Proceedings of the Standing Senate Committee on
Issue 18 - Evidence - Meeting of December 4, 2009
OTTAWA, Friday, December 4, 2009
The Standing Senate Committee on National Finance, to which was referred Bill
C-51, An Act to implement certain provisions of the budget tabled in Parliament
on January 27, 2009, and to implement other measures, met this day at 9:33 a.m.
to give consideration to the bill.
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, I wish to thank you all for being here
this morning. We are continuing our study of Bill C-51, which is the
government's second Budget Implementation Act. Other items described as
"miscellaneous" are included in the bill, and we have been dealing with them
Our work today will be divided into three sessions. In the first session we
will hear from representatives of the Canadian Home Builders' Association. In
the second session, further to our discussions yesterday, we have arranged to
hear from the President of the CBC, who will be with us via videoconference from
Vancouver. Finally, we will have a session focusing on the Canada Pension Plan
provisions in Bill C-51. Our time in each session is limited, and you will
appreciate that in order to arrange for the videoconference, the first session
will have to finish at precisely 10:15.
Without further ado, I would like to welcome Mr. Gary Friend, President of
the Canadian Home Builders' Association. Mr. Friend is accompanied by his Chief
Operating Officer, Mr. John Kenward.
Mr. Friend, you have some introductory remarks, and then honourable senators
may have questions and comments. The floor is yours, sir.
Gary Friend, President, Canadian Home Builders' Association: As the
chair mentioned, I am the Canadian Home Builders' Association (CBHA) national
president. I have been a new home builder and home renovator in Surrey, British
Columbia for over 25 years.
The Canadian Home Builders' Association represents Canada's residential
construction industry. Our membership includes new home builders, renovators,
developers, suppliers, trades, manufacturers, lenders and other professionals.
We are pleased to provide the committee with brief comments on some aspects of
My remarks focus on how the bill relates to the home renovation sector of our
industry. Specifically, I would like to address the Home Renovation Tax Credit
and issues pertaining to home renovation activities by Canadians.
The CHBA supported the introduction of the Home Renovation Tax Credit (HRTC)
earlier this year. Given the economic uncertainty that confronts our nation, the
HRTC is an appropriate measure to stimulate consumer investment in home
renovations. The HRTC is having a significant and positive effect on the level
of home renovation across the country. As a result, we are not experiencing the
same downturn in renovation activity that we are seeing in new house
In their work with consumers, renovators report that the HRTC is a
significant factor in motivating homeowners to initiate home renovation
projects. This view is reinforced by building material retailers, who also
report increased sales as a result of the HRTC. In short, the experience of our
industry is that the HRTC is stimulating a significant level of economic
I can offer the committee some additional brief points in relation to the
credit. First, there is evidence that the HRTC is complementing other federal
initiatives, such as the ecoENERGY Retrofit - Homes program. Our renovator
members report that many consumers are including energy-efficiency measures in
their projects. This is allowing them to take advantage of both the HRTC and the
ecoENERGY grants, as well as compatible provincial grants and incentives. This
observation is supported by data from Natural Resources Canada showing an
unprecedented consumer demand for home energy evaluations, a prerequisite for
ecoENERGY grant eligibility.
Taken together, the HRTC and the ecoENERGY grants form an effective package
that is working well. This is stimulating home renovation projects that are
enhancing both the value and the environmental performance of Canada's housing
stock. I note that in the government's recent fourth report on Canada's Economic
Action Plan, it is estimated that some 4.6 million families will take advantage
of the HRTC. In short, the HRTC is a success story.
We have also been pleased to see some major building material retail chains
add additional incentives for consumers doing renovation work that qualifies for
the HRTC. The HRTC has also delivered another important benefit by encouraging
consumers to carry out projects using the services of legitimate tax-paying
renovators. By requiring receipts to support HRTC claims, the government is
moving consumers away from dealings with underground cash operators. Given the
Canada Revenue Agency's apparent inability to address the underground cash
economy through tax compliance measures, it is instructive to see that the HRTC
is having a positive impact in this area. This is a benefit shared by consumers
who are better served when dealing with legitimate tax-paying companies. It also
benefits government through higher tax and other revenues that would otherwise
be lost to underground cash activity.
I will conclude my comments with a caution. It is clear that the HRTC is
having a positive impact on the level of home renovation activity in Canada.
This initiative will end in early 2010. A few months later, the harmonized sales
tax will be introduced in both Ontario and British Columbia, resulting in a tax
increase on home renovations amounting to about $1 billion each year.
Our industry is extremely concerned about this situation. Clearly, it will
have a significant impact on both the level of renovation activity and the
number of jobs lost to the underground cash economy. We know this because it is
exactly what happened in Atlantic Canada when the harmonized sales tax was
introduced there in the 1990s. To put matters simply, the positive benefits
flowing from the HRTC will be more than nullified by the impacts of sales tax
In order to address the situation, the CHBA calls upon the federal government
to introduce a permanent 2.5 per cent GST rebate for home renovation
expenditures. This would be a rebate that, like the HRTC, would go straight to
the consumer. It will achieve tax neutrality with the pre-GST federal sales tax.
I should note that the federal government did not provide a renovation tax
rebate when it implemented the GST. This resulted in a substantial additional
tax burden on Canadians who renovate their homes using the services of tax-
paying renovators. In both Ontario and British Columbia, CHBA provincial
associations — the Ontario Home Builders' Association and CHBA-BC — are urging
their provincial governments to enact similar renovation tax rebates to achieve
revenue neutrality in relation to the provincial portion of the harmonized sales
I would point out that our association recognizes that the harmonized sales
tax offers broad economic and competitive benefits. However, housing presents a
unique case where HST impacts will be particularly significant and unfair. This
represents an acute problem in relation to home renovations and can be best
addressed through permanent renovation tax rebates, federally and provincially.
We brought reports on the Canadian housing industry performance and trends
and the potential impact of sales tax harmonization on the renovation sector.
The Chair: Mr. Friend, thank you very much for your comments.
I remind senators that the second portion of Mr. Friend's submission deals
with the harmonized sales tax, which is a bill currently before the House of
Commons. This bill has not arrived in the Senate, but perhaps Mr. Friend is
The indications are that that bill may be coming to us, if it passes in the
House of Commons. You have already given us some information on it. Although we
do not have authority for a pre-study, it helps us a little to understand the
impact it has on the industry.
We will now focus on what is contained in Bill C-51, namely, the home
renovation tax credit. It is interesting that you should point out that there is
a synergy with the ecoENERGY program. Everyone here is pleased to see movement
towards a green industry and energy savings in relation to renovations. You are
seeing that in your industry, and I am glad you are here to confirm that for us.
I will now go to my list.
Senator Ringuette: Welcome, gentlemen. I can see that you have done a
lot of analysis on the different issues affecting your industry.
Yesterday, we were told by officials that this 15 per cent tax credit will
generate a loss in revenue of $3 billion. For that to happen, there would have
to be $20 billion of purchases either of products or labour. Is it your
observation that this program has generated $20 billion of purchasing throughout
Mr. Friend: We do not yet have any hard numbers on what the home
renovation tax credit has brought in. From talking to renovator members across
the country, I gather that it is foremost on consumers' minds. It is almost
always brought up in their phone calls, and it has brought people into the
marketplace to do renovations. It has dramatically increased the amount of
renovation going on, and it is creating jobs and employment.
In my own area of Vancouver, most renovations are well above the $10,000
limit for the tax credit. There is a lot of spinoff of extra economic activity.
Senator Ringuette: Calculations also indicate that it is generating $1
billion in GST revenue for the federal government. I cannot talk about the net
income because we still do not have the information about the cost of all the
advertising for the program.
You mentioned the underground economy. What impact has the current financial
crisis, with all the layoffs across the land, had on your members? Are people
who are laid off doing renovation work on the side and contributing to the
underground economy? Have you noticed an impact?
Mr. Friend: Our industry, like others in Canada, was severely affected
by the downturn in the economy. There is historical data on the renovation
sector that has an underground cash economy operating in it. That occurred when
the HST came into Atlantic Canada.
One of the successes of the Home Renovation Tax Credit is the requirement for
receipts, because it takes away from the underground economy. The consumer needs
the receipts to get the tax credit, which stops the underground economy from
growing. That is a positive benefit.
Senator Ringuette: You are unable to say at this time whether the laid
off workers have gone into the different trades to do home renovations and
thereby removed jobs from your membership that do pay income tax and GST.
Mr. Friend: In my own market, I am not aware of people I have had to
lay off in my own company that have gone to the underground. Traditionally,
those in the underground economy are not the professional tradespeople that work
within the industry.
Senator Di Nino: I was struck by one of your comments, Mr. Friend. Did
you say that your own experience indicates that the renovations being undertaken
by homeowners are usually over the $10,000 mark?
Mr. Friend: When I made that comment, I was making a reference to my
own experience. I am from the Vancouver marketplace where houses are expensive.
Senator Di Nino: That is what you have seen yourself.
Mr. Friend: Yes.
Senator Di Nino: Has your experience been that those who are
renovating do not stop at the $10,000 maximum but are spending more than that?
Mr. Friend: Yes.
Senator Di Nino: Have any of your colleagues expressed similar
thoughts in your discussions across the country?
Mr. Friend: In my own market in Vancouver and in meeting with my
members across the country, it seems to be fairly prevalent that the renovations
are going above the $10,000 for those who have the money to spend. It is common
that people are spending more than that and creating more jobs.
Senator Di Nino: It seems that the economic activity is greater than
some may have anticipated.
