Introduction

Canada must navigate a difficult global economic context and faces many challenges. These challenges include fighting poverty and the growing scourge of homelessness, bringing inflation to heel and addressing affordability, repairing our health care system, doing Canada’s part to fight climate change, and ensuring Canadian workers are not left behind in the emerging new energy economy by mounting a significant response to the United States’ Inflation Reduction Act in the 2023 budget.

In this context, in June 2022, the House of Commons Standing Committee on Finance (the Committee) of the 44^th Parliament invited Canadians to share their priorities for the 2023 budget. Nearly 700 organizations and individuals submitted written briefs to the Committee. In addition, from October 2022 to February 2023, the Committee heard presentations from 32 witnesses during its pre-budget hearings. These hearings were held in Ottawa in a “hybrid” format, with witnesses and members attending either virtually or in person. The Committee regrets that, due to circumstances beyond its control, it could not travel and meet with a wider range of witnesses from across Canada.

Based on the hearings held and briefs received, the Committee is presenting its recommendations for the 2023 budget. In putting forward these recommendations, the Committee notes that Canada’s fiscal position compares favourably to that of other G7 countries and, as a result, believes that Canada has the resources to address the challenges of our time.

This report contains the Committee’s recommendations and select quotes from witnesses and submissions and is divided into five substantive chapters. These chapters organize the subject matter of the pre-budget consultations into the following categories: fiscal policy and government, environment and climate change, support for people, support for businesses, and support for communities. The proposals from organizations and individuals who appeared before the Committee are set out in Appendix A. In addition, a list of all written submissions sorted by topic can be found in Appendix B.

Chapter 1: Fiscal Policy and Government

Following the end of the recession caused by the COVID-19 pandemic, the Canadian economy recovered rapidly compared with past recessions. Figure 1 shows that real gross domestic product (GDP) contracted during the first two quarters of 2020, reaching a low of −37.1% on an annualized basis in the second quarter. As the COVID-19 containment measures were partly lifted in the third quarter of 2020, real GDP growth reached a high of 41.3% before gradually decreasing to around 3.0% in 2022.

Figure 1—Percentage Change in Annualized Real Gross Domestic Product (%)

Source: Figure prepared by the Library of Parliament using data (adjusted for seasonal fluctuations) obtained from Statistics Canada, “Table 36-10-0104-01: Gross domestic product, expenditure-based, quarterly, Canada (dollars x 1,000,000),” Database, accessed 15 February 2023.

The recovery was supported by various federal spending measures to assist individuals and businesses, most notably the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy, which provided a boost to domestic demand. In addition, the Bank of Canada decreased its policy interest rate to 0.25% at the onset of the pandemic and implemented a quantitative easing program. The program involved purchasing Government of Canada (GoC) bonds to provide monetary stimulus and lower interest rates. Over the course of the program, the Bank of Canada’s holdings of GoC bonds increased significantly, reaching a maximum of $435 billion in December 2021.

As the Canadian economy stabilized, the Consumer Price Index inflation rate began increasing steadily in 2021. This rate rose until mid-2022, when it reached a peak of 8.1% in June of that year. It has since been decreasing and stood at 5.9% in January 2023. According to the Bank of Canada, the high level of inflation in Canada is due to a number of factors, including higher energy prices, supply chain disruptions and excess demand in the economy.

In response to the high level of inflation, the Bank of Canada has increased its policy interest rate on eight occasions since March 2022, bringing it to 4.5%. The bank also ended its quantitative easing program in October 2021 and launched a quantitative tightening program in April 2022. The latter involves letting its holdings of GoC bonds mature without replacing them. The Bank now expects inflation to decrease to 3% in the middle of 2023 and return to 2% in 2024, as a result of lower energy prices, improvements in supply chains and higher interest rates.

The Bank of Canada’s policy interest rate increases will affect federal finances through their potential impact on economic growth, on the one hand, and the federal government’s cost of borrowing, on the other hand. Higher interest rates slow down economic growth and therefore reduce the government’s tax revenues. They will also affect spending by increasing public debt charges.

As shown in Figure 2, public debt charges as a percentage of revenues, or the debt service ratio, have been decreasing since the mid-1990s. This trend continued during the 2010s, when federal debt jumped following the 2008–2009 recession, owing to low interest rates during that period.

Figure 2—Federal Debt as a Percentage of Gross Domestic Product and Public Debt Charges as a Percentage of Revenues (%)

Source: Figure prepared by the Library of Parliament using data obtained from the Department of Finance, Fiscal Reference Tables October 2022, 2022.

While the debt service ratio has not yet increased despite the jump in the federal debt-to-GDP ratio in 2021 and 2022, the Office of the Parliamentary Budget Officer (OPBO) has projected that this ratio will rise and peak at 11.5% in 2025, as a result of higher interest rates and debt levels. It is then forecast to decline gradually as interest rates return to lower levels. The OPBO also projects that the federal debt-to-GDP ratio will gradually fall from 45.5% in 2022 to 36.2% in 2028.

Witnesses who addressed issues of fiscal policy and government made proposals on federal finances, tax reform and compliance, corporate and personal taxation, consumption taxes and carbon pricing, and federal departments and institutions.

Federal Finances

On the topic of federal finances, witnesses focused on fiscal management and government revenue and spending.

With respect to fiscal management, witnesses proposed capping debt service costs and balancing the budget. The Committee also heard proposals on the Canada Health Transfer and Canada Social Transfer payments and calls to tie investments in social assistance through the Canada Social Transfer to adequacy standards. Finally, witnesses discussed equalization, arguing for phasing out this program and for public access to documents on provincial negotiations.

Regarding government revenue and spending, witnesses shared their thoughts on tax increases and support measures for businesses, such as subsidies, tax credits, loans and loan guarantees. They also advocated for a government expenditure review.

Recommendation 1

Work with the provinces and territories to increase federal funding through the Canada Health Transfer while ensuring accountability and improve outcomes for people in Canada through new public health care programs such as dental care and pharmacare.

Recommendation 2

Index the Canada Health Transfer to keep pace with growing health care costs and factor population aging in the provinces and territories into the formula for its calculation.

Recommendation 3

Take immediate steps to create a Canada Mental Health Transfer, which would allocate permanent, ongoing federal funding to the provinces and territories for mental health services starting in the 2023 budget.

Recommendation 4

Mitigate the impacts of inflation, particularly through investment incentives for businesses and, when conditions are appropriate, consider implementing economic growth plans to launch a new, fairer and more sustainable economic cycle focused on increased productivity, increased housing supply and acceleration of the energy transition.

Recommendation 5

Eliminate all inefficient subsidies, public financing, and other fiscal supports provided to the oil and gas sector.

Recommendation 6

Divert subsidies from the fossil fuel sector towards the development of renewable and efficient energy sources, while supporting those most impacted by this transition.

Recommendation 7

Increase its international assistance envelope to align with its commitment to provide predictable and sustained increases to Canada’s international development assistance, advance preparedness for future pandemics, move forward on climate action, and secure a just, inclusive and sustainable recovery in the world.

Tax Reform and Compliance

The Committee received various proposals on tax reform and compliance. Some witnesses called on the government to address growing income inequality resulting from certain tax planning strategies and corporate pandemic windfalls, while others focused on Canada’s obligations under multilateral tax treaties and the implementation of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting’s Pillar Two Model Rules.

Recommendation 8

Undertake a public review to identify federal tax expenditures, tax loopholes and other tax avoidance mechanisms that particularly benefit high-income individuals, wealthy individuals and large corporations and make recommendations to eliminate or limit them.

Recommendation 9

Take steps to close the growing income gap and generate revenue to fund poverty reduction programs by closing tax loopholes and ending the use of low-tax or non-cooperative jurisdictions for tax purposes, taxing extreme wealth, and implementing a tax on excessive profits, including windfalls associated with the pandemic.

Recommendation 10

Undertake a broad review of methods that can significantly increase the quantity, accuracy, quality and timeliness of publicly available information on the fiscal condition of individuals, corporations and trusts, including ownership, assets, income and taxes paid, consistent with the Taxpayer's Bill of Rights which protects their right to privacy and confidentiality, among others.

Recommendation 11

Continue to promote corporate transparency and work with the international community to promote greater transparency in the country-by-country financial reporting of major transnational corporations.

Recommendation 12

Increase the transparency and accountability of the Canada Revenue Agency.

Recommendation 13

Facilitate the sharing of tax information pertaining to the foreign activities of Canadian taxpayers and Canadian-based businesses between the Canada Revenue Agency and Revenu Québec.

Recommendation 14

Fund the Canada Revenue Agency so that it is equipped to address high-profile tax loopholes, while maintaining strong leadership within the Organisation for Economic Co-operation and Development for a more ambitious and equitable application of the initiative on Base Erosion and Profit Shifting for developing countries.

Recommendation 15

Further increase funding for the Canada Revenue Agency to ensure compliance by the wealthiest individuals and largest corporations.

Recommendation 16

Review how mandatory disclosure practices work.

Recommendation 17

Take decisive action, including by amending the Income Tax Conventions Interpretation Act, to prevent treaty shopping arrangements from being used to avoid Canadian tax, especially when capital gains are derived from Canadian natural resources, as was the case in Alta Energy Luxembourg, which alone deprived the government of tax revenues calculated on capital gains of approximately $380 million.

