Finance Committee on Oct. 18th, 2011

[The Chair, Conservative, James Rajotte]

Mr. Jackson.

[Andrew Jackson]

Briefly, I guess there's been a debate amongst economists about the effects of public spending cuts on growth and job creation. The IMF did put out a major study, and they've clearly come down on the side of those who argue that spending cuts will weigh on a recovery in a slow economy, that a 1% cut to government spending, which is about what we're looking at next year, if we look at the federal and provincial governments combined, will lead to a loss of growth in the first year of about 0.7%.

We have no problem with a review of government spending. I think governments should always be reviewing their spending priorities and reallocating, but in terms of whether now is the time to be making major cuts out of total federal government spending, I think the answer is no.

[The Chair, Conservative, James Rajotte]

You've got 20 seconds, if you want it.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Mr. Campbell, I'm sorry, I referred to you and I didn't get a chance to ask you a question.

There is concern with companies sitting on so much cash now; it's close to half a trillion dollars. Is now the time for further corporate tax cuts? And do we have evidence that going ahead with these tax cuts will actually produce jobs?

[Terry Campbell]

I think there is evidence.

On your point about sitting on a lot of cash, we've seen the private sector increasingly ramping up their investments over the last 15 months. It isn't just me saying this. No less of an authority than the Governor of the Bank of Canada said last weekend that in the last 15 months Canadian businesses have been investing. They've been investing at a very strong pace, which is very positive, and we're starting to reap the benefits of that. We're starting to see job growth as a result of that.

So I think you are seeing the traction in the economy. We're not an island, obviously. We're affected by the world.

I'll stop right there.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

I'll just remind members to leave some time for witnesses to answer the question.

Ms. McLeod, please.

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

Thank you, and I also would like to thank the witnesses.

I think we speak for everyone at this table that job loss is always very difficult for the people who are impacted, whether it's in the private sector or the public sector. Certainly in the communities that I represent, when we saw the mills close down, the devastation to the communities was very difficult. No one feels in their heart how difficult that is....

We recognize that we need to create an environment. For example, the mill spent $25 million and re-opened because the corporate tax rate was low, and trade was re-opening into China, Taiwan, and Japan, according to yesterday's headlines. So I think it's critically important to create the opportunity for job creation and then have the public services that we all deem so critical.

That was just a general comment, because I hear the stories that were talked about in terms of the people who have lost their jobs, and I think it's important to mention that.

Mr. Campbell, you talked about the securities regulator, but you didn't have a lot of time to get into specifics. We're waiting for the Supreme Court decision, but how do you perceive it's going to better protect investors, enhance enforcement of regulations, and track new international investment? Perhaps you can talk to why your organization perceives it to be important.

[Terry Campbell]

There were many lessons out of the financial crisis, but one of the key lessons was the critical importance of having a coherent, strong, focused, regulatory system. We have that on the prudential side in Canada and on the consumer side, but we do not have that on the security side. It is a fragmented system that is slow to make decisions. In a crisis, when international authorities need to get together to solve things, you need to have that single point of contact. So I think the coherence of the regulatory system is a key lesson from the financial crisis.

The second issue is enforcement. We hear time and again and read in the newspapers about the problems with enforcement in Canada because there is a fragmented regime across the country. I think the design of the system, as we have seen it through the proposals put forward by the Securities Transitions Office, would significantly strengthen enforcement. That's all to the good for investor confidence, individual consumers, and investors.

There have been a lot of improvements in the provincial security system over the years, but it hasn't gone far enough. I think public companies trying to raise money to create jobs would find it much easier and more efficient to be able to deal with a single authority. Of course, it will be spread across the country. There will be expertise across the country--in Calgary, from coast to coast. You will be able to draw on the pools of expertise that are there. We think it is very clearly and obviously a better system.

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

Thank you.

My next comments or questions will be to the CFIB. I certainly appreciate the really active work of your organization in the red tape reduction commission, which is a bit of a parallel process to this budget. I think it's going to be a really important piece of the puzzle as we move forward.