Mr. Friend: I think so. Renovations as an industry in the housing
sector is larger than new construction today. It was $53 billion in 2008. That
is a large part of the industry.
Senator Di Nino: That is worth repeating. I did not know that. The
renovation market is larger than construction in the new housing market.
Mr. Friend: Yes.
Senator Di Nino: That is a good statistic for us to know.
I want to go back to your comment about the underground economy. I was struck
by your comment that some people who participate in the underground economy are
generally not qualified professionals. They are people who are handymen and
handywomen, as opposed to those who would have professional qualifications.
Mr. Friend: That is correct.
Senator Di Nino: The program that the government initiated has not
only enabled the government to collect its share of the revenue, which must be
added to the calculation that my friend is talking about with respect to the
actual tax pluses and minuses, but it has also been an indirect benefit to the
trades and the industry itself.
Mr. Friend: Absolutely.
Senator Di Nino: I must admit that it caught me by surprise because I
had not thought about it, but you linked the HRTC to the ecoENERGY Retrofit
grants. You suggested that individual homeowners are spending over $10,000. Is
that partially because of the ecoENERGY Retrofit grants as well, or would that
be over and above?
Mr. Friend: Yes, it is over and above.
Senator Di Nino: Those two programs are generating a great deal of
economic activity, particularly at this time of our country's economic
challenges in the global crisis. The news that we got this morning about the
increase in job numbers may be a reflection of this as well.
Mr. Friend: Absolutely.
Senator Gerstein: Mr. Friend, I was interested in your comment that
the renovation market is larger than the new home building market. Would you
have any information or statistics as to the balance of renovations done by
individuals themselves on their own homes versus how much is put out to
Mr. Friend: The numbers on the level of the market and the dollar
amounts are contained in both these reports in different fashions. As a general
rule of thumb, the renovation activity is two thirds renovation contractor and
one third do-it-yourself or home owners.
The Chair: That information is in the brochures you have made
Mr. Friend: That is right.
The Chair: We will give those to the clerk and he will make them
available to all members of the committee. Thank you for bringing those along.
In that report do you have any statistics on the success of eco-renovations?
How much energy is being saved by this investment by Canadians in
Mr. Friend: The report contains the amount of budget allowed for
ecoENERGY retrofits. We are seeing a large uptake in the marketplace. As far as
the amount of energy saved, we will not know until the end of the year how many
audits have been done and what has happened. However, I would say it is
significant. Consumers have a real appetite for reducing energy use.
The Chair: With respect to the eco-renovation, there is a
pre-renovation audit and a post-renovation audit required. That information will
be compiled and will be available in due course?
Mr. Friend: When it is all done, yes. We have seen a substantial
increase in the audits by NRCan.
The Chair: I have a question that flows from those of Senators Di Nino
These programs are maintaining employment in this industry. What is your
position on the fact that these programs are coming to an end in a month? Do you
anticipate a major drop in employment in this area following the incentive
Mr. Friend: Both programs are a much needed incentive to the consumer
to carry out these renovations. Energy retrofits are not inexpensive. It is very
expensive to change windows, heating systems, et cetera. The fact that these
programs are coming to an end is one reason we are calling for a permanent 2.5
per cent GST rebate on renovations, which would allow tax relief and neutrality
to the consumer to be able to spend monies moving forward.
The Chair: You tied that into HST implementation did you not?
Mr. Friend: Yes.
The Chair: Do you want to separate those now?
Mr. Friend: We are calling for a permanent federal GST rebate of 2.5
per cent on renovations. We are also calling for a rebate at the provincial
level on the HST.
The Chair: Irrespective of whether Ontario and B.C. go ahead with the
Mr. Friend: Yes. We are calling for a federal rebate on the GST, and
our provincial associations are also calling on their own provincial governments
for a rebate for renovations under the HST provincial portion.
The Chair: You anticipate that the 2.5 per cent federal rebate that
you talked about on GST would make up for the Home Renovation Tax Credit program
that is coming to an end at the end of January?
Mr. Friend: I do not know if it would make up for it directly in that
way, but it would bring relief to the consumer and create tax neutrality on the
GST charge on renovations. The net result is that it would help them.
The Chair: We have heard suggestions from others on an individual
basis, not before this committee, that because the recovery is so fragile it
might be a good idea to extend the home renovation tax credit for another year.
What is your position on that?
Mr. Friend: It has obviously been taken up by the marketplace. It has
done a lot to raise awareness of renovation and has created activity and jobs,
so it has been of benefit.
The Chair: You do not have a position as an association as to whether
it should be extended?
Mr. Friend: I will ask Mr. Kenward to comment on that.
John Kenward, Chief Operating Officer, Canadian Home Builders'
Association: Our position is that if the economy remains fragile, this is
certainly one of the stimulus measures the federal government has put in place
that would deserve serious consideration for renewal. At the same time, we are
also saying that we would not see that as a substitute for the permanent home
renovation tax rebate of the goods and services tax.
This is a success story, and there is a deep rationale for continuing it as
an economic stimulus, if that is required.
The Chair: We will not know how successful it was until income tax
time when people make claims on the program. However, from the industry you are
seeing that it is a successful program?
Mr. Kenward: Absolutely. When the stimulus program first came out, we
were not sure what effect it would have. As Mr. Friend has observed, it has had
a profound impact. It has been quite amazing. It is impressive to see how much
activity the tax credit motivated. We are all quite taken aback by it.
Mr. Friend: I have a figure that I use when I look at the marketplace.
Renovation activity has grown for the last 10 years. This year, renovation
activity has remained stable. At the same time, new home starts have decreased
in some markets by double digits. Using that comparison, renovation is
outperforming new home starts in this market. Part of that has to be due to the
renovation tax credit.
The Chair: You are suggesting that, had it not been for this program,
there would have been a drop in home renovations, as there was in new home
Mr. Friend: Yes, the numbers seem to show that.
The Chair: That is helpful.
Senator Lang: I want to pursue one aspect off your recommendation to
have a decrease in the HST if it does come about, both federally and
provincially. If you had to choose between the extension of the Home Renovation
Tax Credit and a decrease in GST and HST, what would be your position? I want to
have this clarified, because one interesting aspect of your comments was that
the necessity for homeowners to get receipts for the work they are having done
is causing a significant decrease in the underground cash marketplace, which
does not pay taxes to any level of government.
Just as an observation, it seems to me that, if there is to be a continuation
of economic stimulus and incentive for people to spend, we should be looking at
the extension of the Home Renovation Tax Credit, in view of its success, as
opposed to doing strictly a marketplace decrease in HST or GST.
Mr. Friend: CHBA's position is that we are calling for a permanent GST
rebate of 2.5 per cent on renovations. Just as with the Home Renovation Tax
Credit, you would need a receipt. When we do new homes, people are audited to
ensure that when they claim for the GST rebate, they have the figures to back it
The stimulus program has done a lot of good, but it has a sunset clause. In
the long run, it does not protect the consumer in terms of tax neutrality, so we
would call for a permanent rebate if we had to choose between the two.
Of course, in these economic times it may be worth considering that the Home
Renovation Tax Credit be extended.
Senator Lang: I would like to ask questions on the First-Time Home
Buyers' Tax Credit, which you did not comment on, as well as on the increase to
$20,000 for withdrawals from RRSPs for first-time home buyers.
In your experience in this past year, has it worked in some cases?
Mr. Friend: Yes, it has. It has helped first-time home buyers to be
able to use their RRSPs for a down payment. Of course, the First-Time Home
Buyers' Tax Credit for the purchase of a new home gives them $750 back on up to
$5,000 of closing costs, so it is a benefit to home buyers.
Senator Lang: Has that been another reason for people to get into the
new home construction marketplace?
Mr. Friend: Yes. Every penny helps, particularly for first-time home
Senator Peterson: Thank you, gentlemen, for your presentation. What
are the rules with regard to the program that ends early next year? Do you have
to be completed before the deadline? Can new starts go right up to the deadline?
What validates a new start? Is it someone filling out a form? How does that keep
moving, to maximize it?
Mr. Friend: I do not have the rules before me, but I understand the
cut-off date is the cut-off date. Whatever work is done to that point can be
For example, if you are doing your windows and they are ordered but not
installed you may claim the cost of the windows but not the installation because
it has not been done yet. As long as you have a valid bill for what has taken
place that qualifies, you can use that. If you have product where there is
supply and installation and the supply is done, you can still capture that, but
you may not get the installation because of the cut-off date.
Senator Peterson: Do you think that is an area where there could be
some relief? It is no fault of the home owner that there was a delivery problem.
They were probably counting on that.
Mr. Friend: I think it is on consumers' minds because I am hearing
from our renovator members in Vancouver that their phones are quite busy right
now. We feel that part of that is people are looking at the date coming up and
they have to get things done.
The Chair: My understanding is that the advertising done by the
government says it is for goods and services supplied by the end of January.
Anything after that and the program does not apply.
Senator Ringuette: We are all aware of the dire housing situation in
our native communities. Would you know what the impact of this program has been
in regards to the renovation, purchase or building of housing in our native
Mr. Friend: I do not have direct figures on that, but I will pass it
on to Mr. Kenward to provide some information.
Mr. Kenward: I cannot provide specific numbers but I would just
register that the federal government has implemented a major program on the
affordable housing front. A considerable portion of this is dedicated to the
rehabilitation of housing. I would imagine that there has been considerable
investment, or there is considerable money available for investment in that
Senator Ringuette: Has there been anything noticeable from your
members in regards to the CHBA and the specific program we are examinigt?
