THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, June 7, 2023
The Standing Senate Committee on National Finance met with videoconference this day at 3:31 p.m. [ET] to examine the subject matter of all of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: I wish to welcome all of the senators, as well as the viewers across the country who are watching us on sencanada.ca.
[Translation]
My name is Percy Mockler, senator from New Brunswick and chair of the Senate Committee on National Finance. Now, I would like to ask my colleagues to introduce themselves, starting from my left please.
Senator Gignac: Hello. Welcome, Madam Minister. Clément Gignac, from Quebec.
[English]
Senator Loffreda: Welcome to our committee. Tony Loffreda from Montreal, Quebec.
Senator Duncan: Good afternoon. Welcome, minister and everyone, to our committee. Senator Pat Duncan from the Yukon.
[Translation]
Senator Moncion: Hello, Madam Minister. Welcome. Lucie Moncion, from Ontario.
[English]
Senator Galvez: Hello. Senator Rosa Galvez from Quebec. Welcome.
Senator Cardozo: Senator Andrew Cardozo from Ontario.
Senator M. Deacon: Marty Deacon from Ontario.
Senator Petten: Iris Petten from Newfoundland and Labrador.
Senator MacAdam: Good afternoon. Jane MacAdam from Prince Edward Island.
[Translation]
Senator Gerba: Welcome, Madam Minister. Amina Gerba, from Quebec.
[English]
Senator Pate: Welcome, minister and your officials. Kim Pate, and I live here on the unceded, unsurrendered territory of the Algonquin Anishinaabe.
Senator Marshall: Welcome, minister. Elizabeth Marshall from Newfoundland and Labrador.
Senator Smith: Welcome, minister. Larry Smith from Quebec.
[Translation]
Senator Dagenais: Hello, Madam Minister. Jean-Guy Dagenais, from Quebec.
[English]
The Chair: Honourable senators, today we continue our study on the subject matter of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023.
[Translation]
Today we have the pleasure of welcoming the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance. Minister Freeland will be with us for 75 minutes to discuss the subject matter of Bill C-47.
[English]
Afterwards, we will have the officials from various departments remain with us for an additional 45 minutes to help answer questions pertaining particularly to Part 4 of the bill.
Madam Minister, thank you very much for accepting our invitation. I have been informed that you have remarks and comments.
[Translation]
The Honourable Chrystia Freeland, P.C., M.P., Minister of Finance: Hello, honourable senators, and thank you for the invitation.
[English]
With me are some of the very hard-working officials from the Department of Finance Canada. Miodrag Jovanovic is in charge of tax, and he and his team have been particularly charged with some new and hard work in putting together our green industrial policy tax credits, which Canada has never had in place before. I want to say thank you publicly, Mr. Jovanovic, to you and your team. Thanks for being here.
Beside me is Nick Leswick. Mr. Leswick runs Finance Canada, and I’m very grateful for his hard work and his counsel as always.
Beside him is Julien Brazeau who also runs Finance Canada. Thank you very much for being here.
[Translation]
Mr. Chair, first, I want to mention that I will have to vote a few times while I am here today, so thank you for your patience. My apologies. It will be very quick.
I am pleased to appear before you and the committee to discuss the budget implementation act, 2023, No. 1.
There are roughly 907,000 more Canadians who are employed now than before the pandemic and, at 5%, our unemployment rate is near a historic low.
Canada had the strongest economic growth among G7 countries in 2022. Our real gross domestic product (GDP) increased by 3.1% in the first quarter of this year — the highest rate in the G7 — and Canada has both the lowest deficit-to-GDP ratio and the lowest net debt-to-GDP ratio in the G7.
[English]
Building on this strong economic foundation, I would like to outline why it is so important that we do our work together to pass this legislation.
In this legislation, we’re cracking down on house flipping by fully taxing assignment sales because homes should be for Canadians to live in — not a speculative financial asset class.
To protect Canadians, we’re also cracking down on predatory lending by lowering the criminal rate of interest from 47% to 35%. We’re imposing a cap on payday loans of no more than $14 per $100 borrowed.
We’re protecting air passengers’ rights by making airlines more accountable for delays, cancellations and lost baggage, and ensuring that they compensate Canadians fairly for delays that are within the airlines’ control.
We’re modernizing the oversight of Canada’s financial sector to ensure that our financial institutions act with integrity, and that they are protected from threats of foreign interference.
To help make the cost of an education more affordable for students across Canada, we’re increasing the withdrawal limits for RESPs from $5,000 to $8,000 for full-time students, and from $2,500 to $4,000 for part-time students.
[Translation]
To support the skilled tradespeople who build our clean economy and help double the number of new housing units, we are doubling the deduction for the cost of tradesperson’s tools. This deduction will increase from $500 to $1,000, which will help them invest in the tools they need.
We are expanding the scope of the Canada workers benefit in order to help 4.2 million workers who have the lowest wages and are often the most essential. We will also provide quarterly advance payments so they get more of that money more quickly.
[English]
To help more low-income Canadians receive the benefits and supports they are entitled to, we are nearly tripling the number of Canadians who can auto-file their tax returns. Next year, the Canada Revenue Agency will pilot a new automatic filing system for vulnerable Canadians.
I do want to say this to the senators: A conversation that I had with you all the last time I was here helped encourage us to pay attention to automatic filing as a way to ensure that people receive the benefits they deserve. Thanks for that nudge.
We’re supporting the implementation of the new Canadian dental care plan, which will cover up to 9 million Canadians by 2025 — and it means that you will no longer be able to tell how much money someone makes, or how much money their parents make, by their smile.
Mr. Chair, these are just some of the measures that the budget implementation act will deliver on regarding our plan to support Canadians from coast to coast to coast. I am very hopeful that the members of this committee will support these measures as well.
[Translation]
Thank you very much. I will be pleased to answer your questions.
The Chair: Thank you, Madam Minister, for your introductory remarks.
[English]
This allows us to study Bill C-47, and to meet our main principles of transparency, accountability, reliability and predictability. Now we will proceed to questions. Honourable senators, you will have a maximum of six minutes each for the first round; therefore, please ask your questions directly. To the witnesses, please respond concisely. The clerk will inform me when the time is over.
I would also like to share with you that due to the time factor, I have a special request — as the chair — for the minister and for the senators: Honourable senators, in order to permit you to, at least, ask one question, please be succinct in questioning the minister. And, Madam Minister, it will be appreciated if the answers would also be succinct.
Senator Marshall: Thank you, minister, to you and your officials for being here.
I want to talk about the announcement this morning regarding the Bank of Canada. They increased the benchmark rate to 4.75%. The interest on the public service debt this year — in the budget — is $43.9 billion. Is there a revised figure for that now? I would like to know what number it’s going to increase to as a result of the announcement this morning; I just need a number.
Ms. Freeland: There is not a revised figure yet, but we’re working on it.
Senator Marshall: Could I have a commitment from you that your officials will send that number to the committee when you determine it?
In your budget, you outline the interest costs over the next five or six years, so we’re tracking that. I would like to know what the impact will be on each fiscal year that’s outlined in the budget.
Ms. Freeland: You certainly have my commitment that we will regularly update Canadians and the committee as the economic situation changes, and we will certainly do that in the Fall Economic Statement.
There are a lot of factors that are in motion right now. One of them, for example, is the GDP which came in higher in the first quarter. We provide updated numbers at regular intervals, and we will continue to do that.
Senator Marshall: That is a “no”; we’re not getting the number.
My second question is as follows: Canadians are really struggling now. We can look at the people lined up at the food banks. The food banks are overwhelmed. People are having financial difficulties paying their mortgages, so this rate increase is not a good sign of things to come.
We’ve been hearing from the Governor of the Bank of Canada and the former governor of the Bank of Canada, as well as many economists, that all of the inflation is now homegrown, and the government is responsible for at least some of it.
The spending of the government just keeps increasing and increasing. As we look at each financial document, the numbers are becoming bigger and bigger. When looking at the Fall Economic Statement, we see the numbers. Then, when we look at your numbers in the budget, they’re even bigger.
When are you going to control the spending?
Ms. Freeland: Thank you for the question, senator.
Since you mentioned the governors — plural — including the former governor of the Bank of Canada, I am going to quote from Stephen Poloz, who is the former governor of the Bank of Canada appointed by Stephen Harper. After we tabled our budget, he said that the budget:
. . . arguably boosts the supply side of the economy . . . which is not fiscal stimulus really, but more a disinflationary policy aimed at expanding economic capacity.
He went on to say:
. . . it is even possible that budget 2023 will help improve the odds of a soft landing in the economy, by buffering demand and boosting supply.
In terms of the fiscal position more broadly, I think it is important to be clear with senators and Canadians that Canada is in a very responsible fiscal place. After I tabled the budget, S&P Global Ratings reiterated our AAA rating, and today, Canada has the lowest deficit in the G7, and the lowest debt-to-GDP ratio in the G7 — lower than other AAA-rated G7 peers, like Germany and the United States.
