benefit, or CCB, by providing them with up to $1,200 in 2021 for each child under the age of six. Families that have a net income at or below $120,000 would receive four tax-free payments of $300, for a total of $1,200. Families entitled to the CCB that have a net income above $120,000 would receive four tax-free payments of $150, for a total benefit of $600. This temporary assistance will provide immediate support to more than 1.5 million families and more than 2 million children. I must say, senators, at a time when so much of Canada is fighting a virulent third wave, when so many young children are home and going to school virtually, many of them unable to be at their daycares, now is a time when I think Canada’s young families really need that extra support.
The bill also formalizes an amendment to the Income Tax Act that will allow the Canada Emergency Rent Subsidy to recognize rent payable as an eligible expense, provided certain conditions are met. As members of this committee will, I hope, recall, I announced before you on November 12, 2020, that the Canada Revenue Agency is currently administering the rent subsidy with rent payable as an eligible expense. That’s because the businesses relying on this subsidy required this. They told us so, and we listened. Not all small businesses have the cash flow to pay their rent on the first of the month with a reimbursement to come later. This bill ensures that those small businesses can get the support they urgently need.
Last, Bill C-14 would eliminate the interest on the repayment of the federal portion of Canadian student loans and Canadian apprentice loans for 2021-22, which will provide more than $329 million in assistance to Canadians looking for work or in the early stages of their careers. That support is being extended for an additional year as part of the budget. I want to emphasize how important I believe this support is to Canada’s young people. I think all of us will agree that they have paid a particularly high price in the fight against COVID. They’ve made a sacrifice to keep us, their parents and grandparents, safe. It’s essential we not allow them to be a lost generation. That’s why this support is so important, and I would say personally important to me.
The point I’m making here is simple. The measures in Bill C-14 are essential. They form the critically important base of our plan for recovery. Canadian families and Canadian businesses need this support to get through COVID, to finish the tough fight against a virulent third wave. We need to help them so we can all get back to work and so our country can come roaring back.
[Translation]
To put things in very real terms, in the weeks following Royal Assent, the Canada Revenue Agency will make the additional January and April Canada Child Benefit payments to eligible families. This support amounts to $600 per child under the age of six for eligible families.
[English]
That is support that every family who receives it really needs and will be so, so grateful to get in this tough time. Please help me get this support to them.
I’m very grateful to all senators and members of this committee for your urgent consideration and study of this legislation. I know how hard you’re working. Together, if we are able to support the speedy passage of this essential legislation, we’ll be providing Canadians and Canadian businesses with the support they need and deserve.
[Translation]
The Chair: Thank you, Madam Minister. Thank you for your comments and your statement. We’ll now move on to the question period.
[English]
Senator Marshall: Thank you, minister, for being here today.
My question is on clause 4 of the bill, and you referenced the issue in your opening remarks. It’s the section of the bill that allows rent expense to be paid when the rent becomes due or to pay it in advance.
I would like to say at the outset that I support the amendment, but my question is in the context of section 26 of the Financial Administration Act, which says that “no payments shall be made out of the Consolidated Revenue Fund without the authority of Parliament.” I just wanted to make the point that this amendment has yet to be passed by Parliament, and we were informed by the Canada Revenue Agency that payments are already being made before the bill is approved by Parliament. The official also went on to say that it’s common practice when it comes to tax legislation to administer the legislation in draft form. In other words, parliamentary approval isn’t required to implement proposed tax legislation.
I think that’s an interesting policy in light of your earlier comments about the budget implementation act, which I’m sure has some tax issues in it. Is it government policy to implement proposed legislation before it receives parliamentary approval?
Ms. Freeland: First of all, senator, thank you very much for your question. I am very glad that you started off by saying that you support the notion or concept of rent payable being an eligible expense for small business owners. I trust and hope we are all agreed about that. Many Canadian small businesses have had a hard time during the lockdowns, and making rent payable an eligible expense has helped a lot of them. I’m glad that we have that in Bill C-14.
You’re quite right, as the officials testified to this committee, that for fairness and equity reasons, tax measures are often intended to take effect when they are announced. This is accomplished by the enactment of legislation that is retroactive to the date of announcement —
Senator Marshall: But —
Ms. Freeland: May I please finish, senator?
Senator Marshall: Okay.
Ms. Freeland: This is a practice that is well recognized and long-standing. It dates back to at least 1985. Senators, I hope, will remember that I announced the government’s intention to move ahead with legislation making rent payable an eligible expense on November 12, 2020, in testimony before the Senate.
Senator Marshall: But, minister, even though it has been in practice since 1985, why send it forward to Parliament for approval if government has already stamped it approved? Why is it coming forward to Parliament? What you’re effectively asking is for Parliament to rubber stamp your legislation.
Now that I’m aware that this is happening, I’ll be looking for it with other items in the budget implementation act. It’s very interesting. The luxury tax — has that been imposed now that you have draft legislation? Have they been given the authority to start charging that tax? I find that it’s quite an affront to Parliament to implement tax changes without the authority of Parliament, just on the government’s say so. I’ll leave it there. We’ll have to agree to disagree.
I would like to ask you something about the debt ceiling, because it is quite a significant increase. There are still a lot of significant risks out there. Interest rates might increase — in fact, they are increasing — inflation is starting to rise, and the pandemic is not over. We just heard from business leaders who said they will need support well into the future.
I looked at your Fall Economic Statement and your budget and started comparing some of the numbers. Your debt servicing costs are going up. Between the four-and-a-half months from December until now, the debt-servicing costs are projecting quite a bit higher, even though it’s only been four-and-a-half months between the two documents. The proposed debt ceiling has also increased by about $5 billion. All of your program expenses in Budget 2021, compared to the Fall Economic Statement, have also increased. All those pressures are on the budget. It’s going to be on your debt ceiling.
We looked at the budget. What is your plan should interest and inflation further increase, the economy doesn’t recover when you think it’s going to recover and further support will be needed in addition to what’s already outlined in Budget 2021?
Ms. Freeland: Thank you, senator. Many points are embedded in that question so I’ll quickly try to touch on as many as I can.
To the point about taxes and authority, let me say to all of the senators here and to your colleagues in the House of Commons that our government has the utmost respect for members of Parliament and senators. It is essential that the tax measures — in this case, treating rent payable as an eligible expense — be debated, discussed and approved by all of you. I am personally very grateful that we have the practice of acting on tax measures when they are announced, because that has saved thousands and thousands of Canadian small businesses.
