Finance Committee on Nov. 1st, 2011

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

This has been a constant challenge since we've been the government. We have lowered the small business tax rate to 11%. We have increased the amount of the small business income eligible for the reduced rate to $500,000. As I say, we have gone ahead with the hiring credit for small business in this budget. We need to encourage entrepreneurship, risk-taking in Canada. We need to encourage people to work, to invest their money, take some chances, hire people, as entrepreneurs and small businesses do.

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

I put this question to the governor this morning and I want to get your take on this.

You have been quite stringent and forthcoming in your decision to wrestle the deficit down and to get that under control. There are those who think we should continue to spend money at this time, maybe spend our way out of the deficit.

Why is it important for this country that we adopt and maintain a policy whereby we don't go on successive deficit accumulation?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

So we'll be in good shape when the next crisis happens, as we were in good shape when the last crisis happened.

One of the challenges that some countries in the world are facing now, when we again have a time of some economic uncertainty, is that because they have accumulated deficits year after year, and therefore have accumulated a very large public debt, their room to move is limited. In the budget in January 2009 we were able to bring in a large stimulus program federally. I thanked the provinces for joining with us in that. This federation worked very well during the last recession, where together we provided stimulus of 4% of GDP, which is what we all agreed to do at the G-20 summit in Washington in November 2008.

This is important, but part of the economic action plan was always that we would return to balanced budgets. If you go back and look at the budget in 2009, it's set out there. We're on track now in the medium term to go back to balanced budgets. The deficit this year is roughly 40% less than the deficit last year. We need to stay on this track so we'll get back to balanced budgets in the medium term. It puts our country in a position of strength in the world, where we can resist when crises come to our country from outside.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Mai, go ahead.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

Minister, as we know, infrastructure investments generate five times as much spin-off as corporate tax cuts. That information comes from the 2009 budget. According to the Federation of Canadian Municipalities, Canada has a structural deficit. We are talking about infrastructure worth $120 billion or more.

As you mentioned, the Standing Committee on Finance has travelled across Canada. Economic experts, as well as business and chamber of commerce representatives called for more investments in infrastructure. Today, we had with us representatives from the Assembly of First Nations, and even the Association of Consulting Engineering Companies-Canada was on the Hill. Those people are also calling for increased investments in that area. That is an urgent need.

We know that those types of investments lead to job creation and economic development. They also encourage stability here in Canada. Why then should we limit those investments? Do you think that the measures taken as part of Bill C-13 are sufficient to resolve the infrastructure deficit issue?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you for the question.

Obviously I feel the measures in the budget are the appropriate measures. Making permanent the $2 billion sharing of the gas tax with the municipalities was a request from the Federation of Canadian Municipalities; in fact it was their primary request. It will make it easy, especially for smaller municipalities, not all of whom have been able to do this effectively, to go to their financial partners and leverage the $2 billion share they get every year. This should be leveraged, it shouldn't just be taken as a grant, and especially, as you have accurately described, in infrastructure, which has a long life ahead of it. So it's very appropriate for municipalities to leverage that money.

The other request we had from the Federation of Canadian Municipalities was to launch a discussion, a consultation, with them to develop our infrastructure plan for the future, which is being undertaken by the Minister of Infrastructure. We also have PPP Canada Inc., which we created several years ago, which is approving projects, negotiating public-private partnerships in Canada, and playing a leading role there, and I expect will play a leading role with respect to the commitment to build a Pont Champlain, for example.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Part 10 of Bill C-13 vests the Minister of Finance with the power to provide additional funding to the Canadian Securities Regulation Regime Transition Office.

First, could you explain why the original amount of $33 million was not enough for the Canadian Securities Regulation Regime Transition Office?

Second, most of the provinces are against this bill, and the Conservatives promised in their 2011 platform not to carry out this project before the Supreme Court had ruled on it. So, why are we going ahead with it?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

We are anxiously awaiting the decision of the Supreme Court of Canada on the reference we made to it of the draft bill for a national securities regulator. The argument was heard by the court in April, and we're looking forward to the court's decision. We will, of course, honour and follow the decision of the Supreme Court of Canada, as I expect will the other governments in Canada.

In the meantime, we have been taking some preparations to have the draft bill, which we are able to refer to the court so the court itself can see the proposed legislation in detail. Some work has also been done on other regulatory aspects. Of course, we have a group of participating provinces and territories that have been working with the transition office to help prepare the way for a national securities regulator.

This is the one part of our financial system where we have a significant gap. We have the Bank of Canada, the Department of Finance, the Office of the Superintendent of Financial Institutions, CDIC, and the Financial Consumer Agency of Canada, but we do not have a national securities regulator at the table. This is a gap that I hope we will be able to fill.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Jean now, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair, and thank you, Minister, for your attendance today.

First of all, I want to thank you for your good management of the economy. My constituents thank you for keeping the election promises in relation to the volunteer firefighters tax credit, and I thank you for reducing my personal taxes, as well as those of my constituents. I appreciate that very much. The children's arts tax credit is especially popular in northern Alberta, as is the hiring credit for small business.

It seems clear that you and your department respect Canadian taxpayers. In particular, you've taken the initiative to close numerous tax loopholes, as well as phase out the direct subsidy of political parties. That, of course, was part of our commitment.