Recommendation 18

Consider an automatic and substantial penalty, the amount of which could be discretionary, where the general anti-avoidance rule (GAAR) is found to apply to a transaction in order to alter the risk/reward analysis for taxpayers contemplating an aggressive tax avoidance transaction, giving the GAAR a more effective tax deterrent effect.

Recommendation 19

Amend the general anti-avoidance rule and certain related provisions to:

• put the burden clearly on the taxpayer to show that, despite the fact that the primary purpose of the transaction is to avoid tax, the transaction is consistent with and not contrary to the object, spirit and purpose of the relevant provisions of the Act;
• provide a list of factors, including the lack of economic substance, the absence of any reasonable expectation of a pre-tax profit, the circular flow of funds, and self-cancelling transactions, that must be considered by the courts in determining whether an avoidance transaction is abusive.
• clarify that the GAAR can apply if an avoidance transaction by itself is abusive, one or more avoidance transactions in a series that results in a tax benefit is abusive, or a series of transactions as a whole is abusive;
• clarify that the primary non-tax purpose test in the definition of avoidance transaction does not mean that transactions such as acquisitions of property, reorganizations and financings (whose primary purpose is inherently commercial) are automatically excluded;
• adopt a new statutory definition of series of transactions that encompasses both the common law definition and the definition in the Income Tax Act; and
• expand the definition of avoidance transaction to include a series of transactions where the primary purpose of the series as a whole is to obtain a tax benefit, irrespective of whether the series contains an avoidance transaction whose primary purpose is to obtain a tax benefit, in order to subject the entire series to the abuse test.

Recommendation 20

Ensure support for new qualifying disbursements and disbursement quota rules through resources and training on the rules and guidance, developed in consultation with the charitable sector and offered by the Canada Revenue Agency, along with clarifying the language around pooled funding.

Recommendation 21

Commit to a public examination of ways the tax system can be used to reduce emissions and manage the climate crisis, beyond the carbon tax.

Corporate and Personal Taxation

On the topic of corporate taxation, the Committee received proposals on the corporate income tax rate and the small business deduction threshold. The Committee also heard proposals concerning the Accelerated Investment Incentive, the interest deductibility changes and the new refundable investment tax credits in certain sectors. With respect to personal taxation, the Committee heard proposals to limit or repeal certain tax credits.

Recommendation 22

Implement the Global Anti-Base Erosion Rules, which are described in Pillar Two of the OECD/G20 work on the Tax Challenges Arising from the Digitalization of the Economy, which will ensure large multinational enterprise pay a minimum level of tax on the income arising in each of the jurisdictions where they operate.

Recommendation 23

Implement a 30% refundable investment tax credit for the purchase of new or used equipment by farm businesses with gross annual revenues under $50,000.

Recommendation 24

Accelerate the launch of a refundable investment tax credit for battery storage and clean hydrogen that is sufficient to offset the competitive impacts of the United States’ Inflation Reduction Act.

Recommendation 25

Examine the tax treatment of taxable capital gains on the gifting or low-cost sale of certain farm assets to a nephew or niece.

Recommendation 26

Make the caregiver tax credit refundable.

Recommendation 27

Increase the volunteer firefighters tax credit and modernize the definition of volunteer firefighter used by the Canada Revenue Agency to help retain firefighters.

Consumption Taxes and Carbon Pricing

Regarding consumption taxes and carbon pricing, witnesses focused on the “excise escalator tax” on alcoholic beverages and the select items luxury tax. The Committee also heard proposals about exemptions and rates under the carbon pricing system, the excise tax on fuel and the excise duty on cannabis.

Recommendation 28

Freeze federal beer, wine and spirit excise duties at 2022 rates for fiscal years 2023 and 2024, and until inflation returns to the Bank of Canada’s 1% to 3% target range.

Recommendation 29

Change the excise duty exemption for all-Canadian wine produced from honey or apples to also include all other fermented products that are not grapes.

Recommendation 30

Introduce a specific definition for cider for the purposes of the excise duty, using definitions used at the provincial level.

Recommendation 31

Consider the possibility of implementing a Visitor Tax Refund Program.

Recommendation 32

Exempt counselling therapy and psychotherapy from the application of GST/HST.

Federal Departments and Institutions

On the topic of federal departments and institutions, witnesses discussed government expenditures, procurement and electrification.

With regard to government expenditures, the Committee received proposals related to pandemic pay raises for politicians, the Governor General and federal and Crown corporation employees. Witnesses also discussed the Senate’s spending, public service labour costs, the funding of Crown corporations and the introduction of a public list to disclose the salary of all federal employees who earn more than $100,000 in annual salary.

The Committee also heard proposals on federal procurement, including creating a procurement strategy for domestic small and medium-sized enterprises (SMEs) and a procurement fund dedicated to technology. Finally, witnesses brought forward proposals to help achieve the government’s electrification goals.

Recommendation 33

Guide domestic firms more effectively through the procurement process by simplifying the federal government procurement strategy for domestic small and medium-sized enterprises through the launch of an Innovative Procurement Fund and a Procurement Concierge Service modelled after British Columbia’s Concierge Program.

Recommendation 34

Implement a “Buy Clean” procurement strategy.

Recommendation 35

Reach a framework agreement with Chantier Davie Canada Inc. related to the National Shipbuilding Strategy.

Recommendation 36

Lead by example by ensuring that government installations have charging stations for employees and citizens and that the federal fleet is electrified.

Recommendation 37

Ensure credit unions and their members are granted equal and timely access to all federal support programs delivered via the financial sector, be considered when legislation or regulation affecting the financial sector is introduced or amended and include credit-union representatives on financial and economic task forces and advisory bodies.

Recommendation 38

Create an organization in government with Deputy or Senior Assistant Deputy Minister level accountability for delivering on Biomanufacturing and Life Sciences Strategy (BLSS) and developing BLSS 2.0.

Recommendation 39

Create a cabinet-level position for cybersecurity.

Recommendation 40

Ensure that federal priorities are addressed by providing all federal departments with dedicated budgets to meet their research needs, in collaboration with universities.

Chapter 2: Environment and Climate Change

The transportation sector is a significant contributor to the greenhouse gas (GHG) emissions that spur global warming and climate change. According to the United Nations, the transport sector was responsible for approximately 25% of global GHG emissions in 2020. In Canada, transportation is the second-largest source of GHG emissions, accounting for a quarter of the country’s total. Almost half of these emissions come from cars and light trucks, according to Environment and Climate Change Canada.

To mitigate the impact of transportation on the environment, a number of countries, including Canada, are taking steps to promote the adoption of cleaner transportation technologies, such as battery electric vehicles, plug-in hybrid electric vehicles and fuel cell electric vehicles. According to the International Energy Agency, few areas of the clean energy sector are as dynamic as the electric car market. Sales of electric vehicles doubled in 2021 from the previous year to a new record of 6.6 million units, representing almost 10% of global car sales, or four times their market share in 2019.

In Canada, zero-emission vehicles (ZEVs) make up a growing share of new motor vehicle registrations. As shown in Figure 3, a total of 34,313 new ZEVs were registered in the third quarter of 2022, accounting for 8.7% of all new vehicle registrations in the country, up 43.2% year over year.

Figure 3—Number of new zero-emission vehicle registrations in Canada

Source: Figure prepared by the Library of Parliament using data obtained from Statistics Canada, “Table 20-10-0025-01: New zero-emission vehicle registrations, quarterly”, and “Table 20-10-0024-01: New motor vehicle registrations, quarterly.” Database accessed on 14 February 2023.

During the third quarter of 2022, the trend of the previous four years continued, and battery electric vehicles had the largest share of new registrations for ZEVs. During this period, of all new electric vehicles registered in Canada, 29,376 were battery electric vehicles, representing 85.6% of the total, while 4,937 were plug-in hybrid vehicles, accounting for the remaining 14.4%.

According to Statistics Canada, Canada’s three largest provinces accounted for 91.8% of all new ZEVs registered in the third quarter of 2022. As shown in Figure 3, Quebec had the largest number of ZEV registrations, with a total of 12,194, followed by Ontario with 11,017 and British Columbia with 8,262. Over this period, nearly one in five of all new vehicles (17.6%) registered in British Columbia was a ZEV, which is the highest percentage of any province. At the same time, the share of new motor vehicle registrations that were ZEVs was 12.5% in Quebec and 7.2% in Ontario.

To accelerate the manufacturing and adoption of cleaner cars, the federal government has put in place a sales mandate to ensure at least 20% of new light-duty vehicle sales will be ZEVs by 2026, at least 60% by 2030 and 100% by 2035. The federal government also offers incentives to encourage Canadians to purchase and use cleaner vehicles. These incentives include the Incentives for Zero-Emission Vehicles (iZEV) Program, which was launched in 2019 and offers a rebate of up to $5,000 for the purchase or lease (for at least 12 months) of an eligible ZEV, including battery electric, hydrogen fuel cell and longer-range plug-in hybrid vehicles. To encourage Canadian organizations, provinces, territories and municipalities to adopt medium- and heavy-duty zero-emission vehicles (MHZEVs), the federal government introduced the Incentives for Medium- and Heavy-Duty Zero-Emission Vehicles (iMHZEV) Program on 11 July 2022. The iMHZEV Program offers point-of-sale incentives of up to $200,000 for eligible organizations that buy or lease (for at least 12 months) an eligible MHZEV.

