Finance Committee on Nov. 25th, 2013

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

I think people forget that the CPP is a contributory plan. Every time the government raises rates, the employer pays more and the employee pays more. If you're self-employed, the hit is even greater. So I just say, “Whoa back on that, and we'd just better be careful”. Let's get this economy moving, let's get back up to growth rates like we used to have, and then we can look at such things, and at the same time encourage Canadians to make intelligent choices and save money.

[Randy Hoback, Conservative, Prince Albert, SK]

Again, Minister, if you look back to 2008, you've given us a good walk through time here and some of the things that you were dealing with back in those times. Looking now and comparing Canada to the rest of the world, could you give us a little bit more information on that?

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

I don't know how to put it. I think we took the risk, and the risk worked. But it worked not because of the Prime Minister or me, but because the public servants got the job done, got the money out the door.

[Randy Hoback, Conservative, Prince Albert, SK]

You had a program and you got the money out the door. I know in my riding the amount of money we spent on infrastructure. This is hard infrastructure. It was required. It was going to have to be done sooner or later.

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

If we had to do it again, I'd do it again. I'm not ideological about such things. When you're faced with things like that, you have to look at millions of people losing their jobs.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Flaherty.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hoback.

Mr. Minister, thank you very much for being with us here this evening. We appreciate your input into this process on the Budget Implementation Act.

Colleagues, we will suspend for a few minutes and bring our last panel of the day forward. Thank you.

[The Vice-Chair, Liberal, Scott Brison]

On Bill C-4, the Budget Implementation Act, we're very pleased to welcome Armine Yalnizyan, senior economist from the Canadian Centre for Policy Alternatives; Monique Moreau, senior policy analyst for the CFIB; Michelle Gauthier from Imagine Canada; and Marie-Hélène Arruda from the Mouvement autonome et solidaire des sans-emploi, réseau québécois.

We'll begin with Ms. Yalnizyan. These will be five-minute rounds initially, and then we'll go to Q and A.

Welcome.

[Armine Yalnizyan, Senior Economist, Canadian Centre for Policy Alternatives]

Thank you very much, Mr. Chair.

First of all, I'll give an introduction and a context for my comments. Thank you very much for the invitation to appear before the committee, as members of Parliament review the second budget implementation bill for the 2013 budget. It's a particular honour to be able to appear as a witness since this committee, I understand, will be restricted to hearing only seven hours of witness testimony in addition to what you just heard from the minister over only two days of hearings.

In these two days, parliamentarians will not have an opportunity to meaningfully review the impact of all of the measures embedded in this legislation, which run from tax and spending changes, to EI reforms, to conflicts of interest in financial institutions, a brand new system of processing economic immigrants, and new rules for choosing Supreme Court justices. I have left out dozens of additional changes, including more than 60 amendments to the Canada Labour Code and a new restricted definition of “danger”, an appeal of that definition of danger that the Canadian Bar Association says turns the clock back by decades on health and safety concerns for workers.

In 1994, a freshly elected MP Stephen Harper asked the Speaker of the House of Commons to rule a budget bill out of order because of its sweeping scope. It affected public sector pay, it affected EI measures and payroll taxes, and a reduction in federal spending through the Canada assistance plan. It offered an extension of transportation subsidies and the ability for the CBC to borrow money for the first time.

At that time Mr. Harper said, “The subject matter of the bill is so diverse that a single vote on the content would put members in conflict with their own principles”. That omnibus bill, ladies and gentlemen, was 21 pages. This omnibus bill is 308 pages. It amends 50 pieces of legislation on a diverse array of topics, many of which have zero to do with the federal budget of 2013. it makes a mockery of the process of public oversight.

Consequently, and in keeping with the spirit that brought Mr. Harper and his Conservatives to power in 2006 and since on a pledge of accountability and transparency, this committee should split Bill C-4 into fiscal and non-fiscal measures in order to permit sufficient scrutiny of these incredibly important policy changes that are being proposed. Further, this committee should treat as separate and apart the non-fiscal measures that are major policy initiatives. These include the selection of Supreme Court justices, the fundamental changes proposed to the Canada Labour Code, and the selection process for new economic immigrants who will build the Canada of our future.

