Finance Committee on Nov. 3rd, 2009

[Jean-Claude Grondin]

Precisely.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Roy.

We'll go to Ms. Block, please.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much, Mr. Chair.

Thank you to all of you for being here this morning with us.

My questions this morning are going to be for Mr. Rowe and Mr. Friend. I have heard so many reports from my constituents about our home renovation tax credit, so I'd like to ask some questions on that.

Mr. Friend, can you comment on the first-hand effects you've witnessed in regard to the home renovation tax credit and the first-time home buyers' tax credit in the day-to-day operations of your business?

[Gary Friend]

Our members have reported that when these came in, they picked up work immediately in terms of activity, the consumers' interest.

We have renovators in my own area in Vancouver who are booking almost six months to a year in advance, even today. They tell me that the home renovation tax credit was one of the first things in the consultation that people discussed with their renovator; it brought them to the table. And of course a lot of their renovations involve energy upgrades and they're actually for more than the $10,000 threshold of the tax credit.

When the first-time home buyers' tax credit came out it was well received in terms of helping young buyers get into their first home.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

How do you feel these initiatives have helped during the global economic crisis here at home?

[Gary Friend]

I think there's no question it's increased economic activity. It's created jobs. It's definitely shown consumer confidence in renovating their homes. I think it's done a lot of good for the industry and for consumers.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much.

Mr. Rowe, can you give the committee an idea of how the measures in Bill C-51 have had an impact on the number of Canadians employed in your industry? Do you think these measures helped to save or even create jobs?

[Michael Rowe]

Certainly in the retail industry we represent, one member of a number of bodies, we need to keep our labour pool commensurate with our sales performance. As that came off in the fourth quarter of last year, you had to make adjustments accordingly. Near the end of the second quarter of this year, as that stimulus and the confidence did start to return on behalf of consumers, we did see that rebound again. Therefore now we're in a situation where our sales are growing versus the prior year and we're having to hire to be able to look after the sales coming into our stores. I'm sure our competitors are feeling the same.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Could you describe customer reaction as you have experienced it?

[Michael Rowe]

Certainly. It was announced in February. I think we were first out of the gate in terms of getting our web page up with respect to the home renovation tax credit, and we saw 75,000 hits to that site in the first month. We introduced a top-up program beyond that in March. Then it swelled to almost 300,000, and we've seen another close to 300,000 engage from our standpoint.

Close to three-quarters of the products we sell in our stores are eligible for this home renovation tax credit, but one-quarter of our products are not. When you look back at the fourth quarter of last year, they're performing relatively the same. Then after the home renovation tax credit was introduced, it created a separation between those that are eligible and those that are not. When we have got behind it with further incentives from time to time, that spread in terms of sales performance for eligible items has grown even more.

Really, as Mr. Friend was saying, with that confidence now returning, reaching a low point in the fourth quarter of last year and probably the first quarter of this year, that is giving Canadians more confidence to make these kinds of high-end purchases.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

Mr. Friend, could you comment in terms of the measures in Bill C-51 and the impact on the number of Canadians employed in your industry?

[Gary Friend]

If you look at the renovation activity over the last year, it has remained flat after ten years of solid growth. When you compare it to the new housing side of the industry, which had double-digit drops in starts in some cases, I think it obviously has kept the industry stronger in these tough times and in job creation as well.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Block.

We'll now go to Monsieur Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair. I would like to thank all of the witnesses for joining us today. Your comments will be of great help to us as we continue to study Bill C-51.

Dr. Kenward, Mr. Friend, thank you again for being here. It's the second time I've had occasion to listen to the Canadian Home Builders' Association, and the depth of your analysis is a great deal of help to us.

Thank you very much for coming here, Mr. Grondin. The FADOQ is an important partner, one that is not mentioned often enough on this side of the Ottawa River.

I will begin with you, Mrs. Conradi. The FADOQ and the Fédération des femmes du Québec were invited here at the suggestion of the NDP, following a message that we received recently alerting us to the implicit danger of regulatory action being taken, instead of Parliament openly passing legislation, and of the danger that no analysis would be done or public debate held on this matter.

I want to assure you that the committee has unanimously resolved that once the expert report on pensions has been tabled at next month's joint federal-provincial meeting in Whitehorse, additional hearings will be held. You can rest assured that your urgent message was heard, and that for us, women and the particular impact these measures will have on women will be a priority.

You hinted that you might have other proposals to put on the table, such as ways of extending a person's time in the workforce without that person incurring a penalty. I'd like you to elaborate on these proposals.