Overall, these incentives, coupled with multiple federal and provincial government investments in expanding the network of charging stations for ZEVs, play an important role in furthering the transition toward cleaner and more energy-efficient vehicles and supporting the growth of the ZEV market in Canada. This trend is expected to continue as the federal government and the private sector work toward reducing carbon emissions and promoting sustainable transportation practices in the country.

Witnesses who addressed environment and climate change issues focused their remarks on the electrification of transportation, the transition to a low-carbon economy and the preservation of natural environments.

Electrification of Transportation

Regarding the electrification of transportation, some witnesses recommended setting up a fiscally neutral taxation system that would tax buyers of polluting passenger vehicles to fund ZEV incentive programs. Other witnesses proposed making used ZEV vehicles eligible for the iZEV Program and adjusting ZEV purchase incentives based on household income. Finally, the Committee heard proposals to phase out the federal incentive on rechargeable hybrid vehicles with less than 50 km of electric range.

Recommendation 41

Offer incentives to purchase zero-emission vehicles (ZEV), including:

• a rebate for lower and modest income Canadian individuals and families based on the program implemented in California;
• a “green cash for clunkers” program offering funds for the purchase of ZEVs, transit passes or active transportation tools (e.g. bikes or e-bikes), which program should be stackable with other incentive programs;
• a rebate for taxis, car sharing and carpooling businesses and individuals who want to transition to electric vehicles, which rebate should be stackable and not be limited by the 10-vehicle cap on fleet rebates; and
• programs to educate and support consumers in making the transition to ZEV in partnership with trusted organizations.

Recommendation 42

Adopt clear targets for ZEV sales: 20% of light-duty vehicle sales by 2026; 60% by 2030 and 100% by 2035.

Recommendation 43

Align federal auto tailpipe emission standards with the toughest standards in North America.

Transition to a Low-Carbon Economy

As regards the transition to a low-carbon economy, some witnesses recommended that the various levels of government agree on a common definition of “carbon-neutral investment” and provide estimates of emissions reductions for their policies. Other witnesses proposed creating an equitable funding plan for the transition to net-zero, which would assess the distribution of costs across businesses, households and government and clearly set out who pays in order to ensure the most vulnerable households are not left behind.

Some witnesses advised improving the energy efficiency of the entire country’s housing stock, including for low-income households and Indigenous communities. The Committee also heard proposals to foster the creation, commercialization and manufacturing of low-carbon products in Canada through tax incentives and increased access to government contracts. Other witnesses suggested setting up an agri-environmental working group to provide farming and technical expertise from the outset of the agri-environmental policy making process.

Recommendation 44

Upgrade the energy efficiency and comfort of Canada's residential building stock, including for low-income households, Indigenous communities, and support skills development for the retrofit economy.

Recommendation 45

Advance a zero-emission electricity grid based on renewables, which requires major transformational investments in the generation, transmission, and demand side of electricity, including remote Indigenous communities.

Recommendation 46

Align Canada’s nascent net-zero fiscal support framework to match the ambition of the United States, which would require an enhancement of the Strategic Innovation Fund Net Zero Accelerator initiative, an effective design and deployment of the investment tax credit for carbon capture, utilization, and storage and the introduction of targeted carbon contracts for difference to provide certainty for first-in-market net-zero projects.

Recommendation 47

Provide funding to support front-end engineering and design for transformative net‑zero technologies.

Recommendation 48

Provide funding to pilot low-carbon materials in federally funded construction.

Recommendation 49

Provide funding to demonstrate and scale a diverse set of innovative, near-zero emission building materials.

Recommendation 50

Provide more support to manufacturers to help them adapt to and advance Canada’s climate change plan.

Recommendation 51

Develop renewable energy manufacturing and recycling facilities in Canada, using funding from the Canada Growth Fund.

Recommendation 52

Support Canadian dairy farmers’ commitment to reach net-zero on-farm emissions by providing existing and future agricultural sustainability programs with sufficient and ongoing funding to help with the continued introduction and adoption of clean energy, green technology and best management practices on farms.

Recommendation 53

Support training and retraining programs to help workers make the transition to a low-carbon economy.

Recommendation 54

Fund capacity building programs, staffing and technical support for provinces, territories, municipalities, and private sector to adopt “Buy Clean” procurement policies and approaches.

Recommendation 55

Implement appropriate measures to require full disclosure of all climate and environmental, social and governance risks in the financial reports of Canadian businesses and organizations that meet the established criteria, as recommended by the Task Force on Climate-related Financial Disclosures.

Recommendation 56

Focus on coherent and complementary political action by increasing funding for mitigation and adaptation measures and by setting an example in the fight against climate change.

Recommendation 57

Pledge bilateral finance to explicitly address climate-induced loss and damage in low- and middle-income countries, in addition to existing international climate finance and other foreign aid commitments, and support the creation of a new finance facility to address loss and damage under the United Nations Framework Convention on Climate Change.

Recommendation 58

Work with the provinces to renew the emergency public transit support in 2023.

Recommendation 59

Advance ongoing support for public transit operations to fiscal year 2024–2025 and increase the amounts planned for operations.

Recommendation 60

Establish a working group on a permanent federal contribution to public transit operating expenditures.

Preservation of Natural Environments

The witnesses who discussed preserving natural environments emphasized the importance of providing direct support to farmers to boost on-farm conservation efforts and help them preserve native grasslands. Others proposed expanding the Research and Innovation Stream of the Agricultural Clean Technology Program to include technologies that can directly measure farms’ carbon emissions.

Recommendation 61

Increase direct funding for Northern and Indigenous communities, specifically the Indigenous Guardians program, to enable them to pursue local scientific research and environmental conservation priorities.

Recommendation 62

Deliver on Canada's land and ocean protection commitments, by integrating Indigenous-led conservation, and providing permanent funding for protection and stewardship, ecological connectivity, and collaboration between nongovernmental organizations.

Recommendation 63

Explore how the framework of the Taskforce on Nature-related Financial Disclosures could be applied to issues related to the loss of biodiversity.

Chapter 3: Support for People

According to many economists, in the long run, economic growth is driven by people discovering new ideas and population size plays a crucial role. All things being equal, a larger population means more researchers, which in turn leads to more new ideas and higher living standards. Just as more autoworkers will produce more cars, more researchers and innovators will produce more new ideas, which may raise everyone’s income. Since the growth rate of researchers ultimately depends on the growth rate of the population, the growth rate of income per capita also depends on population growth. As a result, immigration can become an important factor in Canada’s long-term welfare, especially because, in most developed countries, including Canada, the fertility rate is already below the replacement rate.

Besides their negative effects on innovation and new ideas, low fertility rates raise the short- as well as long-run problem of an aging society. They also reduce a country’s living standards by increasing the old-age dependency ratio—which is defined as the ratio of people over 64 to those aged 15–64. A larger dependency ratio implies that productivity growth may not translate into a significant increase in living standards. For example, Japan’s GDP per working-age population during the 2000–2014 period increased faster than that of the United States (U.S.), but the two countries’ GDP per capita increased by the same amount. The difference was that Japan had a rapidly aging population during this period, while the U.S., owing to more immigration and higher birth rates, did not.

Furthermore, a higher dependency ratio implies that a relatively small number of young people will have to take responsibility for caring for their aged parents, both financially and non‑financially. A higher dependency ratio may lead governments to raise taxes to cover growing health care and other population aging-related costs.

Countries can overcome these problems to some extent by boosting their populations through immigration. As shown in Figure 4, the Canadian population grew by 5.2% over the 2016–2021 period, the fastest growth rate among G7 countries. According to Statistics Canada, immigration accounted for nearly 80% of this increase, while the natural increase (i.e., the number of births minus the number of deaths) accounted for the remainder. While the rate of natural increase declined from 0.3% in 2016 to 0.1% in 2021, it is not expected to become negative within the next 50 years, as it will in some other G7 countries. In November 2022, the federal government announced that it plans to welcome more newcomers during the next three years and has set a target of 500,000 new permanent residents in 2025.

Figure 4—Growth Rate of Population Over the 2016–2021 Period, G7 Countries (%)

Source: Table prepared by the Library of Parliament using data obtained from Statistics Canada, Canada’s population is growing at the fastest pace in the G7 and ranks seventh in the G20, 9 February 2022.

Additional immigration may help Canada in a number of ways. As noted by Immigration, Refugees and Citizenship Canada, immigrants already constitute a significant proportion of health care workers and may help alleviate labour shortages in this sector in the future.

In addition, immigrants contribute to tax revenues. In a study on the fiscal impacts of immigration in Organisation for Economic Co-operation and Development (OECD) countries, the authors found that

the macroeconomic and fiscal consequences of international migration are positive for OECD countries, and that international migration produces a demographic dividend by increasing the share of the workforce within the population. … International migration also improves the fiscal balance by reducing the per capita transfers paid by the government and per capita old-age public spending.