One simple way of accomplishing this proposal is to defeat these measures in Bill C-4 and invite the government to reintroduce these measures as separate pieces of legislation. This approach can also be used for matters that you view as time-sensitive, with such items put in a separate bill.

The Parliamentary Budget Officer has queried why the federal government has under-spent its budgetary allocations by $10 billion each year for the past three years. Yet the second round of supplementaries that parliamentarians are considering are requesting $5.4 billion more to spend.

The finance minister's economic and fiscal update notes that the deficit is a surprising $7 billion smaller than forecasted just a few months ago.

It is hard not to feel that the public is being somehow gamed, that payments are suppressed in order to be able to declare great fiscal prudence, then picked up through supplementaries for which parliamentarians have even less time for scrutiny than this budget implementation bill.

In 2013, the budget implementation bill was delayed because of prorogation. Supplementary budgets will have to be passed with even less than usual oversight and there is no time to study a request for $5.4 billion. The integrity of the democratic process that assures there are checks and balances on the government's ability is at risk.

Though the Stephen Harper of 1994 has silenced his concerns over these procedural sleights of hand, he has inflamed that same ardour in many other people.

In conclusion, the Supreme Court controversy that led to the measures in this bill did not even arise until after the budget was tabled. The budget is being used as a Trojan horse to rewrite the Canada Labour Code and our immigration policies. These are not add-ons. They turn the workhorse of a budget implementation bill into a Trojan horse. I fear that Bill C-4 is starting to look alarmingly like a Duffy budget bill, stuffed with hidden measures and designed to mislead the public. But it can and should be amended.

Accountability and transparency were great principles in 2006. They are great principles in 2013 as well.

Thank you.

[The Vice-Chair, Liberal, Scott Brison]

Thank you, Madam Yalnizyan.

Now Madam Moreau, from the CFIB.

[Monique Moreau, Senior Policy Analyst, Canadian Federation of Independent Business]

Thank you, Mr. Chair, and good evening.

Hello again to the members of the committee.

As many of you heard last week, CFIB is a not-for-profit, non-partisan organization representing more than 109,000 small and medium-sized businesses across Canada that collectively employ more than 1.25 million Canadians and account for $75 billion, or nearly half of Canada's GDP. Our members represent all sectors of the economy and are found in every region of the country. Addressing issues of importance to them can have a widespread impact on job creation and the economy.

You should have a slide presentation in front of you that I would like to walk you through in the next few minutes.

CFIB's October business barometer on slide 2 shows that after a rough spring, small business optimism has trended into more positive territory so far this fall. The barometer showed a gain of a half point to 65% from September's reading, but it generally remains in line with the average value from the past four months.

Full-time hiring plans are basically unchanged this month and typical for this time of year. We take this as a sign that business owners remain cautious. Only 41% of owners report a generally good state of business.

The barometer has shown us that the economy is still a bit sluggish. To help us get through this sluggishness, we believe the government needs to address the issues of greatest concern to small business owners so that business owners can focus their attention on hiring staff, growing their business, thereby growing the economy. What are those concerns? As you see on slide 3, the top issue of concern to small businesses is the total tax burden, which includes taxes from all levels of government. Another high-priority issue is government debt and deficit. Small business owners understand the importance of paying down debt and we have seen this issue grow in importance as the deficit itself has grown over the last few years.

Employment insurance is a high-priority issue for over half our members, the reasons for which I will get to in the next few slides.

As the previous slide has demonstrated, one of the top issues of concern to small business owners is their total tax burden. There's only one taxpayer and they pay taxes to all levels of government. With so many taxes, it's important to understand which ones have the biggest impact on the growth of their business. As you can see on slide 4, payroll taxes have by far the greatest impact on growth. Why? It's because they are effectively a tax on jobs. They must be paid regardless of whether the business has posted any profit that month.

