THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, December 2, 2025
The Standing Senate Committee on National Finance met with videoconference this day at 6:33 p.m. [ET] to examine the subject matter of all of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: Good evening, honourable senators, and welcome to you and to all Canadians watching us on sencanada.ca. My name is Claude Carignan, I’m a senator from Quebec and the Chair of the Standing Senate Committee on National Finance. I’d now like to ask my colleagues to introduce themselves.
Senator Forest: Good evening and welcome. Éric Forest from the Gulf division of Quebec.
[English]
Senator Pupatello: Sandra Pupatello, senator from Ontario.
[Translation]
Senator Oudar: Manuelle Oudar from Quebec.
[English]
Senator MacAdam: Jane MacAdam from Prince Edward Island.
Senator Marshall: Senator Elizabeth Marshall from Newfoundland and Labrador.
[Translation]
Senator Hébert: Martine Hébert from Quebec.
The Chair: Honourable senators, we are continuing our study of the subject matter of all of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
For our first panel, we are pleased to welcome Theo Argitis, Senior Vice-President, Policy, Business Council of Canada, and David Macdonald, Senior Economist, Canadian Centre for Policy Alternatives.
Welcome and thank you for accepting our invitation to appear before the committee. Let’s begin with Mr. Argitis’ open statement. You have four to five minutes, after which we’ll move on to questions.
[English]
Theo Argitis, Senior Vice-President, Policy, Business Council of Canada: Honourable senators, thank you for the invitation to appear before this committee.
I am here today on behalf of the Business Council of Canada, which represents CEOs of over 170 leading Canadian enterprises across all sectors of the economy. Together, our members employ more than 2 million Canadians, and their companies are responsible for most of the country’s private-sector exports and most of the country’s private-sector investments. The Business Council has one central mission: to help build a stronger, more competitive and more prosperous Canada. It is a privilege to contribute to your study of the Budget 2025 Implementation Act and to support the Committee’s work in ensuring transparency, accountability and sound stewardship of public finances.
Canada is at an important economic moment and the central challenge before us is how to sustain economic growth and competitiveness while maintaining a credible, disciplined fiscal framework.
Budget 2025 — and the legislation before you — contains a number of measures that point in the right direction: Steps toward a more competitive tax system, signals around improving the regulatory landscape, renewed efforts to attract talent, and additional financing for major projects. These are all positive moves.
Our concern is that the pace of change may not be fast enough to break out of the low-investment trap the economy has fallen into.
For more than a decade, Canada has not been investing at the pace required to keep our economy competitive or to sustain the rising living standards Canadians expect. In short, the productivity crisis we keep hearing about is really an investment crisis. Our industries and our workers are capital starved. I’m happy to get into what I mean by that in later on in the questioning. What this means is that after a decade of underinvestment and uncertainty, we need more than incremental progress from policy-makers.
Canada has enormous strengths, we have the resources the world needs, the talent to lead in advanced industries and the institutions to support long-term growth. What we need now is urgency and a focus on enabling private-sector investment at scale. The cost of inaction is continued stagnation. The reward for boldness is a stronger, more productive economy that delivers rising incomes and enduring opportunity for Canadians. Thank you, Mr. Chair.
[Translation]
The Chair: Thank you very much, Mr. Argitis.
Mr. Macdonald, you have the floor.
[English]
David Macdonald, Senior Economist, Canadian Centre for Policy Alternatives: Thank you, Mr. Chair. I would like to thank the standing committee on national finance for their invitation to speak today.
I’d like to speak in favour of two measures in Bill C-15: the exemption of Canada Disability Benefit, or CDB, from the definition of income and the top-up tax credit to avoid net losers in the change in the bottom income tax bracket rate.
First of all, I’d like to support the exemption of the Canada Disability Benefit from the definition of income.
This follows on recommendations from analysts like John Stapleton, who pointed out the implications of having the CDB count as income.
While in federal taxation, the CDB income isn’t taxed or clawed back against benefits, the same isn’t necessarily true in other circumstances. Subsidized housing calculations have income values drawn from federal calculations. If the CDB were included as income, it could reduce housing subsidies for Canadians with disabilities. Provincial benefits like the Ontario Trillium Benefit might face similar issues. Not counting the CDB as income avoids these undesirable implications. While not in Bill C-15, it is positive to see Budget 2025 offering to cover $150 in expenses to obtain or renew a Disability Tax Credit, or DTC, certificate. This is the necessary certificate to obtain the Canada Disability Benefit.
However, forcing many Canadians with disabilities to obtain a DTC certificate is a time-consuming and cumbersome way to expand access to the program. Cross-recognition of existing government disability programs would be a much faster and cheaper approach. For example, simply accepting provincial, social assistance disability recipients or those receiving the CPP disability benefit into the Canada Disability Benefit program would allow the expansion of access from 205,000 people at the outset to 800,000 people overnight with limited additional effort.
The present CDB of $2,400 a year and the low number of people with a DTC certificate will only result in about 10,000 people being lifted out of poverty as a result of this program. Expanding eligibility to include those receiving provincial, social assistance, disability streams or those receiving the CPP disability benefit would lift that number to 46,000 people. If the actual benefit level were raised to a reasonable amount, say $7,000 annually, then 200,000 people could be lifted out of poverty at a cost of $5.9 billion a year.
I would like to turn to the top-up tax credit. As I pointed out in my initial analysis, the lowest bracket change, unless addressed, people will be made worse off by the cut in the lowest income tax bracket rate.
Non-refundable tax credits are also evaluated at the lowest bracket rate. They become less valuable when the rate drops. This is exactly offset in most cases by the lower tax rate itself. In some instances, though, involving interfamily transfers of tuition, disability or medical expense credits where the credits exceed the upper threshold of first bracket, then the value of the tax credits is lowered by more than the tax savings, making people effectively worse off after the change in the lowest bracket rate.
Ensuring the rate change doesn’t make people worse off is sensible policy, particularly when the cost is relatively low compared to the enormous expenditure on this one single change. The drop in the bottom bracket rate has been pitched as an affordability measure, but provides effectively no benefit to those in poverty and little benefit to those in the middle class. In fact, for those living in poverty, the lowest bracket shift provides an average benefit of $11 a year.
The lowest income tax filers already have enough credits to reduce their taxable income to zero. You can change the tax rates, but it won’t matter as they don’t pay income taxes to begin with.
On the other hand, the top third of filers would make an average of $300 a year from this change, and middle income earners would see an average of $184 a year.
Incredibly, of the almost $6 billion spent annually on this single measure, only 3% of it ends up with the bottom third of tax filers. This is not a measure that will have any tangible impact on affordability, particularly for those that need it most.
Incidentally, the $6 billion price tag for the bottom bracket change is what it would have cost to increase the CDB to $7,000 a year, and lift over 200,000 people with disabilities out of poverty. Thank you, Mr. Chair. I look forward to your questions.
[Translation]
The Chair: Thank you very much.
[English]
Senator Marshall: I’m going to start with Mr. Argitis. Your opinion on something: initially, the reaction of the Business Council of Canada to the budget was a somewhat positive and it said that it’s moving into the right direction, but that it doesn’t go far or fast enough. That was a month ago. So for the past month now, we’ve been getting more details through the media and now we have the Budget 2025 Implementation Act.
I would be interested in hearing your comments now on the budget as it relates to specifically the private sector because you mentioned the private sector in your comment. I’m hearing some comments that government seems to be leaning toward the public sector as opposed to being concerned about the private sector. In some cases what I’m hearing is that government’s going to decide which companies or individuals receive support. I’m also hearing that the nation-building projects and the major projects office will have more public sector involvement than previously thought.
Some of us are wondering, where does the private sector fit into all this? I think that’s something that you’re also concerned about.
Can you round that out for us and just give us your comments on that?
Mr. Argitis: I think all those things could be true at the same time. I would say that the first-best solution would be the government get out of the way and let businesses invest. But, that is, for a number of reasons, not the way the government is moving.
On the major project side, they’ve decided that they will essentially take an active role and it’s not an unreasonable thing to do given the huge amount of investments that would be required and the great amount of uncertainty, not just in the regulatory framework, permitting and approval timelines that people are talking about, but the great amount of uncertainty in the global economy.
There is a lot of institutional opposition to these large projects. We saw with the TMX that the government had to step in to get that done. We don’t think that’s necessarily unreasonable, especially for the major projects. The government can’t hold the hand of every company that wants to invest in this country. In an ideal world, we would like to see the regulatory system improve to allow investment and to do the sort of things that would allow for private-sector investment to come.
Senator Marshall: The business council is also very concerned about the government’s finances and the deficit. That was in Mr. Goldy Hyder’s letter to the Prime Minister in October. If you’re looking at the budget, what is the top thing that you liked in the budget? Perhaps you can tell us the thing you dislike the most in the budget?
Mr. Argitis: I’ll tell you what I liked the most about this budget is we saw a government that is focused on the economy, something that we have been asking for about a decade. We haven’t seen that in a long time. Just the fact this government is thinking about the economy is a move right in the right direction.
Senator Marshall: The biggest disappointment other than not moving fast enough?
