Proceedings of the Standing Senate Committee on
Issue 3 - Evidence - June 22, 2011
OTTAWA, Wednesday, June 22, 2011
The Standing Senate Committee on National Finance met this day at 3:31
p.m. to examine the subject matter of Bill C-3, An Act to implement certain
provisions of the 2011 budget as updated on June 6, 2011.
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, I call to order this meeting of
the Standing Senate Committee on National Finance.
This afternoon, we begin our study of Bill C-3, An Act to implement
certain provisions of the 2011 budget as updated on June 6, 2011.
We will begin by hearing from the Honourable Ted Menzies, M.P., Minister
of State for Finance, who will provide us with an overview of the bill and
what the executive is hoping to achieve with this particular bill.
Unfortunately, due to scheduling problems and trying to complete work in
short order, he is able to stay with us only briefly. He has indicated 15
minutes, possibly a little bit longer. However, if we get him interested, he
might forget what time it is. The Parliamentary Secretary to the Minister of
Finance, Shelly Glover, will be pleased to answer any policy-related
questions if Mr. Menzies has to leave before questions have concluded.
Once we have heard from the Minister of State and the parliamentary
secretary, we will invite departmental officials to explain each of the 12
parts one at a time, starting with Part 1 and ending with Part 12.
The floor is yours, Mr. Menzies.
Hon. Ted Menzies, P.C., M.P., Minister of State (Finance): Thank
you. I do keep my promises. A few weeks ago, you had asked me in the airport
to come here and I said I would be happy to. I wish I could stay longer but
I would have to beg forgiveness from the cabinet committee I am supposed to
be at right now. Minister Flaherty is filling in for me, so I had best not
strain that relationship.
Thank you for inviting me here and for the opportunity. I will make some
brief comments and hope I can stay long enough for some of your questions.
I want to thank the committee, not only on behalf of myself but on behalf
of Canada's vulnerable seniors. I think you all realize how urgent it is
that we get this done. Having said that, I do appreciate the fact that you
have pre- studied the bill in order to move it forward. We have a deadline,
as we have said.
I would like to recognize the Parliamentary Secretary to the Minister of
Finance. I cannot claim her. She helps me out too, but she takes orders from
the Minister of Finance. Ms. Shelly Glover is the Member of Parliament for
Saint Boniface. She is a wonderful addition to our team — much better than
the last parliamentary secretary was, by the way.
The Chair: Look where he is now.
Mr. Menzies: He is late for a cabinet meeting. We also have
officials here with us who will be able to answer the detailed questions, as
Today's legislation plays an important part in the next phase of
Canada's Economic Action Plan by implementing key provisions from the
recent federal budget. Without a doubt, Canada's Economic Action Plan
has been effective in creating jobs, fuelling economic growth and keeping
Canada in a strong position compared to other industrialized countries.
Canada has seen over 560,000 net new jobs created since July 2009. Even
better, we have seen seven straight quarters of economic growth. However, we
have heard many times, and we all realize, that the global economic recovery
remains very fragile and too many Canadians are still looking for work. I
recently had a conversation with MP Scott Brison who was sharing his
concerns. In his riding of Kings-Hants there is over 7 per cent
unemployment. There are still too many unemployed in various regions in this
country. That is important.
As I say, I appreciate your speedy passage of this piece of legislation
to help many of those people. That is why we need to stay on track and move
forward with Bill C-3, the Supporting Vulnerable Seniors and Strengthening
Canada's Economy Act. Among the key measures included in this bill are
enhancing the Guaranteed Income Supplement, GIS, support for low-income
seniors. That measure will start July 1 of this year.
The bill authorizes $65 million in support for Genome Canada; $20 million
for Canada Youth Business Foundation; and nearly $1 billion in Total
Transfer Protection payments to affected provinces, which are Quebec for
$368 million, Nova Scotia for $175 million, New Brunswick for $149 million
and Manitoba for $275 million. That measure is an extension of guaranteeing
the protection payments they received last year; it was to ensure payments
were not reduced.
This bill amends the Canada Shipping Act to eliminate mandatory
registration of small vessels like canoes and kayaks. Senators can go back
home and you will not have to register your kayaks like you did last summer.
It was one of those little things that the House of Commons and the Senate
did not see, and it was troubling to many people.
We are also trying to make part-time study more affordable for more
Canadians by reducing the in-study interest rate for part-time students to
bring them in line with full-time students. This measure applies to this
coming academic year.
We are moving forward with the national strategy on financial literacy,
following up on the report delivered earlier this spring.
We are providing tax relief for purchases of Remembrance Day poppies as
well as wreaths by the Royal Canadian Legion. We are improving the
Registered Disability Savings Plan for those with shortened life
expectancies, removing hurdles to potential eligibility.
We are allowing ratifications of tax information exchange agreements, and
removing mandatory retirement age for the Auditor General's position.
There are other things in Bill C-3, honourable senators, and I am sure
you will see the benefits from those things.
Before concluding, I want to speak to the provision in this bill to
enhance the Guaranteed Income Supplement for low-income seniors starting on
We understand the importance of secure and dignified retirement for
people who have spent their lives building Canada through their hard work.
In recognition of their contributions, our government has taken significant
action since 2006 to improve seniors' quality of life, including over $2
billion in new annual targeted tax relief.
The next phase of Canada's Economic Action Plan, through this
bill, builds on that record by improving the financial security of the most
vulnerable seniors. The bill proposes a new GIS top-up benefit targeted at
Canada's 680,000 most vulnerable seniors.
Effective July 1, seniors with little or no income other than their Old
Age Security and GIS will receive an additional benefit of up to $600 for
single seniors and $840 for senior couples. This additional benefit would
represent the single biggest increase to the GIS in over 25 years.
I want to underline that while Canada's most vulnerable and poor seniors
are counting on the GIS top-up, this bill needs to be passed before then to
allow the act to come into effect on July 1, as promised.
In my brief time here today, I have presented a few highlights of this
bill. Clearly, this bill is important to protecting our economy and helping
the most vulnerable seniors. That is why I urge Parliament to support this
legislation as the next step in Canada's economic recovery.
With that, and along with Ms. Glover, who will stay long after I have
left you, we would be pleased to take questions.
Senator Ringuette: Thank you, Mr. Menzies. Ms. Glover, it is nice
to have you before us for the first time.
I want to ask a question with respect to Part 11 of the act. While the
offices of ministers and the Prime Minister's Office have increased spending
by 14.2 per cent over the last two years, in this proposed piece of
legislation, in Part 11, you are contemplating cutting tens of thousands of
public service jobs. That situation is sad.
In the last few days, I read an article in the Ottawa Citizen that
referred to the fact that the government is proposing to cut over 500 jobs,
particularly with regard to auditors.
At least two times a year, this committee has the Auditor General in
front of us. In 2006, this committee reviewed the Accountability Act, which
your government put before us, and one of the central portions of the act
was to have auditors.
When the Auditor General was in front of us, she repeatedly told us that
it was highly difficult to recruit qualified auditors. She has invested a
lot of time, energy and money over the years to have qualified auditors so
that the pertinent accountability would be available, not only through her
offices but also through the different departments.
Minister, was the reporting in the newspaper accurate with regard to over
500 auditors being without employment in the near future?
Mr. Menzies: I cannot clarify that number. I do not deal with
internal manpower in that department. To your first comment, I understand
there has been some reduction in staff.
In the 2010 Budget, we froze ministers' office budgets. The ministers'
office budgets overall, government-wide, have been reduced each year since
2006, a lower level than they were for many years before that, and those
ministerial department office budgets remain frozen, as MPs and senators
We are embarking on the strategic operating review. We have had strategic
operating reviews in each department to try to streamline and ensure that we
are using taxpayers' dollars in the most efficient form possible. We gained
some positive results and we have cut some of the fat out of spending.
During this last election campaign, we told Canadians that if we formed
the government, we would come back here and ensure that we treated their tax
dollars with the utmost respect. We received a solid mandate to come back
and do that, and that is what we are embarking on.
This mandate will impact on some public servants and on some programs,
and that will be difficult. Back in the 1990s, we saw serious cuts that were
arguably necessary to ensure we returned to balance and that we cut down our
deficits. Those cuts were made, unfortunately, on the backs of the
provinces. We have said we will not do that again. We will not off-load our
short-term deficit, which was necessary to help Canadians in this recession.
We will not cut transfers to provinces or people.
Senator Ringuette: I realize that in your electoral platform you
did not indicate that you would have an increased number of cabinet
ministers and ministers of state. Nevertheless, you mentioned three key
words, and they are "strategic operating review." Can you tell the members
of this committee the criteria that will be used with regard to the
strategic operating review?
Mr. Menzies: We will review $80 billion of program expenditures.
The details of how we will get that remain to be seen. The minister and the
deputy minister will be tasked with conducting an internal audit of their
programs and reporting back to the committee, which is chaired by the
Honourable Tony Clement, to find those savings.
We have committed to a figure, a 5-per-cent figure of $4 billion ongoing
when we have realized all the savings, which is achievable. Most businesses
that survived the recession — and I would argue most homes that lived
through the recession — cut their expenses by 5 per cent. The figure is
attainable. It will not be easy or painless, as Minister Flaherty said, but
the cut is necessary to get back to balance.
Senator Ringuette: May I, in a positive way, make a suggestion?
Mr. Menzies: Please do.
Senator Ringuette: Since you are not telling us the criteria that
will be used with regard to this review, I know where you can find $1
billion right now. It is the Minister of Finance's pet project, namely the
Public-Private Partnerships, PPP, program. This program has over $1 billion
and 48 employees full time, and in the last two years it has approved only
three projects. I make this important suggestion that will help you meet
your objective pretty fast.
Mr. Menzies: That is an interesting suggestion. One has to be
careful. I answered this question in Question Period one day. I was wearing
a pink shirt and a pink tie, and I referred to PPP Inc. I quickly received a
note saying that was a little too obvious wearing pink. PPP Inc. is looking
at investing in infrastructure and projects in every region of this country.
If you have travelled in Chile, they have incredible roads down there. The
roads are all PPP projects.
Senator Ringuette: They also have incredible weather, too.
Senator Callbeck: I thank both of you for taking the time to come
You mentioned the Old Age Security Act. I know there is an initiative in
the bill to help some seniors, but 1.6 million seniors are receiving the Old
Age Security and the supplement. They are receiving the supplement, so that
means they are in low income. Most of them are living below the poverty
line. This initiative will help 680,000, so there are still one million
people that will not receive any help, as I understand it. I am wondering
why you chose that cut-off.
Mr. Menzies: Those decisions are tough. Sincerely, we wrestled
with it. At what level do we top up the Guaranteed Income Supplement? To be
frank, many recipients of this initiative are widows whose husbands did not
have a pension plan and did not prepare or did not have enough time to
prepare for his retirement. We wished we could have helped more but,
realistically, this initiative is helping. I look at it on the other side.
We are helping 680,000 seniors. Many of these seniors have lived through
difficult times. Many have lived through the Depression.
This increase is substantive. It is the largest one in many, many years.
Sure, we would like to have done more. We have reduced taxes for those
seniors that are paying taxes. We have taken many seniors off the tax roll,
as I said earlier. We have reduced seniors' taxes by $2 billion. We have
taken one million low-income Canadians, not only seniors, right off the tax
roll. We are trying to help them.
We are encouraging more people to save. That is why we are working on
financial literacy, to ensure that young people now coming up plan for their
retirement, plan for downturns in the economy and plan for drops in their
Registered Retirement Savings Plans. The decision is difficult, but these
seniors are the lowest income seniors, the ones that receive both OAS as
well as the GIS.
Senator Callbeck: I know that 1.6 million are the lowest income
seniors. You are leaving many of them still living below the poverty line.
How was that decision made? Do you decide that a certain amount of money is
set aside and that will cover so many seniors? How is that decision made?
Mr. Menzies: The decision is not an easy one. We are working
within a budget. We are on a medium-term plan to return to balance. That is
not the only way we are helping seniors, but it is a positive way to help
I beg your forgiveness. I do have to leave, but I will leave you in the
capable hands of Ms. Glover.
The Chair: Mr. Menzies, however brief, it has been good having you
here. Thank you for keeping your promise.
Mr. Menzies: I always enjoy coming here. As I told you before, we
receive the best questions here; better than in that other place.
Senator Ringuette: We have good suggestions too.
The Chair: Ms. Glover, it is a pleasure to have you here.
Shelly Glover, Parliamentary Secretary to the Minister of Finance:
Thank you very much. It is a pleasure to be here. I thank you for being
patient as I enjoy this visit. I must look a little star-struck. I have
never been in a Senate committee. I had to figure out who the fellow with
the bowtie was. Thank you for welcoming me.
The Chair: Who is the fellow with a bowtie?
Ms. Glover: I think he is a page.
The Chair: This is your first visit to a Senate committee. You are
starting at the right committee, the Standing Senate Committee on National
Finance, with a fine deputy chair from Toronto, Senator Gerstein.
We will go to Senator Eggleton, from Toronto, unless Senator Callbeck had
Senator Callbeck: Yes, I have further questions. One is on youth.
Right now, we have hundreds of thousands of youth, students, trying to find
jobs for the summer. The unemployment rate is roughly 17 per cent, which is
double the national average.
You have in this bill an initiative with regard to part-time students and
the interest rate. Other than that initiative, there is nothing new to help
them. Seventy per cent of these students rely partly on that summer job to
pay their tuition.
I was surprised that there was not a new program, or that the existing
programs were not topped up to help them, because students have really
suffered with the downturn in the economy. Last year, 128,000 jobs were
lost. I was surprised that the government did not have initiatives in this
Ms. Glover: I thank you for the question, senator. I might perhaps
give you some information with regard to your first question that was not
touched upon, and that was about the Old Age Security.
I want to make note for senators that when we talk about the GIS
supplement, there are people who are counted into the numbers who receive
OAS and GIS who do not qualify or who are under the level of income that we
deem acceptable, which frankly often is not acceptable. Immigrants, for
example, do not necessarily qualify.