Another study of the fiscal impacts of immigration in the U.S. concluded that, while “first-generation immigrants are more costly to governments … due to the costs of educating their children, … the children of immigrants (the second generation) are among the strongest economic and fiscal contributors in the U.S. population, contributing more in taxes than either their parents or the rest of the native-born population.” In fact, while immigrants make up only 14% of the U.S. population, they are responsible for 30% of patents and more than 38% of U.S. Nobel prizes in science.

However, it has been argued that immigration might lead to lower wages since it increases the labour supply. Although more immigration may increase labour supply, it would also increase demand as newcomers purchase goods and services. This rise in purchases may in turn boost labour demand and exert positive pressure on wages. While the net effect of immigration on wages is unclear, many economists have concluded that it is small.

In addition to immigration, witnesses who discussed support measures for people touched on employment and labour, skills training, children, families and social policy, health, and retirement income and seniors.

Immigration

With regard to immigration, witnesses highlighted its importance for addressing the talent and labour shortages in certain sectors. The Committee received proposals to increase the number of economic-class immigrants and skilled workers, speed up the application processes and streamline the pathways to permanent residency. Finally, the Committee heard proposals that underlined the importance of investing in critical services for newcomers and targeted programs for foreign-trained professionals to help them overcome barriers and ease their entry into the Canadian workforce.

Recommendation 64

Improve service delivery within Canada’s immigration system.

Recommendation 65

Address talent shortages and immigration system shortfalls impacting strategic high-growth sectors in Canada through:

• enhanced support for Immigration, Refugees and Citizenship Canada and Employment and Social Development Canada to eliminate backlogs and ensure regular service standards;
• the implementation of a High Potential Tech Visa where high-skilled workers can come to Canada without a job offer, increasing the labour density by augmenting the Global Talent Stream; and
• accelerate funding for Canadian businesses that develop upskilling and retraining programs to enhance the domestic workforce.

Recommendation 66

Create a dedicated pathway to permanent residency through Express Entry designed for National Occupation Classification (NOC) C and D workers in the hotel sector, workers with previous Canadian work experience, or with offers of employment for a NOC-categorized tourism, hospitality, or hotel sector job.

Employment and Labour

On the topic of employment and labour, witnesses proposed strategies to address labour shortages in various sectors, including by improving foreign credential recognition and reducing barriers to and delays in hiring skilled and temporary foreign workers. Witnesses also discussed the Employment Insurance program.

Recommendation 67

Improve the immigration system and the Temporary Foreign Worker Program to ease the labour shortage, by implementing the Trusted Employer Program, allowing all work permits to have a duration of more than three years, simplifying the application process and reducing delays.

Recommendation 68

Increase speed and reliability of applicant processing within the Trusted Employer Program and build a dedicated stream through the Temporary Foreign Worker Program for tourism and hospitality with greater predictability to meet the demand of labour for the peak season.

Recommendation 69

Prioritize Temporary Foreign Worker Program applications within the hotel sector by:

• expediting applications with tourism sector National Occupation Classifications, among which the most needed by the hotel sector are: 6731—Light duty cleaners, 6312—Executive housekeepers, 6525—Hotel front desk clerks, 6721—Support occupations in accommodation, travel, and facilities set-up services, 6322—Cooks;
• removing the Labour Market Impact Assessment requirement and $1,000 fee;
• waiving the 30-day job posting requirement; and
• automatically granting tourism, hospitality, and hotel sector companies the trusted employer status, which would include a dedicated channel for employers and applicants to get faster updates on applications as well as further reductions in red tape in both Employment and Social Development Canada and Immigration, Refugees and Citizenship Canada processes.

Recommendation 70

Revive the Destination Employment program previously used for Syrians to successfully connect Ukrainians arriving through special immigration measures with hospitality and hotel sector careers and help with the hospitality and hotel sector’s immediate staffing needs.

Recommendation 71

Create a new stream within the Temporary Foreign Worker Program for the food sector, to reduce the administrative burden in the application process and facilitate the workers’ arrival and entry, which should do the following:

• reduce the requirement of three job recruitment activities to the job bank advertisement and simplifying the parameters for it;
• waive the requirement of a transition plan to domestic workers once the temporary worker has departed;
• waive fees for a single restaurant owner with a profit margin of less than 10%;
• enable a company which has several restaurants or franchises to file a single labour market impact assessment (LMIA) application for up to 20 workers in up to 10 restaurants to reduce the cost of the application while ensuring expertise;
• make the work permit valid for two years instead of one for employers experiencing long-term vacancies, as is already available in the meat processing pilot project, and for up to three years instead of two for foodservice workers to enable longer-term employment and enhance the opportunity for a pathway to permanent residency;
• allow the employers who do not require a two-year employment permit to combine summer and winter seasons with some flexibility on the seasonal work term, like programs currently in place for agricultural workers;
• allow minor employment contract adjustments related to job duties where the employer and employee both consent to the changes and they result in additional benefits for the worker;
• implement an accelerated LMIA process with a 10-day review target for applications in the foodservice industry;
• create a dedicated support team to process the foodservice applications, which would be a one-stop-shop contact point for the industry; and
• implement the Trusted Employer Program (Recognized Employers’ Model) for repeat foodservice industry employers who have demonstrated high standards.

Recommendation 72

Support food sector temporary foreign workers once they arrive by:

• providing support on insurance during the transition period when the new workers are not on provincial coverage;
• creating a federal backstop to ensure that workers do not fall between the cracks if they experience health issues; and
• holding program participants to the highest standard for the protection of workers and their families by ensuring more rigorous compliance, enforcement and sanctions for employers who are determined to be non-compliant with the program.

Recommendation 73

Simplify National Occupation Classification (NOC) descriptions for the Temporary Foreign Workers Program by combining restaurant categories C and D and categorizing them in three key categories (service, administrative and management and kitchen) to encompass a wider range of positions available and provide more latitude for growth possibilities to these workers and, in the meantime, update the application form to allow for multiple but similar NOC positions to be performed by the worker.

Recommendation 74

Work with provinces and territories to establish supports needed to upscale/retrain workers, to reduce the barriers to hiring highly skilled foreign talent, and to enhance the systems and processes for foreign credential recognition.

Recommendation 75

Release its plan for Employment Insurance modernization before 1 July 2023.

Recommendation 76

Reform and improve the Employment Insurance program, to address issues exposed during the pandemic.

Recommendation 77

Modernize the Employment Insurance program to the realities of the gig economy to include self-employed and freelance workers in the arts sector.

Recommendation 78

Use general revenues to pay down pandemic-related costs incurred by the Employment Insurance program.

Recommendation 79

Return to the direct funding of a share of Employment Insurance to improve the program and create better employment opportunities for recipients.

Recommendation 80

Extend the Employment Insurance benefit period to a maximum of 52 weeks for caregivers who must leave work temporarily to care for a family member.

Recommendation 81

End the use of replacement workers in the event of a lock-out or strike.

Recommendation 82

Implement mandatory human rights standards and environmental due diligence legislation.

Education and Skills Training

With regard to skills training, the Committee heard proposals on training and retraining programs, particularly to help workers make the transition to a net-zero economy and to enhance the domestic workforce in fields such as cybersecurity. In addition, some witnesses discussed the Canada Job Grant. As well, the Committee was presented with various proposals concerning education in written submissions, including on support for research, students and universities.

Recommendation 83

Expand the funding for the announced Futures Fund beginning in 2023–24 to ensure a just transition for workers and communities to a low-to-zero emissions economy and provide substantial ongoing funding, guided by unions, to create new, sustainable jobs and pathways for workers in high-emitting sectors and workers entering the workforce.

Recommendation 84

Invest in people through apprenticeship loans and grants, and make improvements to the Union Training and Innovation Program to better equip training centres to meet new challenges and demands of the labour market, including funding for the expansion of training centres.

Recommendation 85

Create a training benefit, modelled after the Union Training and Innovation Program, prioritizing training centres which offer substantive training courses instead of for-profit programs offering quick fixes or fast-track training, to support skilled trades workers impacted by the transition to a low-carbon economy.

Recommendation 86

Combat unintended age discrimination toward older learners by raising the upper age limit for eligibility in federal internship programs from 30 to 40.

Recommendation 87

Action the recommendation of the College Applied Research Taskforce through a new investment in the College and Community Innovation Program.

Recommendation 88

Increase funding to the three granting councils to enable them to:

• Increase the value of the master’s, doctoral and postdoctoral awards offered by 25%;
• Double the number of graduate and postdoctoral fellowships offered by the three Councils in their master’s, doctoral, and postdoctoral fellowship competitions;
• Beginning in 2023, provide tri-agency grant holders with the means to increase the value of master’s, doctoral and postdoctoral fellowships offered to students and postdoctoral fellows from their research funds by 25%; and
• Develop or strengthen mechanisms to help students get involved earlier in their studies by offering them opportunities to participate in the world of research as early as the undergraduate level (for example, research internship scholarships and scholarships for participation in scientific conferences, etc.).

Recommendation 89

Invest in future researchers by increasing the amount of funding support for graduate students and postdoctoral fellows to adjust for inflation and index the value of these funds to the consumer price index.

Recommendation 90

Fund all Canadian academic institutions to ensure that they have sufficient resources to meet new government requirements for research security.

