Budget Implementation Bill, 2021, No. 1
Second Reading
June 28, 2021
Moved second reading of Bill C-30, An Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021 and other measures.
She said: Honourable senators, I rise today to introduce Bill C-30, the Budget Implementation Act, 2021, No. 1. I’m proud that for the first time in the history of Canada, a woman finance minister introduced this fundamental legislation. I’m also proud to stand here today, as a woman, sponsoring this bill in the Senate. We must acknowledge these moments in our history and be grateful for the progress of women’s equality in Canada.
This bill has many measures that will help women recover from the pandemic and provide them with the opportunity to fully participate in the economy for years to come.
This bill enables the government to move forward with selected measures from Budget 2021, to continue its response to the COVID-19 pandemic and manage the economic recovery.
Budget 2021, which was presented on April 19, is a blueprint for how the government wants to set the annual economic agenda. The budget sets out the plan for a greener, fairer and more prosperous economic recovery for all Canadians.
This plan includes many important measures that reflect our country’s common economic and social foundations. It addresses the challenges we face and sets out our vision for the future.
A number of the proposed measures have a longer and broader scope, meaning that they will carry over to the next fiscal years. For example, the budget proposes the creation of a Canada-wide early learning and child care system, investments to reduce greenhouse gas emissions, an increase to Old Age Security to help seniors, and extended measures to help businesses. These measures reflect Canadians’ current aspirations, and Bill C-30 is a first step towards implementing this ambitious plan.
The recession caused by COVID-19 has disproportionately affected certain Canadians, including low-wage workers, young people, women and racialized people.
For businesses, it has been a two-speed recession, with some finding ways to prosper and grow but many others, especially small businesses, fighting to survive.
The measures included in Bill C-30 seek to address difficulties the COVID-19 recession has created for Canada, to support individual Canadians and to put measures in place to help businesses return on a path of long-term growth.
Honourable senators, the government is confident that the spending in the budget is reasonable and sustainable. They have pointed to a couple of key markers outlined in the budget. The first is that the budget shows a declining debt-to-GDP ratio, falling to 49.2% in 2025-26. Second, there is a declining deficit, falling to 1.1% in the last year.
Outside validators have also weighed in and said the budget is sustainable. On April 26, Standard & Poor’s credit agency reaffirmed Canada’s AAA credit rating, the highest there is, and said the outlook was stable. Also, former Bank of Canada governor Steven Poloz, who was appointed by the previous prime minister, said that in his view the assumptions in the budget were actually small-c conservative and he believed there was a sustainable path forward.
The budget not only provides a sustainable path forward, but important economic growth. The budget provides prudent growth projections based on the average of private-sector economic forecasts. The use of these indicators is a long-standing practice that dates back to 1994. Further, a recent report by the PBO found that the budget measures:
. . . will provide a temporary boost to real GDP growth in 2021 and 2022. By the end of 2025, we estimate that Budget 2021 measures will increase employment by 89,000 net new jobs.
First, we know that to revitalize Canada’s economy, Canadians must be vaccinated. Vaccination campaigns are accelerating across the country. There is a glimmer of hope and optimism after a difficult year marked by many sacrifices.
To support these efforts, Bill C-30 proposes a one-time payment of $1 billion to the provinces and territories to reinforce the rollout of vaccination programs. The federal government’s efforts to procure vaccines together with planned investments will make it possible for Canadians to kick-start the recovery with confidence.
Despite the progress being made with vaccinations, the COVID-19 pandemic continues to put significant pressure on health care systems across the country, and Canadians have urgent health care needs.
Bill C-30 proposes to contribute $4 billion through the Canada Health Transfer to help the provinces and territories address immediate pressures on the health care system.
These amounts are in addition to the federal government’s investments in health care systems from the beginning of the pandemic, including the $13.8-billion envelope for health under the Safe Restart Agreement. This additional funding will help health care systems provide Canadians with the health care they need and address the backlog of medical procedures.