Mr. Argitis: The biggest disappointment is that it’s not transformational. Our thesis about the Canadian economy, if you want to call it that, is that we have had a decade where the economic environment hasn’t been that attractive for business. On top of that, we have had all of this uncertainty around global economic fragmentation and the tariffs, the trade wars et cetera. We believe that changing things at the margin, making incremental changes to taxes, for example, or tweaking here or tweaking there is not enough to get investment moving. You need a big jolt. You need something big to get the attention of companies in the investment community.
Senator Marshall: Thank you. Mr. Macdonald, you were saying something you liked in the budget, the part on the disability, and then the taxes, not so much.
I noticed on your website that there is a lot of reference to health care and well-being. Were you expecting to see something in the budget on private health care? Private health care is evolving in Canada. Speaking to officials who have appeared at this committee, we don’t seem to get the impression that there is anything happening with regard to the Department of Health.
Seeing that you’ve mentioned it on your website, do you have any views on private health care that you would like to share with us?
Mr. Macdonald: It was positive in the budget to see the personal support worker, or PSW, tax credit that was introduced for provinces unwilling to play ball with the federal government in increasing wages for their PSWs. That was positive action to move that money out the door for particular provinces.
It was disappointing that there wasn’t more action in terms of some of the big issues in health care, such as wait times in emergency rooms, for instance. In this budget, the government did introduce a new health care infrastructure fund, which could be used to build new emergency rooms. It just couldn’t be used to staff those emergency rooms because of this quintessential focus on capital. In many cases — health care being one of them — it’s often operating expenses that are much more necessary, particularly wages and working conditions that are behind a lot of the challenges in health care, not so much capital.
In other areas like long term care, both are necessary. To focus exclusively on capital to the exclusion of operating in areas like health care is likely to be at the detriment of the final service that Canadians enjoy, or have trouble enjoying, because they can’t get through the wait lists.
Senator Marshall: Thank you. I’d like to go on second round. I would like to ask why nurses are excluded.
[Translation]
Senator Forest: Mr. Argitis, you mentioned that it is important for the government to have a plan to reduce the deficit. Are you satisfied with the content of the budget? Do you have any recommendations for achieving this goal?
[English]
Mr. Argitis: I would characterize our position as two‑pronged. One, we did think that there was license and fiscal capacity for the government to move ahead with initiatives that would increase the productive capacity in Canada. The number one message we are hearing from our members is that the top priority is growth and investment.
We are in an investment crisis; we need to figure out a way to get investment in the economy. We have been asking the government for a decade to be more focused on the economy. We were willing to support the government using fiscal policy to do something up front to help the investment environment as long as it was part of a medium-term fiscal plan that was credible. We were supportive of the government using some deficit spending, for example, to finance infrastructure. This country desperately needs infrastructure.
We got something that was less ambitious than we would have been willing to support. Actually, we were expecting a higher deficit profile than we got, but deficits are still high without as much fiscal capacity going toward a productive kind of capacity as we thought. We kind of have a situation where the deficits are still high, but the deficits that we got we don’t think were used as effectively as they could have been, so somewhere in the middle, I guess.
[Translation]
Senator Forest: Thank you. In your opening remarks and earlier, you called for laser-focused investments, meaning extremely targeted investments. You touched on this briefly. In terms of private investment, when you talk about highly targeted investments, which sector do you have in mind? Is it sector-based, or is it based on productivity, equipment, and standardization? What do you mean by laser-focused investments?
[English]
Mr. Argitis: Are you talking about private or public investment?
Senator Forest: Private.
Mr. Argitis: The investments in the resource sector are critical. We agree with the government that this is a time where we need to pivot. We need to become a stronger economy, more resilient, and do more to diversify our trade. The fastest and most effective way to do that is to bolster our resource sector. We think that’s almost a low-hanging fruit for us as an economy. It’s much more complicated for Canada to diversify its markets in other sectors because we don’t actually have a record of exporting outside of resource sectors.
Having said that, we believe that, as the previous question was put about how the government is picking industries, fundamentally, we don’t think that is a good idea. Fundamentally, we want to see a system where the government doesn’t pick winners and losers and just has a level playing field for all industries and let businesses decide what areas are the most profitable to invest in. We don’t want an economy where we’re allocating capital in ways that are inefficient, unproductive and ultimately will make us poorer.
Having said that, clearly, we needed to find a way to get our resources to market, and that was clearly a priority for the government. I think it’s an obvious priority for the economy, and we definitely support that as well.
Senator Cardozo: I apologize for being late, and my apologies if you’ve covered what I’m going to be asking you.
I want to ask if both of you could talk about the deficit level that was announced in the budget and what you think about that.
Mr. Argitis, I want to pick a bone with something you were saying. There are a couple of things you said. One was governments should get out of the way and not pick winners and losers. What I hear from businesses is opposite to all of that. You want the government to get involved in the pipeline, roll over B.C.’s objections and get that pipeline in. You want the government to invest in roads and ports. I appreciate your honesty in saying that you were prepared to have some deficit spending there. You want the government to get involved and prevent stoppages and strikes in railways and ports. You want the government to get involved and have a trade deal. You say government should not pick winners and losers, but I think your members and others are saying support steel, support auto — which is in trouble — and support canola.
What I see is business groups rightfully — I kind of agree with all those requests — saying the government needs to help in these difficult times. I just say to you, please don’t tell the government to get out of the way and cut the deficit when what you’re asking for is the government to get involved and drive up the deficit.
With that in mind — sorry for that long commentary — what are your thoughts about the current deficit? I would like to hear Mr. Macdonald’s views on that too.
Mr. Argitis: Well, we think that the deficit is high, and we would like to see a more concrete plan to reduce it over time.
Having said that, it might sound a bit contradictory, but we think that should be a medium-term plan. I think, right now, there is a lot of certainty in the global economy. Our economy is barely growing, so we don’t think it’s a time for austerity right now. I think there needs to be a medium-term fiscal plan that’s credible for the markets. However, given the urgency of the situation, we are not going to ask for the government to do that; in fact, we think there is scope for the government to help the economy, particularly to help grow investments in the economy, which is where the problem is.
Senator Cardozo: Could you comment on the spending on defence?
Mr. Argitis: It is very important for us to fulfill our commitments to NATO. We think that is the cost of doing business with our NATO partners. They expect us to honour our commitments on defence. If we want to trade with these partners and be a trusted trading partner, we need to be a trusted ally.
Senator Cardozo: Thank you for that. I just want to get Mr. MacDonald in on this, too, about the deficit in defence.
Mr. Macdonald: The deficit is slightly higher than it was in the past but higher, but on a GDP basis, it was higher at any point between 1957 through 1974. So it is not particularly large, historically speaking.
It is also worth pointing out that there was a fundamental change that happened in this budget — a major shift — with 15% cuts for most operational spending across departments — shifted almost dollar for dollar to defence. The $60 billion that was cut from the operational spending of most departments — we saw a 40% increase to the DND budget over three years.
This is not an austerity budget from an aggregate government perspective; it’s just a massive shift in operational spending from every single department, with some exceptions toward DND. That’s a fundamental realignment of what the federal government is doing.
We still don’t know the full scope of what those cuts will look like. We have some specifics in some areas, but there are a lot more details to come in terms of what is going to be lost here in order for us to fund a 40% increase in DND’s budget over the next three years.
Senator Cardozo: Any thoughts on the job-creation ability on the defence side and defence manufacturing?
Mr. Macdonald: We will see about 40,000 jobs lost in the federal public service, excluding defence, over the next three years. That is partially due to this budget and partly due to the refocusing government programming from the Trudeau era introduced in Budget 2022, I believe. There will likely be some new jobs created in the federal public service at DND. They are actively hiring people being laid off from other departments, but they won’t hire 40,000 new people.
Much of the new expenditures, at least in this first round, has gone toward increasing salaries and recruitment for active military personnel as opposed to procurement. DND has a substantial procurement problem. They are completely unable to use the money they already have to procure defence equipment. This will become substantially worse over the next few years. I think it will be interesting to see whether they can even spend that money, given the difficulties in procurement with the budget they have so far.
Senator MacAdam: My question is for the Business Council of Canada.
Your organization’s letter to the Prime Minister about budget consultations call for comprehensive tax reform to simplify the system and encourage capital formation. There was no commitment to comprehensive tax reform in the budget. Can you expand on why you think comprehensive tax reform is important, and what kinds of tax reforms would be the most important from your perspective?
Mr. Argitis: We think that, fundamentally, tax on investment will need to fall. That’s one of the primary benefits from tax reform. What you want to do with tax reform is to have a very broad base with low rates. The other thing you want to do with tax reform is, optimally, you don’t want to tax income as much as you would other types of taxation. It is a very inefficient way of taxing; it is a very costly way of taxing. It creates a lot of economic — there are a lot of costs associated with taxing income.
You have certain objectives around tax reform. Tax reform allows you to generate the space that allows you to lower the tax rates. You can create that space through simplifying the tax code, for example, getting rid of tax expenditures which are very costly and creating the space to lower taxes on income and personal income, which is a costly way of taxing — as well as income on investment, which undermines investment in the economy. Those are the broad principles of tax reform.
