Finance Committee on Sept. 27th, 2011

[Sylvain Schetagne]

Yes, I will give them quickly.

We have to think about the short term, but also about the long term and about building up capacity in order to retire in decent living conditions. Maintaining your purchasing power is something we are concerned about, and we should take a look at it right now, because in order to build up that saving, you have to take a look at it right now. We are proposing two things. The first thing, of course, is increasing GIS to take care of those seniors living in poverty today. What has been done is not enough. It's not going to move all the seniors out of poverty. More should be done.

The second thing we have to think about are those workers today who are in debt and who are not saving enough for their retirement. In order to do that, we're proposing to double CPP.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Marston.

We'll go to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

I'd also like to thank the panel.

To summarize in broad terms what I'm hearing, it's a softening from original projections, but certainly not below negative. Also, I'm hearing that we need to be very watchful. I've heard in general a suggestion that we need to be pragmatic and flexible. I think I also heard that debt in the long term is a big problem and that we do need to get back to balanced budgets. I think that was certainly an important piece.

If you look at where the government is going in terms of its reduction in government spending, I actually looked at the numbers, and I think we are looking at 0.02% of GDP, so really, we are looking at $4 billion and at government and how they are spending.

So I guess I would certainly say to Mr. Hodgson first, and maybe to Mr. Porter, that 5% of what might perhaps be inefficient spending in different areas of government expenditures seems quite feasible and doable to me, with a very modest impact. So government should be looking towards not spending money on programs that aren't efficient any more.

Comments?

[Glen Hodgson]

Well, there's an issue around structural spending, but I'm going to start with your first point. The track for nominal income growth, because that's what government actually taxes, is below what we were forecasting 18 months ago.

With my colleague Matthew Stewart, who was here, I talked about the government's capacity to actually balance the books by 2015, which was the conversation at that point. We said that it was quite doable. We are below that growth track now, not by a huge amount, but by a few billions.

This means that in our forecast the government will be able to balance its books in 2015-16 now, and I don't think that's necessarily a bad thing to be going out one year longer. It's not going to add much to Canada's overall stock of debt. As well, we have to be mindful of the ratio.

But I would not counsel withdrawal of stimulus. So don't just stick to the plan because you have a plan. Think about the plan in the real world context, where we're having these extraordinary shocks from outside, and then do a course correction with the end plan still being in sight.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

That is what I believe we've heard the Prime Minister and our minister state: that we have a plan right now, but we do have to watch. We need to be flexible and pragmatic. But I think it's perhaps always good practice for governments to review how they spend taxpayers' dollars and to make sure they're efficient and effective.

Mr. Porter, do you have any comments?

[Douglas Porter]

In terms of the broad fiscal plan, I thought it was quite reasonable as of and up to the second budget in early June. As I indicated in my opening comments, I do think the global economic landscape has shifted--and can potentially shift a great deal more--in the last four months or so, but again, I think it's too early to significantly change tack at this point.

I may not agree with all the micro moves beneath the surface, but I think that in terms of the broader plan it was quite reasonable.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

We've also talked about tax reductions and how they can be very important in terms of businesses. What we did hear is that some businesses with money are sitting on the sidelines. In addition to--or perhaps besides--the issue of taxes, what would you say are some things the government can do to encourage the businesses to be putting their money on the table?

Mr. Leitao.

[Carlos Leitao]

Well, as has been mentioned several times before, there's extending free trade with other countries to gain access to other markets. One of the things we realize now, unfortunately, is that we are still highly dependent on the United States, with 75% of our exports still going to the U.S. On that basis, looking to other markets and pursuing free trade is a good option.

Also, there are internal barriers to the circulation of goods and workers. Canada is a federation, and this federation is not exactly ideal in the way it allows goods and services to flow within the country. We should also try to look at those barriers to make things flow a little better.

[The Chair, Conservative, James Rajotte]

Thank you.

Very briefly, Mr. Schetagne.