Senator Marshall: But, minister, you’re being very selective with your ratios. You’re always bringing up the same positive ratios. You even said in your own budget —
Ms. Freeland: Senator, I’m very sorry. I need to take a quick pause to vote, if that’s okay. Maybe Mr. Chair would allow you to start your question again.
Senator Marshall: Your budget last year said that the Organisation for Economic Co-operation and Development, or OECD, is predicting that Canada will have the lowest per capita GDP growth amongst OECD member countries, and that is about 29 or 30 countries.
The Chair: Honourable senator, the minister has to vote, and we have agreed that when she came, we would permit her to vote.
Are you ready, minister?
Ms. Freeland: Yes, and I’m sorry, senator.
The Chair: Senator Marshall, you have not lost any minutes.
Senator Marshall: I was saying that you always bring up the same optimistic ratios. Of the 29 OECD countries, Canada is number 11 out of 29 when you talk about the net debt-to-GDP ratio. Even your own budget says that the OECD is predicting that Canada will have the lowest per capita GDP growth amongst OECD member countries.
Canadians aren’t feeling optimistic, minister, and the economy is having problems. The spending by the government is accelerating or, at least, contributing to inflation, and the government needs to roll back its spending. Every time we look at a financial document from the government, the spending goes up. You look at the fall fiscal update, and then you look at the budget, and it’s gone up by — I don’t know — $60 billion or so. And then you look at the supplementary estimates, and this year, it’s much higher than last year.
Last year’s supplementary estimates were $397 billion; this year, it is $432 billion. Supplementary Estimates (A) were $9 billion last year, and it’s $21 billion this year.
You’ve almost lost control of the spending. The spending is going up and up. All of the numbers are going up — none of the numbers are going down.
Ms. Freeland: Thank you, senator, and respectfully, I disagree.
The truth is that the Canadian economy is very strong right now. The GDP grew by 3.1% in the first quarter. That is the best performance in the G7.
I’m glad, senator, that you quoted the OECD because the OECD came out today with new figures and an upward revision of the OECD forecast for Canada’s GDP. The forecast is that in 2023-24, on average, Canada will have the strongest growth in the G7. Those are really strong numbers.
In terms of spending, senator, again, respectfully, our spending has gone down every single year. The deficit in 2021-22, which was a COVID year, was 3.6% of the GDP. It is forecast to be 1.5% of the GDP in 2022-23; 1.4% of the GDP in 2023-24; and 1.2% of the GDP in 2024-25.
I absolutely agree with you, senator, that we need a balance between compassion and investments in the Canadian economy and fiscal responsibility. Canada is striking that balance.
The Chair: Thank you, minister.
[Translation]
Senator Gignac: Welcome, Madam Minister, and thank you for your efforts to foster a lasting and inclusive recovery in Canada.
My first question pertains to a technical tax measure in clauses 114 to 116 of the bill, which will retroactively amend the Excise Tax Act. I am referring to credit card clearing services which will henceforth be taxable even though the Department of Finance lost its case before the Federal Court of Appeal in January 2021.
In fact, your department waited 26 months before it acted. It allowed the Canada Revenue Agency to reimburse financial institutions that claimed the GST and is now taking a retroactive measure.
Madam Minister, all the witnesses we have heard said that waiting 26 months after losing a case was unprecedented, with the Canadian Bar Association saying that it is even a dangerous precedent.
What is your response to that statement?
Ms. Freeland: Thank you for your question. I agree that this is a technical matter that is important to a number of stakeholders. My officials and I have had many discussions with the banking sector. Our position has two separate components.
First, the legislation that the government will be introducing is not new. It is the same approach that was taken since this tax was first introduced, and it is the same approach that was taken from 1991 to 2021. So this is Canada’s historical approach, it is nothing new.
Secondly, it is the same approach used by countries that have a comparable system to ours. As to your question about the amount of time that passed, I think that is a fair and a good question. Our legislation is in response to the Federal Court of Appeal decision and we acted on their requests, which are fair, and I want to point out that this decision was made in the middle of the pandemic, when the entire country was in the midst of an historic crisis.
Senator Gignac: Thank you. I would like to continue the conversation you had with Senator Marshall. While you are here at committee, I would like to ask you for your reaction to the Bank of Canada’s decision.
Are you not afraid that the Bank of Canada’s target of returning to 2% at all costs could plunge the economy into a recession and compromise your efforts for a lasting recovery? Are we going to have to go through a recession for the Bank of Canada to reduce inflation to 2%? How much confidence do you have in the resiliency of Canada’s economy?
Ms. Freeland: That is a very important and a very complex question. Let me start with the political part of your question. I think that, these days in particular, it is very important for me as Canada’s Minister of Finance, a minister who represents a political party, to respect the Bank of Canada’s independence.
As you know full well, some people are asking questions about the Bank of Canada’s independence these days, and I think that is dangerous for our country. It is dangerous for our democratic institutions, and it is also dangerous for such things as Canada’s triple-A credit rating, which is based on our strong and independent institutions and the respect of all parties. That is my main answer.
As to the macroeconomic part of your question, I think that Canada’s economy is strong and resilient on the whole. I think it is quite possible for the economy to remain strong and for inflation to be stable at a normal level. There are no guarantees, but I think it is quite possible.
Looking at all the countries around the world, I cannot think of a single one that is in a better position than Canada to achieve such a good outcome.
Senator Moncion: I would like to go back to clauses 114 to 116. How can you explain the fact that this approach flies in the face of the principles of the stability and the primacy of the law?
Ms. Freeland: Thank you for the question. As I told Senator Gignac, our approach is based on three principles. First, we are maintaining the historical approach, the approach that Canada has taken since this act came into force. Second, our approach is exactly the same as that taken by countries that have a comparable system to ours. That is the second indicator that it is the right approach. Third — and I think that you and Senator Gignac are asking a fair question — for our part, we are not taking the initiative; we are responding to a court decision.
We are assuming our responsibility as the legislator, which is to respond to the court’s decision. I think it is important and correct to recall that this decision was made in the midst of the pandemic, when the country was facing serious issues.
Furthermore, I understand that the financial institutions that will be paying those taxes would rather not pay them. I understand that and that is to be expected, and they have the right to appeal to senators, ministers and other stakeholders. Ultimately, however, our approach is historically correct and Canada needs a strong revenue base to help people.
Senator Moncion: I have a comment before I ask my second question. The financial institutions’ concern is that the measure is retroactive and not proactive, referring to what lies ahead. They have no problem with paying from now on, but they are concerned about the retroactivity, that it goes back to 1991.
[English]
Last week, we heard the concerns of the Digital Asset Mining Coalition, specifically from Mr. Daniel Brock, the lawyer and policy adviser for the coalition. He shared with us the concerns of the industry with respect to the finance proposal on cryptoasset mining. More specifically, there is a concern that the potential for future growth in this industry will be hurt by the proposed GST changes. An amendment was proposed to the National Finance Committee in the other place to clarify an exception to the rule. The amendment was rejected by a vote of 6-5. The coalition does not want this committee to consider the amendment again; however, Mr. Brock was seeking clarity from the Department of Finance as to how the new GST rules will be applied, and what constitutes the sharing of cryptoasset payments. I would ask you to comment on this and provide some clarity to the industry, please.
Ms. Freeland: Thank you again for the question, and thank you also to you and Senator Gignac for the very careful work and study that you have been doing, including on the technical aspects of the legislation.
This issue is familiar to me and the department, as it is to you, and I do want to assure you that the Department of Finance officials are familiar with these submissions, and we’ve met with the stakeholders. We are very aware of their concerns. The intent behind this legislation is, in fact, responding to requests from practitioners and cryptoasset miners for specific legislative rules in order to provide clarity on how the GST/HST applies to cryptoasset mining. That’s why we’re acting in the first place.
I suppose the other assurance to offer you is this: Computing service companies and their representatives have been consistently assured by the Department of Finance that the proposed measures will not jeopardize the input tax credits to which they may be entitled per the ordinary application of the GST/HST rules where these companies are selling computer services for a fixed price — and not sharing in mining rewards received by mining pool operators. Again, I do want to assure you that we spoke to these stakeholders, and the legislation was modified to take into account some of the concerns we heard.
Senator Pate: Thank you again, minister. You know that the majority of Canadians believe the tax system is unfair and that the inequality was exacerbated during the pandemic, and around 89% of Canadians want to see an annual wealth tax of 1% paid by the wealthiest Canadians as part of our pandemic recovery. Particularly in light of the government’s commitments to greater tax fairness, to lifting all Canadians out of poverty and to maintaining forms of guaranteed livable income — such as the Canada Child Benefit, the Guaranteed Income Supplement for seniors and soon, we hope, the Canada disability benefit — what has your department made of the pre-budget proposals that have been put to you in terms of implementing a revenue-neutral guaranteed livable income for all low-income Canadians between the ages of 18 and 64, which would involve rolling out some existing tax credits, dealing with some existing tax credits and implementing greater tax fairness measures?
Ms. Freeland: Thank you very much, Senator Pate, for your hard work. Thank you for your question; you included a lot in there. You talked about tax fairness, and you also talked about a universal basic income, or livable income.