Fundamentally, we think there needs to be less tax on income in this country. Canada has very high levels of taxation on income relative to other OECD countries — much more. I don’t know the exact numbers, but we are at the very high end when you include personal and corporate income.
Senator MacAdam: Do you support a comprehensive tax review of the whole tax system in Canada?
Mr. Argitis: I am told that a comprehensive tax review is a very complicated thing, but we do support some kind of tax reform. By the way, this was a promise that Prime Minister Carney made during the election campaign.
Senator MacAdam: Thank you.
[Translation]
Senator Oudar: My question is for Mr. Macdonald and concerns a document you published on your website following comments on the budget regarding the size of the public service. In your opinion, in order to achieve its objectives — since there are many promises in this budget — and to provide quality services, the government must not reduce the size of the public service. Quite the opposite, you even go so far as to recommend bringing back outsourced services and abandoning the goal of reducing the size of government.
Yet polls conducted among Canadians show that more than 54% believe that the size of the public service should be reduced. As for small and medium-sized businesses, more than 90% believe that bureaucracy should be reduced and the public service made more efficient. I didn’t see any figures in your document. Have you estimated what the alternative would be, since you seem to be talking about policy alternatives? What do you suggest to achieve an efficient public service and reduce costs — we know that payroll represents a significant portion of the budget — while bringing back outsourcing? I had the impression that you had the magic formula, but that you hadn’t written it down, so I’d like to hear your thoughts on that.
[English]
Mr. Macdonald: The right answer is on the final unpublished page.
[Translation]
Senator Oudar: I read it all the way through.
[English]
Mr. Macdonald: Certainly, if you ask Canadians if they want to cut the public service and bureaucracy, they will say, “yes.” If you ask Canadians if critical services fast and efficient, they will say, “no.” This is one of the critical issues around why there was so much rehiring. There were the Harper cuts of the early 2010s — 2011 through 2014. Some of the results of that were Phoenix pay scandal. They laid off all the HR executives who were administering the system and then had to spend billions to fix it.
Long wait lists for things like citizenship and immigration services, passport services, getting somebody at CRA to pick up the phone and answer your tax questions — these were all reasons why people were hired on. It was an attempt to reduce wait lists in such critical service areas.
So reducing employment in those areas will also likely reduce the service levels.
That’s the other challenge: In the abstract, sure, people say there’s too much bureaucracy, but when they’re specific, they say they want better service and want to be able to call a number and have someone at CRA pick up the line and answer questions about my GST credit, my income tax, et cetera.
One of the promises of the comprehensive expenditure review that’s ongoing is actually to reduce outsourcing. Something ongoing has been to reduce professional services, in particular. That’s something that likely will be done.
The issue of what the right size is can be evaluated in different ways. Certainly, federal government employment as a percentage of all population is higher today than it was in the last few years, but it’s lower than it would have been prior to 1995. Those values go up and down.
The amount of money that the operational expenditure budget spends per employee has consistently gone up. Federal public sector workers manage more money every year. If you get a new, big program, like the child care and early learning program, for instance, this is a $10-billion expenditure. You do want new federal government employees to manage that program and ensure the provinces are holding up their end of the bargain.
Fundamentally, what actually happened in this budget is not so much that there is austerity in general, as I mentioned earlier, but rather that the operational expenditures in some parts of the federal public sector have been shifted to defence. We are seeing a big increase there, with 15% decreases in most but not all departments otherwise.
[Translation]
Senator Oudar: Do you think that these attrition measures — because that seems to be what the budget is suggesting — could lead to a rethinking of how services are provided? Is it necessary to increase the size of the government in order to provide better services? That is what I understand from your document, but please correct me if I’m wrong.
[English]
Mr. Macdonald: In terms of call centres, it often is. You just don’t have enough people picking up the phone, and so there is a long wait list. On the question of whether you can obtain 15% reductions in most departments through attrition, whether that be retirements, which is the biggest part, and also just general turnover, it depends on the age of the department. Some departments like Statistics Canada, which is a relatively old department, you likely could obtain 5%-a-year reductions over three years through retirements and normal turnover.
Most departments, though, are not old enough. They are too young. Departments like Employment and Social Development Canada, or ESDC, for instance, or citizenship and immigration, those departments are too young, and they don’t have a big enough proportion of their workforce that are over the age of 55 in a position to retire. I have done some modelling on this, and it will certainly mean lay-offs in most departments because they just won’t be able to cover 5% a year for three years. They might be able to cover 1% or 2%. But for many departments, with some exceptions, there will certainly be lay-offs.
[Translation]
Senator Hébert: My question will be on the same subject as Senator Oudar’s. The budget provides for the creation of the much-talked-about Build Canada Homes program. Some experts have questioned whether it is really necessary to create a new structure to achieve what we want to achieve with this program. Could all of this have been done through CMHC rather than creating a new structure that will have a new human resources department, a new communications department, in short, a whole host of additional civil servants? Will this ultimately yield better results? No one can say for sure. I’d like to hear your opinion on this. Then I’ll have a question for Mr. Argitis about private sector involvement in this type of program.
[English]
Mr. Macdonald: In terms of the Build Canada Homes program, I think it is an interesting departure from the past insofar as the federal government wishes to itself become the housing developer, to build those developments on its own, using its own resources, using its own land in many cases. This is a fundamental difference from the Trudeau-era programs which were much more about incentivizing private developers to build more units. Frankly, any new units. The actual requirements for affordability were extremely low, and so it was build any new units as long as they were rental units.
This is an interesting new approach by the federal government. It doesn’t appear that it will create that many new units in the end. In terms of the profile of expenditures that exist today, 13, 15, 20,000 new units, which is really a drop in the bucket. I think the programs will likely be quite good. The affordability profiles will likely be quite good. They will just be extremely limited.
I am not against the Build Canada Homes program. It is probably an interesting program, but it’s just not big enough to really make a big impact in terms of improving affordability for renters.
[Translation]
Senator Hébert: My question wasn’t necessarily about the program, but rather its administration. Could the program have been integrated into an existing structure, such as CMHC, rather than building a new one? It will take time to recruit people and set up mechanisms for calls for proposals and accountability. Wouldn’t it have been better to integrate all of this into an existing structure?
[English]
Mr. Macdonald: You are not only seeing it in the housing envelope, but you are seeing it across the government, where you have got these cuts happening on one side and then new programs coming in on the other. The same department. People probably will move between those departments in some cases. To get a net impact of the budget cuts as well as new expenditures on a department-by-department basis is an important part of this — how much of those cuts will be implemented and how much were implemented but there are new programs coming in that will fill up that space in any event.
The Department of National Defence, or DND, is an example of that. The Department of National Defence is facing hundreds of millions of dollars in cuts, but their budget went up 40%. So, yes, they will potentially illustrate that they made these cuts except their budget went up a drastic amount. I think we will have to wait for the spring departmental reports which will provide by department a full accounting of where these departments stand not only with respect to the cuts but with respect to new programs that might have been added on to offset those cuts to some degree in some places, like Build Canada Homes and CMHC.
[Translation]
Senator Hébert: Mr. Argitis, in the same vein, last week in Montreal, several real estate developers announced that they were going to join forces to build social housing and that they were ready to invest. I think they mentioned around 4,500 units.
In your opinion, would greater involvement by the private sector have been beneficial in achieving our ambitious housing goals?
[English]
Mr. Argitis: Yes, absolutely. We’ve seen an inability to build homes in this country from the private sector, but not because there is a lack of private sector interest. There are a number of obstacles in the way, including, famously, development fees and other things, just restrictions on where you can build. This country has some fundamental issues in terms of obstacles to private sector construction of homes. One of the rationales that the government is using to do this, through government, is to help bypass some of these obstacles. This is a pattern with this government, right? They are creating new institutions so they can bypass other institutional constraints to private sector investment, which fundamentally is a negative thing. A first-best solution is to resolve the problem and allow the private sector to build, but the truth is, as a country, we have struggled to do that. To the government’s credit, they are trying to figure out a way, I suppose.
The one thing I would commend them for is for thinking about how to increase productivity in the construction sector — that’s been a huge issue — and thinking about how to build more modular homes and that sort of thing. That’s a worthwhile conversation to have.
[Translation]
Senator Hébert: I’ll have a question in the second round about the business community’s role in the budget’s implementation.
[English]
Senator Pupatello: I would like to ask this question of the Business Council of Canada, please. All of your members are really the largest companies in the country. Many or most are trading internationally, and I would like your opinion on the buy Canadian focus of the budget. A number of your members have commented to me about what they saw and that they actually liked it. Not to prejudge what you may tell me, but there is that element that is really littered throughout the budget about assistance, programs, how to assist them to turn their focus to international markets, that sort of thing. There is that piece of international trade, but there is always this buy Canadian element throughout as well. I want your comment there.
