THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Thursday, May 27, 2021
The Standing Senate Committee on National Finance met by videoconference this day at 4 p.m. [ET] to study the subject matter of all of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures.
Senator Percy Mockler (Chair) in the chair.
[English]
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 recognized by the chair.
[Translation]
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 provided.
[English]
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. Participants should know to do so in a private area and to be mindful of their surroundings.
Honourable senators, we will begin the official portion of our meeting as per our order of reference received by the Senate of Canada.
My name is Percy Mockler, a senator from New Brunswick and Chair of the Standing Senate Committee on National Finance. I would like to introduce the members of the National Finance Committee and other senators who are participating in this meeting: Senator Boehm, Senator Dagenais, Senator M. Deacon, Senator Duncan, Senator Forest, Senator Galvez, Senator Klyne, Senator Loffreda, Senator Marshall, Senator Richards, and Senator Smith. We also welcome Senator Moncion, the sponsor of Bill C-30. Senator Pate and Senator Griffin are also joining us.
I wish to welcome all the viewers across the country who may be watching on sencanada.ca.
[Translation]
This morning, we continue our study of the subject matter of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures, which was referred to this committee on May 4, 2021 by the Senate of Canada.
[English]
Honourable senators, today we welcome the Deputy Prime Minister of Canada and the Minister of Finance, the Honourable Chrystia Freeland.
[Translation]
Minister, thank you for accepting our invitation once again. We are honoured by your presence.
[English]
We welcome you and thank you for accepting our invitation to appear in front of the National Finance Committee.
[Translation]
I have been informed that you have some opening remarks. So I would ask you to provide us with your comments. Then, we will follow with a question and answer period.
[English]
The Honourable Chrystia Freeland, P.C., M.P., Minister of Finance, Department of Finance Canada: Thank you to all the senators who are here today and for this invitation to speak with you about Bill C-30.
The pandemic has been a difficult and challenging time for Canadians. Our government, led by this Parliament, has done whatever it takes to help people and businesses get through to the other side. We hope to continue to do that with your support.
I would like to acknowledge the extraordinary attention you have given to your study of this legislation in this committee, but also in the five other Senate committees that have been involved in this important work. Thank you so much.
[Translation]
We have done everything in our power to protect the health and safety of Canadians, to help businesses weather the storm and to position Canada for a strong recovery. The battle is not yet over, but there is light at the end of the tunnel.
More than 20 million Canadians, including more than 60% of adults, have now received at least one dose of COVID-19 vaccine. Millions of doses of the approved vaccine continue to be delivered to the provinces and territories every week. Canada will get through this and the government will be there to help.
[English]
Senators, this budget is about jobs, growth and recovery. It’s about helping Canadians and Canadian businesses heal the wounds of COVID, and it’s about helping our economy come roaring back. Bill C-30 is the next vital step forward on this journey.
We know that the first thing we need to do is finish the fight against COVID. That’s why Bill C-30 provides an emergency top-up of $5 billion to provinces and territories, $4 billion through the Canada Health Transfer to help provincial and territorial governments address immediate health care system pressures, and another $1 billion to support vaccine rollouts, which are so essential across the country.
Next, we need to punch our way out of the COVID recession. That means acknowledging that the impact of COVID has been uneven. Women, young people, racialized Canadians, low-wage workers and our country’s small businesses have been particularly hard hit. We need to support them with investments.
One set of investments is in social infrastructure. That is why this budget proposes an historic investment of $30 billion over five years, beginning with more than $2.9 billion this year to provide high-quality, affordable and accessible early learning and child care.
[Translation]
In making this commitment, I thank the feminists in Quebec who have led the way for the rest of Canada. I am very grateful to them.
[English]
Young Canadians need to be at the heart of our recovery, not just to help them individually bounce back from the COVID recession, but because the future success of our youth is critical to our success as a country.
This budget will ensure that no one earning $40,000 per year or less will need to make any repayments on their student loans, and the cap on monthly student loan repayments will be reduced from 20% of household income to 10%.
[Translation]
The budget also proposes measures to help young Canadians enter the workforce. These measures would help the recovery of small and medium-sized businesses that have been hard hit by the pandemic.
Bill C-30 proposes to establish the new Canada Recovery Hiring Program. This program would support employers who continue to experience revenue shortfalls since the onset of the pandemic, by helping them with the costs of hiring workers. In addition, Bill C-30 would extend the Canada Emergency Wage Subsidy and the Canada Emergency Rent Subsidy and Lockdown Support until September 25. This would make it possible to protect millions of jobs across the country.
[English]
Bill C-30 also proposes to improve the access that small businesses have to financing, broadening eligibility and increasing loan limits.
I am sure all of us will agree that no one working full-time in Canada should live in poverty. Unfortunately, today that is too often the case. Bill C-30 would mitigate this by extending support through the Canada workers benefit to about a million more low-wage workers. That will lift nearly 100,000 Canadians out of poverty.
To further support workers, Bill C-30 would introduce a federal minimum wage of $15 per hour.
Across the country, 83% of the jobs lost during the pandemic have been recovered. This is good progress, but we all know there is much more work to do. That’s why Bill C-30 would help people who are still unable to work due to COVID by providing an additional 12 weeks of benefits through the Canada Recovery Benefit, and 4 additional weeks for the Canada Recovery Caregiving Benefit. This legislation would also maintain flexible access to EI benefits over the coming year and permanently extend EI sickness benefits from 15 to 26 weeks.