When I first came to this place, and later on, I found it shocking that taxpayers were giving money to political parties without their say-so, and political parties could do whatever they wanted with that. I want to say congratulations on that. The Canadian Taxpayers Federation was recently quoted as saying that eliminating the per vote subsidy is a major victory. It's a major win for taxpayers and for democratic reform.

I wonder if you can describe to us how that is a major win for taxpayers--I think it's fairly obvious--and how much that major win is year over year. How does the phase-out of this particular subsidy work?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you for the question. I'm glad you're paying less tax. It's a good thing. I was unaware of that directly. Don't worry, I can't check, so it's all right.

We've done things before on this issue of funding of political parties. We have a fairly generous system, as you know. If people make donations to political parties they get a significant tax credit in Canada. Back in 2006 we eliminated large personal donations federally, and we also banned donations from corporations and unions.

In this bill we are going to follow through on the campaign commitment to phase out per vote subsidies for political parties. So the subsidy will gradually be reduced from $2.04 per year per vote in increments of 51¢ starting April 1, 2012. It will be completely eliminated by 2015-16, and there'll be a savings there for the federal treasury of about $30 million by 2015-16.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

So by my calculations that's somewhere around $30 million per year. Would that be fair to say?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Yes, that would be very fair and accurate to say.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Now, sir, I have to say that the thing that most pleases my constituents is what has been mentioned by the parliamentary secretary, the new doctors and nurses being encouraged to go into rural parts of Canada. I have to say that over the last 10 years we in northern Alberta, in particular in Fort McMurray, have been faced with real struggles for doctors in particular. I'm wondering if there's been an analysis regarding how many doctors would be encouraged to go from urban areas—where there is, frankly, an abundance of doctors, or at least a significantly greater number than in rural Canada—to rural Canada. If so, depending on whether or not this works, has there been thought of a re-analysis to encourage them even more so?

I see you looking to your officials.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

I am, because I don't have the numbers. I know there were some numbers on what was expected from the tax incentive for doctors and nurses in rural Canada, but let me see if anyone does have numbers.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Minister, I know we're bound by time here, and your time is very valuable, so maybe we could have those forwarded to the committee chair.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Sure. I'd be happy to get the information and send it along.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you very much, sir.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Jean.

I think I speak on behalf of all committee members when I say we look forward to your sharing your increased disposable income with all of us.

We'll go now to Mr. Marston, please.

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

You're welcome to buy us coffee any morning.

Minister, welcome. I'm glad to see you here again.

You'll know better than most that the New Democrats and myself have been raising concerns about pensions in the House for a couple of years now. I have to say that, in my opinion, when we look at where it stands, Bill C-13 doesn't begin to address the very real pension problems facing Canadians. It also suggests, sir, that part 15 of Bill C-13, which deals with the CPP disability, could only have been agreed to at meetings of the federal, provincial, and territorial ministers. For me—and you'll know this well because I questioned you in the House prior to Kananaskis—this was a great opportunity to have started a phased in enhancement of the CPP. I have to question why instead you undertook what appears to be house cleaning. It really strikes me as strange, because we felt before that there was an opportunity here, that going forward it seemed to be something you had recognized as a serious concern.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Thank you for the question.

It's a good question about possible increases in the Canada Pension Plan, and the ministers of finance have dealt with this at some length at our conference. We commissioned some good research that was done. Jack Mintz led that research team, and it reported back to the federal, provincial, and territorial ministers of finance.

The reality is that we've gone through some economic slowness, and the concern was, and remains, that this would not be the best time to impose an additional burden on business by requiring higher CPP premiums. It is a work in progress, however. I say to the honourable member that this is an issue we continue to discuss. I certainly hear from many on this subject, including the Canadian Labour Congress, which has had a lot to do with the subject, and I welcome its continuing participation.

We have gone ahead with the pooled registered pension plans to address a gap that we have; that is, if you work for a big company in Canada you probably have a pension plan that you're eligible to participate in, but if you work for a small business in Canada, or even some medium-sized businesses, you probably don't. That's the advantage of the pooled registered pension plan.

So we look forward to introducing legislation, I hope, on that subject before too long, again in cooperation with the provinces and territories.

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

Sir, as you're considering your legislation for PRPPs, you might consider capping the fees, as that's an area that could be of serious concern to folks.

This morning, when Governor Carney was before us, I posed a question to him, and I appreciate the fact that you're here, and perhaps it's worthy of doing it again. I'm very concerned about the potential for the Canadian banks getting sideswiped by the American exposure to the European banks. There are a number of European banks that are problematic right now, and it looks to us as if the Americans are going to take a bit of a pounding if they go under. Do you see any opportunity or chance that this would affect our banks?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Well, as you know, the Canadian banks have very limited exposure to Europe, but your point is well taken that American banks have greater exposure and we can be affected by that. I'm satisfied that our banks are well capitalized, stable, well regulated, and well supervised, and that the risks they may have relating to American counterparties are controlled risks.

[The Chair, Conservative, James Rajotte]

You have about a minute left.

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

I have one last point.

Mr. Jean talked about the defunding of the money for political parties. It's my understanding that when Hillary Clinton and Mr. Obama ran against one another for the nomination of the party, it cost $250 million. One of the things we have here...even if it was only $20 million, one of the things we had in Canada was the ability for our parties and our people to run without being exposed to spending half their day, as the congressmen in the U.S. do, raising money.

You said $30 million will be saved by this. I accept that figure. But what percentage of our national budget would that be in what we're sacrificing in the name of this cut to our democracy?