Finance Committee on Sept. 29th, 2011

[Randy Hoback, Conservative, Prince Albert, SK]

I'm going to go to the F-35 and the impact on the aerospace sector. Of course, we have some opponents across the room who would say we should cancel the F-35s.

What kind of impact would cancelling that contract have on our aerospace sector in Canada?

[Maryse Harvey]

Canada has been a partner on the F-35 for a very long time, since the very beginning. We're one of the most...of the nine partners. It's something that certain nations are not happy to hear, but we have a huge part of the benefits that come out of being a partner in it. Because we have such a world-renowned and competent and capable aerospace industry, we're getting a lot from this partnership.

If we cancel it, if we get out of this partnership, our companies are not assured of getting the work they've secured on the aircraft. Logically, other partners will argue that they can take on this work; it's part of the partnership. We may lose a lot of work from it, and those are jobs from coast to coast that are in jeopardy if we do that.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Hoback.

We'll go to Mr. Marston, please.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Thank you, Mr. Chair.

I want to welcome our guests here today. We're kind of overwhelmed when we see the number of presentations and the breadth of them.

Mr. Johnson, this is not a question for you but a comment. I was on the United Way board for about 20 years. I watched in the eighties when government withdrew from the communities, and the agencies had to backfill for the losses. Levering $65 billion into $200 billion sounds like a good proposition to me.

Mr. Chair, we've set aside 12 meetings to look at something we agree on. It sounds interesting.

Mr. Penney, we had witnesses before us in the last sitting of this committee who said that now was not the time for austerity measures by the government, and it shouldn't be withdrawing from the economy. We have a situation where Canadians are not investing. We have heard several comments about this $500 billion that the corporations are holding. I suspect they're holding that because they're afraid that the banks will lock up once again and not have cash available.

Do you have any comments at all about how the government might work with the business community to lever some of that money into our economy?

[David Penney]

Ultimately a stable business environment, so businesses can take the risk of investing the money in terms of an actual tax policy.... Quite frankly, I don't think it's tax policy per se that would do that. I think it's assuring them that their shareholders are not taking on too much risk by investing that money.

I think it's understood that there's a lot of cash on balance sheets of corporations. I just think they're very concerned about spending the money until they're sure we're going to have an expanding economy.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

So the answer is that the onus is still very much on this government as the only organization that's in a position right now to spend to stimulate in this downturn that we're starting to head into. We're all very reluctant to use the “r” word. We don't want to cause instability and nervousness. But very clearly the things that have happened in the market in the last couple of weeks--and the risk of Greece potentially defaulting, and all of those things--have people very nervous. So the only group that's positioned to spend and try to keep our economy going forward is the government. Would you agree with that?

[David Penney]

I would agree that the government has to take the initiative to stimulate.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Ms. Schwartz, at one time I was president of The Council of Canadians when it first started, in the Hamilton chapter. We were talking about the competitive advantage we had in Canada. I think the cost of electricity at that time was 22%, compared to Buffalo, just over the border. Is that advantage still in place?

[Sandra Schwartz]

Yes, Canada still has one of the lowest prices at the consumer level, and certainly also for industrial consumers. Canada still ranks...when we look at the charts, even with prices increasing across the country as a result of infrastructure investments.

Part of the problem that we're seeing in many of the provincial political fights right now is that the prices are being equated to other things, instead of being equated to the reality that we have an aging infrastructure that needs money and those investments.

Our prices, despite that, will still remain low. But prices will increase across Canada. Will they be lower than in Europe? Yes.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Well, thank God for that last statement, because Europe's can be quite atrocious.

You were very polite when you went around the HST, because in Ontario, and probably in British Columbia as well, the HST being added to electricity squeezed the margin that you could have gone up a little bit to get more money to invest. In fact, you're transferring that money now to the provincial and federal governments. I think that was ill considered, because there is a huge need for investment in the infrastructure.

I worked for a period of time on the railway installing bells, lights, and railway crossings, and in the maintenance field. I understand what can happen to equipment. I agree with you, and I certainly hope our government will get on side on this.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Marston.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you, everyone, for appearing.

Mr. Cairns, Wheatley in my riding is the site of the largest freshwater fishing port in the world, and in it—you and I discussed this—there is an interesting shipbuilder.

I want to ask a question for Hike Metal, which is the name of that; Andy Stanton is the owner. I'm asking about your first ask, which is the structured financing facility. You say it's underfunded, yet I read that last year it was used to the tune of $15 million. There is $20 million in the fund.

Is the problem because the money's not being disbursed or is it not being accessed?

