Finance Committee on Nov. 7th, 2012

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

Actually they have. If one is interested in jobs and growth we have more than 820,000 net new jobs in Canada since the end of the recession in the summer of 2009. That's easily measured. It's accurate. It's respected around the world. The Canadian brand of fiscal responsibility and monetary responsibility is very strong.

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

Do you agree that there is over $500 billion currently sitting in private companies' coffers and that this money is not being reinvested in the economy?

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

I appreciate the question. I think the operative word there is “was”. We have actually seen some increase in capital expenditures by Canadian corporations. We've seen some acquisitions. We've seen more activity. We've seen that the special provisions with respect to incenting the purchase of manufacturing and processing equipment have had some positive effect. As the year has gone on, I'm more encouraged by the level of business investment by Canadian businesses.

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

I just want to provide you with some context. You and the Governor of the Bank of Canada talked about that issue this summer.

I would also like to come back to the fiscal cliff in the United States. I think my colleague Mr. Adler mentioned that. Unless I am mistaken, you said today that, if we were faced with a similar budget issue, you would be open to certain stimulus measures.

Since you also praised the committee's work when it comes to pre-budget consultations, could you tell us what kind of stimulus measures you were thinking about, in terms of programs or anything like that?

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

First of all, I'm not envisaging anything right now. What I said before and I say again is we are a pragmatic, sensible government. If our economy goes into recession because of an external shock from the United States or the eurozone, or both, we will take steps to stimulate the economy. What we have done before we will do again, and you know what we have done before.

We would not do exactly the same thing again. We've learned, I think, some ways to do things better from our experience during the great recession, but we are not going to stand by and have the Canadian economy slip deeply into recession with high unemployment.

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

I also agree. During pre-budget consultations, many people called for the government to invest in infrastructure. I think all the committee members think that could stimulate the economy and create jobs here.

However, we may like to hear more ideas regarding this. We would also like you to talk more specifically about your budget or the Budget Implementation Act.

There is a tax credit for clean energy generation equipment. We asked the officials how much money was earmarked for that. They said about $4 million would be set aside for clean and renewable energies. I know you said there were no subsidies for oil, but organizations such as the David Suzuki Foundation and the Climate Action Network Canada are saying that $1.4 billion in subsidies is provided for fossil fuel.

[The Chair, Conservative, James Rajotte]

Please ask your question.

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

Yes.

Do you think we should invest more in green energy—in other words, maintain the investments—and not only $4 million?

[The Chair, Conservative, James Rajotte]

Briefly, Minister.

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

We are encouraging clean energy investments in two ways. One, we take away the tax benefits of fossil fuel production. Any of the tax advantages they have are gone. Then we help with the new investments they're dealing with, with clean energy. We are expanding the incentive; well, last year we did expand the incentive to include equipment that generates clean electricity, using waste to create heat. We have further provisions for a broader range of bioenergy equipment in this bill.

[The Chair, Conservative, James Rajotte]

Great. Thank you.

Thank you, Mr. Mai.

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

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

Thank you, Mr. Chair.

Thank you, Minister, for being here. I want to thank you for your work. I think everybody realizes, in this place at least, the hours and the diligence you and your department have put into your job, and the results are there. We are most appreciative of what you do.

I got a call this afternoon from a local reporter—probably most of us did—asking me what I thought about the election results. I think they're fine. That's an American decision and I wish Mr. Obama the best. I went to bed early last night; I had a hunch that was going to be the result.

However, I got up really early because I had to find out about proposal six. I think you're familiar with proposal six. In my neck of the woods that was an attempt by the owner of the Ambassador Bridge to stop the agreement that we had made. I was with the Prime Minister when he made that announcement with the Michigan governor for that very important bridge that we have acted upon to get built for Canada.

We get criticism from time to time. People say this is an omnibus bill and why are we putting in these things, and I'm sure you're familiar with the bridge to strengthen trade act. It's in part 4, division 5. I wonder if you could tell this committee why that is so very important to us as Canadians and especially for our economy.

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

Thank you for the question.

As you know, that's one of the sections for another committee to look at, but I'll talk about it.

This is economic infrastructure. This is the kind of infrastructure we need so that we have more jobs, growth, and prosperity in Canada.

Personally, I've been working on this issue since 1995 when I was first elected to the provincial legislature. I was minister of economic development, minister of finance in Ontario. We worked very hard back then to accomplish this. Still we're sitting here in 2012 in Ottawa and it's not done yet. However, I'm thrilled with the result. I would not be candid with you if I didn't say that I'm thrilled with the result. We can go ahead with this now.

It's usually important to the auto sector. The auto sector, as you know, is reviving. It's doing very well. Sales are up significantly. We have an integrated auto sector in North America. Chrysler vehicles and so on go back and forth. I think the average is seven times to Detroit and back to Windsor during the course of their manufacture.

This is hugely important for southwestern Ontario, for the auto sector, for employment, good jobs, and a good future. It's good for the parts business as well in southwestern Ontario.

I'm thrilled that the voters of Michigan supported the proposal.

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

Thank you.

