Finance Committee on Nov. 25th, 2013

[The Chair, Conservative, James Rajotte]

Yes, absolutely.

[Mark Adler, Conservative, York Centre, ON]

Thank you. I appreciate that.

I want to ask the minister about the freezing of the EI premiums and about the hiring tax credit, but I want to preface my comments by saying that in the riding of York Centre we organize year-round business round tables, a minimum of two a month, just to keep a pulse on what the business people and the business leaders are saying.

They have said unanimously that the freezing of the EI premiums and the small business hiring tax credit have led to job creation and have created stability in terms of the EI premiums, which is what business needs. Business demands stability. With that stability and with the advantage of the hiring tax credit, they have been able to hire more people, which in turn has more people paying more taxes, and we're able to fund, of course, more of our government operations and what needs to be funded.

I want to ask the minister to comment on the necessity and the importance of freezing EI premiums for small business and how important that is in the job creation grand scheme of things.

Could you comment also on the small business hiring tax credit and how successful that has been for Canadian small business in particular?

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

I thank the member for his difficult question.

The freezing of EI premiums will save employers and workers about $660 million in 2014 alone, and we'll be able to still go forward with our 2017 plan about balancing the EI fund. The Canadian Federation of Independent Business is entirely supportive.

We will not ever again do what the previous Liberal government did, and that is, we will not steal money from the EI plan in order to balance our budget.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

How much time is left?

[The Chair, Conservative, James Rajotte]

You have two and a half minutes, Mr. Adler.

[Mark Adler, Conservative, York Centre, ON]

That's perfect.

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

Thank you, Minister, for being here.

Very quickly, I'll say that I was privileged to hear you at the Economic Club about a year ago. You shared with the audience just what happened in 2009 and just how precarious a position the world was in.

We get so much criticism—and you've had criticism—about increasing the deficit and spending that money, but you had a great explanation. I wonder if you could share with us again why that was so critical and what actually transpired, and, as a result of it, how that got us out of a really bad situation.

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

Thank you for the question. I'll try to do this in 30 or 45 seconds.

We were in Australia at an APEC meeting—the finance ministers—and we were all concerned about too much cash sloshing around the world. This was in July 2007. In August 2007 I was at home on a Sunday afternoon and Secretary of the Treasury Hank Paulson called me and said, “Well, now we know where the problem is: subprime mortgages in the United States.” He said, “That's the bad news. The good news is that we know where the problem is.” I went down to the kitchen and said to Christine, “I'm going back to Ottawa.”

And we have been struggling with this ever since, first the credit crisis, and then the crisis in the real economy. You know from your own business background how difficult things became for small and medium-sized businesses in Canada. In any event, we dealt with it, and in a fairly dramatic way. I still think it was a great day for Canada when the opposition parties recognized the seriousness of the economic situation, which they did. I recognize them for recognizing that when it really mattered—except for Scott.

[Voices]

Oh, oh!

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Van Kesteren.

Colleagues, I know that we're bumping up against seven o'clock. If we could ask the minister to finish the second round here, we have two more members with questions.

Can we do that?

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

Sure.

[The Chair, Conservative, James Rajotte]

Okay. We'll go to

Mr. Côté, you have the floor.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Chair.

Minister, thank you for appearing before the committee. The opposition parties, especially the NDP, worked very hard to convince you that circumstances were very bad, given the impending crisis.

That being said, I would like to come back to the issue of workers' funds. Let's not hide from the fact that the Bank of Canada has forecasted lower growth for the Canadian economy. The bank's deputy governor, when giving a speech in Toronto, talked about the disappearance of our exporters. It would seem that one out of five businesses has either changed its mandate or gone bankrupt. Also, we are betting a great deal on a global upturn.

Let's come back to the issue of workers' funds. Since the credit has been abolished, Ontario has seen its position deteriorate. With respect to venture capital funds across Canada, 36% are from Quebec and 36% from Ontario. Yet, Ontario's population is much higher than that of Quebec.