When we talk about the numbers, we will probably have to invite officials
up to the front, senator, for the exact numbers, because the numbers are
skewed a little bit. I believe you are counting the immigrants who do not
qualify for some of the supplements. If you want to look at it closer, we
can do that with the help of the officials.
You talked about youth, and I am glad you asked that question. This
original budget implementation act, this first one, contains only measures
that are urgent, for a variety of reasons. The part-time student interest
rate is absolutely crucial, because we have students who will start shortly
in the fall, and we must pass this bill so that they can qualify for this
new measure that will help them to keep more money in their pockets.
A number of other measures were announced in the budget, senator, that
will help students. As the mother of five, with two children who are in
university, I was pleased and proud of our government because they have made
a number of other commitments, including student loan forgiveness for
doctors and nurses who work in rural and remote areas.
We will extend tax relief for skills certification exams. We will support
Canadian students abroad. We will double the in-study income exemption. We
will reduce, under this BIA, the in-study interest rate for part-time
Canadian students. We will increase the family income threshold for
part-time Canada Student Loan and Canada Student Grant recipients.
We will invest in education in the North. That is a $9 million investment
to expand territorial colleges, and literacy and numeracy programs.
There are a number of measures, and unfortunately they could not all fit
into the first budget implementation act. They will be seen in the next
budget implementation act in the fall. Again, this one we are addressing
today is only for urgent measures that must receive attention before the
fall, before we rise.
I can also tell all senators that it has been important that Canada
Summer Jobs be available to the students who need to pay for their
university. The minister responsible for that program put $10 million more
into that program so that students can benefit from more opportunities to
practice in jobs that will further their study.
We also have Young Canada Works. A number of programs exist, senator, and
it would be highly inappropriate to think that this budget implementation
act mentions them all. We are providing a number of programs for youth. I
know our government is committed to ensuring that our youth have the
opportunities they deserve to thrive.
Senator Callbeck: I know there are a number of programs. You say
this budget is to deal with measures that are needed urgently. I cannot
think of anything more urgent right now than summer jobs. We have a youth
unemployment rate of 15 per cent, and my question is regarding the summer
jobs for youth. The government has not put in any more money. You mentioned
that $10 million.
Ms. Glover: It is already in place.
Senator Callbeck: It was in place for the last two years. It was
announced as a two-year program. Sometime in June, the minister said the
program would be permanent, but there is no more money this year for
students than there was in the last two years.
I find that situation to be rather surprising, when you consider that the
unemployment rate for students is twice the national average.
Ms. Glover: I will have to disagree with you, senator. Clearly,
the fact that the interest rates will be at zero for these part-time
students will mean money in their pockets. That is more money for the
part-time students. That measure is addressed in the budget implementation
act. The other measures that I mentioned that will come in the BIA to follow
in the fall will put money back into the pockets of our students.
With regard to Canada Summer Jobs, it was announced a while ago but this
is the first time that my riding benefits from thousands more dollars
because of the extra $10 million. I can assure you that as I looked through
all the applications for Canada Summer Jobs, as a member of Parliament I
could see that, yes, there is more to be done, but I am proud that our
government took the initiative to put more money into this program, and will
continue to support youth in that way.
Senator Callbeck: I have a final comment. My point is that there
is no more money this year. That $10 million has been there for the past two
Ms. Glover: As it is not my file, that question would be better
asked of the minister responsible for that file. I can assure you it is more
money than the previous Liberal government put toward that program.
The Chair: We will have government officials here to help us with
that question shortly, Senator Callbeck.
Senator Eggleton: Mr. Menzies talked about helping some of the
most vulnerable people in our population, seniors. I appreciate that
initiative is an attempt, but it is arguable that there is not enough and
not enough seniors on GIS being covered. It is always a dilemma to provide
enough to help people.
The budget is silent on other people that are vulnerable in our
population. As Statistics Canada indicated in its recent report, about one
in ten Canadians still lives in poverty. That total is over 3 million
people. That is more people than live in all of the Atlantic Provinces
combined. One in five of them are children. In spite of the attempts of
Parliament going back to 1989 to eliminate child poverty by the year 2000,
we still have as much as ever: double digits in many provinces. We have many
people who are severely disabled. Yes, we want to have as many people as we
can in the job market, but there are people, perhaps, who cannot enter the
job market. Maybe the severely disabled should enjoy the same kind of
benefits that you are talking about here for seniors.
Why is there not more in the budget to help other parts of the vulnerable
population, in addition to the seniors?
Ms. Glover: I believe that we have taken measures to address other
vulnerable people in the budget itself. Again, the budget implementation
act, the act we are referring to today, does not include all these measures.
However, it does include the measures with regard to the Registered
Disability Savings Plan. The RDSP is absolutely crucial to some of our
disabled Canadians, particularly during their time of need in their last few
years of life, which is why the Conservative government has taken a step
toward allowing Canadians who have RDSPs to withdraw amounts if they have a
shortened life expectancy, which I think is a good measure, particularly for
those who have tremendous needs.
We have also removed the cap on medical expenses for those folks who have
to pay for equipment and have other needs so that they can live their lives
more easily. As they have challenges, we are trying to make it much easier
for them to cope by taking away that $10,000 limit. I think these measures
are good. These measures will help those vulnerable.
We have other vulnerable people who will benefit from this budget aside
from the disabled and seniors. Families who have children will benefit who
in the past may not have been able to benefit from things like tax credits
for cultural activities or for music lessons. That initiative is a step
I was lucky to have parents who belonged to a community club that allowed
us to play for free if our parents coached. That situation does not exist
anymore. We are trying to find innovative ways to ensure that some families
who cannot afford these things can give their kids opportunities to
I say they are vulnerable because I have seen through my policing
experience many of these children fall through the cracks because they have
not had the benefits of sports or Girl Guides or Boy Scouts. These children
have sometimes fallen through the cracks and been dragged into a life of
crime, or they have been exploited for whatever reason. I value this type of
move toward assuring that these children and these families are able to
afford these kinds of measures.
Again, the budget has a number of measures that will address the needs of
a number of our Canadian people who have challenges, who have
vulnerabilities. I will never be one to say that we do not have more to do.
We have more to do; that is absolutely true. However, this budget is a
balanced attempt to address those needs while also taking into account the
economy and the need of Canada to ensure that we do not put ourselves at
The Chair: Senator Eggleton, I am sorry to interrupt you but
Senator Eaton has asked to intervene with a supplementary question.
Senator Eggleton: That question does not count against my time,
though, does it?
The Chair: No, but it may count against hers.
Senator Eaton: Senator Eggleton asked you about who was eligible
for the GIS top-up. Is there, Ms. Glover, consideration as to where people
live? If they live in Parry Sound, perhaps, or in some other smaller place,
it is less expensive to live than in a large urban centre like Toronto or
Vancouver where we all know real estate is expensive. Is that difference
taken into consideration in the top-up?
Ms. Glover: If you will allow me, I want to invite the officials
responsible for this file forward so that they can answer your question
accurately because I am not sure how they came to the decision; whether that
difference played any part in it. I do not believe it did, but I do not want
to give you wrong information. Will you allow me to invite the officials?
The Chair: We have the officials here. We will hold that question
until we get to the officials. We are trying to deal with overall issues at
this point in time, but we will not forget your question.
Ms. Glover: Forgive me. I thought I was here for the BIA.
The Chair: We have not started the other. We are still on the
overview here. Senator Eggleton, you are still overviewing.
Senator Eggleton: Let me pick up on your final comment, that there
is more to be done. Yes, I think we all agree. The question is, are we doing
enough at this point in time? Does it have enough priority? I think the
government should adopt a poverty reduction strategy and have a
comprehensive examination. One of the things we found out is that poverty is
costing us a fortune. Some notable economists recently indicated that
poverty costs the governments — provincial and federal — some $30 billion a
year in Canada. That is an awful lot of money.
In health care, to give you an example, the lowest income quarter of
Canadians spend twice as much on health care as do the highest income
quarter of Canadians. There is obviously a disparity there. If we can move
more people out of poverty into jobs or give them the support they need,
like disabled people and seniors, I think we can better spend the money.
You have raised this issue, if I might follow up, on the tax credit
programs. You mentioned it in terms of the disabled and in terms of
children's programming, like the fitness program and the arts program. One
of the difficulties with these programs is that they are non-refundable,
which means the people in the lowest income, the people that you have cut
the tax rate for, cannot take advantage of it at all. In fact, these
boutique tax credits, as I call them, they favour higher income filers in
the tax system.
For example, two thirds of all the claimants for the Children's Fitness
Tax Credit have incomes above $50,000. Higher income people are able to take
advantage of the tax credit, while lower income people are not able to do
According to a University of Alberta survey of 1,000 parents, the tax
credit plays a negligible role in encouraging participation in youth sports.
For low-income families, researchers said it is entirely ineffective because
parents do not receive very much money, if any.
If we want to help low-income people, why do we not make some of these
Ms. Glover: Thank you for the follow-up question. This is exactly
why — and we have to look at the big picture — the Conservative government
cut taxes over 120 times so that families could enjoy more money in their
pocket and we could elevate the number of low-income earners to potentially
middle income area. This is the reason why the Universal Child Care Benefit
was so important, namely, so that parents could have more money to take that
participation into consideration.
Senator Eggleton: That amount of money is awfully small.
Ms. Glover: If you add every dollar that we have put back into the
pockets of families, you would see a $3,000-a- year increase with all the
tax measures that have been taken. That substantial amount of money is
helping our families to move forward, and it is bringing some of them out
from under the poverty line. Again, it is imperative that we look at these
things and say yes, there is more to do. However, I believe that this budget
addresses some of those things.
I mentioned the students. Many of those students still live at home. Many
of them, unfortunately, have been negatively impacted because their parents'
incomes were taken into consideration. These measures will allow our
students to move forward now without having to be penalized because their
parents may have a better income.
Again, taking a look at segmented, specific, targeted measures, you have
to look at the big picture or you miss it.
Senator Eggleton: I agree with the big picture but remember the
most vulnerable, too. That is why I think the government needs to look
comprehensively at the most vulnerable through some kind of poverty
reduction strategy that most provinces in this country are taking already. I
think our federal government must look at this strategy as well.
The Chair: Senator Eaton, you are next on my list. Do you have
Senator Eaton: That is kind but I will wait for the officials
because my questions are more specific.
The Chair: More detailed as opposed to policy-oriented?
Senator Eaton: Yes.
The Chair: I have Senator Murray and Senator Mockler on my list
for questions from a policy point of view.
Senator Murray: I have questions on the stabilization program and
on fiscal equalization that are more of a technical nature. I will pass
until the officials are up.
The Chair: We will wait for the departmental officials, then.
Senator Mockler: First of all, I would like to emphasize that New
Brunswickers are pleased to see that they will be receiving more than $140
million, as the minister indicated earlier.
Yesterday, I had the opportunity to meet with representatives from the
Association francophone des municipalités du Nouveau-Brunswick and from the
Association des cités du Nouveau-Brunswick. I also met people who are very
interested in the public-private partnership program. They tell us that it
is a good program.
Though one New Brunswick senator who has just spoken feels that the
government wants to cut the program, I personally hope that they will not.
These PPPs will let New Brunswickers, whether from the northeast, the south,
the east or the west, have access to funds for infrastructure renewal, which
is a necessity in New Brunswick, not a luxury. Despite what I have just
heard, I must stress that this program should not be cut. The people I met
yesterday in my office deserve some follow-up on my part. I would just like
to state that this program will be of benefit to New Brunswickers.
Ms. Glover: Thank you for those comments, senator. I agree with
you completely. I know the program very well. It helped my home town of
Winnipeg. We received money from partners in the group. They decided to
extend the Chief Peguis Trail in Winnipeg. That is an important project for
Manitoba. If there were no PPPs, tax money would not be enough to support
infrastructure programs in all provinces and territories across the country.
With the PPPs, we can pool private and public resources. Partnerships of
that kind help to meet infrastructure needs in all regions. It really is an
I have met with a number of people and no one has told me that the
program must be stopped. People always tell me how good they find the idea
to be; they thank me and they urge me to continue it. So thank you in turn,
because the program is equally important in Manitoba as the other programs
that our government has put in place.
Senator Rivard: If I refer to section 4 in the book we have in
front of us, I am very pleased to see that the government has decided to
help Genome Canada to the tune of $65 million and the Canadian Youth
Business Association to the tune of $20 million over two years. I understand
the importance of passing the budget. A lot of the Canadian Youth Business
Association's activities will take place during the summer. That is why we
cannot wait until the fall. So the government deserves our congratulations.
Section 2 mentions tax information exchange agreements. You will remember
a few months ago in Quebec, a very prominent businessman came to an
agreement on a federal tax situation. Revenu Québec had trouble getting the
information passed along to it so that the company or the individual could
pay their share like everyone else.
But I recall over the years that, if someone failed to declare income,
whether to the federal or the provincial government — Quebec has its own
income tax system, as you know — the appropriate government authority was
With this businessman in Montreal, I have a hard time understanding why
it was so difficult for the federal government to pass the information to
the provincial government. Can you help me with that?
Ms. Glover: I would really like to give you an answer, but, since
this deals with a specific case, I will have to look at the details because
I am not up to speed on it. Are you referring to section 2?
Senator Rivard: I am referring to section 2 that talks about
agreements with other countries. If we can come to agreements with 14 other
countries around the world in order to find people who are trying to get out
of paying Canadian tax, how is it that we are not able to easily exchange
information inside the country so that the Quebec government can collect the
taxes that people tried to get out of paying there?
Whether it is an individual taxpayer who fails to provide information, or
big companies that self-report, and get caught with undeclared income, how
come information cannot be automatically sent to the Government of Québec or
Ms. Glover: I understand. The arrangements in this section deal
with tax havens. Canadian money kept overseas poses a problem. We are trying
to eliminate tax loopholes. That is why we are dealing with the matter here.
Several agreements have been signed, but they have not yet been implemented.
In our opinion, there is some urgency in doing so because we want to move
forward with our plan to eliminate tax loopholes.
We studied tax havens at the House of Commons Finance Committee. It was a
very interesting study and it is a pity that we lost so many members who
were working on it.