On the point of tax fairness, I think it is appropriate that your question would come in the wake of the questions I’ve received from the other direction. I would say that our government very much believes that everyone has to pay a fair share. We believe that we need to make investments in Canada — I hope we will have a chance to talk about our green industrial policy, which includes really important investments — and we need to maintain our social welfare system. One of the key pillars of this budget is a huge investment in our health care system. I think we all support that — I hope we do — but it’s costly, as $200 billion is a lot of money, and we need a strong tax base to fund that. I do believe our government has taken meaningful steps to ensure tax fairness and the solid revenue base. I would point to our luxury tax, and I would point to significant action in closing tax loopholes in this budget. Mr. Jovanovic and his team have pointed out to me one area that we have done a lot of work on: the alternative minimum tax for high-income individuals. That work is being done.
In regard to the question of a universal basic income, I hear you, and I have a lot of constituents in my own riding, and a lot of members of my caucus, who raised this with me repeatedly. I am proud of the work our government has done to alleviate poverty, particularly among seniors and families with children. But I take your point that there is more work to be done. From my perspective, the constant effort to alleviate poverty and reduce income inequality needs to be balanced against the need for fiscal responsibility, which we have also heard other senators emphasizing. As I see it, my job is to strike that balance.
Senator Pate: That’s exactly why the Basic Income Canada Network provided you — in one of your pre-budget consultations — with a proposal for a revenue-neutral guaranteed livable income. To date, we have not seen any response to that kind of proposal. This week, we’re dealing with the results of the National Inquiry into Missing and Murdered Indigenous Women and Girls, and one of their recommendations was to address some of the most marginalized people. It seems as though the government is moving in an incremental way toward this type of guaranteed livable income — not the universal basic income, but an income-tested model. What will it take to reach the next stage?
Ms. Freeland: If I may, let me focus on where I think, senator, you and the government strongly agree: We need to work hard to continue to reduce poverty. We need to work hard to provide opportunity for all Canadians. It may be that you and I disagree about the speed needed to reach that goal. I know that you hear the other senators here, some of whom have been emphasizing the fiscal responsibility side of the equation. I am very mindful of that as well. This is a very turbulent and uncertain economic time. For me, ensuring Canada’s strength, robustness and resilience when it comes to the government’s balance sheet is also something really important.
A final point I would make is this: I believe that for the vast majority of Canadians, the thing that most determines whether they have a good life or not is whether they have a job. When COVID first hit, the thing that killed me was 3 million people losing their jobs. I was so worried about that, and I was worried that we would have a lost generation of young Canadians. Our focus, time and again, during COVID and now, has been jobs and opportunities for Canadians. I don’t want to say that everything is perfect in Canada. I know a lot of people are struggling. I know there’s an increase in interest rates. I know a lot of people saw that this morning, and wondered what they were going to do with their mortgage. But to me, the fact that there are 900,000 more jobs in Canada than before COVID hit is an opportunity for Canadians.
Senator Smith: Minister, I have some reservations about the use of omnibus bills. I understand the practice isn’t new or limited to this government, but it is troubling. There are several proposals in Bill C-47 that should be stand-alone legislation. For example, the Standing Senate Committee on Banking, Commerce and the Economy expressed concerns about the inclusion of legislation to create the Canada innovation corporation act in an omnibus bill. Second, the Standing Senate Committee on Legal and Constitutional Affairs, in its report on Division 39 of Part 4 of the bill, expressed concerns about amending the Canada Elections Act in an omnibus bill, and emphasized that these changes should be introduced in a separate bill to allow for more study time. Third, the same committee expressed concerns about Subdivision B of Division 3 of Part 4 of the bill, which amends the Criminal Code in respect of digital assets, and, once again, they emphasized that the amendments to criminal laws should be stand-alone pieces of legislation.
Minister, could you please address the concerns that many of us have in this committee in terms of jamming or packaging everything into an omnibus bill, which does not give us enough time to analyze it properly?
The Chair: Senator Smith, before you receive the answer, we are going to give the minister another vote.
(The committee suspended.)
(The committee resumed.)
Ms. Freeland: Senators, thank you very much for your patience with the voting; I do appreciate it. I know that the chair is being careful that your time not be subtracted.
Senator Smith, thank you for the question; it is an important one. I share broadly your view that the work of legislators is important, and legislators exist to do the legislative work of review — the work of the Senate is very important. In regard to automatic tax filing, I mentioned that was a concern that was raised the last time I was here, and we listened to you all, and have been moving in that direction based on that. I value the work that senators do; I know you all are serious about it. It’s not a partisan game for you, so thanks a lot.
I would say that every measure that appears in the budget implementation act appears in the budget. There is no obfuscation here — that was important to us. We were clear on that, but clearly our judgments differ somewhat. Our view is — and was — that we have been clear, open and transparent on the measures in the budget and, therefore, in the budget implementation act.
I’m sorry — it’s the smoke. It’s terrible what’s happening right now in Canada with the forest fires.
Anyway, we took real care to ensure that every measure in the budget implementation act appears in the budget for the reasons of transparency that you mentioned. To mention one example that you raised, the Canada innovation corporation has been advanced for some time by the Department of Finance working with industry. We have been clear about it in the budget, and in a number of budgets. I think it very legitimately belongs in the budget implementation act. I think everyone would agree that productivity is an important issue in Canada, and that is an agency which is designed to directly address that challenge.
Senator Smith: If I could add one little point — in business, the motto is to make things short and to the point so that you can make decisions. I think when you are in situations with omnibus bills — because we’ve seen this over the years not just with this government, but also with other governments — it really affects the ability of delivering quality analysis. Our job is to be quality control specialists. Let’s be simple: We have excellent people with excellent credentials who take this seriously, and when there’s a bill filled with so much — let’s be honest, this is probably one of the biggest bills we’ve seen in terms of volume — it makes it difficult to deliver on the time frames that are required. Remember when everything was a rush during the pandemic. We had to have an attack. And we recognized that as a group. Having said that, I would like to hear your thoughts on how this can be measured and modelled in a different way going forward.
Ms. Freeland: Senator, I’m a former journalist, so it is impossible for me not to agree with your view that things should be as simple, as clear and as succinct as possible. We should all aim for that in the written word. I certainly agree with you that it’s not always a strength of bureaucracy.
The officials around me are admirably straight, succinct, direct and to the point. In regard to urgency, I take your point on the pandemic — my view is, at this moment and in this budget, we were also working against the clock as a country. There was a once-in-a-generation window that we had to jump through. As President Biden said when he was here, it’s a once in five or six generations inflection point with the green industrial transformation of the world. Canada had to jump in there. We did that in this budget. There are a lot of new measures. I am glad we did it now because, otherwise, we would have risked losing this opportunity and Canada falling behind for a generation.
[Translation]
Senator Dagenais: Hello, Madam Minister. As recently as this morning, I spoke with the Railway Association of Canada. I can tell you that their representatives are particularly upset and disappointed. They want to oppose the provisions in your budget relating to interswitching. They maintain that Bill C-47 discriminates against them in this respect, and encourages American railway companies to move into their sphere of activity.
I am conveying their message to you and asking you to explain why your government cannot adopt a position that is fairer for Canadian railway companies. What is forcing you to encourage the Americans?
Ms. Freeland: Thank you for the question. That is also an issue that we considered. In the department, we discussed that with various stakeholders. For us, the key to resolving this issue was supply chains. Our concern was around the problems created in the Canadian economy by supply chains.
We talked about inflation. We have already talked about the economic problems caused by COVID-19. Our goal, our priority, was to make decisions to implement measures that will improve supply chains in our country.
Senator Dagenais: You will understand that this affects Canadian railway companies. Would you be willing to remove the provisions in Bill C-47 regarding interswitching, division 22? Would you be willing to amend this measure to limit it to rail travel in Canada?
Ms. Freeland: I want to stress two more things. It is a pilot project that is limited in time and geographically. We will look at the results of that pilot project and make decisions in accordance with the data.
Senator Dagenais: On another topic, while your budget includes measures to provide a bit of assistance to groups of Canadians, I would argue nonetheless that it is still difficult given the rising cost of groceries, gas, mortgage rates, rent, housing and so forth.
Do you recognize that middle-class families — your government has often said that you want to court middle-class families — can no longer keep up with the cost of living and are falling behind? Are you aware of all that? The middle class is having a very hard time right now.
Ms. Freeland: I completely agree with you that, right now, since the start of the pandemic, it is very difficult for the middle class in Canada. It has been very difficult for the middle class in all G7 countries. The pandemic was a health crisis that became an economic crisis. The economic crisis brought on by COVID-19 was exacerbated by Vladimir Putin’s unlawful invasion of Ukraine.
I completely agree with you that this is a difficult period. Our approach is to offer targeted assistance to the most vulnerable people. That is what we are doing together with the grocery rebate. It is the right approach because, obviously, those people are the most vulnerable. We have a duty to help them.
On the other hand, as discussed with Senator Marshall, we have to strike a balance between compassion and fiscal responsibility. For that reason, our assistance was and is targeted.
Senator Galvez: Thank you, Madam Minister.
