The Broadbent Institute is an independent, non-partisan organization that promotes progressive change based upon social democratic values and ideas. We've advocated for strong action by the federal government to counter growing economic and social inequality, and for a planned transition to a more innovative economy and sustainable environment.
The government plans to introduce some progressive social spending measures that we support, including the proposed Canada child benefit, which will deliver high benefits to all but the most affluent families with children, and increases to the guaranteed income supplement to deal with rising rates of seniors poverty. However, these proposed changes to the GIS exclude couples, and would leave 634,000 seniors living in poverty. A recent study released yesterday underlines the importance of both expanding the CPP and increasing the GIS.
We think that the government's agenda is inadequate or insufficiently ambitious when it comes to such important areas as child care, EI reform, and funding for first nations communities. In our view, there's a contradiction between furthering a progressive social agenda and the new government's promised fiscal plan to continue to reduce public debt as a share of GDP. This will significantly constrain new spending, especially at a time of very sluggish economic growth.
While welcoming the new tax rate for the top 1% and the elimination of family income splitting, the key problem is that the government does not propose to increase overall federal fiscal capacity. Indeed, the so-called middle-class tax cut will cost $3 billion per year, while primarily benefiting higher income earners and providing only very limited economic stimulus.
Sustainable increases to social spending and public services require new sources of revenue. We urge the government to consider modest increases to the corporate income tax and to close tax loopholes for the top 1%, such as excessively favourable treatment of stock options. The government should modify or reverse the ill-advised tax cut for the so-called middle class. Targeted programs are much more effective than tax breaks for the wealthy in building a more innovative and productive economy. Influential economist Mariana Mazzucato argues that strategic government leadership, public investments and research well in advance of immediate commercial opportunities, and direct support for strategic corporate investments are critical to building innovative economies.
We believe that there's also a vital federal government leadership role in building a more environmentally sustainable economy. A recent joint report with the Mowat Centre called for a green Bank of Canada and concrete measures to promote greater energy efficiency and greater use of renewable energy.
We support the government's proposal to increase investments in physical and environmental infrastructure, such as public transit and basic transportation. This will give a badly needed short-term boost to growth and job creation, and it will help to raise long-term business investment and productivity.
An independent study commissioned by the Broadbent Institute last year by the well-respected Centre For Spatial Economics shows that there are overall benefits to Canadians from investments in basic infrastructure in the order of $2.46 to $3.83 per dollar spent. The study further found that the long-term impact on government finances would be, at worst, marginally negative, or even positive, due to increased revenues from a larger and more productive economy.
The economic outlook for 2016 is dismal, with growth expected to fall well below 2%, and unemployment expected to remain above 7%, but growth and job creation could be significantly boosted by a well-designed public investment stimulus twinned with major increases in income transfers to lower income Canadians, such as through enhanced unemployment benefits.
We hope that the government will consider more progressive tax changes to fund a larger and more sustainable increase to social programs.
Thank you.
:
He is. I want to extend his regrets. He tried to get in from the Soo today and was caught up due to the weather.
I'd first like to introduce the Canadian Federation of Agriculture. We're an umbrella organization comprising provincial farm organizations and national commodity organizations representing over 200,000 farmers from coast to coast to coast. As an industry, Canadian agriculture is at the heart of an agriculture and agrifood sector that contributes over 6.7% to Canada's GDP, one in eight Canadian jobs, and well over $50 billion in wages and salaries across over 200,000 businesses.
I'd like to speak to four key areas today, which we've laid out in the brief which we provided you with in advance. These four areas are key to creating a policy environment conducive to continued success and growth in Canadian agriculture.
The first item I'd like to speak to is the issue of industry succession. With the average age of farmers now over 54 years and many looking to retire in the next decade, we're looking at approximately $70 billion in farm assets changing hands over the next 10 years. Estimates suggest that 75% of Canadian farmers look to retire over this period. This poses a significant potential for disruption to the industry.
At CFA over the past few years, what we have done is to work in collaboration with accounting firms across the country that have agricultural interests on developing a suite of low-cost and cost-neutral proposals that would focus on facilitating the intergenerational transfer of family farms while creating opportunities for new entrants to the industry. Family farms still represent 98% of all Canadian farms, and there are a number of positive aspects to this operating model that we would like to see continued in the agriculture industry.
Our requests can be broadly categorized under two main pillars, the first being broadening the definition of family “member” within the Income Tax Act, recognizing that farm families are comprised of a broad set of relations, more so than just parent and child.
The second point to note is the issue of “anti-avoidance” legislation, which we continue to see causing unintended consequences for agricultural operations due to structural changes in the industry. We have seen an increase in farming corporations—larger farms, due to consolidation and economies of scale, that now support multiple families—and because of this, we continue to see new barriers in place preventing flexible transfers from one generation to the next for family farms.
In particular, subsection 55(2) and section 84.1 of the Income Tax Act pose problems for joint sibling ownership as well as the use of holding companies when farm families look to transfer from one generation to the next. We were encouraged last year to see a private member's bill, Bill , introduced by , now the parliamentary secretary for the national treasury. It was looking at this issue of section 84.1 and addressing the use of holding companies for small and medium-sized enterprises. We encourage the reintroduction of that draft legislation.
These measures aren't meant to introduce new benefits or new provisions to the Income Tax Act, but rather to recognize that structural changes in the industry have left existing provisions with reduced utility for farm families looking to transfer from one generation to the next. Farm family children are no longer necessarily expected to stay on the farm. With multiple families supported by larger operations, we continue to see the broader subset of family relations looked at as the potential next best manager for the farm operation in the next generation.
The second issue I'd like to speak to are the chronic labour shortages that continue to plague the agriculture industry. The agriculture industry is full of high-quality job opportunities and career options with competitive wages and benefits. The industry also offers many lifestyle benefits and a flexibility not available in other industries. Agricultural employers expend extensive efforts to recruit and retain Canadian workers; however, the industry continues to identify pervasive and critical labour shortages as a major constraint and one of the biggest risks facing farm businesses.
To address this issue, we've identified three key requests, the first being increased funding for the collection of regional agricultural labour supply and demand information, both through the labour wage survey as well as the Canadian Agricultural Human Resource Council's ongoing work to develop labour market information forecast models for supply and demand.
The third point is that we would like to see a partnership between industry and government struck to implement CAHRC's agriculture and agrifood workforce action plan by creating a dedicated agriculture and agrifood international worker program and promoting channels to permanent residency for agriculture and agrifood workers.
The last two items I'd briefly like to speak to involve agricultural investments. This is speaking to the continued increase of requirements placed on producers because of climate change and trends in retail food markets that have posed increased investment requirements on farm operations without an associated premium in the market.
On this note we'd like to see changes to the AgriInvest program, which are laid out in your brief, that would facilitate more on-farm investment, as well as an increased emphasis on rural infrastructure spending in the new government's commitments.
The final piece I'd like to briefly touch on is the duty relief program. The duty relief and drawbacks program administered by CBSA was not designed for agricultural goods and does not provide adequate safeguards to address the potential diversion into the domestic market when dairy, poultry, and egg products are imported into Canada for further processing and subsequent re-exportation.
What we would like to ask is that dairy, poultry, and egg products be excluded from the duty relief and drawbacks program by making an exception similar to the one that exists for fuel and plant equipment. This exclusion should be included in the budget to ensure its timely implementation. It would solve inconsistencies where participants evicted from Global Affairs Canada's import to re-export program for not respecting the rules are allowed to apply under the duty relief and drawbacks program.
Thank you.
:
Good evening. My name is Bilan Arte, and I am the national chairperson for the Canadian Federation of Students.
The Canadian Federation of Students is Canada's largest and oldest national student organization, representing more than 650,000 students across the country. Our organization advocates for an accessible, affordable, high-quality, and public system of post-secondary education for our country.
Our budget recommendations focus on how to make education more affordable for students and address mounting student debt in Canada. Ensuring that all people in this country are able to pursue higher education and training must be part of any significant, stable, long-term recovery for our economy. The OECD has highlighted that participation rates will have to grow significantly, if Canada is going to address our changing labour market demands and an aging workforce.
In its most recent Global Economic Competitiveness Report, the World Economic Forum ranked Canada 13th in ability to compete economically with other countries around the world, a decline from 10th place in 2009. In its explanation, the forum noted that Canada's disjointed and inefficient post-secondary education system was one of the main reasons for the slide. Over that same period, Canada's ranking for higher education and training had dropped from 9th to 19th.
Unfortunately, the cost of post-secondary education continues to be downloaded to students and their families, despite the significant public rate of return on investments in post-secondary education. In 2013 economist Hugh Mackenzie found that real return on current public investments in education ranged from an annual rate of 3.6% in Saskatchewan to 6.2% in Ontario.
As a result of high tuition fees, student debt has increased substantially. Average public student debt is now estimated to be over $29,000 after an undergraduate degree alone. When that debt is paired with rising tuition fees, it's easy to understand how we've arrived at a situation in which young people in Canada today collectively owe $19 billion to the federal government alone, not including the billions more that they owe for provincial and private loans. In fact, the amount owed to the Canada student loans program is increasing by nearly $1 million every day.
The long-term impacts of carrying such debt include delayed participation in the economy, inability to invest or save for retirement, starting a family later in life, and aversion to taking on further financial risks, such as starting a business.
Credit agencies and major banks are now warning that student debt has reached unstable levels. As of September 2014 more than 200,000 Canadians were unable to make any payments on their government student loans.
We also recognize that the realities of skyrocketing tuition fees and crushing student debt disproportionately affect communities that are already significantly marginalized because of their socio-economic background in today's society, including indigenous and racialized communities. These are communities that feel the pressure of financial barriers most acutely and are often so debt averse that they may choose to not even attend post-secondary.
In conditions such as these, how could we possibly expect students and graduates to participate fully in the economy?
Students are putting forward a vision that would work to address the root cause of student debt.
First, the government should implement a federal post-secondary education act modelled on the Canada Health Act and create a dedicated cash transfer of $3.3 billion for post-secondary education, primarily by redirecting existing government funding for inefficient post-secondary education-related tax credits and savings schemes.
The lack of a national vision has resulted in a significant disparity in tuition fee levels and per student funding across the country, with students in Ontario paying almost three times more than students in Newfoundland and Labrador. Canada's students are calling on the government to ensure that merit and not geography determines whether someone can go to college or university.
This act would be accompanied by a fifty-fifty cost-sharing model to eliminate undergraduate tuition fees, making sure that provincial governments are also held to account, not only to ensure that the transfers they receive from the federal government for post-secondary education are spent on just that, but also to reward provinces that come to the table with adequate funding to support universal access to post-secondary education.
We're also recommending that in order to stop the federal student loan debt from increasing, government should act immediately to increase the accessibility of post-secondary education by redirecting the $750 million currently allocated in ineffective education-related tax credits and savings schemes into the Canada student grants program. This simple solution would double the already limited funds for the Canada student grants program. Such a change would have a significant impact on students' ability to both get an education in the short term and contribute meaningfully to Canada's economy and society in the long term.
We believe access to post-secondary education is the greatest social equalizer at this government's disposal, helping to address cycles of poverty in already impoverished communities that don't have the funds today to start saving for the next generation of Canadians.
Furthermore, for indigenous communities in Canada, access to post-secondary education must be recognized as a treaty right. Funding for the post-secondary student support program must be immediately increased and matched with enrolment.
By implementing these recommendations, this government can increase the ability of young Canadians to obtain financial security and reach life milestones. Allowing more people of all ages to obtain additional training or retrain in emerging fields will allow Canadians to drive our economy forward.
Public education is a public good and needs to be funded as such.
I certainly have appreciated the opportunity to address this committee today. I'm more than happy to answer any questions on any of the items that I've mentioned or any of the items that are included in the full submission before you.
Thank you.
:
Thank you very much, Mr. Chair. Thanks as well to the committee for extending the invitation to be here today.
I would like to focus my remarks on three key messages. These are that the new government's first budget should first, establish its fiscal credibility; second, provide short-term support for the economy; and third, build Canada's longer-term economic potential in a way that's fiscally sustainable. But first, let's back up for some context.