Bill C-30 also includes more than $2.9 billion in initial funding for potential agreements with provinces and territories to support the government’s commitment of $30 billion over five years to provide high-quality, affordable and accessible early learning and child care across Canada.
As noted by economist Armine Yalnizyan, the pandemic is a “she-cession.” After 15 months of the pandemic, women have accounted for 66% of Canada’s job losses and have borne the brunt of increased costs. This was due to the rise of unpaid work as a result of school closures and the loss of services in the early learning and child care sector.
The government wants to support economic growth for women and families and child care can help lift them up from these difficult times. The government plans, within five years, to provide families everywhere in Canada with access to high-quality early learning and child care for an average of $10 a day.
The funding included in Bill C-30 kicks off a system that would work for families across the country, since quality early learning and care provide many social and economic benefits. A Conference Board of Canada report showed that for every dollar spent on early childhood education programs, the economy gets about $6 worth of economic benefits in return.
For children, the benefits are immeasurable. The Early Childhood Education and Care: Next Steps report from the Senate’s Social Affairs Committee found that the earliest years for children are pivotal to a child’s growth and development, and providing high-quality education and care provides that head start.
The chair of that report, our former colleague Senator Art Eggleton, used to say it more succinctly: “Study after study confirms that children who arrive at school ready to learn become adults prepared to succeed.”
The Province of Quebec has been a leader in this regard, blazing the trail for the rest of Canada. The federal government’s decision to get involved is timely and addresses a long-standing problem the pandemic forced to the forefront. COVID-19 exposed the fact that, without child care, parents, typically mothers, cannot work outside the home. COVID-19 exacerbated the situation and showed us just how serious this economic and societal issue is.
The government’s plan to set up an early learning and child care system will help increase parents’, and especially mothers’, labour force participation. It will also create jobs for child care workers, more than 95% of whom are women, and give all children in Canada a solid foundation for a better future.
Colleagues, Budget 2021 and Bill C-30 contain measures to ensure that jobs come roaring back and hard-hit businesses can rebound as quickly as possible. The government, through Budget 2021, has committed to create nearly 500,000 new training and work opportunities for Canadians. As part of Bill C-30, the government is also proposing to extend existing supports for Canadians and Canadian businesses to help them through the third wave of the virus and towards recovery.
To date, the Canada Emergency Wage Subsidy has helped more than 5.3 million Canadians keep their jobs. A total of $81 billion has been paid out to 440,000 businesses. The Canada Emergency Rent Subsidy and Lockdown Support have helped more than 190,000 businesses with $4.14 billion in subsidies to help them pay their rent, their mortgage and other expenses. The wage subsidy, the rent subsidy and Lockdown Support were supposed to end in June 2021.
However, it’s clear that the impact of the third wave and extended closures calls for the extension of these programs to keep businesses afloat during this time of grave economic uncertainty. Bill C-30 extends these measures until September 25, 2021, providing an additional $12.1 billion in support.
Bill C-30 also proposes to provide a bridge for people who are still unable to work by maintaining flexible access to EI benefits for another year until the fall of 2022. The government is also proposing to extend the number of weeks available for important income supports such as the Canada Recovery Benefit and the Canada Recovery Caregiving Benefit.
The Canada Recovery Benefit was created to support Canadians not covered by EI. Nearly 2 million Canadians made use of the program, with over $19 billion in financial aid. Bill C-30 would provide for an additional 12 weeks of benefits for Canadians.
This legislation would also extend the Canada Recovery Caregiving Benefit for an additional 4 weeks to a maximum of 42 weeks. It would also maintain the $500-per-week benefit in the event that caregiving options, particularly for those supporting children, are not sufficiently available as the economy begins to safely reopen. This income support has already helped nearly 420,000 Canadians, with $2.6 billion in payments.
The government has also committed through Bill C-30 to better support Canadians suffering from illness or injury beyond the existing pandemic supports by extending EI sickness benefits from 15 to 26 weeks. This extension, which would take effect in summer 2022, would, every year, provide approximately 169,000 Canadians with additional time and flexibility to recover and return to work.
