Finance Committee on Oct. 6th, 2010

[Thomas Mulcair, NDP, Outremont, QC]

If they are prepared to recognize it, why haven't you asked them to put it in writing?

[Claude Lajeunesse]

They indicated that it was the objective. As I mentioned, we want to make a kind of thermometer with $12 billion at the top so that we can track our progress towards the objective, as a result of the innovation of our companies. Let's not forget that our companies will be able to benefit from their investment in this project by developing products, operating methods and so on.

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Lajeunesse, there is no way you can make that statement because you have no guarantee.

Mr. Simonds, I would like to thank you for being here with us today and to tell you what an important request you are making on behalf of the volunteer firefighters of Canada. I have met you before, as well as the director of the fire prevention service for the city of Montreal. In Quebec and in Canada, the work of volunteer firefighters is often very dangerous. As their title implies, volunteer firefighters provide their time with no remuneration. In our opinion, what you are asking is achievable in the big picture of government expenses. In our business, we hear a lot of presentations. You have a way of explaining things that is so direct and straightforward that it is easy to follow you and provide you with support. You have ours.

Mr. Chair, if I have any time left, I am going to ask Mr. Gamble a question. I am going to ask him to reassure us.

Could he tell us whether his engineers' association accepts that fateful date of March 31, 2011, or whether they would like it to be flexible? If it becomes flexible, would he prefer it to be equally flexible for everyone, or just for the constituencies represented by government MPs?

[John Gamble]

To clarify, we don't see a long-term investment strategy and a stimulus program as being mutually exclusive.

In terms of the stimulus program being what it is, which was very clear to us, we accept the fact that there's a March 31 deadline, because you have to pick a deadline. However, it's apparent and not entirely unexpected that there are great complexities in meeting these deadlines. We're saying we know the stimulus program is not going to be renewed, and we're not going to pick that battle. We are simply asking for some pragmatism. The whole point of flexibility is that it doesn't apply across the board. I believe the FCM is in agreement that if the municipalities created the situation themselves and simply didn't have their act together, that would be one thing. But there are a number of municipalities and a number of projects across the country that have a little bit of a challenge. In Saskatchewan there's been flooding, and sometimes there has been the environmental approvals regime.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Mulcair.

Colleagues, as you know, we have five motions here today. I'm going to ask the witnesses for their indulgence for about two minutes. My understanding is that we have agreement from members to have no debate and to go straight to votes on the five motions. We have four motions by Mr. Brison and one motion by Mr. Wallace.

I'm going to call the vote.

The first motion deals with the estimated costs of the F-35 aircraft.

All in favour of this motion?

(Motion agreed to [See Minutes of Proceedings])

On the second motion, “that the Department of Finance provide committee with...adjustments to the fiscal framework to incorporate the costs of the Government of Canada's justice legislation.”

All in favour of this motion? All opposed? It's unanimous.

(Motion agreed to [See Minutes of Proceedings])

With respect to the third motion, “that the Department of Finance...provide...the cost of hosting the G-8 and G-20 summits.”

All in favour? All opposed? That's unanimous.

(Motion agreed to [See Minutes of Proceedings])

The fourth motion by Mr. Brison, that the Department of Finance provide costs of the “planned reduction of corporate tax rates.”

All in favour of this motion? That's unanimous as well.

(Motion agreed to [See Minutes of Proceedings])

The fifth motion is by Mr. Wallace, “The Committee requests that the Department of Finance provide [this] Committee with...adjustments to the fiscal framework to incorporate the costs of...legislation” with respect to a number of private members' bills.

All those in favour?

[Mike Wallace, Conservative, Burlington, ON]

Can I have a recorded vote on this, please?

[The Chair, Conservative, James Rajotte]

We'll have a recorded vote.

(Motion negatived: nays 6; yeas 5 [See Minutes of Proceedings])

Thank you, colleagues, for doing that very quickly.

I apologize for that intervention, but we did have to deal with those motions today.

We'll now go back to members' questions.