In the slow recovery from the financial crisis, growth in Canada and abroad has been disappointing. The falling commodity prices since mid-2014 have been the latest setback. This is a major shock for Canada. It's primarily felt through weaker terms of trade, a lower Canadian dollar, reduced domestic income, and less resource sector activity. Canada's economy already had some excess capacity before this shock, and this is going to delay its return to its full potential.
In other words, without new policy measures over the next few years, the Canadian economy will not perform as well as it could.
As this painful and slow adjustment unfolds, policy-makers are looking for the right response to support the economy. This is going to require carefully weighing the benefits and risks of additional actions against the status quo.
Accommodative monetary policy has already helped out, but lowering interest rates further will provide little economic stimulus and risks overheating housing markets, excessive household borrowing, and broader financial stability concerns. Instead of cutting rates again or expecting the economy to quickly self-correct, well-crafted fiscal measures are a better option for several reasons. First, the federal government has fiscal room available. Second, it seems that monetary policy would accommodate new fiscal measures. Third, the opportunity cost of long-term government borrowing is near historic lows. Finally, the ongoing restraint on spending at the federal level over the past five years means that there are likely spending needs built up in some areas.
While these fiscal actions admittedly carry several risks, which include the fact that programs and budget deficits are easier to start than to end, the evidence of robust short-term fiscal multipliers is mixed, and larger deficits will inevitably raise debt charges, I think these risks can be managed. But this involves managing expectations.
Canada's economy and economic performance depend on global developments that we don't fully control. Therefore, budget 2016 should be upfront about what fiscal policy can deliver in the near term, particularly on cost-shared infrastructure spending. The last round of fiscal stimulus showed that we shouldn't overestimate how quickly these projects can get going. New announcements will mostly hit the ground after the 2016 construction season, and that's okay. In this regard, shovel-worthy should take precedence over shovel-ready. After all, the main rationale for infrastructure is not short-term economic stimulus, but improving Canada's longer-term economic potential, and that takes time.
Six of the last seven budgets have revised down the consensus GDP forecast. This budget in 2016 would be prudent to explore these prevailing downside risks in detail. For example, consider a scenario where oil prices stay flat at about $30 a barrel over the government's mandate. What would that look like for the government's finances and for the economy? Reporting such a scenario could illustrate the challenges that we face, how oil prices impact the federal finances, and alternative policy scenarios.
It's also important to be transparent in this first budget. Including more internal analysis and technical details will help build fiscal credibility. Finance Canada's analytical capacity could be augmented by publishing staff working papers and encouraging researchers to present their findings externally.
The government has stated two fiscal policy targets. An important one is to reduce the federal debt-to-GDP ratio each year. This rightly shifts the focus away from the annual nominal budget balance. However, rather than requiring yearly reductions, it may be more manageable to establish a medium-term target range for the debt ratio—similar to how we do inflation targeting, try to stay within a band over the next five years.
Whichever medium-term target is used, it should be complemented with a longer-term fiscal target that would rely on sustainability analysis and look ahead several decades.
Looking beyond budget 2016, there are many complex issues that will require attention. Allow me to highlight just one. Eventually the Canadian federation will probably need to raise revenue as a share of GDP. If so, this will need to be done carefully to avoid unduly restraining growth. The government has already expressed interest in intending to review tax expenditures. This is a worthwhile exercise, but I think the scope should be broadened to review the entire tax system to make it more efficient and more equitable.
To conclude, after several disappointments, Canada's economy is adjusting to a major shock. The outlook is weak and highly uncertain. Downside risks prevail, and the economy will probably operate below its productive capacity over the next few years.
To manage these risks, expectations should be tempered, and the macro policy approach should be adjusted in Canada. Fiscal policy needs to be more active, with well-designed fiscal measures that would help cushion the adjustment and ease the burden on monetary policy.
In the short term, timely and targeted automatic stabilizers, which would include unemployment benefits and federal stabilization transfers to resource-rich provinces, should be allowed to work, and some should be temporarily strengthened.
Any new discretionary measures should aim to improve Canada's economic potential over the medium term. They should be funded as part of a longer-term plan that preserves fiscal sustainability.
Thank you very much, Mr. Chair.
Thank you, everyone, for your time today and for your time generally. I appreciate the work you do.
In the context of pre-budget discussions, we were involved in pre-budget meetings with the minister last Friday—Chatham House Rule, so I can tell you what I said but not what anybody else said—and in fairness and for consistency, I thought I'd repeat the message I delivered to the minister on Friday of last week.
Our view on the Canadian economic outlook is a theme we've been on for some time and it looks like it will be with us for a while: an uncertain, uneven, and underwhelming recovery.
The uncertainty we're reminded of on a daily basis. We're seeing movements in markets, that used to be big moves for a month or a quarter, taking place almost on a daily basis. I do think fear is overtaking fundamentals. We think the fundamentals will eventually carry the day, but obviously there are risks that fear will eventually become a fundamental that contains growth prospects.
We are looking at some of the bigger worries like China, like oil prices, and the U.S. recovery, a little less worrisome than what we're seeing priced in for market. We do think China will manage to contain the crisis. Global growth will be in that 3% to 3.5% range. It should support global trade and should also support global commodity prices.
The U.S. we see as a decent growth story. We have 2.5% growth in the U.S. Importantly for Canada, we don't export to U.S. GDP; we export to sectors of the U.S. economy, and those sectors are the ones that are performing well: autos, housing, and equipment and software. We're seeing the strength in our major trading partner, and that's taking place in the context of a more competitive Canadian dollar. We think we're past the lows in the Canadian dollar, but we do see it still remaining in that 70¢ to 75¢ range as we move through the year. That will provide ongoing support for exports.
When you look at the shock to the economy, the shock is obviously in the energy sector. The energy-dependent provinces are moving down the growth rankings, and in those that are export dependent, U.S. and currency helping the way, we do see that transition taking place. Exports are nearly 10% up on a year-over-year basis. That transition is taking hold. The consumer will grow, we think, in line with income. We'll get the added lift from debt, because the debt-to-income ratio is at elevated levels, and we do have a placeholder. When you look at our growth forecast for Canada this year, we're at 1.8% and the Bank of Canada is at 1.4%. I think consensus is probably a bit below that, but we have put in a placeholder for fiscal stimulus now. Not all deficits are created equally. We are aware, and we're holding a spot. We'll reassess the growth outlook when we get the budget details later, probably in March, I guess.
When we look at the fiscal stimulus, as Stephen has suggested, monetary policy has done a lot of the work. Monetary policy is aimed at smoothing out the cycles. It won't reverse the cycles. We're at the point where we need more economic policy, fiscal policy more generally, and that will raise the speed limit for the economy over the long term, which is growing the economic pie we all share.
In terms of focus, everything we see should be looked at through the lens of productivity-enhancing investment. Infrastructure fills the gap short term, but also bodes well long term for productivity. It does tend to have a higher multiplier, so the more bang for your buck than you get from some other programs. Shovel-worthy is obviously an issue. When do you get it into the economy? We'd rather see a good decision rather than a rushed decision. We will see, we think, fiscal stimulus. We do hope it's focused on the infrastructure side.
With respect to the fiscal plan, we've become accustomed to a medium-term plan of fiscal consolidation with a zero out there at some point. It sounds like that zero is looking less likely, but the hope is that it's still part of the plan.
Targeting a debt-to-GDP ratio is less than ideal. You have some control over debt; you have no control over GDP. It isn't ideal, but it does seem to be what we're hearing as the new commitment or the new anchor for fiscal policy. When you have a debt-to-GDP ratio at 31%, and to keep it moving lower, if you have 4% nominal growth, that suggests you can run deficits in the $25-billion to $30-billion range and still manage to keep that debt-to-GDP ratio drifting lower. We would push for something less than that. As Stephen suggested, successful fiscal policy is timely, targeted, and temporary. I'd focus on the temporary component.
Thank you.
The National Farmers Union would like to thank you for the opportunity for this pre-budget consultation.
The NFU is a voluntary, direct membership, non-partisan national farm organization made up of thousands of farm families from across Canada who produce a wide variety of commodities. The NFU works toward the development of economic and social policies that will maintain small and medium-sized family farms as the primary food producers in Canada. Based on the situation left by our previous government, we want to echo the words that it is time for real change.
For budget 2016, we would like to present the following recommendations. We should set the stage for growing forward 3. We recommend a real change from past policy, particularly by aligning the vision of agriculture with the principles of food sovereignty and supporting agriculture's efforts to mitigate and adapt to climate change. The budget should support the next generation of family farmers by establishing universal pharmacare.
The 2016 budget should redirect all agriculture research funding toward public and independent third party research in the public interest and reinstate funding to the public agricultural research institutions to allow them to recover and rebuild their capacity with a new generation of scientists.
Funds should be allocated to public plant breeding to develop varieties that are adapted to Canadian regional climates. We need to help Canadian farmers adapt to climate change in order to do well under low-input, organic, and ecological production practices. The budget should support participatory breeding initiatives and enable new varieties to be released without royalties.
The budget should also fund research and assessment of pesticides, including field crop trials on yields, monitoring of soil quality and surface water contamination, and impacts on pollinator populations. Funds should go toward assessment and implementation of farming practices to increase biodiversity and integrated pest management to benefit farmers, and both natural and agricultural ecosystems.
Budget 2016 should take concrete steps to correct the damage caused by the previous government of ending the Canadian Wheat Board single desk. It should establish and fund mechanisms to regulate the grain system to ensure all farmers have an equal opportunity to ship grain, to counteract the power of major grain companies, and to give priority in shipping to small grain companies, producer railcars, and short-line railways.
We ask that the upcoming budget establish a mechanism to develop additional producer car loading sites when requested by farmers, and ensure that the Canadian Transportation Agency has the funding and the resources it needs to enforce the statutory common carrier obligations of Canadian railways under the Canada Transportation Act.
The NFU recommends that the upcoming budget provide support for new and young farmers by lowering the cap on the government's support programs; making effective, affordable financing programs available to new farmers, including micro loans and small grants; providing funding for farm apprenticeship programs and training; and using tax penalties to effectively prohibit foreign investor and absentee farmland ownership.
Supply management provides Canadian farmers with a stable income based on cost of production. Therefore, the government should reject both CETA's and TPP's allocation of parts of Canada's supply-managed commodities' markets to imports and should address the loopholes to stop the dumping of dairy protein products into Canadian markets.
The focus on globalization and trade means that more of the food Canadians eat every day is imported, thus subject to currency exchange rate fluctuations, external political events, and transportation issues.
Today we see food price inflation because grocers must buy imported products using expensive U.S. dollars. Canadian farmers, farm workers, food processors, companies, and consumers would all benefit from reinvestment in Canadian fruit, vegetables, livestock and meat production, and processing capacity that is distributed all across the country.
If you would like the upcoming budget to include measures to safeguard the space for domestic food production for the long term, the budget should—
:
I can start. Thank you.
I had mentioned that to me shovel-ready has taken on a negative connotation. When we think of infrastructure, as I suggested at the outset, we want to think in a context of long-term productivity enhancement. The challenge of fiscal policy stimulus on the infrastructure side is getting it in place when the economy needs it rather than later when the recovery takes hold.
I think that given our growth outlook we're not terribly worried about that sort of longer-term pressure on the private sector.
I don't think there'll be a challenge with shovel-ready. We've had such an infrastructure deficit built up over decades that I think there are a lot of projects in waiting that are shovel-right, rather than shovel-ready. These are good projects that are ready to go. They'll still take some time to get in place.
I worry about shovel-ready because ready-to-go may not be what's right for the economy and that's the negative connotation of shovel-ready. But I do think we probably have some good projects ready and willing to be funded and put the work in. I'm sure the minister is getting more advice than he needs.
:
To pick up on Craig's point on shovel-worthy versus shovel-ready, one of the things I would caution you guys about in general as a committee would be that when we got infrastructure bundled up with fiscal stimulus, I think that was generally a mistake.
There are two types of infrastructure projects that can take place. There are things that can happen in the 2016 construction season. Those are things like routine maintenance projects. But there are also things that need to be done over the longer term, say, in 2017 or 2018, over the mandate of the government. We can call those shovel-worthy.