Mr. Kenward: No, I do not have specific information. I can certainly
try to get it for you.
Senator Ringuette: I would appreciate that. .
Senator Lang: I would like to pursue another area that, as a home
owner, I found confusing. We have the various programs put in by the federal
government. Then the local territorial and provincial governments put in
programs and you have to apply to various agencies. You almost have to be
unemployed for a period of time in order to have the time to apply for
everything to go about reducing your carbon footprint and the other things that
you are attempting to do.
The Chair: Then you cannot afford the accountant to help you.
Senator Lang: That is right.
All these programs are well intended and put in place politically by the
various levels of government to meet various objectives. Has your organization
ever considered looking to see what could be done to coordinate between the
federal, provincial and territorial governments? There could perhaps be two or
three easy-to-apply-for, streamlined programs to give better value for the tax
dollar that may be forgiven and provide more incentive so more people take
advantage of it? Have you done reviews of that?
Mr. Friend: We have a fairly up-to-date list of the incentives and
programs out there in the jurisdictions federally, provincially and locally that
we provide to our members to inform consumers. Mr. Kenward could expand on that.
Mr. Kenward: It is difficult to keep that list up to date.
Senator Lang: That is my point.
Mr. Kenward: However, I would observe that in addition to our list,
Natural Resources Canada has also developed and is maintaining a pretty good
list of various initiatives. We have not taken the step of suggesting to various
levels of government that perhaps one should consider pulling these together and
amalgamating them. Our sense of urgency was to position our renovators more
strongly in terms of their ability to advise potential customers of what was
available. We managed to put together a list, but that probably needs to be
updated in the near future.
Senator Lang: I have a question about employment. We talked about how
successful the Home Renovation Tax Credit program has been across the country.
The $53 billion involved in home renovations is a huge number. Do you any idea
of employment statistics? How many jobs have been created? Are we at the stage
where you can give an indication on that?
Mr. Friend: We have not yet put together the numbers for this year.
Renovation activity is larger than new home construction, so it creates a lot of
jobs. There is no question about that.
The Chair: Mr. Friend, do you have any statistics on the rate of
unemployment within the industry of new home builders and renovation? How does
that compare to the 8.5 per cent of Canadians looking for work and the many who
have given up?
Mr. Friend: I do not have the figures before of me of what part our
industry plays in the current employment rate.
Mr. Kenward: I will try to get information for you on that particular
point. It does stretch us into another field, which I will not go into in
detail. Despite the fact that we may be in difficult times economically, the
rate of unemployment simply does not reflect the demand that continues to grow
within our industry for trades and people with special skills. It is an
interesting point that even during very difficult economic times our members in
many parts of Canada continue to report that finding the kinds of qualified
people they need is a challenge. That is another issue altogether.
The Chair: I was hoping you would get into that issue because we are
talking to many Canadians who are looking for work. If you are telling us that
there is a shortage and you anticipate, for the foreseeable future, a shortage
in skilled trades for new home building and renovation, that should be made
Mr. Friend: I can tell you firsthand, as a builder in Vancouver, even
today I have difficulty getting the qualified people I need to complete my jobs.
I know the economic downturn has masked the shortage of skilled trades in the
short term. I can assure you that in the long term this problem is not going
away. There is a worldwide competition for qualified trades and they have the
mobility to choose where to go. It will haunt us for some time to come.
The Chair: This is getting into an area not covered by this particular
matter but it is an area we may want to get into in the future. That is, what is
the best way to train these people for the skilled trades where there is a
shortage and a foreseeable shortage? We will look forward to that debate again
sometime in the future.
Senator Finley: The question I was going to pose has been asked by my
colleague, Senator Lang, but just so I understand this. It is certainly a key
part of Senator Ringuette's equation on tax balance.
There have been new jobs created by HRTC. You do not know how many, but there
have been. Would you say it was significant? Do you have any kind of guess at
it? Is it 5 per cent or 3 per cent?
Mr. Friend: I could not guess a percentage. I look at the fact that
the renovation sector has pretty much held steady compared to the declines in
new house starts. I would say in today's market, it has contributed
significantly to maintain and increase employment.
Senator Finley: These people pay tax.
Mr. Friend: Absolutely. One of the benefits of the Home Renovation Tax
Credit is it gets the consumer involved and ensures the receipts are on the
Senator Finley: The newly employed people pay tax.
Mr. Friend: The contractor has to be on the books to issue a receipt
which is a great benefit.
Senator Finley: That should be added to your tax balance, Senator
Senator Ringuette: Perhaps we could look at a total cost of this
program as even less than $1.5 billion, if you remove the GST portion and add
the taxable income it is generating. Maybe at the end of the day this is a
Senator Lang: Perhaps you could put on the books, as well from a
revenue-neutrality position, is that for those new employees who are paying
taxes, a percentage would be taken off the Employment Insurance program.
The Chair: All of this has to be calculated, and as the National
Finance Committee, we have a habit of doing that, of thinking about the overall
cost to the public purse as well as the social costs that are important to take
Thank you, Mr. Friend and Mr. Kenward, very much for being here. We wish you
well in your business and thank you for bringing to our attention some of these
other important issues that are outside of what we are dealing with today in
Bill C-51 but are important points that we will pursue.
Mr. Friend: It was our pleasure.
The Chair: During our discussions yesterday, some points came up with
respect to CBC/Radio-Canada. On very short notice and with our thanks, we have
arranged for a video conference with Hubert T. Lacroix, President and CEO of
CBC/Radio-Canada. We are pleased he is with us from Vancouver. Mr. Lacroix, if
you have a few introductory remarks, honourable senators may then have some
questions and dialogue.
Hubert T. Lacroix, President and CEO, CBC/Radio-Canada: Mr. Chair, it
is a big day for Vancouver, for British Columbia and for public broadcasting in
Canada because we are opening our new broadcast centre here. We expect
approximately 20,000 Canadians to visit our new premises. The building
improvements are spectacular, and it will help improve our connection with the
I understand you have questions about Bill C-51 with respect to
CBC/Radio-Canada's borrowing provisions. Before I get to questions, I will give
you some background of what has been happening over the last 18 months at
We have been under financial pressure, like other broadcasters. Between 40
and 50 per cent of television budgets come from advertising. Those ad revenues
have been on a steady decline for a number of years. The meltdown everyone
experienced last year made things worse. As we entered our financial year, April
1, 2009, to March 31, 2010, we were facing a budget shortfall of $171 million.
We are in a strange position, when you look at us with respect to the other
broadcasters in the country, because we have no access to capital markets. We
cannot borrow. When we lose ad revenues like we did, we can only do one of two
things. When we lose a dollar of revenue, either we cut the expense or postpone
the expense. We simply decided that we would put together a recovery plan to
deal with our shortfall.
To start the plan, we anchored it into a set of guiding principles to protect
our most important priorities. These priorities were that we did not want to put
any advertisements on our radio networks; we wanted to continue investing in new
media; we wanted to continue creating strong Canadian programming across all our
networks; and, very important, we wanted to ensure we were going to stay deeply
rooted in our communities. As a result, we did not close a station across the
country as we implemented this plan.
However, we had to make difficult decisions because you cannot "find" $171
million. It is more than that amount when you factor in the severance payments
that we had to make. The total was about $221 million. We eliminated 800
full-time positions from our corporation. We cancelled some programs and reduced
the number of episodes of others. We made permanent reductions in our
discretionary spending. We froze or reduced the target compensation for all our
senior managers. It still was not enough so we had to start thinking about
selling some assets to make up for the shortfall.
The first asset we sold was some receivables from a transaction carried out
three years ago, the sale of the Galaxy Digital Radio service. This gave us
about $20-21 million. The provisions in Bill C-51, which we hope are passed,
will enable us to complete a second transaction, which is modelled on the first
one. It is a set of receivables from a land transaction in Toronto a few years
ago. The payments started when the transaction was made and go until 2027. If we
are able to complete that transaction, if the advertising revenue projections
from the beginning of the year hold — and we are seeing now that they willd —
and if we complete our sales of assets, I am confident we will balance our
budget by March 31, 2010. This has been the number one focus of the CBC
management team since we identified the shortfall.
In the meantime, we are making some changes to our programming. We are trying
to be more efficient. We are trying to be closer to Canadians. We have new
programs and have revamped our news. We are trying to ensure value to Canadians,
despite all the crazy challenges.
I would be happy to take your questions on the bill because we have been at
this since the beginning of January 2008. I might help you with some of the
concerns that I read that you had yesterday.
The Chair: Thank you, Mr. Lacroix. We appreciate your thorough
analysis of the finances. You are speaking, as you know, with the Standing
Senate Committee on National Finance. Could you expand on the receivables from
land transactions in the Toronto region to which you made reference?
Mr. Lacroix: Absolutely. I will give you a little more feedback before
I get to the precise answer to your question. When you look at the assets we
have on our balance sheet, CBC/Radio-Canada has a simple balance sheet in terms
of assets. We have programming rights and inventory, so we cannot sell that.
We were trying to find ways to balance the budget so we had to sell some of
the furniture in the house to save the house. What did we have in the house?
We had some land across the country, but a down market would have been not
the best of timing for us to come in and do sale and leaseback transactions. It
was not as if selling the land would have been the end of our problem. Selling
the land, the broadcast centres or the stations we had across the country would
simply have meant that the physical premises would have gone to a new owner, but
we would not be moving the studios. We would have become a tenant, and that
would simply adding liabilities. We were not sure we would get full value. In
addition, the timing of these transactions was going to be 12 to 18 months,
which was outside our budgeting year. We looked at all of this. We thoroughly
analyzed our real estate portfolio and we thought that that was not the best way
to do it.