Recommendation 91

Allocate resources to act on the Standing Committee on Science and Research’s recommendation to evaluate how the criteria used by granting councils affect the research ecosystem, consider new funding models to remedy any disproportionality in funding allocation between universities based on regionality and involve a variety of academic institutions in this evaluation exercise.

Recommendation 92

Reduce processing times for study visa applications received from international students admitted to universities.

Recommendation 93

Significantly increase support for the Francophonie in universities by:

• reducing processing times for study permit applications from international Francophone applicants;
• acting on the Standing Committee on Citizenship and Immigration’s recommendations to ensure equity in the international student program, particularly for Francophone students from African countries;
• significantly increasing financial support to Canadian French-language scholarly journals and open-access platforms; and
• establishing a generous mobility grant program or significantly enhancing existing short-stay programs for all Canadian Francophone students to pursue internships in a Canadian French-language academic institution in another province.

Recommendation 94

Enhance the impact and reach of Canadian research by investing in open access publishing.

Children, Families and Social Policy

Witnesses who addressed children, families and social policy touched on child welfare, access to benefits and the non-profit sector.

With regard to child welfare, the Committee heard proposals on the Canada Child Benefit, the protection of Indigenous children and school food programs. The Committee also heard ideas about public and non-profit childcare facilities and the national daycare program.

Regarding access to benefits, witnesses proposed targeted support for people living in deep poverty and the implementation of a disability benefit. Other proposals addressed the efficiency of current application processes and alternatives for marginalized people outside the personal income tax system.

As regards the non-profit sector, witnesses expressed the need for additional support to stabilize the non-profit sector and address urgent capacity needs.

Recommendation 95

Create a supplement to the Canada Child Benefit, which would provide additional financial support to families with children in deep poverty.

Recommendation 96

Invest in urban Indigenous children and youth by re-establishing a national Indigenous youth program and Indigenous children’s strategy.

Recommendation 97

Establish a national school nutritious meal program as a key element of the evolving Food Policy for Canada.

Recommendation 98

Protect funding towards its existing commitments to prevent further rollback of progress towards achieving the Sustainable Development Goals and champion an ambitious, inclusive and holistic agenda for children as part of the global response to and recovery from COVID-19.

Recommendation 99

Consider the development of a pan-Canadian basic income program in collaboration with the provinces, territories and municipalities by engaging the public, promoting a constructive and informed dialogue on the matter, and undertaking negotiations with the province of Prince Edward Island to support a basic income pilot program in that province.

Recommendation 100

Establish a rapid support guarantee with the goal that the Canada Revenue Agency provides income support benefits within a month of eligibility.

Recommendation 101

Implement the Canada Disability Benefit and ensure it provides direct payments to individuals who live with a disability, including episodic disabilities as defined in the Accessible Canada Act.

Recommendation 102

Consider treating the Canada Emergency Response benefit and the Canada Recovery Benefit as non-taxable income.

Recommendation 103

Implement a Canada Emergency Response benefit repayment amnesty for everyone living below or near the low-income measure.

Recommendation 104

Reverse Canada Child Benefit reductions due to receiving the Canada Emergency Response benefit for moderate-income mothers.

Health

On the topic of health, witnesses discussed the need for more health care practitioners, the Canada Dental Benefit, pharmacare, the enforcement of the Canada Health Act and a digital health strategy.

Recommendation 105

Provide funding to the provinces and territories for the hiring of 7,500 family doctors, nurses and nurse practitioners, and the training of up to 50,000 new personal support workers and fund their guaranteed minimum wage of at least $25 per hour.

Recommendation 106

Move forward with the proposed Canada Pharmacare Act by 2023 to provide free coverage for prescribed medicines and commit to funding and implementing a national essential medicines formulary, as recommended by the Advisory Council on the Implementation of National Pharmacare.

Recommendation 107

Enforce the five principles and the conditions of the Canada Health Act to ensure Canadians are not faced with extra billing, user fees and diminished accessibility to health care as some provinces move forward to for-profit care providers, beginning with funding more robust monitoring and sanctioning capacity.

Recommendation 108

Continue supporting ovarian cancer research by providing funding to Ovarian Cancer Canada.

Recommendation 109

Establish and fund, beginning in 2023–24, a Care Economy Commission tasked with examining paid and unpaid care work, developing a roadmap to meet increasing demands for care, addressing the human resource crises in health and care sectors, and planning for the future of Canada's care economy.

Retirement Income and Seniors

Regarding retirement income and seniors, the Committee heard proposals on the Guaranteed Income Supplement and the Canada Pension Plan. Witnesses also presented ideas on community senior care and national standards for long-term care.

Recommendation 110

Increase Old Age Security benefits and the Guaranteed Income Supplement for all eligible seniors.

Recommendation 111

Lower the age of eligibility for the Guaranteed Income Supplement to 60 since poverty rates remain particularly high for Canadians aged 60 to 64 before they gain access to seniors’ programs at age 65.

Recommendation 112

Review the Old Age Security indexing method to account for wage or productivity growth in Canada.

Recommendation 113

Introduce a tax credit for experienced workers and examine the issue of Old Age Security benefits clawback for these workers.

Recommendation 114

Increase the Guaranteed Income Supplement top-up for single seniors.

Recommendation 115

Examine the financial support measures available to seniors to ensure equitable treatment between single seniors and senior couples, including by considering the potential benefit of a non-refundable tax credit for single seniors and a higher threshold for the clawback of Old Age Security benefits for single seniors.

Recommendation 116

Institute permanent restrictions on companies to prohibit dividend, capital distributions and share repurchases, if their worker pension plans carry a solvency deficit and establish a pension benefit guarantee fund on a national scale to protect pension plans from corporate insolvencies.

Recommendation 117

Introduce and pass a Safe Long-Term Care Act by 2025, which would enforce national standards and ensure patients receive at least four hours of direct care, and provide funding to promote publicly owned non-profit long-term care facilities while phasing out for-profit investors from the long-term care sector.

Recommendation 118

Reorient long-term care to improve service by working in partnership with the provinces and territories to establish minimum standards of daily care and a comprehensive workforce strategy.

Recommendation 119

Immediately bring Revera—currently owned by the Public Sector Pension Investment Board—under public ownership.

Chapter 4: Support for Businesses

As mentioned in Chapter 1, the Canadian economy experienced a rapid recovery from the recession caused by the pandemic in 2020, relative to past recessions. More precisely, Canada’s GDP returned to its pre-pandemic level in the second half of 2021, as shown in Figure 5. However, the severity of the 2020 recession and pace of recovery varied substantially across industries. The GDP of a number of industries—such as accommodation and food services; manufacturing; arts, entertainment and recreation; and transportation and warehousing—had not yet recovered to pre-pandemic levels by the third quarter of 2022.

Figure 5—Gross Domestic Product Index, Selected Industries, Q4 2019 to Q3 2022 (Q4 2019 = 100)

Source: Figure prepared by the Library of Parliament using data obtained from Statistics Canada, “Table 36-10-0449-01: Gross domestic product (GDP) at basic prices, by industry, quarterly average (x 1,000,000),” Database, accessed 16 February 2023.

Figure 5 shows that the arts, entertainment and recreation industry experienced the largest decline in GDP in 2020. At its lowest point, in the second quarter of 2020, that industry’s GDP was 60% below its level in the fourth quarter of 2019. This industry has also had the slowest recovery. In the third quarter of 2022, its GDP was still 14% lower than it was in the fourth quarter of 2019. As noted by Statistics Canada, COVID-19-related measures, such as restrictions on gatherings and interprovincial travel, and non-essential business closures, led to a slower recovery for this industry in 2021. Looking ahead, high levels of inflation and rising interest rates could limit Canadians’ discretionary spending on arts, entertainment and recreation and further delay the industry’s recovery.

Similarly, the accommodation and food services industry experienced a decline of 58% in its GDP during the first two quarters of 2020. This industry recovered at a faster pace, but its GDP in the third quarter of 2022 was still about 8% lower than it was in the fourth quarter of 2019. While the accommodation and food services industry was disproportionately affected by COVID-19-related restrictions, it also faces more serious labour shortages, with 58% of businesses in the industry reporting labour shortages, compared with 36% for businesses in general.

The transportation and warehousing industry’s GDP decreased by about 30% in the first phase of the pandemic and has been slowly recovering since then. Its GDP remains about 9% lower than its pre-pandemic level. Within that industry, the air and ground passenger transportation industries have been the most severely affected during the pandemic. In the third quarter of 2022, their respective GDP figures were still 42% and 30% lower than in the fourth quarter of 2019. The removal of remaining COVID-19 border restrictions, including vaccination, testing and quarantine requirements, contributed to a faster recovery for the air transportation industry.

Lastly, the manufacturing industry’s GDP decreased to a lesser extent and has almost fully recovered. Within that industry, however, the aerospace and automotive industries have been among the most affected. Their respective GDP figures remain 25% and 16% lower than their pre-pandemic levels. According to Innovation, Science and Economic Development Canada, the aerospace industry faced disruptions and cancellations caused by the drastic decline in international air passengers in 2020. The department expects that global civil aircraft production revenues will return to their pre-pandemic levels in 2024.