The point I would make is that because a project is ready does not make it a top-of-the-list priority. I think we should be looking at building growth, and I think we should be setting expectations such that people are not thinking.... For example, when I look back at the economic action plan, I see that the initial allocation in budget 2009 was that half the spending would be in year one and half in year two. That's in the expectation that in the first construction season there's going to be a lot of activity. I'm just looking at the cost-shared projects, the projects that include municipal, territorial, and federal governments, and in fact, 17% of the stimulus spending came out in year one, 69% in year two, and then it was 14%, because we extended it into year three.
My point would be that we learned something from that episode. I'm not saying that the stimulus program that happened was not done well, but it was not done as quickly as people had expected. Expectations were such that it was going to be boom-boom. I think that as long as expectations are set with the public that some projects need to be done quickly—and they can be, and those will support the economy—most of the focus should be on supporting economic growth. I think that's the safe way to play it.
:
Thank you very much, Mr. Chair.
Mr. Wright, I guess you'll be getting a lot of my questions today since you talked about some of the matters that I'm very interested in.
One of the things you talked about was the debt-to-GDP ratio, and my colleague on the other side of the table mentioned it as well. I think the part that causes me a bit of concern on using this as a fiscal anchor is that part of the equation is missing, and that's the provincial debt. We don't tend to talk about that, but the reality is that provincial debt is an important piece of the overall economic sustainability of the country. I'll give you an example. If Ontario right now is spending $5 billion a year to service interest payments, that's $5 billion they don't have for the social services and it's $5 billion that goes into the equalization framework and category.
I guess my question is along the lines of how much do the provinces matter, do you think, in terms of the debt-to-GDP ratio. I mentioned some of these numbers yesterday; you may not have them. The reality is, these are a little dated but they're still in the same framework. I don't think they've got particularly better. That's what I'm trying to say from the numbers I'm going to give you.
Alberta has a debt-to-GDP ratio of about 35%. Saskatchewan is 42%; B.C. is 54%; Ontario is 76%; and Quebec is 87%. These are significant numbers that impact what happens on the federal side.
I guess I'd like to get your thoughts about fiscal policy—you're talking about that—the anchor debt-to-GDP, and what role the provinces have. I would submit that the provinces actually do matter when you're talking about debt-to-GDP ratio, and it's something missing from the conversation so far.
:
It's gross debt, maybe, not net debt. Just in clarity, I was speaking net debt to GDP.
I mentioned that my preference for a fiscal anchor is the balanced budget; over the fiscal plan or slightly beyond the fiscal plan would be the ideal. I think the reality of what we're hearing more recently is that fiscal anchor has been altered and that now the preference is debt-to-GDP, which I suggested is not my preference, but that seems to be where we're headed. Then when you look at the debt-to-GDP ratio, there are some who would suggest not to even bother and let it run higher rather than let it run lower. My preference would be to continue to see it move lower for some of the reasons you've mentioned, that we do look just at federal government debt-to-GDP at 31% and hopefully declining. The federal government with their debt situation is in a better position on a net debt basis than most of the provinces, and the ability to stimulate the economy at a time when we need it.... Alberta, given their relative net asset position, is well positioned, and they seem to be going down that path as well, but most provinces Ontario and east have fiscal constraints upon them. Maybe Manitoba is on that list as well, but not quite as much, though.
I think the feds see that the debt-to-GDP ratio going down would be a preference. The first preference would be a balanced budget. But as for the debt-to-GDP, as I suggested, they have some control over the debt but no control over the GDP.
:
That's why a preference would be for a balanced budget, which you have more control over.
If the commitments keep moving lower, if you have 4% nominal growth, you can run a deficit in the $25-billion to $30-billion range. That doesn't leave much leeway for any slip in the GDP numbers, so I wouldn't want to see it push our luck or our limits with a new target.
The other side of it is longer term I'd like to see these debt-to-GDP ratios move lower, because of the aging demographics, which means a slower speed for the economy and a slower revenue base at a time when health care costs are going higher. With the fiscal situation federally as well as in many of the provinces where health care spending is already at 40%, we will see that debt dynamic change.
So with an eye on the fiscal challenges in the provinces, if they do go debt-to-GDP as the new anchor, I think that they should target it lower, not higher.
The commodity shock—the known and now—is taking place in the investment side, and we're seeing a collapse in energy investment. Last year it was 35%, and this year most forecasters have it kind of pegged at another 25%. So it's a big hit. The hope is that the offset comes from the other side. When you get the negative commodity price shock, there are some offsets, and one is the currency. The currency has weakened alongside the commodity and at the same time, it's an effective tax cut to any importing nation or importing province. Effectively, it should be net positive for global growth, and we should see that particularly in the U.S. They have seen some of that tax cut effective in lower gas prices. Their savings rates are up on a year-to-year basis about $100 billion. So they're saving it. I think that's the uncertainty, and it will eventually get spent. But the U. S. growth is, as I've suggested in my comments, at 2.5%. It's taking place in the sectors we export to with a competitive currency. We're starting to see those export numbers turn around. They finished the year on a solid foundation. I think that will carry the support.
You still need consumer spending. It's 60% of the economy, so you can't have growth without a consumer sector. I just think that consumer spending is more moderate than in the past because you're not getting the extra kick from data accumulation, we hope.
My next question is for you, Mr. Jackson.
In your presentation, you briefly talked about pensions. The Liberals' platform during the election campaign contained two main elements: an immediate 10% increase to the guaranteed income supplement, as well as improvements to the Canada Pension Plan and, by extension, to the Quebec pension plan.
I am currently a bit concerned about not seeing any firm commitment in that respect in the next budget. We will see what the situation is in the budget. It seems that they are refusing to answer the question on whether those measures will be included in the next budget.
As for the Canada Pension Plan, the conference of finance ministers was held, which ultimately postponed the decision again for a year in order to carry out more research, even though the issue has been under consideration for 10 or 12 years.
What do you think is the urgency of taking action when it comes to pensions?
:
On the Canada pension plan, I'm optimistic. We may be able to move forward here, but there clearly needs to be a concrete proposal put on the table by the federal government, perhaps in co-operation with Ontario.
I do note there was an announcement yesterday that the matter will be discussed at the June meeting of finance ministers. I would have thought it possible, given the work that was done by the federal government and the provinces earlier, for a concrete proposal to come out of that meeting in June, rather than punting it off until next December.
The study we released yesterday really underlines the fact that the RRSP retirement savings of Canadians who don't have pension plans are, for many, grossly inadequate. There's an increased risk of poverty as a result of that. I think the government's commitment to increase the OAS is welcome, and it should be in this budget. The big flaw in that proposal, the way I understand it, is that the way it is set out it applies only to single seniors. At least one in three seniors living at a low income is actually in a couple. There's always a question of whether a 10% increase is adequate. It still leaves a lot of seniors living in poverty, but it's certainly a step in the right direction.
I think you start running into problems just in terms of technical design on the GIS. It's expensive to increase it for everybody, but the risk of targeting it too narrowly is that you end up with a super GIS and not-so-super, plain-old GIS at the end. There are some real design issues there that are a problem.
It was nice to see three economists, and a fourth here, in a room all agreeing that we need strategic investment in infrastructure to get our economy growing again.
Mr. Jackson, I think we need to point out that in our platform we've proposed the Canada child tax benefit that will provide higher or increased benefits to nine out of ten families in Canada, tax free, means tested, or income tested, and according to the Caledon Institute, will lift 300,000 children out of poverty. I think we need to point that out. It's a major step forward on the equality issue and generally helping middle-income and low-income families.
On the guaranteed income supplement issue and how the clawbacks work and the levels, in our platform we've put in a major billion-dollar proposal of roughly $920 for single seniors on the guaranteed income supplement, a 10% increase that will benefit 1.3 million retired Canadians, one million of whom are female, and lift 85,000 to 100,000 out of poverty.
I think we need to identify those two major steps that our government is undertaking to improve the lot of many Canadians. I think that's a great first step.
I see you've identified some other arguments in the tax cuts that you may or may not like. What would you review on the tax expenditure side with regard to the $100 billion of tax expenditures that are out there?
:
Right. And the C.D. Howe Institute ended up saying that it was about $1.4 billion short of what it was supposed to be, revenue neutral. I just bring that up in the context of your comment about fiscal credibility.
Another term has not been mentioned here that I'd like to get your views on, and perhaps, if we have time, Mr. Wright's.
I don't think anybody disagrees that well-targeted infrastructure spending is a positive thing, and especially if you have room and interest rates are low. We get that; we understand it. But structural deficits are our concern.
So when there are shortfalls in taxation levels for benefits that the government decided to proceed on, even though they broke the promise they had made to Canadians, when do structural deficits come into play in your mind, when the government goes down that road? We've had organizations here for the last number of panels that have put in requests for $3.3 billion, $4 billion, $7 billion, on regular spending programs, not infrastructure programs. When does it become a concern in your mind?
Thank you for your presentations.
My first question is for you, Mr. Tapp. The issue of shovel-worthy versus shovel-ready has me somewhat concerned, given my municipal background. I did financing budgets for my region, which had an annual operating budget of about $1 billion. It's not the largest, but it's certainly not insignificant.
For municipalities, the true meaning of shovel-ready is that it's ready to go to tender. I think we all agree that on infrastructure funding and building smart infrastructure, long-term investment is a great thing. But if a municipality has to spend $200,000 to $1 million on environmental assessments, design, and engineering for a bridge only to then have that project sit on a shelf if they don't get the funding, what municipal councillor is going to make that investment for a project that never sees the light of day?
Part of the problem with the former government's infrastructure investment was that you actually couldn't use any of that funding on making a project shovel-ready, so you were filling potholes or doing sidewalk repairs or a park repair because you could do the engineering and the studies in-house.
To your point about managing expectations in the first year, wouldn't it actually be opening up the investment for these big transit projects, rail projects, or whatever the case may be to get those engineering drawings and the environmental assessments and all of that and to actually make a project shovel-ready? Wouldn't that be a better investment in, say, year one?
:
Yes. I think the only caution I was offering to the committee was, as I said, based on the experience when I looked back at the 2009 package. The argument that economists almost always make is that it should be timely, targeted, and temporary, and on this idea of temporary infrastructure, I think that's a problem. This is the reason people argue that we shouldn't use fiscal stimulus to micromanage the economy and the cycles, because it takes so long to get things going. Infrastructure is an area where I think that in general it takes things quite a while to get going.
If your point is that the municipal, provincial, and territorial levels need to do some work before things go to tender and go out, I think that's certainly the case. As I cited before in some of the data, when the government allocates money, that's conditional if it's going to be a third, a third, and a third. Not all that money is necessarily going to be spent because of cost considerations, timing, or that type of thing. It's possible, in terms of ratcheting down expectations—again, as I said—just to make sure that the money that's allocated is allocated not necessarily in a time-sensitive window, but in a flexible manner so that municipalities can access it. If it takes two or three years, so be it.
I think there are certainly detailed issues, and this is the reason it takes things a while to get going.
Certainly, municipalities would advocate for long-term stable funding anyway, not temporary infrastructure funding. In fact, you could probably go to any municipality.... I know that in mine we have a 15-year infrastructure plan, but you're not going to spend the money on studies if you're not actually going to spend the money in that fiscal year.
Just quickly, because I don't have a lot of time, I'll move to Mr. Ross.
I have an urban-rural riding outside of the GTA, the Toronto area, in Ontario.
One of the biggest issues with agriculture is the fact that land values are so high that most farmers, even when we protect the land, actually sell it to developers because they make so much more money that way, to the point where the province sometimes has to step in and create greenbelt legislation, for example. How do we actually make farming profitable so that families or farmers stay on the land? That's my first question.
Second, for a lot of the land, through greenbelt legislation in Ontario, for example, they now lease the land to farmers so that they can't actually then sell it to developers. What's the length of lease that actually makes it worthwhile for a farmer to invest in the property? Has your organization looked at length of lease? That's the biggest issue. When you have one-year or two-year leases, they're not willing to invest in the land, and it therefore becomes crop farms and does not really produce for food production.
:
Right, this is a topical subject for our organization.
We're currently getting started on a comprehensive study looking at land use policy, land use planning, and some of the provincial regulations around farmland ownership to try to understand exactly the kind of questions you're asking.