As I mentioned at the beginning, you have studied this legislation exhaustively and in great detail. It is my sincere hope that you will receive this legislation from the other place in a timely fashion so you can continue your work.
[Translation]
It is time to end the fight against COVID-19 and it is also time to invest in a better, fairer and more just Canada.
That is what the budget and Bill C-30 are all about, a plan that promotes jobs, economic growth and the middle class. A plan to help Canadians recover, succeed and prosper.
I thank the honourable senators, once again, for their consideration of this bill. I will be happy to answer your questions.
The Chair: Thank you very much, Minister, for your comments.
[English]
Honourable senators, I remind you that we will have a maximum of five minutes each to ask questions. The clerk will make a hand signal to show that the time is over.
Senator Marshall: Welcome, minister, to you and your officials. Thank you for your opening remarks.
Your budget is based on the assumptions of strong economic growth and low interest rates, but even slight changes in economic growth and interest rates can dramatically change your fiscal projections and your debt burden to an even-worse-case scenario than what’s included in your budget. So your projected economic growth might not materialize and the interest rates may rise. In fact, if you look at your Fall Economic Statement and Budget 2021, the projected debt servicing costs increased in the mere four months between the two documents.
Your projections for the next five years show continuing deficits and more debt, even though you’re counting on a healthy economy. Our debt load over the next three years, leading up to 2024, will increase by 50% to almost $2 trillion. There is no indication that there will be any repayment of any of this debt by our generation. Rather, the plan is to pass it on to our children, our grandchildren and our great-grandchildren. It’s really unprecedented.
Minister, can you tell us what provisions you have made in your projections, or maybe somewhere else, should your optimistic assumptions on economic growth and interest rates not materialize or if there is another fiscal shock, such as a recession or another pandemic?
Ms. Freeland: Thank you very much, Senator Marshall, for the question. There are a lot of elements there. Let me try to go through them one by one.
First of all, when it comes to the projections on key issues like GDP growth, like inflation, like the interest rate, it is very important for me to underscore that the key assumptions upon which the fiscal track in this budget is based are not my projections. Those key assumptions are drawn from a survey of private-sector economists. That has been the practice of the Department of Finance since 1994. I think it’s a great practice. It’s one of the reasons that Canada has such excellent financial institutions — because we ensure that those projections are objective and are drawn from the average of those private-sector economists.
I think that’s really important to establish. I know that all senators are very aware of this long-standing practice, but maybe some of our Canadian listeners are not. That element of objectivity in the building of the fiscal track is important to emphasize.
Senator Marshall: But, minister —
Ms. Freeland: I am not finished. Do I still have time to answer, Mr. Chair?
The Chair: Yes, you do, minister.
Ms. Freeland: Thank you, Mr. Chair.
Second, Senator Marshall, you’re quite right that it’s important to have provisions for different scenarios. That’s why I would urge senators to look at Table A1.11 on page 347 where we show some stress tests to which we have subjected the assumptions in the budget. Later on in the budget, there are also a couple of different scenarios depending on the progress of the virus.
Finally, let me just say, when it comes to the debt and deficit, I must respectfully disagree with you, Senator Marshall, on the track that we’re on. This budget shows a sustainable and responsible fiscal track with, in fact, a declining debt-to-GDP ratio, falling to 49.2% by 2025-26. Our debt-to-GDP ratio continues to be the lowest in the G7.
To offer some external validation, let me point out that S&P has reaffirmed Canada’s AAA rating, the highest possible.
Senator Marshall: Minister, regarding the private-sector economists and the rating agencies that you refer to, these are projections and people that you rely on, but people are looking to you to navigate us through this crisis. When I read through your budget document, it’s a very optimistic outlook that’s presented in your budget. I’ve come to the conclusion that there must be projections based on less optimistic assumptions in your department, other than those presented in your budget.
If there are any documents that show a less optimistic scenario, would you be able to provide them to our Finance Committee?
The Chair: Minister, if you have documents to be provided, please do it directly through the clerk.
[Translation]
Senator Forest: Thank you, Minister, for being with us today.
In Budget 2021, it is proposed to introduce a 1% annual tax on vacant or underutilized residential properties owned by non‑resident foreigners.
You know me: as soon as a level of government approaches the tax base of municipalities — which is already so small compared to their responsibilities — I become very suspicious. So, when the federal government is talking about taxing the value of buildings, I am anxious to know the details of this tax. We know that the property tax and the tax field are normally reserved for the municipalities.
I understand that this is not in Bill C-30, but can you or your officials explain how this targeted tax differs from the municipal property tax?
Finally, would it be possible to leave the administration of this tax to the municipalities?
Ms. Freeland: Thank you very much, Senator Forest. That is an excellent question and it is very important.
You’re right, a tax like this is new to Canada. You’re also right that our government is very supportive of municipalities. I hope you see that support reflected in the budget.
As far as housing is concerned, I want to add that I believe that a partnership between the federal government and the municipalities is essential to help build middle-class housing; this is an important issue for Canada. The purpose of this tax is to reduce speculation in the real estate sector.