[English]
I would like to talk about the opportunity you have taken to modernize the mandate of the Office of the Superintendent of Financial Institutions, or OSFI. I see with very much interest that you are extending the mandate so that OSFI takes into consideration emerging risks to integrity or security. In the face of climate change, and what we are living through right now with these forest fires, this is impacting the financial sectors: the banks, the insurance and the pension plans.
We know that insurance companies will not be able to insure houses. We know that banks keep fuelling the climate crisis by investing in oil and gas.
Will you consider that — in this extension of the mandate of OSFI — the risks and emerging risks also include the climate change risk to the financial sector?
The Chair: Go ahead and vote first, please, minister.
Ms. Freeland: Thank you, chair and all senators, for your patience with the voting. I will have to tell our whip that you do a very good job of ensuring that the votes happen. I don’t know if he does that with you all.
Senator Galvez, let me start at a high level with your point about forest fires and the climate. In some ways — and maybe a lot of people around the table felt this way — this morning, I was torn between despair and a feeling of extreme urgency just seeing the smoke around this building. Just before coming here, I received a text from the Spanish economy minister, who is also the Deputy Prime Minister of Spain. Ms. Calviño is a friend; we exchange ideas. She sent me a text saying, “I’m making a trip to New York, and I just saw the forest fires in Canada. What a disaster. I’m so sorry.” I mention that because what is happening now with our forests is an international crisis. I think all of us who are in these positions of responsibility need to take a deep breath, and ask ourselves what we did today to fight climate change. “What did I do today to ensure that we’re doing the right things in Canada?”
At a very high level, I support your focus, and I’m very aware of the work that you have been doing. I am grateful to you for it.
Narrowing in more specifically on the budget, from my perspective, this budget is historic in the climate action that it puts forward. This budget contains an $80-billion investment, taking Canada’s total investment in the green industrial transformation to $120 billion. That’s a lot of money.
I’ve said already — in response to Senator Marshall’s questions — that we take fiscal responsibility seriously, so we are aware of the magnitude of that.
I think that is absolutely necessary because it speaks to the magnitude of the climate challenge, and also to the necessity — for Canada — of building a green economy.
I agree with you; that is where the jobs are going. It’s tremendously important for us, as a government and as a country, to give people some optimism in place of that despair, and to say to people that this green industrial transformation will create jobs. I really see that, and I really believe that.
With the measures in this budget, Canada now has a comprehensive plan. TD Economics did an assessment of our green industrial policy after the budget, and they said that Canada is now level with the U.S. in our attractiveness as an investment destination.
That is our approach, and I think it’s the right one for Canada today.
Senator Galvez: I have a small question, which is in the direction you were going about the Canada Growth Fund. I know that this is your answer to the game changers that are the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. Of course, the amount of money is very little compared to the trillions in the U.S., but it’s a start.
However, the devil is in the details. What is the procurement? Is there a green procurement where you’re going to give away this money? Is it going to be aligned with the Paris Agreement to ensure they are really clean? Is the Public Sector Pension Investment Board, which is going to manage this, independent enough — and there will be no conflict of interest? Thank you.
Ms. Freeland: There are lots of questions there.
The Canada Growth Fund is an important part of our green industrial plan, but it is only one part. We try to lay this out in the budget — I’m looking for the drawing of the pyramid, as this is my favourite page in the budget; I urge people to take a look at it. It is a pyramid, and there is a page next to it that explains the levels of the pyramid. This is our green industrial plan.
The bottom level of the pyramid is a price on pollution and our regulatory frameworks. The next layer is the hard-working engine: It’s the suite of tax credits I mentioned that Mr. Jovanovic and his team have worked so hard to create. On top of that — the third layer of the pyramid that’s getting narrower — is the Canada Growth Fund and the Canada Infrastructure Bank providing concessional financing. On top of that is a further layer of bespoke financing.
That’s how the Canada Growth Fund fits in.
In terms of the Public Sector Pension Investment Board, I am very confident in the job that the Public Sector Pension Investment Board will do in investing these funds. I think it is absolutely the right thing to have professional investors doing it, and I am confident in their independence and their judgment.
Senator Duncan: I would like to discuss the federal-provincial fiscal arrangements, specifically the Canada Health Transfer.
We’ve seen increases in federal health payments — funding to provinces and territories — as in Bill C-46, and they have been much discussed by the public. Canada is the fourteenth province at the table — with the provinces and territories — when it comes to health care responsibility for Indigenous people and for the Canadian Armed Forces.
You are the minister who eventually has to sign off on the funding that’s being paid out to the provinces and territories, and in the federal departmental budgets. What I have not seen referenced in the budget, or as part of the public discourse, is a corresponding increase in funding by the federal government to ensure that Indigenous people and Canadian Armed Forces personnel receive a corresponding increase in health care services or the ability to access health care services.
Canada has established certain benchmarks for this increased funding to the provinces and territories on a province-by-province and territory-by-territory basis. Is there an increase in funding for health care — corresponding at a similar rate — that has been given to the provinces and territories to ensure that services are provided to Indigenous people and Canadian Armed Forces personnel? Are there benchmarks set at the federal level to demonstrate that these improved services, and the access to services, have happened as a result of an increase to funding?
I’m not referring to boutique programs or special programs, like Jordan’s Principle or others. I’m looking for specific increases in federal health care funding — for example, through non-insured health care benefits, or for the specific line item for Canadian Armed Forces personnel.
Ms. Freeland: The short answer is, yes, we were aware of that.
Senator Duncan: Can you tell the Canadian public where we can find them?
Ms. Freeland: In these two areas, as you know very well, senator, the difference is this: In health care writ large, it’s the responsibility of the provinces. Canadians were of the view, particularly in the wake of COVID, that provincial and territorial health care systems needed more funding and support from the federal government. I believe the provinces and territories need to provide additional support as well. We all experienced lengthy delays in waiting rooms, surgery waiting times and so on. The federal government — in doing our part to respond to the needs of Canadians — made a considerable investment. As part of that investment, as well as the announced investment, there was an announced increase in funding for health care for Indigenous people in Canada.
Senator Duncan: How about the Canadian Armed Forces personnel for which you also have responsibility?
Ms. Freeland: Yes, let me be clear here: We recognize our responsibility for the funding of health care in those two areas, and we recognize that we need to ensure it is of the quality that all Canadians merit. However, the situations are slightly different with Indigenous people and with the Canadian Armed Forces, and the provision mechanisms are different.
Senator Duncan: Thank you.
The Chair: I will now recognize the sponsor of the bill, Senator Loffreda.
Senator Loffreda: Minister, welcome to our National Finance Committee. My question is on the Canada Growth Fund. I would like to further explore Division 32 of Part 4 of the bill regarding the Canada Growth Fund. Last fall, when our committee studied Bill C-32, the Fall Economic Statement Implementation Act, 2022, our committee had many questions about the fund, as well as its governance, structure and mandate. As you know, Bill C-32 gave you the authority to acquire non‑voting shares in an amount of up to $2 billion to facilitate initial investments. With Bill C-47, the government is now proposing to entrust the Public Sector Pension Investment Board with the management of the assets of the Canada Growth Fund, and to deliver on the fund’s $15-billion mandate of attracting private capital in Canada’s clean economy.
I have two specific questions about the fund. First, can you speak to us about the work of the Canada Growth Fund since Bill C-32 received Royal Assent last December? At the time, officials argued that the government was seeking that initial $2 billion to get a head start and not risk losing any investment opportunities, considering the billions of dollars the United States was injecting into their economy with the Inflation Reduction Act.
My second question, which you briefly touched upon, is regarding the choice of the Public Sector Pension Investment Board as the asset manager. Why did you choose the Public Sector Pension Investment Board, and what other options did you consider? Any elaboration on this decision is welcome.
The Chair: Minister, we will pause to give you time to vote again, please.
Ms. Freeland: Thank you. Let me approach this in parts. I do believe the Canada Growth Fund is an important element in this pyramid of our green industrial policy. You have a strong background, Senator Loffreda, in business and in finance. I hope you will agree with me that for the green transition to happen at the speed and scale that is necessary, both for the climate and for Canadian jobs, we’re going to need some concessional financing — that is the job of the Canada Growth Fund. That’s insight number one.
Insight number two is this: In order to provide that concessional financing properly, we needed investment professionals. That’s people who have a long history of doing this, and who do it every day. I have the greatest respect for public servants in Ottawa, but that is not their profession. That is why the Public Sector Pension Investment Board, which makes professional investments every day, has been charged with this responsibility. I know they’re taking it seriously. As you well know, senator, the Public Sector Pension Investment Board is based in Montreal. Just last week, I had a meeting with Deborah Orida, a fantastic professional with a background in the Canada Pension Plan Investment Board. She and her team are very enthusiastic about this mission. They see it as value-driven, as supporting Canada and as acting on the climate. Through having the Public Sector Pension Investment Board manage this investment, the people of Canada and the Government of Canada will have access to truly world-class, professional investors putting our money to work. I think that is a very good solution.