I understand the point you are raising about arrangements within the
country, and, in that context, we should look at all possible loopholes.
There is no doubt that a lot remains to be done. But this bill was about
Senator Rivard: I find it curious that we are making agreements
with other countries while inside the country, when someone self-declares,
or is caught by the tax man, there is no mechanism to allow the federal
government to pass that information to the provinces automatically. We come
to agreements with other countries so that taxation is fair. Inside our own
country, while we have the tools to find people who have cheated on their
taxes or left things out, information is not automatically sent to the
provinces, which then have to gather the evidence again. I find that quite
illogical. It's a conundrum; I just hope that there will be an answer some
Ms. Glover: We are working with the provinces in good faith and we
are doing our best to achieve fairness for all provinces and territories.
But it is not always as simple as we would like and there are challenges. We
are trying to reach agreements to the best of our ability.
Senator Gerstein: Thank you for appearing before us today, Ms.
Glover. I was taken by our honourable colleague's comment that there is
always more to be done. I totally agree.
The fact is, on May 2, there was an election that gave Canadians a
choice: either a continuation of the economic recovery program that we have
had in place or a coalition of tax and spend. The Canadian public spoke
overwhelmingly in terms of the program they wanted to see continued.
The question I ask you is, are you satisfied that what is being presented
to us in Bill C-3 continues the economic program as was enunciated to
Canadians — the platform that we ran on and that we are fulfilling?
Ms. Glover: Not only do I believe that this budget is what the
Canadian people wanted, but I wholeheartedly — and this is a heartfelt
"wholeheartedly" — believe that it is the right thing for my family. It is
the right thing for my children.
I took the budget door-to-door with me before the election was called.
That is how proud I was of the budget that was presented. Not much changed
when we reintroduced the budget June 6, and it is because our word is our
bond. I belong to a party that said one thing and did it. That is something
to be proud of. That is something that Canadian people expect.
Unfortunately, they have been disappointed many times over the years.
I thank you for the question because this budget will help us to maintain
our economic advantage. We have been seen by the world as the country to
envy. The International Monetary Fund and the Organisation for Economic Co-
operation and Development have both stated that Canada has weathered the
recession better than any other G7 country. They have said that Canada is
the best country to do business in, and will continue to be for many years.
They look to us for some hope for their own countries. I am proud to be part
of a government that will protect that economic advantage, while also taking
care of the vulnerable, of families and businesses. This budget is balanced
because it does just that. This budget was promised before an election, and
a majority government is now promising this budget during this session. I am
proud of it and we will continue it.
The Chair: I am sorry to interrupt you, but we are receiving
tremendous pressure to focus on Bill C-3, which is the budget implementation
act, 12 parts. That is the bill we have to deal with and report back as
quickly as possible so that the government will be satisfied that we have
done everything we can.
Do you have any more leading questions, Senator Gerstein?
Senator Gerstein: Not at all, but I will take the opportunity to
thank Ms. Glover for that good answer. I must say, it is not only what she
delivered but with the passion that was exhibited as well.
Ms. Glover: I believe in it.
Senator Gerstein: Thank you.
The Chair: We thank you both for your interesting question and
We will now bring in the officials and see how the government proposes to
achieve the policy that we have discussed. Please stay on, Ms. Glover. We
will now bring on Mr. Lalonde and Mr. Cook.
I wish to welcome Gerard Lalonde. He has been with us on a number of
occasions. You know the manner in which we like to deal with things. You are
dealing with Part 1 of the bill. The overall title is "Amendments to the
Income Tax Act, a Related Act and a Related Regulation." We each have the
act in front of us. We want you to tell us what clauses 1, 2, 3 and 4 are
trying to achieve; that kind of approach.
Mr. Cook, are you familiar with the approach we want to take? We welcome
you as well.
Ted Cook, Senior Legislative Chief, Tax Legislation Division,
Department of Finance Canada: Thank you, but it is my first time here.
The Chair: I am sure it will not take you long to settle in.
Senator Murray: We have the material before us. Pardon me for
suggesting that the appropriate thing to do would be to ask questions as you
take us through the bill.
The Chair: Absolutely.
Senator Murray: I do not think we need any further explanation
than that which we have before us.
The Chair: Absolutely; we have heard the policy side of things. If
you feel that a particular section has not been explained in terms of
policy, Ms. Glover is here to help us with that explanation. We want to know
what specifically you are attempting to achieve with these various clauses.
Mr. Lalonde, do you have any comments before we proceed to questions?
Gerard Lalonde, Director, Tax Policy Branch, Department of Finance
Canada: Thank you for kindly noting that I have indeed been here before
and know the routine.
Mr. Cook has recently taken over the position of Chair of the
Interdepartmental Tax Legislation Review Committee. As a result, he is
familiar with the measures in the bill. I am in the course of relinquishing
many of my duties to Mr. Cook. I am pleased to let you know that. Therefore,
you will probably not hear much from me after I finish relating this
information to you, unless Mr. Cook gets into deep trouble, although I am
sure he will not.
The Chair: We welcome Mr. Cook but you left us hanging, Mr.
Lalonde, in terms of where we might find you next.
Mr. Lalonde: I will be around still but in the background.
Senator Murray: Do I take it that other officials will come
forward as we proceed to discuss, for example, the Old Age Security Act and
The Chair: Yes, we will deal with one part at a time, and we are
dealing with Part 1.
Mr. Cook, can you tell us in general terms what Part 1 is attempting to
achieve, and discuss the various clauses that we see here?
Mr. Cook: Certainly: Part 1 of the bill contains two income tax
measures. One was first announced in Budget 2011 and one was first announced
in November 2010 and then referred to in Budget 2011.
Most of Part 1 relates to the Budget 2011 measure; in fact, all of Part 1
except for clause 3 relates to a measure regarding Registered Disability
Savings Plans. RDSPs are long-term tax-assisted savings plans for
individuals who have severe or prolonged impairment of their mental or
physical functions. RDSPs are generally designed to fund long- term care for
This particular measure is designed to allow individuals who have
determined that they have a shortened life expectancy to withdraw amounts
from their RDSP without some of the harsh consequences that would arise on a
normal withdrawal from a RDSP.
RDSPs are eligible for two kinds of government support: Registered
Disability Savings Grants and Registered Disability Savings Bonds. Normally,
when a withdrawal is made from an RDSP, all the grants and bonds that have
been contributed to by the government over the last 10 years are required to
be repaid. This repayment is to ensure that RDSPs are consistent with their
basic objective, which is to provide for the long-term care of an
Normally, it is expected that by the time an individual starts taking out
money from an RDSP, all the applicable government grants and bonds have been
contributed well before the prior 10 years.
The government grants that are eligible with respect to an RDSP are in
the nature of matching grants. On the first $500 that is contributed to an
RDSP each year, $3 of grant are applicable. On the next $1,000 contributed
to an RDSP, a grant is available in the amount of $2 per $1 contributed.
Therefore, an individual with an RDSP, depending on family income, can
receive grants each year of up to $3,500. The bond has no requirement that
there be a contribution; the existence of the RDSP is enough to allow
government assistance to be paid in to the amount of $1,000. This amount may
depend on family income.
As I indicated, under the normal rules, when amounts start to be taken
out of a RDSP, the grants and bonds that had been contributed to the plan
over the prior 10 years all have to be repaid. When we talk about
individuals who have shortened life expectancies, the exigencies around
their care are not the same as for a person trying to fund long- term care.
The amendment is meant to allow withdrawals to be made on a RDSP that has
elected to become what we are calling a Specified Disability Savings Plan.
These are plans for which a medical practitioner has certified that a person
is not likely to survive for more than five years and for which the plan has
made an election to be treated as a Specified Disability Savings Plan. Once
that election is made, normal withdrawal limits with respect to RDSPs do not
apply. Taxable portions — the grants, bonds and investment incomes of up to
$10,000 a year — can be withdrawn, and we do not have the requirement of
repayment of the grants and bonds.
The measure also has conditions for remaining a Specified Disability
Savings Plan. If a condition changes, a person can elect out of the
Specified Disability Savings Plan and there is a waiting period to go back
To implement this plan, there are also consequential amendments made in
Part 1 to the Canada Disability Savings Act and also the regulations
relating to that act.
The Chair: Refresh my memory: Did we deal with this legislation
last year? We were dealing with bonds and grants. What does this bill
achieve and what did we miss last year such that we need this legislation
again this year?
Mr. Cook: I do not know if we missed anything. The current system
had a provision that if an individual was certified as likely to have a
shortened life expectancy, the individual could make withdrawals. However,
it did not deal specifically with the main part of this measure, which is
the assistance hold-back amount. The assistance hold-back amount is the
repayment of the grants or bonds.
The other thing this amendment changes is the exemption from the regular
withdrawal limits on an RDSP. The limits used to apply for a five-year
period; now they apply only once. The plan is a Specified Disability Savings
Plan. If a person happens to live more than five years, the new regime
applies as long as it remains a Specified Disability Savings Plan.
The main difference for most individuals is dealing with the assistance
hold-back amount, or the repayment of the grants or bonds.
The Chair: What were we trying to achieve in the amendments last
Mr. Cook: The amendments announced in Budget 2010 also related to
this regime but they primarily related to allowing entitlements for
disability savings grants and bonds to be carried forward for different
years. If an individual had an entitlement for a bond or a grant — a grant
in particular, because there is a matching amount depending on the income
that individuals put into it — the Budget 2010 measure related to carrying
those entitlements across years so that it maximized the benefit available
out of the RDSP. However, it was a different aspect than the one we are
looking at in this bill.
The Chair: Does this measure continue to improve the regime for
people with disabilities?
Mr. Cook: Certainly this is a more flexible regime for individuals
who have been certified, in the sense that the grants or bonds do not have
to be repaid upon withdrawal.
The Chair: Thank you for that clarification. Are there any
questions with respect to Part 1?
Senator Ringuette: Will we be able to ask questions as we go along
with each part?
The Chair: As we normally do.
Senator Ringuette: What happens to the bonds and the funds of such
a plan, and the government subsidizing of that plan if a person dies?
Mr. Cook: I am sorry. I have to refer to my notes here.
Senator Ringuette: You are talking about reduced life expectancy.
Mr. Cook: If a person dies, then there is the specified repayment
of grants and bonds. Are you talking generally, or out of an RDSP generally?
Senator Ringuette: Yes.
Mr. Cook: Out of an RDSP generally, when an individual dies, there
may be a required repayment of grants and bonds if there are still funds
left in the RDSP.
Senator Ringuette: If there are still funds there, the government
grant portion would be repayable to the government. Is that what you are
Mr. Cook: That is right.
Senator Ringuette: Thank you.
The Chair: Senator Ringuette is the only person who indicated any
desire to discuss anything further with respect to Part 1.
Mr. Cook: There was one other measure in Part 1. That measure was
the main measure and there was a smaller measure. It is clause 3.
It also deals in a fashion with Registered Disability Savings Plans. To
open a Registered Disability Savings Plan, the individual must be eligible
for the Disability Tax Credit under the Income Tax Act. There was a
gentleman by the name of Giovanni Tozzi who applied to the Canada Revenue
Agency for a Disability Tax Credit simply so that he could open up an RDSP.
The CRA disagreed with him and said that he was not eligible for the
Disability Tax Credit so Mr. Tozzi contested that decision in the Tax Court
of Canada. Since Mr. Tozzi had no tax payable for the particular year in
which the dispute arose, the Tax Court ruled it had no jurisdiction to
determine whether he was eligible for the Disability Tax Credit and to open
up an RDSP because there was no tax at issue. The Tax Court declined
To correct this situation and allow individuals who wish to open an RDSP
to contest their eligibility for a Disability Tax Credit, the Income Tax Act
is being amended so that the CRA can make a determination with respect to a
person's eligibility for the Disability Tax Credit. If the person disagrees
with that determination, the person has objection rights and ultimate rights
to appeal to the Tax Court of Canada.
The Chair: They are appealing the decision as opposed to an amount
Mr. Cook: That is correct.
The Chair: Thank you for bringing that to our attention. Part 1
amends the Income Tax Act, the Canada Disability Savings Act and the Canada
Disability Savings Regulations.
Mr. Cook: That is correct.
The Chair: Mr. Lalonde, do you have some final words?
Mr. Lalonde: I will hang around for the next panel as well and
then I will go.
The Chair: Please stay right there.
Next, we ask for Pierre Mercille and Lucia Di Primio to join us. We are
now on Part 2 of 12 parts.
While the new team is coming in, honourable senators, I propose that when
we go to clause-by-clause consideration, I will go through the parts the
same way, as opposed to each clause. That is how we want to fix this fix
bill in your mind in terms of parts.
We are now into Part 2, which runs from page 8 to page 10, entitled
"Measures Relating to Excise Duties and Sales and Excise Taxes."
Who is the spokesperson for this group?
Lucia Di Primio, Chief, Excise Policy, Sales Tax Division, Department
of Finance Canada: I will speak to the excise measures in Part 2 of the
With respect to the excise measures, it is proposed that two statutes be
amended: the Excise Act 2001 as well as the non-GST portion of the Excise
The proposed amendments in the bill will allow the sharing of information
obtained under these statutes with countries or tax jurisdictions with which
Canada has entered into a tax information exchange agreement, TIEA.
Generally, a TIEA signed by Canada and another country provides for the
mutual exchange of tax information between taxation authorities of these
countries to enforce taxation laws better and to help prevent international
fiscal evasion. However, under the federal taxation statutes, confidential
information cannot be shared generally unless a specific provision in the
legislation allows it to be shared.
These proposed amendments will create that specific exemption, allowing
the sharing of the confidential tax information in accordance with the TIEA.
These proposed amendments to the excise statutes are already in existence
under the Income Tax Act. Consistent measures already exist in the Income
The Chair: Presumably there was some difficulty, and some court
case required this legislation to be cleaned up?
Ms. Di Primio: The Income Tax Act provisions had been put in place
already, and these proposed amendments will put in place similar amendments
with respect to excise.
The Chair: Thank you. That is clear.
