Bill C-21 (Historical)

Political Loans Accountability Act

An Act to amend the Canada Elections Act (accountability with respect to political loans)

This enactment amends the Canada Elections Act to enact rules concerning loans, guarantees and suretyships with respect to registered parties, registered associations, candidates, leadership contestants and nomination contestants.

Business of the House

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

Mr. Speaker, this afternoon we will continue the debate on today’s opposition motion from the NDP. Pursuant to the rules of the House, time is allocated and there will be a vote after the two-day debate.

Tomorrow we will resume the third reading debate on Bill S-9, the Nuclear Terrorism Act. As I mentioned on Monday, I am optimistic that we will pass that important bill this week.

Should we have extra time on Friday, we will take up Bill C-48, the Technical Tax Amendments Act, 2012, at report stage and third reading.

When we come back from constituency week, I am keen to see the House make a number of accomplishments for Canadians. Allow me to make it clear to the House what the government's priorities are.

Our government will continue to focus on jobs, growth and long-term prosperity. In doing that, we will be working on reforming the temporary foreign worker program to put the interests of Canadians first; implementing tax credits for Canadians who donate to charity and parents who adopt; extending tax credits for Canadians who take care of loved ones in their homes; supporting veterans and their families by improving the balance for determining veterans' benefits; moving closer to equality for Canadians living on reserves through better standards for drinking water, which my friend apparently objects to; giving women on reserves the rights and protections that other Canadian women have had for decades, something to which he also objects; and keeping our streets and communities safer by making real improvements to the witness protection program. We will of course do more.

Before we rise for the summer, we will tackle the bills currently listed on the order paper, as well as any new bills which might get introduced. After Victoria Day, we will give priority consideration to bills which have already been considered by House committees.

For instance, we will look at Bill C-48, which I just mentioned, Bill C-51, the Safer Witnesses Act, Bill C-52, the Fair Rail Freight Service Act, and Bill S-2, the Family Homes on Reserves and Matrimonial Interests or Rights Act, which I understand could be reported back soon.

I look forward also to getting back from committee and passing Bill C-60, , the economic action plan 2013 act, no. 1; Bill S-8, the safe drinking water for first nations act; and Bill C-21, the political loans accountability act.

We have, of course, recently passed Bill C-15, the strengthening military justice in the defence of Canada act and Bill S-7, the combating terrorism act. Hopefully, tomorrow we will pass Bill S-9, the nuclear terrorism act.

Finally, we will also work toward second reading of several bills including: Bill C-12, the safeguarding Canadians' personal information act; Bill C-49, the Canadian museum of history act; Bill C-54, the not criminally responsible reform act; Bill C-56, the combating counterfeit products act; Bill C-57, the safeguarding Canada's seas and skies act; Bill C-61, the offshore health and safety act; Bill S-6, the first nations elections act; Bill S-10, the prohibiting cluster munitions act; Bill S-12, the incorporation by reference in regulations act; Bill S-13, the port state measures agreement implementation act; Bill S-14, the fighting foreign corruption act; Bill S-15, the expansion and conservation of Canada’s national parks act, which establishes Sable Island National Park; and Bill S-17, the tax conventions implementation act, 2013.

I believe and I think most Canadians who send us here expect us to do work and they want to see us vote on these things and get things done. These are constructive measures to help all Canadians and they certainly expect us to do our job and actually get to votes on these matters.

I hope we will be able to make up enough time to take up all of these important bills when we come back, so Canadians can benefit from many parliamentary accomplishments by the members of Parliament they have sent here this spring.

Before taking my seat, let me formally designate, pursuant to Standing Order 81(4)(a), Tuesday, May 21, as the day appointed for the consideration in a committee of the whole of all votes under Natural Resources in the main estimates for the final year ending March 31, 2014. This would be the second of two such evenings following on tonight's proceedings.