For Mr. Macdonald with the Canadian Centre for Policy Alternatives, if you could comment on the tax credit elements that are assisting people with disabilities in working. In my previous roles, there was a big focus on assisting people with disabilities who want to work. These elements are doing that, whether it is devices, additional supports for transportation, et cetera, and there were a number of them added in this budget. Have you heard commentary back about all of those elements that are really what people have been waiting for in many instances?
Mr. Argitis: The way I would answer that question is — I mean, we are losing, potentially, access to the U.S. market. That generates a lot of sales for many Canadian businesses.
Transition to other markets is going to take a lot of time, so everyone is looking for ways to — especially for impacted industries, manufacturing in particular. Manufacturing is the one area, the one sector, that is really at risk from the loss of access to the U.S. Hopefully, we will resolve these trade wars and we won’t lose access to the U.S., but that is a real risk.
It is natural for people to think of ways to support those sectors and provide some time so we can actually transition toward other markets. I think you will find some support for buy-Canadian initiatives within the business community for that reason, that there is a transition component.
Again, fundamentally, we don’t like government imposing new rules on businesses like that. The buy-Canadian provisions impact the federal government, Crown corporations and that sort of thing, but generally, there are a lot of industries that are at risk of hurting from the trade war, and any initiatives that support those industries in transition are good.
Senator Pupatello: A positive piece to the budget?
Mr. Argitis: I think so, yes.
Senator Pupatello: Thank you.
Mr. Macdonald: Certainly, additional items that are actually included in Bill C-15, as you mentioned, having the ability to write those off as medical expenses can help folks who have disabilities and are working and require additional assistance.
The fact of the matter is for most Canadians with disabilities, it is difficult to get accommodation even if they want to work, and many of them can’t work. The unfortunate reality is widespread poverty for Canadians with disabilities, particularly with severe disabilities. For many of them, their sole source of income ends up being provincial social assistance programs. Provincial social assistance programs have become disability support programs in Canada.
Senator Pupatello: When you mentioned earlier in your remarks about that adjustment in working federally, provincially, and whether they would overlap or somehow combine programming, you are likely aware of the differences in levels of support across provinces for disability support. For example, ODSP in Ontario and what it might be elsewhere.
Have you thought through how that could work? How could you make it work when it will be an “everyone move to the highest level” or “everyone move to the lowest,” which is likely not what anyone would want?
Mr. Macdonald: My comments were with respect to how you get the Canada Disability Benefit. At present, you get the Canada Disability Benefit by getting a DTC certificate. Once you have the certificate, then you can get the Canada Disability Benefit if your income is within a certain range and so on and so forth.
Getting that DTC certificate, though, is challenging and cumbersome. It doesn’t have to be. Other levels of government, such as the provinces, have already rigorously vetted folks with disabilities in terms of allowing them or not into social assistance.
Senator Pupatello: But they have different ways, though, because they are different levels. I’m not sure if the definition is the same everywhere. Are you aware if it is?
Mr. Macdonald: It isn’t. But it would be much faster to accept provincial definitions at the outset and harmonize them later as opposed to making people wait years to get even a modest Canada Disability Benefit as it exists.
Senator Marshall: You are here now post-budget. I know you both probably submitted something pre-budget. What sort of consultation do you do with the federal government? Do they approach you before the budget and say, “We are thinking of doing such and such. What do you think of it? Do you see any downside to it?” How much discussion or consultation do you do with the federal government while they are working on their budget and putting it together? You are both from reputable organizations.
Mr. MacDonald, do you want to start? I think it will be a short answer.
Mr. Macdonald: I can’t say the finance minister — that’s not true. The finance minister once called me after the budget but not before the budget.
We don’t generally have consultations in advance of the budget, no. Every year, we do coordinate our alternative federal budget where we bring together 100 different authors and contributors to attempt to revise policy platforms to make them more rigorous and then submit them through the pre-budget consultation process in the hopes that they are useful to folks who are making budgets.
Much of the budget creation is happening with cabinet behind closed doors, and often the folks who are directly affected a level or two down in individual departments don’t know what will be in the budget before the budget is published.
I couldn’t say that they consult me specifically. That would be great, but it doesn’t happen.
Senator Marshall: What about the Business Council?
Mr. Argitis: We undertook some consultations with our members and with some economists, and we came up with some results and some recommendations. We produced a report on that.
Senator Marshall: Is that reflected in the letter that went to the government?
Mr. Argitis: That’s right. We then presented our results to Mr. Champagne about 10 days before the budget.
Senator Marshall: And that was it?
Mr. Argitis: That was it.
Senator Marshall: Nobody said, “We are thinking about doing this. What do you think your members —”
Mr. Argitis: Not with me. It’s possible that they were speaking to members or others.
Senator Marshall: But you are not aware of it?
Mr. Argitis: No.
[Translation]
Senator Forest: Mr. Macdonald, regarding the Build Canada Homes affordable housing program, you mentioned that the funds were insufficient. The amounts allocated are quite impressive, yet you say that there is little new money. Beyond the financial aspect, do you have any suggestions for the government so that we can tackle this enormous challenge in all of Quebec’s municipalities, not only in large urban centres, but also in medium-sized and even smaller towns?
[English]
Mr. Macdonald: This is one of the big challenges of affordability of our time, attempting to provide rental households with affordable places to live in big cities so they can do basic things like go to work and go to school.
One of the big challenges is we are trying to do this in a high-interest-rate environment. One of the goals of high interest rates is to reduce construction of residential housing. That is one of the key ways that high interest rates interact with the economy, so you are attempting to push against that.
To some degree, the federal government’s efforts prior to this budget have been reasonably successful in continuing to encourage the construction of multi-unit dwellings, even though we are seeing a real collapse — particularly rental multi-unit dwellings — of more single-family home construction as a result of high interest rates.
Those programs have been reasonably effective at building some new units. The affordability requirements were very low.
There have been some programs that were heavily oversubscribed in previous budgets, programs that have allowed the rapid conversion of existing motels and hotels to supportive or assistive housing. Those have been very successful programs, and it could likely absorb a lot more money than had been put out.
Some programs over the last couple of years allowed non-profits to purchase apartment buildings that already exist and just come up on the market have been very effective.
One of the big challenges with CMHC is the fragmented nature. If you go to a housing conference, advocates swap stories about how you can get 10% from this fund and 2% from that fund and 8% from this fund, and if you piece it all together and wish on fairy dust, then you can get enough money to buy this apartment building and bring it out of the for-profit system and into the non-profit system.
I am in favour of the Build Canada Homes program. I think it’s an interesting approach. I just don’t think there is the scale necessary to really build this out.
What’s interesting about it is the actual upfront cost doesn’t show up on the deficit. If you structure it correctly, it is accrued over the life of the asset, so you can do a lot of building of housing. The federal government can build a lot of housing. If it owns that housing, it doesn’t show up on deficit line, or its direct cash cost doesn’t. It’s accrued over a very long period of time, just as you do for defence expenditures, for instance. You can do that for housing as well.
We are not looking at that at scale in this budget, but it’s something we could absolutely be doing more of.
[Translation]
Senator Hébert: Let me return to the question of consultations with the business community. I’m interested in the implementation of the budget, but I’m also interested in what will happen after the budget. At this point, we know that when we talk about investment in defence, mining, or construction, it’s not the government that will build mines, houses, and military equipment. Private companies will do that, we all agree on that. We know that there are some opportunities in the Canadian defence industry that are more ripe for the picking than others, what we might call low-hanging fruit.
So, has the government consulted with you to find out what your companies are capable of delivering in the short term in order to direct initial investments toward these projects, and then move on to longer-term projects later? Are there mechanisms in place?
[English]
Mr. Argitis: Me personally, No.
I don’t know.
[Translation]
Senator Hébert: What about your members?
[English]
Mr. Argitis: There is an ongoing conversation between government and stakeholders. I think every office has stakeholder relations. I’m sure there are conversations going on as the government tries to inform itself. But I don’t know if they are entrenched in the decision-making process.
The Chair: Senator Cardozo, last question.
Senator Cardozo: Last question, and it is going to be a short question but a huge answer, maybe.
If you could give us your thoughts — given the members that you have — on where you see the economy five years from now, and how do you see us getting from here to there given Canada-U.S. situation?
Mr. Argitis: If we don’t resolve the Canada-U.S. situation?
Senator Cardozo: Given what can or cannot happen, what is your advice to us as to what we should be keeping an eye on?
Mr. Argitis: I think it’s absolutely critical that Canada gets more investment to the economy. That Canadian businesses — and the government as well through infrastructure — shift the economy toward investment. If we don’t do that then we won’t have growth. We won’t have growth in incomes; we won’t have higher productivity; we won’t have a sustainable fiscal track. If you don’t have growth, you won’t be able to have a sustainable budget going forward.
Growth is what makes everything possible. Growth that is not investment-driven is not sustainable either. We’ve seen, over the last 10 years, the reliance on debt financing and immigration to drive growth, and we’ve seen the limits of both those things.
The one thing we haven’t tried in this country is investment-led growth. If we don’t have investment-led growth, we’ll be in trouble.
[Translation]
The Chair: Thank you very much to the witnesses; we greatly appreciate your availability and your generous responses.