In terms of the profitability of farming, I think it's a complex picture for what drives that. Certainly the amounts of money going through from development pressures are always going to be a concern for farming. Length of tenure, as you suggested, is an issue for farmers.
For ownership and leasing arrangements, having a mix is always optimal in terms of risk management in planning for farming operations. Certainly long lease tenures would be critical. We don't have a number to place on that, but I think it's an important aspect to the long-term viability of operations and the ability to invest.
When it comes to profitability, we've done a lot of work looking at the structure of agricultural research and what can be done on that front. I would echo some of the sentiments of Mr. Slomp in terms of investing in varietal research for Canadian products and also looking at bolstering the next agricultural policy framework to provide access to capital for new entrants.
I think it is a critical piece of the picture to try to keep farms in operation and farming, not just for the profitability of the operation, but so the capital and the flexible intergenerational transfer policy context is there to make sure, where there is a desire to keep it in farming and a committed farm family, they can make that work.
:
One minute for tax reform in Canada. I don't know how we could do much justice to that.
I think the argument I was making to the committee was that simply looking at the tax expenditure review that's planned is not ambitious enough. There are certain tax preferences that we have in the system, for example the children’s fitness tax credit, and then we have preferences ranging from pensions and stock options to these other issues.
I think that's part of the tax system in looking more comprehensively at personal income taxation, and looking at whether the system is progressive enough, and whether it's taking enough revenue in.
On the business side, the same question is there in terms of the rates and whether we get the system to have lower rates and broader bases. I think that is what most economists would argue for.
The pitch I would make would be to not limit ourselves to looking at particular tax preferences, but look at the system as a whole, look at how the federal and provincial levels of government work together, and try to make it more efficient and more equitable.
:
Thank you for the opportunity to present today.
As a representative of the upstream oil and natural gas sector in Canada, I want to focus some of our comments today broadly on matters of the investment environment in Canada.
Simply put, we believe that to create wealth for Canadians, significant and ongoing investment is required in the various sectors of our economy, ours included, of course. This includes investments in manufacturing production as well as technology development, people, and communities. We look at it broadly speaking as an investment, as a key criterion for creating wealth for Canadians across the economy.
There's no question that the current economic environment in our sector has been devastating to many individuals and families, not just in Alberta but across Canada. We're feeling the effects of the current commodities cycle across Canada, and we certainly appreciate governments'—plural—recognition of the devastating effects and the willingness to find solutions and ways of mitigating some of those negative effects.
I will also point out a bit of doom and gloom. The situation is not going to be corrected any time soon. We see clearly that things will get worse before they get any better.
There's one thing I do want to talk about in terms of the investment environment for our sector in particular. It's a notable fact that for the last eight to ten years every dollar of cash flow that our industry, our sector, has realized in Canada has been reinvested in Canada. This is a pretty important record. Also, a really important point I will add onto that is that on top of that reinvestment, that cycle that's been pretty steady for the last eight to ten years, there's been a significant direct investment from outside Canada into the Canadian economy through our sector. We'd like to continue that cycle and be ready to come back when the commodity prices come back so that we can be better prepared to function well in a different world.
We believe that government should proceed with a strong sense of urgency on a variety of initiatives that will help create an environment that ensures continued investments in Canada. I'll give you some specific examples and then certainly I'm open to questions afterward.
One area we're most interested in right now is addressing underemployed capital within Canada. I'll give you a few examples that we are looking at and doing some research on, and look forward to engaging with government on this through the budget process.
We believe there's an opportunity to modernize the large corporation tax rule to more effectively deploy what appears to be billions of dollars in capital across the economy. I would point out that this is important for our sector, but it's also very important for many other sectors in the economy. There's an opportunity here that we believe Canada should explore.
We also believe that it's time, given our current environment, or change in environment, to modernize the capital cost treatment for tax purposes for the unconventional oil and natural gas resource wealth that we have in this country. The current rules for capital treatment were devised and implemented many years before we thought of the new technologies and the unconventional nature of some of our resources. It is time to look again at that to see if we can't find better ways to allocate capital to make sure that we get the maximum benefit out of our resources.
I will point out to you another area within the broad bucket of underemployed capital. I think last week a CIBC report came out that identified in the order of $75 billion that we Canadians are holding onto in cash because of our fear of the volatility in the equity markets. The notable thing in that report is that they've indicated that through previous down cycles, Canadians were late getting back into the game and lost significant opportunities for investment returns. So we think, broadly speaking, that there's a pool of underutilized capital in Canada. Within Canada, with our current foreign exchange environment, we believe there's a window of opportunity to strengthen the confidence of those investors and get that money working within Canada for Canadians. Certainly we'd be happy to look at increased investment in any areas of our business.
Certainly, we also believe—and maybe you're surprised I didn't lead with this—in increasing investment attraction for Canadian resource development. That's another way for me to highlight the need for market access, diversifying our access. I will say that this is an issue for the oil and gas business in Canada, but it's also, broadly speaking, about natural resources in Canada, getting them to as many diverse markets as we can so that we maximize the opportunities of that wealth.
I do know from my past experience that the current forest sector is looking at market access issues as well. That hasn't changed, hasn't gone away. We need to address that, broadly speaking, within Canada.
We also believe in and are encouraged by the government's intent to invest directly in Canada. Certainly in areas related to indigenous peoples and community investments which are very important to our sector, those investments are critical for long-term growth in our businesses. We appreciate the economic infrastructure opportunities that are there for Canada, whether strengthening the marine infrastructure, or any of the safety or environmental agencies or issues in Canada. We do believe strongly in the technology and innovation investment opportunities within our sector. We have some pretty stellar examples in our sector to share around Canada's Oil Sands Innovation Alliance and the partnership they recently created with the technology fund in Alberta, as well as the federal SDTC organization.
On behalf of the Canadian Medical Association, I appreciate the opportunity to appear before the committee as part of its pre-budget consultations. As the national organization representing Canada's doctors, let me commence by highlighting the CMA's strong support for the federal government's commitments to health and health care. The CMA's recommendations for the federal budget are based on tangible and meaningful actions that support the advancement of the government's commitments.
I'll briefly outline our core recommendations. Taken together, these measures will go a long way to addressing the major challenges facing Canadians as well as the provinces and territories in meeting the needs of our aging population.
As our first area of focus, the CMA recommends new funding to the provinces and territories to support seniors care by means of a demographic-based top-up to the Canada health transfer. This needs-based funding would be delivered in addition to the CHT, which currently leaves provinces with older populations at a disadvantage. Rather than opening up the funding formula, the federal government can deliver this much needed funding immediately.
Our second area of focus is on expanding the availability of home care and long-term care. The CMA recommends that the government establish a new targeted home care innovation fund. In addition to incenting innovations, this fund would support scaling up best practices.
To support access to long-term care, where wait times range up to hundreds of days across Canada, the CMA recommends including capital investment in the continuing care sector as part of the commitment to social infrastructure.
Our third area of focus is on delivering support to Canada's informal caregivers. There are 8.1 million Canadians currently giving informal care to family and loved ones, and only a fraction are receiving any assistance. As an initial step to expanding support to caregivers, the CMA recommends that the federal government amend the caregiver and family caregiver tax credits to make them refundable.
Our fourth area of focus is on improving access to prescription medicine. The CMA was pleased to hear last month that Ottawa will be joining the pan-Canadian pharmaceutical alliance in negotiating savings for all publicly funded drug plans. In addition to this important step, the federal government can reduce costs further by establishing a new funding program for catastrophic coverage of prescription medication. As we know, far too many Canadians simply cannot afford to buy their prescription medications, and this is unacceptable. We must and can do better.
A final matter I'd like to raise as part of the pre-budget consultations is that while the CMA strongly supports the federal government's commitment to reducing the small business tax rate, we have been concerned by statements regarding Canadian-controlled private corporations. This may be unknown to some, given our public system, but the majority of Canada's doctors are self-employed small business owners.
Physicians are highly skilled contributors to the knowledge economy. They invest in our communities, and provide hundreds of thousands of jobs. For a significant portion of physicians, incorporation is a key component of the practice model. Changes to this framework could introduce unintended consequences for the health sector. In light of the critical role of this framework, the CMA is calling on the federal government to affirm its commitment to the existing framework governing Canadian-controlled private corporations. I would be pleased to provide more information on this issue.
In summary, the CMA's pre-budget recommendations offer tangible and practical means of implementing many of the federal government's health sector commitments. Each of these recommendations has been designed to deliver an immediate impact in areas where Canadians are struggling the most.
Thank you.
:
Good afternoon. I'd like to thank the House of Commons Standing Committee on Finance for this opportunity to bring to you recommendations from the Canadian Nurses Association, the national professional association for nurses and nurse practitioners, representing 139,000 individuals across the country.
As nurses, we see first hand how Canadians can be better supported by more accessible, community-based care approaches and a shift from current policies and funding models that drive acute, episodic, and hospital-based care. New models for more integrated community-based care would emphasize health promotion, chronic-disease prevention and management, client-centred accessible care, and the use of a range of technologies.
Our official submission to the 2016 federal budget highlights three recommendations for your consideration.
First, deliver federal health dollars through a needs-based top-up in addition to the CHT to each province and territory based on demographics and population health priorities. This new formula would take into account the concerns that several provinces and territories have raised about the demographic differences and unique requirements of their respective populations, especially those living in rural and remote areas.
Furthermore, to increase transparency for taxpayer dollars, we recommend that every bilateral agreement must include a robust accountability framework. Such a framework would take into consideration the relationship between federal funding and the measurable outcomes that need to be achieved for the benefit of Canadians, include reporting on a comprehensive set of indicators and outcome measures derived from existing national data sources, and provide outcome measures calculated using publicly accessible data to report on federal heath funding and the associated measurable health and social outcomes that we seek to achieve for all Canadians.
Our second recommendation is to improve access to equitable, national, publicly funded home and community-based care that includes telehealth, mental health, and palliative care. We applaud the federal government's commitment of $3 billion over four years for home care. This funding will encourage a shift toward client-centred, cost-effective care that supports patients and caregivers and promotes the health and well-being of Canadians. CNA will work with the federal government and stakeholders to support policy development, implementation, and scaling up of existing and new and promising models for community-based care.
Our final recommendation is to invest in early, secondary, and post-secondary education for indigenous students and in professional development for health care providers who serve Canada's rural and remote communities. We are ready to work with the federal government in acting to implement recommendations of the Truth and Reconciliation Commission and strongly support the government's commitment to make significant new investments in indigenous education, improve essential physical infrastructure for indigenous communities, and create jobs for indigenous peoples.
This can be achieved by providing a four-year annual investment of $100 million to improve infrastructure in rural and remote communities, specifically in the form of construction of educational facilities and satellite learning centres and expanded broadband to promote distance education.
We also encourage a four-year annual investment of $25 million for initiatives to create more locally accessible infrastructure and learning opportunities for students enrolled in health care training programs and health care professionals already serving in rural and remote communities. Access to high-quality post-secondary health care education and professional development programs for health providers has been shown to lead to a more stable and skilled health care workforce to serve rural and remote communities.
Thank you very much for your attention.
:
Thank you very much. I'm the economist for the Canadian Union of Public Employees. Our new national president, Mark Hancock, is out of town and sends his regrets.
CUPE is Canada's largest union, with 635,000 members. We deliver front-line services for municipalities, health care, social services, education, and many other sectors in communities across Canada. Our members take pride in delivering quality public services, and with incomes close to the Canadian average of $40,000 to $50,000 a year, they depend crucially on quality public services to maintain their standard of living, as do all Canadians.
As we all know, Ottawa experienced a record snowfall yesterday. I and many others spent hours shovelling snow for neighbours and pushing cars stuck on the road. I was happy to help, but I was also happy to see the snowplows arrive, operated by CUPE members. That's what we Canadians do. We shovel snow, but we also help each other. We help each other in our communities and as a country. We help each other out because it's in our nature, and if there's a car stuck on the road, or someone in poverty, in sickness, or without decent education, it holds us all back as a nation.
As a nation, our progress has been held back by inequality and an increasingly unbalanced economy. We need increased stimulus and infrastructure investment, but we also need more fundamental changes. We won't achieve sustained economic growth unless we work together to diversify and grow our economy, improve public services, generate good quality jobs, reduce inequality, and make the transition to a more sustainable economy.