Since EI is a payroll tax that can have a big impact on hiring decisions, our members have told us repeatedly how much the EI hiring credit has helped them maintain their workforce, especially during uncertain economic times. As you see on slide 5, 64% of our members indicated that the EI hiring credit would help their business. The stability of the EI rate is just as important to our members, and 85% of our members indicated that a steady and predictable EI rate is critical for small business to help keep their businesses afloat during unstable economic times, and in turn help them grow their business as the economy improves.

Even a few years after the recession started in 2008, as you'll see in slide 6, over half our members were in support of the EI hiring credit. The EI hiring credit has given those small businesses that received it a break from payroll taxes, this particular tax being EI. The hiring credit also allows small business owners to keep their employees, increase wages, and hire when they might not otherwise have been able to.

On slide 7, our research from 2011 shows that the rapid rise in premiums prior to the EI rate freeze would have resulted in the fund coming into balance in 2017. We see from the government's recent economic update that the fund will be in surplus prior to this time. While the recent rate freeze announcement has provided some predictability to the rate-setting process, which our members welcomed, we do recommend that the seven-year rate-setting process begin as early as possible.

CFIB recommends a fixed-rate approach as it provides the most stability in premium rates, which is a very important factor for small firms in their business planning. To conclude, CFIB supports the EI hiring credit and its expansion. It has given small business some measure of security during uncertain economic times.

Second, rate stability is a critical component of a well-managed EI program. The current projections indicate that we are close to the break-even rate and that the EI account will be in surplus in 2016. We suggest the government reduce rates as soon as the EI account is in balance, and do not let surpluses accumulate.

Last, CFIB encourages the government to maintain a separate, independent EI account. Transparency and accountability to the taxpayer are key to creating business confidence in the EI system.

Thank you, Mr. Chair.

[The Vice-Chair, Liberal, Scott Brison]

Thank you, Madame Moreau.

We'll now hear from Imagine Canada, Madam Gauthier.

[Dr. Michelle Gauthier, Vice-President, Public Policy and Community Engagement, Imagine Canada]

Thank you Mr. Brison. I would also like to thank the committee for having invited us this evening.

When I appeared before you to speak on behalf of Imagine Canada during the pre-budget consultations, I said that we had to change the way we think about the charitable sector's contribution to Canada and to the whole world. Charitable and not-for-profit organizations employ two million Canadians, represent more than 7% of GDP, and involve 13 million volunteers. We create jobs, we stimulate economic growth, and nine out of ten Canadians believe that charitable organizations are an essential part of our quality of life.

It is in that context that we would like to speak to one part of Bill C-4, that is the enhancement and extension of the Hiring Credit for Small Business.

As committee members are aware, the hiring credit for small business would provide a rebate of up to $1,000 to eligible employers whose EI contributions increase from one year to the next. Despite the name of this initiative, this provision is available to all small employers including those in the non-profit sector. This initiative is most welcome and yet reinforces my point about changing our mindset.

When the credit was announced in the 2011 federal budget, given its labelling, charities unfortunately did not take note immediately. It was only when Imagine Canada made inquiries months later that we learned, albeit happily, that it applied to our sector as well.

We appreciate that the credit was designed and implemented without discriminating between for-profit and not-for-profit employers. Greater clarity, however, about its applicability to our sector would have enabled the government to recognize more publicly its support for charities and non-profit organizations' roles as employers. In a climate where every dollar counts, greater clarity would also have enabled organizations to make payroll decisions with the immediate knowledge that the credit applied to them.

For policies aimed at promoting jobs and growth to achieve their full potential, we need to make sure not only that they are inclusive, as was done in this case, and most appreciated, but also that they are described and marketed accordingly.

Using the most recent information available to us on staffing and payroll costs, we've assessed the potential impact of the renewed and extended hiring credit for charities. Based on the level of employer contributions paid in 2011, we estimate that almost 40,000 charities could benefit from the hiring credit included in Bill C-4. This represents almost 90% of all the charities that have paid staff. That's 40,000 charities in every community in Canada that will find it a little easier to meet their payroll obligations if they, for example, turn a part-time job into a full-time job, take on new staff, or provide staff increases.