Now, on —
Senator Marshall: Minister, we don’t need to approve it because it’s already been approved. But okay, thank you.
The Chair: Please, minister, continue.
Ms. Freeland: Thank you, Mr. Chair.
Then there were a number of questions about borrowing authority, interest rates, debt management and program expenses. Let me begin by saying that the government is pursuing a prudent and sustainable debt-management strategy. We are pushing out to longer maturity Canada’s debt. Before the pandemic, 15% of the bonds issued by the government were at maturities of 10 years or greater. In 2020, our allocation of long bonds rose to about 29%. In the budget, we propose to increase that proportion to 42%. This will result in the longest average term to maturity in four decades. Senator, that is an important measure in order to protect Canada from rollover risks.
I could go on, but I think the chair wants me to stop.
The Chair: Thank you, minister. There is no doubt you will have other questions.
[Translation]
Senator Forest: Thank you, Madam Minister, for joining us to discuss this important legislation in the midst of the pandemic.
My question concerns two topics: the housing crisis and employment insurance reform.
In terms of housing, we’re currently experiencing a critical situation in several parts of Canada, and particularly in Quebec. When we look at large centres, such as Montreal, and even at large regional centres, such as Rimouski, we can see that the vacancy rates are grossly unbalanced in relation to supply and demand. In your recent budget, you took certain measures to address this issue. I’m thinking in particular of the non-resident property tax.
The Canada-Quebec agreement includes $272 million over 10 years for the construction of new social housing units. However, the cost of building materials is currently staggering. Having been a mayor for a long time and having handled social housing on several occasions, I can tell you that the participation of municipalities is disproportionate given the resources. We’re talking about building a few units with $27 million a year. The figures are fairly modest. This is a far cry from the 1980s when Ottawa funded 7,000 social housing units a year in Quebec alone and 30,000 units across the country.
Don’t you think that we could help the economy and the families in need by investing in the construction of new social housing and by providing more structural support to municipalities? Will the new non-resident property tax to reduce the real estate frenzy at least be reinvested in social housing?
Ms. Freeland: Thank you for the question. Rest assured that I consider this issue very important, a key issue for Quebec and for Canada. Housing is a very important issue. We must remember that Canada has a rather unique characteristic among G7 countries: the population is growing. As Minister of Finance, I think that’s great — and I can see that you agree with me. That’s one reason why we can be optimistic about economic growth in general. However, because of the growing population, housing must be built every year.
You referred to the tax as a measure. This measure is important because we don’t want speculation in the housing sector. The housing sector must focus on creating homes for Canadian families and Quebec families. The housing sector mustn’t be a place for speculators. The tax is one of our measures to prevent this.
In general, I agree that we should build more housing. The budget includes $2.5 billion for housing construction. I agree with you. We must continue.
You also spoke about municipalities. I want to point out that, in March, we also announced that the municipalities will receive $2.2 billion for the capital project, which could include housing.
Senator Forest: While the CMHC was an important partner, it’s less involved today.
My second question concerns Employment Insurance. Despite a certain level of economic recovery, over 440,000 Quebecers are still receiving employment insurance benefits. The COVID crisis has demonstrated that the employment insurance system isn’t always adapted to the reality of the labour market. Programs had to be cobbled together to cover self-employed workers and gig workers, including seasonal workers. In eastern Quebec and the Maritimes, we know better than anyone that the employment insurance system doesn’t adequately cover seasonal workers.
The budget includes $5 million over two years to conduct a consultation on employment insurance reform. In my heart, I wonder why we need a two-year consultation when the solutions are obvious. In particular, with respect to seasonal workers, the human resources committees have prepared many reports on the topic and the Axworthy reform did so as well. I’m thinking, for example, of the 2001 report in which parliamentarians from all parties proposed a single eligibility threshold for Employment Insurance.
Why focus only on Employment Insurance and ignore the issue of a guaranteed minimum income, as proposed by the activists from your own party at the recent convention, which we watched with interest?
Ms. Freeland: Again, multiple points and questions are included in a single question.
Senator Forest: Sorry.
Ms. Freeland: That isn’t a criticism. I’ll try to respond to all the questions and points.
With respect to the employment insurance system, I basically agree with you. The pandemic has shown all Canadians that we have major gaps in our employment insurance system. Our employment insurance system is from the 20th century. This is the 21st century. I agree with you that our system needs improvement to meet the needs of the 21st century.
I may not be as smart as you, senator, because you said that everyone knows what to do. To me, the issues are obvious, but the answers aren’t as clear. I understand the vital importance of our employment insurance system. The lives of many Canadians depend on it. I think that we must take a very careful approach. We must be absolutely sure that any changes are fair and correct. That’s why we must take some time to make sure of this.
The Chair: Thank you, Madam Minister.
[English]
Honourable senators, please ask direct questions rather than preambles. Also, minister, I would ask you to be precise in answering the questions, please, so we can give all senators a chance to ask you a question.
Senator Klyne: Welcome to all the officials and to you, minister. Thank you for the opening remarks.
I want to focus my question around Canada’s exporting future and EDC’s renewed 10-year corporate strategy that was announced pre-pandemic. I’m quite inspired by EDC’s strategy and am equally encouraged by Canada’s SME exporters and their potential and demonstrable abilities to create jobs in the areas of agri-food, clean technology, advanced manufacturing, digital industries and resources of the future.
Regarding EDC’s 10-year strategy, I hope the government has a government-wide focus when taking measures aimed at giving a hand up to those SMEs poised to commercialize and monetize in the export industries, especially those on the threshold of scaling up and contributing more to exports. Can you provide the committee with any insights into Bill C-14 that demonstrate how the government is looking to assist and support our exporting SMEs to recover and leverage their abilities to punch their way out and contribute to the 37-member countries of the OECD in terms of finding their rightful place in Canada’s market share? I’m thinking of areas like functional and effective trade relations, and the inflow and access to the brightest, smartest and most innovative talent and scholars. In addition, is there any strategy or effort to augment Indigenous-controlled exporter businesses? Finally, is there a strategy under consideration to nearshore supply chains?
Ms. Freeland: Again, there are lots of great points embedded in those questions.
Let me first say, senator, that I welcome your focus on both small- and medium-sized enterprises and on Canadian exporters. I would like to take the opportunity to congratulate them, including those from your province of Saskatchewan, on how well Canadian exporters are doing. Particularly, our commodity exporters are doing well, and that is providing a lot of strength to the Canadian economy, so well done, including well done to our Prairie farmers.