To these ends, our recommendations for this budget are that the federal government increase infrastructure spending, particularly in public transit, green and social infrastructure, and particularly for those most in need, including through affordable housing, transition homes, child care centres, seniors facilities, and community and cultural facilities.
Federal infrastructure funding should support a long-term plan to reduce our emissions and generate good quality jobs. The federal government and other levels of government should demonstrate leadership by ensuring that all public buildings and facilities are constructed or retrofitted to high environmental standards.
All federal infrastructure funding should be tied to environmental, climate change, and social requirements. In the short term, we support the government providing more than a third share of the funding for these investments, tied to achieving environmental and broader social objectives, including decent wages, labour rights, pay equity, and opportunities for apprentices and equity-seeking groups.
The federal government should establish a dedicated fund to support public waste-water infrastructure investments required to meet the new national waste-water regulations. It should also increase funding for first nations water and waste water.
We commend the government for removing requirements that recipients of federal funding use or consider P3s, but urge it to go further and eliminate PPP Canada, and redirect the P3 fund to public infrastructure projects. It should also introduce comprehensive P3 accountability and transparency legislation.
The Canada infrastructure bank shouldn't be another vehicle to subsidize high cost private finance.
With unemployment rising rapidly, we urge the government to accelerate planned changes to EI in this budget.
In training and labour force development, funding should be restored with an emphasis put on literacy and essential skills development. As a priority, we agree that the federal government should work with the provinces and territories to establish and fund a national, affordable, and public non-profit early childhood care and education system with a distinct system for indigenous communities. We also support reducing and ultimately eliminating undergraduate university and college tuition fees.
We welcome the commitment to enhance the Canada pension plan, and urge the federal government to demonstrate leadership in achieving a universal expansion of the CPP, instead of deferring to piecemeal and provincial measures.
A new health accord should provide significant annual funding increases strictly tied to enforcement of the Canada Health Act, as well as improvements and expansion of the public health care system, including a national pharmacare plan.
We urge the federal government to commit to a 10-year timetable to increase our international development assistance budget and to dedicate at least half to the least developed countries. We're opposed to the ratification of the Trans-Pacific Partnership, CETA, and other deals that expand corporate power at the expense of jobs, wages, the environment, and our democratic sovereignty.
Finally, we need increased tax fairness. Priorities in this budget should be to broaden the base by eliminating regressive tax loopholes, such as the stock option deduction, to tackle tax evasion, and to move toward higher taxation of both corporate and capital income. After many lost years, we look forward to working with the new government and parliamentarians to rebuild a more prosperous, diversified, equitable, and sustainable Canada.
Thank you.
:
Good afternoon. Thank you for the invitation to appear today on behalf of YWCA Canada.
For almost 150 years, YWCA Canada has worked to improve the lives of the tens of thousands of women and girls who use our services annually. My remarks today respond directly to their life experiences.
YWCA Canada and our 32 member associations across the country in nine provinces and two territories are committed to building a country that works for all women and girls. That includes first nation, Métis, and Inuit women, young women, and newcomer, refugee, and immigrant women. We welcome the quick initiation of the development of a national inquiry into missing and murdered indigenous women, and look forward to the government honouring its funding commitment to this in federal budgets 2016 and 2017.
Gender-based analysis is essential across government departments and should already be incorporated in the development of this federal budget. It is particularly important for allocation of infrastructure funds to affordable housing and early learning and child care to ensure that this spending responds equitably to the needs of women and girls. The Auditor General reported that in the 20 years since the government committed to applying gender-based analysis, it has been implemented in only some departments and agencies. Correcting this will require ensuring that Status of Women Canada has sufficient staff capacity.
YWCA Canada welcomes the government's support of the motion on pay equity earlier this month. Women working full-time year-round earn 20% less than men in comparable work, feeding poverty and inequality. We look forward to funding in federal budget 2016 to support recognition of pay equity as a right, implementation of the 2004 pay equity task force report, and restoration of the right to pay equity in the public service.
The new Canada child benefit, or CCB, is a potential life-changer for single mothers and all families living in poverty if the federal government can ensure that provincial and territorial governments refrain from deducting it from social assistance payments, or counting the CCB as income for access to means-tested benefits. If it is to lift 300,000 children out of poverty, women and children living on social assistance must retain the entire benefit.
The is responsible for ensuring that no one fleeing domestic violence is left without a place to turn. Often violence survivors are unable to leave women's shelters because they can't afford housing. This leaves shelters full to capacity and turning away women in need. The CCB would provide a single mother with one child under six with $580 a month. With two children under six, she'd receive $1,160 a month. These payments could be enough for women to secure housing in the community and reduce the system bottleneck if they remain fully in women's hands.
As Canada's largest single provider of shelter for women and children fleeing violence, we work to end the interconnected issues of violence against women and women's homelessness. Federal budget 2016 needs to provide a minimum of $5 million to Status of Women Canada to support participation of the violence against women sector in the development of a national action plan on violence against women. Federal budget 2016 should restore the shelter enhancement program at $10 million per year to achieve the promise of no one turned away.
The promised national housing strategy requires a gender lens and gender-based analysis. Male bias pervades perceptions of who is homeless, despite women and girls comprising almost half of the estimated 235,000 homeless people in Canada. Homelessness is gender differentiated. Violence and poverty are the major drivers for women. Forty per cent of women leaving shelters don't know where they will live. Women and girls hide their homelessness because the streets aren't safe.
For women, housing first is not a panacea. The shift of funding from the homelessness partnering secretariat to the housing first model was not accompanied by gender-based analysis. This is absolutely critical before expansion. Transitional housing is an essential service for survivors of violence. It doesn't fit the federal government's current housing first model. Actual housing first for women and children living with violence would leave them in the home, remove the perpetrator, and secure their safety.
The national housing strategy must address housing for women and families in the northern territories. Women with children trying to escape violence are profoundly impacted by the northern housing crisis and seriously disadvantaged by the lack of federal social housing funding that has continued for years.
YWCA Canada welcomes statements indicating quick progress by federal, provincial, and territorial governments under a framework for a national early learning and child care program. Federal budget 2016 should dedicate social infrastructure funds to a short-term emergency-style fund for transfer payments to provinces, territories, and indigenous communities for early learning and child care during funding negotiations.
:
Thank you very much, Mr. Chairman.
I want to thank the standing committee for the opportunity to speak on behalf of the Canadian Energy Pipeline Association and to provide the submission and speak today with respect to the upcoming budget.
I will summarize our submission comments with respect to Canada's investment climate for major pipeline development, the NEB processes, and NEB modernization.
CEPA represents Canada's 12 major mainline transmission pipeline companies, which operate approximately 117,000 kilometres of pipeline in Canada, moving annually approximately 1.2 billion barrels of oil and almost three trillion cubic feet of gas.
For more than 60 years, our pipelines have operated across the country, delivering energy safely, reliably, and efficiently. Over the past decade, CEPA members have had a 99.999%—almost 100%—safe delivery record. In 2015 there was a 100% safety record, with zero incidents along the mainline transmission system.
Our industry is undoubtedly a pillar of the Canadian economy, but recently we have seen difficult challenges. The collapse in the price of oil has resulted in delayed or cancelled energy projects and enormous job losses. In 2015 alone, over 100,000 direct and indirect jobs have been lost, and more are expected.
The situation is made much worse by our dependence on the United States as our only major customer from an exporting perspective. This forces us to sell our oil at a severely discounted price because of the lack of pipeline infrastructure to access global markets, and this results in billions of dollars of lost revenue for Canada.
CEPA members have over $68 billion of proposed investments in pipeline projects forecast over the next five years, projects that will open new markets and provide greater access to existing markets. All of these projects will be built with private capital. To build these important projects, we need to have a competitive investment climate. Companies will choose to invest their capital in other jurisdictions if they see the Canadian regulatory and fiscal system imposing process uncertainty, additional risks, costs, and delays that are not inherent to more competitive jurisdictions.
We recognize that the responsibility to create investment confidence comes hand in hand with building public confidence. To build public trust and confidence, we believe that decisions on whether new pipelines will be built must be placed and based on predictable and rigorous quasi-judicial processes based on evidence, science and fact, and appropriate consultation.
Unfortunately, the recent government announcements that extended the review of two proposed pipeline projects, together with the requirement of additional reports and processes at the back end of an extensive NEB process, are leading to increased ambiguity, delays, duplication of work, and growing potential politicization. Building public confidence requires industry, regulators, and governments to work together.
To that end, CEPA recommends the following:
We need to avoid politicizing the NEB. We are concerned with the potential politicization of the review process and believe that an evidence-based process serves better than a cabinet decision for Canada, which may be based on politics.
The National Energy Board was established in 1959 to depoliticize energy infrastructure decisions. More recently, we find ourselves in a similar situation. The legislative changes brought about by Bill in 2012 changed the role of the NEB from making a decision to making a recommendation to cabinet, leaving cabinet with the final decision. The change has now led to politicization of the decision-making process.
CEPA recommends that this 2012 amendment be reversed, restoring balance and decision-making towards the NEB, a quasi-judicial regulator whose decisions are based on science, fact, and evidence, rather than with cabinet.
On modernizing the NEB, the government has also committed to moving forward with that; however, we need to recognize that not everything is broken. Ensuring the board composition reflects regional views and has sufficient expertise is a good step, particularly greater indigenous representation. Taking a look at governance and the practices and overhauling the information management systems should be part of modernization.
The NEB's role in regulating existing operations spans the life cycle of a pipeline from design approval to construction, operation, and ultimately abandonment. It has done this for 60 years, mostly quietly.
Continuous improvement is always welcome, but we do this at the same time as recognizing that the NEB is recognized globally as a leader in life-cycle pipeline regulation.
As we modernize the NEB, we believe that public confidence can be improved by getting the right balance, building on what works well, improving what doesn't, and providing the regulator with the tools and resources for oversight through the entire life cycle of pipelines.
CEPA believes that a strong, credible regulator needs to be well resourced to provide the tools it needs to fulfill its mandate. This was recently confirmed by the Commissioner of the Environment and Sustainable Development's report. To better address these issues, CEPA recommends that the Treasury Board grant the NEB greater flexibility with the cost recovery model, allowing the NEB to better attract and retain highly skilled employees and to continue to fulfill its strategic priorities.
In summary, by improving public confidence and trust we're better able to make progress on necessary pipeline approvals and infrastructure development.
Thank you for the opportunity.
:
Strangely enough, I will continue in the same vein with Mr. Sanger.
In your brief, you said that privatization compromises those shared values in communities. Subcontracting and public-private partnerships are risky and expensive for municipalities and Canadians. Costs increase, quality decreases and local management is weakened. Services are less accessible and project time frames continue to increase. Public funds are diverted from essential services to the benefit of large corporations.
Moreover, my colleagues, several MPs and business people often repeat that PPPs are a great way to help the government save money and share the risk. However, you are basically telling us that this is not the case. It seems a bit counterintuitive. Do you have anything else to bring to our attention?
Ontario's example was striking, but do you have other examples to explain why it may seem that PPPs help governments, while they actually negatively impact the ability to provide services at a lower cost?
Mr. Bloomer, your presentation was very thought-provoking. For a time, I was the official opposition critic for natural resources. So I am quite familiar with the pipeline issue. I was also a member of the Standing Committee on Finance when changes were made to the way the National Energy Board operated. I agree with you. We need to have renewed confidence in a regulatory body like the National Energy Board. Unfortunately, that won't happen just because we wish it to. The changes made in 2012 and 2013 have resulted in the National Energy Board having only 15 months to study very complex projects that can often involve tens of thousands of pages of documents.
With the TransCanada project, we are already talking about more than 30,000 pages and consultations that have so far excluded many people. In the case of the Energy East Pipeline, in Quebec, about 90% of those who wanted to attend the hearings were denied the opportunity.
There is also a more problematic element when it comes to environmental assessment. In the past, environment departments would take care of environmental assessments for those projects. Now, the National Energy Board is responsible for conducting the environmental assessment, as if it was not enough for the board to study the project itself.