While this is not a magic bullet for charities, it does suggest how government can, through instruments at its disposal and programs already in place, add another plank to its support for charities as engines of economic and social prosperity.

In addition, charities will continue to pursue earned income activities and access to grants and contributions and to depend on the generosity of Canadians supported by the federal government through tax incentives such as the new super credit and the proposed stretch tax credit.

We encourage the government to extend the sector-neutral approach taken with the hiring credit to other policies aimed at job creation and economic growth.

As I explained in my recent testimony, there are numerous federal initiatives that could help charities expand their earned income activities, and thus their financial sustainability and their ability to create jobs.

We look forward to working together to ensure that federal programs such as the Mitacs-Accelerate program, the Business Development Bank, the Community Futures program, and the industrial research assistance program, to name just a few, could assist charities as employers and social entrepreneurs, and that they be fully and unambiguously open to them.

Addressing this issue across all government programs would further reinforce the positive support provided the hiring credit in Bill C-4.

Mr. Chairman, good people doing good things here in Canada and elsewhere in the world are an important part of the story of charitable organizations, but the story is much more than that. The story is about jobs that we create throughout the country, about the economic activity and opportunities that we create, and the enormous and positive impact that we have on quality of life. In short, it is a story about building a stronger Canada and working with Canadians, the private sector and all levels of government to achieve that.

I would like to thank you for this initiative that goes in the right direction and maximizes the contribution of charitable organizations.

[The Vice-Chair, Liberal, Scott Brison]

Thank you, Ms. Gauthier.

We will now continue with Ms. Arruda.

[Marie-Hélène Arruda, Coordinator, Mouvement autonome et solidaire des sans-emploi (réseau québécois)]

Good evening and thank you for your invitation.

I am going to be speaking to the part on unemployment insurance.

What I basically see is that this bill is making the dissolution of the Canada Employment Insurance Financing Board official. It was created in 2008 in order to respond to several concerns that had been voiced by the labour movement. The purpose was also to improve the transparency and independence in the managing of the Employment Insurance Fund and to compensate for the misappropriation of funds. Sixty billion dollars had been taken from the employment insurance surplus.

The board was intended to respond to these concerns and to establish a $2 billion reserve. It would have done so had the legislation been implemented. The funds would have come out of the Consolidated Revenue Fund. It would have been a way to deal with the resentment. By dissolving the Canada Employment Insurance Financing Board, one will also be eliminating this reserve that, of course, never existed ultimately. It could have existed. Two billion dollars would have perhaps somewhat stabilized the employment insurance system during an economic downturn. I think it was a prudent decision.

Now it looks like the idea is to make sure that the Employment Insurance Fund is merely sufficient. There is simply an attempt to balance the numbers, that is all. That may become more difficult if there is an economic downturn. If premium increases are kept at 0.05%, that is one way of ensuring that the system will not be able to adapt during an economic downturn, I believe.

There is something else that we are quite concerned about. When these kinds of caps are set that prevent increases in premiums and when the board and the idea of a reserve are abolished, then the funds themselves are limited. We feel that doing this puts an end to any ability to improve the system that, in our opinion, does not adequately fulfil its mission because it is not adequately protecting the unemployed. Improving the system and providing real protection become impossible when premium increases are so rigidly set.

Several stakeholders spoke about the Hiring Credit for Small Business. Replacing employment insurance premiums and employers' premiums in this way was supposedly meant to foster hiring, employment, etc. In our opinion, this measure does that goal a disservice. Yes, the social security contributions of employers are reduced, but does that foster employment? We doubt it.

Furthermore, this measure is a way of removing the burden from employers having to face the problem of unemployment. I realize that some may be pleased about this measure, but we feel that the part of the bill on unemployment insurance does not necessarily go in the direction that we feel it should. Premiums will be reduced, the amount of money in the account will be reduced, and this means that the protection of unemployed men and women will be reduced; at the very least it will not provide any increased protection.

