Finance Committee on Oct. 6th, 2010

[Robert Simonds]

Mr. Chair, as we had indicated through our preliminary analysis, we know that if we predicate our numbers on 75% of the volunteers across this country qualifying with a 200-hour threshold, it's approximately $29 million per year.

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that because I didn't see that in here.

The aerospace folks were at the defence committee during the summer. Were you not at the defence committee, talking about the purchase of the new aircraft? Am I not correct on that?

[Claude Lajeunesse]

That's accurate.

[Mike Wallace, Conservative, Burlington, ON]

That's right. That's where I know you from.

Then in the same presentation today, our venture capital group, and I do have another question for them, is making recommendations to improve the IRB program.

My question to you, for your industry, and the IRB program isn't applying to the purchase of this aircraft, but are your companies able to survive without that? Why is it important on this contract that you are supportive of buying these jets?

[Claude Lajeunesse]

Let me try very briefly to say that the purchase value of the F-35 planes is about $4.8 billion. This is a new plane. This is not an off-the-shelf product. If we were to apply, for example, the IRB policy to that, we would be limited to about $4.8 billion. I did mention before that we're looking at a potential of $12 billion.

[Mike Wallace, Conservative, Burlington, ON]

Right, so it's improved.

[Claude Lajeunesse]

This is possible because this is not off the shelf.

In terms of the IRB, it is an excellent program. Last year Minister Clement made some amendments. There had been no amendments in 23 years. He made some great amendments to that program. We really support the IRB program, but it's better for off-the-shelf products.

[Mike Wallace, Conservative, Burlington, ON]

Beautiful. Thank you very much.

How much time do I have left?

[The Chair, Conservative, James Rajotte]

You have two and a half minutes.

[Mike Wallace, Conservative, Burlington, ON]

Good. I have lots of time.

The venture capital market, as Mr. Brison has pointed out, let's be frank, is not huge in Canada. There are other countries that have more opportunity.

I know you have here an establishment of a $300 million private sector fund. You want public money to go to a private sector investment fund. Is there anything we could be doing from a tax perspective, other programs, to encourage Canadians to invest in venture capital companies, to provide capital for you to reinvest?

What is it called? We have the workers--

[Mark McQueen]

It's the labour sponsored fund.

[Mike Wallace, Conservative, Burlington, ON]

Sorry, it's the labour sponsored program. Are there any other programs that would encourage Canadians? Nothing drives me more crazy than when something happens to a corporate entity and people say that government should not allow foreign investment in there. My response has been, “Well, why haven't you put your money in there?” I mean, I do it politely.

What do we need to do to get Canadians to invest in venture capital?

[Mark McQueen]

Two things: first of all, the government already does fund private sector funds via the Business Development Bank of Canada, through its fund of $58 million, which is not enough. It shouldn't be a crown entity, anyway.

On the question of the labour sponsored fund, it is a very useful program and works very well in British Columbia, Quebec, the Maritimes, and Saskatchewan. Ontario, unfortunately, cut this off at the knees four or five years ago. That has brought Ontario venture capital down to be half of what Quebec has per capita. That has had a direct impact.

On flow-through shares, our people have talked about parts of our ecosystem in order to match up with the mining companies and with what oil and gas companies are able to do. Venture capital and biotech are not, strangely. What a surprise. Canada is a leader in oil and gas and mining exploration, and we're trailing badly in technology and biotech.

[Mike Wallace, Conservative, Burlington, ON]

So more flexibility...flow-through shares are not part of your recommendations here today?

[Mark McQueen]

No, they're not, because of the inability...what the costing might be. BIOTECanada, for example, would be in favour of it.

But you asked the question, and I'm trying to give you an answer for that.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

Your turn, Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

I would like to welcome all the witnesses who made a presentation.

I am going to start with Mr. Lajeunesse. I really want to make sure that I understood his remarks and that I am not putting words in his mouth inappropriately.

You are in favour of spending the money to buy the F-35, which, I suppose, will become the CF-35. We are on the way to signing a contract without having gone to tender. First of all, is it normal, in your opinion, for a government to make such a procurement without a tendering process to make sure that, if there are competitive products, the taxpayers get value for their money? The reason this committee is here at present is to prepare a budget and the word budget implies managing the public purse.

I would just like to know your thoughts on that, if you would be so kind.

[Claude Lajeunesse]

Thank you, Mr. Chair.

Our association played no role in the government decision. We…

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Chair, I am going to save the committee some time. He is arguing a point I never raised. I never said that his association was playing a role in the decision. I am asking him if, as a representative of business, he thinks it is a normal practice to make a major purchase without a tendering process, without making sure that we are getting the best price.

[Claude Lajeunesse]

Mr. Chair, those are political considerations that I do not want to get into. As far as we are concerned, the decision was made and announced. We know that, in the next two years, the supply chain for the F-35 will be developed and put into place. Our objective is to make sure that Canadians working in the area now or in the future will derive as many benefits as possible from this investment made by the Canadian government.

[Thomas Mulcair, NDP, Outremont, QC]

We all agree on that, Mr. Lajeunesse. But if, in this untendered contract, there is not the slightest indication that any part of the work will be done in Canada at all…You are just in the process of telling us about a supply chain that will be developed and put into place. But where? Will it be in the United States, or somewhere in Canada? Where in this project do you see the slightest guarantee for your clients and your industry?

[Claude Lajeunesse]

Mr. Chair, that is an excellent question. I really have to explain our position on the matter clearly.

First, as I mentioned earlier, our companies are ready, willing and able to be competitive and they all tell us that they will be successful at it. But there is also the obligation to be accountable. We have proposed that, every four to six months, we produce a detailed report on the investments that have been made and the contracts that have been signed in Canada. We believe that it is very important for us to make sure that the promised objective of $12 billion is met. A little like the United Way, we are proposing to make a thermometer with $12 billion at the top, so that we can track the progress towards it every six months. I think that is the only way to make sure that our objectives are reached.

[Thomas Mulcair, NDP, Outremont, QC]

One last question, Mr. Lajeunesse, if I may. Who in the government mentioned an objective of $12 billion?

[Claude Lajeunesse]

Minister MacKay indicated that it was possible to go after contracts worth $12 billion dollars. We have also spoken to Lockheed Martin. We have had discussions with officials from the Department of National Defence. The figure seems to be recognized by them all.