Witnesses who discussed support measures for businesses touched on the tourism and hospitality sector, agriculture, food and fisheries industry and innovation, temporary support measures and the regulatory environment.

Tourism and Hospitality

With regard to tourism and hospitality, witnesses focused on recruitment, support measures and improvements to road and air travel.

On the topic of recruitment, the Committee heard proposals for targeted recruitment campaigns, the expansion and modernization of tourism and hospitality programs in schools, and funding to support Tourism Human Resources Canada’s operations.

With regard to support measures, witnesses discussed tax measures to support creating, maintaining and refurbishing tourism assets and incentivize hotel investments, along with government investment in the sector to stimulate innovative products and sustainable initiatives. The Committee also received proposals to increase funding to Destination Canada and promote Canada as a tourism destination.

Finally, the Committee received proposals to improve road and air travel, including reconnecting Canada via motor coach, increasing the use of biometrics and other digital tools and providing financial relief to airports.

Recommendation 120

Invest in a destination development strategy to align all tourism investment stakeholders, including funding agencies.

Recommendation 121

Explore the possibility of facilitating lending to the hotel sector through government-backed loans and an optional federal mortgage insurance for hotels.

Recommendation 122

Stimulate innovative tourism and hospitality products with a dedicated federal grant fund.

Recommendation 123

Implement new steps to make the border security process more effective and efficient for travellers.

Agriculture, Food and Fisheries

With regard to agriculture and food, witnesses expressed the need for funding for research and innovation and additional resources and support for producers. Witnesses also addressed emissions-reduction strategies and environmental risk management, including the AgriStability and AgriRecovery programs. Lastly, witnesses discussed Canada’s organic standards and forest management.

With regard to fisheries, the Committee heard proposals on the aquaculture and seafood sector and fisheries science. Witnesses raised the role and structure of the Department of Fisheries and Oceans, including the need for improved decision-making processes and, more generally, for the regulatory framework to accommodate innovations that improve sustainability and performance. The Committee also received proposals on the Canadian Science Advisory Secretariat and resource management, including stock assessments.

Recommendation 124

Provide a stable and predictable budget for agronomic and agri-environmental research and innovation.

Recommendation 125

Implement measures to enable Canada to become a leader in sustainable and innovative agriculture with a resilient and diversified food system.

Recommendation 126

Implement a special assistance program specific to the agricultural sector to mitigate the impact of inflation on the financial health of agricultural businesses.

Recommendation 127

Establish a food security program to support producers who were negatively impacted by federal government-imposed tariffs on imported Russian fertilizer.

Recommendation 128

Create a limited statutory deemed trust, as established in Bill C-280, Financial Protection for Fresh Fruit and Vegetable Farmers Act, to provide critical financial protection to produce growers and sellers.

Recommendation 129

Ensure a continuum of support and guidance over a 10-year horizon for compensation for environmental goods and services and the fight against climate change, both in terms of adaptation to climate change and reduction of greenhouse gas emissions.

Recommendation 130

Implement improvements to the Business Risk Management programs to enhance on-farm climate risk management, as well as the mitigation and prevention of future damage from extreme weather events, such as:

• ensuring coherence between AgriStability support and producers’ payment histories by increasing the payment trigger for each successive year of participation without a program payment, to a maximum of 85% and decreasing it upon receiving payment to encourage ongoing program participation and investment in on-farm climate risk management; and
• instigating a collaborative review with producers, key industry stakeholders, and government officials following each AgriRecovery program, to assess and report measures that could prevent or mitigate associated risks in the future.

Recommendation 131

Provide ongoing funding for the review and upholding of Canada’s organic standards.

Recommendation 132

Provide an organic certification cost-share program.

Recommendation 133

Create an individual forestry savings and investment plan for Canadian forest owners.

Recommendation 134

Formalize an aquaculture sector development mandate at Agriculture and Agri-Food Canada including a new pilot program to help insulate shellfish farmers from catastrophic climate events and increased funding for the Canadian Shellfish Sanitation Program.

Recommendation 135

Increase funding for fisheries science in support of management decision‑making.

Recommendation 136

Prioritize the hiring and retention of fisheries scientists specializing in quantitative stock assessment.

Industry and Innovation

On the topic of industry and innovation, the Committee received proposals to foster economic growth through increased investments and incentives in the field of science and technology. In particular, witnesses discussed the Strategic Innovation Fund, tax measures, a patent box regime and the Canada Digital Adoption Program.

In addition, witnesses raised the issues faced by SMEs and specific needs in certain fields, such as manufacturing and aerospace.

Recommendation 137

Immediately start the comprehensive review of the Scientific Research and Experimental Development (SR&ED) tax incentive system so that it is fit for purpose in the 21st century knowledge-based and data-driven economy and ensure that reform of the SR&ED program for Canadian scale-ups leads to more accountability in this program and that funds go to domestic firms instead of foreign multinationals.

Recommendation 138

Prioritize creating strong intellectual property (IP) and data commercialization frameworks in Canada by incorporating freedom to operate strategies to encourage IP generation inside Canadian companies and increase business expenditure on R&D outputs for Canada, with the implementation of a national patent box regime, while respecting international standards and agreements and ensuring that these measures dot not contribute to tax avoidance or evasion.

Recommendation 139

Renew the Patent Collective Pilot Program with a greater focus on other sectors beyond clean tech, such as health tech, fintech, and cybersecurity.

Recommendation 140

Design and implement a multifaceted industrial strategy to maintain Canada’s competitiveness in light of recent measures taken by the United States, such as the adoption of the Inflation Reduction Act.

Recommendation 141

Increase incentives, enact reforms that accelerate innovation, investment, and the adoption of advanced technologies and promote commercialization and domestic production in Canada’s manufacturing sector.

Recommendation 142

Develop a long-term national aerospace industrial strategy that includes clear plans for defence and a dedicated strategy for space.

Recommendation 143

Develop, as part of the implementation and evolution of the Biomanufacturing and Life Science Strategy, a funding strategy for mission-oriented organizations focused on translational research supporting preclinical to clinical development.

Recommendation 144

Support innovation in the forest sector and provide funding to establish and maintain winning conditions for Canada’s forest sector that will result in the pre-commercialization of innovations that will solve the challenges of sustainable growth and optimize the use of fibre.

Recommendation 145

Implement an economic spillover lens to foreign direct investment (FDI) policy and study the negative spillovers of FDI on local technology companies to allow the net-benefit review process to be better aligned with the needs of the intangible economy.

Recommendation 146

Expand the core grant to increase the capacity of Canada's 60 Technology Access Centres to assist small companies.

Recommendation 147

Make Tech-Access Canada's Interactive Visits program more flexible and permanent to increase SME’s participation in the program.

Temporary Support Measures

With regard to temporary support for organizations, witnesses discussed the repayment of the Canada Emergency Business Account loans and the Canada Emergency Wage Subsidy, and made proposals respecting other pandemic-related support programs available to businesses in specific sectors.

Recommendation 148

Allow organizations that have been denied the repayable portion of a Canada Emergency Business Account loan to re-file in an attempt to re-establish their eligibility for the program.

Recommendation 149

Increase the forgivable portion of the Canadian Emergency Business Account loan to at least 50% and extend the repayment deadline for an additional year.

Recommendation 150

Make needed changes to Strategic Innovation Fund and Aerospace Regional Recovery Initiative to increase access to funding support for the aerospace sector.

Regulatory Environment

On the topic of the regulatory environment, the Committee heard proposals to improve internal trade and regulatory predictability. In particular, witnesses called for applying an economic lens to all regulatory mandates and expanding the one-for-one rule to legislation and policies. The Committee also received proposals to reduce credit card fees for small businesses and enhance services in the aviation industry.

Recommendation 151

Increase support for SMEs by reducing the regulatory and compliance burden to help boost economic growth.

Recommendation 152

Remove inter-provincial trade barriers and harmonize regulations across Canada as a low-cost solution to drive economic growth.

Recommendation 153

Champion a policy of mutual recognition to improve internal trade.

Recommendation 154

Deliver on its outstanding promise to lower credit card interchange fees for small businesses.

Recommendation 155

Protect the integrity of Canada’s financial system by continuing to make progress on payments modernization and open banking.

Recommendation 156

Inject resources to enhance Transport Canada’s aeronautical certification capacity and use the revenues from charges imposed by the Canadian Aviation Regulations for service enhancements.

Recommendation 157

Prioritize the adoption of a Canada-wide governance framework by businesses and governments for secure digital identification and authentication and provide leadership to ensure alignment and consistency between current and future initiatives in the Canadian ecosystem.

Recommendation 158

Encourage, in cooperation with the private sector, the universal adoption of a Canada-wide network to ensure secure digital identification and authentication interoperability across Canada and its various areas of activity to avoid the exclusion of use cases of and maximize the benefits to Canadians.

Recommendation 159

Ensure that any legislation that directly or indirectly relates to the “right to repair” includes vehicles to support consumers, protect jobs and improve environmental outcomes as part of Canada’s economic recovery.

Trade

On the topic of trade, witnesses discussed export support measures and investment in export programs and services as well as the need to harmonize export control measures, reduce trade barriers and streamline procedures. The Committee also heard proposals calling for the compensation of producers as a result of concessions made in the Canada-United States-Mexico Agreement and stressing that no further concessions should be made in the future.