Pierre Mercille, Senior Legislative Chief, GST Legislation, Sales Tax
Division, Department of Finance Canada: In Part 2 of the bill, there is
also an amendment with respect to the Goods and Services Tax legislation.
There are two such amendments. The first one is in respect of a tax
information exchange agreement, identical to what was described, to ensure
consistency across tax acts.
The second measure in this part is basically the measure to provide for a
100-per-cent rebate of the Goods and Services Tax and the Harmonized Sales
Tax paid by the Royal Canadian Legion on the purchase of poppies and wreaths
for Remembrance Day.
The Chair: That is a restrictive piece of legislation, is it not?
What happens to other people who buy poppies?
Mr. Mercille: Sometimes we have a bigger part for the GST and
sometimes we have a smaller part.
The Chair: I see that at clause 12 amending section 259.2 of the
Excise Tax Act, page 9.
Mr. Mercille: The clause dealing with poppies is clause 12; the
TIEA is clause 11.
The Chair: Any further clarification needed?
Senator Murray: With regard to the sharing of information, I
presume that the Privacy Commissioner is cheering on this provision, is she?
Mr. Mercille: When we propose an amendment to the exchange of
information, because there is a general prohibition under the tax act, we
usually consult with the Privacy Commissioner. This amendment is
consequential to an amendment for income tax a few years ago.
Senator Murray: She has no objection?
Mr. Mercille: I am not aware of any objection that she might have.
Ms. Di Primio: I am not aware of any objections either.
Senator Murray: We will hear from her, then, if she has.
The Chair: It would be nice to hear from her beforehand rather
than after the fact.
Senator Murray: We are still at pre-study, chair.
The Chair: Yes; the pre-study and the bill merged only this
Senator Callbeck: You talked about sharing information with
countries with which Canada has entered into a tax agreement. Roughly how
many countries are we talking about?
Ms. Di Primio: Three agreements are currently in force with
Bermuda, the Cayman Islands and Netherlands Antilles. Others have been
signed. I could name them also. These agreements will be fully in force when
these proposed amendments come into force. The agreements have been signed
but are not yet ratified. I will ask my income tax colleague to add.
Mr. Lalonde: You are ahead of yourself. Two are in force with the
Netherlands Antilles and the Caymans. Regarding the third, with Bermuda, all
the procedural requirements have been completed but that particular treaty
comes into force 30 days after the last event and, hence, will come into
force on July 1 of this year.
For all intents and purposes, all the procedures have been in place.
Another 11 TIEAs have been negotiated, of which I believe eight require the
amendment that is in this bill to be ratified. As well, a number of tax
treaties are in place that already have similar information exchange
provisions in them. Eighty-seven treaties have those kinds of provisions.
The Chair: With that much activity, presumably, somewhere along
the way Senator Murray's question has been answered.
Mr. Lalonde: Yes, absolutely: The government announced in the 2007
Budget that it would be engaged in a program of negotiating tax information
exchange agreements to help prevent international tax evasion. The
government put in place a Canadian tax incentive to encourage other
countries to negotiate such agreements with Canada, and also provided that
any new tax treaty and any revision of existing tax treaties would have to
incorporate the latest OECD standard language on tax information exchange.
The Chair: You have the Privacy Commissioner's wand of approval of
all these provisions?
Mr. Lalonde: The Privacy Commissioner does not generally approve
measures but can give indications of whether they appear problematic. We
have no indication that those measures will be problematic with the Privacy
The Chair: Can I assume that the Privacy Commissioner has been
consulted that you have no indication of something being problematic, or are
you saying, I have heard nothing, so I know nothing?
Mr. Lalonde: We have consulted the Privacy Commissioner on
information exchange measures from time to time. In this particular case,
there were existing information exchange authorities before the 2007 Budget
measures were in place, and those authorities extended to comprehensive
double tax treaties.
A tax information exchange agreement is somewhat similar to a
comprehensive double tax treaty in that it includes a provision for the
exchange of information, but that is all it includes. As a result, since the
previously existing authority was in place for comprehensive double tax
treaties, I do not have a personal recollection right now as to whether the
Privacy Commissioner was asked about this particular subset of double tax
treaties. However, this legislation has not been an issue. It has been in
place since 2007, and the government has announced and put in place three of
these TIEAs and has a number of others under negotiation and ready to be
Senator Ringuette: Mr. Lalonde, from your statement, you are
assuming that this legislation will be okay with the Privacy Commissioner.
Mr. Lalonde: If I look back on the transcript, I may well have
used that word. The point I want to make is that these provisions are a
subset of a type of instrument, which is an international tax treaty. We
have had authority for this kind of information exchange in international
tax treaties for a long time.
Senator Ringuette: It was not your words but my question to you
because of your statement. Your statement indicates that you are assuming
that what is before us is acceptable because it has been acceptable in the
past in other legislation, but what is in front of us has not been accepted
by the commissioner.
Mr. Lalonde: By the Privacy Commissioner?
Senator Ringuette: Yes.
Mr. Lalonde: I may have used the word "assume."
Senator Ringuette: No, I did.
Mr. Lalonde: I will correct the record. If I said that, what I
meant to say is that we have had authority to make international agreements
that include tax information exchange for a long time, and this legislation
is a subset of international tax agreements.
Senator Ringuette: Again, Mr. Lalonde, to correct the record, I am
saying "assuming" because of your statement. I am assuming that you are
making an assumption that this legislation is okay.
Does the other piece of legislation you are referring to include the
wording "provides that the Minister of National Revenue may, by notice,
require any person to provide information?" Is the Canadian citizen
required to provide consent?
Mr. Lalonde: If another country asks for tax information about a
particular Canadian that may be relevant to that other country's tax
administration, no: in the same way that if Canada were to go, for example,
to the Cayman Islands and say, We are auditing an individual, and we think
this individual has a bank account in the Cayman Islands and has unreported
investment income; can you please provide us with the tax information we
need to check out whether that is indeed the case or not?
Senator Ringuette: None of this legislation requires the consent
of a Canadian citizen?
Mr. Lalonde: No; these agreements are between the countries and
the tax authorities involved. It would be a pretty ineffective rule for the
prevention of international tax evasion if those who evaded taxes were asked
their permission first.
Senator Rivard: I am going back to the problem I brought up
earlier. We have agreements with 14 countries. In the case I mentioned just
now where someone was found guilty of federal tax evasion, how is it not
possible to send the evidence to the taxing province? Quebec has its own
taxes, as we know. For the other provinces, the money goes to the feds first
and is then paid to the appropriate province.
Is this an area for which you are responsible? Can you tell me how come
Quebec is not advised when someone is found guilty of tax evasion?
Mr. Lalonde: If I may, I will answer in English.
Mr. Lalonde: While the discussion was going on earlier, I was
surprised by the discussion, so I contacted the department and our people
who deal with federal-provincial relations to ask them about that. As well,
my colleague Mr. Cook did some research on the spot.
In the Income Tax Act, we have authority for the federal government to
exchange information with the province for the purpose of the administration
of an act that imposes an income tax. Federally, we can exchange that
information with the province.
I am advised by our people in the department that there is a similar
exchange of information permission for Revenu Québec to exchange information
with the Canada Revenue Agency.
I have no personal knowledge of the particular example that was cited, so
I do not know what happened that caused the information not to have been
exchanged, if indeed that was the case. I can tell you that agreements are
in place with Revenu Québec and the federal government. In our own act, the
Income Tax Act, section 241(4)(d)(iii), I am told, provides
that the federal government can exchange such information with the
In other provinces that have a tax collection agreement with the federal
government, of course, it is not necessary because we administer the taxes
for them. Quebec is the only province that, at the personal level, is not a
member of a tax collection agreement.
The Chair: Thank you very much. You have made it clear for us and
that is why we asked you to be here. Mr. Mercille and Ms. Di Primio, thank
you very much.
We move to Part 3, which seems to be the heart and soul of this piece of
legislation. Part 3 deals with increasing the Guaranteed Income Supplement
for seniors. We have heard quite a bit about this part from a policy point
of view from the minister. Let us now hear from the government officials as
to how this policy is achieved. A couple of other items appear in that part
We have Bruno Rodrigue, David Tousignant, Nathalie Martel and Annette
Would anyone like to be the spokesperson for Part 3 to tell us what is
going on in the various sections that appear between page 10 and page 14?
Bruno Rodrigue, Chief, Income Security, Department of Finance Canada:
My name is Bruno Rodrigue. I am with the Department of Finance. Part 3
of the legislation establishes a new guaranteed top-up benefit under the Old
Age Security Act. With this new benefit, eligible single seniors can benefit
from up to $50 a month, or $600 a year, and couples can be eligible for a
new benefit of $70 a month, or $840 a year.
The benefit is an income-tested benefit and, therefore, eligibility is
based on annual income.
Based on estimates prepared by the Office of the Chief Actuary, we
estimate that about 680,000 seniors will benefit from this measure.
The Chair: They will not all benefit from the full amount,
presumably. Does a clawback apply here?
Mr. Rodrigue: The benefit depends on the income.
The Chair: When does the clawback start and when does it stop?
Mr. Rodrigue: I have learned colleagues from Human Resources and
Skills Development Canada here who are the administrators of the Old Age
Nathalie Martel, Director, OAS Policy, Human Resources and Skills
Development Canada: Is your question about how the top-up amount will
The Chair: Correct, and as of when.
Ms. Martel: As Mr. Rodrigue indicated, for single seniors the
amount of the top-up is $50 per month. It is reduced by 25 cents for each
dollar of income that exceeds $2,000. When I talk about $2,000, I am
excluding OAS benefits. It is $2,000 of personal income.
In the case of couples, the amount is $70 per month; $35 for each member
of the couple. The amount is reduced by 25 cents for each dollar of joint
income, combined income of both spouses that exceeds $4,000, again excluding
The Chair: You do not count Old Age Security. I am a single person
and I will receive an additional amount of $50 per month as long as I do not
make more than $2,000 of income per year.
Ms. Martel: That is correct. I will add that there is an exemption
— this exemption has been in place since 2008 — of $3,500 of employment
income that we do not take into account when we calculate GIS benefits.
In your example, if you are a single senior with no income other than
$3,500 of employment income, you will receive your maximum GIS plus the
The Chair: I think that is clear. Are there any questions?
Everyone is anxious to have this bill passed so they can start receiving
their extra $50 a month here.
Senator Ringuette: In our briefing book, you indicate that the
top-up will be indexed every three months, but will the maximum income also
Ms. Martel: That is a good question. The amounts, the $50 and the
$70, will be indexed but the thresholds, the $2,000 and the $4,000, are not
Senator Ringuette: They are not indexed?
Ms. Martel: No they are not; only the amounts.
Senator Ringuette: Why not?
The Chair: That is a policy decision, I would say. Ms. Glover, can
you tell us why not?
Ms. Glover: I will defer to the officials. They are the ones who
worked on the file extensively.
Ms. Martel: I do not want to lose you with the technical details.
If you become bored, just stop me.
When we designed the benefit, we looked at the interactions with income
supplements provided by provinces and territories. We tried to ensure that
the reduction rates would not interact with the reduction rates of
Provincial- Territorial supplements. I am looking at Ontario, for example.
The income supplement provided by the Government of Ontario is completely
phased out at an income level of $2,000. That is how we chose the threshold
of $2,000. That PT benefit is not indexed. To remain consistent with other
PT benefits, we recommended that the thresholds remain the same year after
year. Only the amounts are indexed.
Am I going into too much technical detail?
Senator Ringuette: No, I understand. Your threshold was based on
an Ontario-based income supplement?
Ms. Martel: As an example, yes.
Our goal was to minimize the situation where we would have reduction
rates that would accumulate so that low- income seniors would have no
incentives to save or to work because if they earn one additional dollar,
they lose 50 cents of the regular GIS and 25 cents of the top-up. Depending
on the province, they lose some benefits on their PT income supplement. We
wanted to avoid situations where the cumulative reduction rates would be
excessive. That is how we chose the threshold. The $2,000 and $4,000
thresholds represent thresholds where most of the PT income supplements are
phased out. The thresholds avoid the issue of cumulative reduction rates.
Senator Ringuette: I understood everything you said. Thank you.
Ms. Martel: I am glad.
The Chair: Thank you very much for being here and helping us with
this part and working on this particular program. When we first looked at
the bill, we saw all these formulas of A times B minus C over 4 and I was
worried until I asked Senator Gerstein and he was able to help me out.
We will now bring on our next group, dealing with Part 4 payments. That
should not take long but it will be nice to know about it.
Ms. Glover: Senator Eaton asked me a question earlier and I would
like to give him the opportunity to ask our officials.
The Chair: To ask Ms. Martel?
Ms. Glover: We could do it right away, with your permission.
The Chair: But I do not want to put pressure on Senator Eaton.
Senator Eaton: Chair, you said my question would not go
unanswered. Thank you.
The Chair: There you have it. Did you hear the question or would
you like to have it repeated?
Ms. Martel: Yes, I did. You asked if the top-up took into account
The GIS is calculated based exclusively on marital status and income. It
does not take regional differences into account.
Senator Eaton: I asked the question because I thought that what
might seem poor in a large urban centre might not seem so uncomfortable in a
Ms. Martel: That is a good comment.
If I were to take the example of a single senior with no income other
than OAS benefits, he or she will receive the maximum OAS pension and GIS if
he or she lives in a rural area where the low income threshold, Statistics
Canada's most common measure of poverty, is below the maximum OAS/GIS.
Someone living in a rural area in Canada with no income will be above the
threshold and is not considered living in poverty, while a similar
individual in the same financial situation with no income receiving maximum
OAS/GIS will be considered living under the low-income cut- off.
The Chair: Thank you, Ms. Glover, for reminding me of that point.
Senator Eaton, you are satisfied?
Senator Eaton: Thank you, chair.
The Chair: We will go on to Part 4. This deals with Genome Canada.
We want to have background on Genome Canada's funding over the years, what
they are doing and how this work fits in with funding in previous years. The
part is not an extensive part of this act, but it is a significant amount of
money, nonetheless. I am looking at page 14, Part 4, Genome Canada. Mr. Ram.