We had two other things we could have done. We looked at our accounts
receivable and factored some of them. That was not a good idea because of the
discount involved. We would not get full value for the accounts receivable.
What we did, was to look at the result of a sale of land in Toronto around
the broadcast centre. The total value was $220 million, to be paid to us $11.6
million every year for 20 years. There was value in that stream of receivables.
We went to investment bankers, because I did such transactions in my previous
life on a regular basis. The idea is to find a person who will give you today
the value of those amounts owed to you over time. You have to negotiate a
discount factor because $11 million in 2022 is not worth $11 million today.
Sitting down with government officials and with our investment bankers and
advisers, we structured a deal. These receivables will be monetized to us and
for us as soon as Bill C-51 is passed. We think it will take about three weeks.
They will be sold in the marketplace through an investment banker. Pension funds
and other institutions of that kind are willing to buy that stream of
receivables over time and to pay you right now some amount of money for it. We
think that we will get something like $125 to $130 million if the markets hold
and if we are good at negotiating at the last minute the lowest possible
discount factor to our receivable.
That is the concept behind trying to plug the big hole we had on the budget
shortfall in selling some of the assets on our balance sheet. The only assets
that we could go to that were liquid enough to allow us to do this within the
budget year were these two streams of receivable, the Galaxy transaction and the
other deal. Does that answer your question?
The Chair: It does clarify matters, and there may well be questions
arising from that. From looking at the clause without any background and
explanation, and we are pleased we have that information today, I understood
that the borrowing authority of CBC/Radio-Canada was being increased, which
means you could go out and borrow from any institution. What you are describing
to me sounds more like you are selling some assets.
Mr. Lacroix: That is exactly right. Let me tell you why we have to go
through our Broadcasting Act and the borrowing authority. I will try not to fall
into too much detail here, but I will give you some of it so I can bring you to
the borrowing concept.
We sold those receivables to a third party, to Cadillac Fairview in Toronto.
Cadillac Fairview, as you know, is a wholly owned subsidiary of the Ontario
Teachers' Pension Plan. It has pretty good credit. We feel confident that the
$11.6 million that Cadillac Fairview owes us every year, would be paid to us
until the end and the termination of the debt. This has been the case so far
If I turn around and I sell you the receivable that comes from Cadillac
Fairview, you might say: "It is really a good thing that your debtor is
Cadillac Fairview, but I do not want to deal with them. I want to deal with the
CBC. You will have to give me a guarantee that if the dollars that come from the
people at Cadillac Fairview are not paid to me, now that you have sold me the
receivable, I can come to you and I can make a claim on you." That is fair. We
are not too concerned.
On top of that, if we give a guarantee of the kind that is requested from us
in the public markets, we actually get a better value. Because of the
government's credit, we get a better value for the sale of that receivable and
the discount factor is less. It is all to the advantage of Canadians.
When you look, then, at the accounting principles behind this transaction,
the guarantee given by CBC to a third party is the equivalent of the concept of
borrowing. Because we borrow from the government to try to extend the guarantee
to a third party, we then run afoul of the $25 million limit that we have in the
act. That is the reason we are in front of you trying to get the limit increased
from $25 million to $220 million, because that is the value of the whole of the
transaction that we are trying to monetize, over time, in tranches.
Now you understand the context in which we are selling our assets. This does
not mean that all of a sudden we have a free rein to borrow $220 million. The
transaction is already done, and it is simply the backstop of the government
guarantee to CBC selling the assets that is akin to borrowing that forces us to
have you look at Bill C-51 and have a conversation with me this morning from
The Chair: You have made that very clear. We appreciate that.
Two other points came up from our discussion yesterday. Assuming you are
within your borrowing authority, can you pledge assets to borrow? What steps do
you have to go through in order to do so?
Mr. Lacroix: Regarding the pledging of assets, we have no free rein
for any transaction which is akin to borrowing,. Let us say we were trying to
sell something outside our limits. Any transaction has to go through our
minister and the Treasury Board Secretariat, the framework within which we work
on a regular basis. Right now, we are looking at a transaction in Toronto where
we will lease some square footage to new tenants in our building. We have to do
what we normally do. It starts with the minister and then goes to Treasury Board
Secretariat. The Finance Committee looks at it, and then it comes back to us.
All the same guidelines and touch points and restrictions we have with respect
to our financial abilities, will be there in this context.
The Chair: That is helpful. The second point that came out yesterday
that we did not have an answer to was in relation to federal grants to
CBC/Radio-Canada. We saw a figure in the Main Estimates, and we were wondering
if that is an increase or decrease over previous years.
Mr. Lacroix: Are you talking about the $60 million that is the
envelope that we normally get on a yearly basis?
The Chair: Yes.
Mr. Lacroix: The $60 million is an amount that government has given to
us since 2000. It is the same amount. It is either given to us for two years or
one year. Last year, April 1, 2009 to March 31, 2010, the government gave it to
us for one year. The purpose of the $60 million is to invest in Canadian
programs and Canadian programming. We have to hand over a detailed list of where
those dollars go. It is the same amount we have been receiving since 2000.
The Chair: Was there any special, extraordinary injection of funds
from the federal government to CBC/Radio- Canada as a result of the economic
downturn in this fiscal year?
Mr. Lacroix: Absolutely not. We have managed our way out of a
difficult situation. The only help we got from government, once they realized
that we had to sell some assets, was to figure out a way to get all the
approvals for the transactions that we suggested, which is the sale of our
receivables. We did not get a dollar from the federal government in this
The Chair: Thank you. Some of those questions may prompt other
questions from honourable senators. I will begin with a senator from New
Brunswick, Senator Ringuette.
Senator Ringuette: Thank you, Mr. Lacroix. I appreciate the
explanation that you just gave us. However, I have major concerns. This deals
with year one of less advertising. You are selling your accounts receivable to
compensate for a loss in operating funds. What will you do next year and the
year after that?
Mr. Lacroix: That is a good question, senator.
Senator Ringuette: This concerns me, because CBC/Radio-Canada plays a
vital role in many facets of our nation. I would not want to see you being
obliged to sell more of your necessary assets in order to continue operations.
I want to add a second question or comment with regard to that. Even though
you are facing this shortfall in this budget year of operations, you laid off,
in a period of financial crisis, 800 employees. They lost what I consider to be
The government is boasting about its action plan whereby billions of dollars
are invested to stimulate economic activity, while at the same time you had to
lay off 800 employees to compensate for your budget shortfall, without any help
from the federal government.
Mr. Lacroix: Thank you for that comment. Let me say a few things to
try to alleviate some of the concerns you have with respect to next year.
In the context of the recovery plan that we put together and the 800 jobs
that we took out, we permanently reduced CBC/Radio-Canada's costs by $135
million. Not only did we do one-offs, meaning we cut everything we could see to
bring it to $221 million, but we also brought the whole of the costs of
CBC/Radio-Canada's production units down by $133 million. Therefore, less
revenue is now matching less expense.
With what we are seeing right now for the next 12 months in the next budget,
I think we will be okay. It will work, subject to getting the $60 million. That
one-off for Canadian programming is important for us. It will work, subject to
some of the CRTC initiatives being available to us like they are to everyone
else. For example, there are things called the Local Programming Improvement
Fund and the Canada Media Fund. Right now, the rules are being made, and the
only point we are making to the regulators and to the world, is that we do not
want to be prevented from participating. We want to be treated like everyone
else, with the same rules applying to everyone. We think we should have access
to these dollars.
The last thing I will say is that you have heard about the conversations
about value for signal between the broadcasters and the cable companies. We
think there is value in our signal, and that is why, again, we want to be
treated like all the other private broadcasters and given a fair chance.
If all these pieces are available to us in a fair way, then we will be able
to manage ourselves out of a difficult situation.
Senator Ringuette: You are saying that, in your future budget
operation years, you are anticipating getting a share of this new CRTC tax for
Mr. Lacroix: It is not something that we have factored into our
budgets because right now we do not know what the outcome is. My only point to
you is that should there be dollars available to help the broadcasters in this
country, private and public, we should be entitled to those dollars like
everyone else. That is my point there. We have not factored in a single dollar
of that as we are starting the budgeting process for 2010-11 because we do not
know what the outcome will be.
Senator Ringuette: Concerning the 800 employees who were laid off, did
you have a plan with regard to those who were not at retirement age to try to
identify new job avenues for them? I know you are a socially conscious
Mr. Lacroix: Absolutely. We did a few things. Because of our
collective bargaining agreements, when we start cutting jobs, through the
bumping process, the people who are normally affected the most are the last
hires, the younger people in our corporation. We tried to give incentives to
some of the older people to give away their spot as they were nearing
retirement, so we could keep the jobs at the bottom. Three hundred and three
people took what we coined the "voluntary retirement incentive plan."
For the people who moved on, we had all sorts of mechanisms to help them, as
they left our company, to ensure that we treated them as best as we could.
Equally important, we are focusing on the people who stayed behind. They have to
work extra hard, because we have to deliver to Canadians the same kind of
services as when there were 800 more people in the company.
Senator Ringuette: Thank you very much, Mr. Lacroix. I congratulate
you for dedication in ensuring that the CBC survives through all of this.
Mr. Lacroix: Thank you, senator.