[Craig Scott, NDP, Toronto—Danforth, ON]

Be careful what you joke about, Mr. Kingsley. That might appear as an endorsement in literature down the road.

I have one last question, again dragging you back to Bill C-21, which at the moment we're sort of working within. We're open to opening it up, I suppose.

You said something very interesting about how you had to make judgments about making extensions, often on a no-information basis, and using a presumption of good faith on the part of the person asking for the extension. Mr. Mayrand also spoke about the problems in the current bill. Section 405.6 deals with the circumstances under which an unpaid amount doesn't become a deemed contribution—that's another area of confusion—at the end of three years if one of four things has occurred.

One is the loan is subject to a binding agreement that effectively means you have almost a new loan, and another one is that it's been written off by the lender as an uncollectable debt.

Basically I think he was saying that if he was going to have those functions, he was going to need access to more information than he currently had.

I assume you would agree with that and that we should be considering writing in informational requirements.

[Craig Scott, NDP, Toronto—Danforth, ON]

Mr. Mayrand also spoke to us, Mr. Kingsley, on two points. He suggested that we need to have a provision to make sure that no indirect loans could take place. I know that your system might make that less of an issue. I'm assuming that if we kept the system and tinkered with whatever in Bill C-21, you would say as well that we should add a prohibition on that.

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

Thank you.

Thank you, again, Mr. Kingsley, for being here.

I want to go back to Bill C-21 and get your observations on some of its elements.

One of the ongoing problems we have is that we've seen, for example, from the 2006 Liberal leadership campaign, that there are still outstanding loans from some of their leadership contestants. I think they total over $400,000. I think elements of Bill C-21 would go a long way toward preventing that type of situation from happening again, specifically since, as you've mentioned, loans could only be granted through financial institutions.

The problem we see now with the unpaid loans is that they will probably end up being deemed contributions, since it's been six years in the case of some of those contestants. If a party were to backstop a financial institution's loan through a legal contract between the two, it would be difficult for a party or an EDA to renege on repayment because there would be consequences, but in the existing regime, since Bill C-21 hasn't been passed into law yet, there's still that loophole.

Do you see in Bill C-21 enough preventative measures to stop the type of situation we saw in 2006? You're going further. You're making the suggestion that the party be the guarantor, in effect, and that's not contained in Bill C-21. In your read of Bill C-21, does it have enough provisions in it to prevent the type of situation we saw in 2006 from occurring again?

[Jean-Pierre Kingsley, Former Chief Electoral Officer, As an Individual]

Thank you very much, Mr. Chairman.

Mr. Chair, members of the committee, appearing before this committee is always a great pleasure for me. I see there is continuity, both in the chair and among certain members.

I have had the opportunity to examine Bill C-21, mainly its objectives, and the testimony of the Chief Electoral Officer and representatives of the Canadian Bankers Association. My opening remarks will only take about eight or nine minutes. I would like to recall that the Canadian system, the Quebec system for controlling funds, has made Canada, Quebec, a world leader in the control of money.

Canada understood a long ago that if the system did not control the money, the money could easily control the system. It is important to bear in mind that you are examining what I would call the most refined points in the control of money. We are not dealing with absolutely atrocious scandals, but it is very important to solve the problems that may arise as a result of the present definitions.

I really liked the analogy that one of the committee members made, that money is like water, in that it can seep into all the cracks. It seeks equilibrium, but moves downward. I have previously said that the smallest crack could eventually allow a Garda or Brink's truck to drive through it. So it is very important to make sure there are no cracks.

I share the concerns expressed by the Chief Electoral Officer regarding the complex nature of the proposed system and those concerning certain aspects on which you might focus your attention. I agree that there is a need for complete transparency and periodic reports that would be made public. I also agree that only financial institutions should be allowed to make loans. That moreover is the recommendation I made before I left my position in 2007.

Two options are possible here.