We’re pleased to welcome our second panel this evening. Joining us by videoconference from the Quebec Environmental Law Centre are Geneviève Paul, Chief Executive Officer, and Ann Ellefsen, Lawyer.
We also have with us, from the Canadian Labour Congress, DT Cochrane, Senior Economist, and Lisa Freeman, Senior Researcher.
Welcome and thank you for accepting our invitation. We will now hear opening statements from Ms. Paul, followed by Mr. Cochrane and Ms. Freeman.
Geneviève Paul, Chief Executive Officer, Quebec Environmental Law Centre: Honourable senators, on behalf of the Quebec Environmental Law Centre, the only charitable organization in Quebec that provides independent legal expertise on environmental protection, I sincerely thank you for inviting me to testify tonight.
I’ll be frank with you, we have serious concerns. First, we find it highly problematic to propose legislative amendments that would set aside the entire federal legislative framework, with the exception of the Criminal Code, in the middle of a 300‑page omnibus bill. This is an opaque process in which the intent behind the proposed amendments isn’t explained in a clear and transparent manner.
The Treasury Board Secretariat refers to this as a power to allow the minister to establish regulatory sandboxes.
That said, I think we need to be clear. What is being proposed in the bill is completely different. What the government is hoping to achieve here is use a vehicle, the Red Tape Reduction Act, which was originally intended to reduce the administrative burden on businesses, to propose something completely different, namely to allow a few people within the executive branch to authorize the circumvention not only of regulations, but also all acts of Parliament, with the exception of the Criminal Code, including the Explosives Act, the Foreign Influence Transparency and Accountability Act, and so on — any federal act.
The scope of all this is unprecedented. It targets not only businesses, but also any individual and any other unincorporated association or organization, in addition to provincial and federal entities.
Regulatory sandboxes have been set up in contexts where technology often evolves faster than regulatory processes. Rather than rushing to adopt inadequate regulations, the idea is to conduct certain experiments to test developments that, ultimately, must obviously benefit society — and I really emphasize these words — in a very targeted, transparent, temporary, and controlled manner.
Here, the proposed provisions are not limited to innovation trials at all. They’re talking about trials aimed at stimulating innovation, economic growth, or competitiveness. Essentially, we could be talking about any sector of activity, from nuclear power to carbon capture to arms manufacturing. We believe it is misleading to refer to regulatory sandboxes, because what is being proposed here goes much further.
There are no clear, precise, controlled, and transparent boundaries. These are different objectives that involve risks of a completely different magnitude. The proposal is to give a handful of people in the executive branch the power to set aside federal laws outright. Basically, this goes against the will of the legislature with regard to laws that have been built up over decades, even centuries.
One of the main questions we have is this: Do we consider all acts of Parliament to be nothing more than paper? The message this sends is that respect for our laws and our rule of law is optional, which, with all due respect, is extremely serious and won’t make us more competitive.
The provisions set out in section 12 are meant to guide ministers in their decision to grant exemptions. These provisions don’t even include strict monitoring measures and are, in our opinion, completely insufficient to protect the environment, health, and safety, as is the suggested time frame.
So, the main message we want to convey this evening is that this opens the door to the erosion of the principles underlying the rule of law in Canada, namely legality, predictability, and fairness, particularly between companies in the same sector. I would even go so far as to say that it undermines the very principle of democracy, which reminds us that it is elected officials who decide which laws apply.
When we cast aside all laws and allow the executive branch to decide the direction of legislation rather than its application, it is as though we are putting the government on a throne, opening the door to arbitrary enforcement.
Our request is simple. In our opinion, section 5 of the bill must be withdrawn. If the government’s intention is really to create a sandbox mechanism, it must come back with a separate, precise, and coherent proposal, with guidelines that are defined transparently and strictly limited to innovation projects that have been debated by parliamentarians.
You’re in a good position to know that laws exist for a reason. The principles behind them are fundamental to protecting Canada’s health, safety, environment, and economic vitality.
I’ll conclude on a more personal note by saying that I’m still stunned by these provisions. I never thought I’d have to testify before you on proposals with such serious consequences. The conflations behind these provisions and their consequences are serious and have no place in Canadian democracy.
As a lawyer, a citizen, and a mother, I cannot hide my dismay and deep concern. I believe we’re on the wrong track and need to correct course. Once again, I sincerely thank you for your attention.
The Chair: Thank you very much. Next up are Mr. Cochrane and Ms. Freeman.
[English]
DT Cochrane, Senior Economist, Canadian Labour Congress: Thank you for inviting the Canadian Labour Congress, or CLC, to comment on Bill C-15.
My colleague, Dr. Lisa Freeman, and myself, Dr. DT Cochrane, are representing more than 3 million unionized workers in Canada that belong to 55 national and international unions. The CLC unites 12 provincial and territorial federations of labour and over 100 local labour councils across the country.
Bill C-15 contains many measures that are not in the best interest of workers and their communities. I’ll start with some measures that the CLC welcomes.
First, we welcome efforts to prevent misclassification of employees. Corporations use misclassification to avoid taxes, labour and other regulations, most notably the so-called ride-sharing companies.
Second, we commend the government for accepting the CLC’s call to exempt the Canada Disability Benefit from the definition of income to prevent the provinces from clawing it back.
And third, the personal support worker tax credit offers some welcome assistance to these vital workers, although it falls short of properly valuing and remunerating PSWs.
I will now identify two aspects of the budget implementation that are problematic for different reasons. The first is a handful of tax cuts that include the repeal of the Digital Services Tax, or DST, the increase to the lifetime capital gains exemption and the repeal of the luxury vehicles tax. The second is the use of accelerated capital cost allowances to “incentivize” private sector investment.
The tax measures in Bill C-15 are just some of the cuts made by the current government that deliver the most benefit to the highest incomes. For example, the repeal of the DST is a handout to American tech giants that will have cost $6.8 billion by 2030. This is an insult to the people of Canada, who are being told they need to sacrifice given the current economic turmoil. By delivering the greatest benefit to the highest-income Canadians, these tax cuts will also have a negative impact on equity.
The investment incentives are not inherently bad. However, they are misguided and inadequate given the scope and scale of the challenges that Canadian workers and their communities are confronting.
Underinvestment in productive capacity by businesses has been a problem since 2008. Mounting sources of uncertainty have further reduced the willingness of the private sector to make investments. A small reduction in the effective corporate tax rate will not get the investment that we need to build a fair, sustainable and flexible economy. It is time for the federal government to make directly the investments needed instead of tinkering with the tax system.
I’ll now turn it over to my colleague, Dr. Freeman.
Lisa Freeman, Senior Researcher, Canadian Labour Congress: Thank you, Mr. Cochrane. It’s nice to be here tonight.
Workers in Canada are facing an affordability crisis, especially in terms of housing. We were glad to see Bill C-15 address housing, specifically Build Canada Homes. Bill C-15 outlines the amount of money the Minister of Housing can allocate for the operations and projects of this agency, Build Canada Homes. This is important, yet we would like to see more details of exactly where this money will be used.
We have concerns about public money entering the private sector with few restrictions. We understand the need for the government to work with a private sector to build housing. That’s the way we need to go forward. However, we want to make sure that public funds are protected, go toward creating housing for those most in need, support future affordable public housing and are not bolstering corporate financial landlords and the private sector.
Speaking of which, Bill C-15 repeals the Underused Housing Tax Act. We view this as very unfortunate. The Underused Housing Tax Act was intended to slow down the housing market and encourage owners to make their properties available for Canadians to live in. By repealing this act, the government is supporting housing as an investment for financialized landlords. We want to see more robust measures in this bill to ensure that housing is treated as a human right — as we see in Canada’s National Housing Strategy — not as a financial asset for corporate investors.
As I read through Bill C-15, I noticed there were missed opportunities and a few items I was surprised were not mentioned. First, this bill does not provide any financial support for the post-secondary education sector. It does amend the Canada Student Financial Assistance Act in terms of some funding for students going to public or private universities out of Canada, but it does not address the deep financial crisis facing colleges and universities as a direct result of the federal government’s recent caps on the international student program. We had hoped to see more financial support for post-secondary institutions who are cutting programs and laying off staff.
The second missed opportunity that I noticed was a lack of mention of the Canadian Ombudsperson for Responsible Enterprise. This office was intended to keep Canadian corporations accountable for actions in global supply chains. We fought for this office over 10 years ago and are advocating to see it strengthened and not be dismantled. We had hoped to see more financial support to maintain and improve the office in this bill, and it is not there.
Thank you for your time and we look forward to your questions.
[Translation]
The Chair: Thank you very much.
[English]
Senator Marshall: Thank you very much. I will start with Ms. Paul. I’m wondering how the government could get it so wrong, in your eyes? I’m taken aback by your comments on the legislation. I’m wondering, were there any consultations? Did you submit a prebudget document? Can you just give us some idea as to whether you were invited to participate, or you just saw the Budget Implementation Act and, surprise, there it was?
Ms. Paul: Thank you for your question. We were not consulted. I don’t know of any environmental, not-for-profit organization that we work with, or even human rights organizations that we work with were consulted and knew these positions would be included in the middle of the hundreds of pages of the bill.