In terms of Bill C-14, it does include some border measures, which are, of course, important to our exporters. The budget has many measures supportive of our exporters, and I will list a few. They include an expansion of our National Trade Corridors Fund and significant investments of more than $5 billion supporting small- and medium-sized enterprises, including powerful tax incentives for them to invest in themselves and make access to financing easier. That will be very significant.
Another significant new program for small- and medium-sized enterprises is in technology adoption — and I see the chair shaking his head.
Let me quickly say, senator, you referred to Indigenous entrepreneurs. That is, of course, important to all senators and to our government. The budget includes significant measures to support Indigenous business and Indigenous entrepreneurship.
Senator Klyne: Thank you, Madam Minister. If there is any other information you or your officials would like to share post-wise, we’d be grateful. Thank you.
Senator Richards: Thank you, minister, for being here today.
I have a question and I don’t know if it’s for you or someone else to answer. However, there is a terrible by-product of this pandemic, and it is the scourge of meth addiction in the rural areas of this country, particularly in New Brunswick and Nova Scotia. We have a whole generation of kids becoming lost because of this addiction. This is not to cast blame on the government. I just wonder if the government is aware of the problem and aware that these kids are on the street day and night with bolt cutters and hack saws, breaking into places because they need a meth fix. Is the government aware of this, because it’s certainly a problem in the rural areas of the Maritimes?
Ms. Freeland: Senator, thank you very much for raising that issue.
I noticed you used the term “lost generation.” I share your great concern for Canada’s youth and young people. I think we all should be aware that they’ve made a big sacrifice for us. It’s harder for them, I believe, than for us to comply with social distancing restrictions. They’re at an age where they need to be out with young people, and they are not able to do that. I think that imposes real social and economic costs on them. That’s why I believe we have a duty as a country to support them.
I talked about some of the measures to support students that are in the budget, and we’re creating more than 200,000 work placement opportunities, precisely, senator, to help that lost generation.
I agree with you that addiction is an issue and that the pandemic has exacerbated it. The budget does have some significant support for fighting addiction, including — you’ve mentioned meth, and I would also add opioid addiction, which is maybe more pronounced in the west of the country.
The final thing I would say is the budget does include some significant mental health support. For example, we have found, in our Wellness Together federal portal, that young people are the ones who are turning to it the most, which tends to speak to the issue that you have identified. I would point out, senators, that Bill C-14 includes measures for students in particular, like that one interest-free year.
Senator Loffreda: Thank you, Minister Freeland, for being here with us.
I’d like to talk about our long-term debt. Previously, social spending programs were considered current operations funded, mostly, with current revenues. We are now starting to see those programs being funded by long-term debt. No one is arguing the merits of these programs, but is this an optimal strategy? We’re creating intergenerational debt.
I ask the question because I’m a little concerned about the stress testing that was performed. There has to be more than what I have seen. There has to be some back-room analysis that’s being done on what-if scenarios, and I’d like you to elaborate on the level of stress testing that we don’t see. I do see a bubble of 100 basis points, but I don’t want to dwell more on that. We’ve all seen the budget. What is the extent of stress testing performed on the debt level and borrowing limits being requested in Bill C-14 in light of the spending announcements in the Budget 2021?
Also, are we exhausting any permanent spending capacity for the future? Is this a concern? We don’t know where the pandemic is going or what will be needed in the future, so I’d like you to maybe elaborate and reassure us about all this. Thank you.
Ms. Freeland: I’d like to thank the senator for the question. You said at the end you would like me to elaborate and reassure. I’m happy to do that.
I want to start by assuring all the senators here and all Canadians that I, personally, as well as the entire department, take fiscal sustainability very seriously. I believe that prudence is built into the DNA of Canada’s financial institutions, and that is a good thing. I believe that’s reflected in this budget. Let me give you a few proof points.
The first, because I always think people should be careful about checking their own homework, is Standard & Poor, the ratings agency. After the budget was released, they came out with a research update on April 26 reaffirming Canada’s triple A rating. These are people who are very careful. They looked at our numbers and our plans, and they found that Canada is still in the highest possible category of credit worthiness. I think we all should be very reassured by that verdict.
Let me offer a couple of other measures of fiscal sustainability. Overall, senator, a lot of your points were about what is the long-term sustainability? Are we building in debt that will be a burden on future generations? I would say the best strategy for paying off our debts is a plan for jobs and growth. The best thing we can do for our young people, who we’ve spoken a lot about today and that’s a good thing, is have them graduate into an economy that is growing robustly and where they can get a job. Yes, that has meant supporting our businesses and Canadians through the pandemic, but preventing economic scarring, as our measures have done, is an investment well worth making.
Let me give you two data points. In Q4, Canada’s economy grew by nearly 10%. In the G7, that performance was only exceeded by Japan, which, as an island in Asia, was spared the worst ravages of the corona virus. We just had Q1 numbers out, and we see the Canadian economy growing, despite the new lockdowns, at about 6.5%, slightly ahead of the U.S. I attribute that growth to the resilience and ingenuity of Canadians, but I also attribute it to the fact that our government acted at scale and with speed to prevent economic scarring. By preventing that economic scarring, we are allowing Canadians to be resilient and we’re positioning Canada very well to come roaring back when the pandemic is fully behind us. That’s the economic plan that will pay off our COVID debt.
I have more to say, senator, but I see the chair leaning in to his screen, so I will stop there.
Senator Smith: Thank you, minister, for being here today.
I am going to ask a question on behalf of Senator Patterson, who has spent most of his career in the North. The Fall Economic Statement purports to support infrastructure in Indigenous northern and remote communities. Iqaluit, Nunavut’s capital and home to over 8,000 citizens, is in danger of running out of potable water. Due to a combination of factors, including decreased precipitation and increased population growth, the current reservoir supplying the city of Iqaluit is no longer adequate to sustain residents. A new long-term water supply will include a new source supply of potable water and an additional storage and distribution system. A new system is integral to the city’s ability to mitigate the impacts of climate change, support economic growth and to ensure that the current and future needs of residents are met.
Minister, the question from Senator Patterson is simple: Will your government commit to providing the estimated $130 million required to fix Iqaluit’s water supply issue, and will you commit to doing this in this fiscal year? It is a fairly direct question, but it’s an urgent situation, minister, which needs to be addressed, if it hasn’t been.