If the loan is unpaid by the agent at the end of the three years, the EDA would pay. If the EDA cannot pay, then the party would pay. This would obviously mean that the party may wish to get involved, but that is something for internal workings of parties. It would certainly start getting people to be more responsible about the loans that are taken out.

The second thrust would be to allow loans to leadership contestants, again from financial institutions only, up to an amount approved by the party for the leadership for three years, keeping in mind that parties don't have ceilings. There's no ceiling in the law. Parties are free to set the ceilings on expenditures. They may well be entitled to set ceilings for their candidates. Obviously the logic is if it's unpaid at the end of three years, then the party pays. Again, this would instill a sense of reasonableness in the process.

I also note that in their testimony, the banking association representatives stated that grounds for loans would be economic. They would make money available based on the ability of the person to repay and their ability to make money in the process. I took a lot of comfort from that, realizing that no political grounds would be invoked for turning down a loan. That came back to Mr. Reid's concern about independent candidates and candidates from smaller or marginal parties with ideas that are not yet mainstream.

The result would be that the debt would be finalized. It would be off the books. One would have achieved separation of the member of Parliament from the debt. There would be no more undue influence, no potential for it, no perception of it in the minds of the public. The CEO—the Chief Electoral Officer—and the courts would no longer be involved in extending this very complex system. It would be simple to administer, and parties and EDAs would effectively have control over the system to instill responsibility.

In a nutshell, that is the suggestion, sir—not the recommendation, not the proposal, but the suggestion I would like to make to the committee for further discussion.

The objective of Bill C-21, in my view, is it seems to remove the reality, the perception, or the potential of undue influence on a member of Parliament or on a party leader through loans.

The capacity to exceed the contribution limit by the back door is essentially what you're trying to shut down. I thought I would make a suggestion to you for a very simple system, based on the view that the more complex the system, the more tangled the web that is woven, to quote somebody who is well known to most of us.

As I mentioned earlier, in my view—and this I think is the purport of the bill—only financial institutions should provide financing to parties, to candidates, or to any emanation in the political sphere. The terms and the conditions should be made public, and as soon as possible. I struck out “immediately” in my notes, realizing that “as soon as possible” may be better.

There are essentially two broad strokes to what I'm going to suggest to you, allowing for the fact that they may well be shot down and hoping that people will keep in mind that I've been absent from this particular statute for five years now.

I would suggest that loans to nomination contestants and candidates—from financial institutions only—would be only up to an amount approved by the electoral district association, and only for the maximum of three years that we're talking about. The maximum amount could be up to some percentage of the ceiling that may be spent on the campaign, and it could be based on what the EDA itself wishes to establish, so that the EDA would have something there.

[The Chair, Conservative, Joe Preston]

Folks, I will get us to start back in, please.

It's always good when my own colleagues don't even recognize when I gavel.

Thank you very much. We have a full second hour today, and I'd like to get started.

It's a great pleasure to have Mr. Kingsley back before committee. It's probably five times now that I've been at committee when you have been here. It has always been a great day when it happens.

You know that we've been studying Bill C-21. As you shared with me, you watched some of it and you have some suggestions for us, perhaps, or at least some points of view on it.

I'll leave you to open with comments, and then we'll go to questions.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

Thank you very much, we appreciate that.

Thank you for having come here to testify.

You explained earlier that loans always involve risk management. Consequently, you are aware of the risk that a candidate may not be able to reimburse a bank loan after a campaign. In the context of Bill C-21, however, that becomes a presumed contribution to the campaign.

What consequences could this have? As we know, banks cannot fund either candidates or campaigns.

[Anthony Polci]

A more general statement in response—I would say banks take their responsibilities quite seriously. How banks conduct themselves in political financing, whether it's under the regime proposed in Bill C-21 or in provincial financing regimes, is ultimately a bank decision, an individual institution decision. We have a competitive marketplace. They are competitors with one another. They will take a number of factors into consideration in their approach.