Colleagues, in this budget, the government is committing to increase prosperity for Canada’s middle class and improve equality of opportunity. In Canada, low-income workers are among the hardest hit by the pandemic. Over the past year, they have faced a high risk of infection and many of them have lost their jobs. These workers were the backbone of the Canadian economy during this time of great turmoil, and their many sacrifices made it possible to continue to provide Canadians with essential goods and services.
However, many of these workers live below the poverty line despite the fact that they work full time. Such injustices and inequities have no place in a privileged country like ours. The government is proposing to address this problem by expanding the Canada workers benefit, investing $8.9 billion over six years to provide additional support for low-income workers. That amount will provide a supplementary income to approximately one million additional workers and will help lift 100,000 Canadians out of poverty. Bill C-30 also provides for a federal minimum wage of $15 an hour, which will benefit over 26,000 workers.
Young people were among the hardest and fastest hit when the pandemic struck, experiencing more job losses than any other demographic. The government is committing to putting young people at the centre of Canada’s economic recovery, not only to help them rebound today but to invest in their future success and the future stability of our economy.
The government’s commitment to young Canadians is one of the largest plans in the world, totalling $13.1 billion over six years. This includes supporting Canadians in making college and university more accessible and affordable. To achieve this, Bill C-30 would extend the waiver of interest on federal student and apprentice loans to March 2023. Waiving the interest on student loans for one additional year will provide savings for the approximately 1.5 million Canadians repaying student loans.
At the other end of the age spectrum, no one has suffered more devastating health impacts than seniors these past 15 months. Older Canadians have also faced additional economic burdens as they took on extra costs to stay safe. Even before the pandemic, many seniors were relying on monthly benefits to make ends meet. As seniors get older, they tend to have lower incomes and often face higher health-related expenses because of the onset of illness and/or disability. This vulnerability is further compounded by a reduced ability to supplement income with paid work, the risk of outliving savings and the risk of becoming a widow or widower.
A recent report from the Canadian Centre for Policy Alternatives also showed that certain seniors are hit harder than others as they age. The report shows that Indigenous and racialized seniors have much lower retirement incomes and higher poverty rates than non-racialized Canadians. The poverty rate for Indigenous seniors is 22%, and for racialized seniors it is 20% compared to 14% for non-racialized seniors. Many have to rely on public pensions such as the OAS to look after themselves and their families.
They also found that there is a consistent gender gap between seniors from all demographic backgrounds. Senior women had lower incomes and higher rates of poverty compared to men. The report further said that the OAS, along with the GIS, is an important anti-poverty measure and is a crucial source of income for Indigenous and racialized senior women. To narrow retirement income disparities, they welcomed the increase to OAS for seniors 75 years old and above, which is outlined in Bill C-30.
To help ensure a safer, more secure and dignified retirement, in Bill C-30, the government is proposing a 10% increase in Old Age Security benefits for people aged 75 and over on a permanent basis effective July 2022. This will increase benefits for approximately 3.3 million seniors. In addition to this increase, the bill provides a one-time payment of $500 in August 2021 to Old Age Security recipients who will be 75 years of age or older as of June 2022, to bridge the gap between the permanent increases and the needs of older seniors now.
Colleagues, in this legislation, the government is also committed to supporting small businesses, which are at the heart of our economy and have been extraordinarily hard hit by lockdowns.
As part of Budget 2021, the government laid out a longer-term plan for robust, sustained growth for Canada’s small businesses in addition to extensions to the wage subsidy, rent subsidy and lockdown support that are intended to bridge businesses into recovery.
Bill C-30 proposes to create the new Canada recovery hiring program, which will run from June to November and make it easier for businesses to hire back laid-off employees or to hire new workers. The government estimates that this measure will provide a total of $595 million in support.
Small businesses need access to financing in order to invest in people and innovation, and to have the space to operate and grow. To help businesses, Bill C-30 enhances the Canada small business financing program through amendments to the Canada Small Business Financing Act. This will mean broader eligibility and increased loan limits.