We're talking about pensions, and one of the suggestions we hear regularly is that we should be thinking about doubling CPP benefits and premiums as a way to deal with the retirement issues. Can I hear how that would impact small businesses?

[Corinne Pohlmann]

As I mentioned in my opening remarks, payroll taxes, generally, have a pretty big impact on small companies, and from the perspective of small business owners, CPP is a payroll tax, since they pay 50% on behalf of their employees.

We have actually surveyed our members on that and they are opposed to an increase in CPP. They see it as detrimental to job creation and job growth at this point in time. We are supporters of the pooled registered pension plan approach as an alternative.

We do know that pension plans are not widespread among smaller firms, so we do agree we need to find more opportunities for smaller firms to provide pension plans to employees, and for themselves, for that matter. But we don't think necessarily increasing CPP is going to be the way to go in terms of making sure that happens.

We think we need to have more options that are less expensive and more available to smaller companies. We're hopeful the PRPP will be that solution.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. McLeod.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thanks to each of you.

The first question is to the CFIB. In terms of payroll taxes, last January there was an increase in the payroll tax of $600 million. The government is scheduled, in January 2012, to increase payroll taxes by $1.2 billion, a 5.6% increase.

Given that unemployment rates are now almost 2% higher than they were three years ago and that we've lost 500,000 full-time jobs in Canada over the last three years, wouldn't it make more sense to freeze payroll taxes exactly where they are now and not increase them further?

[Corinne Pohlmann]

That would be one of our key recommendations going forward. We feel there is growing uncertainty in the global economy, and even in our own business barometer we're seeing a little less confidence than we saw at the end of 2008-09. But having said that, it's not as bad it was.

We feel at this point it might be more prudent to perhaps look at freezing EI rates for 2012, or at the very least extending—or even expanding a bit—the EI hiring credit into 2012 so we can offset some of the costs associated with hiring.

[Scott Brison, Liberal, Kings—Hants, NS]

The hiring credit is $165 million and the proposed increase is $1.2 billion, so I think it's important to put the scale and potential deleterious impact of the increase into perspective.

I have a question for the Canadian Medical Association. We have an aging population in Canada. Health care costs are going to go up. We also have a crime rate that's going down. Yet the government is proposing to move forward with legislation that will dramatically increase spending on prisons and the crime side, at a time, again, when we have an aging population, rising health care costs, and crime going down.

The Parliamentary Budget Officer estimates that just some of the government's crime legislation will cost $13 billion. Is there a risk to the Canadian health care system, on the eve of the 2014 deadline negotiations of the next health care accord, of gutting the federal capacity to invest in health care with this level of spending on crime bills?

[Dr. John Haggie]

My area of expertise is really health care, so I don't know that I can answer all of your question. In terms of health care budget, there's a lot of evidence that would suggest the money we're spending at the moment isn't getting us the value for money that you would think it should.

In terms of the age of the population, there is a considerable debate about what impact that will actually have on health care costs. There is a suggestion that the bulk of health care costs occur in the last year or two of life—I believe 80% of an individual's health care expenditure occurs in the individual's last 18 months. Set against that is an actual fact that the boom generation that everyone's concerned about could actually be the healthiest generation we've seen. There's certainly evidence that the generation that's following it may not be as healthy, so whether or not your question may be one generation misplaced is another matter.

I would answer that question by saying, first, I think we can do better with the money we're spending at the moment. People talk about bending the curve of health care costs, and it may only be that 1% or 2% of GDP might make a huge difference. We certainly don't get the performance value back for the level of expenditure compared with what the European and the OECD indicators would suggest it should.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

In terms of pension options for the 70% of Canadians in the private sector who do not have pensions now, some proposals are not to increase on a mandatory basis CPP premiums but to expand access to the CPP on a voluntary basis; in addition to the pooled registered pension plans, to have a voluntary supplemental CPP that employees of small businesses could pay into and participate in. The CPP is well managed, and it is diversified geographically and sectorally across asset classes of publicly traded securities.