Senator Peterson: Thank you, sir, for your presentation. You indicated
that you do not want to sell your broadcast properties because you do not think
you could get fair value for them. It seems to me that if you were to go to the
market and sign a 25- or 30-year lease, you could possibly even get a premium on
that because the returns that investors are getting are not as high as they used
to be. This would give you some breathing room as you move forward in your
If you were to do that and sell the property, would CBC get to keep the money
or would you have to share it with other parts of the government?
Mr. Lacroix: Thank you for your question, Senator Peterson. Here is
how we started this process. The first thing we did is we sat down with our
minister and said, "Sir, if we do these transactions, we need some kind of
commitment from government that we can keep the dollars for our own operations,
because if we do these transactions and we cannot keep the dollars, then this is
all for naught."
We got confirmation from our minister and from government that if we did
these deals and they made business sense, and sense for Canadians, that we could
keep the dollars. That is to your first point, which is an important point.
To your point on the real estate properties, I want to bring you back to
September/October 2008, as world markets were melting and the financial
institutions did not want to give credit to anyone. That would have been the
time for us to go into the markets and try to sell real estate assets. In order
to be able to sign a lease, as you know, I need a landlord. I need someone to
buy the asset that we have in our different locations, for example, Regina and
Saskatoon in your province, and Calgary.
Someone must be strong enough to buy the real estate at a value that we think
is fair in that kind of market and get us as a tenant. The worst thing that we
could have done, Senator Peterson, is to sell our assets at a discount and then
walk in as a tenant, stuck with a 25-year lease actually paying premium rent to
a landlord. We were concerned about this.
We were also concerned because when we talked to our advisers, they said it
would take between 12-18 months to do this. That would have brought us into next
year. Not only did we have issues with the value that Canadians would lose on
our real estate portfolio, but we were concerned that we could not do this
transaction within the necessary timeline to balance our budget for March 31.
Senator Peterson: Is it too late now? If you went into the market now,
I think you would fare a lot better. Have you solved your problems and therefore
do not need this? Why could you not go to the market now?
Mr. Lacroix: With the transactions that you are looking now, with the
ONTREA transaction which is the object of Bill C-51, we will be okay and we will
not touch our real estate portfolio. Should we see markets collapse again and ad
revenues disappear even further, we will not have any choice but to go to the
real estate portfolio. As I mentioned, we have a simple balance sheet involving
simple assets, and the only item we could look to for sale is the real estate
portfolio. I hope we will not have to go there, but if we have to, that would be
the next step.
Senator Di Nino: Good morning, sir, and welcome. First, let me
congratulate you on your clear explanation of this transaction. Frankly, even
those of us who may have a little more knowledge in this area than others are
not particularly clear about what was happening with this borrowing authority. I
want to congratulate you because you put it in everyday, proper terms.
I want to make sure that I understand — and for the benefit of the record —
that when you monetized your receivable, which is the mortgage you got back on
the property, the current market value of $130 million was an actuarially
calculated value. Is that correct?
Mr. Lacroix: No. The $130 million that we hope we will get out of the
sale of this receivable will be a market- negotiated discount. Let us assume we
get your approval today and we get the last Treasury Board Secretariat approval
on December 10. We would like to start selling this on the market for about a
five- or seven-day period. That is where we will know the exact rate for this
kind of paper, the value with the government guarantee.
Based on the information we currently have, we have a feeling that the value
will be about $130 million. The value that we are selling is about $202-203
million, over time, in the market today, depending on what the rates are. The
rates will only be finalized, allowing us to determine what CBC/Radio-Canada
gets from the sale, once the buyers of that paper sit down with our investment
bankers and us, in a market-negotiated transaction in the week, we hope, of
December 14. We do not know that the value will be exactly $130 million. The
result of those negotiations will give us the final number. Is that clear?
Senator Di Nino: Yes. Thank you for that clarification. I thought that
number had been established already.
Mr. Lacroix: No.
Senator Di Nino: The fact that the Government of Canada is backing you
should enable you to get some extra value than would be the situation otherwise;
is that correct?
Mr. Lacroix: Absolutely.
Senator Di Nino: You advised us that 800 employees were let go. After
consideration of all retirement costs and so on, how much will that save you in
the first year and in ongoing years, making an assumption, which may be
incorrect, that none of them will be replaced, at least in the second or third
Mr. Lacroix: It is difficult to pinpoint this number. I would like to
return to the figure I cited a few moments ago. It is $130 million in reduced
costs for CBC/Radio-Canada on a permanent basis. Those labour costs are factored
into the number I gave you. I should also help you by saying that the labour
cost component is between $38 and $46 million. I am running it up to $50 million
when you put in a few other charges related to labour. The 800 jobs trigger a
severance amount of close to $50 million with the ancillary charges. That is
factored into a permanent reduction of our budgets of $133 million.
Senator Di Nino: Your comment about being treated like everyone else
was related to the revenue sharing that may come because of a number of
different initiatives. I took from that, as well, that you understood that the
actions that you had to take were the same sort of medicine that the rest of
world had to take in this economic crisis and that you are satisfied with the
solution that is suggested. Am I correct?
Mr. Lacroix: It is not fun to lose 800 great employees and to be
fighting through the challenges that we have. However, if Bill C-51 goes through
as it is presented, and if we get the $60 million of investment that we need for
Canadian programming, I am satisfied that we will have received what we should
be receiving to balance our budget this year, yes.
Senator Gerstein: I understand that CBC/Radio-Canada indicated in the
spring that their funding is not stable. As you indicated, you might not know
what advertising revenue might be. You also indicated that the $60 million that
is received from the government was, perhaps, an uncertainty. As I understand
what you said today, this $60 million has been given by the current and previous
governments since 2000.
Do you factor the revenue that is being applied for in Supplementary
Estimates (B) into your annual budget, or do you look at this each year as a
possibility, that you may or may not get it?
Second, when you do get the $60 million, does it have any strings attached as
to how you can use it?
Mr. Lacroix: With respect to the $60 million, we are never sure when
we receive dollars from the government in something which is not our government
appropriation because the $60 million does not form part of our base. We are
never sure whether we will get it. When you are trying, as president and CEO, to
build budget in a tough year, and you see this amount having been received by
CBC/Radio-Canada since 2000, you factor the $60 million in your budget and count
it. You also know that if you do not get it, you need a plan B.
This year, and this is not a criticism, it is simply a fact, we got
confirmation that the $60 million was going to be in the sups on March 28, which
is three days before my year end. It is difficult to plan, as you know, when we
get these dollars so late in the process. That was the point I made this spring,
which you probably read, because I was in Toronto and I made a comment in a
speech there. That was the comment, perhaps, that you remember. That is the
issue with the $60 million.
Does it come with strings attached? The idea behind the $60 million from day
one was that this goes into Canadian programs and Canadian programming. If you
know our industry, Canadian programs are expensive, and we are the only ones
that actually commit to a full line up of Canadian programs. Our competitors,
CTV and CanWest-Global, because of their requirements to maximize their ad
revenues, basically, have an all-foreign, all-U.S. programming schedule in the
evening. The $60 million that we get is to ensure that Canadians see great
Canadian programs in prime time.
Does that answer your question, sir?
Senator Gerstein: Yes, it does and I thank you.
Mr. Lacroix: Thank you.
The Chair: Mr. Lacroix, your answer about the $60 million in
Supplementary Estimates (B) having been announced in late March leads to this
question: Were you given an explanation as to why the $60 million was not in
Supplementary Estimates (A)?
Mr. Lacroix: No, sir. I do not have an answer to that question.
The Chair: Neither do we.
Senator Gerstein: As a clarification, could I add that it has been in
Supplementary Estimates (B) since the year 2000, under both the current
government and past government.
The Chair: Supplementary Estimates (A) were sooner this year than
Mr. Lacroix: I am told, senator, that sometimes it is in Supplementary
Estimates (A) or Supplementary Estimates (B). Being told that we would get the
$60 million and being able to plan for it in our cash flow, knowing that it
would get to us and get to the right places by the end of December was better
than not getting the $60 million, so we are happy that it is in front of you
The Chair: In the end, I understand your point. It was just an
interesting question. I have no idea why, but the Treasury Board Secretariat
will be able to tell us why it was not reflected in Supplementary Estimates (A)
and was in Supplementary Estimates (B). We see them regularly, and we will be
able to ask them.
Senator Ringuette: I congratulate you on your analysis with regard to
the sales of buildings at fire sale prices, and having to lease them back for 25
years, which is detrimental in comparison to just operating and having the
occasional maintenance of the building. I must congratulate you because we in
this committee have seen that it has been the trend for the current government
to sell buildings and then lease them back for 25 years at a higher cost to
You said that you had to go to an investment banker and you have to negotiate
a market discount. Do you have the approximate cost for these two items?
Mr. Lacroix: Do you mean what kind of discount we expect in the
Senator Ringuette: First, if you went to an investment banker you have
to pay commission to that investment banker.
Mr. Lacroix: Clearly, yes.
Senator Ringuette: The other issue is that you are looking at a
discount. Are you looking at a 2, 3, 4 or 5 per cent discount? I know it is not
done yet, but you must have a general feeling about how much these two items,
either separately or together, will cost the corporation.
Mr. Lacroix: Yes, we know this. You would be disappointed if I did not
tell you that we know exactly what kind of numbers we are looking at now.
Investment banking fees are regular fees for a transaction of this kind. When
you are CBC/Radio-Canada and you are selling assets to maximize their value in
the context of third party buyers who are experienced buyers and will negotiate
the better discount rates in their favour and you are trying to maximize value
for Canadians, you will equip yourself with the best investment banker to
maximize the value for Canadians.