The proposed changes in Budget 2021 are expected to increase annual funding by $560 million, which will provide support to approximately 2,900 more small businesses.
Like small businesses, cities and towns have faced steep revenue declines because of COVID-19.
To support communities across Canada, to maintain and build the local infrastructure which Canadians depend on, Bill C-30 includes $2.2 billion to flow through the Federal Gas Tax Fund, which would be renamed the Canada Community-Building Fund. The projects that will be supported through this fund will help lay the foundation for long-term recovery and, through stronger communities, a more resilient country.
The final measure I would like to outline concerns measures related to corporate beneficial ownership transparency. Although Canada has faced some criticism over the years for the perceived lack of enforcement over money laundering and corruption, the measures proposed in Budget 2021 and Bill C-30 would jointly help reverse course towards a risk-based approach to anti-money laundering compliance.
The establishment of the beneficial ownership disclosure requirement, as proposed in Budget 2021, and the amendment to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to strengthen the criminal penalties in Bill C-30, are consistent with the approach adopted in several other jurisdictions.
I’d also like to point out that the bill contains specific measures to counter tax avoidance, such as the expansion of the scope of the foreign affiliate dumping rules. In addition, outside of Bill C-30, the government recently agreed with its G7 counterparts on setting a global minimum corporate tax rate of at least 15%. This is an important step in terms of coordinated action to address tax havens exploited by far too many multinational enterprises.
I wish to thank my colleagues Senators Wetston and Downe for their hard work on this matter over the years and congratulate them on their advocacy work on these important issues.
Colleagues, as you can see, Bill C-30, as presented in Budget 2021, is vital for the implementation of a strong, equitable economic recovery.
Not only does it include investments to support recovery from the COVID recession, but it also includes support measures for Canadians and businesses that are needed to bridge those hardest hit by the pandemic to better days.
I urge all senators to join me in supporting the passage of this vital bill. Thank you.
Thank you, Senator Moncion, for your excellent and optimistic overview of Bill C-30.
Honourable senators, I am speaking to Bill C-30 with a specific focus on the millions of people in Canada who live below the poverty line. Depending on which numbers we use, between 1 in 10, or 1 in 7 Canadians live in poverty, many of them Indigenous and racialized women and children, which is particularly vital to reflect upon right now as Canada has yet to address housing and health crises, including boil-water advisories; as Canada continues to fight First Nations children in the courts; as Canada has yet to implement the Truth and Reconciliation Commission’s Calls to Action and National Inquiry into Missing and Murdered Indigenous Women and Girls Calls for Justice; as Canada’s shameful residential school record is replicated today in current child welfare, juvenile and adult prisons.
Despite some laudable initiatives in Budget 2021, the government persists in leaving far too many behind. Throughout this pandemic, we watched as unemployment rates reached the highest levels since the Great Depression as working-class, low- to middle-income households faced eviction, homelessness and food insecurity. We watched as one in three children accessing food banks still went hungry. We watched as women, Indigenous peoples, racialized people, newcomers, seniors and those with disabilities faced inequality intensified by the pandemic.
Today, Black and Indigenous peoples are 2.7 times more likely than the overall population to report difficulty making rent payments, and urban Indigenous peoples are 8 times more likely to experience homelessness.
Colleagues, many of us have had both the humbling privilege and the corresponding responsibility of hearing from people behind these statistics, whose well-being, health and indeed lives have been put at risk by Canada’s policies; the people who have been left out of the forms of emergency response we have prioritized; people evicted from their homes and left on the streets in winter, during a stay-at-home order; personal support workers earning a pittance caring for elderly residents of care homes — some of the most vital and most risky work during this pandemic — yet who sleep in homeless shelters because rent is unaffordable even for those working full-time at minimum wage in nearly every Canadian neighbourhood; people on social assistance and kids transitioning out of foster care who were encouraged to claim the CERB, the Canada Emergency Response Benefit, as a desperately needed lifeline and therefore lost access to other support payments and programs for low-income people and for whom repaying CERB money to the government means they go without food or other essentials.
