Procedure and House Affairs Committee on May 31st, 2007

[The Chair, Conservative, Gary Goodyear]

Colleagues, let's begin our meeting this morning.

Thank you, everyone, for coming.

As members will know, as a result of the House's having referred to our committee Bill C-54 on Monday, May 28, today we are beginning our review of that bill.

I would remind members that this meeting is being held in public for the opportunity to go over this bill.

With us this morning, from 11 o'clock to 12 o'clock, we have the minister, Hon. Peter Van Loan, leader of the government in the House. The second hour we have reserved for our witness, the Chief Electoral Officer, Mr. Mayrand.

Colleagues, if we're ready, we'll begin. Documents have been handed out to you, including copies of the minister's comments this morning.

Minister, I welcome you to the committee. It's a privilege to have you here before us today to discuss this bill. I'll open the floor for you. You can please introduce your team first and then proceed with your comments.

Thank you.

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons]

I'll have my team introduce themselves.

[Randall Koops, Senior Policy Advisor, Legislation and House Planning, Privy Council Office]

I'm Randall Koops. I'm senior policy advisor for legislation and House planning, Privy Council Office.

[Marc Chénier, Counsel, Legislation and House Planning, Privy Council Office]

I am Marc Chénier and I am a Legal Counsel in the Privy Council Office.

[The Chair, Conservative, Gary Goodyear]

Welcome.

[Peter Van Loan, Conservative, York—Simcoe, ON]

And I'm Peter Van Loan.

I'm pleased to appear today to assist the committee in its scrutiny of Bill C-54, the accountability with respect to loans bill. The bill is another important part of our agenda to strengthen accountability in Canada through democratic reform.

Our agenda in this respect is extensive and ambitious. It has three main components: strengthening our electoral system to make it more responsive, fair, and effective; second, modernizing the Senate; and third, reforming the financing of political parties to eliminate the undue influence of rich and powerful individuals.

To start, we are strengthening our electoral system by, firstly, ensuring our democracy remains fair to Canadians across the country through Bill C-31, which seeks to reduce voter fraud, and Bill C-56, which ensures fairness and representation in the House of Commons by restoring the principle of representation by population.

Secondly, we are taking steps to improve voter turnout through Bill C-55, which adds two additional days of advanced polling on the two Sundays prior to election day.

Lastly, we are also providing a level of certainty and transparency to the public by establishing fix date elections. Under legislation that was recently enacted into law, the date of the next general election will be October 19, 2009.

Through another piece of legislation currently before Parliament, we hope that October 19, 2009, is the date of the first national consultations process for choosing senators.

For the first time, Bill C-43 provides Canadians with the opportunity to have a say in who represents them in the Senate. This legislation, which represents a realistic and practical way of modernizing the Senate, is one part of our plan to do so. The other part is our bill to limit the terms of senators to 8 years from the current maximum of 45.

The last major component of our agenda to strengthen accountability through democratic reform is our legislation to reform the financing of political parties, candidates, and associations to eliminate the undue influence of rich, powerful individuals in the political process.

We committed to doing this in the last campaign, when we introduced, as our first piece of legislation, the Federal Accountability Act. On April 11, 2006 we fulfilled that commitment and on December 12 of the same year, the Federal Accountability Act became law.

The act banned corporate and union contributions, imposed tighter rules on gifts and trust funds and limited annual donations to a political party to $1,100 in 2007.

The bill being studied by this committee today builds on the Federal Accountability Act and on our commitment to eliminate the influence of rich, powerful individuals from the political process.

The bill would amend the Canada Elections Act to establish stronger rules and better transparency for loans made to political parties, candidates, and associations. These amendments would enhance accountability and increase transparency around the use of loans as a political financing tool, which is vital to ensuring the confidence of Canadians in the integrity of the political process.

Along with the Federal Accountability Act, the changes proposed in Bill C-54 will ensure that the financing of political parties, candidates, and associations is fully transparent with straightforward rules that are easy to enforce.

The amendments proposed for the treatment of loans in Bill C-54 would extend to loans the same standards of transparency that are now in place for contributions. By removing chapter 3, which allows for the use of loans to circumvent the restrictions on the source or limit of contributions, the amendments will ensure that the reforms enacted in C-2 cannot be undermined through the misuse of loans.

Specifically, the amendments would make the following changes to the treatment of loans.

First, the bill would establish a uniform and transparent way of treating loans made to political parties, candidates, and associations. It would require mandatory disclosure of terms and the identity of all lenders and loan guarantors. It would achieve greater transparency and ensure that political parties, candidates, and associations are treated uniformly, which is, believe it or not, not now the case.

Second, total loans, loan guarantees, and contributions by individuals could not exceed the annual contribution limit for individuals established in the Federal Accountability Act, which is set at $1,100 for 2007. Since loans from individuals would be treated as contributions from the time they were made, loans could not be used to circumvent the limit on individual contributions.