Mr. Szabo, go ahead for five minutes, please.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

For the electrical association, the estimate on the investments over the next 20 years is some $230 billion. I thought the statement was very telling, and I agree with it very much, that it has to ensure that our infrastructure is maintained, new low carbon facilities are in place to meet growing demand, that Canadians continue to benefit from secure, safe, and reliable electricity.

Canadians want to hear this. I think they understand it's important that we make those investments. I tend to agree that the CCA route--recommendation one--would be certainly very helpful. Productive, good projects, etc., will certainly pay back the government many times over on that.

The energy storage grant, I'm not very familiar with. The regulatory reform--I'm a little concerned about that in the near term.

Could you briefly tell the committee what the energy storage program is?

[Geoff Smith]

Sure. I think in terms of linking those things and that investment in core infrastructure to not only continue to meet current demand but to reconfigure the electricity system for the vision of the future, which in many ways is the two-way grid and distributed generation, and integrating some of the renewables onto the grid, something like investment in the research in energy storage technology really is a key component to that. Essentially, whether it's electric vehicles or whether it's any sort of wind, solar, or whatnot, it has to.... At this point our grid is the same as the one our grandparents built. In order to get to that point, this kind of investment is the Gordian knot, if you will. Energy storage really is the catalyst to get to that point. It really is a vision for the future, and there's good work being done elsewhere that we could highlight. It would be very important, I think. It would really do a lot for Canadian electricity.

[Paul Szabo, Liberal, Mississauga South, ON]

I agree. Thank you, and continue to pursue it. I think you're going to get some support.

For the consulting engineers, this is probably the most significant revelation that I think the committee has had with regard to the underinvestment in infrastructure. This is not just “let's make some jobs and we'll have a defined period”. We have an investment deficit. I was on the finance committee over ten years ago and the problem was mildly identified at that point, but it's gotten worse.

I have not seen the publication Public Infrastructure Underinvestment: The Risk to Canada’s Economic Growth, but the title alone, “The Risk to Canada's Economic Growth”.... Virtually every banking institution, every economic input we've had at this committee, has said that we have to balance budgets. And you can't balance budgets without having sustained economic growth.

I want you to explain to the committee, as best you can, the consequences of underinvestment in this infrastructure.

[John Gamble]

The infrastructure underlies virtually every aspect of our lives—our roads, our water systems. You cannot go into a building--including this building--you cannot go into a factory that creates jobs, you cannot go into a car plant, you cannot go into a mine, you cannot go into a public school without infrastructure allowing those assets to exist, to provide their service to society, and to employ people. What we're concerned about is if we allow our infrastructure to erode...and by the way, if you average it all up, in lump sum, Canada's infrastructure on balance is at about 85% of its usable design life. It's not something you can fix immediately.

Here's the dilemma. You need to be fiscally sound to make these types of investments, but it's hard to become fiscally sound when your infrastructure is threatened. That's why we're appealing for a balanced plan. We know there's no quick fix. We recognize that the government has to be fiscally responsible in the management of its affairs. We think this actually adds to the urgency of having a long-term vision, compared to what we've seen for the last several decades of sporadic, intermittent infrastructure investment programs. I think we need to work in all three levels of government, the public and the private sectors, and I think we need to do some hard thinking about where we need to get to and maybe set a goal on the horizon—maybe that's 25 years, maybe that's 50 years. But we need to develop a long-term sustainable plan so that we can take a very rational approach. I think that's responsible to the taxpayers. I think it measures expectations.

We don't want to be trading off a structural fiscal deficit against a structural infrastructure deficit.

[The Chair, Conservative, James Rajotte]

Thirty seconds.

[Paul Szabo, Liberal, Mississauga South, ON]

The estimate is that GDP is going to decline about 1.5% if we don't deal with it.

[John Gamble]

I have the title of the report here; it's Public Infrastructure Underinvestment: The Risk to Canada’s Economic Growth. The report forecasts a drag, if we maintain the status quo, net of stimulus—that is, not including the stimulus, but just the status quo.... The stimulus did help; it didn't fix it, but it did help. They're looking at a drag of about 1.1% on the GDP; that's lost opportunity cost.

