Finance Committee on May 25th, 2010

[John McKay, Liberal, Scarborough—Guildwood, ON]

Up from?

[Paul Rochon]

Up from $463.7 billion in 2008-09.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Paillé, you have eight minutes.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you, Mr. Chair.

Perhaps we can talk a little more about the debt. There is a fixed portion of the national debt for which the rate is known; there are outstanding bonds. What is the variable proportion as compared with the fixed portion?

[Paul Rochon]

Today, the fixed proportion is around 62%.

[Daniel Paillé, Bloc, Hochelaga, QC]

So it is the 38% then that accounts for the fluctuations we were just talking about. I would also assume that the new debt....

The Bank of Canada probably issued its bonds early so that people could benefit from the lowest interest rates. I would assume that as far as debt management or new borrowing management goes, they stocked up based on the current financial markets.

[Jeremy Rudin]

The debt strategy is set out in every budget. This fiscal year, we are aiming for $80 billion in bond issues—

[Daniel Paillé, Bloc, Hochelaga, QC]

Of Canada.

[Jeremy Rudin]

—in fixed bonds. That would keep the fixed rate more or less stable or, rather, it would slightly increase the fixed ratio accordingly.

[Daniel Paillé, Bloc, Hochelaga, QC]

I am not daydreaming, but there was another budget today, the supplementary estimates (A). It seems that the debt service dropped slightly from $33 billion to $31 billion. So there was $2 billion.... Therefore, our discussions today are outdated.

I want to come back to the problem of the securities commission. You said that the IMF had not.... You seemed to be a bit surprised with respect to the IMF. The International Monetary Fund has recently commented on the financial market issue on at least two occasions. I just want to read a quote from the IMF report entitled Canada: Financial System Stability Assessment-Update, which seems to indicate that if Canada stands up to the provinces to form its commission, then:

The conclusion is obvious: unless Canada wants to diverge from international norm, a centralized regime would essentially copy and duplicate what already exists.

The fact is it is a cut-and-paste job, cutting from the provinces and pasting to the federal government to fall in line with what is generally recognized around the world. Furthermore, since we were talking about it earlier, the same report states that the IMF examined the ability of a single securities commission to satisfy its two groups of clients—issuers and investors—and also took into consideration the fact that Canada, for example, has different economies. Quebec has an economy based on small to medium-size businesses; western Canada has a real venture-based economy—there is a reason that it started in Calgary and Alberta. One of the IMF's findings is as follows:

Arguably, the current system has responded to the specific characteristics of its capital market, such as allowing for a large presence of small issuers, and the concentration of certain industries in specific provinces.

If we are to believe the International Monetary Fund, if the federal government does take action, it will be a duplication. The IMF also said that Canada's current system reflects market characteristics that are very local, very regional, and that it cannot be repeated afterwards.

I wonder—and I am not looking for your opinions, since you are public servants and you apply federal policies—whether the Department of Finance has done any specific, technical or empirical analyses to show the merit of the takeover by the Government of Canada.

[Jeremy Rudin]

The government's plan is to create a unique agency, one that would still have the strengths of the current system while going even further to improve on it. As I said, the plan is to take advantage of the existing expertise in the current commissions and to really take into account industry needs, which vary from one end of the country to the other, from one region to another.

[Daniel Paillé, Bloc, Hochelaga, QC]

Is the office reviewing the recent analysis done by the former president of The Montreal Exchange and former Bombardier president, Pierre Lortie? It is called “The National Securities Commission Proposal: Challenging Conventional Wisdom”. It clearly shows that undertaking a project such as this, in other words, having two systems, one where you opt in and one where you opt out, is the worst system there is.

Have you done an empirical analysis of that study? Have you studied that for the minister?

[Jeremy Rudin]

The goal of the government's plan is to ultimately establish a single system that would apply nationwide. We are well aware that it may not happen immediately, but that is the goal. We are focused on success.

[Daniel Paillé, Bloc, Hochelaga, QC]

You said that success will not come right away, so that means that, for a certain period of time, Canada's capital market will be a real mess, as far as issuers and investors go.

[Jeremy Rudin]

Right now, we have 13 commissions.

[Daniel Paillé, Bloc, Hochelaga, QC]

And a national system that is working well.

[Jeremy Rudin]

There are 13 commissions, and that is a situation we can really improve on. That being said, the 13 commissions have still found a way to work together. So, if we reduced the number of commissions to 3 or 4, the challenge would be no greater than it is today.

[The Chair, Conservative, James Rajotte]

You have 30 seconds left.

[Daniel Paillé, Bloc, Hochelaga, QC]

I have one last question. It may not be aimed at you—so you can take a breather.

Where in the appropriations is the $2.2 billion requested by the Quebec government for harmonizing the GST and QST?

[Nancy Horsman, General Director, Analysis, Tax Policy Branch, Department of Finance]

It's not in the main estimates.

[Daniel Paillé, Bloc, Hochelaga, QC]

It was not included.

[Nancy Horsman]

It is not there.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you.

[Nancy Horsman]

No problem.