Our government believes that it is very important that houses and apartments in Canada be spaces for Canadian families. We do not want Canadian real estate to become an investment sector for foreigners and we believe that having vacant houses when there are families in Canada who need a house is unacceptable. That is the purpose of this tax.
Senator Forest: Indeed, I fully support the objective. Currently, throughout Canada, in regions such as Rimouski, Toronto and Vancouver, we are facing an unprecedented housing crisis for the middle and lower classes. So, perhaps we could kill two birds with one stone.
As a suggestion, I saw an estimate that the anticipated revenue from this tax would be $700 million over four years. Could we not, in this case, set aside the specific revenue from this tax to be used exclusively for financial support? It could be used as a lever for collaboration between the territories and the provinces and especially with the municipalities that are investing considerable sums of money in order to devote this revenue to the construction of affordable housing for the most economically disadvantaged families.
Ms. Freeland: Thank you for that suggestion. I have to say that I agree with you, because the housing situation is an urgent issue for Canada. We’ve done a lot for housing in this budget and in the previous budget, but I agree with you that more needs to be done.
As you know, our government already has permanent funds for municipalities, but this is an interesting suggestion, and I say to you, Senator, and to all honourable senators that ideas for housing will be greatly appreciated.
The Chair: Thank you, Minister.
Senator Forest: Thank you.
[English]
Senator Klyne: Welcome to our Minister of Finance. As Deputy Prime Minister and a Minister of Finance with roots in Alberta, and I’m thinking as a senator from Saskatchewan, I’m curious about your thoughts on approaches to address climate change in terms of building public buy-in in the West. For example, this year’s budget highlights near-term potential to advance carbon capture, utilization and storage technologies in Alberta and Saskatchewan. The Fall Economic Statement also mentioned projects like zero-emission vehicle infrastructure, restoring natural carbon sinks like wetlands, green-farming investments and small modular reactors, including interest from Saskatchewan.
Is this an issue of demonstrating that a climate plan will involve major creation of green jobs in the West, and should we interpret this as important to national unity?
Ms. Freeland: Thank you for the question, senator. My short answer to you is I absolutely agree with the direction of your question. Action on climate change is a priority for our whole country. It’s a priority for the world. Canada will only be successful in acting on climate change if we have a plan that involves the whole country and that creates great green jobs across the country, and also, senator, a plan which recognizes the diversity of our country.
You mentioned my Alberta roots, senator. I talk to my dad a lot. My riding is University—Rosedale, I live in downtown Toronto, I don’t own a car, I have three children and we’re okay. We can take the subway, we can ride our bikes or we can walk wherever we need to go.
My dad is in Peace River right now, and he is a very fit guy. He can’t walk or ride a bike to all the places he needs to go. I really believe that Canada’s approach to climate has to bear in mind the diversity of our country.
Specifically on the West, let me talk about a couple areas I see as very promising. I recently had a great talk with Kyle Jeworski, the CEO of Viterra, and he is enthusiastic about clean fuel standards and the possibilities they hold for Canadian canola producers. I’m excited about that, too.
You mentioned CCUS — carbon capture, utilization and storage — and again there I see some tremendous opportunities across Canada that very much include our energy producers in Saskatchewan. In Alberta just last night I was in touch with Mark Little of Suncor, who is one of the people who is very committed and sees the necessity of embracing a climate change plan and sees our CCUS plan as something that can help him get there.
Senator Klyne: That’s good to hear. What are you hearing around these initiatives from the West in terms of support and buy-in? What would you say to late adopters, those with only one foot in?
Ms. Freeland: Senator, that’s a great question. I would say the following: I do think that there is actually a strong understanding of the importance, both as a policy for our children and a policy for the planet, of addressing climate change. But also, certainly among the business leaders I talk to in the West, there is an appreciation of, frankly, the pure business imperative for individual companies to adopt strong climate change policies and for governments to adopt strong climate change policies.
I think we all know we have to do it, but I really welcome your questions, because I think we will only be successful if we have a plan that supports people and that supports jobs and that people see as viable in their daily lives. All Canadian people need to see that, whether they live in a big city or small town, whether they live in Toronto or Peace River.
Senator Richards: Thank you, minister, for being here today. There are things in this budget I think are very good, like the money to be given to child care and the relief of student loan payments. I wish I had that when I was younger. The $15 an hour I think is pretty timely too.
Senator Marshall talked about the debt-to-growth ratio, which I was going to ask about, but I will leave that for another time. What job will the Net Zero Accelerator accommodate? I’m not sure about that. Can you give some examples of that platform, please? I just heard about the Net Zero Accelerator. I’m not sure what it’s about.
Ms. Freeland: Thank you, Senator Richards. It’s a really important question. The Net Zero Accelerator, which was launched in December with Canada’s more ambitious, carefully costed climate plan, and which we built on in the budget, has $8 billion in it, and that is money to actually support the sort of thing that Senator Klyne was asking about. It is money to support the green transition for existing industries. So if you think, for example, of the steel sector — a very important part of the Canadian economy — it can transition to a green economy, but it takes some investment to get there. Cement is another area. It can be produced in a green way, but it takes investment.
The Net Zero Accelerator is about the government being there to support the essential investments that businesses need to make that critical shift to the green economy, because you know, senator, I really see it on the international stage, as I’m sure you do, that the world is moving very fast in this direction. We need to help our existing Canadian businesses along so that they move into that space as well and the jobs of today can become the jobs of tomorrow.