In terms of the speed — and I recall clearly the concerns and the questions which senators quite legitimately raised — you were with me when President Biden addressed us together and spoke about this inflection point in history and in the world; I agree with him. It is so important to me for Canada not to be left behind and to seize the moment. I’m grateful for your support in standing up these institutions as quickly as possible. It’s important for us to dot the i’s and cross the t’s to ensure that the professionals at the Public Sector Pension Investment Board, who are making these investments, have all the legal authorities and all the independence necessary. We’re doing that properly.
Having spoken to Ms. Orida just last week, I can assure you that she is very seized with this. Her team is very seized with this, and they’re looking for opportunities right now. We’re standing at this structure so that we can make it work and start going.
Senator Loffreda: Thank you.
The Chair: We have five new senators that came to this meeting. I want to say thank you very much for coming.
Minister, when I look at the time that we’ve given you to vote, I think we can take a couple of extra minutes in addition to our first hour.
Ms. Freeland: Absolutely.
Senator Cardozo: Welcome, minister. I want to take this question about 30,000 feet up, and talk about the inflection point that you’ve made reference to a few times. I want to ask you about the values we’re dealing with — the values that you, as the Minister of Finance, and the government are dealing with.
Sometimes, in the necessity of deficit spending, it’s not always bad. No one wants to do it, but sometimes it’s necessary. I look at what you and your government did during COVID. You really helped Canadians and racked up a big deficit. I look at the forest fires now, and what I hear from the government is that you’re there to help. It’s going to cost us a lot, but nobody is thinking about what the bill will be because it is something you have to do. That’s why we have the federal government to do those kinds of things.
Could you share your thoughts about the values around that? Do you know the amount of the deficit, or the amount of spending that we did? There were special programs around COVID which are separate from the rest of the deficit that exists, and I’d like your thoughts about the need to do these things — this inflection point. Had you not done that spending during COVID, our society would be in a much worse space. As we look at the polarization of people, what are the values regarding what guided you in coming to this?
Ms. Freeland: Thank you for being here. It’s a real pleasure to speak to you in your senatorial role. Thanks for your work.
It’s a hugely important question that you’ve asked. Looking back on the investments our government made during COVID, yes, it was a lot of money, but it was absolutely the right thing to do. I’ve been looking back: The Department of Finance has been doing some work comparing the recovery from the COVID recession with the recovery from the much shallower 2008 recession. The contrast is striking.
Following the COVID recession in 2020, Canada recovered to the pre-COVID employment rate in 24 months — in two years. After the 2008-09 recession, it took 110 months — nine years — for Canada to recover to the pre-recession employment rate. Today, the unemployment rate is at a historic low of 5%.
I do not want to minimize the challenges that Canadians are facing; they are really significant. However, the fact that we’ve been able to return to an economy with lots of jobs is so important in terms of the well-being of people. Indeed, as you said, senator, we avoided these things: With those investments during COVID, we avoided economic scarring. We avoided these deep cuts into the economic muscle of Canada that would have left us weaker for a long time afterwards. I think we avoided deeper social polarization.
I think that COVID and the COVID recession were traumatic notwithstanding the economic support, but it would have been a lot worse had we not been able to provide support.
[Translation]
Senator Gerba: Welcome to the committee, Madam Minister. As my colleague just said, we must recognize that the government provided a great deal of assistance during COVID-19 in terms of financial support, for individuals and companies.
According to the Canadian Independent Business Federation, however, one out of five SMEs in Canada, or 250,000 SMEs, is at risk of closing shop in 2024 if Ottawa does not extend the deadline for reimbursing the Canada Emergency Business Account, the CEBA, which is December 31, 2023.
I know you have already issued an initial report, but just 10% of recipient businesses have reimbursed what they owe to date.
With Bill C-47, how does your department intend to help companies, SMEs, which are important providers of employment in Canada?
Ms. Freeland: Thank you for the question. I spoke with a few MPs from Quebec this morning. We discussed this a few weeks ago with Dan Kelly, who was with me in Brampton to make an announcement regarding credit cards and some relief we were able to provide in the rate that SMEs have to pay. Many thanks to Mr. Kelly and his team for working with us.
I agree with you: SMEs are the cornerstone of our economy. We have to support them. We stood by them during the pandemic. I am proud that we did that. I know that idea was raised with regard to SMES and we are in the process of considering it.
The only thing I would add, to be honest, is that yes, we understand the challenges and we want to help everyone. At the same time, we are fully aware of the balance we have to strike. We recognize that fiscal responsibility is also important.
At a personal level once again, the focus of my work is striking a balance between compassionate investments, investments in the economy and in the green transition that are necessary on the one hand, and a fiscally responsible approach on the other, in order to preserve our triple-A credit rating. That is important to our government.
The Chair: Thank you, Madam Minister.
[English]
This brings us to the end of the time that we had agreed with you. Thank you very much.
We will now proceed to the second round with the officials. Minister, do you have a few comments?
Ms. Freeland: Mr. Chair, would you allow me to quickly vote before making a comment? Is that okay?
The Chair: Absolutely.
Ms. Freeland: Thank you so much.
Mr. Chair and senators, thank you for this opportunity to hear your questions. I would like to sincerely thank everyone for your work. I know that I haven’t been able to satisfy all of you with my answers, and I know there isn’t full agreement of all of us here, but I appreciate three things about this conversation: The first is the professionalism and seriousness of each person here. I am grateful to you, and I believe that Canadians are grateful to you.
As I mentioned with the automatic tax filing, when you all speak, we listen carefully, and you give us good ideas and nudges in addition to the scrutiny of the specific legislation before you. Thanks a lot.
Second, this is a moment where people are questioning and challenging institutions around the world, including in Canada. There are questions about the value of our traditional institutions. We need our institutions, and that includes the Senate and our legislatures. Working on the budget implementation act is a big job, but you are also having a bigger impact than that.
Finally, in gratitude, it is useful for me and Canadians to have a group of people who are able to disagree politely and respectfully, and who are able to challenge legislation from different perspectives because, at least from my perspective, it helps people understand how hard it is to strike a balance.
You’re going to have some senators who, quite legitimately, say, “Pay attention to fiscal responsibility.” You’re going to have other senators who, very legitimately, say — Senator Pate isn’t here — “You need to make sure you’re focusing on the most vulnerable.” Meanwhile, others will say, “Are you investing enough in the green transition?”
Hearing those questions in the round in a single discussion is very helpful and illuminating for Canadians to understand that every time we make a decision — certainly every time we make a budget decision — we have to find the balance between competing interests and competing points of view. Thank you very much.
[Translation]
The Chair: Honourable senators, we will continue with the departmental officials.
[English]
I’m informed that each senator will have three minutes, and, when you ask your question, the official who is responsible to answer will come to the head table.
Senator Marshall: Welcome back, Ms. David. I have some technical questions on the Canada Growth Fund.
Last year, we were told that the Canada Growth Fund was going to be a subsidiary of the Canada Development Investment Corporation, or CDEV. On the website of that corporation, they said that a subsidiary was created, but now it’s with the Public Sector Pension Investment Board. Does this mean that CDEV is out of the picture? Tell me what the relationship is.
Anne David, Senior Director, Crown Investment and Asset Management, Department of Finance Canada: I’m here to answer all of your questions about the Canada Growth Fund.
Thank you for your question about the Canada Growth Fund and its relationship with CDEV and the Public Sector Pension Investment Board. As mentioned, the Canada Growth Fund was set up as a subsidiary of CDEV in December 2022. Today, the Canada Growth Fund remains a subsidiary of CDEV.
In Budget 2023, the government announced the intention to enable the Public Sector Pension Investment Board to manage the assets of the Canada Growth Fund. That means that the Canada Growth Fund Inc., the corporation that is a subsidiary of CDEV, will remain, and it will own all of the assets. It will be the client who will enter into an investment management agreement with the Public Sector Pension Investment Board, who will incorporate a subsidiary that will act as the investment manager of those Canada Growth Fund assets.
Senator Marshall: What is the function of the regulations — that were gazetted in December — which exempt the Canada Growth Fund from section 91 of the Financial Administration Act, and why does it do this? I know what it does, but I want you to read it into the record. Then, I want to know why it was done.
Ms. David: Thank you for the questions.
As you indicated, there was a regulation that exempted the Canada Growth Fund from section 91 of the Financial Administration Act so that the Canada Growth Fund may enter into certain transactions without Governor-in-Council approval. This was done so that the Canada Growth Fund may do certain things, like incorporate certain subsidiaries, in order to move at the speed required by business.
Senator Marshall: Why is there no provision for reporting to Parliament? Parliament is approving the money — there should be some sort of accountability mechanism back to Parliament, but there is no provision for an accountability document.
Ms. David: Thank you, again, for the question. As you noted previously, the Canada Growth Fund is a subsidiary of CDEV which is a Crown corporation owned by the Minister of Finance. CDEV, as a Crown corporation, is under obligations — under the Financial Administration Act — to report to Parliament. This includes things such as providing an annual report on its activities and that of all its subsidiaries, including the Canada Growth Fund, as well as providing corporate plan summaries that are tabled in Parliament and quarterly reports that are made public.