[VAdm Peter Cairns]

At the moment, as I understand it, as of March of this year, it has become unfunded. It is still authorized, but it's not funded.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

You say it's funded to the tune of $20 million, but—

[VAdm Peter Cairns]

No, the funding at the moment in there, I believe, is around $13 million. We are asking in our submission that we should look at funding it to $20 million a year over the next five years. That's what we're asking for; that's not what it is right now. I think at the moment it's only $10 million or $12 million.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Mr. Johnson, I think we're all intrigued, and we've all discussed your proposal at quite some length. I'll tell you why it's something I support. It gives people the opportunity to place their charitable donation where they want to place it.

Mr. Reilly-King, we've seen each other in Foreign Affairs. We always have to remember that when we talk about CIDA, for instance, this is taxpayers' money. Would you endorse a plan like this if the government could direct some of those moneys that you're talking to, to areas where the private sector or businesses would advocate? In other words, if they like your proposals, they would say they wanted to use this program and they wanted to use that money in that direction. We do that now with NGOs, for instance, in CIDA. We work with CARE, we work with Samaritan's Purse, we work with all these other organizations.

If I can just frame my question so you understand what I'm saying, if we allowed some vehicle to direct where those moneys were going to go and move it through CIDA, would you endorse that plan?

[Fraser Reilly-King]

A measure to allow private individuals to direct their funding toward CIDA?

It's a possibility--individuals at a global level, official donors. Governments like Canada provide about $120 billion in funding for international development. I think they estimate private individuals between $25 billion and $30 billion. So private individuals are already giving their money and they're giving it to individual charities, such as the organizations Mr. Johnson is representing.

I think CIDA should look at innovative ways to generate greater finance. That is one opportunity. This could be a means. But I think the interest of the individuals is in supporting individual charities rather than the Canadian government's development agency. But some of the innovative mechanisms could be, for example, a financial transactions tax, which has gained increasing support in Europe. Right now they're looking at how they might implement it within Europe. There's also—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Sorry to interrupt; we're going off in another direction.

I guess what I'm trying to emphasize is that, again, ultimately the money we're talking about is taxpayers' money. So we could find direction from the public as to where those moneys should go if we implemented that type of program. Would you be open to that, understanding of course that some of the programs you advocate may not be...? They may be, there's an element of risk there, but it would certainly give you an opportunity to access more funds in CIDA.

[Fraser Reilly-King]

I think it's an interesting idea, but I would probably just reiterate that I think the government also has an obligation to meet its targets and its commitments, and not necessarily rely on the public and private individuals to help it achieve this.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

We do match funds. We did that in Haiti, for instance, dollar for dollar. There is an opportunity to do that. We are looking for direction, I think.

[Fraser Reilly-King]

It is a possibility.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Giguère, you have the floor for five minutes.

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

Thank you, Mr. Chair.

I will first address Mr. Penney, but I will need Maryse Harvey to answer questions on aeronautics taxation.

As Mr. Penney seems to be having problems with the interpretation, I will immediately go to Mr. Cairns, of the Shipbuilding Association of Canada. It looks like he's having the same problem, so I will move on to Mrs. Harvey.

Mrs. Harvey, unless I'm mistaken, the wording of section 37 of the Income Tax Act is problematic in terms of R & D. I'm talking about paragraph 37(1)(d), which states that we must deduct the total of all amounts “each of which is the amount of any government assistance”. When this legislation was drafted, only the Canadian government would provide money for R & D, so the term “federal” was not explicitly stated. Since Quebec launched its provincial R & D program, the money allocated by the provincial government has had to be deducted from eligible expenses. Is that correct?

[Maryse Harvey]

Your question is a bit more specific than I was hoping it would be. However, there's no doubt that Quebec's R & D tax credit program is the envy of many non-Quebecker aerospace companies. They would very much like the national R & D program to be more like what Quebec has.

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

Thank you very much.

Here is my second question. Basically, 17% of Canadian aeronautical production is focused on military products. We still note with some regret that Canada is the only developed country with a major aeronautical industry that does not develop its own military aircraft. Truth be told, we are still a subcontractor. Sweden, Brazil, Taiwan, Japan, India, China, Argentina and even Turkey develop their own fighter aircraft. However, Canada does not.

We realized that there was no harmonization, in the programs, between purchase budgets and Canada's industrial capacity. For instance, P-3 Aurora patrol aircraft will be replaced by Boeing 737 versions, instead of being replaced—following some planning—with C-Series aircraft.

Could you talk about this problematic lack of harmonization between military expenditures and Canada's industrial capacity?