There is nothing in this budget to improve the prospects of people beneath the poverty line. A growing majority of Canadians of all political stripes and income levels are calling for guaranteed livable income to ensure that anyone who finds themselves in need can have access to income necessary to live securely and freely, making choices for their personal well-being.
In place of this type of permanent and comprehensive program, Bill C-30 provides short-term extensions and programs that meet some, but not all of Canadians’ needs, for some but not all Canadians. Similarly, Bill C-220 provides for bereavement leave for those in the federal sector protected by the Canada Labour Code, and many are calling for sick leave, but none of these measures would be available to those who are self-employed, living with a disability or are caring for children or friends or family members who are elderly or who have disabilities.
The flagship program in Bill C-30 for people below the poverty line is a minor $1,000 annual addition to the Canada workers benefit. The government acknowledges that at best it might move about 3% of those currently in poverty who are working at minimum-wage jobs to a few hundred dollars above the poverty line. This measure neither responds meaningfully to the depth and breadth of poverty that exists in Canada nor the fact that so many people working full time at minimum-wage jobs cannot scramble above the poverty line.
Like CERB and Employment Insurance reforms, the current initiative fails to provide supports to everyone in need and, instead, picks and chooses people based on their work status. The assumption that some people are deserving of support, but others are not, belies Canada’s commitment to human rights and human dignity. It ignores evidence from basic-income pilots that people receiving direct income contribute more, not less, to their communities through both paid and unpaid work. It is also willfully blind to the fact that keeping people in poverty costs much more than supporting people to rebound out of it. Poverty has health, human and social costs, but also financial costs in terms of loss of productivity and investments in emergency health care, shelters and criminal legal system costs, estimated at up to $33 billion per year for residents of Ontario alone.
Are we really so afraid that people will not work — despite the lack of evidence to suggest this — that we are willing to pay more to keep them in poverty than it would cost to give them supports?
Bill C-30 measures that support universally accessible childcare are touted as vitally important to support women in participating in the workforce and earning income. I agree. However, a childcare program on its own is of little use to those who cannot work or cannot find work; those earning so little that even a few dollars per day for childcare is an unaffordable expense; those working shift work or gig work at hours when childcare programs are not available; those in rural and remote areas where childcare programs are not operating; or those whose children need culturally sensitive or care tailored to meet specific health needs.
Some parents will still need or choose to stay home or will be unable to access this form of child care and have to pay more for alternatives. A direct income support measure like a guaranteed livable income could help ensure more equitable access to any child care program and other options for caring for children.
Budget 2021 and Bill C-30 also fail to take a long-term, anti-poverty approach to the affordable housing crisis. By October 2021, over 125,000 households will be struggling under the weight of rental arrears totalling $150 million and will likely face eviction. Census data shows that Canada lost 322,000 affordable housing units within the past decade. The demand for affordable rental housing far exceeds the amount promised under the National Housing Strategy and the Rapid Housing Initiative. Furthermore, the Bill C-30 amendments to the Income Tax Act do not limit the ability of large capital funds, including real estate income trusts, to purchase rental housing assets — a measure that could have helped prevent the rapid decline in affordable housing.
Canadians who have reached out to us throughout this pandemic about guaranteed livable income asked if we, in this place of privilege, have ever struggled to make ends meet the way that impoverished Canadians we are placed here to represent do every single day. People ask what we would do if we and our families were on provincial and territorial social assistance incomes that provide less than half of the poverty line and that claw back and criminalize people for trying to earn enough to climb out of poverty, or if we were prohibited from saving money and taxed at 100% on other income, including loans.
As we head into a summer break and the looming possibility of another election, many of us share the concern that the status quo, supplemented by Bill C-30, is unacceptable. It risks delaying and denying people in urgent need of supports and abandoning them to months more of avoidable suffering.