[The Chair, Conservative, James Rajotte]

Thank you.

[Paul Szabo, Liberal, Mississauga South, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Your turn, Mr. Carrier.

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

Good afternoon, gentlemen. Welcome to this meeting of the committee.

I would particularly like to welcome Mr. Lajeunesse. I have been an engineer for about as long as he has. I am somewhat familiar with his career.

[Claude Lajeunesse]

We do not have the same colour of hair.

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

I just hide my grey hair.

On the subject of the economic benefits from the contracts that the government is currently handing out, you seem to be fairly confident, from the aerospace industry's point of view. Earlier, you were asked about the F-35 aircraft and you seem to be satisfied and happy with the direction the government is taking.

We at least have a text from you, which is important for us, and, in your second recommendation, a very eloquent one, you say:

AIAC recommends that government and industry work in partnership to develop, adopt and implement a cohesive and visionary defence industrial strategy…

The way in which that is written implies that a strategy does not exist at present. You continue with the words:

This strategy should align Canada's defence industrial capability and Canada's military needs; maintain other benefits to Canada and the defence sector…

Those are all fine intentions that I share and I feel that my party also shares, but they do not correspond to current government actions. Everything is uncertain still. All we see is contracts being given to a foreign company, an American one, and we are rushing after little scraps from that table.

I wonder about the extent to which you are able to influence the government to improve things when it comes to a real military defence plan.

[Claude Lajeunesse]

Mr. Chair, in terms of the F-35 aircraft, I would like to say that I see no reason why history will not repeat itself. The Canadian aerospace industry is the fifth largest in the world. It exports 80% of its annual production. For me, that guarantees both ability and innovation. It proves that we are able to compete with anyone, anywhere in the world.

With the possibility of getting up to $12 billion in contracts as a result of the decision to purchase F-35 aircraft, and the ability to do so, I feel that our companies have proved that they can succeed. I am completely confident about that. In my presentation today, I mentioned developing an aerospace policy, including both aviation and space as well, since we can already chalk up some successes there.

The monthly magazine Policy Options published an article by Tom Flanagan this month entitled Space: Punching Above Our Weight. He discusses exactly these Canadian abilities and achievements in the area.

I think it is important to have a plan. If our government puts its words into action, our industries will certainly be there to provide support.

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

Thank you, Mr. Lajeunesse. We are going to put our faith in your determination when it comes to convincing the government to act on this. Having active pressure groups always helps us.

I have another question for the people from Canada's Venture Capital and Private Equity Association. I am not an expert in the area. I am just a member of Parliament. In your document, you say that “Canadian VC investment is at a 14-year low”. As a man in the street, I have a question. We have been told several times here that the Canadian economy is doing well compared to other economies, the United States, for instance, and that our control over our banks ensures that they perform well.

In your opinion, why is venture capital dropping? Financially and economically, things seem to be going well, so why are we so uncertain about the future?

[The Chair, Conservative, James Rajotte]

Merci.

I know that's a big question, but could we have as brief a response as possible?

Mr. McQueen.

[Mark McQueen]

Yes, Mr. Chairman. Canada's is a new industry relative to the United States'. They've been doing venture capital since the sixties, and it came to Canada in perhaps the late seventies or early eighties, so there's less time on the job.

Largely, institutional investors got into the sector in 1997 and 1998. They had one experience and it wasn't a good one: when the NASDAQ went from 6,000 to 2,000.

American investors who had been doing this since the sixties were able to go through a tremendous 25-year cycle in which venture capital returns beat every other asset class. So as a result, money has been pulled out of the system by the Canada Pension Plan, by OMERS, by Teachers', by the Caisse de dépôt, by bcIMC, and by AIMCo. If Canada's six largest pension plans have pulled out of the sector, there's less money to be in funds, which is less money into companies. It's that simple.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Ms. Block, please.