Senator Richards: Thank you. That is fine. I yield the rest of my time.
Senator M. Deacon: Hello, minister. Thank you so much for being here again. As I’m looking at the budget implementation act and all of the work, I’m continuing to filter it through three words: recovery, hope and healing. When I ask this question, it is meant to fall in that filter, although it may initially appear not to.
I’m looking at the concerns of the future and how uncertain it becomes as we look further and further away. This morning’s Parliamentary Budget Officer report shows there is a lot of confidence in the short term. To summarize what we heard, the economy fell far, and once vaccines win the day and the economy reopens, there will be a strong economic rebound. Some argue, even, that once we open up, the economy won’t need a lot of stimulus in that shortest term — that there is a lot of pent-up energy waiting to be released. We heard that today.
Why did the government decide to turn up the stimulus full force now in this budget? Why did it not, instead, wait for the anticipated rebound to lose some momentum, at which point we could have more fiscal room to manœuvre and react to the uncertainties that exist three, five or eight years down the road?
Ms. Freeland: Thank you very much, Mr. Chair. Let me offer a few answers there. The first one actually is a direct response, Senator Deacon, to your final question on having some support in the later years. The reality is that this budget does have support for the economy in the later years. The $100 billion stimulus is actually spread out over three years. So yes, it is support for 2021-22, but it’s support for the next two years as well. That is quite intentional for some of the reasons that you suggest, senator.
I will also say, senator, that I am of the view that we must not take the recovery for granted. When you look back at the lessons of 2008-09, the experience around the world, including in Canada, was the recovery was too slow with very painful economic and social consequences. In Canada, it took a full decade for labour force participation to recover to the pre-2008-09 recession levels. That is too long. Canadians can’t wait.
I would like to quote Stephen Poloz in testimony to the Finance Committee last week. He said:
I, therefore, subscribe to the view that it makes sense to push the economy harder during the early stages of recovery because this will encourage business investment and create new economic growth.
I very much agree with that view, and that is one of the things this budget does.
I think the final point it’s worth making to senators about the $100 billion stimulus is that $30 billion within that stimulus are actually to finish the fight against COVID. The incoming business support measures, which I believe have been absolutely essential and very effective at keeping Canadians afloat and preventing economic scarring, are expensive. In this budget, we propose to extend them through to September 25. It’s important to do. That is a big part of that $100 billion.
Senator M. Deacon: Thank you very much. For a different spin, this question concerns the state of health, well-being, support and physical activity in Canada. Specifically, I would like to ask about the $80 million announced in April’s budget. The purpose of this was to:
. . . remove barriers to participation in sports programming and to help community organizations kick-start local organized sports that are accessible to all.
Certainly, the sport and physical activity sector in Canada is hurting but not for the lack of demand. I don’t think we will have to convince Canadians too hard to get out there and participate when it’s safe to do so. Yet almost all sports organizations have struggled over the last year with lost revenue and staff. How does the government plan to spend this money to ensure that when Canada can safely return to play, the infrastructure and community support will be ready to accept them? Thank you.
The Chair: Madam minister, can you answer in 30 seconds?
Ms. Freeland: In 30 seconds, I am going to thank my colleague Adam van Koeverden, who’s an outstanding athlete himself and has played a big role in putting together this program. I agree with you, senator, that getting Canadians back out playing and moving around is essential. The money is there to do it. We are already at work with sporting organizations, who have had a difficult year, to be sure that they’re ready to welcome Canadians when it is safe to do so. You were quite right to emphasize that.
Senator Boehm: Hello, minister, it’s good to see you again. I didn’t think it would be so soon, but here we are. In the Financial Times — which I know is a newspaper you know very well — on May 12, there was a supplement on investing in Canada. It gave a very optimistic picture about the recovery. The lead article referred to the $200 billion nest egg that relates to a consumer-led recovery in our country. Of course, more than half of that nest egg was given by the government to individuals in Canada, but it shows a growth rate, based on Bank of Canada projections, of 6.5% in 2021 and 3.75% in 2022, and, of course, references a more predictable trade relationship with our largest trade partner, which in the ensuing two weeks has gone the usual way of the hardy perennials on softwood lumber and dairy, as you will, of course, recall and know. We have an incandescent housing market. We are talking a lot about pent-up demand. This is what that article did as well.
It’s very different from 2008 and 2009 because not all sectors of the economy are going to recover the same way. If pent-up demand for Canadians, for example, is channelled into the travel sector, that is going to go much more slowly. There may be some reticence on the part of Canadians. Are you factoring that into your thinking and into your projections as you look ahead and if you’re not being just a little too optimistic?
Ms. Freeland: Thank you, Senator Boehm. It’s great to see you. I can’t resist saying, since you mentioned that invest-in-Canada special section, that is read by Financial Times readers around the world. It did present, I believe, an accurate and accurately positive view of Canada. I hope and trust that it will encourage a lot of people to invest in our great country. So thanks for mentioning it.
You mentioned a lot of different things, but I’ll actually start at the end and work my way back. On the point of the optimism or otherwise of our projections, I really want to emphasize, senators, that I really shouldn’t even describe them as our projections. The fiscal track is based on the projections of the private-sector economists who we survey. We surveyed them in March just before the budget. In fact, you, Senator Boehm, referred to the Bank of Canada now forecasting 6.5% growth for this year. Well, the fiscal track projections, based on which we built the budget, came to an average of 5.8% growth for the year, so that is a little less optimistic than where the Bank of Canada currently is.
