Finance Committee on Nov. 3rd, 2011

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, I think there's ample opportunity in the next round to raise issues.

[The Chair, Conservative, James Rajotte]

Okay. Because I need unanimous consent, I need all members of the committee to agree not only to continue but as to what we do once we continue.

[Shelly Glover, Conservative, Saint Boniface, MB]

Do you need unanimous consent to finish the round while the bells are going?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'm frankly worried about the next round of witnesses, Mr. Chair.

[The Chair, Conservative, James Rajotte]

I appreciate both your points, but there has to be unanimous consent to continue, and to do the same thing. As the chair, I need your guidance. Is there unanimity on what we do if we choose to continue? There's not?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

You would certainly have consent from our side, Mr. Chair, to move to the next round of witnesses.

[The Chair, Conservative, James Rajotte]

Okay, I don't have unanimous consent.

I apologize to the witnesses for this. I'm sorry, but we are going to have to head to the House for votes.

The meeting is suspended.

[The Chair, Conservative, James Rajotte]

I call this meeting back to order, if I can ask colleagues and witnesses to take their seats, please.

Again, my apologies on behalf of the committee. We've had two unscheduled votes this morning. My understanding is there should be no more votes to interrupt our session--I am hoping.

We're very pleased in our second panel, continuing on our pre-budget consultations, to have five organizations with us. We have, first of all, the Canadian Gas Association; deuxièment Desjardins Group; then the Directors Guild of Canada; REAL Women of Canada; and finally, Sustainable Development Technology Canada.

I want to thank our guests for coming in, as well as their patience, and indicate to them that it is a shortened time, but you will have five minutes for your opening statement. I will ask you to keep to that time, and then we'll have questions from members.

We will start with Mr. Egan, please.

[Timothy Egan, President and Chief Executive Officer, Canadian Gas Association]

Thank you, Mr. Chairman. I'll read quickly.

Thank you, Mr. Chairman again, and thank you, members of the committee, for the opportunity to speak today. I'm president and CEO of the Canadian Gas Association. CGA is the voice of Canada's natural gas distribution industry, and its members are natural gas distribution companies, transmission companies, their equipment manufacturers, and other service providers.

Last year, the natural gas distribution sector directly employed over 15,000 Canadians and invested almost $3 billion in new systems and in the operation and maintenance of existing systems. Most people don't know that natural gas has a central place in Canada's energy mix, meeting 30% of the country's end-use energy needs. In fact, today over six million customers, representing well over half of the Canadian population, rely on natural gas for heat and power in their homes, apartments, buildings, businesses, hospitals, and schools.

The Canadian Gas Association agrees with the committee's objectives that advancing on those four objectives for the 2012 budget will help mitigate the threats facing the economy and ensure the economic well-being of Canadian families and communities. Our part of the effort centres on the energy system, a key foundation for economic well-being. Natural gas and natural gas utilities can contribute to smarter energy use, to more innovative applications of energy technology in Canada, and to help keep the Canadian economy strong.

We offer three recommendations for specific action. First, provide energy cost savings solutions to northern and remote communities, those not connected to existing gas and electricity grids. The federal government spends over $7 billion annually on Canada's northern and remote communities, a sizeable portion of which is for energy. CGA would like to work with the federal government to show how natural gas can reduce the energy costs and improve the environmental performance in northern and remote communities. Together, we can leverage investments by Canadian utilities and others to fund energy infrastructure. We can showcase technologies like high-efficiency natural gas-fuelled combined heat and power systems to make use of otherwise wasted heat. We can support national networking capacity billing and information sharing efforts. And we can drive community sustainability by fuel switching from more expensive, higher emitting fuels to less expensive, cleaner burning ones.

The second recommendation is to drive energy efficiency and innovation across Canada. Sustainable economic growth turns on the efficient use of inputs and a culture of innovation. By revisiting the government's energy efficiency programs, there's an opportunity to work more closely with industries to leverage private investment and improve program delivery.