Ms. Freeland: Thank you very much, Senator Smith. You said it was Senator Patterson on whose behalf you’re asking the question, so thank you via you to Senator Patterson.
Look, we work very closely with the governments of the territories, very much including the government of Nunavut, and both the Fall Economic Statement and the budget include a number of measures specifically to address the needs of the Canadian North. That includes housing and infrastructure. It includes an increase in the travel deduction for Northern residents. We are in really close touch with the government of Nunavut, and we work very hard to be responsive to their needs, including in the fight against COVID. What I will commit to do, both Senator Smith and Senator Patterson, is to raise this issue with Nunavut and see what they have to say.
Senator Smith: That would be appreciated.
One of the other reasons for asking the question is because through the various infrastructure projects that have been tried to be implemented, there is some concern about the execution and delivery and the capacity of the government to complete the projects it says it’s going to complete. I would appreciate it if you would take this into consideration and take a leadership role in making sure this gets done. Thank you.
Senator Downe: Minister, I want to personally thank you for your leadership on beneficial ownership. In the budget, you committed $2.1 million to look into a publicly accessible registry, followed by implementation of the registry by 2025. Could you please provide us with an understanding of what you expect will happen with those funds in that time frame? Is there any possibility of having the registry come into existence prior to 2025?
Ms. Freeland: Senator Downe, thank you for that question and for highlighting what I personally believe to be a very important measure in the budget.
The beneficial ownership measure is part of a broader suite of measures designed to close tax loopholes, avoid jurisdiction shopping and to give us the tools we need to go after tax evasion. The pandemic has highlighted the importance of the value of the need for social solidarity. Social solidarity starts with everyone doing and paying their fair share. This is a really important measure to me.
In terms of beneficial ownership, I think the time has come to shine light on these arrangements. This is where we see our G7 peers moving, including the U.K. and the U.S. There is some complexity in setting up a new public and publicly accessible system, so we want to do it right.
I’m pleased that you put highlighter under this measure. It is an important one, and this is something that the government is committed to doing.
Senator Downe: Do you have any specific examples of how you see the $2.1 million being spent over the next years?
Ms. Freeland: Sure, senator. We do not have this system at the moment. The jurisdiction that is probably the most advanced in doing this is the U.K. Setting up a register is pretty complicated, especially setting up a register that is publicly accessible and searchable. We will be looking at best practice and laying the foundation of setting this up.
I will mention one other thing that I heard directly from Rishi Sunak, the British Chancellor of the Exchequer, which is that they see beneficial ownership and opening up beneficial ownership arrangements as important in the fight against climate change. The view is that crimes against nature are sometimes concealed through beneficial ownership arrangements. That’s another reason that this is important to act on, and we will.
Senator Downe: Thank you, minister.
Speaking of overseas tax evasion, the Parliamentary Budget Officer said before the Senate:
. . . there are hundreds of millions, if not billions, of dollars in taxes that go undeclared, unreported and that escape Canadian tax authorities, probably on an annual basis . . . .
There have been many tax evasion leaks over the years, and one was the Panama Papers. Over five years ago, we found out that over 894 Canadians had accounts in Panama. Of those 894 Canadians revealed by the Panama Papers to have accounts, the Canada Revenue Agency hasn’t recovered a dollar. Australia has recovered $138 million; Ecuador has recovered $84 million; Spain, $166 million; and Iceland, a country of 340,000, has recovered $25 million.
Minister, you’re also the Deputy Prime Minister. This conduct undermines trust in the Canadian tax system. It appears there are two levels — one for those who can hide their money overseas and the rest of us who have to pay through domestic tax arrangements.
Why is there such a discrepancy? Why does the government allow this to continue year after year, notwithstanding the many funds we spend? The CRA seems incapable or incompetent to do anything about it.
Ms. Freeland: Thank you, senator, for the question.
I do want to start, actually, by speaking up for the CRA. It is not always a loved job being the tax collector, but I have to say this pandemic has really caused me to have tremendous respect and admiration for the CRA. Many of the business support and income support programs that the government has been able to deliver, which have been so important to get Canadians through this, have been delivered by the CRA, which has acted with professionalism and agility. I do want to give credit where credit is due.
On tax evasion and tax avoidance, senator, I share your sense of urgency. I think it is always important for people to pay their fair share, but especially today. That’s why this budget includes unprecedented action, first of all, to go after aggressive tax-planning schemes, second of all, fixing shopping loopholes, and third of all, to give our government the tools and the financial support to go after tax evasion. I’m confident that with this support, and with these additional measures, they will be able to do just that.
The Chair: Thank you.
[Translation]
Senator Galvez: First, Madam Minister, I want to congratulate you. You’re the first woman Minister of Finance and you have tabled your first budget. Well done!
[English]
I also want to thank you because you dedicated a part called “A Healthy Environment and a Healthy Economy,” which I appreciate. You know that the devil is in the details, and I want to ask you three questions. I’m going to ask them, and if you can answer them now, it’s fine, but if you can answer me later in written form, I will appreciate it.
The first one concerns the tax incentive for fossil fuel hydrogen in your Budget 2021. My question is: can you clarify whether the Net Zero Accelerator program will provide funding for emitting forms of hydrogen such as blue hydrogen created using natural gas?
My second question is about the green bonds in Budget 2021. You want to put 5 billion to create green bonds. The European Commission just put out its taxonomy on the regulations, where it figures they are the least of the criteria, science-based, for implementing this green new deal. Given the European Union is advancing this issue, will you rely on the EU taxonomy as a blueprint for Canadians’ green bonds?
My last question concerns the fossil fuels receiving clean tech funding. Do you have data and analysis on the proportional allocation of clean innovation funding to the fossil fuels versus renewable or energy efficient sectors, for example through the Strategic Innovation Fund?
Ms. Freeland: Senators, you all have a lot of questions and you’re jamming them into each one. I will try to be succinct.
Thank you, senator, for the kind words. I do think it’s important to support women in Canada and around the world, and I’m grateful to you for recognizing that.
On the green bonds, this is a really important initiative. It’s the first time for Canada. Obviously, we know that it’s going to be very important that our green bond be serious and that investors in it have a deep confidence that their money is going toward truly green projects.
You’re quite right, senator, to point to the EU example. We have had some good conversations with our European partners. Canada will develop its own approach. I think we can hold our head up high on these issues. However, we always look to best practice, and there are European countries that have a lot of experience already issuing green bonds. So that’s the green bond point.