I do agree with your point that the COVID recession has been decidedly uneven. That’s why the investments in this budget are targeted precisely at healing the wounds of COVID. That’s why there is $1 billion for the tourism sector. That is why we have the hiring recovery credit to help the hardest-hit businesses and support them as they bring back more workers. That’s why there is support targeted at low-wage workers and families.
Senator Boehm: Thank you, minister, for the answer. In the budget, I noticed measures to look at money laundering, and this is in the larger context of work, as you know, that has gone on in the OECD on base erosion and profit-shifting.
I’m particularly concerned about casinos. I know there are references in there, but they are not entirely clear, at least not to me, and we have seen in other sources that there is a lot of international and organized crime money that comes into Canada and flows through in this way. Do you have a comment on that?
Ms. Freeland: I have three quick comments. The first is an adjacent one. The budget does have strong measures targeted at tax evasion and aggressive tax-avoidance schemes. That is really important particularly as we come off of a highly uneven recession.
The second is when it comes to money laundering, a very important element in the budget is the work we commit to on beneficial ownership and making those arrangements transparent. Those are going to be really significant for Canada, and it is the direction the world is moving in. I’ll be happy to talk about the OECD and the tax discussions happening there should another senator choose to follow Senator Boehm and ask about that.
Senator Duncan: Thank you to the minister for attending our committee meeting. I’m, of course, speaking to you from the traditional territory of the Kwanlin Dün First Nation and the Ta’an Kwäch’än Council. I’m grateful to be a Yukoner.
Minister, I would like to focus on the recovery. In the immediate short term, we have seen in government initiatives, in a country as large and diverse as Canada, that one size does not fit all. Reopening the border between Canada and the U.S. is an example of one massive reopening where one size does not fit all.
There are many jurisdictions in Canada that can present the case that they are the exception. My question concerns the Alaska-Yukon border. As a former premier, I appreciate the work being done at the Council of the Federation and the agreement, and I, in no way, want to jeopardize Premier Silver’s cooperation with his colleagues, but I would like to focus on our border.
B.C. and Yukon have permitted travel between Alaska by road, and throughout the pandemic, travellers have stayed in their vehicles and had limited interactions. These travellers have transited through the traditional territory of several Yukon First Nations, including Champagne and Aishihik and White River. I highlight these First Nations as the closure of the border is especially acute. Sometimes there are families with one part of the family on one side of the border and another part of the family on the other. Canadians could argue the same situation.
There are initiatives and programs to reclaim the culture of these First Nations, and the separations at the border are especially acute because cultural workers are not necessarily considered essential.
Opening the border is also essential to the tourism industry, particularly southeast Alaska and southwest Yukon — all of the Yukon. The minister has spoken to the tourism industry. The backcountry outfitting and wilderness tourism forms a large percentage of Yukon and Alaska’s GDP.
Business witnesses have told us that they need a road map and a plan for reopening the border. Dr. Theresa Tam has stated publicly that Yukon is a model we are looking toward for success.
Minister, can we apply this truism to the Yukon-Alaska border and start a planned and gradual reopening of the Canada-U.S. border, beginning with Yukon and Alaska?
Ms. Freeland: Thank you very much, senator, for the question. I recently had a conversation with some Yukon entrepreneurs, particularly in the tourism sector, and it was a chance for me to recall very fondly my own childhood experiences hiking across that very border. I cannot think of a more wonderful thing to do than to hike on the Chilkoot Trail.
You ask a very important question, senator. I would also say I very much agree with Dr. Tam that the Yukon has been amazing in how it has handled COVID. Yukoners took some tough decisions early on that stood them in very good stead. Dr. Tam is quite right that Yukoners are a model for the rest of the country.
I also agree with the point you raised about First Nations, senator. First Nations existed here on our territories before the borders, and that’s important for all of us to bear in mind.
When it comes specifically to the Canada-U.S. border between Yukon and Alaska, let me assure you, senator, our government has an excellent relationship with the government of the Yukon. There are a lot of us who are on a texting basis with Premier Silver. I bet you are too, senator. We have been working closely with his government and will continue to do so. I know you work closely with him. If he wants to give me, Dominic LeBlanc or, indeed, the Prime Minister a shout to continue that conversation, we are ready to do it any time.
I am excited about the possibilities of reopening. I’m excited that more than 60% of Canadian adults have been vaccinated. You Yukoners are ahead of us, senator. We need to remember that the virus is still present in Canada and the world. The most important thing is to ensure health and safety and not to, in any way, imperil what is looking like our national victory over this third wave.
Senator Loffreda: Thank you, Minister Freeland, for being here with us. Congratulations for being the first woman in Canadian history to present the federal budget. We are looking at the budget, and I wanted to congratulate you on that.
In your opening remarks, you did mention changes to the government-guaranteed small business loan, which is welcome news by the business community.
Amounts have been increased, and we have expanded eligibility. Terms have been increased. An important element of that is the increase you made to the 12% cap for the claims made by lenders. That is very important.
Can you share your discussions with our banks? We know the strength of our banks. We all see the positive results. We are expecting positive results to continue. To what extent have you had those discussions? I’m asking because the banks always prioritize cash flow and certainty of repayment.