We talked many times about the importance in my riding, as well, of the greenhouse industry and how much flow goes there.

Mr. Chair, how much time do I have?

[The Chair, Conservative, James Rajotte]

You have just under two minutes.

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

I'll ask the question very quickly.

In the summer I went to an OECD conference. The socialist part of that organization is quite emphatic when they talk about austerity and how this is harming economic growth. I heard you say at the last G-8 meeting that there's a consensus that governments have to get spending under control. I'm encouraged to hear that. I just wonder, because we hear it in this place, too, if we're doing the wrong things when we cut back and reduce spending. I wonder if you could enlighten us on that.

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

When Chancellor Merkel visited Canada this summer, she made it very clear that Canada is on the right track in controlling expenditures. Germany has done so and Germany has avoided a lot of the difficulties that other countries have experienced in Europe and has maintained quite a strong manufacturing base in their country.

I know you've run businesses. I know you're busy here in Ottawa now so you're not there all the time. However, you can't run a business, you can't run a household, you can't run a country by running into debt year after year and pulling out the credit card every time there's a problem and adding on to your debt load. It eventually catches up with you. It catches up especially when interest rates go up, and they inevitably will go up, which is why we've been saying that, and I've been saying, and the governor has been saying that about our housing residential mortgage situation.

We all have to make sure that we stay on track to balance budgets, that we keep the Toronto commitments. The Prime Minister showed a great deal of leadership on that in pushing that forward at Toronto and in the G-20. I think we all need to get on that course. Really, there's not a lot of push back that I hear at the meetings from some of the countries that are in difficulty, but there has to be the will to follow through and to implement, which is always challenging.

Ireland, for example, is following through and is going to be successful, in my view, in their austerity measures, at the same time as promoting economic growth in the country, and they will recover.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Mr. Marston, please.

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

Welcome, Minister. I'm pleased to see you again. That is the biggest posse I've ever seen with anybody, but we're glad to have them here because I'm sure they'll supply good information if we need it.

You will recall, sir, that we went back and forth in the House a bit during the time that you started talking about the proposals for changing OAS. At the time, we were trying to draw out from you the costing figures that you were working from. It caused us some grave concerns at the time we were having that kind of a struggle. Recently the Auditor General has talked about the fact that you were in possession of those, and your department had them for a considerable bit of time before.

I'm going to ask you if you'll give us a commitment today that going forward, for the benefit of the parliamentarians in this committee, we'll be able to access those types of figures as we need them to do our due diligence.

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

Yes, there were some recommendations made by the Auditor General, as you know, and we've agreed to follow all of the recommendations that the Auditor General made, except his recommendation about the federal Department of Finance commenting on long-term financial situations of the provinces. That's really an area of provincial responsibility. It's not an area of federal responsibility. I appreciate the comments you've made and if life goes well for you, some day you could be the parliamentary budget officer.

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

It'll have to go really well.

I'll go a little bit further. There are all kinds of new buzzwords that we're starting to hear, the financial cliff, dead money, things of that nature. Mr. Carney has talked about it.

Do you have any specific plans of addressing the so-called dead money to get it active?

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

Yes. We took some measures, as you know, in the budget last year to encourage investment in manufacturing machinery and new processes and we have seen an increase in that spending, so that's encouraging. As I was just saying to your colleague, we've also seen in recent months more spending showing up by Canadian companies, so they're starting to invest some of their capital. We're seeing some acquisitions done and so on. It's encouraging.

Having said that, there could be more and it would be helpful for there to be more.

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

I come from Hamilton where we had for generations a huge industrial base. We've heard at this committee concerns regarding SR and ED, and you'll notice that's percolating through the conversation fairly well tonight. We've had indications that the changes are going to drop us from ninth to fifteenth in R and D. There is all kinds of negative commentary out there. People are saying there are concerns that we'll be less productive as a nation going into the future. Investment in R and D is one of the things that seemed, for North America as a whole, to get us into a better position to compete in the world. We have the education systems to fortify that. Again, I'm from Hamilton. We have McMaster and the centres of excellence there.

At a time when other countries appear to be investing more, and your comments earlier tonight seemed to address that to some extent, could you give us more reasons as to why you appear to be moving in the opposite direction?

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

We're moving in a modified direction, I would say. The reason is simple. We invest among the largest amounts per capita in the world in R and D, and our results are not stellar. They're a long way from stellar.

Do we just continue with this system, or do we try to improve it to get better results? After all, this is a tax incentive program designed to get better R and D results, at the end of the day, so that it shows in the economy and helps create jobs.

We think, and Mr. Jenkins' panel was of some help to the government on this, that it would be a good idea to take some of the money and encourage young innovators, including the ones at McMaster University, which has a very good reputation for innovation in medical devices and all sorts of innovation.

There is risk to it. We'll see how well the venture capital scheme works. It will take several years to see how it takes hold. There are many reasons for a positive attitude toward this. We have some really good universities such as McMaster with great engineering programs, superb medical schools, and so on, and some very bright young people. We think they should get part of the action.

[The Chair, Conservative, James Rajotte]

You have 10 seconds.