Elisha Ram, Director, Microeconomic Policy Analysis, Economic
Development and Corporate Finance, Department of Finance Canada: I am
glad to have an opportunity to be here. The first time I came up, I was sent
back to the bleachers.
The Chair: Let us see if we can warm you up.
Mr. Ram: Absolutely. Thank you for inviting me. I am from the
economic development branch of the Department of Finance. I am here to talk
to you about Part 4 of the budget implementation act.
Part 4 seeks appropriation solely for payment to two organizations. The
first is Genome Canada, under clause 15. Specifically, it is proposed to
provide Genome Canada with $65 million under requisition of the Minister of
Industry. That amount will be used to support new competition as well as
research in the area of human health and funding to support the operating
costs of Genome Canada and the six regional genome centres until 2013-14.
Would you like me to move on to the second clause, or should I take
questions now for Genome Canada?
The Chair: Are there any questions with respect to Genome Canada?
Senator Rivard: You mention that there are six genome centres in
Canada. Can you tell me which provinces they are in? Are they mostly in
Quebec and Ontario, or are they all over the country?
Mr. Ram: Can I answer in English?
Senator Rivard: Yes, of course.
Mr. Ram: There are six regional genome centres located across the
country. They are in British Columbia, in Alberta, in the Prairies covering
Manitoba and Saskatchewan, the Ontario Genomics Institute in Ontario, Genome
Quebec and Genome Atlantic.
Senator Ringuette: If I understood correctly, this funding is for
two years of operations?
Mr. Ram: Is it for the operations through 2013-14, so this fiscal
year as well as the next two.
Senator Ringuette: This funding is for three years?
Mr. Ram: For the operating costs, yes.
Senator Ringuette: This funding is for the operating costs for
three years for six centres. How much would that mean per year per centre?
Mr. Ram: That is a good question. The details need to be finalized
through the funding agreement. The Minister of Industry will be negotiating
with Genome Canada. They will have to come to a decision as to the best
allocation of the funding between the research part, the competition and the
In general, Genome Canada and its centres have an operating cost that
ranges between 8 per cent and 10 per cent of the overall budget. You can
make a general statement that approximately $6 million of the $65 million
might be used for operating, but those details still have to be worked out.
Senator Ringuette: How does this funding compare to the last
Mr. Ram: In Budget 2010, the government gave Genome Canada $75
million. That $75 million was for two purposes. One was to have a
competition that was focused primarily on the environment and forestry. The
other was to support the cost of the technology centres that Genome Canada
operates. The budgets are not exactly comparable. The funding for Genome
Canada and its regional centres was included until now in previous funding
that the government had provided.
Senator Ringuette: Comparing operating cost to operating cost, how
does it compare? I want to be able to compare apples with apples, not apples
with oranges, Mr. Ram.
Mr. Ram: Of course. I do not think I have that information
specifically in front of me. I would be happy to provide it to you. In terms
of determining the amount, it was chosen to ensure that the operating costs
would remain comparable from year to year.
Ms. Glover: I might add that Genome Canada has benefited from more
than $900 million from the Government of Canada. We cannot forget that they
also receive donations that are, frankly, more than what is provided from
the Government of Canada. It is difficult to break down specific amounts
when much of the money that is given to Genome Canada is under their
purview. An example is the competition. It will be under their purview to
hold the competition and distribute those funds. The operational costs might
change from year to year, depending on things like even climate. It is
difficult to say A and B equals C because most of the time, unfortunately,
there are factors that affect those things. I do not want to leave you with
the impression that there are not other revenues that come into Genome
Canada, because a number of private donation are made every year that help
Genome Canada do the great work that they do.
I suggest, honourable senators, that you would find it interesting to
have Cindy Bell appear before your committee. Genome Canada has done some
amazing things, and we are leaders in the world, thanks to some of their
research. I would invite you to ask her to come. She is a wonderful example
of some of the talent we have, and she can provide you with examples of the
creative minds that have come up with important resolutions to challenges
that the world faces.
Senator Ringuette: I have absolutely no doubt about that. I have
listened to many excellent documentaries. Bravo if the private sector
invested in genome research and technology. However, I have a concern
because, in 2010, for two years, we provided $75 million to Genome Canada,
and we are now looking at $65 million, which is $10 million less, but with
an additional year of operation. I want to compare apples and apples to see
whether, effectively, this funding is a reduction in contribution to Genome
Mr. Ram: Senator, I should clarify that the funding that was
provided by Budget 2010 was not for the operating costs of Genome Canada and
genome centres but rather for the operations of the technology centres,
which is another kind of activity.
I refer now to Genome Canada's annual report for 2010-11. I can tell you
that, over the first 10 years of Genome Canada's operation, they spent $92
million for the science platforms, $52 million for the operation of the
regional genome centres and approximately $63 million on the Genome Canada
operations. Their forecast for 2010-11, last year, was $5.5 million for the
genome centres and about $8 million for Genome Canada itself. The
expectation is that the funding provided through this budget will sustain
approximately that same level of operating going forward.
Senator Ringuette: Thank you very much.
Senator Callbeck: There is a genome centre in Atlantic Canada.
Where is that centre?
Mr. Ram: The centre itself is located in Halifax, but they also
have regional offices in other parts of Atlantic Canada. It is not located
only in a single place.
Senator Callbeck: I take from what you said that you do not have
the breakdown for that $65 million and how that will be divided up
Mr. Ram: That is right. For the regional breakdown, you have to
remember that the bulk of Genome Canada's funding is allocated through
research competitions, and the funding is allocated on the basis of
scientific merit as determined through international scientific peer review.
A lot will depend on the terms of the competition that Genome Canada moves
with this funding and the kinds of applications they receive.
I can give you some sense as to the historical distribution of Genome
Canada funding, but it is premature to talk about how the current round of
funding might be allocated.
Senator Callbeck: What about last year, the $75 million?
Mr. Ram: I have with me the announcement that was made this March.
Of the $75 million, $60 million was used for competition. With respect to
summaries that were posted on Genome Canada's website in terms of the
projects that were funded, I can provide that summary to you. We have
historical breakdowns that show how much of Genome Canada's previous funding
went to particular regions. I can provide that breakdown to you as well.
Senator Callbeck: You will provide that information to the
Mr. Ram: Yes, I think it is more efficient for us to provide that
to the members of the committee.
The Chair: You can provide that information to our clerk and he
will distribute it to all members of the committee.
Mr. Ram: Yes, we would be happy to do that.
The Chair: Thank you very much. Clause 16 at page 15 is the
Canadian Youth Business Foundation.
Mr. Ram: Under this clause, the government is seeking to provide
$20 million to the Canadian Youth Business Foundation in the current fiscal
year and the next fiscal year to continue its support for promising young
entrepreneurs. The foundation supports entrepreneurs between the ages of 18
and 34, either starting up their own businesses or taking over existing
businesses. The foundation does so through a mixture of loans as well as
mentoring and business support services.
The government has provided funding previously to this foundation on a
number of occasions, mostly through $10 million in each of 2009 and 2010.
The current funding is intended to continue that level of support at the
same level over the next two years.
The Chair: Help us with the background of the foundation. Does it
act merely as a conduit for the money, or does it provide some of these
services as well?
Mr. Ram: The foundation works through a network primarily of
volunteers that provide primarily for people from the business sector who
have extensive business expertise. The network works by twinning a young
entrepreneur with someone with experience who provides them with advice,
helps them to develop a business plan and helps them through some of the
regulatory processes required to set up a new business.
At the same time, on the basis of a business plan, the foundation then
provides loans of up to $15,000 per entrepreneur, which are repayable over
three years at relatively low interest rates.
In addition, the foundation has a strong relationship with the Business
Development Bank of Canada, and the BDC will often match and, in fact,
exceed the foundation's loan support, providing up to $30,000 of support per
The maximum that a young entrepreneur can receive through their
association with the foundation is up to $45,000 in loans.
Senator Callbeck: That funding is $10 million a year. Do you know
what the total budget of that foundation is?
Mr. Ram: The foundation uses the funding provided by the
government to seek matching contributions from other partners. In the past,
the foundation has received contributions from provincial governments as
well as endowments from the private sector. To date, the foundation has
provided loans to more than 4,200 entrepreneurs, rising up to $46 million in
Senator Callbeck: You say they raise matching money. If you
contribute $10 million a year, they raise $10 million. Is that right?
Mr. Ram: I believe that to date, contributions account for
slightly more than half the foundation's total support. They have not quite
reached 50/50. In addition, they also have access to repayments on the
loans. They have a high recovery rate, over 95 per cent, and are able to use
that recovery money to make new loans as well.
Senator Callbeck: How does a young person apply to this program?
Mr. Ram: That is an excellent question. The foundation, because it
is a small organization, does not have its own front counter; there is no
office that one can go to beyond the national office. The foundation works
through a network of partner organizations, over 150 of them across the
country. Many of them are Community Futures Development Corporations, while
others are interprovincial economic development organizations as well as
regional development agencies.
A young entrepreneur can approach one of these organizations that have a
relationship with the foundation and ask for support. That organization will
then match that entrepreneur with one of the foundation's volunteer mentors
who will help them to develop a business plan. That business plan then will
be submitted to the national office of the foundation. On that basis, they
will receive their loan support.
Senator Callbeck: Thank you.
The Chair: Any further questions on that particular area?
Senator Rivard: Do Genome Canada and the Canadian Youth Business
Foundation have to present their annual financial statements or a business
plan in order to receive grants; is there any oversight of their activities
Mr. Ram: That is an excellent question. Naturally, there is
accountability and oversight. The government, through its funding
contribution agreement with these organizations, puts in place both
accountability and evaluation provisions. That means that each one of the
organizations must undergo periodically an independent outside audit to
ensure that they are using the funds in the way the government has
prescribed for them. In addition, the organizations are subject to regular
evaluations to ensure that the government and Canadians are receiving value
for money for their investment.
The Chair: Thank you very much, Mr. Ram. We appreciate your help
on these two sections.
Mr. Ram: Thank you very much.
The Chair: I have not missed any, have I?
Mr. Ram: No.
The Chair: Thank you. We will go to Part 5. This is the Auditor
General Act. It is topical as a new Auditor General is being sought at the
We have a number of colleagues here to help us ensure there is nothing
hidden in this rather minimal section of clause 17, which states that
"Subsection 3(2) of the Auditor General Act is repealed."
Mr. Guéranger, Mr. O'Callaghan and Mr. Nevison: Mr. O'Callaghan is not
Gonzague Guéranger, Acting Assistant Comptroller General, Financial
Management Sector, Treasury Board of Canada: No, not for this part. He
Senator Murray: Are you both from the Department of Finance?
Mr. Guéranger: No, I am from the Treasury Board Secretariat. I am
the Assistant Comptroller General.
Douglas Nevison, Director, Economic and Fiscal Policy Branch,
Department of Finance Canada: I am the director of fiscal policy
division from the Department of Finance.
The Chair: We see this section under Part 5. Please help us with
Mr. Guéranger: In a nutshell, relatively speaking, compared with
the other parts, this one is straightforward. It proposes to repeal
subsection 3(2) of the Auditor General Act. To put this clause into context,
section 3 of this act provides that the Auditor General may hold office for
a term of 10 years. Subsection 3(2) of the act, though, requires that the
Auditor General retire at the age of 65. This requirement limits the number
of candidates with the appropriate skills that would be interested in
applying to the position. The repealing of subsection 3(2) would ensure that
a larger number of experienced candidates could apply to the position.
The Chair: That provision seems logical.
Senator Eaton: Is 65 the new 45?
Senator Murray: Are you saying there are no age limitations at
Mr. Guéranger: Yes; this amendment is also in line with other
amendments that have been made in different acts, such as in different parts
of the human rights statutes.
The Chair: There was a qualification the Auditor General could not
serve beyond the age of 65. There was another qualification that the Senate
removed in relation to the Auditor General's qualifications, and that is
that the Auditor General must be a chartered accountant, CA. We had that
qualification removed in 2006, yet the advertising for the position
continued to have that qualification as a requirement.
How can we be assured if we make this amendment that the requirement that
the Auditor General can serve only until 65 will not be repeated?
Mr. Guéranger: As soon as it is in the act.
The Chair: It will not be in the act any longer. As soon as it is
gone, do you mean?
Mr. Guéranger: Yes, when it is gone. It gives the flexibility.
The Chair: Flexibility is the word.
Ms. Glover: When talking about policy, this amendment is important
to us because we feel it is the right thing to do. In other areas of the
budget, you will see that we have committed to remove the mandatory
retirement age for federal employees. This removal goes hand in hand with
what we believe is the right thing to do.
The Chair: We felt it was important to remove the qualification
that the Auditor General must be from one auditing association when there
are several. It did not seem to be right in legislation; however, the
qualification has continued to be applied in the hiring.
Senator Murray: Who is hiring? These people are servants of
The Chair: They are, indeed, but they put that qualification in
the ad by the Privy Council Office.
We wanted you to know that we keep following these things. We do not go
away, until age 75.
Is there anything further regarding the Auditor General? Thank you very
much. We appreciate you staying here to help us out with that short but
Next up is Part 6: Canada Student Financial Assistance Act. We have Ms.
Miller or Ms. Clark and Mr. LeBrun.
Who will take the floor?
Gina Clark, Policy Analyst, Labour Markets, Employment and Learning,
Department of Finance Canada: This measure was straightforward. Part 6
will eliminate the in-study interest rate for part-time students. Currently,
they accrue interest on their loans at a rate of prime plus 2.5 per cent,
while full-time students do not pay interest on their loans.
There is a clarification in one of the French clauses that no fees of any
kind will be charged on student loans. This part was a technical amendment
to clarify that provision.
That provision is in subclause 18(2) and it clarifies the issue of while
the student is in study.
The Chair: Are there any questions? I think that part is a good
initiative. Are there any part-time students here that want to question this
Senator Rivard: Mr. Chair, I do not see the cost of that
initiative in the report. Would it be a few thousand dollars, a few hundred
thousand dollars? Has the amount been calculated?