Senator Marshall: Does that exemption from section 91 of the Financial Administration Act mean that information on individual investments and the names of corporations can still be provided in the annual report to Parliament, or will that not be allowed?
Ms. David: Thank you for the question. The reporting of names of corporations will not be prohibited. Annual reports and corporate plan summaries will be provided with the same level of detail and information as would normally be expected for an independent investment fund making a large number of investments.
Senator Marshall: Thank you very much.
[Translation]
Senator Moncion: My questions pertain to the funding of terrorist activities and amendments to the Criminal Code. Under what authority do law enforcement agencies currently freeze or seize digital assets, and how will the proposed measure support or expand those powers?
[English]
Mark Scrivens, Senior Counsel, Policy Sector, Policy Implementation Directorate, Department of Justice Canada: My name is Mark Scrivens, from the Criminal Law Policy Section at the Department of Justice Canada, and I am filling in for a colleague who had a health issue due to the smoke. I’m just arriving, but I can attempt to answer. Please repeat the question.
[Translation]
Senator Moncion: Under what authority do law enforcement agencies currently freeze or seize digital assets, and how will the proposed measure support or expand those powers?
[English]
Mr. Scrivens: The amendments would, essentially, extend the current provisions for the seizure of assets to digital assets, with the necessary adjustments that are required for the technology involved in virtual assets or digital assets. All of the current powers and authorities that are granted to law enforcement for the seizure of assets related to proceeds of crime would be extended to virtual assets.
Senator Moncion: How often does it happen that police officers will use this measure, or have asked for this measure to be added?
Mr. Scrivens: It’s becoming more common. Virtual assets are the most common mechanism by which ransomware attacks yield profits to criminals, for example.
More often, virtual assets are sought by criminals who are seeking to defraud people because they believe they can quickly transfer the assets, and oftentimes transfer them outside of Canadian jurisdiction.
Senator Moncion: Time moves pretty fast within the financial system, so it would always be after the fact.
Mr. Scrivens: There’s no doubt there are limitations.
Senator Smith: Is Fabien Lefebvre, from Transport Canada, here? Welcome. This is like the League of Nations. We’ve never had so many people here.
We’re looking at Division 22 of Part 4 of the bill regarding extended interswitching.
Fabien Lefebvre, Acting Executive Director, Oceans Protection Plan Operations, Transport Canada: I’m the wrong person for this question. However, there is someone who can take that question, sir.
Senator Smith: Is there someone in the other room? Now I really have something to talk about here. This is going to be a quick question.
Senator Galvez: My question is for Ms. David. Division 32 of Part 4 of the bill enables the Public Sector Pension Investment Board to manage the assets of the Canada Growth Fund. However, in a recent report, according to Shift: Action for Pension Wealth and Planet Health, the Public Sector Pension Investment Board is one of the only major pension managers in Canada that has yet to commit to net-zero emissions by 2050, which is the act that we recently adopted. The Public Sector Pension Investment Board continues to invest the retirement savings of federal employees in fossil fuel companies with no credible or profitable decarbonization pathway other than phase‑out. Moreover, this report stated that a corporate director of Imperial Oil simultaneously sits on the board of directors of the Public Sector Pension Investment Board, creating an obvious conflict of interest.
Given all of these issues, are you setting up the Canada Growth Fund for problems? Are you going to look into these potential conflicts of interest before giving them the power for clean energy and clean renewable investments?
Thank you.
Ms. David: Thank you very much for the questions.
There are many questions there, senator. In terms of the Public Sector Pension Investment Board and its management of the Canada Growth Fund assets, the Public Sector Pension Investment Board will establish a subsidiary of the Canada Growth Fund, which will establish an investment committee. The investment committee will have a number of members who will be making independent investment decisions for the Canada Growth Fund based on the Canada Growth Fund’s strategic objectives: to build Canada’s clean economy and to invest toward goals such as net zero. To be clear, the growth will be managed independently, and will be managed toward these strategic objectives that have a particular climate focus.
In terms of managing any conflicts of interest, there will be strong conflict-of-interest provisions between the Canada Growth Fund and the Public Sector Pension Investment Board to ensure there are no conflicts between, for example, the responsibilities of both the Public Sector Pension Investment Board and the Canada Growth Fund and the goal of the Public Sector Pension Investment Board and its subsidiary to manage the assets of the Canada Growth Fund in line with the Canada Growth Fund’s objectives.
Thank you.
Senator Galvez: Thank you.
The Chair: Senator Smith, we now have the official who will answer your question.
Senator Smith: Mr. Dei, thank you for coming. I didn’t realize how many people we had coming here today.
I would like to talk about Transport Canada and Division 22 of Part 4 of the bill regarding extended interswitching. I think this is a hot topic. According to the Railway Association of Canada, your department provided assurances to the industry at the Commodity Supply Chain Table in 2022 that the implications of the extended interswitching would be fully assessed, and that railways would be consulted if the government were to proceed with the change.
Did your department consult with the railways before these changes were drafted in Bill C-47?
Joel Dei, Director, Rail Policy and Legislative Initiatives, Transport Canada: Thank you for the question.
We have talked with the railways about the merits of extended interswitching, and the fact that it was highlighted by the National Supply Chain Task Force’s report in terms of the recommendations, as well as that the government was required to provide a response to it. As we look at this pilot — and it is characterized as a pilot — there is an opportunity for government to look at the merits of this particular initiative, and to understand the impacts and effectiveness of it as we develop a longer-term solution to competitive access measures, which is what this is.
Senator Smith: Did your department undertake a full assessment of the implications of extending interswitching limits prior to the tabling of Bill C-47?
Mr. Dei: We are aware of the fact that it was done from 2014 to 2017, and that informed some of the thinking around it. However, as I mentioned earlier, this is a short-term pilot with set parameters around it that gives us an opportunity to evaluate its effectiveness and impacts with regard to the fluidity, resiliency and effectiveness of the rail system for Canadian shippers.
Senator Smith: The proposal in Bill C-47 is limited to an 18‑month pilot project, as you know. I’m trying to understand what the government is trying to achieve this time around that is different from the previous attempts at extending the regulated interswitching limits.
Mr. Dei: Thank you for your question. Yes, that is correct. This was done from 2014 to 2017. In addition to that, through the National Supply Chain Task Force’s consultations with various stakeholders, one of their recommendations, as part of their report, was an extension of interswitching limits, recognizing that there are still concerns around the lack of competitive options to inform better rates, service and performance in Canada. Again, this pilot gives us another opportunity to look at it from an evidence-based approach in order to determine what our long-term solutions should look like with respect to competitive access measures in Canada.
Senator Smith: Will you be doing the proper follow-up with members of the Railway Association of Canada so that you can monitor the ongoing progress of this particular intervention, as well as determine, at a certain point, whether this is the right thing to do, or whether we should return to the other system? People are complaining about the fact that it may affect the competitive position — Western Canadians are more heated up about it than Eastern Canadians. What do you think?
Mr. Dei: That’s a great question. We have offered — to all of the stakeholders, railways and shippers — the idea that it is important that we work together to discuss the potential metrics and data to inform our evaluation of this particular proposal. That offer is there for the railways as well, and that has been communicated.
Senator Duncan: My apologies that I was not here when everyone was introduced.
My question is for Mr. Countryman, the Director General of the Federal-Provincial Relations Division of the Department of Finance Canada. Earlier this afternoon, I was questioning the Minister of Finance regarding the increases in federal funding — in Bill C-46 — to the provinces and territories in terms of the Canada Health Transfer. In my role as a senator representing minorities, I’m particularly interested in Canada’s responsibility to provide health care services — and to pay for them — to the Indigenous people of Canada and Canadian Armed Forces personnel. I asked the minister about increased funding, and she assured me that there was increased funding for health care for both Indigenous people and Canadian Armed Forces personnel. However, I didn’t get a chance to ask her this — and I would like to have it on the record: There have been benchmarks established for this increased Canada Health Transfer, as we publicly understand it. We don’t know what those benchmarks are. Are there benchmarks for the increased funding for health care services for Indigenous people and Canadian Armed Forces personnel?
Galen Countryman, Director General, Federal-Provincial Relations Division, Department of Finance Canada: Thank you for the question. Within the federal package of investments for health care that was in Budget 2023, this included the $2‑billion funding for the Indigenous health equity fund. Currently, Health Canada is responsible for leading that in conjunction with the Department of Indigenous Services Canada, and they do consultations with First Nations, Métis and Inuit because it is going to be distinctions-based in terms of the roll-out and the development of that fund.
There are other complementary investments. I was listening in the other room when you were asking the minister about this — there have been top-ups to things like the Non-Insured Health Benefits program in recent budgets. If you go back and look at recent budgets, there have been investments in Indigenous health.
With respect to benchmarks, as part of the federal health package, there is a $25-billion fund with bilateral agreements where, again, this will be led through Health Canada at a high level. The provinces and territories will come to an agreement with the federal government in terms of setting objectives for what they want to achieve with that funding. This is common to all things: Obtain better data and tracking on common health indicators so that the country, as a whole, has better information on health outcomes and access to health care.