There are two things here. First, on innovation, we'd recommend cooperation with industry on initiatives like our own Energy Technology and Innovation Canada, or ETIC, to mobilize strategic investment in the demonstration and commercialization of natural gas technologies. The goal here is to move efficient and innovative new technologies into the marketplace, and ETIC represents the first step of a virtual fund we've created to do that. We're working with Natural Resources Canada on specific projects now, and we'll want to expand on that cooperation. Second, on efficiency, is to cooperate with CGA and other organizations like QUEST, an organization that appeared before you earlier in the week, I believe, who have a particular interest in better delivery of energy solutions to Canadian consumers across the country. CGA member companies have been running efficiency management programs for over 10 years, realizing about $430 million in gas cost savings for Canadian customers. We think more opportunity exists still.

The third recommendation is to help provide more cost-effective transportation choices to Canadians. Natural Resources Canada worked with a number of private sector stakeholders to complete the “Natural Gas Use in the Canadian Transportation Sector - Deployment Roadmap”. This document shows that the medium and heavy-duty vehicles subsector is a good starting point in terms of where natural gas can offer significantly lower fuel costs, operating costs, and emissions. CGA and the Canadian Natural Gas Vehicle Alliance believe that progress can be made at minimal cost by leveraging existing in-kind federal government and private sector resources. We'd recommend that the Government of Canada do two things: first, convene an implementation panel to act on the recommendations of the “Natural Gas Use in the Canadian Transportation Sector - Deployment Roadmap”; second, establish a partnership between Finance Canada and Canada's transportation industry to assess and define an appropriate fiscal measure to help diversify the sector's energy use.

Mr. Chairman, we believe that natural gas is smart energy. It is growing in popularity in Canada because it is versatile, reliable, affordable, safe, and clean. We believe that CGA, Canada's natural gas distribution utilities, and natural gas can support the government's economic, energy, and environmental objectives going forward.

Thank you for your time.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from Desjardins, s'il vous plaît.

[Bernard Brun, Director, Government Relations, Desjardins Group]

Thank you, Mr. Chair. Dear committee members, first of all, I'd like to thank you for the opportunity given to us to appear before you as part of the pre-budget consultations of the Standing Committee on Finance.

The Desjardins Group is the largest cooperative financial force in Canada. We are a financial institution with over $188 billion in assets and we have over 6 million members across Canada. We are also the only financial institution present in 58 per cent of Quebec's municipalities, and this makes us a very significant component in Canada's economic life.

As part of these consultations, I'd also like to draw your attention to a something particular. The UN recently declared 2012 the International Year of Cooperatives. In fact, early this week, the United Nations officially announced the launch of this year. As a cooperative, Desjardins believes it is extremely important to expand this sort of business model, which is an opportunity for greater participation by individuals and also for a better distribution of wealth.

As for budget forecasts, our comments are going to be very high-level and economic in nature. In light of the time available to us, they will be brief.

First of all, the world economic situation is particularly difficult and is also very fragile. We talk about almost extreme volatility. Nevertheless, Canada is all and all in a very enviable situation. The Desjardins Group therefore believes the budget should stay the course.

That said, we would like to draw particular attention to three recommendations. The first one is on infrastructure. It's no secret to anyone that Canadian infrastructure is in poor shape and is wearing out more or less throughout the country. A little earlier, reference was also made to the rather problematic case of Champlain Bridge. While the economic recovery plan of the Government of Canada allowed some catching-up to take place, it remains that this is an ongoing problem and that the government should focus on this problem by providing adequate funding for the modernization and maintenance of infrastructure, so that at the very least we don't waste the catching-up going on now.