Now to the points about clean technology, where the funding is going, Canada’s energy sector and so forth, let me say a couple of things quickly. When it comes to the Net Zero Accelerator in the SIF, one of the core views that our government has is that Canada needs to build on our existing economic strengths. One of the jobs of the SIF is to help our existing industries — whether it is in forestry, in aluminum, in aerospace — to adapt to the green economy. That’s going to be a key mission.
On fossil fuels and the energy sector in particular, we know that a great deal of Canada’s emissions come from the energy sector, so it absolutely makes sense for us as a country to work hard together, with the federal government and with the energy sector, to reduce the emissions. That’s something that this budget has a number of measures designed to do. I do also want to say that we agree that subsidies directly to fossil fuels don’t have a place in a modern economy, and we’re careful about that.
Finally, I just want to say one thing to all of us as Canadians. As finance minister in conversations with international partners, I have really experienced that the price on pollution that Canada has across the country is a model for many countries around the world. Pricing pollution is seen by the IMF and the OECD, for example, as the gold standard policy to bring down emissions. It’s been hard for our country to get that in place, but we’ve done it. As a country, we should be proud of that.
I see our chair telling me to wrap up.
The Chair: Thank you for your cooperation, minister.
Ms. Freeland: If I may say, Mr. Chair, your hand gestures are helpful to me. I thank you.
Senator Boehm: Minister, it’s good to see you again. I have two questions that are very different. I will ask the first one, and if there’s time I will ask the second.
My first question involves independent travel advisers. As you know, these are entrepreneurs who run small businesses. They work mainly from home and were working from home even before the pandemic. 85% are women, and more than half of them rely on commission as their sole source of income. Consequently, they’ve fallen between the cracks of the support programs, both federal and provincial. They have formed an association — they have been meeting with a number of us — to put out their concerns that in any subsidy or package to bail out the travel industry, their commissions, which are often paid six months down the road, should be paid to them. This is their biggest concern. I’m wondering whether you and your team are focusing on that, because it’s a very vulnerable sector. I notice, of course, that you have established the very welcome Task Force on Women in the Economy, and perhaps this could be something that could be looked at in that context as well.
Ms. Freeland: Nice to see you, senator, and that is a great point. It is an issue. It’s a sector that I’m very aware of, and it’s an issue that I’m very aware of.
Let me point to one important example of that awareness that is in the supports measures that we agreed on with Air Canada, which included reimbursing Canadian travellers for their vouchers. Specifically, travel agents will not be asked to reimburse the commissions that they received on the initial sale of those tickets. That is an element that travel agents themselves made us aware was a concern of theirs. We were glad to talk to them. We listened, and it is reflected in our subsequent agreements with the airlines. So that is there.
We continue to talk with travel agents. I agree with you, senator, that this is a group composed predominantly of women, small business people, women entrepreneurs, and we know that’s a group we need to focus on in our recovery efforts. We’re going to keep talking to them. I hope and believe that the $1 billion in the budget to support tourism and travel around Canada will also support Canada’s great travel agents.
Senator Boehm: Minister, this will not surprise you, coming from me. It’s G7 season. I know you and your counterparts have been engaged in discussions about the extent of stimulus and how to support the global economy. We have some new leaders around the table. There is likely to be an in-person meeting. Italy has a well-known former banker as its Prime Minister. What are the prospects for unity or a collective approach to stimulus to get us out of this?
Ms. Freeland: That question doesn’t surprise me at all, Senator Boehm, and I can’t resist pointing out that it was in one of my recent Senate testimonies that I quoted Mario Draghi and his approach to the Euro crisis.
Senator, there is a high degree of collaboration at the G7 table. Secretary Yellen is a very welcome new member of that group and brings some extremely helpful economic thinking. I’ve had some valuable bilateral conversations with her and her team.
I’m going to give a shout-out to another woman who is very involved in forging international consensus on the approach to the corona recession, and that is Kristalina Georgieva, the Managing Director of the IMF, with whom I had a conversation just this morning. She is very supportive of Canada’s approach to focusing on women in the economy, particularly given that the IMF has found, as has Canada — we spoke this morning about the “she-cession,” and she said the IMF research suggests we should be calling it a “mom-cession” and focusing particularly on the challenges mothers of young children face, and I’m glad to say I think our budget does that.
Senator M. Deacon: Thank you for being here, and congratulations on this budget. We are really excited.
I am going to take away the G7 and come back to Canada and the question of federalism. While the question may feel broad, I think you’re the right person to ask. Bill C-14 touches on a number of areas traditionally in the realm of provincial jurisdiction such as health spending and long-term care. This budget did this as well, particularly via the child care announcement.
It is fair to say that federalism has been on display more in the last year than it has in recent memory. Discussions on border control, sick leave, and other aspects of our pandemic response have been a source of consistent debate. You, in your different roles, have been at the centre of the relationship of the federal, provincial and territorial governments.
Today I would like to know your insight of how you would say federalism has performed over the last year, what were the strengths and what areas can we improve upon as we embark on what we hope will be a long, sustained and successful recovery.
Ms. Freeland: Wow, that’s pretty broad. I’d need to write a PhD thesis to properly answer it.
Someone once said — and I need to look up this quote — that Canadian federalism was like a bumblebee. If you see a blueprint of it on paper, you would never think it could fly, but actually it can. That’s a good description of how we’ve seen Canada doing during this pandemic. The Prime Minister asked me to join him and Dominic LeBlanc on the thirtieth phone call of Canada’s first ministers last night. Thirty calls. Wow.
No one would be surprised to hear that we don’t always, or even ever, agree about every single thing, but I want to thank the premiers of the provinces and territories and my colleague finance ministers. I think we have all entered this in good faith, trying to work together.
There’s a saying that if you want to go fast, go alone; if you want to go far, go together. That is maybe a good description of Canadian federalism. It takes longer to get consensus. Our system makes it harder to do things quickly because there are a lot of different authorities at different levels of government. We are a vast and diverse country, and that really makes sense.
You mentioned, senator, early learning and child care in the budget. For me, that is both an example of the challenges of federalism and the opportunities it represents. Opportunity because I think it’s possible to propose a universal system of early learning and child care in Canada today, only because Quebec went first, and because pioneering feminists of Quebec had the courage to go and do it and show it could be done. That’s what gives the rest of Canada the confidence to say that it is possible and pays great economic dividends.