Senator Duncan: How will health care services for Canadian Armed Forces personnel and Indigenous people — throughout the country — be reflected in those benchmarks for funding given to the provinces? They deliver, but Canada pays. How can Canadians be assured that everyone in Canada is able to access the same level of health care?
Mr. Countryman: That is a good question. That would be a question for Health Canada as they work through these bilateral agreements with the provinces and territories, unless they develop those indicators in conjunction with them in terms of the breakdown by population, subpopulation, et cetera, as well as how they will achieve that, and what’s available.
Senator Duncan: Thank you.
[Translation]
Senator Dagenais: I have a question for the witness Joël Girouard, from the Privy Council Office.
Mr. Girouard, the Privy Council Office — correct me if I am mistaken — is the Prime Minister’s department. For information purposes, can you give us an overview of the overall expenditures of the Privy Council Office and tell us about the annual increases in expenditures over the past five years or so?
Joël Girouard, Senior Privy Council Officer, Machinery of Government, Privy Council Office: Thank you for the question.
I think someone else could perhaps answer those questions. I am here to answer questions specifically about the Royal Style and Titles Act.
Senator Dagenais: I will turn to another witness then.
My question is for the witness Colin Stacey, from Transport Canada.
Mr. Stacey, the airline company representatives who have appeared before this committee have been very critical of the new fees that will be charged directly to travellers and they are worried about what they consider a lack of direct investment to improve the flow and safety of passengers.
Can you tell us about the use of the new amounts that you will be able to collect under this budget?
Colin Stacey, Director General, Air Policy, Transport Canada: Thank you for the opportunity to be here.
Unfortunately, senator, I cannot tell you how the fees will be applied. I think you may be referring to certain costs that were included in the budget. As a public servant at Transport Canada, I cannot answer that question because Transport Canada does not make the decisions about the application of certain fees to the airline sector or other sectors.
Senator Dagenais: Perfect.
I would like to call on the officials from Employment and Social Development Canada. Who will be the lucky one to represent that department?
The Chair: Senator Dagenais, can you tell us which part you are referring to?
Senator Dagenais: My question is about GST credits for eligible Canadians.
The Chair: Is someone in the other place?
Senator Dagenais: I will not win my case today. It is not going well, Your Honour.
The Chair: Ask another witness, Senator Dagenais.
Senator Dagenais: Your Honour, I have to decline; I have no witnesses left. I will hand it over to another senator.
The Chair: In one way or another, we can say that the public servants here today are professionals.
Senator Dagenais: Yes, indeed.
The Chair: I will now give the floor to the bill’s sponsor, Senator Loffreda.
[English]
Senator Loffreda: My question is on the digital asset mining sector and the new GST/HST rules for cryptoasset mining activities set out in Part 2 of Bill C-47.
The Chair: Would an official please come to the microphone and give us their comments?
Senator Loffreda: Would someone be able to answer my question on continuing consultation with the cryptoasset mining industry — no? Okay, I will ask another question. My next question is on the Canada innovation corporation.
Mr. Reade, I would like to take a moment to shift our attention to Division 7 of Part 4 of the bill regarding the Canada innovation corporation. This is a great initiative. I am happy to see that the Canada innovation corporation will be run by private sector experts, and will operate at the speed of business.
I was happy that the corporation can rely on annual statutory transfers that will provide consistency and operational stability. I appreciate that the corporation will have to table annual reports to Parliament, including information relating to each program that it develops, delivers or administers.
However, as our Banking Committee suggested, would the government or Department of Finance officials be open to conducting an evaluation of the Canada innovation corporation three years after its establishment to determine whether it has been successful in meeting its mandate, and then publishing the results of this in-depth evaluation in its annual report? Also, could a timeline be established for when it’s going to set up the board, appoint a CEO and hire employees? What discussions have been had at this level, and when can we expect to see money flowing out of the corporation?
Greg Reade, Director General, Economic Development Branch, Department of Finance Canada: Thank you very much for those series of questions, and it’s well noted on the reports to Parliament. You’re quite right; there are parts of the legislation to ensure what we think is very robust reporting.
In the context of your suggestion in terms of an evaluation report, I’m not sure that I can commit to that today. But I can confirm that there is an intent — including through provisions in the legislation and in the blueprint document that was publicly released — that one of the corporation’s core mandates is to experiment with programs in order to find the most effective ways to achieve the mandate: to maximize business investment and research development in all regions and sectors in the country in order to promote economic growth. I think it’s a reasonable expectation, and it will certainly be taken back in several ways, whether it’s three years, sooner, later or ongoing. That’s a very good suggestion.
You asked about the timeline for the CEO, the chair of the board and board members — this is the subject of most of the work that’s currently under way. We are in the midst of a process where we’re hoping to begin identifying suitable candidates, and to start meeting in the very near term with the objective to announce the chair and then the CEO during the course of the summer. If it all comes together, and we can work with the candidates in terms of their availability, we hope that we’ll have a reasonable plan in place.
In terms of the budget flowing, that’s probably number two on our priority list. We have funds this year. We’re working closely with several program experts to understand what we can do. Of course, it’s a new corporation. We don’t have systems in place yet, but we think there are ways that we can leverage existing systems — potentially through other programs — to deliver funding on behalf of the Canada innovation corporation. We’re trying to be innovative to ensure those funds are released for the important purpose that they’re intended. I hope that answers your question.
Senator Loffreda: It does. Thank you very much.
My next question is for Mr. Stacey. On air passenger rights, I have a question on Division 23 and the changes proposed to the Canada Transportation Act to strengthen air passenger rights and to streamline the process of administering air travel complaints.
When the National Airlines Council of Canada, or NACC, appeared before our committee last week, they raised some concerns regarding future regulations. Of note, they want to ensure that adherence to safety is the primary guiding principle when defining the exemptions that airlines can claim from paying compensation over and above the refund and duty of care. In a follow-up written submission, our committee received a list of circumstances that NACC considered to be extraordinary. In a submission we received this morning, NAV CANADA also states that safety-driven decisions resulting in delays and/or cancellations by any player in the system, including airlines, should continue to be protected from compensation requirements. I have no doubt that safety will always be the number one priority for the government. Another issue NACC raised was the sharing of responsibility and accountability among all entities in the air travel ecosystem. However, NAV CANADA seeks to be exempted from any assignation of financial responsibility for refunds or compensation.
Having said that, can you speak to us about the next steps following Royal Assent of Bill C-47, and the engagement you will have with stakeholders during the regulatory process? Has the government been working on that list of extraordinary circumstances that NACC is calling for? What about the idea of shared accountability among all industry players?
Colin Stacey, Director General, Air Policy, Transport Canada: Thank you very much for the questions. I’ll start by noting that the basis for these changes to the Canada Transportation Act with regard to passenger rights is, simply put, a new regime that was brought in place at the end of 2019, and was exposed to an enormous stress test by the COVID-19 situation that revealed some areas where there was room for improvement.
Amongst those areas — where there was room for improvement — was a greater simplification and clarity in terms of obligations, and also improvements in terms of the process for dealing with any complaints if they were to arise. Part of the challenge that we identified was this: Under the current system, during the process for dealing with compensation for passengers — in instances where there are delays and cancellations — it’s effectively up to the carriers to determine whether or not an issue or an incident was either within their control or not, or due to safety. As a result of that, they could choose not to provide compensation, in which case the passenger could then take a complaint to the Canadian Transportation Agency.
What we’re doing is simplifying this and aligning it more with, for example, the situation in Europe where it’s not up to the carriers to determine whether or not an incident is in regard to safety or is within their control, but rather a greater onus and responsibility are placed on the carriers to compensate — unless there is a situation that falls within a very specifically prescribed list of exceptional circumstances that would allow them not to provide that compensation. That’s the essence of the change.
You’ve asked about the list, and what would be included and what wouldn’t. It would be inappropriate to speak to that at this point.
You’ve asked what the next steps would be. The next step would be that the Canadian Transportation Agency, through a regulatory process, will elaborate on these regulations and will create, for example, the specific list of exceptional circumstances that would allow a carrier to not provide compensation under given circumstances. What will or won’t be in this list can’t be stated at this point. It’s something that the agency will be carrying out, presumably as soon as the bill receives Royal Assent.
Your additional question was with regard to the sharing of responsibility. In particular, we’ve heard carriers speak on this issue — the Air Passenger Protection Regulations, as it stands, and as similar regulations apply in other countries as well, focus particularly on the entities that have a direct commercial relationship with the passengers, and that’s the carriers themselves. Having said that, we’re aware of those concerns that the carriers have.
Senator Loffreda: Thank you very much.
The Chair: Thank you, Mr. Stacey.
Senator Duncan: My question relates to Division 14 of Part 4 of the bill. This is the timely sharing of death information with Employment and Social Development Canada. Do we have someone here to answer this question?
Stéphanie Brodeur, Acting Director, Policy and Partnerships Division, Integrity Services Branch, Service Canada, Employment and Social Development Canada: Yes, I can answer the question. My name is Stéphanie Brodeur. I’m the Acting Director in the Policy and Partnerships Division of the Integrity Services Branch at Service Canada at Employment and Social Development Canada.