The Desjardins Group is also of the opinion that the government should maintain transfers to the provinces, for both other levels of government and individuals. We're thinking particularly of individuals where transfers for employment insurance and old age security benefits are concerned. These are people who are especially vulnerable. Some of them live below the poverty line and these payments, especially in the state of the current economy, should in our opinion be maintained

Finally, the last matter I'd like to raise is household debt. This has been discussed repeatedly in the past year. We're talking about mortgage debt and also consumer debt. Since 2008, the government acted three times to change measures pertaining to mortgage credit, which in our opinion, was an excellent thing. Now the situation, even though it's relatively stable, still remains fragile. In our opinion, the government must be very vigilant, particularly with regard to mortgage debt, since a rise in interest rates, which is not expected in the very near future but nevertheless seems to us inevitable, could put many Canadian households in difficult economic situations.

As far as consumer credit is concerned, we think that this should also be paid particular attention by the government. We've observed fairly fast growth in debt, even though assets are also increasing.

In closing, I mention the example of Desjardins, which has raised its minimum payments on credit cards from 3 per cent to 5 per cent, which seems to us to be an appropriate measure. We need to send a clear signal to taxpayers and especially consumers. The message is as follows: consumer financing is not long-term financing.

On that, I yield the floor.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll hear from Mr. Barr now, please.

[Gerry Barr, National Executive Director and Chief Executive Officer, Directors Guild of Canada]

Thank you, Mr. Chair.

And thanks also to the members of the committee for this welcome opportunity.

I'd like to tell you that when it comes to audiovisual production in Canada, culture works. The sector is a major source of employment. It creates 117,000 jobs across the country, more work than is generated by the Canadian steel industry. Last year the industry generated just over $6.8 billion for Canada's GDP.

The sector is a Canadian success story. It's an example of what happens when effective public policy, entrepreneurial energy, and talent and skill are mixed together.

We agree fully with the heritage minister when he says that to invest in arts and culture and to support the creative economy is to support the economy as a whole. Our members are entrepreneurs. They are key creative contributors in their industry.

And when the industry minister says that content drives demand for digital technologies and bandwidth, attracting continued investment and talent, he's right, and he underscores one of the reasons it makes sense to create a financial environment in which content production can flourish.

Our recommendations today speak to the creation of this environment. We have the infrastructure. We have a skilled workforce. We have talented creators. The industry is ready to move on to another level, and we believe these recommendations will help get it there.

Canada's refundable tax credit programs for film and television production have helped make Canada a globally competitive venue for production.

The commitment to this tax credit system has given Canada a positive reputational edge to attract foreign production as well as supporting domestic creation. That Canadian edge could be consolidated and enhanced with changes to extend tax credits to qualifying non-labour expenditures, as Quebec and Ontario do in their provincial tax credits. We encourage you to consider that possibility.

We also think you might want to extend the current tax credit arrangements to digital media, something that plainly fits within the goals of Canada's digital strategy. The Canada Media Fund now makes its financial support conditional on there being a digital media component associated with television content. The extension of the existing tax credit arrangements to digital production would complement that new approach.

Minister Moore has said that support for culture should not come strictly from taxpayers, and that finding a way to draw in the private sector should be an important part of government policies in this area. We agree with that. Public policy has gone a long way to build a competitive audiovisual sector in Canada, but it needs a boost from private sector investment to take on the scale and the depth that a globally competitive industry needs.

Film and television, though it is lucrative when you get a hit, is a high-risk business with large upfront expenditures. Oil and gas is another hit-based industry that requires large upfront capital outlays on a number of projects, often unsuccessful ones. In order to get investors and entrepreneurs across the risk threshold associated with this and to invest in this industry, the government used the flow-through share model.

Attracting risk capital for film and television production is crucial for the development of globally competitive content and sustainable corporate growth. With encouraged private investment, production companies can acquire the scale necessary to finance development of a slate of projects, mitigating risk, increasing the chances of finding hits. There can be greater retention than is now the case of intellectual property rights for revenue generation on the finished product.

Minister Moore is right that increased private investment in this already significant sector is what is needed. The flow-through share model is a way to increase private sector investment in audiovisual jobs in Canada. It provides income tax relief and opportunities for investors and entrepreneurs, and it consolidates advantages for an industry that public policy has done so much to build.