But early learning and child care also underscore the challenges of federalism because it’s going to be hard. This is not something where the federal government can wave a magic wand and make it so. We’re going to have to have a lot of conversation and collaboration. I’m probably going to have a lot more grey hair when it is over. The pandemic has added a few. I will say, optimistically, that that effort, those conversations, will mean that the final system we have is better and more suitable to the diverse reality of Canadians across our amazing country.
Senator M. Deacon: My other question concerns the rent subsidy. One of the issues we heard when studying Bill C-9, which introduced the subsidy, was that some entities could not apply for the program if they did not have a CRA number. Newer firms that have not needed a business number, or say a school that is GST or HST exempt, for instance, were not able to apply for the program. We heard from an earlier panel today that this was a hurdle for a number of on-reserve businesses, and the Canadian Council for Aboriginal Business asked that this qualifier be removed. Why was this kept in for Bill C-14, and what hurdles exist to removing the need for it or the possible removal of a CRA business number?
Ms. Freeland: Thank you for that question, which I have come across in other conversations. With the business support programs, we had this challenge of balancing the need to support as many businesses as possible with the need to have a program with integrity. We know that Canadians want to be sure that the government’s money, which is finite, is going to the people who deserve it. Having a CRA number is a really important integrity measure.
I agree with you, senator, that there are some entirely deserving entities that get left out with that approach. You mentioned specifically Indigenous. There is a specific support program for Indigenous entities in the budget that is meant to fill some gaps in the other programs. That’s one source of support.
We have given significant funding to the RDAs to specifically address some of the unique circumstances where it is a deserving applicant but who doesn’t check all of the necessary boxes.
Senator Duncan: Thank you very much, minister, for your appearance here today.
I truly appreciate, as others have, that the government has been responsive, in particular, to use an overused COVID-19 phrase, to pivot when required. The changes, for example, recognized in Bill C-14 are the adaptation of the CERS, the rent subsidy.
I also noted, minister, from the website the information that there were no applicants for CERS from either Yukon or Nunavut, and that in the Canada Student Loans Program, which is also contained in this bill, Quebec, Nunavut and N.W.T. have alternate programs. All of this is to say that one size does not fit all in Canada, and you addressed that in part to Senator Deacon’s question.
In the interest of time, my specific question is on the ongoing evaluation of programs. Where is that housed? There can be such a patchwork of situations and needs and adaptations that are requested. Is there one central location for it?
Related to that, how do new policy initiatives, programs and proposals, such as Prince Edward Island’s basic income guarantee or the Yukon’s putting people first proposal, fit in a basic income guarantee pilot?
The questions are on the ongoing evaluation and how do the new proposals fit. Thank you, minister, for your response.
Ms. Freeland: It is very nice to see you, senator. Again, there is lots in that question, from rent support all the way to basic income. Let me just say a few things.
First of all, one thing that has been really important that I alluded to in answer to Senator Deacon is just people talking and being in touch. Speaking to the senator from the Yukon, let me congratulate Premier Silver who was on the call yesterday. I personally, Dominic LeBlanc, the Prime Minister, we have a good, direct connection with Premier Silver. He does not hesitate to text me when he needs something, and that is exactly the right approach. I would say that’s part of the solution to having programs that fit specific needs.
On these business and income supports, this has been I hope a once-in-a-generation crisis. We’ve had to — as you said, senator, the much used but appropriate word — pivot as we go along, course correct. We’re going to continue to do that. Let’s hope that soon, when I come to testify again before senators, we will be talking about measures that we need to come roaring back.
I also want to congratulate the Yukon for the very smart policy the Yukon put in place very early on the sickness benefit. Premier Silver spoke to all of the first ministers yesterday and described how the Yukon has done it. That’s another example of federalism yielding good ideas for everyone.
Very quickly on the basic income point, let me point you to some of the important measures in that space in the budget. First and foremost, I think that the Canada workers benefit and the top-up there is really important. That will cover an additional 1 million Canadians and will lift another 100,000 people out of poverty.
I could say a lot more, but I see again our chair leaning into his computer screen and smiling at me, so I’m going to stop.
The Chair: To the minister, before I ask you for closing remarks on Bill C-14 for two minutes, I want to share with you that I have just been made aware that of the 15 questions that senators asked for answers in writing, we have today received the last question we were waiting for today. I would like to take this opportunity to thank the leadership of the professional Canadian public servants and also your office for helping us, and hopefully we will continue doing that so that we can have answers in order to go forward on a pathway, that we have a common denominator in our pathway, the common denominator with you, minister, no doubt. It is about transparency, accountability, predictability and also about reliability and assuring Canadians.
On this, I will recognize your closing remarks for two minutes, please.
[Translation]
Ms. Freeland: Thank you, Mr. Chair and honourable senators. I want to thank you and tell you how much I appreciate your hard work. Your questions clearly showed that you pay very close attention to the details as well as the main points.
[English]
I want to complete by saying thank you very much. From your questions, it’s really apparent to me how much work each of you puts into serving Canada in the Senate from the level of detailed knowledge and also the level of, if I may say, sort of philosophical reach in the questions. I think that’s exactly what senators are meant to do. They’re meant to hold us accountable on the detail and they’re meant to draw our attention to some of the big ideas. Thank you very much. I’m grateful for your hard work. I look forward, I hope, to having Bill C-14 pass soon. The measures are really important for Canadian families and, as we fight the third wave of the virus, more so than ever.
The Chair: Minister, thank you. Please feel free while going through the blues with your department to answer questions in writing that you did not have time to answer. On this, minister, thank you for your availability and the time that you have given us.
[Translation]
The Chair: Welcome to the third portion of the meeting of the Standing Senate Committee on National Finance, where we’ll proceed with the clause-by-clause consideration of Bill C-14, An Act to implement certain provisions of the economic statement tabled in Parliament on November 30, 2020 and other measures.
[English]
Honourable senators, before we proceed with clause-by-clause consideration, I would like to remind senators that if at any point a senator is not sure where exactly we are, please ask for clarification. I want to be sure everyone is on the same page and knows where we are in the process at all times.
I wish to remind honourable senators that if there is ever any uncertainty as to the results of the vote, the most effective route is to request a roll call vote. Senators are aware that any tied vote negates the motion in question.
Before I proceed any further, I would like to know if there are any questions. A virtual clause-by-clause meeting is challenging, sometimes difficult. I don’t have the clerk sitting next to me to basically guide me all through this, so your indulgence and cooperation, senators, will be very appreciated.