Third, only financial institutions and other political entities could make loans beyond that $1,100 limit. Unions and corporations would now be unable to make loans, consistent with their inability to make contributions. They could not disguise contributions as loans. Since financial institutions would have to charge commercial rates of interest, neither borrowers nor lenders could exchange favourable rates for favourable treatment.

Finally, the rules for the treatment of unpaid loans would be tightened to ensure that candidates cannot walk away from unpaid loans. Riding associations will be held responsible for unpaid loans taken out by their candidates. Those would succeed to the associations.

At this point I want to pay some tribute—and I don't want to say I'm disappointed that Monsieur Godin is here, but I am disappointed that Mr. Martin is not—because Pat Martin deserves some credit for having kept this issue on the radar screen and pressing us to move forward with this legislation. I wanted to give him due credit for having done that.

In January 2007, the Chief Electoral Officer presented recommendations to Parliament for changing the rules on loans. This was the first examination of the rules for loans since 2000.

The CEO recommended that Parliament impose additional controls on loans, make loans more transparent, and establish consistency in the treatment of loans for all classes of political entities. Specifically, he recommended the kinds of changes we are including in Bill C-54: the amendments in Bill C-54 implement the recommendations of the Chief Electoral Officer with respect to loans.

At second reading, several members expressed an interest in having the bill come into force earlier than six months after royal assent, which is the current wording in the bill. The government would like to see the changes in force as soon as possible. l would encourage the committee to discuss the matter with the Chief Electoral Officer, Mr. Mayrand, when he is here next hour—how quickly the changes could be put into operation—and to feel free to encourage him and challenge him to do it as quickly as possible.

In conclusion, accountability with respect to loans is an important part of our new government's agenda to strengthen accountability through democratic reform. By adopting this bill, which updates the rules for loans and expands transparency, Parliament would demonstrate to Canadians that it remains serious in its commitment to clean up all aspects of federal political financing.

It will show that we will not allow rich, powerful individuals to influence the political process. It will show that we will continue to build upon the reforms made in the historic Federal Accountability Act.

Today, I am seeking your support for these measures and will be pleased to attempt to answer your questions.

[The Chair, Conservative, Gary Goodyear]

Thank you, Minister.

Colleagues, we're going to do our usual, which is to start with a first round of seven minutes per member.

I forgot to mention that I would like, if possible, five to ten minutes at the end of this meeting to discuss future business. I'll just put that on the floor right now, and we can start our round of questioning.

If you don't need the full seven minutes, that's fine, but I think we'll start off with at least that length of time to give people a thorough examination.

Mr. Owen, please.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Thank you very much, Chair and Mr. Van Loan.

We'll all resist the temptation to make puns on Minister Van Loan.

Thank you for being here and for bringing this forward, together with your set of other approaches for democratic reform.

We've had an opportunity to discuss many of those in the past and will in the future, as we all tackle this joint opportunity to tighten up our political system, including the political financing.

Let me say by way of preamble that Bill C-26, brought in during January 2004 by the former Liberal government, was perhaps the most dramatic change in political financing in Canadian history, creating one of the tightest political financing systems in any democratic country. This is taking that a step further, as did Bill C-2, with respect to limits.

One question I have is with respect to that. In Bill C-24, which didn't go as far as Bill C-2—in the sense that it allowed union and corporation loans at the level of $1,000, which is pretty limited, but left the individual, basic unit of democracy at $5,000—part of the government's consideration at the time was not to unduly infringe on the political, democratic rights of individuals under the charter to express themselves and take part in a meaningful way in the political process.

This was, of course, as you may recall, part of the Liberal opposition's concern in Bill C-2. It wasn't to do with corporations or unions because their contribution was going from $1,000 to zero—it effectively was zero, anyway, at $1,000—but with individuals it caused some concern that it might unduly restrict people's exercising of democratic rights.

When we look at this bill, my observation is that if someone were to enter a national leadership contest, for instance—it could be the Canadian Alliance in 2002, the Conservative Party in 2004, or the Liberal Party in 2006—understanding that it's a national contest to be contested over many months...to apply this to a person who at that point is not backed up by a political association, or, I might also add, but on a much smaller scale, someone who's seeking the nomination to be a candidate for an election and isn't a sitting member and doesn't have a riding association, and looking at the potential costs of engaging in, for instance, an 11-month leadership campaign cross-country, and thinking of the amount of money that must be spent and has been spent in those contests by all parties, and then thinking about who might be capable of getting a loan from a financial institution.... My concern is that for some individuals who are not wealthy enough to either be credit-worthy themselves to raise the amount of money that would be necessary for that sort of contest or who have the friends who would be able to guarantee that loan, this would effectively be a barrier to that person's taking part in that leadership contest or, on a smaller scale, a nomination contest.