Through an RFP process, we went to RBC Capital Markets. Depending on the
value of the transaction, they will get a standard fee, which is a percentage.
Off the top of my head I do not remember what the percentage is, but it is not
an irregular fee. Returns depend on the markets rates at that time. For example,
a 10-year Government of Canada bond is 3.5 to 5 per cent in the markets. There
are some comparables. You benchmark the value of your paper against that, and
this is being negotiated.
To tell you what the rates are, one would have to look at today's rate and
speculate from there. I hope my answers give you a feel for what we are
expecting for final numbers.
Senator Ringuette: I feel that it will cost you roughly 7 per cent.
Mr. Lacroix: Frankly, I do not know. These are still market sensitive
and kind of confidential in the conversation we are having now with the possible
buyers. I do not want to jinx or affect the value of our deal.
Senator Ringuette: I am asking this because one of my colleagues,
Senator Di Nino, says that you are being very well backed up by the federal
government right now. I can tell you that you are not, and I will tell you why.
It is because of the two costs that you must incur in selling those receivables.
The federal government has bought $64 billion of mortgages and car leases to
provide liquidity in the financial sector.
You are a Crown corporation. These receivables should have been backed
without you having to incur all these costs from an investment banker and the
discount in the market so that at the end of the day you would have had more
Mr. Lacroix, because of the costs you have to incur, because of the current
financial crisis, and because the federal government has bought $64 billion
worth of mortgages and car leases from private entities, I think you are not
properly backed by the current federal government.
The Chair: You may or may not wish to reply to that.
Mr. Lacroix: Senators, my job and that of my team is to manage
CBC/Radio-Canada as best we can given the cards we have. What is in front of you
is a solution to a nasty problem that we face this year. We did not like having
to let 800 go people. A number of media companies in our environment had to do
the same thing. We are just about able to balance our budget, and we hope that
the two pieces before you now, the $60 million for Canadian programming and the
approval of the Bill C-51 amendment to our act to allow us to do the ONTREA deal
will be approved so that we can move forward and look at 2010-11.
Senator Di Nino: I thank the witness for his response. It was very
I am not sure what Senator Ringuette was saying. If you were wondering why we
did not buy the paper and save all these costs, I suspect that when you put an
asset on the balance sheets of the government you have to go through the same
assessment that you would if you were selling it to the public. The costs would
probably be just about the same, as would the discount. If you are going to
manage the affairs of the people of this country in a professional and proper
manner, you would have to do that. I do not think that would have saved any
money, if that is what you were suggesting.
You said that perhaps we should have given an extra grant to the CBC. That is
always an option, but there are many difficulties in this country. The federal
government has undertaken a certain program which seems to be working quite
well, better than in most other places in the world. Our witness understood that
anyone involved has to be part of that solution and if there is a price to pay,
we all have to pay it together.
The Chair: Mercifully, we are almost out of time, so I will not invite
Senator Ringuette to respond.
Senator Lang has promised that his question will be very short.
Senator Lang: I am looking for more information. I believe that in
your opening remarks you stated that CBC/ Radio-Canada made the decision not to
pursue ads on the radio. Is that correct?
Mr. Lacroix: Absolutely. Do you want me to comment on that, sir?
Senator Lang: We are talking about possible revenues, and I wonder why
we would not go after that type of revenue.
Mr. Lacroix: In looking to increase our revenue lines in a number of
ways, one way could be to add revenues to our radio networks. However,
CBC/Radio-Canada has a duty to be distinctive and to provide Canadians with
something different from the other networks you listen to. We also think that
getting ad revenues on our radio network would be detrimental to the economies
of the communities we are in. For example, the person who has a lumber store
could choose, instead of putting his or her ad in the local paper, to put the ad
on our local network. That would hurt the local economy in a different way. We
also think that trying to leverage this at our level might not get us as far as
we would want.
I do not know whether that will be our position forever. We will have to look
at it on a year-by-year basis, but we do want to keep our radio networks in
French and in English free from ads.
The Chair: Thank you very much, Mr. Lacroix.
I have two points to round out our record. How many employees does
CBC/Radio-Canada have after the reductions?
Mr. Lacroix: About 9,200.
The Chair: If the CRTC rules in the manner in which you are hoping it
will, although I appreciate you have not factored that into next year's budget,
have you anticipated the revenue from those royalty fees?
Mr. Lacroix: It is impossible to assess that. In the old way of
looking at the value of the signal, the CRTC coined the phrase "fee for
carriage." It was going to be a percentage of revenue taken away from them and
given to the broadcasters for the value of their signal. The CRTC has changed
the way they are looking at the problem.
They are saying the broadcasters, cable and satellite providers should sit
down and negotiate a rate which will express the value of the signal for the
broadcaster and the cable provider. Depending on what that value is, and there
is a whole set of criteria to be used to determine the value, then an amount
would be paid to us and to CTV, Global and TVA and all the other private
broadcasters in the country. That is why I cannot tell you what the impact would
be on us and why we cannot factor in a single dollar in our budget next year.
The amount we would receive would be the result of a negotiation to come between
the parties. Obviously I do not know what that would be.
The Chair: Thank you very much for that answer and for all of your
answers. This dialogue has been very helpful to us. I know I speak for all
members of the committee in wishing you well in the opening of your broadcast
centre in Vancouver and in thanking you for the good work that you and all 9,200
employees with CBC/Radio-Canada are doing for Canada.
Mr. Lacroix: Mr. Chair, thank you. I know it is difficult through a
screen in your room. I wish I had been there. As I told you, it will be a pretty
fun day here in B.C. Thank you for your questions.
The Chair: Thank you.
We are continuing to deal with Bill C-51, the second act to implement
provisions of this year's budget.
For this final portion of today's session, we are very pleased to have with
us: from the C.D. Howe Institute, Mr. Finn Poschmann, Vice President, Research;
and from Towers Perrin, Mr. James Pierlot, Senior Consultant.
We will be discussing the provisions of Bill C-51 in relation to the Canada
Finn Poschmann, Vice President, Research, C.D. Howe Institute: Thank
you for inviting me. I have not been before this committee for some months at
least. It is delightful to be back.
I speak for myself always. The C.D. Howe Institute does not take
institutional positions, and that is not always clear to everyone. I always
remind people that I do not speak for my members or board of directors, so do
not blame them for things that I say.
I know that this committee mostly wants to hear about the second part of the
budget implementation act, but there is a broader context. In the fiscal
measures and tax measures introduced in Part I we have the Home Renovation Tax
Credit, the home buyer's credit, and changes to the Working Income Tax Benefit.
These are important things.
I have a couple of things in different directions that I will direct you to.
One is process and timing. It is December, and these are some important personal
income tax measures that will affect many people. In fact, the eligibility for
the Home Renovation Tax Credit will run out soon and we have not legislated it
yet. I want to express some frustration over the timing and process, which I
understand is beyond this committee's control.
I have written on this point a number of times in the past. It is a little
disturbing that Canadians are expected to comply with tax measures of different
kinds long before they are legislated. It is a funny world we live in, and we
ought to mention it and think about it every now and then. That is just process
and does not really address the substance of the bill.
On the substance I want to make a point about the broader fiscal context and
the importance of long-term planning. The Part I measures were described as
being intended to address economic stimulus issues. That is perfectly
reasonable. I will not comment on the specifics of those measures other than to
express some doubt about their efficacy and some worries about the ease with
which the home renovation credit in particular will be administered and complied
with. I see potential issues there.
The broader question is the long-term fiscal plan. The worries on this front
do carry over to the reasons why we pay attention to some of the things in Part
II of this act.
Worries on the long-term fiscal plan are connected to the sustainability or
the ability to fund measures in the budget. More specifically, there are worries
about the ability to fund these measures while achieving a balanced budget in
the second part of this decade.
It is important that we do that. Much of it has to do with the population
aging which will come up over and over again. The fact is that the ratio of
people out of the workforce and over 65 to the number of people who are working
will roughly double over the next 20 years. That puts huge fiscal pressures on
government. We need to be fiscally armed to be ready for that, and that means
careful stewardship of the budget balance between now and then.
I will finish my lecture, if I may, by pointing out that in order to achieve
a balanced budget by 2015-16, leaving aside the fiscal stimulus measures which
will come out over the course of the cycle any way, we would have to trim
program spending something on the order of 1 to 2 per cent to per year in real
terms. If interest rates creep up by a percentage point next year and then stay
a percentage point higher, that would mean more trimming on the discretionary
side to the order of 2 or 3 per cent annual shrinkage in federal discretionary
spending over the next few years. That is how hard it will be to reach some of
those targets and why it is important to think carefully about the long-term
That said, it is good to be concerned about having flexible arrangements,
flexible social supports for people who are near to retirement, thinking about
retirement or in retirement. We would all agree that it is part of public
policy's duty to treat people well as they make decisions about how long they
work, when they retire and the terms of retirement. We have built in a certain
amount of unfairness in the Canada Pension Plan, some unfairness and some
over-generosity. The goal is a neutral policy with respect to the retirement
decision, so you do not unduly penalize people for either retiring early or
continuing to work past the age of eligibility for the public pension plan, the
CPP and QPP in particular. That is what this is all about.
f you look back to the earlier part of this decade, similar reforms to these
in Part 2 of the budget act were proposed for the Quebec Pension Plan. We did
quite a bit of publishing on these measures at the time and recommended them, as
did a number of working groups who looked at the Canada Pension Plan at the
time. The measures themselves are generally the right ones. I am referring to
two measures specifically. First, the provision to permit people to continue to
work even if they have taken an early retirement provision under the Canada
Pension Plan and to actuarially adjust their future benefits in a fairer way.