Lastly, Canada's public broadcaster is a vital part of the cultural fabric of this country. It provides the greatest opportunity for Canadians to see their own stories on their screens. It's an island of Canadian culture in a televised sea of American programing, which is the mainstay of private broadcasters.

While we recognize that this is a time of restraint, that increases to the government's contribution to the CBC are very unlikely, we caution seriously against cutting this vital cultural institution.

Mr. Chairman, members of the committee, thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Barr.

We'll now hear from REAL Women of Canada, please.

[Diane Watts, Researcher, REAL Women of Canada]

Thank you, Mr. Chairman and members of the committee.

REAL Women of Canada is a national organization of women from all walks of life and from different backgrounds. Since our incorporation in 1983, we have supported the equality of women and recognize them as interdependent members of society, whether in the family, workplace, or community. We have been united in our concerns for the family, the basic unit of society.

The federal Conservative government is to be commended for recently eliminating some forms of discrimination against the family. Positive developments from a family perspective include pension splitting for retired Canadians, making the spousal tax deduction equal to that of the principal earner, the $2,000 tax credit for parents with children under 18 years of age, raising the basic personal deduction in personal income tax, and the universal child care benefit.

Our first recommendation is to end tax discrimination against the single-income family by income splitting. Federal tax policies still discriminate against the career choice made by women who choose the career of full-time homemaker. The child care expenses deduction program provides $7,000 per year for children under 7 and $4,000 for children 7 to 16 years of age in tax deductions to the double-income family, and it makes no similar provision available to parents living on the salary of one parent and caring for children at home. Day care, such as exists in Quebec, provides institutions with about $10,000 per child for two working parents, with no equivalent amount directed towards the one-income family that cares for children at home. These inequities are based on the false assumption that parent-based child care has no expenses, but in reality all forms of child care have associated expenses.

Public policy should equally assist parents if they choose to care for their own children in the home environment. Child care costs exist because children exist, not because both parents work outside the home. One way to correct inequality in family taxation would be to recognize the family unit rather than the individual for tax purposes. Income splitting would address the preferential treatment given to double-income families.

Our second recommendation is that the universal child care benefit should be increased as it funds parents directly rather than costly institutions. It is essential that child care legislation support a flexible system so that Canadian families can make their own decisions in balancing work and family, including having one parent care full time for family needs.

Our third recommendation is to convert special interest funding to tax relief. Status of Women, for example, has an objective that states equality and “the full participation of women in the economic, social and democratic life of Canada”. This is their objective. Unfortunately, this is interpreted to exclude the contribution made by women who offer care and formation at home for their children, family members with health problems, and elderly relatives. This is a serious bias. We have called for the disbanding of this agency for many years. No single government agency or ideology can represent the views of all Canadian women, as no single agency or ideology can represent Canadian men. In order to provide a level playing field for all groups, to avoid government-initiated discrimination, and to decrease unnecessary government spending and duplication of provincial services, the federal government should end all special interest funding.

We have provided ample background information in our brief in support of all these recommendations.

In conclusion, we believe that the family, which is the foundation of a nation, should be central to the formation of all public policy. Government decisions, especially regarding tax and social policy, must be fair and equally beneficial to all Canadians.

In light of recent general awareness of a demographic deficit combined with an aging population, it is important that the government give prime consideration to the family unit and its invaluable contribution to the well-being of all segments of society. We have many references in our brief to studies that support our position.

Thank you, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from Ms. Sharpe, please.

[Dr. Vicky Sharpe, President and Chief Executive Officer, Sustainable Development Technology Canada]

Thank you very much, Mr. Chairman and this committee, for an opportunity to talk to you about how Sustainable Development Technology Canada, or SDTC, which is the primary mechanism of the government to build a clean tech sector in Canada, can contribute to the very important requirements around maintaining and building jobs in this country and strengthening our economic recovery.

By definition, clean technologies create efficiency, which improves productivity and hence competitiveness, often taking what are now waste streams and making them into revenue streams.