Bill C-30 should make us all uncomfortable and urge us to act. We should not console ourselves with the inadequate measures it offers to those in poverty or rationalize why it does not go further. We should be revolted, quite frankly, by the maxim we sometimes hear about legislation — that perfection should not be the enemy of the good. When the question is one of human rights, of access to resources that are a necessity if people are to survive and thrive, it is not enough for the Government of Canada or for us as senators to advance only the rights of some and not others and claim that doing so is enough for now.
In our collective work, we have a duty to refuse to look away from the realities of those who are in poverty and the corollary obligation to accept responsibility for the consequences of, once again, leaving behind those most marginalized and vulnerable, not just to COVID-19 but to the ongoing legacies of colonialism and inequality, to the climate crisis and other crises that await us.
Let us amplify and urge the implementation of a guaranteed livable income prioritized in the national action plan of this government in response to the National Inquiry into Missing and Murdered Indigenous Women and Girls and advocated by provinces and territories such as P.E.I. and the Yukon, not to mention countless municipalities and community leaders. Let us move together, honourable colleagues, to build on the call of 50 of us last summer across groups and regions to alert the government to the need to evolve its emergency income support measures into a guaranteed livable income.
As colleagues — including Senator Galvez in her white paper and Senator Woo in his recent op-ed — have emphasized, a guaranteed livable income is not only an anti-poverty tool, but a vital part of the resilience, stability and vibrancy of the post-COVID-19 economy that puts the well-being of Canadians at the centre of recovery efforts. It would create the possibility for each to consider and act upon how best to contribute to society. It is the step forward that Canada needs.
I look forward to working together with each and all of you to honour and fulfill our responsibilities as we try to make this a reality. Meegwetch. Thank you.
I’d like to thank Senator Moncion and Senator Pate for their speeches.
Honourable senators, I rise today at second reading stage of Bill C-30, the Budget Implementation Act, 2021, No. 1. As a member of the Standing Committee on National Finance and the Standing Committee on Banking, Trade and Commerce, I had the pleasure of participating in the pre-study of this bill.
I always knew that studying budget implementation acts was an enormous undertaking. Bill C-30 is no exception. It’s 366 pages long and is divided into four parts and dozens of divisions that amend many different laws.
I would like to also congratulate our Deputy Prime Minister and Minister of Finance, Chrystia Freeland. This is the first federal budget in Canadian history to be written by a woman. Congratulations.
There is much to unpack with Bill C-30, and I do support it, but I want to focus my remarks on a few recommendations with respect to our strategy moving forward, while addressing the economy in general that would link in nicely to the recommendations.
In my view, the government has done a good job at supporting Canadians through this pandemic. At the outset of this global crisis, the government was quick to react and implement various targeted programs to help Canadians survive, and it was relatively successful at adjusting, adapting, improving and extending these programs along the way.
Let me start by outlining a few targeted programs that greatly helped Canadians and Canadian businesses. Some of these emergency programs included the emergency wage and rent subsidies as well as the Lockdown Support. Bill C-30 extends these programs until the end of September and extends qualifying periods to November, should the economic and public health situation warrant it.
With Bill C-30, the government is also introducing a new recovery hiring program for businesses, which is very important, that continue to experience qualifying declines in revenues. I welcome this measure because we all know that businesses have been impacted unevenly, and some are still struggling.
Another important measure in Bill C-30 that will definitely assist in a buoyant economic relaunch is in the changes to the Canada Small Business Financing Act. The changes proposed in Bill C-30 will help more entrepreneurs access financing by expanding loan class eligibility, increasing the maximum loan amount, extending the loan coverage period, expanding borrower eligibility to include non-profit and charities and introducing a new line of credit product to help with liquidity and cover short-term working capital needs. These changes are projected to increase annual financing by $560 million and support nearly 3,000 additional small businesses.
You can tell I welcome that, and I’m very excited about it for our business community. It is my hope that our business community will benefit from this and other measures in Bill C-30 and continue to contribute to our economic recovery and prosperity.
Other issues that were mentioned are housing affordability and supply, along with the reintegration of women into our workforce. These are major issues that have been properly addressed in Budget 2021. Senator Moncion did a fine job in outlining these issues.