Second, the provision respecting people who continue to work after 65, or wish
to do so, making it possible for them to contribute to the Canada Pension Plan,
continuing to earn eligibility, and, in other words to make work pay and make it
pay reasonably sensibly. It is basic fairness and getting at some basic
neutrality in those systems.
Those are broadly good things, and we should probably be generally supportive
of the direction. The direction is important. Whether or not the numbers are
exactly right is an actuarial question. Mr. Pierlot may have more to say about
the adjustment factors. I do not know how much detail you want. It is important
to try to get them right. The adjustment factors affect the benefits' generosity
or the rate at which you accrue entitlements, either in the pre- or post-
A new, interesting feature about those adjustment factors is in clause 33.
Whereas the adjustment factors for the next two years will be set by the chief
actuary at OSFI, there is a mechanism now that would allow the Governor-in-
Council to set adjustment factors by regulation as they see fit but in agreement
with provinces containing two thirds of the population. The initial rules that
governed the creation of the Canada Pension Plan, a partnership between the
federal government and the provinces, are being carried through into these
reforms. It is probably a good idea that future adjustments are agreed to by the
provinces and we do see that in that legislation. This is the right thing to do.
With that, I will stop and turn things over to Mr. Pierlot.
James Pierlot, Senior Consultant, Towers Perrin: Good morning, Mr.
Chair, senators. Mr. Poschman covered the broad issues associated with the
changes and the act. Canada's population is aging. By 2015, seniors will
outnumber children; by 2031, the proportion of non-working to working Canadians
is expected to increase to 61 out of 100 from 45 out of 100 today. These have
very significant long-term implications for Canada's budgeting because, as the
tax base from employment income and work shrinks, what will replace it? As
pointed out, the choice will be between finding new sources of revenue and
cutting budgetary expenditures in real terms.
As I mentioned the last time I was here, there is a study done by the
University of Waterloo that indicates that by 2030 two thirds of Canadian
retirees will not have enough pension income. All of this points to a need to
try to encourage workers to participate in the labour force longer than they do
now, both from their own point of view, for retirement saving, and also from the
point of view of maintaining government tax revenues.
I will focus my comments on measures in the bill. As you know, other things
have been discussed with respect to the CPP, such as expansion of benefits,
whether it be done through the promised benefits under the CPP or through the
addition of personal accounts under the CPP. If you have specific questions
about those, I am prepared to talk about that generally.
As an overview of what the bill will do, many pension plans, the CPP
included, contain incentives to retire early. This applies to private employer
pension plans within the public and private sectors as well as the Canada
Pension Plan. One change allows people to start to collect a pension at age 60
without ceasing work, provided that the pension is actuarially adjusted so it is
value-neutral to the plan, or in theory value-neutral to the plan.
This is a good thing. It may increase take-up, causing some to depart the
labour force more quickly. Overall it would be expected to keep people in the
workforce longer. The effect on employers will be positive for labour supply.
The effect on government is that it will cause an increase in tax revenue from
employment income as people continue to participate in the workforce. It is good
for individuals because it gives them more choice and an ability to transition
into retirement rather than working at full speed and coming to full stop, which
suits very few people.
The bill also provides for continuing pension contributions under age 65 and
over age 65. It is mandatory until age 65. Thereafter, there is an opt-out
provision. The employee can decide not to make pension contributions and just
receive those pension contributions that he or she would have made as increased
In practice, experience with negative option choices shows people typically
do not choose them, so it can be expected that most people will continue, if
they work past age 65, to make contributions.
People often talk about the ability or the right to work after age 65. The
challenge we have in Canada is getting people to work even to age 65 because the
median retirement age in Canada in private sector is age 62; it is lower in the
public sector. When there is discussion about changing withdrawal rules for
pension plans or registered retirement income funds to increase it past age 71
to allow people to continue working, it really will not affect anything. We need
to try to get people to work to age 65. If they work beyond, that is great.
However, that is not where the real problem is.
The bill also provides for an increased dropout of low earnings years under
the Canada Pension Plan. It will move from a 15 per cent dropout today to a 17
per dropout by 2014. This would increase the cost of providing CPP benefits and
the value of benefits for long service workers. It has some social advantages
because it gives workers assistance from a pension savings point of view if they
leave the workforce to retrain, for child care and so on.
The dropout provisions have the effect of encouraging people to retire
earlier. The Quebec proposed approach for dealing with these incentives is to
move from the dropout approach to a 40-year accrual rule, which means that
people would get the pension after 40 years of accrual and you would not have
There are competing social interests here. You want to encourage people to
retrain. You want to encourage higher birth rates. At the same time you want to
encourage longer working lives. The question is, can you really have both? I do
not have any specific criticisms for that part of the bill.
To give an example of a pension payable in 2009, under CPP the maximum
pension is $10,905 or $10,908. If you collect that pension earlier, it is
currently reduced by a factor of 0.5 per cent per month, so that if you collect
it earlier, it will be value equivalent to a pension payable at age 65. The
question is whether those adjustment factors reflect the true cost of providing
it early. Certainly, the mechanism in the bill where it can be set by regulation
with agreement of the provinces representing two thirds of the population is
workable. It is important that those adjustment factors be reviewed regularly
and that they be neutral for purposes of fairness and also to not increase
incentives to retire earlier under the plan.
With that, I will stop my comments and open it up to any questions you may
The Chair: I wish to thank each of you for your comments. Can you talk
more about the adjustment factors? We learned earlier that these adjustment
factors will be fixed in regulations. After that, it will be a matter of
negotiation to change them with the provinces.
Mr. Pierlot, you indicated that it is important that the adjustment factors
have an actual objective background and basis. Will not moving these into the
political realm of negotiations between the provinces, not move it away from
objectivity and more into politics?
Mr. Pierlot: For the first two years, before 2010, the adjustment
factors will be fixed by the minister on the advice of the Chief Actuary. They
will then be fixed by regulation after 2010. The act contemplates obtaining
actuarial advice, as necessary, from the Chief Actuary.
I am not sure that I see a huge risk that political considerations would,
somehow, cause the actuarial adjustment factors before age 65 to be seriously
out of whack. Right now they are talking about moving from an actuarial
adjustment factor of 0.5 per cent to 0.6 per cent per month. This was in a May
2005 consultation paper on the Canada Pension Plan. Moving from 0.5 per cent per
month to 0.6 means moving from 6 to 7.2 per cent a year. It is material for
sure, but I would not expect a political process to lead to actuarial adjustment
factors that would deviate very significantly from what is actuarially neutral.
Anything is possible. Given that the Canada Pension Plan is a joint venture
between the federal government and the provinces, I think the provinces would
want to have some input into the process for determining those factors. That
seems reasonable to me.
The Chair: Mr. Poschmann, you indicated you thought it was a good idea
to move this into the political realm and have this in regulation. In order to
change it, it would require the agreement of the provinces. Do you have any
concern about getting away from actuarial stability here?
Mr. Poschmann: Normally, I would. Normally, I would like to see
politics or other political concerns express themselves during the shaping of
general policy and, after that, set a framework for the rules that play
themselves out over time.
However, this is one where my answer is much the same as that of Mr. Pierlot.
It is not terribly high stakes politically, but it is important to recognize
that it is a partnership involving the federal government and the provinces.
Historically, that has been one of the reasons why reforms and changes can take
a long time. Taking a long time sometimes is okay, notwithstanding my previous
concerns about things that drag out altogether too long. Sometimes political
processes involving a number of parties can improve rather than worsen the
outcome. I am relatively sanguine on this point.
The Chair: Could either or both of you comment on what is happening in
some other jurisdictions, in addition to the factors being adjusted, to try to
encourage people to stay in the workplace longer? Adjustments are also being
made with respect to when one can opt for early retirement with respect to a
pension. Is there any movement toward changing the age of 60, either up or down,
and the age of 70, either up or down?
Mr. Poschmann: Canada, like most other western countries, is facing
significant increases in the share of the elderly population, in part because of
increased longevity. It is not just the baby boomers cycling through. In fact,
we are living longer.
If you think about this, at first sight, if people are living longer probably
they want to be working longer, and we should facilitate that. That is one of
the reasons why it is reasonable to look at the retirement system in general and
features of public pension plans, as well as the rules surrounding drawdowns
from RRSPs, LIRAs and the other retirement savings tools that we have, to
reflect the aging age structure of the population and the fact that we are
These changes would and should all be in the direction of liberalization,
first with respect to choice and, for the most part, making them optional. As
Mr. Pierlot said, one of the issues is getting people to work past the age of
60, never mind facilitating working past the age of 70. That said, people should
not be penalized in their pension entitlements simply for doing so; they should
be treated in an actuarially fair manner.
When it comes to the big public plans like the Canada Pension Plan, like
Social Security in the U.S. and similar plans mostly in the Commonwealth
countries, there is huge tension around the notion of pushing up the retirement
age. The U.S. has done it over a very long time horizon to defuse that tension
in order to put the U.S. social security plan on something a little closer to
actuarial soundness. However, they are very far from there.
This is one area where Canada stands out pretty well in the sense that the
Canada Pension Plan is actuarially sound. We made some hard decisions on the
funding of the program in years past. We should have a note of caution about the
expansion of benefits, and Mr. Pierlot pointed out that there are some
expansions of generosity of benefits here in this bill. However, they look to be
of the sort that will not blow the bank over the time horizon at which we
examine the pension plan as to its sustainability.