Marc LeBrun, Director General, Canada Student Loans Program, Human
Resources and Skills Development Canada: The cost has been calculated to
be $5.6 million dollars annually.
Ms. Glover: That is for about 10,000 students.
The Chair: That is all? Thank you, Ms. Clark and Mr. Lebrun.
Next we will discuss Part 7. It can be found at page 16 of this bill. It
is entitled "Mortgage or Hypothecary Insurance: Enactment of Protection of
Residential Mortgage or Hypothecary Insurance Act."
Who would like to begin, to help us with Part 7?
Diane Lafleur, General Director, Financial Sector Policy Branch,
Department of Finance Canada: I will start, and if you have really tough
questions, I will leave them to my colleague.
The Chair: This part seems extensive. It goes from page 16 through
to page 36.
Ms. Lafleur: It does, but Part 7 creates a new act, the Protection
of Residential Mortgage and Hypothecary Insurance Act, which formalizes in
legislation the government's protection in respect of certain mortgage
insurance contracts provided to private mortgage insurers.
This legislation will replace the existing contracts that are in place
with the private mortgage insurers; it will formalize arrangements in place
and make them more transparent by virtue of being in legislation. It will
also make consequential amendments to the National Housing Act to ensure
that the Canada Mortgage and Housing Corporation is treated as the private
insurers are treated.
The new legislation is designed to support the efficient functioning of
the housing market and the financial stability of the system in Canada. It
will continue to foster a competitive mortgage market in Canada. It will
also modernize the risk management framework for mortgage insurance in
The government does not expect this legislation to have any kind of
impact on the structure or functioning of the mortgage market because the
government is taking contractual arrangements and putting them in
legislation as they were, without making significant changes.
This act will be brought into effect only once significant regulations
are in place. It is proposed that the coming into force of the act await the
passage of the regulations so that the complete framework can come into
place at once. Therefore it will not disrupt the contractual arrangements
that are in place until the legislative framework is complete.
Senator Neufeld: When is it expected the regulations will be in
Ms. Lafleur: We cannot start the regulation making process until
the act is passed through Parliament. Therefore, we need first to have this
piece of legislation passed, and then we will start the regulation making
process. We intend to have the regulations go through the regular regulation
making process so there is sufficient time to comment through the
pre-publication period, et cetera.
Much of that process is out of our control in terms of timing, but we
want this framework in place by next year at the latest.
Senator Neufeld: Let us say Monday, as a hypothetical. How long
from Monday? What is your estimate? I know you cannot tell me the exact day.
I appreciate that; I am used to regulations. Give me a sense of how
difficult it will be to put together the regulations.
Ms. Lafleur: If you look at the regulation making provisions
within the act, an extensive set of regulations needs to be drafted. It will
be a significant package of regulations and, because it is significant, it
will require some good consultation with the affected parties. We want to
ensure that everyone has a chance to comment. As I said, 2012 is when we
expect to have the framework in place.
Senator Neufeld: That is when you think the regulations will be
Ms. Lafleur: Yes, they will be finalized and everything comes into
Senator Neufeld: Thank you.
The Chair: You are right. At page 31, an extensive regulatory
authority appears there and carries on to page 32.
Did you say that the private contracts between the government and certain
financial institutions will be put in statutory form? Did I interpret that
Ms. Lafleur: Right now, the federal government has contracts with
the private mortgage insurance providers. The contracts provide a certain
level of guarantee to allow the companies to be competitive with CMHC, which
has the full backing of the federal government. Essentially, we are taking
the provisions of these contracts and bringing them into legislation and
therefore cancelling the contracts, as well.
The Chair: Do I find that in this legislation or will that be in
Ms. Lafleur: The cancellation of the contracts?
The Chair: No, the level of guarantee.
Ms. Lafleur: The level of guarantee will remain the same. Right
now, the guarantee is 90 per cent, and it will remain the same going
The Chair: Will we find that guarantee in the regulations? Where
will we find that guarantee once you do away with the contracts?
Ms. Wang: It is in the legislation. Sections 16 to 26 of the
proposed act spell out the level of government protection.
The Chair: It is in the statute as opposed to the regulation then.
Ms. Wang: That is correct.
The Chair: Before I go to other senators, at page 34 we see that
"Part 9 of the Budget Implementation Act, 2006 is repealed." What
was that provision? I did not bring that with me today.
Ms. Lafleur: That provision set a cap on the amount of business
that the private mortgage insurers could write with the benefit of the
government guarantee. As the economy grows and more people buy homes, et
cetera, that limit has, from time to time, been raised. Now that limit is
being brought into proposed section 27, on page 27, so the new limit is $300
billion, the protected loan limit.
The Chair: I see it. $300 billion: That is a lot of houses.
The upper level is $300 billion for all of the private insurers,
Ms. Lafleur: That is right.
The Chair: That was my understanding. Okay.
Senator Ringuette: This $300 billion, was this limit not at $600
Ms. Lafleur: That is the CMHC you are thinking about, not the
Senator Ringuette: This limit does not include CMHC?
Ms. Lafleur: That is right. It is for the private-sector mortgage
Senator Ringuette: We recall the mortgage buy-backs that occurred
in the last two years, and I still do not know how much of these mortgage
buy-backs were from AIG Life of Canada that no longer exists, like the old
Chrysler incorporation act that no longer exists in regard to repaying these
To compare what you say is in the existing contracts of those private
insurance providers and what is the legislation before us — of course remove
the names — can we see an existing contract?
Ling Wang, Executive Advisor, Financial Institutions Division,
Department of Finance Canada: One of the largest private insurers is
Genworth Financial, and it is a public company. They file, as part of the
public disclosure requirement, with the Toronto Stock Exchange. They file
the contract that they have with the Government of Canada. The contract is a
Senator Ringuette: If we go through that private sector website,
we will be able to see the exact wording of the existing contracts they have
with the Government of Canada?
Ms. Wang: I do not know whether it is listed on their website, but
I know it is filed and available to the public probably through SEDAR, where
the disclosures of public companies are for Canada.
Senator Ringuette: To facilitate our task here, because we are
asked to work quickly on this piece of legislation, can you provide the
clerk of our committee with a copy of that document through whatever agency
that you have?
Ms. Wang: Certainly.
Senator Ringuette: I have a few more questions in regard to this
With respect to the $300 billion that is stated here, what is the capital
requirement for the private insurers to go to this maximum?
Ms. Lafleur: The private insurers are regulated financial
institutions, and their prudential capital requirements are set by the
Office of the Superintendent of Financial Institutions.
Senator Ringuette: When you looked at putting this legislation
together, and that is a major issue in regard to capital requirements, what
is the additional capital requirement that will be required from these
Ms. Lafleur: I want to be clear that we understand what the $300
billion is. It allows these private insurers to continue to grow their
In the normal course of events, financial institutions hope to grow their
businesses. Their capital levels are set as percentages, so to the extent
that the business grows, the dollar amount of capital that has to be set
aside grows proportionately with it.
Senator Ringuette: Exactly: To increase their level of market
participation to reach $300 billion, what is the level of additional capital
that they are required to provide through the Office of the Superintendent
of Financial Institutions?
Ms. Lafleur: They do not provide the capital to OSFI.
Senator Ringuette: I know, but they need to have on their books —
Ms. Lafleur: It depends on how much their business grows and
whether they take advantage of this increased cap. The percentage of capital
that they have to set aside stays the same.
Senator Ringuette: What is that percentage?
Ms. Wang: There is a formula, and each company has a different
capital requirement set by the Superintendent of Financial Institutions. I
am not sure those numbers are public, because they are set between the
superintendent and the financial institutions. However, I can tell you that
in this act, in addition to the capital requirement set by OSFI, we also
include a requirement that the private mortgage insurers set aside capital
on top of that capital requirement, as determined by the Minister of
Finance, with the advice of the superintendent. This requirement is to
ensure that any risks to the government are further reduced.
This level of capital will be determined in the regulation-making
process. Even though it will not be in regulation, we will determine that
capital as we go forward.
Senator Ringuette: That requirement will be in the regulation that
is yet to be drafted?
Ms. Wang: This particular requirement will not be in regulation.
It will be a determination by the Minister of Finance for the private
mortgage insurers. It will be determined concurrently during the regulation
Ms. Glover: If I might assist, we held a BIA briefing, and this
subject came up again. It was best explained that the $300 billion is a cap.
It is not that there is a money flow as a result of this increase. It is the
cap upon which those insurers can negotiate the mortgages. Because there is
increased need for housing, as that need increases, as the population grows,
as we receive more wonderful immigrants to this country, the need to raise
that cap has been created.
Insurers can now make deals based on a $300 billion cap, where before it
was only a $250 billion cap. That cap has absolutely no impact on borrowers
and no impact on the capital, except when insurers negotiate the mortgages.
Senator Ringuette: Let us be clear here. The Canadian taxpayers
through these — right now three — private sector housing loan insurers, are
guaranteeing to these insurers 80 per cent of what they insure as loans.
Their risk is 20 per cent and the Canadian taxpayers' risk is 80 per cent
because that is the guarantee we provide.
Ms. Lafleur: May I just —
Senator Ringuette: In this bill —
The Chair: Do you accept that?
Ms. Lafleur: I want to be clear and step back for a minute.
Under the Bank Act, when somebody goes for a mortgage, if they do not
have 20 per cent down they must have mortgage insurance. It is a legal
requirement. To get that mortgage insurance, they have two choices
essentially. They can get it from CMHC or they can get it from a private
mortgage insurer. If it is from CMHC it is fully guaranteed by the
government. The guarantee is 100 per cent.
Senator Ringuette: At the cost of 6 per cent, roughly.
Ms. Lafleur: If they go to the private sector, the guarantee is 90
per cent. In fact, the taxpayer is a little less on the hook when it is a
private mortgage insurer than when the mortgage is with CMHC.
Senator Ringuette: Yes, but CMHC is a Crown corporation so
therefore any profit goes back to the taxpayers where the issue is not the
same in regard to the private sector. This point goes back to my primary
concern if we raise the level by $50 billion. You said we are raising the
level from $250 billion to $300 billion, so we are raising that ceiling by
$50 billion, to private insurance companies and we, the taxpayer, guarantee
80 per cent of that amount. We guarantee 100 per cent to CMHC but we
guarantee, what, 90 per cent — no, sorry.
Ms. Lafleur: Eighty per cent is the loan-to-value ratio that
triggers the mortgage insurance requirement.
Senator Ringuette: There is a lot of risk that we are adding to
this guarantee by the federal government to these private entities.
Ms. Glover: The risk has not changed. What has changed is, if we
demand and require Canadians to have mortgage insurance, we must allow the
insurers to have the ability to have a cap that is realistic. If the private
insurers have only a $250-billion ceiling, and one more person comes to the
table to a private insurer with only 15 per cent down, the government says
that person must have an insurer and the insurer has to say sorry, we are at
our top level, we cannot help you. We have told a Canadian that they cannot
buy a house.
Senator Ringuette: I am sorry, but the ceiling for CMHC is $600
Ms. Glover: It is a ceiling as well.
Senator Ringuette: As I said earlier, CMHC provides profits to the
treasury of the Government of Canada. I have major concerns. We have seen in
the last three years, around the world, major issues in regard to mortgages
and here we are asking the Canadian taxpayer to add to their risk by $50
Ms. Lafleur: Senator, you have to look at this issue not only in
isolation of the cap. You have to look as well at what has been Canada's
strength in the last several years and that strength is our supervisory and
regulatory framework. The cap does not exist in isolation. These
institutions are subject to OSFI supervision. As we have seen, it is an
effective supervisory regime. They have had a good track record and, as my
colleague pointed out, we are also building in additional capital
requirements to create additional loss absorbency buffers in the event that
some of these companies might go through difficult times. There will be
better prudence and better safeguards built into the system to ensure
against failure of these institutions.
Senator Ringuette: I still have my doubts anyway.
Senator Murray: Because I do not see any exemption, at least in my
notes, I presume you will confirm that all the regulations that might be
promulgated under these various authorities are subject to the Statutory
Ms. Lafleur: They are.
Senator Murray: Thank you. That is all I wanted to be sure of.
Senator Callbeck: I have a question on fees. If a person goes for
a mortgage and they do not have 20 per cent to pay down, then they have to
obtain insurance, so what is the difference in fees if they obtain the
mortgage with the private mortgage insurers rather than the CMHC?
Ms. Wang: The fees are the same.
Senator Callbeck: What is guaranteed is different: 100 per cent
with CMHC and 90 per cent with the private insurers.
Ms. Wang: As a point of clarification, the insurance, the fees are
paid by the borrower but the claim, in case there is a default, is paid to
the lender so it is the mortgage lender that benefits. The difference does
not have an impact on the borrower; it has an impact on the lenders in the
event of default: what it matters to them in paying the claim.
The Chair: I noted, relating to page 32, we talked about the
various agreements and Senator Ringuette had raised the issue of agreements.
Proposed section 43 lists a significant number of agreements that will come
to an end as a result of this legislation being passed.
We obviously would not have the time or the inclination to review all
those various agreements, but the important aspects of the agreements will
be reflected in the legislation before these agreements are cancelled,
before this legislation comes into force?
Is there anything further on that? If not, thank you Ms. Lafleur and Ms.
Wang. I appreciate your coming and staying on to help us. This part was the
largest part of the bill, I believe.
Now we will go to Part 8, which deals with the Federal-Provincial Fiscal
Arrangements Act, and is intended to address equalization payments. Senator
Murray has been awaiting his opportunity anxiously so I will put his name on
the top of my list.
Mr. McGirr, do you remember us?
Tom McGirr, Chief, Equalization and TFF Policy, Department of Finance
Canada: I certainly do, yes, and it is a pleasure having an opportunity
to be here again.
The Chair: This committee has dealt with equalization payments and
equalization schemes over a considerable period of time and we have always
appreciated your help along the way.
Mr. McGirr: Perhaps since I have been at it only for five years, I
could seek your guidance with some of the questions you may be asking.
The Chair: Can you look at Part 8 that starts at page 36 and ends
at page 37 and then tell us what is trying to be achieved?