Would that be, in addition to PRPPs, helpful to Canadians who do not have pension plans currently?

[The Chair, Conservative, James Rajotte]

Let's have just a brief response from Ms. Pohlmann, please.

[Corinne Pohlmann]

We just want to make sure that there's a voluntary component out there, and the more options there are, the better it will be.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Van Kesteren, please.

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

Thank you, Mr. Chair, and thank you all for appearing.

I want to make a quick statement, first of all, to the Public Service Alliance.

Thank you for coming. Thank you for your presentation. However, I take one issue with you, if you'll afford me that. Previous to your appearing here, the Canadian Union of Public Employees came. I appreciated their submission, because they talked about how we can sustain an economic recovery in Canada to create quality jobs—I took some issue with them on that—to ensure relatively low taxation, and to achieve a balanced budget.

I would suggest, sir, that you're absolutely right concerning your cases of hardship, and all of us are sensitive to those. But I would suggest that Ms. Pohlmann would also tell you of many cases within the private sector too, and I would encourage you, if you could still do this for this committee, to submit something in which, rather than just look at the hardships—and we all recognize them—you might suggest ways that we as a committee might be able to tackle those issues that the public service union talks about.

I'm on a roll here, Mr. Olson. I have to disagree with your analysis of the cost of houses too. In Chatham, where I'm from, you can build a brand-new house for $450,000, and in Toronto that same house will cost you over $1 million. I would suggest this difference is due to more than just regulatory factors; I think there are other factors that play in, in all fairness.

I'm not going to ask you to respond to that. I'll bet you would like to, but I want to get to Mr. Campbell first.

We're seeing a phenomenon. The Windsor Star had a little quote from Buffalo Springfield that “There's something happening here”--you may have read that.

Could you tell us why our Canadian banks have fared differently and why that is so important to sustain economic recovery? Could you expand on that? I think it's our job to not always jump on the bandwagon but maybe as leaders to say, “Folks, there's another story here; you need to hear something else.” Maybe you could explain to us why we are in the position we are in today.

[Terry Campbell]

The second line of that song was “What it is ain't exactly clear”. Obviously there is a worldwide movement going on here, and we're listening very carefully, very closely. There are people with concern. Obviously there's a lot of uncertainty about the economic future, and we have to be sensitive to that.

But having said that, I mentioned that this is worldwide, and if you look at the protests on Wall Street and in Europe and elsewhere, the things that are the targets did not happen here. There were no bank bailouts; there were no failures; there was no taxpayers' money on the dime being spent on Canadian banks. Banks continued to lend during the crisis. They did what they were supposed to do. Other lenders, non-bank lenders, pulled out of the economy, folded up shop, and went home.

Canadian banks took up the slack to the best extent they were able to. That is critically important. If there is one lesson we have learned from the crisis, it is the importance of having banks that remain strong and can contribute in communities across the country, and they have done that.

So in the sense that there is this maybe unfocused concern out there, I think within this country--and not only looking just at the banks and the role they play in supporting job growth--we have an economy that still is on the plus side of GDP. Jobs are bring created. There is uncertainty, but there is no country in this world that I would rather be in than Canada.

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

Do I have a few more minutes, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have 45 seconds.

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

Ms. Pohlmann, our Minister of State, Maxime Bernier, announced today that there would be $20 million for funding for the Canadian Youth Business Foundation. We recognize, and I think you know this better than I do, the importance of small business and entrepreneurship.

How fundamental is this to achieving some of your goals as an organization? How do you feel about those types of investments from this government?

[Corinne Pohlmann]

I think investments in targeted measures that we know are working, that we know are producing results, can be helpful.

Another is the BizPal initiative, which is an initiative out of Industry Canada that provides information to small businesses from all three levels of government, which has become very useful. That was another initiative that was very important for small businesses.

So yes, as long as you're targeting those specific areas that we know are working, then this can make some sense.