It certainly was a surprise. We received information through a journalist after one of the members of Parliament —
Senator Marshall: Did you know there were some amendments coming? Were you aware of that? You weren’t even aware of that?
Ms. Paul: We were not aware. Not at all.
Senator Marshall: It was a total surprise; no consultation?
Ms. Paul: Total surprise, yes.
Senator Marshall: That’s good to know. Thank you.
Ms. Freeman, Build Canada Homes, you referenced the fact that more transparency is required. That’s something I’m very interested in and I think more transparency is required too. I’m wondering what you’d like to see and compare it to what I would like to see.
Ms. Freeman: I’m excited as well. There are so many transparency questions, I’m trying to think of where to start.
First, a lot of money is going toward this. They’re building a new agency that costs money that could be going toward housing and maybe used with the CMHC, or whoever is already there.
What I would like to see is what percentage of this money is going to non-market housing. By “non-market housing” I’m referring to co-operatives, public housing, social housing, community housing like supportive housing for people fleeing gender violence, people struggling with addictions. To say we’re going to build housing from the bottom up and make sure no one falls through the cracks.
We are hearing a lot of talk about the need for housing supply. What I want to see is details about what kind of housing supply we need in Canada.
One thing we’re really missing — and I know CMHC really tries — there are a lot of organizations that try to do this. We don’t have great housing research. We don’t really know, across the country, what the needs are in each area. We know rents are going up, we know the cost of housing is going up, but we don’t know the exact type of housing that communities need.
When we hear Build Canada Homes say, we’re going to build way more affordable housing; we’re going to work with private developers; we’re going to give incentives for private developers and builders — well, they’re incentives. I grew up in an area where there was construction. Everybody around me worked in residential construction or were contractors. They’re trying to make a profit on that housing. That’s not what we need right now.
We need to make sure people are housed and can afford that housing. We know the types of housing Canada needs. Those are some of the details I want to see in this sector.
Senator Marshall: One of the areas that interests me is information on the number of units that has been completed, because everybody’s talking about what we’re going to do in the future but nobody ever, at the end of the day, says, “look, this is what we achieved.” Would that be an area that would be of interest to you or of concern to you?
Ms. Freeman: I think it’s really good to see builds. The CMHC does monthly or quarterly reports on new builds. If you look down into the new builds — or when they say vacancy rates are changing and you look to see what that is, it’s often one‑bedroom condos in Toronto and Vancouver that a family of four might not be able to afford and couldn’t live in.
Having more detail on the types of new builds happening, and we can see that, that would be useful. We need much more detail on that. Right now the reports come out and, oh, we built all of this new housing, and when you look to see what the housing is it’s not meeting the needs of people in Canada.
[Translation]
Senator Forest: My first question is for Ms. Paul. You have compellingly demonstrated the potential impact of section 5. People talk about thinking outside the box, but we can see that thinking outside the sandbox can have major consequences.
You’re calling on parliamentarians to amend Bill C-15. You want this section to be removed entirely. If that doesn’t happen, do you have any ideas on how to better regulate this policy and what safeguards could be put in place to prevent abuse?
Ms. Paul: Thank you for your excellent question, senator.
First of all, I do agree with you. In our opinion, this isn’t a sandbox we’re talking about, but rather a desert, because there are no limits to the sandbox. It is difficult for me to answer your question, in the sense that it is such a broad topic, with so few guidelines, which is why we’re asking for this part to be withdrawn.
As we said, if the goal is really to look at regulatory sandboxes and identify very specifically which regulations may be hindering innovation, then we’re talking about all the other provisions that should be proposed. I repeat: This should be specific to innovation. It should be done in a clear and well-defined manner, and with a time frame. We have none of that. We don’t even know which sectors we are talking about, which economic activities, which players or which companies.
For the moment, it is very difficult to propose amendments to such broad provisions, which, in our opinion, leave room for a great deal of arbitrariness.
Senator Forest: The government talks about innovation, competitiveness and economic growth, so the sandbox is rather vast.
Ms. Paul: Exactly, it’s quite vast, and that’s why we say it’s misleading to refer to the concept of regulatory sandboxes, because they’re really specific to innovation in very specific cases for certain technologies. We’ve seen this in Ontario, Alberta, and Barcelona, among other places. As you said, it’s innovation, economic growth, or competitiveness — the word “or” is used in the provision, not “and.” Essentially, we’re talking about any economic activity for very broad entities, as has been clearly pointed out.
Senator Forest: If you have any ideas for amendments that could better structure these initiatives, please send them to us. Thank you for your response. Do you have anything else to add?
Ann Ellefsen, Lawyer, Quebec Environmental Law Centre: You mention the legal aspect of innovation. Why are these sandboxes so relevant? As my colleague said, the uncertainty that comes with innovation leads us, from a legal standpoint, to want to propose a solution to ultimately avoid ending up with an empty corpus. In the case of growth, the aim is completely different. We are not trying to fill a legal void in order to better meet the needs of the population; we are trying to reduce regulation. These being completely different objectives, it is important to distinguish between them if we want to have a clear regulatory framework.
Senator Forest: Thank you.
[English]
Senator Cardozo: I want to ask our witnesses from the CLC, a couple of questions. I want to ask you about youth unemployment and your thoughts about that. The unemployment rate in Canada is about 6.9%, and the youth unemployment rate is just about double that.
As you know, it is a real problem not just in the short term when a person is young, but there are studies that continually show that people who are not employed in their first years of employment age have many years of being behind the eight ball and have a long time catching up. The other part of it is that they are increasingly politicized and radicalized.
What are your thoughts about what we could do? The government has announced the dates for its next summer program. Some of those will be 8 weeks of employment and not even the 16 weeks that most university and college students are off. Is there a way to do a really grand project on this, where we make this a national objective where all governments get involved and where the private sector gets involved? We realize this is a huge problem. If we did something for one year and changed the trajectory, maybe that would bleed over to the second year and the third year.
Mr. Cochrane: Thank you very much for this question. The youth unemployment issue is one that I have been examining for, frankly, over a year because it is not a brand-new problem. It was already a problem before the trade war began. The trade war has simply exacerbated this existing problem. If I can start on a positive note, something that could be built upon — I think the Youth Climate Corps is the nugget of an idea that could go some way toward addressing the problem of youth unemployment. The Youth Climate Corps is intended to take young people and give them skills and then put them to work on addressing climate issues of various sorts, and communities would identify the kinds of climate rehabilitation work that they need. I don’t know all of the details of what they might be involved in, but it is meant to provide skills to these young people, give them work experience, some income, and put them to work doing the kinds of useful things that the country needs.
We can all probably come up with a list of jobs that need to be done, but the private sector is not providing those jobs for a whole range of different reasons. The government’s approach to all of the economic problems we are facing is to try to incentivize the private sector. They themselves have said that this is the kind of thing that will pay off in 5, 10 years. We do not have 5 or 10 years. As you are pointing out, young people are without jobs right this minute, and more and more of them are going to be — not losing jobs because that’s not the problem at the moment. The problem is a lack of hiring. They are entering the job market, and the jobs are not there.
The share of the unemployed who are new entrants or re‑entrants to the labour market is at an all-time high. We also have a growing share of long-term unemployed, and a lot of those long-term unemployed are young people. Long-term unemployed is being unemployed for six months or more. Imagine that you enter the job market, and for six months you are applying for jobs week after week and not getting anything. At the same time, you are seeing rents climbing faster than inflation and grocery prices climbing faster than inflation. Any hope you may have had of moving out of your parents’ house, well, that’s dashed. You can’t find a job. You can’t afford to live. And as you said, this foments resentment and radicalization. What faith are these people to have in the prospects of this country? Put them to work. Just put them to work. Create the programs that put them to work. I don’t understand why this has to be so difficult.
We know there are jobs to be done. There are people who want to do those jobs. Put the two of them together. Stop just trying to incentivize to create this condition. It is an indirect approach that has not worked for the decades that we’ve been trying to do it. Just put them to work.
Senator Cardozo: Do you have a sense of how much the federal or the federal and provincial governments should be spending? Maybe you can comment on AI, because my sense is that a lot of entry-level jobs are increasingly going to be taken over by AI, everything from office jobs to coffee shop jobs to young lawyers, where lawyers will say, “Why hire a junior when I can get the answer in two minutes off my computer?”
Mr. Cochrane: I think we need to pull apart some things when it comes to AI. I think it is very overhyped, both in the immediate detrimental impact it will have on jobs and on the hopes for the good that it is going to accomplish. A KPMG report said something like 91% of companies have now incorporated AI in some form into their business, but I think it was only 2% that could identify any kind of positive financial return from that. I suspect it is a bubble that is about to burst.
Where it has maybe been having some impact is another reason businesses are delaying hiring. It is not that they don’t need these workers, but they are kind of waiting. Is the AI solution for this just around the corner? If I hold off, is AI going to do what I need done so that I don’t have to hire this worker?