We want those projects to be socially acceptable and we want confidence in the National Energy Board to be renewed. I think that the changes made in 2012 and 2013 were detrimental in that regard. You are talking about reconsidering a part of the legislation that gives the government the right to make a decision that could go against the National Energy Board's recommendations. That change was proposed by the Conservative government. I think that if we back off when it comes to this, we should back off when it comes to all changes that have been made and perhaps review the National Energy Board's role to give it to the necessary tools to do a good job in order to give the government all the information it needs to make a well-informed decision.
:
I'm happy to respond; I'm just checking.
One of the key things on both sides of the fence to restoring confidence and trust in the system.... The changes in CEAA 2012 I think were grown out of the Liberals' smart regulation proposals. Making the process longer doesn't make it better. Changing the consultation requirement, the federal government taking on the role of consulting with first nations directly, I think that's the role of the federal government.
The technical and process evaluation that the NEB undergoes is rigorous, and I think that within those time frames they can get it done. It is fair to say these pipeline projects have been going well beyond the initial time frames for analysis. You're right in that there are tens of thousands of pages of documentation on consultation, on communication, on the technical aspects.
I think that a lot of the changes in 2012 were appropriate. I think that we need to have clarity of process. Right now, I think the overarching thing is that we don't. We don't know how the greenhouse gas issue is going to be rolled into decision-making. We don't know how the consultation process is going to work through this interim process. We need clarity on that side too. We need some certainty overall in the process going forward.
I think that tweaks on the NEB in terms of the infrastructure that it has to do things is important. I think that should be funded, but we should look at it from the perspective that the regulator has been doing its job, especially on the existing pipeline systems, very well and is well regarded internationally. I don't think we need to roll everything back, but I do think we need to do some things, and governance is one of them. Including indigenous people on the NEB is an important thing to do also.
I hope that is helpful.
I too would like to think that we can reach that objective.
First of all, I want to thank all of you for being here with us today.
I would like to raise another topic, but first, I want to thank Mr. Ferguson and Mr. Bloomer for their constructive contribution. I know the drop in oil prices has greatly impacted the industry. Please be assured that we are fully aware that the government needs to act, not only in the interest of all Canadians, but also in the interest of those who work in the energy sector.
The Canadian health care sector is well represented here today, both its employees and practitioners. In 2005, when the health accord was negotiated by Prime Minister Martin, there was a great demand on the part of the provinces for the federal government to exercise leadership, not only by investing in the health sector, but also by playing a coordination role and by showing greater leadership in the health area, while respecting provincial jurisdictions.
Given the time I have at my disposal, I would like to ask you, Ms. Forbes, Ms. Sutherland Boal and Mr. Sanger, what recommendations you would like to make to the committee with regard to federal government leadership in the health sector, in addition to the investments you have recommended.
:
Okay, and I believe your organization, if my memory serves me right, was against NAFTA as well.
Let's move on to the next question, which was with regard to home care. I'm very familiar with that. I worked 29 years with some of the most vulnerable people in society, disabled people.
Often, in some of the most gut-wrenching circumstances, parents have to tend to their children's needs when they're diagnosed with cancer. That was my situation when my son was two years old. My wife and I have a small business. One of us left our job, and we stayed with our child.
Through those years, we found that the support of civic organizations—civil society, if you want to call it that—such as the Canadian Cancer Society and others was quite adequate. In fact, it was a bit overly generous at times for our situation. There were other families on the oncology floor—about 16 of us—at McMaster Hospital. There were other people in different socio-economic circumstances who were given additional resources from civil society organizations, such as church groups and others who support that.
Is there any place in Canadian society for that to be a model to go forward? We survived it and we came out stronger. We weren't eating Kraft Dinner every night; we were living, not a rich lifestyle, but.... I'm not going to go there, but do you know what I'm trying to say here?
I hear all of this, and I think it's admirable, but I'm a conservative and I say the government can't do everything for everybody.
Switching gears to home care and prescription drugs, we have a health care system in Canada that's great. We all know its merits, but it's missing one last piece of the journey in terms of prescription drug costs.
There's a cost here of a billion and change for the program you've outlined. Have you estimated the benefits of going to this? There are families who can't afford prescription drugs and who end up going to emergency afterwards.
A voice: That's right.
Mr. Francesco Sorbara: Also, I want to get your general comment on refundable versus non-refundable tax credits. It's shameful that the system is structured as such, because if you are in the lower income brackets and you don't have taxes payable, you don't benefit from it. It's a shame, and it's actually a tragedy.
More on the prescription drug side, could you add some comments there, please?
I want to direct my questions to Mr. Ferguson and Mr. Bloomer.
I have the pleasure of representing the riding of Sherwood Park—Fort Saskatchewan, which is really Canada's hub for energy-related manufacturing. We have the industrial heartland, and I'm very proud of our region and the jobs that are created there, but also across the country.
I did want to pick up on the issue of accelerated capital cost allowance, because I was a bit concerned by some of the comments made by the Liberal member. I think this is a good opportunity for us to talk further about just what accelerated capital cost allowance is and how important it is for creating jobs in my region and across the country. So many of the products we use on a regular basis come from energy development. Even the election signs that we use are a derivative of a petroleum product that is in plastic. Even Liberal and NDP election signs come from the energy sector in some sense.
Accelerated capital cost allowance is not a cost to government. In fact, it's an economic incentive that creates opportunities for the government to generate revenue, because it allows companies that make major investments in energy-related manufacturing to write off the cost of that capital earlier on. It creates jobs, but it also creates an opportunity for revenue.
Given the situation right now in Alberta, with relatively higher unemployment than we've seen in the past, it just seems to me that now is a very good time to create incentives for these kinds of projects. Now is a very good time for more activity in the downstream sector. I know that we have you gentlemen here representing the upstream sector and the transportation part of our energy resource sector, but I wonder if you could talk a little more about the importance of accelerated capital cost allowance and maybe the kinds of things that we could include in the budget that would create incentives for the downstream sector for energy-related manufacturing.
Good evening, ladies and gentlemen. My name is Alex Scholten, and I'm president of the Canadian Convenience Stores Association. Thank you for giving me the opportunity to speak with you tonight on behalf of the convenience store industry in Canada.
Our trade association represents the 26,000-plus convenience store operators in Canada and the 230,000 employees we employ in this industry in rural and urban communities from coast to coast to coast. Many of these stores may be small businesses, but together we contribute significantly to the economic well-being of Canada. We serve at the centres of many communities.
To give you an idea of the economic footprint of our industry, Canadians purchased from our stores, last year alone, in excess of $51 billion in goods and services. Those sales also resulted in $18 billion in taxes being collected on behalf of federal and provincial governments.
We're also significant employers of new Canadians, providing these entrepreneurs with an opportunity to own and operate their businesses.
Our association is encouraged by a number of small business measures announced in the recent election platform, particularly around lowering small business taxes by two percentage points. As this committee will likely hear through consultations, small businesses are the first to be positively impacted by these types of initiatives, so we are appreciative of them.
Two of our biggest priorities in working with the Department of Finance are the impact of excessive merchant credit card fees and the persistence of illegal, untaxed tobacco that is sold in Canada.
On the first issue, merchant credit card fees, the Canadian Convenience Stores Association works with a coalition of 24 other trade associations, the Small Business Matters coalition. This coalition came together to provide government with the concerns and direction of over 98,000 small businesses operating in Canada. It's no secret that merchant swipe fees in Canada are among the highest in the world, and have risen sharply over the past number of years.
Last year saw the introduction of an average credit card merchant fee rate of 1.5% under a voluntary agreement between the Canadian government and credit card providers. Unfortunately, this was not enough to create any real difference to Canada's small businesses. In an effort to support their small business merchants, several other countries have lowered their rates to 0.3% to 0.5%, or one-fifth or one-third of the average rate imposed under the voluntary code of conduct. We think these examples from other countries would serve as an excellent model for Canada.
We need to do more for small businesses so that expense savings can be used for hiring more staff, making capital investments in our businesses, and lowering consumer prices. We also would like to see this committee put forward a recommendation to implement greater enforcement behind what currently remains a voluntary code of conduct on swipe fees.
With respect to the issue of illegal and untaxed tobacco, the Canadian Convenience Stores Association and our four regional counterparts regularly engage government to advocate against additional tax increases on tobacco products. We do this because of the impacts such increases have on illegal tobacco activity in Canada. The issue of contraband tobacco has consistently affected our sector, as we view ourselves as being a partner with government in the controlled sale of legal tobacco products. Not only do our members keep tobacco out of the hands of youth, but we also collect taxes on behalf of federal and provincial governments. In 2014 that amounted to in excess of $4.7 billion.
Tobacco tax increases are often advocated as a way to reduce smoking rates, particularly youth smoking rates. The reality, however, is that once taxes become too high and prices skyrocket, consumers simply purchase their products elsewhere, that is, in the illegal and uncontrolled environment.
In December of last year, himself acknowledged, when discussing the potential of taxation on marijuana products, the potential for illegal market activity if taxes rise too high. He stated that by taxing a product too much, it inadvertently creates or fuels a black market. An increase in the illegal market also diminishes the impact of tobacco control measures.
Our association has long advocated for greater deterrence measures against the illicit market, including additional resources for the RCMP, Canadian Border Services Agency, and other investigative bodies.
Additionally, it is important to note that fines levied against illegal tobacco traffickers are very often not collected. This is an incredible source of lost revenue that this committee should strongly pursue as a means of deterring criminality while also recouping lost government revenue.
Thank you to the members of the committee.
It's a pleasure to be here today to talk about the diverse and real opportunities presented both from an economic standpoint as well as an environmental standpoint that a diverse energy mix in Canada can provide, including what we think is essential, and that is the expanded use of biofuels.
For over 30 years, the Canadian Renewable Fuels Association has been the country's leading advocate for the biofuels industry. It is also an industry that generates $3.5 billion in yearly economic activity, has created over 14,000 quality Canadian jobs, and returns over $3.7 billion in investments back to government every year. Biofuels, like ethanol and biodiesel, reduce greenhouse gases by up to 99% compared to fossil fuels and on a life-cycle basis, biofuels are already reducing carbon emissions by 4.2 megatonnes annually, which is the equivalent of removing one million cars from the road every year.
With this committee's work in mind, to look for strategic ways to invest in our economy, as well as the government's stated ambitious targets for reducing greenhouse gas emissions in Canada in combatting climate change, we'd like to briefly offer some ideas that our industry has on how to leverage the successful biofuels mandates that we already have in place in Canada to strengthen the economy, while at the same time helping reach those ambitious greenhouse gas reduction targets.
First is increasing the already successful biodiesel mandate from 2% to 5% by the year 2020. The transportation sector of course accounts for 23% of Canada's greenhouse gas emissions. You hear about this quite a bit. That works out to about one-third of Canada's overall greenhouse gas emissions. Every year Canada's 2% biodiesel mandate reduces those annual emission levels by 910,000 tonnes. Increasing the mandate incrementally year by year by 1% or so would more than double those reductions. Blending more biofuels is also consistent with what consumers have told us they want and what they are looking for in their fuels. We did a recent survey of 17,000 Canadians from across the country. When asked, 88% of them said they wanted to see more renewable fuels products and that they felt that government should be doing more to promote Canada's renewable fuels industry.
In terms of increasing the federal mandate that I just talked about, the majority of Canadians, over 65%, are already in support of seeing more biodiesel in the fuel mix. Interestingly enough, less than 10% really seemed opposed to it.
Second is placing a fair value on GHG reductions. Many provinces have, or are working on, some sort of design for a carbon price system. We support this work and we're fully engaged with the provinces in their leadership on this issue. However, complementary measures from the federal government cannot be ignored and really are needed to be a winning part of the overall equation for battling climate change in this country. These can include a variety of things, such as vehicle efficiency standards, increases to the federal mandate, as well as looking at GHG requirements layered on top of those mandates.
Finally, we think there needs to be increased support for clean technology and the bioeconomy in Canada. We should all be very proud of the fact that we have one of the strongest economies in the G-8, but our long-term economic prosperity is going to be determined by the priority we place on sustainability, innovation, and clean technology. Be it through government programs, tax incentives, or the creation of a national bioeconomy framework similar to what already exists in countries like the United States, the European Union, and Croatia, Canada's public policy must continue to find ways to keep up with the needs and the pace of business.