Given the economic context, and maybe the challenges small- and medium-sized businesses will face getting through this pandemic when we reopen, are the banks going to be more aggressive? I am curious what discussions you have had with them.
It’s great to have the government-guaranteed loans and increase the amounts and caps, but to what extent can we expect the small- and medium-sized business community — and it has been extended to charitable organizations; so you have done a great job on that. Thank you.
Ms. Freeland: First of all, thank you for drawing attention to that element in the budget. Clearly, it’s important. That’s why I put it in my brief opening remarks. I very much agree with you, senator, that one of the top areas of focus in the recovery needs to be small- and, as you put it, medium-sized business. These businesses are the heart of the Canadian economy. They are also one of the areas that has been hardest hit by the COVID recession, even as some parts of the economy have prospered. You mentioned the banks, senator, and we are seeing their strong results. That’s an area that has been much less affected.
That is exactly why there is this emphasis in the budget on small- and medium-sized businesses. We know that access to credit is essential. That’s why the government is doing its part to make access to credit easier, more expansive and more generous. I’m not going to speak for the banks. I’ll let them speak for themselves.
Senator Loffreda: I don’t intend for you to speak for the banks. Having been in the industry for 35 years, I know that you can’t.
I’m curious whether you have had any discussions with the banks. Are they open to being more aggressive? Obviously, I don’t expect you to speak for the banks, but it would be nice to hear your comments on that.
Ms. Freeland: Again, senator, I will let the banks comment on their own approach to small business. I think it would be fair to say that we have been working closely with the banks on a lot of our small business support.
Senator Loffreda: That’s what I wanted to hear. Thank you for that.
Ms. Freeland: Let me leave it there.
Senator Loffreda: Thank you for that. I did want to hear that you have had discussions with the banks. They are part of the process, because the cap has been increased to 12%. If they are part of the process, it reassures me that they will be more aggressive. I do know we have great banks, so that’s not a concern. Thank you for having done that for our small- and medium-sized enterprises.
Senator Smith: Welcome, minister. It’s great to see you.
I think Canadians are well aware and thankful for what the government has done in addressing the COVID pandemic. I would like to look at the concept of debt. I won’t try to hammer the debt issue other than to say that a C.D. Howe report came out recently saying your scenarios were optimistic. We all hope the optimism will turn into results.
When you look at it, debt has to be paid one way or the other. One is way is through increasing our capital stocks, encouraging investment and reducing regulatory burden.
Canada ranks twenty-third today on the World Bank’s Doing Business report. According to the same report, we rank sixty‑fourth in dealing with construction permits, as an example.
The issue of competitiveness comes in. I would like for you to address competitiveness as an element of an opportunity that we could utilize to improve our chances of recovery.
Minister, does the government have a plan to address the shortcomings of our economy’s competitiveness? What steps is the government taking to encourage foreign investment in Canada? It’s a bit of a different question and a different bent on the whole issue of managing our future.
Ms. Freeland: There is a lot of stuff in there. Thank you very much, senator.
On debt and deficit, I’ll make three quick points and then I’ll go into competitiveness.
Let me emphasize for senators that the projections on growth, inflation and interest rates are not my own. The ones that are baked into the fiscal forecast are projections of private-sector economists. As we learned from Senator Boehm’s questions, the latest projections of the Bank of Canada are a little higher in terms of growth for this year than the ones we derive from private-sector economists that are baked into the budget.
Second, I want to underscore that in the budget there is a declining debt-to-GDP ratio, falling to 49.2% in 2025-26. This is the lowest in the G7.
I want to point out as well the fact that S&P, after the budget was tabled, reaffirmed Canada’s AAA rating with a stable outlook. That is a significant judgment and one that should reassure all senators.
On innovation and competitiveness, I agree with you; I think what we should talk about 90% of the time is how we can grow faster. That is how we can be a more prosperous country, and that’s what we all want.
What are the ingredients of growing faster? One ingredient, for sure, is to make it easier to do business in Canada, so I very much support that. I think the single thing we could do to make it easier, which would cost absolutely no money, is to remove barriers to interprovincial trade. There is a lot of economic research showing that that would be a big boost to GDP. That is a set of regulations that I hope all senators will support the federal government in trying to clear out.
Another thing we can do to grow the economy is to attract foreign investors, as Senator Boehm pointed out. The FT — the Financial Times — published a report that was very positive about Canada and pointed to a lot of investment opportunities. Let’s hope a lot of people read it.
I see a lot of investment in the budget for driving innovation. Immigration is also part of Canada’s growth strategy.
Finally, increasing labour force participation is where the Early Learning and Child Care Innovation Program and the Canada workers benefit come in.
These are all elements that can increase our country’s growth, make us all more prosperous and, by the way, help us to pay off our debt.
Senator Smith: Here is a quick follow-up. Has the government specifically looked at the whole area of competitiveness in light of the projections that have been made to move us forward? The facts speak for themselves. We need to improve our competitiveness. Does the government have a plan?
With all due respect, I know these are pieces of information coming from specialists, private enterprise, the banks and the Bank of Canada; however, at the end of the day, as the Minister of Finance, you represent all Canadians in terms of standing up and saying we are going to do ABC. We need to make sure those ABCs will give us the opportunity for success. I know you know that, but if you could confirm, it would be helpful.