It is one more reason why young people are struggling to find jobs. I don’t think it is the big major concern. The lack of investment generally, businesses having so much uncertainty because of the trade war, not wanting to make their investments, and so not hiring to do the jobs.
[Translation]
Senator Hébert: I would like to return to the issue of regulatory sandboxes.
Ms. Paul, in your opening remarks, you said you were surprised that this element was included in the Red Tape Reduction Act, but that it was not just a matter of red tape. I think the government’s intention was to find a vehicle to extend this concept to other departments and agencies that could benefit from it. We are not the only ones doing this. The European Union has adopted something on regulatory sandboxes for artificial intelligence.
I understand that your concern is that this is widespread across several departments and agencies. However, we need innovation in Canada, and we need to keep up with other countries around the world that are implementing sandboxes for their businesses. Canadians are not known as champions of innovation in several sectors that are crucial to meeting the challenges ahead.
I would like to hear a little more about the question Senator Forest asked you. What would reassure you, given that artificial intelligence and innovation are very broad concepts and are found in all departments and agencies?
Ms. Paul: Thank you for your excellent question. Indeed, we are using a vehicle that is the Red Tape Reduction Act. Our concern is not simply that it is broad in scope, meaning that it can target any entity, not just a legal person, but also federal and provincial government entities.
Our concern is that it’s the wrong vehicle. Forgive me for saying so, but it’s like adding a monster’s head to a vehicle that isn’t designed for that at all. Regulatory sandboxes target regulations and are designed specifically for that purpose. You cite an excellent example in the field of artificial intelligence. What are the obstacles? How can we justify giving a blank cheque that allows us to disregard—I say this again, because it is at the heart of the matter—all federal laws, with the exception of the Criminal Code? While no exceptions can be made in the case of murder, they can be made in the case of all other laws. So there is a very important distinction to be made here: we are not simply talking about regulations, but about legislation; that is why I referred to the erosion of the principle of law and the role of the legislator.
You asked the question: what are the obstacles if they are known? Can we propose regulatory sandboxes that are truly regulatory sandboxes, meaning that parliamentarians can debate, in complete transparency, a proposed regulatory change to stimulate innovation?
You’re right: we need to innovate, it’s very important, and if the obstacles are known, let’s discuss them in a very focused way. I think that’s what we see happening elsewhere. The idea is to learn from mistakes before going too fast and casting too wide a net. So we do tests, but to do so, we need a defined sandbox, with very specific proposals that would be submitted to you for debate, on a very specific activity, to determine which technology we are aiming to improve.
As you said, none of this is happening. It’s a challenge.
We are no longer dealing with red tape, but with the outright trampling of the rule of law; in addition, there is no indication as to which sector is being targeted.
Ms. Ellefsen: Indeed, there are initiatives being taken elsewhere, and we consulted this literature in order to prepare ourselves.
What we understand from these lessons is that it is based on innovation and that the key to the success of these sandboxes is to precisely define sectors, themes and priorities. This is what makes them useful and fills this void. This unpredictability is what drives innovation.
We are in a context of innovation, not economic prosperity. We are in a clearly innovative context, and lessons learned from various administrations tell us that even in a highly defined context, safeguards are obviously needed to ensure that it works. There has been a great deal of literature on this subject, and these considerations have also been raised before several European bodies on issues related to the rule of law.
It is in light of their experience that we are conveying this message today.
[English]
Senator MacAdam: My question is for the Canadian Labour Congress. In a recent statement, your organization indicated that the federal government’s 2025 budget fails to adequately address the affordability issue, fails to address the daily realities facing workers and what working people are demanding instead.
What specific alternative or additional measure does the CLC propose that would have a more immediate and significant impact on affordability?
Ms. Freeman: Thank you for your question, senator. There are several areas that we’re asking for in terms of affordability.
First, we’re asking for national pharmacare and health care to ensure people are not paying out of pocket. I know there have been recent changes and debates around the Pharmacare Act, so we are advocating for that to ensure people have access to health care and not pay out of pocket.
Additionally, when we think of another area of affordability, we think of child care. There are major issues with child care across the country. There are programs with the $10-per-day child care, but there are child care advocacy organizations asking for more than what we are formally getting. Apparently now with the budget, it is covering what had been there in the past, but it is not covering for more people. That means fewer children and families will have access to affordable child care.
Housing is a huge thing affecting people in Canada, all over the country. I can’t think of any city, any town or even a rural area that is not facing a housing and homelessness crisis right now. I really do appreciate the federal government focusing on housing. We have not seen that. The previous Trudeau government was the first that we have seen in a long time doing this.
I am happy to see this government doing it, but we need to find a way to ensure that people on minimum wage, such as a PSW in Vancouver, can afford rent in Vancouver and does not need to take transit for two hours to get to their job. An electrician in Halifax who makes maybe $40 an hour can barely afford a one-bedroom apartment in Halifax.
We need to start thinking about rent. This is usually under the jurisdiction of the province, and this is something that is missing in this budget. We are not seeing the federal government stepping in to make any measure about rent. The Canada Housing Benefit is something for the lowest of the renters. The eligibility is too low for most people to access it.
The government is not stepping in and saying that we need rent control. They’re talking to the provincial governments and saying that we need to control rent. That’s one area where we can think about affordability.
Mr. Cochrane: If I could have a moment to talk about the other side of affordability, which is income. Prices are one and income is the other.
At a time of high and rising unemployment, we will see income growth slow, and we’re seeing a lot of unevenness where jobs are being lost, incomes will stagnate and worsen. Algoma Steel just this week announced it will lay off 1,000 steelworkers. These are very well-paid workers but who will now be going without.
There are a lot of people in this precarious position of not knowing if their jobs will be around in a few months’ time. We need to see leadership from the government that it understands the scale of the problem.
Talking about the steel industry specifically, it faces huge challenges, losing access to a market of 400 million people. How will we address those challenges?
The government convened a sectoral table to discuss the issue of steel producers and steel users and how they could get them together, and then nothing more came of it. What are the consequences? Well, it is a $400 million cheap loan to Algoma Steel and then 1,000 lost jobs.
What the government is currently trying to do is not working. It needs to show it understands the problem and it will work with stakeholders to develop a plan to address that to ensure that people’s incomes are protected.
We are incredibly uncertain, and as we see prices rising, that uncertainty will translate into all kinds of anxiety. If inflation comes to pass, if job losses come to pass, then the negative consequences will follow.
[Translation]
Senator Oudar: I have a question for the Canadian Labour Congress. In your introduction, you mentioned the refundable personal support workers tax credit. I would like to hear a little more about that, particularly in relation to the bill. How are health care facilities defined? The fact remains that not everything is covered.
Do you have an opinion on this issue that you could share with the committee?
When you consider what personal support workers must do to obtain their tax credit, which can be as high as $1,100 and represents 5% of their eligible income—that’s a significant amount. In addition, the conditions are cumulative: they must perform duties as personal support workers and comply with a professional’s instructions; they must do this throughout the year as part of their primary duties.
I have not heard any criticism of this measure. You seemed to agree with it. Do you have an opinion on this measure? Should it be amended, or do you agree with it?
[English]
Mr. Cochrane: I hope it was clear that we offered very soft support for doing something, because the situation facing personal support workers, both the inadequate incomes that they are paid, the lack of more of these workers to support the growing number of people who need that kind of personal support worker, this tax credit is the absolute bare minimum that could be done to support them. So we’re happy to see something.
It falls well short of what actually needs to be done. I get that this is where federalism comes into play, because it is mostly under provincial-territorial jurisdictions. I also feel that any time the federal government wants to bypass what supposedly is provincial jurisdiction, they do so, and when they want to point to it as a reason not to do something, they do so.
If they really wanted to assist personal support workers across the country, there are things they could do. They could mandate that the provinces adhere to certain salary levels and then negotiate what kind of financial supports would come from the federal government to get salaries to those levels to attract more people to do this work, to ensure we have the numbers needed.
You are absolutely right that the tax credit is a pretty meager measure. It’s better than nothing. It’s really trying to find the things in the bill that we could point out to say that it’s not all bad. Yes, this is a thing that we’re happy to see. Would we like to see something else? Yes, absolutely. Directly pay these workers much closer to what I think everybody would agree that they are worth.
Ms. Freeman: I worked for many years at the Hospital Employees’ Union in British Columbia. The government at the time there during the pandemic levelled the wages for PSWs, what they call health care aides in B.C., and people were in tears about this wage levelling. I think this was between the private and the for-profit, or the for-profit and the public sector long-term care, or what we call nursing homes here. That is something we could see across Canada that it is needed. They could do it there. It would cost them a lot of money.
Now they are dealing with for-profits who are going to be getting that money and now aren’t paying people as well. But people are doing exactly the same job and getting paid. There was between $6 to $10 an hour difference for the same job. That is something that Mr. Cochrane was talking about, that we do need to look at wages and find a way to level that up, to make them have more public long term care homes and nursing homes than private is kind of —
[Translation]
The Chair: Thank you, Ms. Freeman.
Senator Dalphond: I hear a lot of disappointment from our participants tonight. Is that how you perceive Build Canada Homes?