For clarity, I will ask the clerk to name the members of the committee who are present on the clause-by-clause consideration of Bill C-14.
Maxime Fortin, Clerk of the Committee: We have Honourable Senators Mockler, Boehm, M. Deacon, Downe, Duncan, Forest, Galvez, Klyne, Loffreda, Marshall, Richards and Smith.
The Chair: Thank you.
Honourable senators, I would also like to point out that we have officials of departments, if need be, to answer questions, if there are any, during the clause-by-clause consideration of Bill C-14.
We will now proceed.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-14, An Act to implement certain provisions of the economic statement tabled in Parliament on November 30, 2020 and other measures? Is that agreed, honourable senators?
Hon. Senators: Agreed.
The Chair: With leave, is it agreed that the committee be allowed to group clauses by the seven parts identified in the bill, when appropriate? Is that agreed, honourable senators?
Hon. Senators: Agreed.
The Chair: Honourable senators, shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 1, which contains the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Part 1, Income Tax Act, containing clauses 2 to 5, pages 1 to 3. Shall Part 1, entitled Income Tax Act, containing clauses 2 to 5, carry?
An Hon. Senator: On division.
Some Hon. Senators: Agreed.
The Chair: Carried, on division. Thank you.
Part 2, Canada Student Loans Act, clause 6, page 4. Shall Part 2, entitled Canada Student Loans Act, containing clause 6, carry, honourable senators?
An Hon. Senator: On division.
Some Hon. Senators: Agreed.
The Chair: Carried, on division.
[Translation]
Shall Part 3, entitled Canada Student Financial Assistance Act, containing clause 7, on pages 4 and 5, carry, honourable senators?
Some Hon. Senators: Agreed.
Some Hon. Senators: No.
The Chair: Carried, on division.
[English]
Part 4, honourable senators, Apprentice Loans Act, clause 8, page 5. Shall Part 4, entitled Apprentice Loans Act, containing clause 8, carry, honourable senators?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
The Chair: Carried, on division.
Honourable senators, we will move to Part 5, Food and Drugs Act, clauses 9 to 11, pages 5 and 6. Shall Part 5, entitled Food and Drugs Act, containing clauses 9 to 11, carry, honourable senators?
Some Hon. Senators: Agreed.
Some Hon. Senators: On division.
The Chair: Carried, on division.
Honourable senators, Part 6 is Payments, clauses 12 to 14, pages 6 to 7. Shall Part 6 entitled Payments, containing clauses 12 to 14, carry, honourable senators?
Some Hon. Senators: On division.
Some Hon. Senators: Agreed.
The Chair: Carried, on division.
[Translation]
Shall Part 7, on page 8, entitled Borrowing Authority Act, containing clauses 15 to 19, carry, honourable senators?
Some Hon. Senators: Agreed.
Some Hon. Senators: No.
The Chair: Carried, on division.
[English]
Honourable senators, I will now move to the Schedule, pages 9 and 10. Shall the schedule carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1, which contains the short title, carry?
Hon. Senators: Agreed.
The Chair: Carried.
The title, honourable senators. Shall the title carry?
Hon. Senators: Agreed.
The Chair: Now we bring to your attention the bill, honourable senators. Shall the bill carry?
An Hon. Senator: On division.
Some Hon. Senators: Agreed.
The Chair: Carried, on division.
Honourable senators, do you have any additional comments, or do you have any observations that the committee should consider?
Senator M. Deacon: This may well be from Senator Marshall, but I want to come back to something that you brought up a few times again today, and that is where is the place we bring up concerns around what decisions have been made and the fact that we’re voting on something we don’t need to vote on because it has been done? Where does that not get lost?
Senator Marshall: It won’t get lost with me.
Senator M. Deacon: I don’t think so.
Senator Marshall: I will remember it now. It’s been touched on before when we discussed supplementary supply in March. I’ve asked officials: Are you going to have enough time to implement this? And they’d say yes, but with only a week left in the fiscal year, they had $50 million, and you wonder how they’d get it out the door. For me, it is an issue.
I appreciate the minister’s comments, but I do know the point I’m making is correct. That section of the legislation was implemented last November, and now it’s coming forward to us for what I consider to be rubber stamping. Other members of the committee have different opinions on it, so I think we should keep it in mind when we have other officials appear before us.
The minister did reference the Budget Implementation Act, so there are some tax increases in there. It would be interesting to see now, for example, the taxes on luxury items and whether that’s going to be implemented right away before the legislation gets approved.
Senator M. Deacon: Thank you, chair. I just wanted to check that.
The Chair: Thank you, Senator M. Deacon, for bringing this to the table. As for Senator Marshall, we have heard her comments. We can address them through observations, or they can be addressed directly when we give our speech in the Senate. This is an additional tool we can use.
[Translation]
Senator Forest: In keeping with Senator Marshall’s remarks, clearly the issue is the whole budget process. It’s completely illogical to pass supply that normally, before being incurred, would have been studied and passed, if at all, at the end of the fiscal year.
So either the supply was incurred without the authorization of both Houses, or they haven’t had time to spend the supply yet.
I think that some thought must be given to this. My comments show that I’m really concerned about the budget process, which is unrealistic in terms of the budget schedule.
Senator Galvez: I agree.
Senator Forest: This requires some thought and maybe our committee — perhaps when we finish the stewardship with the Main Estimates — can address the matter. However, according to our budget processes, if we had managed our cities in this fashion by authorizing money that had already been spent... it’s rubber stamping. I believe that we need to conduct a thorough review of the budget process itself.
[English]
Senator Lankin: I think the issue Senator Marshall has raised should be talked about in a broader context because it doesn’t just pertain to this bill. Here, as the minister said, she gave notification. She told us she was going to implement it and by what means. This has been a long-standing practice. It may be a wrong practice, and it may be something that Senator Marshall can help us dig into and come to an opinion on. However, it’s not a specific observation about this bill, but it is something we should follow up on.
With respect to the budget, one of the reasons it’s kept embargoed until it has been read is to not affect the markets with advance notice of what changes are to come. Some of those changes are actually implemented immediately, or at least they have been in past years — I have no idea about this particular budget — but that is standard practice. I think it’s worth looking into and rejecting, accepting or understanding.
At this point in time, I don’t think the process of trying to craft the wording for an observation on this bill is particularly helpful, but I think the issue that Senator Marshall has raised is important. Thank you.