Ms. Freeland: Senator, I totally agree with you. I think productivity and global competitiveness are absolutely essential. This does come back to the conversation we had about the green transition. That will be a huge, essential element in Canadian competitiveness in the years to come. There are big investments in the budget for precisely that.
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Senator Dagenais: Good morning, Minister. We were talking about a measure that could have a positive effect on government revenues, that is, increasing the GST from 5% to 7%, but don’t you think that this could have a negative impact on consumption and Canadians’ ability to consume? Because if we combine a 2% GST with an increase in interest rates, couldn’t that be catastrophic for many Canadian households?
Ms. Freeland: Thank you for the question, Senator. The short answer is that we have a policy, I believe, that is very balanced in terms of all taxes.
On the one hand, as we just discussed with Senator Smith, we understand that the most important thing for the budget, for me, for you and for Canada, is economic growth.
We should not do things that will prevent economic growth, especially now, when we need a strong and robust recovery. At the same time, we need revenue for the government and therefore we need taxes. I assure you that when we think about specific taxes and the level of taxes, we are always careful not to cause negative effects on economic activity, on economic potential and on growth.
Senator Dagenais: I’d like to come back to the financial assistance that your government provided last fall to a casino in the Sudbury area, to the tune of about $200 million. I have to tell you that I didn’t know that casinos were an essential service; most of the time, they are money-printing machines!
Are there any other measures in your budget to help casinos financially?
Ms. Freeland: Thank you for the question, Senator. Are you talking about the Large Employer Emergency Financing Facility?
Senator Dagenais: It was the financial assistance that was given to the casino in the Sudbury area. There was talk of $200 million.
Ms. Freeland: If you’re talking about this program and the credits that were given by the federal government to some Canadian companies, I have to tell you that the Large Employer Emergency Financing Facility program is very strict. It’s designed to preserve Canadian jobs and Canadian businesses, and it has very strict conditions in terms of compensation for the companies that receive these credits.
The program operates with high interest rates to encourage only those businesses that really need it, and to ensure that Canadians can benefit from the credit, because it is our money. I want to assure you that the Large Employer Emergency Financing Facility includes very strict conditions to ensure that the benefits are very positive for the country.
Senator Dagenais: Thank you very much, Minister.
Senator Galvez: Thank you, Minister, for being here to answer our questions.
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The Globe and Mail identified at least 80 asset managers that received the Canada Emergency Wage Subsidy. Meanwhile, Canadian hedge funds with assets under management of at least $15 million have had their best year of the decade.
Timelo Investment Management, a CEWS recipient, posted returns of almost 30% in 2020, outperforming the S&P/TSX composite index by more than 10 times.
Ms. Freeland, did the federal government build a mechanism into their support that provides for the clawback of financial assistance that was clearly not needed?
Ms. Freeland: Thank you for your question, senator. When talking about the wage subsidy, I think it’s important to go back to first principles and for all of us to bear in mind how absolutely essential this program has been to doing what, for me, has actually been the core economic job of the government in the pandemic, and that is maintaining Canadian jobs. Since its inception, the wage subsidy has supported more than 5.3 million jobs across the country. Senator, in your province of Quebec alone, the wage subsidy has supported more than 1.29 million jobs. That is really important.
Now, I do know that Canadians want to be sure that there is appropriate conditionality with their money, so one of the measures in Bill C-30 is a measure around conditions for executive compensation for companies receiving the wage subsidy going forward. Any company that gets the wage subsidy going forward and increases executive compensation above where it was in 2019 will have to repay the wage subsidy for that amount.
Senator Galvez: Thank you. The budget proposed amendments to the Bank of Canada Act regarding unclaimed asset regimes. Last March, the U.K. chancellor updated the central bank’s monetary policy remit and its target to ensure growth should now be environmentally sustainable and consistent with the transition to a net-zero economy. The Bank of England will now adjust its 20-billion-pound corporate bond program to account for the climate impact of the companies whose bonds it holds. The European Central Bank is mulling a similar move.
Avoiding dangerous climate change is the only way to ensure the stability of the financial system. Will you move the amendment that mandates the Bank of Canada to ensure it assists the country in achieving its climate commitments?
Ms. Freeland: Again, let me give an answer in a few parts. First, I agree with you, senator, about the centrality of climate action to everything that we’re doing in Canada. Of course I think this is, if you will, a moral issue, but I welcome the economic direction in which you have posed your question, as have some of your other Senate colleagues. Increasingly, we need to see climate action as just a pure, hard economic question, a question of the sustainability and international competitiveness of the Canadian economy. So broadly, I agree with you. We all need to move in that direction, every single sector, whether it is agriculture or finance.
When it comes to the Bank of Canada, as Minister of Finance, I want to be a little bit formal in my comments and restrict myself to saying that I absolutely respect the independence of the Bank of Canada. The Bank of Canada does an extremely professional job. Of course, it is the government’s responsibility at the appropriate moments to review the mandate of the Bank of Canada, and we will do that, but we will restrict ourselves to those moments. Especially now, I think it’s very important for Canadians and the Bank of Canada to hear respect for their independence from the Minister of Finance.
Senator Moncion: Thank you, minister, for being here today and for agreeing that I may sponsor your bill. I am proud of supporting this work.