In terms of the public duty aspect—if that's the question—the political process can be widely defined in terms of the participants. You use an example of a couple of parties. There's a good, proper understanding of the main parties that are involved in the political process and their viability and their staying power, if you will. If there's a suggestion perhaps that banks should be providing loans under any circumstances to any political party, there ultimately becomes a conflict with the prudential regulation because banks do lend to get the money back. We are regulated by the Office of the Superintendent of Financial Institutions. The lending that is undertaken by banks is lending that Mr. Wrobel has referred to. It is undertaken consistently to assess and manage risk, and to ensure repayment. That ultimately has to be the final decision.

That's probably the perspective that banks come at this from. For that public duty aspect, you have to look at how broad this can become in terms of an equation.

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

Thank you both for being here.

I'm going to divert a little bit from the actual elements of Bill C-21. I don't know how germane my questions will be to the examination of Bill C-21, but I am going to ask the questions anyway.

I would like to hear from you, as an industry, as to what you feel your obligations may be to assist and participate in the democratic process. I want to give you a specific example. Back in the late nineties, there was a political party—I'm not talking about candidates now, but a political party—in Saskatchewan. It was called the Saskatchewan Party. I was very involved with it at the time. Now, of course, it's the current government of Saskatchewan. At the time, it was fledgling. It had just started. About a year and a half after the party was formed, there was a general provincial election. I was one of those who was tasked with negotiating with financial institutions to try to secure a bank loan. Of course, there are slightly different determinants in provincial elections as opposed to federal elections in terms of rebates. You need 15% of the popular vote, both as a candidate and as a party, to get any kind of a rebate. Nonetheless, we didn't really have much of a political history to assure the banks that we would in fact be able to get over and above 15% of the popular vote and then trigger a rebate.

We were able to secure a loan. One of the determinants was that the banker in question said that he believed, and his bank believed—I won't give you the name of the bank—there was an obligation on their behalf to participate in the democratic process. It really was part of their decision-making process to assist in the political process. Having said that, I don't think they would consider it if there was a million dollar loan request from the Rhinoceros Party of Saskatchewan. But given the fact that this was a fairly legitimate political entity, that factored in to their determination of whether or not the loan should be granted.

Is that common in the industry, both at the candidate level and at the political party level, or does it have any bearing whatsoever?

[Anthony Polci]

At the end of the day, the bank is not lending to the individual, so the personal credit history is not the relevant feature; it's their ability to have a campaign that is, as I said, a viable campaign. You're not collecting from the individual; you're collecting from the campaign in terms of repayment of the loan. It is that entity that matters. You have to assess, can they fundraise? Is the rebate part of the equation?

So the personal credit history, the way Bill C-21 is structured, is not a part of that assessment.

[Anthony Polci]

The industry doesn't have a position on the bill for or against it. We haven't come at it from that angle, and banks operate within the laws of Canada. As Mr. Wrobel noted, banks are federally regulated, so we're used to that sort of oversight.

I think, though, the one concern I would state is that we watched very carefully the discussion around this legislation in the House of Commons and at committee, and the allegations or the charge that perhaps banks would be controlling access to the political process concerns us. The banks will make decisions based on lending decisions. They will look at the financial viability of a campaign, as I've said, and their ability to repay. It's not a question of anything other than that. This is what banks do.

So the idea that banks could be accused of favouring one candidate over another or one party over another is a cause for concern for the industry, but if Parliament sees fit to have political financing conducted in the way that it's proposed in Bill C-21, the banks would absolutely comply with the law.

[Marion Wrobel, Vice-President, Policy and Operations, Canadian Bankers Association]

Thank you, Mr. Chairman. My name is Marion Wrobel and I'm the vice-president of policy and operations at the Canadian Bankers Association. I'm joined by my colleague, Anthony Polci, the CBA's vice-president of government relations.

We're pleased to be here today at the committee's invitation, as part of your review of Bill C-21, Political Loans Accountability Act, to provide the committee with the banking industry's perspective and to answer members' questions.