Recommendation 160

Provide more funding for trade-enabling infrastructure and services to help Canadian businesses increase their value-added exports.

Recommendation 161

Support Canada’s supply chains by funding the roll-out of a full program designed to allow the clearance of goods using a single, common digital platform.

Recommendation 162

Fund the creation of an Exporter Concierge Service that enables trade associations to develop programs that link their members to government export agencies and services.

Recommendation 163

Accelerate the development of export control measures and harmonize them with those of our allies.

Recommendation 164

Implement carbon border adjustments.

Recommendation 165

Make no further concessions on supply-managed products in future trade negotiations.

Chapter 5: Support for Communities

Housing prices have fluctuated significantly since 2020. According to Canadian Real Estate Association data, the actual average home price in Canada was $626,318 in December 2022, which is 23% lower than its peak of $816,611, reached in February 2022, but still 21% higher than in December 2019. The housing price increases over the 2020–2022 period varied across regions, with some experiencing larger increases than the Canadian average, such as Moncton and the Greater Toronto Area. In addition, the Bank of Canada noted that prices grew faster in suburban and rural areas, partly due to the shift to telework, as well as for single-family homes, reflecting the shift in demand away from condominiums toward these homes.

This increase in house prices, along with higher interest rates, affected housing affordability. While the Bank of Canada’s housing affordability index, which measures “the share of disposable income that a representative household would put toward housing-related expenses,” decreased sharply at the start of the pandemic when interest rates declined, it has now reached its highest level since the early 1990s. Moreover, the OPBO has found that house prices and household borrowing capacity have become “de-linked” in many regions in Canada, meaning that growth in the former has outpaced that of the latter. According to the OPBO, house prices in several Canadian cities, including Hamilton, Toronto, Ottawa, Victoria, Halifax and Vancouver, were already “de-linked” prior to the pandemic.

Regarding the rental housing market, the Canada Mortgage and Housing Corporation (CMHC) reported that, because of a surge in rental demand, the vacancy rate for purpose-built rental apartments reached a “near-historic low” of 1.9% in 2022. While the CMHC noted that the supply of rental housing grew at its fastest pace since 2013, the tightening of rental housing markets led to an average increase in rent of 5.6% over the 12-month period ending in October 2022, double the average annual rise of 2.8% over the 1990–2022 period.

Figure 6—Year-over-Year Rent Growth for a 2-Bedroom Purpose-Built Apartment, Selected Cities (%)

Note:      Rent growth for Calgary and Regina is not statistically different from zero during the 12-month period preceding October 2021.

Source: Figure prepared by the Library of Parliament using data obtained from the Canada Mortgage and Housing Corporation, Rental Market Report: January 2023 Edition, 2023, p. A2.

As shown in Figure 6, growth in rent varied across Canadian regions. While the national average rent for a two-bedroom purpose-built apartment was $1,258 in October 2022, Vancouver and Toronto had the highest average rents, at $2,002 and $1,779, respectively. In addition, new renters experienced a larger increase; the average rent growth for two-bedroom purpose-built apartments that turned over to a new tenant was 18.3%, significantly higher than the average for all apartments. Lastly, as the CMHC pointed out, low-income renters faced greater affordability challenges owing to the “very low stocks of rental units that are affordable” for them.

In addition to housing, witnesses made proposals respecting infrastructure; safety and security; arts, culture and information; and equity, diversity and inclusion.

Housing

On the topic of housing, witnesses spoke about the need to create more affordable housing, including affordable housing to meet the needs of families with children and support immigration targets. To that end, witnesses encouraged greater collaboration among the three levels of government, businesses and non-profit organizations to find ways to accelerate zoning, permit delivering and development processes. The Committee also heard proposals for an urban, rural and Northern Indigenous housing strategy to address homelessness and core housing need.

Recommendation 166

Commit to building up the affordable housing stock, and to bring together provincial and municipal business and non-profit partners at the table to find innovative solutions and to expedite zoning, permitting and development processes.

Recommendation 167

Work with the provinces and public and private sectors to adopt innovative initiatives to meet the needs of the housing sector, particularly in the context of a sharp increase in inflation and interest rates.

Recommendation 168

Create and fund an Indigenous housing centre that would develop and implement a comprehensive, urban, rural, and northern Indigenous housing strategy that includes dedicated investments to support the construction and delivery of housing for Indigenous peoples.

Recommendation 169

Support the protection of and increase in community housing supply that meets the needs of Canadians by enhancing the financial incentives and opportunities within the National Housing Strategy.

Recommendation 170

Adopt a consistent definition of affordability applicable to all National Housing Strategy programs, based on a household’s ability to pay.

Recommendation 171

Create a property acquisition program for non-profit housing providers that will provide them pre-approved financing to purchase existing rental housing projects and ensure their affordability.

Recommendation 172

Expedite the rollout of the Federal Lands Initiative.

Recommendation 173

Finance the construction of new social housing in Canada, in new constructions or by purchasing and renovating existing buildings and converting them to cooperatives, non-profit organizations and/or housing offices to ensure their sustainability.

Recommendation 174

Prioritize, through its National Housing Strategy, the development of new social housing, in the form of public, co-operative, and non-profit housing, while guaranteeing Quebec its fair share of federal funds so that it can invest them in its own social housing programs, including by:

• creating a concierge service to help guide and support those who seek to create social housing;
• renewing the Rapid Housing Initiative and making it recurrent and fund rent supplement subsidies needed to make housing accessible to low‑income tenants;
• using the funds of the Housing Accelerator Fund dedicated to municipalities exclusively to support the development of social housing in various forms, including through the acquisition of land from decontaminated land for future social housing projects and the construction of the necessary infrastructure on these sites;
• transfer the money from the new Affordable Housing Innovation Fund for Quebec to the Quebec government to finance social housing; and
• transfer the funds of the new co-operative housing program for Quebec to the Quebec government to finance the AccèsLogis program and fund new non-profit housing cooperatives.

Recommendation 175

Increase the amounts granted to provinces and territories to ensure that the full renovation, improvement, and modernization of social housing that it has helped bring about in the past is undertaken as soon as possible.

Infrastructure

With respect to infrastructure, the Committee received proposals to support the development of vehicle charging infrastructure, including the adoption of clear targets and measures to encourage the integration of charging infrastructure in new and older constructions. In addition, witnesses requested additional funding for the National Trade Corridors Fund and programs that enable more Canadians to connect to high-speed Internet in rural areas.

Recommendation 176

Adopt clear targets for light-duty vehicles charging infrastructure in accordance with Natural Resources Canada’s 2022 report entitled Canada’s Public Charging Infrastructure Needs.

Recommendation 177

Provide sufficient funding so Canada reaches the following charging infrastructure targets:

• 53,000 public ports by 2025 (5,000 Direct Current Fast Charging and 48,000 Level 2 chargers) and
• 200,000 public ports by 2030 (15,000 Direct Current Fast Charging and 185,000 Level 2 chargers).

Recommendation 178

Set a goal of making one million existing apartment and condominium or strata parking stalls electric vehicle (EV)-ready by 2030 and establish new funding programs to achieve this target.

Recommendation 179

Incorporating EV-ready requirements into the National Building Code of Canada and National Energy Code of Canada for Buildings and support EV-ready municipal zoning bylaws.

Recommendation 180

Put underutilized government lands to work by facilitating multi-service provider “charging hubs,” particularly in high density and high-cost real estate markets.

Recommendation 181

Include EV charger installation or EV-readiness as part of energy efficiency programs to help Canadians who live in older houses (40 years and older) retrofit to the electric infrastructure requirements for EV charging.

Recommendation 182

Treat the provision of safe clean water as a public emergency and provide the funding and infrastructure necessary for every community in this country to have access to safe, clean water by 2025.

Recommendation 183

Accelerate infrastructure spending and transfers under the Investing in Canada Plan to boost productivity and address specific social and environmental objectives.

Recommendation 184

Support energy workers impacted by the transition to a low-carbon economy—particularly workers in oil and gas—by making investments that support brick-and-mortar projects and new large-scale infrastructure projects (for example hyperloop projects) and investments in green technologies (for example small modular reactors and hydrogen), which will create job opportunities, and provide financial and regulatory support to the private sector to make that transition.

Recommendation 185

Increase payments from the Canada Community-Building Fund, as a measure to address the crumbling essential infrastructure in communities.

Recommendation 186

Demonstrate support for the Kivalliq Hydro-Fibre Link, a nation-building green infrastructure and connectivity project, by allocating the required funds to the project’s development and construction.

Recommendation 187

Ensure that all the people of Canada, regardless of income, have access to affordable wireless and broadband Internet plans, including by expanding the Connecting Families initiative.

Recommendation 188

Implement legislation requiring any Canadian telecommunications company who receives government funding for broadband infrastructure to publicly report any operations that are contracted out, both domestically and overseas.

Recommendation 189

Establish stronger corporate transparency and reporting requirements through a broader framework around due diligence, based on the OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights.

Recommendation 190

Increase investments in broadband and energy infrastructure in Canada’s remote and northern communities.