One of the economists used the term “shecession” for the more than 100,000 women aged 20 and over who have been 10 times more affected than men by the pandemic. In your budget, you have a national child care program that is very important, which is laying the groundwork for a recovery.
Now, we haven’t heard a lot of comments, I would say, about the importance of this measure in the media or in conversations that we’ve had, even from our friends at the Bank of Canada or former governors who haven’t spoken on this, but we’ve heard some economists say that for every dollar that will be invested in this program, the return on investment is going to be between 1.5 and 1.8. There was another economist who said it was going to be much higher.
Could you provide some comments, please, on this program and the outcome of it for our country’s productivity?
Ms. Freeland: Thank you for the question. Allow me to thank you, senator, for agreeing to do the hard work of sponsoring this essential legislation. I’m very grateful. And thank you for your question about early learning and child care. It is exactly the right question. I think many members of this committee have quite rightly been focused on the imperative of an economic recovery and of driving growth. Our commitment to building a national child care system across the country is a major growth driver and an investment in jobs and growth.
The calculations the Department of Finance have done suggest that this will be the program which increases Canada’s GDP and our growth possibilities by more than any national program since NAFTA. We’re calculating a GDP increase of 1.2%.
Let me quote Stephen Poloz, the former governor of the Bank of Canada. In recent testimony to the House Finance Committee, he said, “. . . a national child care program . . . can also help boost labour force growth,” and he said, specifically, “This is the sort of program that can literally pay for itself.”
He is absolutely right, and as you know, senator, this is no longer a theoretical argument. We have within Canada, in the province of Quebec, a concrete practical demonstration that investments in early learning and child care yield a very high economic return, not to mention the benefits for young Canadian families.
Senator Pate: Thank you, minister, for appearing and thank you for the government’s stated commitment and support to build a better, fairer and more equitable Canada for all. There is so much evidence now of the damage and the current rampant inequality that has been laid bare by the pandemic in terms of the most negative health consequences, as you were just alluding to, for women, particularly racialized and poor women. There are many laudable things in the budget, but of the three and a half million Canadians still plunged into poverty, it will bring about 100,000 out of that situation.
Given that we know the advantages of a guaranteed livable income over some of the approaches that are being taken, and certainly over the costs of poverty to our economy on an annual and longer-term basis, can you please describe how provisions under Part 1 and Part 4 will assist people in terms of long-term perspectives? Can you describe what is next in terms of economic support to give people a chance to actually climb out of poverty? Thank you.
Ms. Freeland: That’s a really big question, Senator Pate, and an important one. I will focus on one specific area of the budget, which I think is one of the most important and a hugely important poverty-fighting initiative to which you alluded. This is the huge, nearly $9-billion expansion of the Canada workers benefit. This will mean that around 1 million additional Canadians will be supported by the Canada workers benefit.
As you said, senator, it will lift 100,000 people out of poverty. For me, it hits this very important and often-overlooked group in Canada. These are people who are working so hard, who can be working full-time and still live in poverty. They deserve our support. This program will give them more support. I also think this program is going to be a real driver of economic growth by increasing the labour force. That is not only my perspective; that’s also something that economists like BMO economists pointed out. So you can fight poverty, and that is a path to growing a labour force and having a stronger recovery and more prosperity for us all.
Senator Marshall: There were a couple of issues on money laundering. We looked at Division 8 of Part 4 under the proposed retail payment activities act and we also looked at the section on money laundering. It shows that whatever is going to happen is going to happen several years down the road. The publicly accessible corporate beneficial ownership registry is not supposed to come in until 2025, and, of course, we’ve all been waiting for that. However, the funding is only for the first two years and there is no funding for the subsequent two years. Therefore, I was wondering, is it contemplated that that system is going to come in by 2025 or will it be ready? We’re looking forward to it but it seems the funding is not there and the plan is not there to bring it in by 2025.
Ms. Freeland: Senator, thank you for the question. I am very pleased to hear the focus on the public transparent beneficial ownership registry. This is a big deal and a big new step. It is a personal priority for me, and hearing questions from senators like you, Senator Marshall, is extremely helpful.
I think this is really important to Canada. I see the world moving in this direction. This is an issue that I have discussed, for example, with the U.K. Chancellor Rishi Sunak, and I’m glad to hear you’re supportive, senator. That is going to encourage me to push even harder to get this done.
Senator Marshall: You’ll like my ending statement: I think you’re going to need more than $2 million to do the job and I would support that.
The Chair: Thank you, minister, to you and your staff for your generosity when we ask you to be present. Now for your closing remarks, minister.
Ms. Freeland: I would really like to conclude just by saying this:
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I thank you most sincerely for your hard work. Thank you for your excellent questions informed by a very diligent study.
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I know the people gathered here certainly do not agree about everything and there might even be a limited number of things that we agree on, but I very much appreciate the thoughtful, authentic and sincere questions that all of you ask. It’s clear to me that the questions I have been asked by this committee are really seeking to understand and are driven by strong views about what we need to do together to support Canadians. I appreciate that very much. It is not always easy answering your questions, but hearing them, I am confident, makes me and my team better.
Thank you very much. I really hope that the chamber of which I am a member will be equally diligent and get our work done quickly so that you can keep on and go to the next stage of doing your work. Thank you.
(The committee adjourned.)