Senator Duncan: Thank you very much. For my colleagues who may not have it on hand, Division 14 of Part 4 of the bill is the timely sharing of death information with Employment and Social Development Canada. This part of the budget implementation act proposes to allow Employment and Social Development Canada — when they’re paying death benefits — to access social insurance numbers. It gives the Minister of Employment and Social Development the power to collect and use the social insurance number for the purposes of effective administration of any program under their responsibility.
This may be very useful to the department. My concern is privacy. If Employment and Social Development Canada works with the Canada Revenue Agency, or CRA, and has a person’s social insurance number, is it possible that they would determine if there were outstanding benefits that were also accrued to the person who was deceased? Or, conversely, what happens if the CRA comes back and says that an individual owes taxes — does that impact the death benefit that is paid because now you have access to the social insurance number?
Ms. Brodeur: Thank you for the questions. The changes to the legislation are to close a gap that we have within the department where some of our programs do not currently have access to the death information that is in the Social Insurance Register. There is no additional information sharing with other departments. In regard to the CRA, there would not be any additional information sharing that would be allowed by these legislative changes. It’s to make sure that, as per the main point of contact within the Government of Canada in case of Death Act, Employment and Social Development Canada is the main point of contact for the Government of Canada — and that we are able to share the death information within the department, with the programs for integrity reasons and to avoid having clients report several times to the same department the death of a loved one.
That being said, this gives the power to the minister for the programs to collect social insurance numbers, but every program that needs to collect a social insurance number needs to go through a privacy assessment. The same that is currently in place will still apply.
Senator Duncan: Are there safeguards in the legislation to ensure that this information would not be inadvertently shared, and to ensure that someone providing it does not then hear about other moneys owed to the government? Perhaps, conversely, an upside could be that we could determine that a person had past benefits that were owing to them with their social insurance number. Are there safeguards in place?
Ms. Brodeur: The department is still under the Privacy Act and under the Department of Employment and Social Development Act. There are some safeguards in both of those acts in terms of disclosure of information that restricts any information sharing.
Senator Duncan: Thank you.
Senator Cardozo: I have three quick questions. I hope that we can get through this.
My first question is for Lindy VanAmburg from Health Canada, my second question is for Rachel Pereira from the Privy Council Office and my third question is for Peter Christensen from Immigration, Refugees and Citizenship Canada, or IRCC.
Thank you to all who are here. It’s an awful lot of time that we’re taking from you, but one of the things that really strikes me is that we — at the Senate — deal with these policies, and the minister deals with these policies, but you are the real people who make these things happen, and who go to enormous amounts of negotiations, discussions and outreach with the provinces, territories, stakeholders and all that kind of stuff. I’m sure that all Canadians would want to say “thank you” to you for everything you do.
Ms. VanAmburg, the new act that you’re talking about in Division 29 is the dental care measures act. How different is that from the policy that was announced a year ago? As I recall, the government worked out this policy and put it in place at the beginning — and this is the act. Is it different from what was announced a year ago?
Lindy VanAmburg, Director General, Policy and Programs, Dental Care Task Force, Strategic Policy Branch, Health Canada: There are two different streams here. Last year, an act was put in place called the Dental Benefit Act, which was passed and has resulted in the interim Canada Dental Benefit for children under 12 years old. I think that might be what you’re referring to.
That benefit is up and running. At last count, over 300,000 children had benefited from that, as of last week. We’re quite proud of that. That is the interim measure, and it will end in June 2024.
The dental care measures act, which is included in this piece of legislation, is laying the groundwork for the long-term Canadian dental care plan, which will be put in place and will be open to all Canadians — who are not insured — earning under $90,000 a year. This is one of the things that we have learned as we worked on this policy: Although the intent is to target those who don’t currently have insurance — and most Canadians receive their insurance through their employers or as part of their pensions — there isn’t a way to understand who has insurance and who doesn’t. This measure would require employers to begin to report that information on T4 and T4A slips. They would need to indicate whether they offer coverage to the employee or pensioner, and their family, so that the government would have a reliable means of knowing whether a person had insurance as part of the administration of the long-term plan.
They are two different pieces of legislation, both for dental care.
Senator Cardozo: Is there an age limit on this, and when does this go into effect?
Ms. VanAmburg: There is no age limit on this. This is an income-tested program. As long as you’re under $90,000 for family net-adjusted income, you could be eligible, if you don’t have other insurance.
This budget indicated that the first recipients of the long-term plan will start to be brought onto the program at the end of 2023.
Senator Cardozo: So it dovetails with the current policy that will be phased out.
Ms. VanAmburg: Yes, there won’t be any overlap for children in the long-term plan, but children will eventually be eligible for the long-term plan when it is their turn to enroll.
Senator Cardozo: Thank you.
Ms. Pereira, in terms of the Canada Elections Act, you talk about providing a national, uniform, exclusive regime. Was that not the case before, and what are we adding here?
Rachel Pereira, Director, Democratic Institutions, Privy Council Office: Thank you for the question. This establishes the privacy requirements that are currently required of federal political parties as a condition of registration under the Canada Elections Act as the regime. That becomes the new federal political party privacy regime across Canada, regardless of where parties operate.
Senator Cardozo: When you’re making an amendment like this — are we out of time?
The Chair: Last question, please.
Senator Cardozo: Is Mr. Christensen available?
Peter Christensen, Assistant Director, Social and Discretionary Policy and Programs, Immigration, Refugees and Citizenship Canada: Yes, I’ve joined by video conference, senator.
Senator Cardozo: That’s good. I will quickly ask you a question. The College of Immigration and Citizenship Consultants Act has been around for a while. What necessitated these changes to the act?
Mr. Christensen: Thanks very much for your question.
I’ll start just by introducing myself. My name is Peter Christensen. I am an assistant director in the Social Immigration Policy and Programs Branch at Immigration, Refugees and Citizenship Canada.
To answer your question, as you noted, the act has been in effect since 2019. The college opened in 2021, undertaking its role to regulate immigration and citizenship consultants in the public interest pursuant to the College of Immigration and Citizenship Consultants Act.
Since that time, both IRCC and the college have noted areas where the full extent of the act could be improved — areas such as the college’s complaints and discipline process, and extending immunity for acts done in good faith to those who work for the college — basically, a series of different areas where the legislation could be improved.
During the course of the college undertaking its operations as the regulator and working with IRCC, these specific areas for improvement became apparent. Following that, we’ve undertaken to seek to make these amendments in order to improve the functioning of the college through the legislation.
The Chair: We will conclude with a final question.
Senator Marshall: I have a quick question for the Department of Finance officials. I think I saw Mr. Wu on the screen a little bit earlier.
In the area of debt, can somebody give me a more current figure with regard to the debt of the government, plus the debt of all the Crown corporations, as per the Borrowing Authority Act?
James Wu, Director General, Funds Management Division, Department of Finance Canada: Yes, senator, I do have the figure. I’m checking through my notes.
Senator Marshall: It is as of March 31, 2023.
Mr. Wu: Nothing has been released publicly yet.
Senator Marshall: That’s why I’m asking.
Mr. Wu: However, I’m happy to share a number with you. I want to ensure that I get the right one before I cruise off on that.
Just bear with me for a second — my apologies. I’ll look into my notes. I’m happy to return with it when I find it.
Senator Marshall: Please do that.
Why is that number so difficult to find? I can find the number for the government — the central government — but it’s difficult to find the borrowings of all the Crown corporations, as I think it’s disclosed every three years; it’s not disclosed annually, is it?
Mr. Wu: Thank you for the question. We do disclose it every year. It follows the public accounts process because, as you understand, the borrowings for the Borrowing Authority Act include borrowing from the Crown.
Senator Marshall: It comes so late; it’s six or seven months afterwards.
Mr. Wu: Indeed, I think the issue is the timing.
Senator Marshall: If you can provide a more current number to the clerk, that would be great. Otherwise, I will try to calculate it myself.
Mr. Wu: I will endeavour to do that.
Senator Marshall: Thank you.
The Chair: Thank you. To the officials, on behalf of the National Finance Committee, I want to also share — for the record — that Part 4 is on various measures which encompass 39 vote divisions and over 400 pages in Bill C-47, or the budget implementation act.
[Translation]
To the officials from the 14 different departments, I would like to say thank you for your professionalism. I can see that you know your stuff well.
[English]
Thank you for being with us today. You’ve shown a lot of professionalism. It basically zeroes in on our four main principles: transparency, accountability, reliability and predictability of the budget for Canadians.
To the officials, before we adjourn, for the last question that was asked by Senator Marshall, we have a time frame to please have the answer by the end of the day on Monday, June 12, 2023.
Honourable senators, our next meeting will be next Tuesday, June 13 at 9 a.m. Before closing the meeting, I would like to thank the entire support team for this committee — those in the forefront of the room, as well as those behind the scenes who are not visible. Thank you for your hard work which contributes enormously to the success of the senators of the National Finance Committee.
(The committee adjourned.)