Those are our ideas. We've kept it intentionally short with the ambitious agenda of this group in mind, but of course, I'd be happy to answer any questions that you have later.
Thank you very much.
:
Thank you, Mr. Chair. I'm pleased to be here.
The CWTA represents wireless service providers as well as companies that develop and produce products and services for the industry, including handset and equipment manufacturers, content and application creators, and business-to-business service providers.
My remarks this evening will focus primarily on the pre-budget consultation question that asks: what infrastructure needs can best help grow the economy?
Wireless technology contributes to virtually every aspect of the Canadian economy, as wireless devices are now indispensable business and consumer tools, and Canadians' preference for wireless is clear. In only seven countries in the world does the average mobile user consume more than one gigabyte of data per month. Canada is one of those countries, and Canadians currently rank as the fourth-highest consumers of wireless data in the world, at more than 1.5 gigs per month.
The cumulative effect of more Canadians using smart phones and connected devices to do more is a massive growth in overall data usage. The latest projections indicate that Canadian mobile data traffic will increase 600% by the year 2020. No other sector of the economy must consistently meet levels of demand growth similar to those experienced by the wireless industry every year.
Demand is met by significant infrastructure investment. The Canadian wireless industry has invested more than $2.5 billion in capital expenditures each year since 2009. The doubling of total data usage every two years keeps the industry in a perpetual investment cycle. The industry has also invested an additional $8 billion since 2014 to acquire the spectrum needed to expand and enhance wireless networks to meet current and projected traffic volumes. As a result, the government currently records more than $830 million per year in spectrum auction revenue. These investments create jobs directly related to network expansion and enhancement and the ongoing delivery of advanced wireless services from Canada's service providers.
In 2014 Canada's wireless industry generated 134,000 full-time jobs and an overall economic benefit of $23.5 billion. Canada's service providers will continue to make record investments to meet the exploding demand for data use and ensure a consistent level of service for all Canadians.
Strategic government policies can facilitate additional investment in wireless network infrastructure and support innovation and economic development across Canada. To further enable investment in wireless network infrastructure, CWTA submits that budget 2016 include an accelerated capital cost allowance from current rates to 50% for classes of depreciable assets that relate to telecom network equipment, including broadband networks. These classes include 8, 42 and 46.
Such a change to the income tax system would return significant benefits to Canadians and the national economy. It is projected that increasing the CCA rate for class 46 to 50% would increase telecom investment by $122 million per year in the near term. If the rate is increased permanently to 50%, the increased investment would total as much as $225 million per year, would create an additional 1,660 full-time jobs, and would add $163 million to the GDP.
CWTA has also consistently submitted that additional capital would be available for infrastructure investment if spectrum licence fees, which are currently 37 times greater than those paid by American service providers on a per-subscriber basis, were reduced.
Finally, CWTA submits that the government review the scientific research and experimental development program with the goal of reinstituting competitive tax credits that were reduced or eliminated through the 2012 federal budget.
Wireless technology innovation and R and D is evolving rapidly as companies compete to pioneer 5G network technology and move the digital economy forward. Much of this innovation will happen in Canada if it provides a competitive environment for facilitating telecommunications innovation and investment.
Wireless network infrastructure expansion and enhancement deliver unmatched commercial and social benefits to Canadians, including job creation, contributing to the GDP, and enabling the mobile and virtual workforce, thereby removing geographical barriers for rural businesses and communities to participate fully in the Canadian economy.
Wireless service also connects all Canadians, allowing for collective participation in society and contributing to our shared national identity.
The government, therefore, can directly contribute to innovation and economic development across Canada by facilitating additional investment in wireless network infrastructure.
Thank you.
I'm happy to answer any questions you may have.
:
Good evening, everyone. Thank you for the invitation to appear before you.
The Centre of Excellence in Energy Efficiency, or C3E, is a fund that focuses mainly on investing to help Canadian companies get through what is referred to in marketing as the “valley of death”. We invest a lot of money in research and development and in expending plants to obtain contracts, but between the two lies the “valley of death”. That is where C3E wants to position itself and further what it has been doing since 2009. The Centre of Excellence in Energy Efficiency feels that the only way to make money is to export products and import money.
We note that in the wake of COP21, the Government of Canada has shown a strong interest in decarbonizing the country's economy and in investing more to reduce our carbon footprint. The transport sector is responsible for more than 23% of greenhouse gases in our country. In certain provinces, like Quebec, that figure is 45%. Globally, the figure is 13%. Consequently, we must focus our attention on this matter, but not only on the “transportation” aspect. If certain provinces want to eliminate oil from their plans, and purchase BMS, vehicles and batteries offshore, the loss of trade will simply be transferred to another sector. Consequently, it is important to invest in Canadian innovations so that we can export our products and import currency. That is how we will create wealth here.
Let's look at another issue. We've been discussing transportation. Did anyone come here today without using some means of transportation? Some of you took a plane and others took the train. Personally, I came by car. What can Canadians do to encourage homegrown innovations and help businesses get through the first steps in commercialization? That is exactly where the problem lies. We invest in research and development, but there is nothing left for commercialization. That is where businesses need a hand up to get the first sales and raise their profiles.
Currently, projects are funded in silos. There are budgets for transportation, industry, natural resources, the environment, and there is a desire to invest in all of those sectors. For our part, we invest in the energy efficiency of rail, sea, road and air transportation. We know that the majority of projects concern the road sector, but there are also many applications for the lightening of materials, as well as for managing power, energy and engine power.
According to a study by the International Energy Agency, in 2035 oil will still be used for certain mobile applications. We think it is still possible to improve and increase the energy efficiency of traditional internal combustion engines. Consequently we must invest in our innovations. When it comes to lightening, hydrogen, and electric vehicles, I am convinced that Canada as a whole would benefit if the Department of Transport, the Department of Environment and Climate Change, the Department of Innovation, Science and Economic Development and the Department of Natural Resources were grouped together so as to invest in a program to advance the commercialization of our spinoffs.
For instance, SDTC, Sustainable Development Technology Canada, has quite an impressive budget for technological demonstrations. They show Canadians that things are working. That is were C3E would like to intervene and have a fund to help commercialize the best ideas, the best positionings and these innovations. Once again, the idea is to export products, import money and create wealth here. That is what we want to do.
We need to see initiatives from government as well as policies on industrial technological spinoffs. The Department of National Defence, for instance, buys technology abroad. It is used here to reduce our carbon footprint. Imagine how good the financial picture could be if we did the same thing with our Canadian innovations.
Thank you.
Mr. Chair, members of the committee, good evening.
[Translation]
Good evening, everyone. Thank you for having invited me to take part in this consultation.
[English]
TIAC really appreciates the opportunity to participate in this important dialogue.
Travel and tourism is an $88.5-billion industry. It's Canada's largest service export sector and it generates $17 billion of annual export revenue. It's an economic driver and significant job creator in every riding across this country. We employ more than 600,000 people and we are the largest employers of Canadians under the age of 25.
There are a number of factors that undermine our international competitiveness. We've circulated a brief underscoring the factors that contribute to tourism's underperformance.
Tonight I want to focus my remarks on the need to increase international tourism marketing through Destination Canada..
You may be thinking to yourselves that tourism is one of those industries that's doing just fine and that the low dollar is taking care of this sector, so nothing needs to be done. What the low dollar is doing is keeping Canadians at home this summer. While domestic tourism is vitally important to the economy, we've grown overreliant on this segment. Currently, 80% of travel revenue in this country is derived from Canadians travelling within Canada. This is up from 65% just a decade ago.
While a low Canadian dollar is good for exports, we operate in a global marketplace where we compete with countries which invest significantly more in marketing than we do, and it shows. Globally, travel and tourism is one of the fastest growing economic sectors, surpassing $1.5 trillion in revenues. Our share is only 1.5% of that growing pie.
We need to grow international visitation. That's what generates the export revenue that drives investment, economic stimulation, and job growth in this sector.
Our largest key market is the U.S., so we're going to focus on that for a moment. Canadians are very conscious of the value of their currency. It's the topic of almost as many conversations at Tim Hortons as the weather is. But the vast majority of Americans are unaware of currency exchange. They base their travel decisions on value. Travel options are advertised to Americans in U.S. dollars. The effectiveness of the advertising campaign and the value proposition is really what's attracting them.
Canada has not had a significant marketing presence in the U.S. for at least five years. Last year TIAC requested $35 million annually to re-enter the U.S. leisure market and we received $10 million a year over three years. We're very grateful for the investment, but it does fall far short of the request. It's further compounded by the fact that we're experiencing a 30% loss in buying power in the U.S. because of the currency exchange.
Since 2002 Canada has fallen from eighth to seventeenth in the world in terms of visitation. Our marketing budget has dropped from $98 million to $58 million and we've shed four million international visitors a year.
Market conditions are now optimal to drive demand.
National tourism brand advertising is not only an effective way of promoting tourism but it's a powerful vehicle to communicate a country's values, including quality of life, cultural diversity, and environmental stewardship. Advertisements depicting Canada's magnificent geography, cultural diversity, and modern cities will not only drive visitation to Canada but will go a long way to setting straight the global impression of Canada as a leading progressive nation.
The travel and tourism sector is experiencing optimal market conditions when other sectors are struggling with global commodity prices. Increased advertising in key source markets would generate significant return within the same fiscal year at a time when government revenues and cash flow are vitally important.
TIAC is therefore asking for Destination Canada's marketing budget to be increased to $150 million. In 2001 the budget was $98 million, when Canada's visitation levels were at their highest. That converts to $127 million in today's dollars. We believe this amount should be increased to $150 million to compensate for the loss in buying power in key markets attributed to currency exchange.
Mr. Chair, members of the committee, the low dollar should not be seen as a solution to the tourism industry. It's an investment opportunity that really shouldn't be missed.
On behalf of Canada's travel and tourism businesses, I want to thank you for the opportunity to participate in the pre-budget consultations and look forward to your questions.
Thank you.
I thank the committee for inviting our group, a non-profit organization dedicated to the development of information technologies in rural Quebec.
We are here today to speak on behalf of the communities affected by this problematic situation. We are talking about half a million Canadian men and women who, in 2016, still do not have access to cellular telephone technology or mobile Internet. And yet we know that by 2018 this technology, through smart phones and tablets, will dominate the Internet sector worldwide.
Satellite coverage is already rather good in Canada. However, in terms of performance and cost, we believe that this technology will soon become obsolete. Because of this, development in the North, in Canada in particular, will be adversely impacted. By 2019, average speeds will quickly reach 20 to 43 megabits, which is beyond current capacity.
As you know, Canada's topography and its vastness hamper the development of affordable wireless Internet. Infrastructure sharing has brought down costs for users. However, this had an adverse effect on rural communities deprived of services by discouraging, to some degree, telecommunications carriers from developing new sites.
We want to see dynamic services in all of Canada so as to ensure the security, retention and development of resources, in addition to maintaining the competitiveness of businesses. Elected representatives say, and have confirmed to us verbally, that they favour a technology that will be able to keep pace with upcoming developments. This will have to be wireless telephony, because it is and remains the only sustainable technology that can provide fixed and mobile broadband internet, and, collaterally, cellular telephony, which is a very important factor in some communities.
We cannot overemphasize the importance of developing a fibre optic backbone and alternative networks in the North. They will become the support structure of all future telecommunications in the Canadian North.
Today, telecommunications infrastructure has become just as strategic as our roads and bridges, particularly for our rural municipalities, located far from large centres, devitalized, often mono-industrial, and having rather undiversified economies.
Consequently, to support the initiatives of our municipalities and their citizens, who are willing, in co-operation with telecommunications carriers, to develop innovative solutions, and even to contribute financially to the cost of the services they need, AIDE-TIC believes that the current government could, in its next budget, include the following three measures to support these local initiatives.
First, the definition of broadband infrastructures should be amended in the Building Canada Fund to incorporate fixed, mobile and voice Internet. The objective is to allow our municipalities to have access to development projects. I am referring here to cellular technology.
Next, given the vastness of Canada and limited municipal means, we suggest increasing the federal share from 33% to 50%, thus reducing municipal participation and encouraging the creation of such initiatives.