The CBA works on behalf of 54 domestic banks, foreign bank subsidiaries, and foreign bank branches operating in Canada, and their 274,000 employees. The CBA advocates for effective public policies that contribute to a sound, successful banking system that benefits Canadians and Canada's economy. The association also promotes financial literacy to help Canadians make informed financial decisions, and works with banks and law enforcement to help protect customers against financial crime and to promote fraud awareness.

Canada's banking industry supports objectives to strengthen accountability and enhance confidence in the integrity of political institutions, and we recognize that the proposals contained in Bill C-21 are aimed at achieving higher standards of transparency and accountability in political financing. Canada's banks have a long history of supporting the political process by providing financing to political parties and candidates, assessing individual loan applications on their own merit. Banks will continue to assess applications for political loans in the same way as any other loans. Decisions on whether to lend funds and the appropriate terms and conditions will be based on prudent risk management considerations, including repaymentability of the potential borrower.

As you know, Canadian banks are well-managed, well-capitalized institutions operating in a competitive market and within effective and efficient federal-provincial prudential and consumer regulatory oversight. That was the case prior to the global financial crisis and it is the case today. A strong and healthy banking system is a cornerstone in helping Canadians buy homes and save for retirement, helping small businesses grow and thrive, and promoting Canada's brand internationally. Canada's banks have always employed a prudent approach when it comes to lending. This is one of the key reasons why our banks have largely avoided the problems that have plagued banks elsewhere. Such a prudent approach is vital because a healthy financial sector is important for a well-functioning economy, and Canada's banking system is widely recognized as being one of the soundest and strongest in the world.

While we cannot be certain about the practical aspects of this bill's impact in the absence of actual loan applications, under this new proposed regime, banks will continue to operate within the framework of sound prudentially focused management and a robust regulatory regime. It's within this context that we are pleased to offer the industry's perspective based on our understanding of the legislation. I should note that banks are not the only financial institutions that would be authorized under this bill to make political loans. Other financial institutions such as credit unions and caisses populaires would also be authorized to make such loans available. While the CBA can only offer the perspective of our member banks, the committee may also be interested in hearing from representatives of these financial institutions.

We would be pleased to answer questions from members of the committee. Thank you very much.

[The Chair, Conservative, Joe Preston]

Good morning, all. Thank you for attending committee this morning. It's great to have you here.

We're still in our study of Bill C-21, An Act to amend the Canada Elections Act (accountability with respect to political loans), and at the request of the committee, we've asked the Canadian Bankers Association to come here today and talk to us.

Mr. Wrobel is going to start today. Please, go ahead with your opening statement and then the members will have time for questions.

Mr. Wrobel.

[Marc Mayrand]

Currently, there's no restriction, so we have to look at it in the context of Bill C-21. Again, my suggestion is based on the fact that....

You're absolutely correct: the candidates get most of their funding through contributions and another big part from transfers from their EDAs or the party. But when we look at the system globally, they are looking for 7% of their funding—it's not a large amount—that comes from loans other than those from the parties or EDAs. What Bill C-21 is taking away is that 5% to 7%.

What I'm suggesting is that consideration be given to either eliminate those loans entirely, because of the complexity in the bill, or allow a separate, one-time, one-campaign loan, with a strict limit, to allow candidates to get seed money to start their campaigns. That's all I'm suggesting.

[Marc Mayrand]

It varies by political entities. Of the two entities we have spoken most about today, for candidates in an election, 50% of the loans are from the candidates themselves, and another 30% are from other individuals. In leadership contests, which have been an issue of much discussion, leadership contestants are again depending on individual or other entity loans to the tune.... Again it varies very much, because there are far fewer contests, but it's somewhere around one-third of their funding that is through loans. Of this, a third is from individuals or corporations. Put the private loans aside—those covered by Bill C-21.