Minister, would it not have been preferable to take the deal offered by workers' funds and still implement your initiative for creating a $400 million venture capital fund? This seems to be betting a lot on the future.

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

Thank you for the question.

In Canada, we face certain challenges because our country has such a small population. We have about 35 million inhabitants. Our federation has to work and we have to talk to each other. I often speak to my colleagues at the Department of Finance as well as with the ministers of finance in Quebec and other provinces. I hope for economic growth in all countries. In Canada, growth is balanced. There is more growth in western Canada than there is in the east. That is the current reality in Canada.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

I understand...

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

The federal government must take that into account.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Minister, it is my understanding that you gave in to very specific interests instead of taking the general context into account, at least on this issue.

I would like to briefly touch upon the Employment Insurance Financing Board. I was fairly dissatisfied with the answers I got during the previous consultation with respect to the $57 billion surplus that had accumulated before 2009. That was eliminated, which is frankly contrary to practices elsewhere, not only in the insurance sector but also in the pension sector.

How can you justify the existence of this board, if not simply to create a scheme giving you access to this virtual surplus of $57 billion?

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

I will go back, if you'll forgive me, to basic principles.

The purpose of the employment insurance program isn't to provide income for people from time to time. It's to provide income to people when they're out of work, when they're down on their luck, when things haven't gone well for them. That's what it's there for. Being in government and being a minister and being in the cabinet, it seems to me that we have to remind ourselves that that's the purpose of the fund. The provinces run social assistance funds. I was a provincial finance minister; I know how much it costs. But I think we have to be careful to remember the purpose of the fund. If we can use it...and with the job grant program, I think we will be able to use it to retrain people and make sure people can match the jobs that are available in this country.

I met with one of our western premiers a couple of weeks ago. He told me how awkward he felt flying to Europe to hire people to come and work in western Canada when he was flying over parts of our country with double-digit unemployment. I'm all for people retraining, and I'm all for people working.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chairman.

Thank you, Minister.

[The Chair, Conservative, James Rajotte]

Thank you.

The last round will be Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

And thank you, Minister, for being here this evening and taking time to spend it with us. I know you're a very busy individual.

I'm listening to my colleagues across the table here talk about EI. It makes me think about what they were proposing a couple of years ago, a 45-day work year where you could work 45 days and all of a sudden go on EI. Now Mr. Brison's talking about lowering EI rates even more. Here's a party that one day is going to make it so easy to get EI that provinces like Saskatchewan are going to have an even tougher time finding people, and then the next day he wants to lower EI rates. So we're not sure how he's ever going to get the money to spend on what he wants to spend it on.

That comes back to what you talked about in terms of stability, creating stability for the business community, whether it's EI rates or Canada Pension Plan rates. We just brought out the pooled pension plan. That is a program that I think will have some benefit once people start to give it time and take it up.

There's one thing I wanted to ask you about the break-even mechanism in seven years for EI, when you looked at EI going forward. Can you just touch on that, what that will do to EI rates going forward once that's in place?

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

For 2017 onwards, the EI rate will be set according to the seven-year break-even rate-setting mechanism. This will ensure that premiums are no higher than they need to be to pay for the EI program. It's as simple as that. We have frozen rates for the next few years, but that's because it's a fragile world out there, and we have to be careful.

[Randy Hoback, Conservative, Prince Albert, SK]

If two years from now the economy should go for the worst and all of sudden we have higher unemployment, as a business owner my concern would be that the rates would go up because of that. Now you're saying they're going to be frozen, they're going to be stuck, so at least I can bank on what I'm going to be paying for those payroll costs.

Then as far as the Canada Pension Plan goes, how does it relate to that? What would the impact be on EI or hiring if we all of a sudden yanked up CPP rates?

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

Well, there are lots of people in Canada who want to raise rates...employers, employees.

[Randy Hoback, Conservative, Prince Albert, SK]

About the benefit of that, or the drawback—