Finance Committee on Sept. 29th, 2014

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cullen.

We'll go to Mr. Saxton, please.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair.

Thanks to our witnesses for being here this evening.

To Mr. Hodgson, as the government approaches its target for a balanced budget, our government has indicated that paying down the debt and providing tax relief to Canadian families are its top priorities. I'd like to ask, do you agree with that?

[Glen Hodgson]

As I said in my opening comments, I think we have to look at every element of the budget going forward in terms of the contribution to economic growth. I think investing in strategic assets like infrastructure probably is the higher priority right now, frankly, than further tax cuts. I think paying down debt is critical, because as we've seen around the world, if you let your public debt get out of control, you end up in a disaster. We would probably have a shift in priorities and look at some of the catch-up really required in an area like infrastructure spending in particular.

[Andrew Saxton, Conservative, North Vancouver, BC]

Then you would agree with our government's Building Canada plan and the $53 billion we've dedicated towards infrastructure.

[Glen Hodgson]

I would agree with that as a good down payment, but the last estimate I saw was probably a decade ago by the consulting engineers, and they were talking about a deficit at that time of $125 billion. If I just do some simple arithmetic, that's probably pushing $200 billion right now.

We know that the provinces are also earmarking funds in their budgets, but the infrastructure hole is very large in this country.

[Andrew Saxton, Conservative, North Vancouver, BC]

Do you want to elaborate very briefly on why it's important for us to be investing in infrastructure, as we've announced that we will be doing?

[Glen Hodgson]

Sure, it's because it really underpins all parts of commerce and our economy. If it takes you an extra two hours to get goods or services to market, you've just lost a two-hour advantage against an American competitor in the U.S. market, or against a country like China. To ensure that our economy is really as productive as possible, we have to ensure that we're functioning on all cylinders. A strong infrastructure base is part of that.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

To Peter Holle, our government's trade agenda has already made Canada one of the most open and globally engaged economies in the world. Indeed, our government recently completed negotiations on a comprehensive economic and trade agreement with the European Union. The agreement alone has the potential to add more than 80,000 new Canadian jobs and to give Canadian businesses preferential access to over half of the global economy.

Why is it important for Canadian businesses that our government continues to open up new markets for their goods and services?

[Peter Holle]

You're creating private sector growth. What I'd like to say is that while I would encourage the government to do the European trade deal, the trans-Pacific deal has also been a great opportunity for western Canada, where my think tank is based. What I would like to stress is that one of the items that has held things up is supply management, which has affected our grain industry, beef, and parts of our agricultural economy.

I think the government is on the right track. It should take that whole drive and bring it to the trans-Pacific deal as well.

[Andrew Saxton, Conservative, North Vancouver, BC]

Since coming into government in 2006, which is just over eight years ago, we've increased the number of free trade agreements between Canada and other countries from 5 to 43. Based on what you just said, you would agree that this is the right way to move it forward and it's going to be good for building Canadian jobs and building the Canadian economy.

[Peter Holle]

It is absolutely the right path.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

Mr. Holle, as we approach the budget period, what do you believe our government's priorities should be? We're looking at balancing the budget next year. We're on track for that. Where do you think our priorities should be after we balance the budget?

[Peter Holle]

You should be reducing taxes and reducing debt.

Again, there is a major opportunity for the government to look at structural reform within the federal civil service. I would encourage it to look at some of the best practices from other countries. A simple thing like bringing a capital charge into the government's books and requiring departments to actually have a cost of capital for different assets, in my experience, would give departments an incentive to privatize assets. That would be a good thing, again from the point of view of balancing budgets and lowering spending.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay, thank you.

Since coming into government, our government has lowered over 180 different taxes. We now have taxes at a 55-year low in Canada. The average Canadian family is reported to have about $3,400 extra in their bank account at the end of each year as a result of our low-tax plan.

Would you agree that this is the right approach, that we should be looking at lowering taxes both for individuals as well as for companies?

[Peter Holle]

Yes, lower taxes are good.

Again, we would go toward general tax cuts, raising the exemption. We would tend not to go toward boutique tax cuts, or tax credit programs, which has been the practice before.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

My next question is for Brian Kingston.