Now, allow me to share some of my recommendations that may be considered going forward.
I would strongly recommend that we have an exit strategy on the additional stimulus spending. The $101.4 billion in new spending aimed at both supporting the country through the COVID-19 third wave and stimulating the economic recovery post-pandemic can be made conditional based on the actual strength of our recovery moving forward. That doesn’t mean it won’t be required, but let’s make it conditional. The entire fiscal stimulus package may not be required, and it does not have to be fully spent.
An appropriate exit strategy would be preferable given the current high savings rate of Canadian households and the inflationary tendencies and expectations we are starting to see. The goal is not to diminish aid to those in need, but rather be prudent in controlling inflation and guiding this economy toward a full economic recovery, which includes inflationary control. The risk of increasing inflation through increased stimulus spending is real.
There are two major variables that can affect inflation: scarce resources and excess liquidity. There may be signs of both in many areas, which is a concern because it could increase the gap between the wealthy, the middle class and those working to join the middle class. Inflation is driven by expectations. Once it starts to climb, it is difficult to control. If there aren’t conditions to the stimulus spending and inflation starts to increase, all we are doing is adding fuel to the fire.
To reinforce this point, globally, central banks are also starting to have inflationary concerns. Due to these concerns, some are projecting the possibility of increased rates in the near future. Another reason to monitor stimulus spending and inflation is the fact that any possible increases to the interest rate can be extremely detrimental, not only to our increased government debt but also to our Canadian household debt levels. It’s worth noting that in 2020, according to the OECD, the Canadian household debt level was the highest among G7 countries at 176%. This concern was confirmed by our own Governor of the Bank of Canada during one of my recent interventions in our Banking Committee.
The consumer has historically proven to be the motor of many economic recoveries and an important driving force in our economy. These debt levels will be an even greater concern in an increasing interest rate environment, and it must be avoided. So we must ascertain that inflation won’t become an issue and that the above-average inflation increase will be transitory only, and it will eventually restabilize and interest rates will remain low for the foreseeable future.
I would also like to address something I have previously raised in the chamber and in committee with our Deputy Prime Minister and Minister of Finance, which is the need for more solid, concrete and targeted fiscal anchors and guardrails. This is an integral part of any sound fiscal policy, particularly in times of crisis. I feel that Budget 2021 is a little vague on this issue. As our economic recovery gathers more steam and certainty, committing to less vague but firmer fiscal anchors and guardrails will allow us to better monitor our stimulus spending and debt levels. This strategy would also strengthen our capacity to allow for future spending in case it is required and when it is required, rather than spend with the possibility of creating further inflationary tendencies and expectations when the need is not as evident.
This leads me to another concern of mine: our increased debt levels. The additional spending, while necessary, has increased our debt levels to heights never seen before.
During her appearance before the National Finance Committee, Minister Freeland argued in response to a question on debt and deficits that her budget “. . . shows a sustainable and responsible fiscal track with . . . a declining debt-to-GDP ratio falling to 49.2% by 2025-26” and that the “. . . debt-to-GDP ratio continues to be the lowest in the G7.” Yet Yves Giroux, the Parliamentary Budget Officer, reminds us that:
The Government has decided to effectively stabilize the federal debt ratio at a higher level, potentially exhausting its fiscal room over the medium- and long-term. This means that any substantial new permanent spending would either lead to a higher debt-to-GDP ratio or have to be financed through higher revenues and/or spending reductions in other areas.
What recommendations can I make on this important issue? I would like to examine and comment on a few ways to repay debt, which is a growing concern for many Canadians. The most preferable way of repaying debt is by growing the economy. With targeted investments and job-creating programs, I’m hopeful measures announced in Budget 2021 will help reduce our debt burden.
In its April Monetary Policy Report, the Bank of Canada projected that the economy will expand by around 6.5% this year and 3.75% in 2022. The bank expects strong consumption-led growth in the second half of this year. It is my hope these encouraging projections will materialize and lead to enhanced debt repayment.