[English]
BCH which is committed to spend half of its budget on social housing and non-market housing.
Ms. Freeman: I think that it is great. I think it is great that they are advocating to do that.
I am also concerned that we might need more than that. The federal government stopped funding public housing and put it on to the shoulders of the provinces in the 1990s after Mulroney and Chrétien. We have not seen substantial funding for that type of housing. Even though they are giving half of the budget money to that — it might seem like a lot, and it is a substantial amount — but it doesn’t account for decades of lost money going into that.
For me, I would like to see more of it going toward non-profit cooperative housing. Cooperative housing is a great solution where people who need subsidized housing can live. People who can pay and afford market rates can live.
When I was in Vancouver, so many people in the public service, unions and academia lived in co-ops and helped govern that and supported people. There are a lot of ways to make that money go further. But I also think we need to invest more in cooperative housing than they are. They are giving a little bit more. We need to go way more into public housing and also thinking about the supportive housing. Yes, I am happy to see the government focus on housing. I think it could be more.
Senator Dalphond: The Parliamentary Budget Officer was here earlier today. According to his revised estimate, there would be 26,000 units built over five years with this $16 or $17 billion, including 13,000 over five years for social housing. We’re talking about 2,500 to 3,000 units per year in social housing when the needs in Montreal are about 78,000 units for Montreal alone.
Are you still considering it is a major step forward, what we are doing now?
Ms. Freeman: Well, it is a step forward from doing nothing for decades, yes, but not a step forward for what we are doing now.
For years, the housing sector has received nothing from the federal government, so people are excited to see anything they can get.
I’ve been in consultation with multiple housing organizations that are scared to say anything bad about Build Canada Homes because they are so happy for the scraps they are getting. So I think that is a tricky thing.
We are saying it is not near enough to solve the problem, but this is more than people have been seeing in a long time. They don’t want to lose what they are getting so they are a bit cautious, I think, to say anything bad about it. But some of us aren’t, and we are willing to, but we also want to continue it.
Senator Dalphond: Was it necessary to create a new agency? Couldn’t they have left that to the Canada Mortgage and Housing Corporation and say add this to your mandate?
Ms. Freeman: I agree, yes, and use that money to directly build housing.
And I have concerns too about the agency. There is nothing to stop or control financialized landlords. There is nothing that is putting limits on people making profit on housing. I think I am worried that this agency is going to start looking like a public-private partnership to support the private sector. I think that’s something that we need to hold this government accountable for and make sure that doesn’t happen.
So, yes, I ask for more. I would love to see more housing, but people are happy to get anything. I think that’s a really difficult position for people in the sector to be facing.
Senator Pupatello: My questions are also for you as you get all the focus tonight, or a lot of it. But I want your comment. A number of people have come before the committee, this one and the Banking committee, with their serious concerns about the debt-to-GDP ratio, the level of spending, et cetera.
There are quite a wide range of opinions that comes to the table: One, we’re spending too much; we need to tighten our belt, focus on helping the private sector, et cetera; then the other is the PSW credit should be higher, and there is more spend, more in hospitals, et cetera.
Whether or not it is that level of government responsibility, as you mentioned, the feds are finding their way around that through a tax credit, for example. How do you square that?
We have this big, wide range of opinion. The government has to walk this line of finding the money to do the things for the people who really need the help and then, as you mentioned, the thousand Algoma Steel workers, they need to work.
We are in the middle of a trade war that is probably our generational crisis for the economy. I would like your comment and your view of the budget as it addresses the trade war, because that’s about workers working to help us pay to do more for people who really need help. There is that element.
Then your commentary on, if you ever do look at the larger fiscal positioning of the government, your view there?
Mr. Cochrane: Yes. I’m happy to comment on the fiscal picture. I will say that people who are concerned about the size of the deficit don’t know what they are talking about, pure and simple.
The deficit right now is well within historical norms. If I can go back in time, during World War II, federal spending approached 50% of GDP. During World War II, Canada’s productivity was, by far, at its highest level.
Right now there is this popular idea held by our Prime Minister, and many others who subscribe to his ideology, that the public sector takes away from the private sector. Nonsense. The two work together.
Public money spent in the right way crowds in, attracts the private sector. If the federal government were to invest in a true nation-building project, just high-speed rail from coast to coast, they are going to need all kinds of private-sector providers to give services, supplies, to undertake this project. Those businesses would love the income that would come from the government spending.
Okay. You are going to put huge amounts of money into the economy, like we did during World War II. Fiscal responsibility requires that you tax that money back so that you don’t end up with excess money supply that can drive inflation. But you have to tax that money back from where it ends up doing no good and that is hoarded by the ultra-wealthy and corporations that aren’t investing, that are instead distributing their currently record-high profits.
So increased taxes where money is pooling and not being put to good use, and spend the money where it can actually do good.
Senator Pupatello: On the measures you saw in the budget related to extra supports for these sectors that are really struggling, like the steel industry, those are all measures you support because it is helping people keep their jobs?
I don’t know if there are others, because I’m a little confused with some of your comments because I think you said don’t use the private sector for housing, do it social, all public. You just said partner with the private sector and that’s how you — so you guys have to check your notes.
Ms. Freeman: No, I hear what you are saying, but it is to focus on building public housing. You need to use the private sector to build because we don’t have a —
Senator Pupatello: Was there anything in the budget that you liked about what we’re doing around this trade war which our members, your members, we are all affected by this? Our economy is in a crisis because of it. I think it will be one we talk about it with our grandchildren. Your members in the Americas, you mentioned some of your unions are also American-based, they are telling their president they like knocking Canada out of the supply chain. They are not really being our friends at the moment either, and that’s very concerning because a lot of their wealth comes from Canada.
The Chair: A very short answer, please.
Mr. Cochrane: I think that “Mr. Elbows Up” is currently showing that he is completely out of touch with what is needed. The scale of the challenge that is faced by both employers and employees is way beyond what the budget is offering. The Prime Minister does not recognize the challenge.
The Chair: Thank you, Mr. Cochrane. That’s clear.
[Translation]
I have two quick questions for the Quebec Environmental Law Centre. When you talk about removing Part 5, are you referring to Part 5 or Division 5 of Part 5? Because Part 5 contains all the extraordinary provisions relating to the high-speed train. Did that include that as well?
Ms. Paul: No, you are correct. We are talking about the provisions they want to add, namely Part 2 relating to the Red Tape Reduction Act, in Division 5 of Part 5.
The Chair: I would like to know what you think about the rules relating to the high-speed train and everything related to expropriation, relocation of services, compensation and where the line will run. I am less familiar with the area leading to Toronto, but I am very familiar with the land that will be in the Quebec City-Laval and Quebec City-Montreal corridor. It is agricultural land, along with wetlands and forests. What do you think of these exceptional powers?
Ms. Paul: That’s an excellent question. Unfortunately, we haven’t had the opportunity to examine these provisions in detail. That’s also why there is no brief to supplement our presentation. Finding out about these provisions came as a complete surprise.
That said, you raise some important points. I would like to add a word of caution: I know that this corridor needs infrastructure projects, but we must adopt an approach that will provide a structural solution, create jobs and stimulate the economy. If we end up sacrificing biodiversity, we will not necessarily come out ahead. This is where we need to be careful about one of the elephants in the room, which is not only implying that laws are useless and incidental, but also continuing to pit the economy against the environment. In 2025, we can and must do better.
We also know the costs of our inaction on climate change and biodiversity, which amount to billions of dollars per year. In Quebec, we are always very cautious when provisions that disregard the principles of biodiversity protection are proposed for the sake of accelerating growth. It is dangerous to imply that laws are blocking everything; this is a dangerous generalization, because laws have a purpose, but the rule of law is just as useful for our economy, as it creates a stable, predictable and fair environment in which stakeholders and the government can be accountable.
The Chair: If you have any documentation, briefs or presentations to supplement your answer on this particular section, I would appreciate it if you could send them to us. We know that environmental groups tend to be in favour of the high-speed train, so I want to make sure that just because you are in favour of the high-speed train, it does not mean that you support projects that will bypass certain environmental considerations.
Mr. Cochrane and Ms. Freeman, I did not hear you mention the public sector pension surpluses that will be transferred to retirement programs. In 2024, the government also used the surpluses, $1.9 billion in this case, to reduce the deficit; now, $1.5 billion is being allocated to the retirement program to reduce the public service workforce. I would like to hear your views, if you have any, on the issue of the employer having sole discretion over the use of surpluses.
[English]
Mr. Cochrane: I think it’s bordering on fraud. It’s taking funds that were not meant for that purpose and putting them to a purpose that was not what they were earmarked for. When you’re taking pension funds from public sector workers at the same time as you intend to reduce your workforce, it feels like adding insult to injury. There are much better, more supportive ways that those funds could be used, and I know that our public sector affiliates have ideas about how those funds could be used in better ways. Yes, we have significant issues with what the government is doing.
[Translation]
The Chair: Thank you very much. That concludes our session for today; we will resume tomorrow at 6:45 p.m.
Thank you very much; thank you for your generosity and your testimonials.
(The meeting is adjourned.)