Those were my remarks. Thank you.

[The Vice-Chair, Liberal, Scott Brison]

Thank you Ms. Arruda.

We will now move to questions from committee members. Mr. Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much Mr. Chairman.

I will begin with you, Ms. Arruda. Thank you very much for your remarks.

I have two questions. The first is about the Canada Employment Insurance Financing Board that was supposed to be responsible for setting premiums. However, it was dissolved before it even existed. On the other hand, what we have heard about employment insurance, from management and unions—that is employees—is that premiums are paid by the businesses and by the employees. The government does not contribute a cent to the account but it makes all the decisions. Minister Flaherty's remarks appear to confirm that the government will be continuing in the same direction.

In your opinion, how can the government justify closing down the board that was supposed to play a much more independent role than government in setting premium rates?

[Marie-Hélène Arruda]

That is a good question. In my opinion, the board was originally created simply to silence the labour movement's demands for an arm's length organization and more rigorous management of the funds in order to make sure that money would not be taken from the surplus. My hypothesis is that, in theory, the board would respond to the labour movement's concerns once it had been established, but in practice, that did not happen. The government was supposed to provide a $2-billion reserve. That was on paper, but it never actually happened. Perhaps the board was temporarily created to deal with the crisis. At the time, that kind of board was necessary because we were in the middle of a misappropriation scandal. Now that that scandal has been somewhat forgotten, the board no longer serves a purpose.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you. And now, it's the government that is going to set the premium rates.

[Marie-Hélène Arruda]

Yes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have a second question. We have just heard from the Minister of Finance and there is a specific problem with respect to seasonal employment. The minister said that employment insurance belongs to those who have had the misfortune to lose their job, not to those who want to use it as regular income. I have the impression that he was directly attacking workers who have seasonal jobs.

Could you take perhaps 45 seconds to comment on that before I ask my next question?

[Marie-Hélène Arruda]

Of course.

I don't think anyone wants to be on employment insurance. If workers have seasonal jobs, it's not their fault; it's not a lifestyle. I don't think anyone really wants to make 55% of their salary. It's not a particularly generous amount. I think that idea is false. Employment insurance is not what people want. It is protection during difficult times. Whether the work is seasonal or not, unemployment is a difficult time, it happens during the off season and one has to survive during that time.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

One should add that several regions depend on seasonal industries such as tourism, agriculture, forestry, fisheries and so on.

Ms. Yalnizyan, I quite liked your presentation on what a budget bill should be. Minister Flaherty appeared just before you did. We asked him why provisions on health and safety, which can be found in divisions 17 and 18 of part 3 of Bill C-4, are in a budget bill. He answered that ultimately the government wants to be accountable and that spending is involved.

If you take that argument to its logical conclusion, anything can involve spending and therefore end up in a budget bill. The government could conceivably only present one budget implementation bill per session and include all the legislative provisions that it wants to bring forward for the entire session.

Do you agree with my reasoning? Could that be the logical conclusion?

[Armine Yalnizyan]

I think the problem has been raised before by, as I pointed out, our Prime Minister when he was just a member of Parliament. If you throw too many things in one bucket, you can't really take a look at the different measures, some of which are fundamental policy initiatives. I mentioned three of them. I mentioned over 60 amendments to the Canada Labour Code, a brand new way of bringing in economic immigrants, and the choice of Supreme Court justices. The Supreme Court justice controversy erupted after the budget was tabled, so this was not an add-on to a budget implementation act. It's just like, whatever, let's just throw things in.

We know that this is the opposite of what we were promised we were going to get with this fresh Harper government approach. This was exactly what they railed against with the omnibus bills of the Liberals, and we just got more, and in spades, in the last few budgets.

[The Chair, Conservative, James Rajotte]

Thank you.

Merci, monsieur Caron.

We'll go to Mr. Keddy, please.