Safety and Security

A number of witnesses made proposals to improve cybersecurity in Canada, including more funding to help essential service providers and SMEs prevent and respond to cyberattacks, and measures to encourage the commercialization of cybersecurity products to improve Canada’s capability in this regard. The Committee also heard requests related to community security infrastructure, NORAD modernization and the firearm buy-back program. Lastly, Committee was presented with a request to implement the Calls to Justice of the National Inquiry into Missing and Murdered Indigenous Women and Girls.

Recommendation 191

Implement an economic lens in the next phase of the National Cybersecurity Action Plan to bolster Canada’s cybersecurity industry and support the pipeline of cyber commercialization, talent and collaboration and in the next National Cybersecurity Action Plan, focus on building domestic partners, developing cyber testing streams for co-developed cyber solutions alongside industry and addressing the shortage of cyber talent.

Recommendation 192

Provide funding for the Implementation of the Calls for Justice from the National Inquiry into Missing and Murdered Indigenous Women and Girls to improve the safety and security of First Nations women, girls and 2SLGBTQQIA+ people and ensure culturally appropriate healing and support services.

Recommendation 193

Consult with industry on the North American Aerospace Defense Command modernization to propel research and development activity.

Recommendation 194

Strengthen the beneficial ownership standard for corporations, trusts, partnerships and other legal persons and, in partnership with the provinces and territories, accelerate the implementation of a high-quality beneficial ownership registry this year instead of 2025.

Recommendation 195

Ensure that Canada’s beneficial ownership registry is publicly accessible and utilizes a structured, machine-readable data format that is free‑of‑cost.

Recommendation 196

Spearhead a political agreement between the federal government, provinces and territories for a central beneficial ownership registry model.

Recommendation 197

Introduce a national whistleblower protection framework to fight financial crimes.

Recommendation 198

Enhance Canada's readiness for all-hazard events by investing in a clearly defined, permanent humanitarian response capacity.

Recommendation 199

Implement changes to the government machinery to support emergency readiness, coordination, and whole-of-society approaches.

Recommendation 200

Reinstate a modernized version of the former Joint Emergency Preparedness Program for fire/emergency training and equipment, with net new monies.

Recommendation 201

Increase funding and implement policy changes to close the protection gap for a more resilient recovery from all-hazard risk events such as fires, floods, and heat events.

Recommendation 202

Include the recommendations from the Climate Proof Canada coalition in Canada’s National Adaptation Strategy.

Arts, Culture and Information

Witnesses who addressed arts, culture and information made proposals on local journalism, community broadcasters, CBC/Radio-Canada and cultural diplomacy through the Mission Cultural Fund.

Recommendation 203

Provide an annual operating budget for all community, Indigenous, and campus-licenced radio stations that are meeting or exceeding their licensing standards as established by the Canadian Radio-television and Telecommunications Commission, which could be established and administered by the Community Radio Fund of Canada.

Recommendation 204

Increase funding for the Local Journalism Initiative to enable this program to realize its full potential and contribute to the fight against disinformation, and ensure the funding is not temporary.

Recommendation 205

Set a policy directive for the Canadian Radio-television and Telecommunications Commission on Bill C-11, Online Streaming Act, directing it to support local news programming by developing an independent fund, financed by distribution and online undertakings, the distribution of which must be calibrated to employee headcount or payroll expenditure of news gathering and production staff.

Recommendation 206

Renew and expand the government’s commitment to the Canadian Journalism Labour Tax Credit and the Local Journalism Initiative, including through a reform of tax laws to legalize philanthropic journalism endowments to any qualified news organizations, and to allow employee or citizen news cooperatives to operate as non‑profits.

Recommendation 207

Reform section 19 of the Income Tax Act to extend rules restricting tax deductibility of advertising expenditures to online foreign media, generating general government revenues that can be used for news journalism while repatriating lost advertising revenue for Canadian news organizations.

Recommendation 208

Increase the budgets of all federal arts and culture institutions, so that these institutions can play a key role in sustainable cultural development.

Recommendation 209

Permanently increase the Canada Council for the Arts’ granting budget to continue to serve new applicants and innovations in a post-pandemic environment.

Recommendation 210

Permanently increase funding to the Canadian Arts Training Fund as core operating support in order to run professional and post-secondary programming.

Recommendation 211

Ensure that arts training schools are engaged when funding programs are designed across government, including but not limited to research opportunities, health and supporting seniors, women and gender equality, diversity and inclusion, tourism and economic development, and skills development.

Recommendation 212

Take the following steps to generate additional revenues to support film, television and digital media production:

• ensure all online programming services, as well as internet service providers and wireless service providers, contribute a percentage of their gross Canadian revenue from broadcasting-related activities to the creation of Canadian audiovisual and music programming through a public fund; and
• allocate a portion of the proceeds of all spectrum auctions to the production and distribution of Canadian content, including audiovisual and music programming.

Recommendation 213

Demonstrate its commitment to Canada’s diverse content creators, and the importance of ensuring that Canadians are aware of and have full access to the stories they create, by formalizing its commitment and support for National Canadian Film Day as an annual celebration of Canadian cinema to be held in April of each year.

Recommendation 214

Reaffirm the importance of the future of performing arts in Canada by addressing the identified gap in Canadian Heritage funding for national performing arts organizations serving the development of amateur performing artists.

Recommendation 215

Invest in the Canada Arts Presentation Fund and the Building Communities Through Arts and Heritage to support the adaptation and growth of the live performance sector in the post‑pandemic era.

Recommendation 216

Initiate high-level consultations between Canadian Heritage and independent music venues in Quebec and Canada to find a way for them to access the Canada Arts Presentation Fund and the Building Communities Through Arts and Heritage Fund.

Recommendation 217

Support festivals and events by extending and expanding the Major Festivals and Events Support Initiative to benefit more festivals and events across Canada, including “event and festival tourism” as a priority in the Canadian Experiences Fund and providing increased and permanent funding to the Canada Arts Presentation Fund and the Building Communities Through Arts and Heritage.

Recommendation 218

Implement a fulsome ticket-matching program which covers the 2022–2023 and 2023–2024 seasons for performing arts organizations to protect them against altered buying habits and reticence from audiences during the reopening transition for the arts sector.

Recommendation 219

Permanently increase the funding to the Canada Music Fund, to support commercial live music-specific companies, among others, present Canadian artists while driving domestic and international tourism through live concert and event activity.

Recommendation 220

Increase annual contributions to the Canada Music Fund to support:

• the production and marketing of recorded music and shows, particularly for emerging artists;
• operations aimed at workforce retention and training;
• the development of collaborative tools to address the labour shortage in the sector;
• the production of traditional and innovative musical audiovisual content; and
• export activities.

Recommendation 221

Immediately amend the Copyright Act to ensure that it protects all creators and copyright holders and that it implements market-based solutions that encourage fair remuneration of rights-holders for use of copyright-protected work, including when such work is used by the educational publishing industry.

Recommendation 222

Implement the Minister of Canadian Heritage’s mandate letter commitment to support Canadian authors and book publishers by increasing funding for the Public Lending Right Program on a permanent basis.

Recommendation 223

Enforce the Revised Foreign Investment Policy in Book Publishing and Distribution, with a more meaningful assessment of “net benefit to Canada” to keep our book industry Canadian and put Canadian-owned publishers first.

Recommendation 224

Ensure that new and substantial investments are made in order to implement a strong and ambitious 2023–2028 Action Plan for Official Languages, including support for the official languages reform stemming from Bill C-13, An Act for the Substantive Equality of Canada’s Official Languages, with a view to countering the decline of French in Canada.

Equity, Diversity and Inclusion

On the subject of equity, diversity and inclusion, witnesses raised a number of topics, such as measures to improve the representation of certain groups in a number of sectors, combat anti-Semitism and racism, and sensitize Canadians about the appropriate use of social media. The Committee was also presented with a request to implement the Calls to Action of the Truth and Reconciliation Commission.

Recommendation 225

Undertake a national social media literacy campaign to sensitize Canadians—especially the younger, more vulnerable demographic—about the appropriate use and abuse of social media.

Recommendation 226

Provide funding to the Black Screen Office as an equitable partner to scale and grow its important work in making Canada’s screen industries’ practices free of anti-Black racism and empowering Black Canadians working in these industries to thrive and share uniquely Canadian Black stories.

Recommendation 227

Implement the Truth and Reconciliation Commission’s Call to Action #21 by providing “sustainable funding for existing and new Aboriginal healing centres to address the physical, mental, emotional, and spiritual harms caused by residential schools, and to ensure that the funding of healing centres in Nunavut and the Northwest Territories is a priority.”

Recommendation 228

Address the backlog of land claim and self-government negotiations with Indigenous organizations by increasing the staffing levels of federal negotiators.

Recommendation 229

Increase the permanent funding to the Friendship Centres.

Recommendation 230

Establish an Office of Environmental Justice and commit an appropriate portion of benefits from climate and clean energy spending to disadvantaged communities.

Conclusion

The Committee sincerely thanks all those who submitted a brief or provided testimony for consideration in this report. The input provided was of great value for the Committee in preparing its recommendations.

Having concluded its pre-budget consultations, the Committee hopes that the government will carefully consider its recommendations when crafting the 2023 budget and future fiscal documents. The Committee is confident that, with the proper public policy choices, Canada can address the challenges of our time.