Public pensions are a big issue in many places. The U.S. tried to take some
measures, but they are nowhere near sustainability. Canada actually is, and we
should be mildly pleased about that, at least.
The Chair: Presumably you would want us to continue to be close to
Mr. Poschmann: Yes, sir.
Mr. Pierlot: As everyone knows, we have the Quebec Pension Plan and
the Canada Pension Plan. They were designed to operate similarly and provide
similar benefits. Currently, the contribution rates are identical. At normal
retirement date, the pension is identical. That will probably change. Quebec has
different demographics from the rest of the population. The population is older.
The fund is managed by an entity that is different and separate and apart from
the Canada Pension Plan Investment Board. Its investment performance in 2008
diverged significantly from the investment performance of the Canada Pension
Plan Investment Board. I think the Caisse de dépôt et placement du Quebec had a
return of negative 25 percent in 2008, and the CPP, in the three quarters ending
December, 2008, had a return of minus 13.7 per cent, which is about twice as
good, roughly, as the caisse.
The Chair: Or half as bad.
Mr. Pierlot: Yes. Both funds are certainly doing better in 2009.
However, this points to the risks of having a large amount of money, which is
generally in large institutional plans, managed well. It points to the risks of
having all your eggs in one basket. That ties in to design issues with any
expansions to the CPP, which I can talk about further.
I will get back to your original question about what is happening in other
jurisdictions. A consultation paper that Quebec released this year proposes to
increase the contribution rate of the QPP from 9.9 to 10.4 per in 0.1 per cent
increments starting in 2011. It is hard for them to not consider contribution
increases, given the performance of the fund and the aging population.
Practically speaking, the benefits on the contribution rates of the Canada and
Quebec pension plans will diverge. You will not have the uniformity that you did
in the past.
It is clear that Quebec is committed to keeping its plan on a sustainable
path and, as Mr. Poschmann has mentioned, the pension plan is on a sustainable
The Chair: Your question raised a supplementary question in terms of
portability, because people do not work in Quebec all the time. They may start
paying into the Quebec Pension Plan and then move to British Columbia. Is there
portability in the plans? Does the contributor then have the option of choosing
which plan would pay benefits when he or she is ready to retire?
Mr. Pierlot: My understanding of how that works — and I have not
looked into this for a while — is that there is a form of portability. I think
the way it works is that you get your pension from the jurisdiction where you
retired. There is recognition of service under the plans. For that matter, there
is recognition of service under foreign social security plans — that is,
agreements between Canada and the United States and Canada and a number of
countries. If you are in Quebec, you will be paying the higher contribution rate
and you will earn that pension. I actually cannot recall how the portability
system works, but obviously some people will be paying a bit more for their
pension if they work in Quebec and in another jurisdiction as opposed to people
who work uniquely in a non-Quebec jurisdiction.
The Chair: As benefits diverge, as they may over time, Mr. Poschmann,
you can see where there may be some jurisdiction shopping going on when people
start to draw their pension. They will want to choose the one that will give the
Mr. Poschmann: If portability measures are badly designed, that would
be a risk. However, and this is unusually optimistic for me, but our policy
managers with respect to pension both in Quebec and in the rest of Canada will
and do surely recognize the potential problem and, therefore, will take steps to
limit the divergence in benefits. That is what will be primarily salient in
retirees' minds. There will be, we can expect, small differences in the
contribution rates, but limiting the divergence in benefits will probably be not
an all-determining goal but an important goal of the design of the two systems.
Mr. Pierlot: One of the items noted for discussion in the Quebec
consultation paper was whether they would expand the defined benefit guarantee
under the QPP — that is, provide greater pensions by increasing the pensionable
earnings. If Quebec did that and the Canada Pension Plan did not, or vice versa,
you would see a significant divergence in the pensions payable. It remains to be
seen what will be done with that.
If you did expand the pension payable under the CPP or the QPP, it would lead
to a problem of intergenerational fairness. We are currently in a situation
where our children will be paying for our pensions, and we are paying for the
pensions of current pensioners. There are wealth transfers. Those
intergenerational wealth transfers would be exacerbated if the CPP were to be
expanded to increase the benefit promise.
Senator Di Nino: I have a quick supplementary on that. Does the paper
you gave us this morning speak on the issue that you just raised?
Mr. Pierlot: I do not think that one does, but there may be some
Senator Di Nino: That is fine. We only have 10 minutes. I wanted to
know if we should be looking at that in the same vein, or otherwise.
Mr. Pierlot: I gave that to you because it provides an overview of the
proposed changes for the Quebec Pension Plan and the Canada Pension Plan. I am
not sure that it specifically addresses that question of intergenerational
Senator Ringuette: I have one question for both of you in regard to
taxable benefits, that is, taxable CPP as income. If someone takes up the option
of receiving their CPP benefits while working, then their total income is in a
higher tax bracket. Therefore, they will be paying more tax on their CPP
benefits than if they were non-working Canadians. Have you looked at how much
that will increase the income tax that these individuals will be paying on those
CPP benefits while working?
Mr. Poschmann: The short answer is no, but it is fairly easy to
describe the practice first and then the principle.
It is absolutely correct, senators, that pension income is taxable.
Therefore, it will be taxed at the marginal tax rate that applies to the
recipient, whether or not that recipient is working. If we imagine that the
marginal tax rate of a worker between ages 60 and 64 is, federally plus
provincially, in the neighbourhood of 40 per cent, then about 40 per cent of the
incremental benefit will come back in federal and provincial income tax. That is
a fact of arithmetic.
From a policy perspective, that is not problematic in any way, once you have
made the decision that pensions are taxable. A lot of tax policy and a lot of
the tax act goes into defining "income" and what is taxable. Remember, pension
income could be investment income. Conceptually, retirement income could come
from a lot of places. It could come from taxable and nontaxable investments.
Senator Ringuette: However, in this bill we are looking at CPP.
Mr. Poschmann: Part of the taxable stream.
Senator Ringuette: Therefore, if you receive CPP benefits while
working, then those benefits will probably bring you into a higher tax bracket
than if you were receiving these benefits while not in the workplace. People who
will be receiving CPP while working will be paying a higher income tax on those
benefits than if they were retired.
Mr. Poschmann: Absolutely.
Senator Ringuette: That makes sense.
Mr. Poschmann: In many circumstances, that would be true.
Senator Ringuette: Have you made any assumption with regard to what
that additional income would be?
Mr. Poschmann: No. It would not be hard to do, though.
Senator Ringuette: Could you do that?
Mr. Poschmann: Of course.
Senator Ringuette: Thank you.
Senator Lang: I would like to query further the question of
demographics and the way our country is changing as far as our population is
concerned. The point was made that no matter what we do, it is difficult to
entice people to work longer than, say, their object of age 60, or perhaps lower
because they happen to work in a different part of the economy.
In view of what has transpired here in the last number of years, with the
depth of the recession that has faced many of us, and its consequences, do you
have any statistics that show an increase in the number of people who would
normally have retired but have continued to work? I personally know many people
who had plans and changed them dramatically with the meltdown, internationally
and nationally, in their savings.
Do you have any statistics that show that perhaps there has been an incentive
for people to continue in their jobs, or to find a job and become part of the
labour force, as opposed to what was going on prior to the meltdown that we had?
Mr. Poschmann: That is an interesting question and one that has come
up several times over the past year. I do not have a clear empirical answer. The
presumption is probably correct that under financial pressure, many older
workers will either work longer than they otherwise might have chosen to, or
will seek to re-enter the workforce under the pressure of recent events in
financial and economic markets.
That pressure will be there for a certain number of workers who have been
keenly affected by a significant economic slowdown. However, we have not yet
seen data on the extent to which that is taking place. I imagine there are
surveys out there that could tell you, but there is nothing that I am aware of
from our regular survey cycle to this point.
Senator Lang: We talked about demographics. You made the statement,
Mr. Pierlot, that currently 40 per cent of our population is retired, 60 per
cent is working, and that that will flip around to where 60 per cent will be
retired and 40 per cent will be carrying the load.
Looking at those statistics, and looking ahead, has whoever provided you that
information taken into consideration, for example, increased immigration? We
need people in the workforce, so obviously that is where you would look. Do you
have any comments on that?
Mr. Pierlot: The figures I quoted to you have taken into account
projections on what immigration and birth rates are expected to be. It is
broadly recognized that at current levels, immigration will not keep our
population young. Those numbers are based on projections of immigration at
current levels or modest increases from current levels.
Mr. Poschmann: If I might add to that: We take great care in building
models that account for the situations that you would normally think of. You can
also build models with high, low and medium immigration scenarios. That is a
normal part of population modelling. You have a range of fertility and
Our work has shown that there is no reasonable scenario under which you could
come close to freezing the age structure of the Canadian population. No
reasonably assumed level of immigration, even with a youth/age filter, one that
preferentially targeted younger immigrants, will do that.
The Chair: Honourable senators, that concludes my list and we are just
at the time that we had designated.
On the committee's behalf, I would like to thank Mr. Poschmann from the C.D.
Howe Institute and Mr. Pierlot from Towers Perrin.
As you know, we have been dealing with the Canada Pension Plan and other
pension issues previously. Mr. Poschmann was here earlier on to help us in that
regard. We will continue to work on this issue, which happened to be raised at
this stage because it appears as part of the bill that we are dealing with, Bill
C-51. Thank you both very much.