Mr. McGirr: It comprises three clauses. In December of 2010, the
government announced its intention to provide total transfer protection of
payments to provinces in 2011-12, to ensure provinces would receive at least
the same amount in total major transfers, which is equalization, Canada
Health Transfer, Canada Social Transfer, as they did in the previous year,
including the total transfer protection payments made in 2010-11.
A second provision in Part 8 provides special payments to Ontario and
Prince Edward Island. These payments arise from the fact that subsequent to
the announcement of equalization payments in December of 2010, it was
discovered that erroneous data was used in the equalization calculation.
With corrected data, the amounts to be paid to Ontario and Prince Edward
Island are lower than what was announced in December, and so the government
decided to make payments to these two provinces in 2011-12 to ensure that
their budget planning is not impacted negatively from the corrected data.
These payments will be recovered from the two provinces over the next 10
years. The final provision is simply changing the stabilization legislation
to ensure that the total transfer protection payments that are being made in
2011- 12 are treated in exactly the same way as the payments made in
Senator Murray: My information on much of this stuff is rather
dated. You can bring me up to date and correct me. Let us talk about the
stabilization program. My recollection is that it is a program that will
compensate provinces that suffer a precipitous decline in revenues through
no fault of their own. For example, the decline in revenues was not because
they lowered their tax rates; it was because of economic circumstance.
My recollection, and here you might want to correct me, is that this
program has not often been used. I recall an occasion in the early 1990s
when Saskatchewan was about to hit the wall, and there was imaginative use
of the stabilization program to help them out. I think that both Ontario and
Alberta availed themselves of the stabilization program. Has it been used
more frequently in recent years?
Mr. McGirr: I do not have the exact figures in front of me, but I
believe the last payment made under the stabilization program was 1994-95,
but do not quote me on that date.
Every province has benefited from stabilization, but I must correct you
on Saskatchewan. Saskatchewan did in fact make a stabilization claim, but
when the final assessment was made, Saskatchewan did not qualify.
Senator Murray: Was that in the early nineties?
Mr. McGirr: Yes.
Senator Murray: I read the book by Janice MacKinnon, who was the
provincial treasurer under Premier Romanow for a while. She described the
process by which the federal government helped them avoid the wall. I
thought it was under the stabilization program, but let us not be detained
Let us go back to equalization or to the additional fiscal equalization
payment. You are proposing to pay four provinces money that they would
otherwise have lost. In other words, they would have been subject to
reductions of these amounts but for this provision.
Mr. McGirr: Without the payment, their total of major transfers
would have fallen from 2010-11 to 2011-12; that is correct.
Senator Murray: It would have been by these amounts.
Mr. McGirr: Yes.
Senator Murray: I am reading the questions and answers, which is
the lazy man's way of reading a bill. You are trying to ensure by the
stabilization provisions that you do not pay twice; is that right?
Mr. McGirr: That is correct. That is simply because in the
stabilization program the revenues subject to stabilization include
equalization payments themselves.
Senator Murray: Yes, I understand. The treatment avoids
stabilization compensation for the same declines that led to the transfer
This is what I want to get at. I will make a statement that perhaps is
not correct and you will correct me. My statement is that the declines that
would otherwise be suffered by Quebec, Nova Scotia, New Brunswick and
Manitoba are not attributable to precipitous economic declines but, rather,
to the changes that the government has made in the equalization formula. The
change you have made with the Canada Social Transfer in which the pool,
because you went to equal per capita cash, is being more widely distributed.
Those provinces would have suffered declines on that account also. Am I
wrong about that? In the operation of the equalization formula, the
government has put in two caps, right?
Mr. McGirr: Yes. There is what we refer to as the "fiscal
capacity cap," and the "sustainable growth ceiling," yes.
Senator Murray: My argument would be that he has solved the
problem as far as predictability is concerned. That is not my issue.
I want to get at whether these numbers here, the declines that would
otherwise be suffered with this bill by these provinces, are attributable
mostly to the operation of the equalization formula and to the changes you
have made in the Canada Social Transfer program specifically going to per
capita cash. Do you know whether I am right or wrong?
Mr. McGirr: Let me address my comments to the 2011-12 situation.
Certainly, if you look at the composition of transfers in 2011-12 versus
2010-11, without the total transfer protection payments, the provinces in
question here would have seen reductions in equalization.
I have figures here that I can quote. In terms of CST, just looking at
the provinces that are getting the total transfer protection amounts, New
Brunswick's CST is going up; Quebec's CST is going up; Manitoba's CST is
going up and Nova Scotia's CST is going up. They are year-over-year
increases. The same thing is with the CHT.
Senator Murray: They would not have suffered a decline as a result
of the CST. I understand the CHT. They probably would have gotten more on
the CST if the government had not gone to equal per capita cash. With equal
per capita cash, it turned out to be very profitable for Alberta and
Mr. McGirr: The crux of your issue is that you are trying to get
at differences in transfers from one year to the next, and the CHT does
still reflect the tax point transfer number and the CHT numbers did grow for
Senator Murray: I was never concerned that there was a problem
with CHT. It was CST, and you are telling me there were no declines in CST;
rather, this compensation reflects mostly the declines they would have
suffered under the operation of the equalization formula probably because of
the two caps.
Mr. McGirr: Correct.
Senator Murray: It is not because I want to make a point of that.
The question is important because looking ahead, how long is the government
prepared to continue with what are essentially transitional payments? Are
they not? Do you know the answer to that question?
Mr. McGirr: I like to refer to them as one-time payments, but this
is the second year.
Senator Murray: We know that there will be a renegotiation of the
Canada Health Transfer. That is in the works; we have heard a lot about it.
Is equalization coming up for renewal? I cannot remember.
Mr. McGirr: Yes, equalization will be renewed in 2014-15, as will
Senator Murray: Meanwhile, it is conceivable that there will be
further one-time transitional payments. Yes, it is conceivable. That is as
far as we can get today.
The Chair: Is this just the second year of a two-year guarantee
that there would not be a reduction or an attempt by the government to
ensure that it would not happen?
Mr. McGirr: The payments made in 2010-11 were characterized as
being one-time, but the government has decided they want to extend the
measure for a second year.
Senator Murray: It is a lot of money.
The Chair: It is a lot of money, but this is the second year in a
row, and it is being said, "Do not expect this next year."
Mr. McGirr: I am not saying that.
The Chair: How many years do you go before it is expected?
Ms. Glover: We hope they never "expect" because, of course, we
never like the word "entitlement." We have to take into consideration that
when these decisions are made, exterior circumstances are taken into
consideration. We all know we have been through a global recession that
requires government to look at all avenues of help for our provinces and
The Chair: Ms. Glover, am I correct that this is characterized as
being for this year only?
Ms. Glover: This is for this year only. You are correct in stating
that. We will see how we do next year.
The Chair: Has the federal government communicated to the
provinces that this is not something that you should necessarily be
budgeting for in another year?
Ms. Glover: I believe that is correct.
The Chair: That was my understanding as well.
Senator Callbeck: I have one question on the amount that Prince
Edward Island owes. That $1 million must be paid back over the next 10
years. Is that to be paid evenly over the 10 years, or can the province pick
the time when they want to pay it? How does that work?
Mr. McGirr: On an amount equal to one tenth of that payment. The
legislation calls for it to be equal instalments.
Senator Callbeck: Is there an interest rate on that?
Mr. McGirr: No interest.
Ms. Glover: Senator, it starts in 2012.
The Chair: We will now go on to the next part, which, according to
my list, is Part 9, Insurance Companies Act and demutualization. We keep
seeing familiar faces here.
My recollection, Ms. Lafleur, is that in legislation not that long ago we
dealt with demutualization in companies that are under federal jurisdiction.
Ms. Lafleur: I risk dating myself, but I think it was in the late
The Chair: No, I was not even here; I was not even born then.
Ms. Lafleur: Ms. Legault is nodding and she would know.
The Chair: It was one of those bills that were tucked away and I
actually read it. I was hoping you could remind us.
Ms. Lafleur: You may be referring to the demutualizing framework
for cooperatives, which would have been 18 months to two years ago. That
sounds better, does it not?
The Chair: That sounds better than the 1990s, yes.
Senator Ringuette: You were born then.
The Chair: Has this got anything to do with that?
Ms. Lafleur: This is different from what you considered last time.
Under the Insurance Companies Act there exist rules or a framework for
mutually owned companies — that is, companies that are owned by their
policyholders — to convert to stock companies. The details of the process
for demutualization, for converting to a stock company, are contained in
When we created the framework some years ago in the Insurance Companies
Act, it was determined that we would go ahead with regulations for life
companies. However, at the time, in consulting with the industry, it was
decided not to go ahead for P and C companies.
Now it has now come to our attention that a number of casualty companies
may be interested in demutualizing, so we are proposing to move forward with
a demutualization effort with some regulations for the P and C companies. We
will be doing that through the regular regulation making process, and we
will want to consult before we do so. However, in the meantime it has been
brought to our attention that there may be a gap or a loophole in the
legislation that would allow companies to effect a series of transactions
that would essentially have the same result as demutualization but without
doing it through a structured process that ensures fairness for all
interested stakeholders. This piece of legislation closes that gap pending
the coming into force of a structured regulatory framework that ensures
fairness for all of the policyholders.
The Chair: Should we anticipate seeing that structured regulatory
framework as a separate piece of legislation?
Ms. Lafleur: That is correct. The first step is to issue a
consultation paper so that all stakeholders can express a view on the
principles, priorities, how the process should be structured and whether it
should be similar to the life process or whether there are things that are
unique to the P and C sector that require adjustments.
After that consultation takes place, we will go into the regulation
making process and that will go through the regular process of
prepublication and consultation before it is finalized.
The Chair: This applies only to companies that are under federal
jurisdiction. There are mutual companies in the insurance business that are
provincial jurisdiction as well.
Ms. Lafleur: That is correct.
The Chair: Are we just talking federal here?
Ms. Lafleur: We are just talking federal.
The Chair: There has been no federal and provincial collaboration
for similar type legislation.
Ms. Lafleur: This is a federal initiative only.
The Chair: The legislation that we finally determined was only 18
months or so ago was for co-ops but not for insurance.
Ms. Lafleur: That was not for insurance. This is under the
Insurance Companies Act. You were looking at the new Federal Cooperatives
Act which allows institutions that are cooperatives under provincial
jurisdiction currently to migrate into the federal regulatory framework to
allow them to have a broader reach and set up cooperative banks.
The Chair: Some of us are old enough to remember a company by the
name of Mutual Life of Canada Limited. That was an insurance company. I
think it might be Sun Life now.
Ms. Lafleur: Most of the big mutual life companies went through a
demutualization process. That is what I was talking about when I mentioned
the late nineties. For example, Manulife, Standard Life, Clarica and Canada
Life all went through that process.
The Chair: Like Senator Murray, I read a book on this, but he is
not here to hear that.
Any further questions on Part 9? I think what you are doing is clear. We
will look forward to the overall regulatory framework in due course, but
this provides some interim relief.
Ms. Lafleur: Thank you.
The Chair: Thank you very much. Part 9 is concluded.
Next is Part 10, Assessment of Financial Institutions Regulations. We
have with us Ms. Alexandra Dostal.
Alexandra J. Dostal, Chief, Financial Sector Stability Section,
Department of Finance Canada: I am with the financial sector division of
Finance Canada. I am here with Mr. Girard, also from the financial sector
division. I am here to speak about Part 10 of Bill C-3.
To step back, the Office of the Superintendent of Financial Institutions
supervises federally incorporated financial institutions. This includes
banks, trust and loan companies, insurance companies, as well as private
pension plans. The supervisory costs of the Office of the Superintendent of
Financial Institutions are recovered from the financial institutions that it
supervises through assessment. Part 10 is a technical amendment to the
assessment of financial institutions regulations that set out how the
amounts of the assessments are calculated.
The proposal would amend the part of the regulations that deals with the
amounts assessed against life insurance companies that have global
operations. The proposed amendments will ensure that the regulations reflect
the policy intent and the administrative practice by which assessments have
been calculated for life insurance companies since 2001. The proposed
amendments will not change past amounts assessed against life insurance
companies, nor will it change current assessment practises.
The Chair: Thank you, Ms. Dostal.
Senator Ringuette: Could you repeat your last sentence?
Ms. Dostal: Sure. The proposed amendments will not change any of
the past assessments of life insurance companies, nor will it change the
current assessment processes.
Senator Ringuette: It will not change the assessments, but will it
change the fees received by OSFI?
Ms. Dostal: No, it will not change the fees. They will continue as
they have in the past and going forward.
Senator Ringuette: And going forward?
Ms. Dostal: Yes.
Senator Ringuette: Am I to understand that the global business
activities or the funds supervised by OSFI currently include the global
Ms. Dostal: That is correct, yes.
Senator Ringuette: Are you saying that global activities will no
longer be part of the assessments?
Ms. Dostal: No, that is not the case. When OSFI does its
supervision and assessments, it assesses — and it has since 2001 when the
regulation came into place — based on both global and domestic operations.
With the policy intent and the administrative practice, this change is a
technical amendment to ensure that the language of the regulation reflects
the policy intent.
Senator Ringuette: What has been done since 2001?
Ms. Dostal: Correct, and what will be done going forward.
The Chair: Are there any other questions with respect to this
area? Those of us who do not deal with this on a regular basis find this
area somewhat difficult to understand. You are here to assure us that this
will achieve what you are trying to achieve; is that correct?
Ms. Dostal: Yes.
The Chair: The Superintendent of Financial Institutions is
requesting this change in the law?
Ms. Dostal: That is correct.
The Chair: Thank you very much, Mr. Girard and Ms. Dostal, for
your clear presentation.
Next is Part 11 of 12 parts, transfers between departments. Mr. Guéranger
was here before and is back again. Mr. O'Callaghan is here this time. We
looked for him last time and he was not here. We also have Mr. Matiation,
and Mr. Nevison is back again.
Mr. Guéranger: I will give a brief summary of this part of the
bill. It proposes to add one section to the Financial Administration Act,
that being section 29.2. The objective of this new section is to enable
collaboration between departments so that they can provide administrative
services amongst themselves.