[Sylvain Schetagne]

Very briefly, we also could focus on the manufacturing sector and provide income tax credits to companies investing in new machinery and equipment and research and development, as well as the training of workers. This is a sector in need. It has been deeply affected in the last ten years and it needs help.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Giguère, you have five minutes. Go ahead, please.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

I would like to thank you all very much for coming to share your views with the Standing Committee on Finance.

This summer, Statistics Canada announced that private companies have assets of around $500 billion. This is money that companies are holding at the moment. The Bank of Canada's financial system review indicates that these funds are not being invested. Investments are increasing very slightly, but the increase is not enough by far.

At the same time as all of that money is being accumulated, we have seen a loss of 300,000 manufacturing jobs in Canada in recent years. Our productivity is declining. Our research and development work is declining. Those high-paying jobs are being replaced by lower-paying jobs. This explains why, although 600,000 jobs have been created, we are seeing the situation in Canadian households deteriorate greatly. Their financial situations have become critical. Statistics Canada tells us that the average debt level in Canadian households is 147%. There are massive regional inequities. In some parts of British Columbia, 80% of people's salary goes to pay the rent or other costs of housing.

Could you tell me how tax cuts will allow Canada to benefit once more from the mass of unused capital, to regain our industrial base and to see an end to the drop in the real value of our incomes?

My question goes to all the witnesses.

[Carlos Leitao]

There are a number of aspects to your question. As for the excess cash currently held by companies, it seems to me, as my colleague said earlier, that the situation is in part temporary. It arises because of a huge amount of uncertainty, especially in Europe, where the banking system is undergoing the same kind of stress that we in North America went through three years ago. So businesses are being extremely careful, but it is temporary. Once this acute phase of the European financial crisis subsides—and I think that will happen in the next few months—businesses will be a little more ready to invest.

How to get the manufacturing sector back? That is complicated. It is a global phenomenon that has been happening for a long time. In Canada, we were somewhat sheltered from it for a number of years because our currency was too low for too long. That is an old argument. So it overshadowed the major trends a little, and the adjustment happened very quickly in recent years. The government could take steps to support the manufacturing sector, of course, but you always have to bear in mind that we are part of the global economy. There are things that can be done and other things that the government does not have the luxury of doing. It is certainly a major issue that deserves debate.

[Marc Lavoie]

To answer your question, I would say that the situation is not exactly temporary in the sense that, for a decade, Canadian businesses have been making more profits than they have been investing. You might say that businesses have been lending money to households for a decade whereas normally you would expect households to be lending money to the businesses.

As for the manufacturing sector, I'm going to go back to the subject of free trade that was mentioned just now. In my view, free trade is a good thing when we have full employment but not necessarily a good thing when we don't. In fact, it has led to the inequities we were discussing earlier.

Here is one suggestion for increasing productivity in Canada—a matter that government MPs should be very interested in. It seems to me that, if real wages were raised, the minimum wage, that is, it would force businesses to be more productive in order to preserve their profits.

[The Chair, Conservative, James Rajotte]

Merci, monsieur Giguère.

Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I would like to welcome all the witnesses joining us today.

I have three quick questions, and I'm going to try to get them in within my five minutes.

I listened closely, Mr. Leitao, and I would like to know whether you agree that the current economic turbulence Canada is facing is due to shocks beyond our border. Is it fair to say that this was not a made-in-Canada problem?

[Carlos Leitao]

I would agree with that, yes.

[Shelly Glover, Conservative, Saint Boniface, MB]

You would agree with that. Thank you.

Mr. Hodgson.

[Glen Hodgson]

I agree.

[Shelly Glover, Conservative, Saint Boniface, MB]

You agree.

Mr. Schetagne.

[Sylvain Schetagne]

There are issues, such as the trade imbalance between countries and the way we've been trading, that have impacted us. Those have to do with the way we interact with other countries, so it's not entirely beyond our borders.

[Shelly Glover, Conservative, Saint Boniface, MB]

Mr. Porter.

[Douglas Porter]

I would agree with you.

[Shelly Glover, Conservative, Saint Boniface, MB]

Monsieur Lavoie.

[Marc Lavoie]

I also agree.