Finally, despite the low volume of users, we must ensure that our roads remain safe and usable. In rural areas and the Canadian North, that is important. We believe that a tax incentive or a capital cost allowance rate of 55% should be provided to telecommunications carriers willing to service interregional access roads. This would enable the geolocation of users in danger on our roads, as well as 911 emergency services.
Mr. Chair, thank you once again for having invited us.
If members of the committee have any questions to complete the brief we tabled, we will be pleased to answer them.
:
Correct. You can probably guess where a lot of my questions will go as the official opposition critic for tourism.
My riding has our beautiful Rocky Mountains in it, with Banff and all it has to offer, and Canmore, so tourism is obviously a prime focus of mine. I do have some questions for you, Ms. Bell, but never fear to the other panellists. I do have some colleagues here who I'm sure will have some great questions for you as well.
There are a couple of areas that I want to ask about. You mentioned in your remarks about what we call the connecting America campaign. I'm going to quickly read from the press release that you put out after last year's budget. The quote from you says, “Today's federal budget promises to improve Canada's global competitiveness in attracting U.S. visitors, and strengthen the travel industry's ability to create jobs and wealth for Canadians in every region.” It goes on to say, “The federal budget includes important measures for the Canadian travel and tourism industry, specifically a commitment to invest in TIAC's Connecting America marketing proposal.”
With that context in mind, I'm really glad to hear at the recent federal-provincial tourism ministers' council that it sounds like the current government which is still in its infancy is looking to continue with that investment that we had announced in our budget last year. I certainly hope we can see them follow our lead on a few more things like fiscal responsibility and balanced budgets, but that's another story.
I want to get a sense from you, though. Obviously there is a lot of opportunity there right now. The low dollar you mentioned is a small part of that, but obviously, a lot of other factors come into play as well, including the fact that we're investing in marketing. You mentioned the desire to see an even greater investment for marketing through Destination Canada. Are there a couple of other suggestions you might have on ways the government could build on the increased visitation that we're seeing from the United States? I've heard it from the tourism operations in my riding, from people all across the country. In fact, just before I came here, I was talking on the phone to an operator on one of the ski hills and he was saying that they've seen about a 15% increase in business this year over last year, and about half of that was coming from the U.S.
Could you give us a couple of other specific ideas or suggestions on ways that we could build on the opportunities that there are from the U.S. right now?
:
Thank you very much, Mr. Chair.
I found it interesting that both Mr. Nepton and Mr. Eby said the same thing during their presentations. We had seen Mr. Nepton's presentation beforehand, but not Mr. Eby's. The difference is that Mr. Nepton, of the AIDE-TIC, suggests that the accelerated capital cost allowance—
Is the interpretation coming through?
An hon. member: Yes.
Mr. Guy Caron: I wasn't sure if it was working.
I was saying that you are both of the same mind regarding the accelerated capital cost allowance. But Mr. Nepton said that it should be conditional upon companies providing service to rural and more remote areas.
Looking around, I see that four of the five members around the table represent rural areas: Mr. Richards, who represents a more or less rural riding; Mr. Champagne; Mr. Easter; and myself. This is probably also the case in Mr. Champagne's riding, since I'm somewhat familiar with his region, but at least 8 or 9 of the 39 municipalities in my riding do not have access to cellular services. They can rely only on satellite reception. The problem is that the companies wanting to set up in these areas can't be competitive because high-speed services aren't available through satellite.
I understand why you don't invest in rural areas. It makes sense. The last 5% is the most costly, and I get that.
But back when land lines were the norm, Bell Canada had a monopoly in exchange for meeting the obligation of providing everyone with service. Since then, the market was opened up to competition in an effort to bring down prices. Unfortunately, that has happened at the expense of the regions, which are not being served and will receive no better access. The more networks improve, the more marginalized remote areas become because they don't have access to the services that would allow them to participate fully in the economy.
Mr. Nepton, my first question is for you, since I had a look at your model. At the end of the day, you work with the regions, the RCMs, the municipalities, to obtain the necessary capital to build cellular towers, which you in turn make available to the various companies who could then provide services through the network. Is that right?
:
Thank you. I appreciate that.
[English]
It's difficult to do justice to all your submissions. Obviously, as we went from, I would say in my case, Moncton to Yellowknife, a lot of the issues you brought to the table we've heard.
[Translation]
I'd like to pick up on the issue you brought up, Mr. Nepton, and that is connectivity.
What I called digital infrastructure is an issue we've heard about in every region of the country. I can assure you that, together with our partners and various colleagues, we are looking into the matter.
When we talk about infrastructure programs in an urban area, we are referring to bridges and roads. In a rural area, however, we are referring to digital infrastructure. You will definitely find people on our end who are very aware of that. As Mr. Caron said, a number of our fellow members are from the regions.
I can tell you that high-speed Internet and cellular phone service provide people with opportunities to participate in today's economy. What is often proposed revolves around investing in productivity, innovation and exports. But, in order to do that, most of the regions need to have access to cell phone or Internet service.
My question is for Mr. Scholten, specifically.
[English]
We've heard from credit card companies and a number of banks, and I'm very curious to know, where is the 1.5% going? I've heard different things from different industries on exactly who's charging the 1.5% and where it is going. Could you shed some light for the members of the committee on where the 1.5% is going?
:
In a proactive way, what we've been promoting for some time is the approach that the Australian government took to determine a reasonable rate.
We understand as merchants the importance of having a vibrant credit card system and we want to make sure that's ensured. The Australian government, when they looked at this as well, studied the issue, studied how much the costs were for all of those components of the credit card system to understand what was necessary and what was too much in terms of costs.
The recommendation that we would make is that a very fulsome study be conducted on all aspects of the credit card network system to understand where there is overcharging being done and where there's a situation where reductions should be passed along to merchants. With that in mind, the Australian government came back and initially created a rate of 0.55%. What we're talking about in Canada right now is 1.5%. They've since reduced that to 0.5%. From what I understand, they're looking at reducing that further to 0.3%.
In their review of the system in Australia, they have found that 0.5%, or an even lower rate, is sufficient to ensure that members of the credit card industry are making enough money, and compare that to 1.5% in Canada. We don't have a different system; it's exactly the same. What we're saying is it's too much. Studying that first, understanding and making sure that it's a reasonable rate is what we would suggest.
The other point that we've made, which we've seen in the United States, for example, is that some states in the U.S. have looked at the possibility of actually not charging credit card fees on the tax portion of purchases made. In our industry, for example, as I mentioned earlier, we collect $18-billion worth of taxes for federal-provincial governments. The thanks we get for that is when those purchases are made by credit cards, it costs us 1.5% to 4.5%.
What we suggest is if finance is looking at this, if this is something that you want to study, I would suggest that this would be a very good avenue to look at as well.
:
This is a huge issue. It's an issue that poses all kinds of dilemmas and unfortunately, a politicization of things. That particular manufacturer, by the way, pays the excise tax. They pay no other taxes, no property taxes, no income taxes, and no corporate taxes, just the excise tax, so they have a huge advantage.
The other interesting fact is there are 11 known illegal manufacturers on the Six Nations territory that GRE told me about when I visited them six years ago, so my information is dated.
The issue is one that is so difficult to tackle. In fact, some of the richest people in Canada live on Six Nations as a result of this business.
I appreciate your encouraging the new government to tackle this issue in a meaningful way, but it's a very difficult issue to tackle. I just wanted to put it in context, because you've been fighting this battle for a long time.
Your business people, the people who own the stores, have lost the revenue numbers you mentioned: $2.5 billion, estimated four years ago, in lost revenue for them, and $2 billion, estimated four years ago, in lost revenue for the government. Are those numbers correct?
:
Thank you for the question.
The Liberal Party said that it wanted to deal with the carbon issue. It's a fact that the transportation industry is responsible for 23% of the country's greenhouse gas emissions. Our goal, then, is to invest in the commercialization of energy-efficient innovations in the transportation industry. For instance, there is a hydrogen company in British Columbia, and Quebec has a hydrogen research institute. And both of them have developed wonderful applications that could find takers throughout Canada's north.
The Germans, however, hold patents and their products may cost buyers less because our companies don't have the resources to commercialize and sell their products. It's hard for them to compete with companies that have the upper hand over Canadians in the country. We want to invest that money in those Canadian companies. We want to help them commercialize their products outside the country, and their profits will generate our return on investment.
That's what C3E does. As a non-profit organization, we pass on the profits to the next company to create the wheel that will allow Canadians to engage in more commercialization all over the country.
We'd like to put in place a strategy, in other words, create a Canada-wide efficient transportation community. All the projects that universities are working on would be part of that platform, as would all of our promotional endeavours. Large entities would see Canadian innovations on that platform and be able to acquire them. Canadian companies would be in a position to export their products and import money.
:
The short answer is that it's not true. When the industry started—you'd have to go back 30 or 35 years, really—there would have been more concerns in terms of the impacts on agriculture. Ethanol comes from corn. We use soybeans too.
Look at traditional platforms and where they started. Certainly you wanted to make sure, as with any resource industry, that the environmental and agricultural components were worked out responsibly.
We've come so far, but the information about our industry hasn't really kept pace. There are still some people who think there is a correlation between the biofuels industry and the price of food, or that maybe we're taking up too much land. But in fact, if you look at some of our plants in Ontario as an example, GreenField ethanol and IGPC Ethanol, the latter of which is a farmer-owned co-operative, they have actually reinvested in agriculture to make it more efficient. We are not using any resources that would otherwise be going into the feed market. As a result of making ethanol, other by-products are made that actually enter the animal feed market.
It really is an issue that has gone from food versus fuel to food and fuel, because both are being produced. The innovation part of it is really important. There have been so many strides in the industry, but we still get people who haven't quite kept pace with our advancements.
Our polling done in April showed that about 10% to 12% of Canadians still thought there was a correlation between the biofuels industry in Canada and food prices. By comparison, that same polling group thought there was a correlation between climate change and higher food prices: that was 37% of people. It's a vocal minority, but more people now think that climate change is having more of an impact than us on food prices and agriculture.
Since I have a bit of time left, I would like to address Mr. Nepton and Mr. Eby. I will continue along the same lines as Mr. Caron, talking about service in rural regions.
Telecommunications companies are trying to recoup their capital costs more quickly. As I understand what Mr. Nepton was saying, he mentioned, just like Mr. Caron, that there was a shortage of services in rural regions.
Mr. Eby, would you be in favour of a type of tradeoff if the government were able to provide you with a more accelerated depreciation? Would the companies you are representing then be willing to invest more in rural regions?
Mr. Nepton, would you welcome something like that?
The question is for Mr. Eby first.
:
What we've requested would result in increased investment in urban areas, obviously, to meet demand, extend networks into areas that don't currently have service, and improve poor or substandard service in rural areas.
I don't know exactly how a trade-off would work in a situation like this, where it's a tax writeoff. I don't know how it would be structured.
The other issue is, I represent a variety of members, some of whom are still building networks in urban areas to catch up to the companies they are competing with that have had networks for a lot longer. Certainly they want to be able benefit in urban areas. But as you've seen from the data, all our members need to enhance these networks to meet the demand everywhere.
From what we've heard today, a rural strategy is certainly very appealing and makes a lot of sense. We've heard from other members that are doing similar things: bringing people together, identifying the gaps, and trying to work with the industry to build out.
I think that what we've requested, the accelerated capital cost allowance, will certainly help. It will free up capital for that. I don't know if it is the solution to a rural issue.
:
We can't continue to fall behind in terms of international tourism as we've been doing.
I come from Prince Edward Island and I know how much the Japanese tourists mean to us as a result of Anne of Green Gables.
I have just one comment before we close.
Tomorrow the meeting will be here at 11 a.m., rather than what was on the original schedule. It will be in C-110 because we have to do a video conference, and this is the only place we can both do video and have it be televised.
One organization can't come tomorrow, so another organization will be added to tomorrow's 11 a.m. meeting and that will be the Canadian Pharmacists Association.
With that, I want to thank the witnesses for their presentations. There has been a lot of information provided here this afternoon and evening.
Thank you very much. We'll adjourn the meeting and see you at 11:00 tomorrow.