The flip side of it is that we're handing over to financial institutions, really, the power to decide who can enter those contests and who can't, by virtue of their need—understandably, given their responsibilities and the way this is written—to have it guaranteed or to find the person credit-worthy themselves.

It doesn't take much to imagine a large group of people who are incapable of entering those sorts of contests.

I noted, Minister, in your introductory remarks, on six occasions I believe, you mentioned that one of the intentions of this bill is to limit the influence of the powerful and the rich and such. I'm worried about the people who aren't rich and powerful, who may face a barrier to enter those types of contests when they don't have means themselves.

I wonder if you could comment on that.

[Peter Van Loan, Conservative, York—Simcoe, ON]

Based on your concern, I thought you would actually be heartened by what this bill does, because it levels the playing field.

Right now, of course, there is a situation where someone who is a wealthy individual or who has access to wealthy friends can get those significant loans with which to run a leadership campaign. If somebody comes from a more modest background and lacks those kinds of friends or those kinds of resources themselves, they won't have access to it.

Right now we have exactly the situation you fear. We have the situation where those who have the means can do this and those who don't are at a disadvantage.

This bill levels that playing field by putting everybody in the exact same position, where if they wish to get a loan and they can't finance that campaign through their own personal wealth.... We have seen that in previous leadership campaigns. Candidates have been able to have an advantage by financing it through their own personal wealth, either through loans or contributions. Everybody will be on the same footing with regard to going to a chartered financial institution to finance the campaign.

In fact, I think the situation you fear is exactly the situation we have today. When this legislation is passed, you will find that those individuals of modest means are in a better position vis-à-vis the wealthy and the powerful, those who have those resources and who now have the advantage.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Maybe if I could just follow that up--

[The Chair, Conservative, Gary Goodyear]

I'm sorry, there are only two seconds left.

There will be a chance, Mr. Owen, for another round.

[Peter Van Loan, Conservative, York—Simcoe, ON]

Let him have his two seconds.

[The Chair, Conservative, Gary Goodyear]

Okay, now we're done.

I want the record to show that I did offer you the two seconds. There'll be time for another round, Mr. Owen. Thank you.

We might want to recall--it has been a while since we've had questions for witnesses in this committee--that seven minutes sounds like a long time, but it's not. We might want to keep our question part of it as short as possible so there is time for follow-up.

Mr. Lukiwski, seven minutes, please.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Thank you, Chair.

And thank you, Minister, for appearing.

I'll follow up a bit on some of the comments made by Mr. Owen and ask you to respond to a criticism that has been levied by some members of the opposition with respect to this bill. They are contending that this bill would prevent qualified candidates from seeking nominations, particularly women. I don't necessarily share that view, but I'd like to hear your views on that and how you would respond to those criticisms.

[Peter Van Loan, Conservative, York—Simcoe, ON]

Before I do, I'll pick up on another point Mr. Owen raised, that those who don't have the backing of a wealthy riding association can't run. Riding associations cannot transfer funds to leadership campaigns already. If they're doing that, they're engaging in an illegal practice under the act. So that's not a factor.

On the question of nominations, again I think we have the same phenomenon. I'd remind everybody that nomination campaigns are already strictly regulated under the act. The spending limit is strictly regulated. It's 20% of the spending limit of an actual campaign for that riding. From that perspective, you already have the playing field levelled. Those restrictions come from the legislation that Mr. Owen referred to previously.

You're talking about a typical campaign in a big riding limiting somebody to spending $14,000 or $16,000. That's the most you can spend on a nomination, so already you have very limited potential.... To say that putting everybody on a level playing field so they can't reach in to find their own $15,000 and that they have to borrow it from a bank and so on.... I don't buy that notion that there is any barrier there. Again, this is something that puts everybody on the same level playing field.

There is some suggestion that women have a more difficult time raising money as candidates. I'm not sure I agree with that. They will now be on a level playing field with everybody else in terms of being able to run a campaign. They won't be able to rely on a rich, powerful person to come up with that $14,000, or, if you're in a riding in Saskatchewan, the $9,000 or $10,000 you can spend on a campaign for a nomination.

I think the effect of what we've done here will create greater fairness and put everybody on the same level playing field.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Thank you, Minister.

I have just a couple of other quick questions, one of clarification first. With respect to the provisions of this bill, candidates, whether it be for nomination or leadership or whatever, will now have to finance significant loans through financial institutions. That, as you've stated in your presentation, would get away from the influence of having wealthy friends finance them personally and then forgive the loan that could be repaid, and things like that, which is wonderful.

Would a wealthy individual or an influential, wealthy friend be able to guarantee a bank loan on behalf of a candidate?