There are four proposed subsections under section 29.2. Subsection (1)
gives departments the authority to enter into these kinds of arrangements
when they want to collaborate amongst themselves to exchange internal
Subsection (2) requires departments to have a written agreement before
proceeding with such arrangements. This is for a disciplined and transparent
Subsection (3) prohibits departments from providing specific services
that are already provided by statute by other departments, such as Public
Works and Government Services Canada.
Subsection (4) lists the internal administrative services that are
covered under section 29.2. For example, they cover human resources
management services, financial management services, information management
services, et cetera.
The Chair: Senator Ringuette will lead off the questioning.
Senator Ringuette: You cannot bring forward issues of human
resources and not have questions from me.
What is the purpose of the proposed section?
Mr. Guéranger: We have seen over the past years an increasing
desire from departments to collaborate by sharing services. Rather than
having two departments each providing the same service and paying twice for
the same system, these two departments could collaborate and use the same
system, thereby reducing the cost of operations for better use of their
However, surprisingly, departments currently do not have legal authority
to do that. There is a legislative barrier that prevents that kind of
collaboration. That is the main purpose of this.
Senator Ringuette: Minister Menzies told us about a strategic
operating review, and you are saying that this is a fundamental part of
doing this review.
Mr. Guéranger: No. It is independent of the strategic operating
review, although it is certainly not contradictory to it. However,
regardless of the strategic operating review, we would have proceeded with
this proposed amendment because it is an issue we have been facing for many
years. In fact, it is a response to recommendations in the Auditor General's
2008 report that pointed out that many small agencies across government do
not have enough capacity to manage these administrative services and that
they are struggling or are putting administrative services in place in a way
that is not cost effective. It was recommended that we provide this
flexibility in order to reduce the cost for small agencies, in particular,
to increase their capacity.
Senator Ringuette: Give me an example of these small government
Mr. Guéranger: Are you asking for the name of an agency or the
kind of services?
Senator Ringuette: I want you to give me examples of those small
government entities, those agencies.
Peter O'Callaghan, Senior Analyst, Financial Management Sector,
Treasury Board of Canada: Agriculture Canada, for example, provides
services to the dairy commission and to the inspection agency. Those are the
kinds of arrangements that they enter into. They have done that, but they do
not have the legal authority to do so. This amendment would provide that
authority and would encourage others to enter into similar arrangements.
Senator Ringuette: We know that federal departments require the
services of lawyers from the Department of Justice. Do they currently have
the ability to do that?
Mr. O'Callaghan: Yes. Certain departments, and Justice is one of
them, have specific legal authority to deliver services to all departments
of government, but most regular departments do not have such authority.
Senator Ringuette: Have the various public service unions been in
discussion with you about the proposal to contract out services from
department to department and probably reduce staffing in departments
depending on the services that need to be tendered?
Mr. Guéranger: No, the unions have not been consulted in this
process. This process relates to the internal machinery of government in
order to enable departments to collaborate, when appropriate, so that their
operations are more efficient and effective.
This amendment does not force departments to enter into these kinds of
arrangements. It will be at the initiative of at least two departments, when
there are commonalities and synergies between them, to decide to proceed
with this sharing of services. It does not mean that there will be an impact
on jobs. That is not the intent. The intent is to ensure that the
departments and agencies are agile enough to cooperate for greater
Senator Ringuette: Are any layoffs occurring as a result of Part
11 of the legislation?
Mr. Guéranger: It is impossible to indicate any direction in this
regard. That is not the intent. As I said, it is to allow departments to
collaborate for greater efficiencies. The strategic operating review is not
about cutting jobs.
Senator Ringuette: Mr. Guéranger, every time we on this committee
hear the phrase "greater efficiency," it means reductions in jobs. I am
wondering if there is a plan with regard to the implementation of this. Who
will be supervising this?
Mr. Guéranger: In terms of the site of that, first, the
accountability will reside primarily in departments because we have deputy
heads and ministers accountable to and before Parliament. The deputy heads
in particular are accounting officers, so they are in charge of their
Treasury Board will also issue a directive, a policy, if you wish, for
specific responsibility, accountability and transparency requirements,
particularly as they relate to the region agreement I talked about earlier,
in an effort to ensure that those arrangements are effective.
Ms. Glover: I unfortunately have to ask to be excused as the bells
are now ringing. Before doing so, I thought I would mention for senators'
benefit that when Minister Menzies was here, I, too, was a little confused
by the question you posed. You mentioned 11,000 jobs that you thought were
at risk, which is why he went into the discussion about the strategic and
operational review. However, they are separate and do not affect each other.
In fact, this legislation is simply clarifying what is already happening,
and it needed to be legislated.
For example, Treasury Board and the Finance Department share IT services,
a service that has similarities and commonalities. We share that but it was
not legislated. This is simply putting into legislation what is already
happening, but it is completely different from the strategic and operational
review that Minister Menzies was referring to.
Senator Ringuette: Honestly, I do not see that we should legislate
cooperation between departments.
My question to Mr. Menzies was specific in regard to auditors and
accountability. It has been indicated publicly that over 500 auditors are at
risk of layoff, which is a very important function in all the different
departments. In the last 10 years, they were extremely hard to recruit.
Ms. Glover: It has nothing to do with this legislation, senator.
That problem is different.
Senator Ringuette: Every time we talk about efficiency, we are
looking at downsizing. The loss of these auditing positions has been already
indicated publicly, and they were very hard to recruit. If they are let go,
the entire public service and accountability framework will take a strong
I am still looking at this legislation. I find that sharing expertise
between departments does not require legislation, so what is the real
purpose of this legislation?
Ms. Glover: In fact, it does. Canadians would be quite surprised
to know that we do not have the clear ability to share those services, which
is why we are making it more efficient so that Canadians do benefit from the
fact that we can share those services.
I have to be excused, if you would not mind. May I?
The Chair: We certainly understand that. We thank you for being
with us through 11 of the 12 parts.
Ms. Glover: Thank you for your patience with me.
The Chair: Mr. Guéranger, did you expand on the deeming provision
that appears at page 40?
Mr. Guéranger: No, it is not ours. That relates to Finance.
The Chair: We have Finance here. They just happen to be at the
Senator Nancy Ruth: In the example that Ms. Glover gave about
Treasury Board and Finance sharing IT, do you each pay half the cost or does
one department pay it all? Who collects money? How is it spent?
Mr. Guéranger: The costs are shared, so instead of duplicating
efforts independently from each other, we are regrouping and making
economies of scale. That is the first purpose of this collaborative regimen.
Senator Nancy Ruth: Are these IT people hired by the departments,
or is it an outside contract? Would you each buy so much service? Can you
just spell out the story a bit more about how it will work?
Mr. O'Callaghan: The most likely scenario is that one department
will hire additional people to provide services not only for itself but for
the other department, and it will in turn recover the additional costs or
some costs from that other department. Each department will end up paying
for its own costs, effectively, because any costs for the other department
will be recovered. Overall, it should be more effective and efficient and
make better use of technology.
Senator Nancy Ruth: Hypothetically, Finance contracts for IT. They
sell services to Treasury Board, and Treasury Board pays Finance. What does
Finance do with that money?
Mr. Guéranger: This money in the first place does not affect any
votes approved by Parliament for Finance. It is completely independent. The
revenue that Finance receives from Treasury Board Secretariat will be
credited against the vote at the first instance. This money will be used
only to pay for the incremental costs that Finance incurred because of
providing the services to Treasury Board Secretariat.
Senator Nancy Ruth: Thank you.
Mr. Guéranger: Sorry for this complexity.
Senator Nancy Ruth: It is not complex.
The Chair: Are you okay with that?
Senator Nancy Ruth: Yes.
The Chair: I wish I could say the same.
Senator Callbeck: The bill states that the provision comes into
effect June 1, 2011. Why June 1?
Mr. Guéranger: June 1 does not apply to this amendment but to the
other amendment that my colleagues will talk about.
Mr. O'Callaghan: It does not apply to clause 34 of this bill. It
only applies to clause 35 of this bill, which is a completely different
The Chair: It says section 35 is deemed to come into force June 1.
You are at page 40 of the bill.
Stefan Matiation, Senior Privy Council Officer, Machinery of
Government, Privy Council Office: Mr. Chair, I am here to speak to
clauses 35 and 36 of the bill.
Clause 35 would add a provision to the Financial Administration Act that
would clarify that a department to which a portion of the federal public
administration is transferred under the Public Service Rearrangement and
Transfer of Duties Act may make expenditures in respect of that portion.
To explain this further, the Public Service Rearrangement and Transfer of
Duties Act is legislation that has been available for many years. It enables
the Governor-in-Council to move portions of the public service from one
department to another. The amendment would clarify that any unexpended money
appropriated for the portion of the public service that is subject to such
an order can be spent by the receiving department as of the date of the
order. This means that spending authority would thereby be aligned from the
date the transfer is made with the department that receives the portion of
the public service.
The Chair: In previous years Treasury Board would require a line
item for $1 to transfer these funds from one department to another?
Mr. Matiation: No. Previous to this provision, this operation or
transfer of spending authority would occur at the next available
supplemental estimates or in the estimates process. This will essentially
deem the appropriation to have occurred as of the date of the transfer.
The Chair: We are accustomed to looking at the estimates. We are
focused in that way. Treasury Board helps us through them. Before this piece
of legislation comes into force, if a transfer of some activity in a
government department had a vote item attached to it, would that be
forfeited and the full amount appropriated for the rest of the year in one
of the supplementary estimates, or would there be a $1 transfer?
Mr. Guéranger: I have to admit that I cannot answer this question
with full accuracy. I would need to talk to my colleague in another sector
of TBS in charge of the expenditure management cycle. I am not in charge of
that. I think the $1 is right, but I could be wrong.
The Chair: The Privy Council Office is advising us that once this
legislation comes into force on June 1, 2011, retroactively, then we know
how it will be handled from then on. If there is a transfer of a portion of
activity, then the money that relates to that goes with it automatically.
Mr. Matiation: Essentially, it means that the receiving department
has the authority to spend that money.
The Chair: Without coming back to Parliament and saying, "Please
Mr. Matiation: Subsequently, the transfer would be reflected in
the estimates process.
The Chair: It would be reflected in due course thereafter.
Can you tell us why the date of June 1?
Mr. Matiation: It was a matter of prudence to pick a clear date in
the event that such orders-in-council were made during the period when this
bill was before the house.
The Chair: There is no fundamental change that you are trying to
catch up with this legislation?
Mr. Matiation: No. Since June 1, there have not been any such
The Chair: Thank you.
Next is Part 12, shipping vessels.
Sylvain Lachance, Executive Director, Regulatory Services and Quality
Assurance, Transport Canada: The objective of this amendment to the
Canada Shipping Act is to give powers to the Minister of Transport to exempt
certain classes of vessels from registration and to simplify the
registration process for those who will have to keep on registering their
Currently, under section 46 of the Canada Shipping Act, all non-pleasure
vessels must register. This has created a number of problems for
organizations such as summer camps, Girl Guides, et cetera, which have a
large number of craft. According to that section, they now have to register
them individually. This is not a desirable situation. We want to amend the
act to give the power to the minister to, for example, register a whole
fleet of vessels if they meet certain criteria and exempt others as well. We
are considering human-powered vessels and vessels of less than 10
The Chair: That is the way it was before, before we passed the
legislation last year.
Mr. Lachance: That requirement was for pleasure craft. This
requirement is for non-pleasure craft.
The Chair: You are suggesting that even non-pleasure craft, less
than 10 horsepower, would not have to be registered?
Mr. Lachance: That is correct.
Senator Nancy Ruth: What is the non-pleasure craft that uses a 9.9
Mr. Lachance: A river raft, for example, is considered a
non-pleasure craft because it is operated by commercial operations, and you
do not have horsepower or motors on these craft.
Senator Nancy Ruth: How is it that canoes and kayaks are not
pleasure craft, or are they?
Mr. Lachance: They are considered non-pleasure craft if they are
operated in a commercial manner or by non-profit organizations. Under the
law, they are not considered pleasure craft.
Senator Nancy Ruth: If I own a kayak, I do not have to license it?
Mr. Lachance: You do not have to license it, no.
The Chair: I hate to say it, but we are at the end of this piece
of legislation. Thank you very much. We appreciate your being here.
Colleagues, we have only heard from the government, but I think you will
agree with me that those government officials who have been here have been
clear and forthright in their explanation. I have in mind the importance of
this legislation and pieces coming into effect July 1, et cetera. There is
some desire and hope on behalf of the government that we can move this
legislation through fairly quickly, and we have done so. We agreed to
pre-study the bill, and we have also agreed to shorten the time for second
reading. In fact, the pre-study and the bill are merged now. We do not have
to do a report on the pre-study because we have the bill as of this
I propose that we think about what transpired here this evening. I never
like to move into clause-by-clause consideration at the same time as the
witnesses are vacating the committee room. I suggest we meet at nine o'clock
tomorrow morning. We will find a room and let you know. We have been here
three and a half hours, including the support staff, who have done a
wonderful job for us. I suggest that at nine o'clock we do clause by clause
on the Budget Implementation Act and the report on the Main Estimates. I
will report those back, with your permission, to the Senate as soon as the
Senate goes into session tomorrow.
Senator Gerstein: Mr. Chair, I certainly support your
recommendation. I would like to add how much we appreciate the spirit of
cooperation that has existed around here.
I must say that I am totally impressed by the calibre of witnesses we had
here today. It was a pleasure. The people who have appeared before us are
great tributes to our civil service. Quite frankly, I thought every one of
them was outstanding.
The Chair: They did a very fine job.
Senator Nancy Ruth: A meeting tomorrow morning is an excellent
idea. Can we make it 10 a.m.? There is an Energy Committee meeting.
Senator Neufeld: It has been cancelled.
The Chair: Do you withdraw that request?
Senator Nancy Ruth: Yes.
The Chair: Thank you very much. This has been a long, tough job.
We will meet at nine o'clock in the Victoria Building, hopefully either
in this room or the room next door.