Mr. Kingston, in your submission to the finance committee, you noted that Canada's labour market information system should be comparable to Germany's integrated virtual labour market system. Could you please explain for the committee today how the system functions, and how that should be used here in Canada?

[Brian Kingston]

Germany has a virtual labour market system that's actually administered by a centre, one of our member companies. It's a clearinghouse for essentially all labour market services in a virtual environment, and employment services. Every citizen is registered here. It has proven to be very effective at lowering the unemployment rate and reducing long-term unemployment.

We think it's a system that Canada should consider looking at as a way to bring the unemployment rate down and help people who are seeking jobs.

[Andrew Saxton, Conservative, North Vancouver, BC]

Did you look at all at the apprenticeship programs in Germany and perhaps Switzerland and other places where they're quite effective?

[Brian Kingston]

Yes, we did. One thing that we've recommended actually in our submission is to help apprentices basically achieve parity of esteem with other degree holders. Right now apprentices receive their papers. We think there's a way to actually make them on the same level as a university graduate by giving them what would be equivalent to a diploma, something they could be proud of, which would encourage more people to actually take the trade route.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Saxton.

Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Parent, the 2013 figures from your office show that out of around 87,000 clients of Veterans Affairs Canada, 1,428 of them are “totally and permanently incapacitated”. Of these over 1,400 veterans, 406 would not receive any allowances or Canadian Forces pensions.

Could you elaborate on that deficit of such a large number of veterans who are totally and permanently incapacitated who are not receiving any allowances or pensions? What should we include in the 2015 budget to address these severely injured veterans?

[Guy Parent]

Thank you, Mr. Chair.

When the new Veterans Charter was introduced, it replaced a pension plan. The pension plan was made up of benefits and programs that would last for life.

When they introduced the new Veterans Charter—the income loss benefit—they introduced, for the first time in veterans benefits, a program that ended at 65 years old. Those people who are totally and permanently incapacitated right now are only receiving the earnings loss benefit, which ends at 65.

However, there is a permanent incapacity allowance that is available. In fact, we've questioned the logic there. Why are people who are totally and permanently incapacitated not receiving a permanent incapacity allowance? That's where the big secret is right now.

People who are not capable of generating any income at all should have benefits for life. Therefore, the PIA, the permanent incapacity allowance, should be widened so that it's easier for people to access. It should also be brought up to a level that is consistent with life after service, which is in the $70,000 area.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

Mr. Hodgson, you seem to be calling for a growth agenda that is consistent with the consensus that emerged from the G-20 finance ministers meeting in Cairns recently. The Australian treasurer said, “It is critical that we take concrete steps globally to boost growth and create jobs”.

Compared to economies like the U.S., Australia, and the U.K., we're growing more slowly as an economy than those countries. Yet Australia and the U.K. are investing massively in infrastructure: the federal government in Australia, the national government, working with state governments, working with Canadian pension funds.

With probably the greatest concentration of expertise in the design, construction, and financing of infrastructure in the world resident here in Canada, should we build a more robust national infrastructure plan today as David Dodge would counsel us, by working with the provinces to invest massively in fixing our infrastructure? We would create jobs in the short term and better competitiveness in the long term.

[Glen Hodgson]

I can give you a one-word answer, yes, or a longer answer.

It's not a surprise that I've set out a growth agenda, given that I worked at the Department of Finance for 10 years and at the IMF for three-and-a-half years. I would align with the kind of view that would come out of the G-20. We've said for over a decade now that Canada has a huge infrastructure deficit that has to be addressed.

I am pleased that the government has made a down payment, but we have to eliminate the deficit over the next decade, let's say.

[Scott Brison, Liberal, Kings—Hants, NS]

Part of the problem with the down payment is that much of it is back-end loaded to 2017. That's a bit of a problem when the infrastructure needs are right now.

The work that the Conference Board has done on intergenerational inequities is important. TD Economics estimates that there's a scarring effect on young Canadians who are currently having trouble finding work, potentially something that will cost $13 billion to the Canadian economy over the next 10 years.

Could you speak to that scarring effect and the long-term impact of a generation of young Canadians who have significantly less opportunity than their parents or grandparents?