Finance Committee on Feb. 23rd, 2009

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McKay.

We'll go to Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Minister. We are pleased to see you. We are asking ourselves a lot of questions about the budget you have brought to us.

Earlier, you mentioned the need for urgent action. Of course it is important to act quickly to kick-start our economy. But you will recall that, last fall, you preferred to plunge us into an election, and then to prorogue the House. So here we are at the beginning of 2009 with the same problem for which urgent action is required.

Perhaps we could have acted quickly, except, as someone mentioned previously, the budget implementation bill contains some major legislation that we need to think about, like pay equity, the Navigable Waters Protection Act, and the entire principle of collective bargaining. We are not necessarily experts in all these matters, and they deserve to be studied by other standing committees.

I previously sat on the Transport Committee, and, starting in February 2008, I was part of a process of study on the Navigable Waters Protection Act. In June 2008, we reached the point where we were ready to make recommendations for a bill. Now here you are with a budget implementation bill that you are asking us to pass quickly. At very least, it should have been studied at a joint committee, with the Transport Committee, the people who have looked at this whole matter, to see if what you have proposed in your bill is any good.

Anyway, I will forget all that; it is very problematic and you are not going to be able to solve it today.

I could ask you a number of questions, but I will just ask about securities. In your budget implementation bill, you propose a Canada-wide commission even though the matter is in provincial jurisdiction. You say that you have received a legal opinion on the scope of your proposal. I have asked your officials to send me a copy of that opinion. Could you make a note of it and have it sent?

I would like to ask another question, this time about the treatment of Hydro-Québec. There was no answer a while ago, though there was an answer about Hydro One. Electricity distribution, such as Hydro One is involved in, has been considered business income and so is not included in the calculation of assets. Hydro-Québec is considered as two divisions, one dealing in transmission and distribution, just like Hydro One. That division could also be considered not part of the assets, but as business income.

You were asked this question before and we did not get a reply. Why does Hydro-Québec not get the same treatment, which would result in $250 million more in equalization payments for the people of Quebec?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

To respond to the latter question, the different entities in Ontario and Quebec do not perform exactly the same functions, which results in a difference with respect to their treatment under the equalization regime.

With respect to the issue of securities regulation, as we have always said, we will respect the jurisdiction of the provinces. That is not to say that the federal government does not have jurisdiction.

We will respect provincial and territorial jurisdiction.

In terms of the legal opinion, before I forget, the Hockin report deals with the legal issues—and that panel had pre-eminent legal counsel.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

What was that you said?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

It's the Hockin report that was delivered in January, the report by the Honourable Tom Hockin, who chaired the panel.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Can we have a copy? Has that document been published?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The report is public. The legal views received by the Hockin panel are set out in the report, and the names of those who gave the opinions are provided. As I say, they dealt with pre-eminent constitutional scholars in Canada.

[The Chair, Conservative, James Rajotte]

Okay, thank you. Merci.

We'll go now to Mr. Dechert, for five minutes.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Minister, thank you very much for your comments today and your description of the economic situation facing our country.

As you mentioned, Bill C-10 is a very lengthy bill of over 500 pages, and it includes many positive initiatives. We obviously spend most of our time as parliamentarians focusing on those initiatives with the biggest dollar amounts, the major infrastructure announcements. But I've noted that there are a number of other very important changes for people that are really quite worthy and deserve to be recognized. One in particular is the extension of the deadline for registered disability saving plan contributions. I know that in my riding, as I campaigned in the last election, I encountered many people who have children with disabilities or other family members who do, and this is something that's very important to our society.

RDSPs, as we know, are the new savings vehicle that our government has introduced to help parents and others set aside future funds to financially support children with severe disabilities. It's an important program with important changes that I'd like you to comment on, but I'd also like to underline how important this program really is by quoting someone who will actually benefit from the proposals that have been introduced.

Here is what Laura Mackenrot, a young woman from Vancouver who happens to be blind and is a strong disability advocate, had to say: “This is just going to be absolutely incredible for the disabled community nation-wide. This is really going to help improve people with disabilities, their lives and their quality of life. The rest of the world, the disabled communities of the world, are watching. They're watching Canada, so we're literally making history right now, and I'm very happy to be a part of it.”

I wonder, Minister, if you could comment on that.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I suppose the important technical point for Canadians who want to make use of their new registered disability savings plan is that contributions made up to March 2, 2009, will be considered to have been made in 2008. That's important, because there are government benefits involved for many of the persons who are entitled to have a registered disability saving account. There is a matching Canada disability savings grant from the government. The Canada disabilities saving bond is also available for low- and middle-income families even if no contributions are made.

So it's important for families with family members with significant disabilities to make use of the registered disability savings plan. A number of our large banks have the facility available now, so I encourage Canadians to make use of the plan by March 2.

This is a good example of the development of public policy, in my view. We appointed a panel of experts to look at this issue following budget 2006. They did extensive consultations across Canada and reported back. We acted on the report. We went through the design stages and it eventually became law. And now we have the actual accounts up and running in the system and available for Canadians. It took time, but I think the result is well worth the effort for persons with disabilities in Canada.

The last thing I'd say about this is that internationally we are getting tremendous credit for this around the world. This is a novel, leading program in the world for helping persons with disabilities and their families create some financial security for the person in the family with a severe disability.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Minister.

I'd like to take a slightly different tack, particularly as I have a little extra time.