If I can direct your attention to slide 2, you will see that these clean tech companies operate in rural and urban communities across Canada. We are not necessarily understood, because we're not a sector individually, but in fact the clean tech sector—the pure play clean tech sector—when you add up all the jobs it contributes to different parts of the economy in oil and gas, mining, aerospace, pharmaceuticals, has put 44,000 jobs into the economy, and a study has shown that these jobs have a median wage that is 13% higher than the average job.

In doing so, they create $9 billion in annual revenues, and it's good to see that 86% of these revenues are generated from Canadian-owned companies. Of those revenues, 53% are from exports, almost half of those going to non-U.S. destinations. These companies, 92% of them, are small and medium-sized enterprises. They come from where we live. They create wealth and economic opportunity where we live.

How are we doing as an area? Well, globally in terms of growth, we've seen the clean tech sector move up in revenue growth by some 11%. SDTC has a portfolio of superb performing companies whose compound annual growth in revenues is twice that of non-SDTC companies, all of which is greater than the global average.

If we want to look at the specifics of creating jobs, 46 of the companies in our 220-company portfolio, into which we have invested $100 million, have so far accumulated revenues exceeding $212 million in 2010 alone and are forecast to do another $190 million in 2011. When you add this up, it is considerably in excess of the amount of money that has gone into them, and almost 75% of the total value of the fund.

We can see an example. Mercedes had an opportunity to choose where it would place its new $50 million fuel cell plant globally, and it chose to go to Burnaby, British Columbia, because of this.

But SDTC contributes to jobs in the forestry and agricultural sectors by often taking waste, non-food fuel, food crops, and turning it into biofuels and also into products that have additional revenue and that diversify the incomes of our farmers.

We also work extensively with the oil and gas industry on how they can improve the efficiency of their extraction methodologies and reduce the impact environmentally. This is all very important.

Originally, clean tech in 2005 had about 4% of the investment money placed in Canada; it is now nearly 20%. The important point here is that we also leverage public funds extensively. At the project level, we do one in three, but our total leverage, when we help our companies get financing from the private sector, is at times 14.

Essentially, if you look at the TSX, the largest clean tech lister in the world, 30% of those companies are ours. You can see that essentially we have an opportunity to build into a massively growing economy an economic opportunity; the export numbers show $60 billion potentially by 2020 and 126,000 jobs.

We feel that we've performed well. We've been evaluated thoroughly. We are requesting explicitly, so that we may maintain that momentum and help Canada seize its share of the export market, $110 million per year for the next five years in the upcoming budget.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We begin members' question with Mr. Julian.

You have five minutes, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair. We'll only have time for one round, I assume, so I'll split my time with Mr. Mai.

Am I right?

[The Chair, Conservative, James Rajotte]

We are scheduled to go until one o'clock. If the committee consents, we can go beyond that for questions, but it's up to committee members.

Do committee members wish to go beyond one o'clock?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'll split my time with Mr. Mai just the same, and we'll see what happens at one o'clock.

Thank you very much to all our witnesses. It is very kind of you to be here.

I'm going to start with Mr. Brun. I find what you've told us, on behalf of the Desjardins Group, to be extremely important. For days, witnesses have been telling us it's essential for the budget to contain investments and not cuts, which is what the government was planning to do. The message is very clear, investments are required in this budget.

You talked about ensuring quality infrastructure. Do you have any figures on the amount required for such an investment to ensure quality infrastructure in the country?

[Bernard Brun]

Are you asking how much investment would be necessary for Canada as a whole?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Yes, and I'd also like to know how much would have to be invested annually. If you had to draft the next federal budget, how much would you allocate for infrastructure?

[Bernard Brun]

I can't give you a specific figure, but I'd be happy to send you our economic studies on this matter. I couldn't give you an exact figure.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

The Federation of Canadian Municipalities is talking about a total deficit of some $125 million in the area of infrastructure. Do you think this is an accurate figure?