Second, if we cut spending and monitor and control the additional $101 billion-plus in stimulus spending, we can shift the money towards repaying our debt. The level of spending in the last year was obviously justified by the pandemic. But at this time, it’s important to focus on finding the right balance between revenues and spending going forward. This should be a priority moving forward as our economy recovers.
Let me quickly mention three other common methods of debt repayment, which are not recommendable, but only to stress how important growing our revenues and controlling our stimulus spending is at this point.
A third method of debt repayment we must mention, although definitely not welcome, is inflation. Inflation has many negative outcomes and must be avoided, but it has a positive impact on debt repayment. As prices rise, so do profits and revenues, including government revenues and tax revenues, and it must be avoided.
A fourth way of reducing our debt is to increase taxes. I do not think that is a solution as it could stifle the economy. However, some targeted, strategic tax increases are welcome, like the increase in excise tax on tobacco products and the application of the GST/HST on e-commerce that Bill C-30 proposes. It is anticipated that the excise tax increase on tobacco could generate $2.1 billion in five years, which translates to much-needed new revenue to the treasury.
The last measure is monetizing the debt. This definitely can’t continue long term going forward as it leads to an increase in total money supply in the system and hence inflation.
In Budget 2021, the government provided supplementary information on the sensitivity analysis of its fiscal projections to economic shocks and offered alternative economic scenarios on page 345 of the budget. The government illustrates the possible impact of three different economic shocks that could affect its projections for revenues and expenses.
I spent the greater part of my career in commercial and corporate banking where stress testing and sensitivity analysis were extensively performed and was never enough. With respect to Budget 2021, I felt that the sensitivity analysis could have been extended. However, I was reassured by a Finance Canada official during one of our meetings that the debt management plan, as it is developed, goes through a wide range of scenario analysis, including looking at different yield curves and profiles. He told us there is a considerable amount of joint work between teams at the Bank of Canada and Finance that look at this on an ongoing basis. I strongly recommend that this thorough sensitivity analysis be aggressively continued with creative “what if” scenarios to ascertain that all debt levels are sustainable.
In closing, honourable senators, I think it is important to remember what the government said in its Fall Economic Statement last November. It wrote that:
. . . the government’s fiscally expansive approach to fighting the COVID-19 pandemic need not and will not be infinite. It is limited and temporary. Canadians understand that the crisis demands targeted and time-limited support to keep people and business afloat.
As we reopen, I think it will be important to monitor closely and recalibrate the government’s many emergency programs. What Canada needs now is a long-term plan for growth and prosperity. Innovation, investment and immigration will be three important factors in determining how successful we will be in recovering, relaunching and reimagining our economy today and well into the future.
We must pay close attention to housing supply and affordability, and find ways to accelerate the reintegration of women into our workforce. These are two major issues that have been accentuated by the pandemic and thankfully have been underlined in Budget 2021.
In my view, Bill C-30 proposes changes that should help grow the economy, support Canadians and increase our competitiveness while providing much-needed money to our health care system and other initiatives such as the much-touted and much-needed early learning and child care program. Indeed, relaunching and, more importantly, growing our economy will rely heavily on these targeted policies and sound investments as we safely reopen. I think we have reason to be hopeful that our recovery will be positive, steady and in an upward trajectory. But as we move forward, I think the government must not lose sight of the need to properly manage and repay our debt, consider an exit strategy, should the stimulus spending plan not be fully needed, and establish clear and measurable fiscal anchors and keep expanding its sensitivity analysis in light of the uncertainty that lies ahead, particularly with respect to inflation and the unpredictability of the future. Thank you. Meegwetch.
Are honourable senators ready for the question?
Is it your pleasure, honourable senators, to adopt the motion?
Some Hon. Senators: Agreed.
An Hon. Senator: On division.
(Motion agreed to and bill read second time, on division.)
Honourable senators, when shall this bill be read the third time?
(On motion of Senator Moncion, bill placed on the Orders of the Day for third reading at the next sitting of the Senate.)