We all heard the comment that projects should be shovel-ready, and it's somewhat confusing to know exactly what that means. I wonder if you could describe what you think that means in terms of that infrastructure projects that have been announced. And could you discuss how quickly we need to move on these projects in the current economic circumstances?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Well, as the Italian minister of finance said the other day at our G7 meeting, we are in terra incognita. I don't have a crystal ball about how the economy is going to do. You had the Governor of the Bank of Canada here, I know, and he's fairly optimistic about next year.

What we do know now is that we need to create economic activity in Canada. We know that the private sector is not doing so adequately, due to access to credit issues and other things. So that is why we have the use-it-or-lose-it approach in the budget with respect to infrastructure.

Many of the municipalities and some of the provinces have work that could be done right away in the nature of repairs, renovations, and restorations that do not require environmental assessments. We believe in environmental assessments, but environmental assessments cause some delay, and the need for job creation is immediate. That's one of the reasons for the provision of a few billion dollars for colleges and universities in the budget, to permit the universities to go ahead with some of the deferred maintenance, as it's called, that needs to be done at our universities from coast to coast. So that's what I mean by shovel-ready.

There will be other projects later this year and next year contemplated in the funding for infrastructure in the budget, projects that will be constructive—excuse the pun—or good for the country, but these will not provide immediate employment.

[The Chair, Conservative, James Rajotte]

Thank you, Minister.

Thank you, Mr. Dechert.

We'll go to Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Thank you, Minister, for appearing before the committee. It's always a pleasure.

Just quickly, I'm a little troubled by Mr. Kramp's question regarding the tax-free savings account. I've had a little different feedback on what's been going on. I've been talking to a few people who are actually having a hard time putting money into RRSPs—it's RRSP season. In fact, there are a few people withdrawing money from RRSPs.

So I don't see how you can determine that it's been a huge success. The numbers are not in. I spoke to a few people in the banking sector. They said they've thrown huge amounts of money at it in terms of advertising, and it hasn't brought in any new business. People are turned off by the fact that they just can't make ends meet, never mind trying to put a couple of bucks together to open an account.

We had your officials here last week. Much to our committee's surprise, the Finance officials threw out $15 million in advertising to promote this tax-free savings account. The first instalment at the CRA is $19 million just to set up the infrastructure for a program that probably is going to generate nothing. I'm not sure what the return is going to be from an account like this. Even if people were to put $5,000 away, at a 1% return, I don't see what the return is going to be for the Government of Canada. If I were to give almost $50 million to taxpayers, I think they could probably find more use for it than what the government has done with it today.

So if there's a failure with the tax-free savings account.... I look at how it was supposed to generate a stimulus and to increase savings, but then you turned around and said, no, it's not supposed to increase savings, but it is more of a stimulus. And now I look at this package again, which is supposed to generate a stimulus. But if we look at all the little tax deductions here and there.... Again, I'm an accountant by profession and I'm talking to friends and constituents. They're not seeing any difference in their paycheques. Some of them are losing their paycheques. For somebody earning $30,000, it's $33.

Wouldn't it just have been easier to say, we're going to give the people who need the money $200 or $300—pick an amount—and actually stimulate the economy as we have to? I say this because with some of these personal tax deductions, even if people are entitled to get them and have jobs until the end of the year and file their 2009 income tax returns, they will only be refunded by April 2010. So even the direct stimulus part of the budget is not going to generate a direct stimulus.

Perhaps you could comment on this. And then I have a couple of other quick questions.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Sure.

On the first issue about sending out cheques to people, that is a failed policy. You can look at the American experience last year under the administration of President Bush and how they had anticipated a substantial stimulus in the economy by sending out cheques in 2008, and the anticipated stimulus did not result, because some people used the cheques to pay down debt and other purposes—and not to purchase goods and services. So I can assure the member that we looked at that policy in the preparation of the budget and we rejected it because it does not work well.

With respect to TFSA, the tax-free savings account, I'm not quite sure where you're getting your data. These have been incredibly successful; Canadians have responded by the tens of thousands. In fact, ING Direct sold more than 100,000 accounts in a matter of weeks.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Sold accounts? Opened accounts? Has there been any money put in there?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Yes, there sure has. In fact, it was about $800 million. It's a very substantial amount of money.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I have friends who are opening tonnes of accounts as well, but there's not actually any money going in there.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

If you read The Globe and Mail online, ING Direct said it was racking up about 2,000 to 3,000 new accounts a day, while BMO InvestorLine said about 85% of new accounts opened in the past couple of weeks have been--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay, Mr. Minister.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

But the more important public policy here, and I'd like to discuss it, is why we are doing this. It's because 15 to 20 years from now most Canadians' savings are not going to be taxed. This is a good thing. This is reducing taxes on Canadians.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

You can promote that during question period. My time is limited. I just have two more quick questions.

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Pacetti, make it one. You've got 30 seconds, maximum.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay.

The home renovation credit doesn't seem to be anywhere in the budget, it doesn't seem to be anywhere in the ways and means. And the third quick question is, has anybody calculated how much money the Government of Canada is guaranteeing via EDC loans, BDC loans, CMHC, swapping bad assets for good assets? Has anybody made a calculation as to how much money the Government of Canada is on the hook for?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The home renovation tax credit is not in the bill; it was in the ways and means. It's a tax measure, yes, and it has been approved by the House. I had this discussion recently with your colleague from Markham--Unionville. This is not easy to design. The design is complex. So the home renovation tax credit will be in the usual second budget bill this year.

Your other concern is about the total credit, is that correct? As we set out in the budget, up to $200 billion is the extent of the extraordinary financing framework.