[Alexa Conradi]

Thank you for your question. This is a rather technical matter and I will try to explain it as best I can. We call it the 15-42 formula. Allow me to explain the formula to you.

It is described as follows: According to this formula, contributors would still be able to drop 15% of the lower-earning periods during their career. For the purposes of pension calculation, these years are replaced by an average for the other years, which is then divided by 42, or the number of years between 18 and 59 years. Using this formula, claimants will receive the same amount that they now receive with the current formula, if they choose to retire at 60 years of age. However, for every year they continue to work after the age of 60, their pension amount will be improved, whether or not they have applied for their pension. What we are proposing is a pension calculation formula that makes working beyond 60 years an attractive option, without any radical or repressive cuts as the government is proposing. For nearly 30 years, the feminist movement has been demanding improvements to the QPP to replace the 50% of pre-retirement income. Maximum eligible earnings would be comparable to eligible earnings under the Quebec automobile insurance plan and the Quebec Parental Insurance Plan.

Basically, under this formula, 15% of lower-earning periods can be dropped when calculating an average for 42 years.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you.

Mr. Dale, I would be remiss if I didn't ask you if the CPPIB didn't have the chance to respond to the minister's invitation to be prudent with regard to the granting of multi-million-dollar bonuses in light of the fact that CPPIB had lost multi-billion dollars of deposit money. So perhaps you could tell us if and when you answered the minister, and did you still pay yourselves those huge bonuses?

[Ian Dale]

Thank you, Mr. Chairman. I'd be pleased to answer Monsieur Mulcair's question.

I think with regard to compensation, the compensation at the CPP Investment Board is the sole responsibility of the board of directors, and I think that the compensation is paid out over multi-year periods. For instance, I know that the portfolio declined last year in line with markets, but the compensation is based on longer-term performance and is paid out over longer periods of time, in line with long-term performance.

[Thomas Mulcair, NDP, Outremont, QC]

I thank Mr. Dale for that fulsome explanation that completely avoided my question, so I'll repeat it. Did you or did you not roll back pursuant to the minister's request, who cited the G-8 and the G-20? Did you continue with the same multi-million-dollar bonuses that had already been planned by the board of directors, or did you roll them back when the minister wrote to the same board of directors?

You're here as the vice-president responsible for communication. Communicate with me, Mr. Dale.

[Ian Dale]

Thank you, Mr. Chair. I'd be happy to do that.

First of all, obviously our organization is very respectful of the views of Parliament. In June, Minister Flaherty did write a letter to all financially related crown corporations, and in that letter he asked if the compensation principles complied with the G-20 principles on compensation. Just to explain to the members a little bit about those principles, they are that compensation is to be based on long-term performance, that it is not to encourage short-term risk, and that any incentive payments be paid out over longer periods of time, and completely in line with long-term performance.

[Thomas Mulcair, NDP, Outremont, QC]

Maybe it's the trial lawyer in me, Mr. Dale, but am I to understand from that second long answer that completely avoided the question that you did not roll back those multi-million-dollar bonuses for the multi-billion-dollar losses, as requested by the minister in his letter? Did you indeed maintain the bonuses at the level they were at when the minister wrote to you? Yes or no would be fine as an answer.

[Ian Dale]

First of all, Mr. Chairman, let me again give a bit of context around that answer. I would say that the board of directors of the CPP Investment Board consider the compensation framework to be totally appropriate for managing a global fund of $117 billion.

I would like to give committee members just a bit of context here. We are operating in the way that ten governments asked us to operate ten years ago. In the reforms of 1996-1997, the CPP Investment Board was set up to operate independently from government but to be very highly accountable to ten finance ministers. By design, the CPP Investment Board board of directors makes important decisions on investments, hiring, and compensation. So we are acting as we should, and our board of directors believes that compensation framework is appropriate.

[Thomas Mulcair, NDP, Outremont, QC]

I'll try to summarize, Mr. Chairman, in ending.

You lost billions of dollars of your deposit money. You paid yourselves multi-million-dollar bonuses. The Minister of Finance of the Government of Canada wrote you a very nice letter asking you to reconsider, and you kept those bonuses. They haven't been changed. That's what I retain from your testimony.

Thank you very much for your presence here, Mr. Dale. Your first three answers, where you completely avoided the question, were quite enough as far as I am concerned. I don't need a fourth one. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mulcair.

Mr. Dale, do you want to...?

[Ian Dale]

There is perhaps one other thing. In the response to Minister Flaherty, where there was a comparison done between our compensation system and the G-20 principles, they were found to meet or exceed those principles, and the fact is, those are the principles that G-20 leaders are now promoting as being leading best practice for financial institutions.