Senator Richards: I agree with Senator Marshall. I’m glad it’s on division. I think she’s absolutely right. The money being spent before we get a chance to view the bill is a pretty broad sleight-of-hand, and I think she was right to bring it up. That’s my only comment.
Senator Loffreda: Although I don’t feel it’s necessary to put this as an observation, I will come back to it when we look at the budget, or maybe through a speech in the chamber. However, I do want to stress the following fact about stress testing. We’re all aware of the triple-A rating, and I’m not suggesting that we’re incapable of paying our debt, but when I was in banking, lending $100 to $200 million, the stress testing was exhaustive. We did what-if scenarios beyond your imagination. When I look at the budget, on page 344, when Finance Canada answered my question, they said there was a 200 basis-point bubble. I don’t want to embarrass them, but it was 100 basis points, not 200. They’re looking at limited features compared to what we, in the banking world, used to do.
I don’t want to be negative. The U.S. stimulus package is bigger than the Canadian economy. I think we’ll eventually see GDP growth, but the infrastructure of our debt has changed. We’re financing social programs with long-term debt, and the stress testing I see is limited compared to what I’m used to seeing in banking. Yes, we could have a what-if scenario where growth surpasses 6.5%, but then will we cut some of the programs and spending? How quickly will we alleviate the intergenerational debt that has been created?
I don’t think it should be an observation, but I want to defend my point, which wasn’t answered by the minister. In her defence, there’s only so much you can do in five minutes when you could write a PhD thesis on stress testing. My wife tells me all the time, “Don’t look back; look forward,” so I want to look forward, but we have to share what we’ve learned. Maybe on the budget, I will bring it up again in the form of a question.
I had a second question for the minister, but we didn’t have time. I wanted to ask, “Even if the what-if scenario was positive, what would happen?” Not just with three factors but more, including inflation, the stock market — you get my point.
I don’t think an observation is necessary, but I will pursue that point. I think it’s in everyone’s interest. Maybe they do stress testing in the back office. I would just like that confirmed. I would like them to say, “Yes, there are scenarios that are done in the back office by our economists. We can’t share them publicly, but, Senator Loffreda, rest assured that is the situation.” I’m just curious.
Senator Marshall: First of all, Senator Loffreda, I agree with you 100%. The stress testing wasn’t robust enough, and my question was along the same lines as yours.
For this issue of parliamentary control — and it’s not a partisan comment — I think we all know that governments like to exercise full control, but there is a role there for Parliament. We as a parliamentary committee have a role to play, and for government to effectively override our role I find quite insulting. Another word would be disingenuous. It is an issue. I would not want to hold up this bill. I don’t like the increase in the borrowing authority limit. However, the rest of it is to provide support during the pandemic, so I feel that I wouldn’t want to jeopardize the bill. However, I do think that we should get our heads around this issue of what the role of Parliament is versus what the role of government is. It’s a usual thing with government. They like to have total control, and why bring it to Parliament and create all that fuss if you can do it yourself within the fences of government?
I’d like to do a little bit more research on it. What I intended to do — I didn’t realize all the members were interested in it — is to see what else is being done. I just see this one example, but I would say it’s more pervasive than that, so I would like to see where else it’s happening. It’s a matter of educating ourselves so that when officials appear before us in the future, we’ll be able to ask those pointed questions.
I’d like to say thank you to all my colleagues who provided support on this.
Senator Boehm: I think Senator Marshall, both in our last meeting and at this meeting, has made a very valid point.
I tend to agree with Senator Lankin in her comments. I don’t think it would make much sense to add an observation at this point because, after all, it doesn’t apply to all aspects of the bill. However, it is nonetheless an important point in terms of parliamentary authority but also of government machinery in terms of how this goes forward. It is on the record; it is in Hansard. The exchange is there, and colleagues may want to raise it in the context of the budget implementation bill when it comes to us. All of that is fairly legitimate. It might be an idea to have a broader conversation on this and the way we go ahead. Finely targeted as it might be, the practice has been around for at least three decades, and some of us have seen that.
The Chair: Before I give you the floor, Senator Downe, thank you for participating in our meeting. The floor is yours, sir.
Senator Downe: Thank you, chair. It’s nice to be back. I served for many years in Finance. It was the committee I most enjoyed, but I’ve never been able to cycle back into it.
I want to emphasize what I think is a critical point Senator Marshall raised today. Senator Boehm is right as well. This has been going on for decades, but it really goes back to the heart of our system. As we all know, one of the things the Magna Carta did was reduce the power of the king to levy certain taxes and over his royal council and so on. Over time, that evolved into Parliament, and the monarchy was reduced from what it was to what it is today, which is that they really have no influence.
What we’re dealing with here, and I think it’s extremely important, is that the executive council — the cabinet — is taking over more and more rights of Parliament. That begs the question of what we are doing. What are we approving? We’re approving things that are already spent? Talk about horse out of the barn. This is a significant point. It’s the foundation of Parliament, and we should address it. Notwithstanding it has been slowly going on for the last number of decades, it’s either right or it’s wrong. In my opinion, it’s wrong.
The Chair: Honourable senators, would any other senators like to comment? I see none.
I would also like to bring to your attention that the discussion we’ve just had is public. Therefore there’s no doubt that the comments that you have brought to the table — what was raised by Senator Marshall and commented on by other senators of the Finance Committee — are about an important issue. Again, you’ve heard me say this: It’s about transparency, accountability, predictability and reliability. Thank you, honourable senators.
Before we move on to adjourn the meeting, I will ask again. Are there any other comments that you want to make? Therefore, I am asking you: Does the committee wish to consider appending any observations to the report? Yes or no?
Hon. Senators: No.
The Chair: Thank you, honourable senators.
Is it agreed that the Subcommittee on Agenda and Procedure be empowered to approve the final version of the report taken into consideration today and the discussions, with any necessary editorial, grammatical or translation changes as required? Do you agree that the Subcommittee on Agenda and Procedure be empowered?
Hon. Senators: Agreed.
The Chair: Agreed. Thank you, honourable senators.
Is it agreed that I report this bill as presented today, as agreed today, to the Senate?
Hon. Senators: Agreed.
The Chair: Thank you, honourable senators.
Before I adjourn the meeting, I would like to ask the steering committee to please stay connected. I want to bring certain elements of our agenda for the coming weeks, and please permit me to ask you to stay connected.
Honourable senators, I now declare the meeting adjourned. Thank you very much for your due diligence on Bill C-14.
(The committee adjourned.)