[Peter Van Loan, Conservative, York—Simcoe, ON]

They would be able to, but the amount of their guarantee would be limited to the same amount and be counted toward their annual limit of $1,100 right now. Whether as contributions, loans, or guarantees, all bundled together they cannot exceed the $1,100. So effectively you couldn't use it as a way to do a back-door loan over the longer term.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Okay. Thank you for that.

This is probably a question that would be best asked of Mr. Mayrand when he appears in the next hour, but if riding associations are ultimately responsible for the repayment of loans that may be defaulted by the candidate, have you any thoughts on or contemplated what the penalties might be if a riding association were not able to repay the loan?

[Peter Van Loan, Conservative, York—Simcoe, ON]

This is one of the more interesting pieces of the legislative proposal: that for any registered party, the debt from the campaign succeeds ultimately to the riding association if it is not paid. This is a practice that applies, for example, in Ontario under their electoral law right now. That's how they operate, and it seems to have functioned very well.

You wouldn't need to have a penalty. It actually creates an avoidance of having to have a penalty, in that the debt continues. These riding associations don't cease to be riding associations at the end of the campaign the way a candidate ceases to be a candidate. You don't have this end date of four months or eighteen months or whatever it will be after the campaign for them to pay the debts; they will carry those debts. They will have to report them every year in returns and report progress on paying them back to the bank, if they haven't paid them back to the bank. Interest will continue to accrue in accordance with normal commercial terms. So those obligations ultimately survive, and if they become deregistered or decertified, they become the obligation of a political party.

In this kind of cascade of guarantees you create a situation wherein people cannot engage in the practice of making loans with the objective of their actually being converted into contributions. It means that those loans will have to be ultimately returned or paid back at some point in time by some entity related to the party.

Some people think that's a little difficult for a riding association, but I look at how it has worked in practice in Ontario at the provincial level. You're going to have tensions one way or another, and all of us who are in political parties know this. When somebody wins a nomination or gets appointed as a candidate and the riding association doesn't like them and doesn't want to free up the money, you have one kind of problem. Sometimes it's the other kind of problem: when a candidate spends too much and you have an overhanging debt. But those tensions are part of the difficulty of people having to assume responsibility, and we think people should assume responsibility for their debts.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Would it be fair to say, then, Minister, that you believe the provisions contained in this, since we have some historical evidence based on the Ontario experience, would severely limit if not prevent outright any of the loans being converted into contributions?

[Peter Van Loan, Conservative, York—Simcoe, ON]

I believe that's what will happen in practice, yes. It works well in Ontario. It has worked smoothly, and people pay their debts.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Thank you.

[The Chair, Conservative, Gary Goodyear]

Thank you very much.

Madame Picard.

[Pauline Picard, Bloc, Drummond, QC]

Thank you, Mr. Chairman.

Welcome, minister.

I would like to start by making a comment before I ask my question. Earlier, in your conversation with Mr. Lukiwski, you spoke about equal opportunity for women candidates. While the bill does not work against women candidates, the fact remains that it is much more difficult for women to get into politics, for all sorts of reasons. So some day, we will have to look into that. We need rules that will enable us to attract more women to politics, so that we can have equal representation of women in the House of Commons.

The Bloc Québécois agrees with the bill. My question is of a more practical nature. In your opinion, what is the average loan per candidate per party? Do you have that figure?

[Peter Van Loan, Conservative, York—Simcoe, ON]

I don't have a figure. I've gone through the statistics, and they vary for just the province of Ontario. I have no idea what the typical loan would be for a Bloc Québécois candidate, because you have not yet started running them in Ontario.

What you will find I think is that among the Liberal Party and the Conservative Party it's pretty consistent. It seems to be that about 28% or 30% had loans of one type or another, and they ranged widely. Some had very significant loans; some had very modest ones. Some had them from financial institutions; a lot of them had them just from themselves or family members in significant amounts. The NDP seems to have shied away from loans. There seem to be very few loans on the NDP side, at least in Ontario.

So I couldn't give you an exact statistic. I could tell you, though, that about 30% of Conservatives and Liberals take loans of some type, in Ontario, at least. I should say, though, that most of those were probably in total under $10,000.

I might comment on one other thing, while I have the opportunity, concerning bank loans.

Provincially, banks provide loans based on the rebate that the candidate gets after the campaign. That determines the level of the loan, it is the guarantee.

That means it should be fairly easy for any candidate, assuming you're in the range where you have confidence you'll get 10% of the vote, to get a loan from a bank at least equal to the amount you will get in your rebate after the campaign, in terms of your spending. At the provincial level, where this is the case, they tend to use as the guarantee the candidate's guaranteeing of the loan by writing their promise of the rebate they get from Elections Canada. That way, the banks have found a pretty good practice to approach this.