Evidence of meeting #45 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investment.
A video is available from Parliament.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
In your estimation, the EI reforms and related measures, such as the elimination of the boards of referees, have had a negative impact on program access.
Treasurer, Confédération des syndicats nationaux
They have had a negative impact not just on workers' ability to access benefits, but also on Quebec's regions. When people aren't able to access EI benefits, that is money that is lost by the regions. The Gaspé region comes to mind; it is hurting owing to extremely high unemployment, especially in off-peak seasons, in the fall, winter and spring.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
That brings me to my next question.
We know that $57 billion was diverted from the EI fund to the general revenue fund. The government has just announced a measure whereby companies paying less than $15,000 in EI premiums will benefit from lower premiums. The Liberal party would like to take that even further and lower EI premiums for all companies, from multinationals to small businesses that create jobs. We are still talking about EI premiums.
What is your view on this use of EI premiums?
Treasurer, Confédération des syndicats nationaux
As we see it, any surplus in the EI fund should be used to enhance the program. I am not aware of any employment insurance system in the world where only 40% of contributors are able to access benefits when they need them. That is the first thing. The other thing is that the level of income replacement, which used to be at 60% of maximum insurable earnings, has also dropped. We believe the rate should be restored to at least 60% and that the maximum insurable earnings threshold should be reviewed.
A truly separate fund would need to be created. The money in the EI fund comes from workers as well as businesses. Business should manage the fund. It should not be a component of the government's reporting entity, as is currently the case, in light of the ruling that was issued a year or two ago.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Basically, what you are saying is that, if the current EI fund has a surplus—which the government is projecting between now and next year—that money should not be used to encourage businesses, small or large, to create jobs, but should instead be used to restore the program access that was scaled back in the wake of the reforms.
Treasurer, Confédération des syndicats nationaux
Exactly, because that is the purpose of the EI fund.
The other point we are making is that the government has other tools to support economic development. In that respect, labour-sponsored funds come to mind. The last or second-last budget called for the corresponding tax credit to gradually disappear over three years. And in Quebec, Fondaction has $1.25 billion in assets, and Fonds de Solidarité holds $10 billion in assets.
Studies show that, for a given year, the tax credits available to those who purchase shares in labour-sponsored funds generate greater tax revenue for both levels of government, federal and provincial.
In other words, the government did not make a wise choice, in terms of either economic development or government revenues.
Conservative
The Chair Conservative James Rajotte
I'm going to take the next round as the chair.
First of all, I want to commend and compliment the U15 for its proposal last year, which was presented to this committee and put forward in the budget. I was very pleased to see that strong support for research and development in last year's budget. At the outset I do want to commend your organization for all the good work it does on a public policy basis.
In terms of my questions, I want to follow up with Mr. Nantais on some of the questions that Mr. Van Kesteren was asking. He and I were involved in the industry committee back in 2007. Mark, you will remember this well. The committee unanimously recommended changing the accelerated capital cost allowance for the manufacturing sector. We recommended that in February 2007. Jim Flaherty put that in the budget just a month later, in March 2007. It's been in sort of a two-year.... It keeps being renewed on a two-year basis. I know the industry generally would like to see it done on a more permanent basis.
What I want you to comment on, Mr. Nantais, is.... A lot of it is Canada puts accelerated capital cost allowance, in some ways, to compete particularly with our American counterparts, who actually have better depreciation rates on an ongoing basis. Can you comment generally? Would it be a better approach for the government to actually look at a comparison between depreciation rates in all sorts of sectors and look to harmonize, for lack of a better word, between ourselves and the American counterparts on depreciating capital?
President, Canadian Vehicle Manufacturers' Association
Certainly in respect to the ACCA and the counterpart program in the United States, there are differences. The U.S. program generally gives more latitude, I think, some different methods of calculations, and so forth, but they include things that we don't include in Canada.
I think it would make sense at least to benchmark our program with their program. Things like regulatory harmonization are very good initiatives in terms of our competitiveness, but it could extend to programs like that, where we benchmark not only the ACCA but also the AIF in response to what other jurisdictions are doing, as well as SR and ED. These are all things that would benefit if we were to do some benchmarking.
Conservative
The Chair Conservative James Rajotte
I should know this, but I don't. Has your industry done a comparison between the two countries on capital depreciation and other measures in terms of showing the competitiveness between the two jurisdictions?
President, Canadian Vehicle Manufacturers' Association
Actually, the auto industry hasn't, but Canadian Manufacturers & Exporters did. I believe it was last November. I'm sure we can make that report available to you. It is a very good report, and it does give a direct comparison of those programs.
Conservative
The Chair Conservative James Rajotte
I'd appreciate that.
I want to follow up on the Canadian Automotive Research Institute. This is something which I believe Peter Frise from Windsor has worked on and is advocating as well.
I cut you off before you could finish your opening statement. I wonder if you want to expand on that and explain to the committee why you believe it's necessary.
President, Canadian Vehicle Manufacturers' Association
Yes, I would very much appreciate that opportunity.
We are faced with, as I said, landmark regulations for greenhouse gas emissions reductions. It's going to take a multiple technology pathway. The technology, of course.... Certainly in the United States, for instance, there are programs in place that focus specifically on not just the basic or pure research side of universities, but also, as I said, the innovation and new product development in commercialization. That's where things tend to fall apart. That's the valley of death which we referred to.
This is why it's so important to help manufacturers do that in Canada. Our supply chain and so forth.... Most of that innovation comes out of our supply chain. We can do that, acquire that in Canada, and we will have it stay in Canada. That's where the real value-added is going to happen here.
The CARI proposal is not duplicated in any way with any other programs in that technology readiness chain or continuum, but it does address a very critical part of what is necessary to attract that investment in Canada.
Conservative
The Chair Conservative James Rajotte
I appreciate that.
I'm bumping up against my own time, so I'm going to move on to Mr. Rankin, please.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I am going to share my time with Mr. Cullen. It's all about teamwork.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I would like to speak with Mr. Patry again.
Today, we put a question on the issue in the House. What's more, the Parliamentary Budget Officer's report yesterday indicated that the federal government's finances were fairly satisfactory. The government is currently well-positioned to deal with the aging population, but that is not the case in the provinces.
Obviously, the federal government's decision to reduce health transfer growth and change the indexing formula for the transfers will have a huge impact on the provinces. They do not have the federal government's capacity to adapt to the aging population.
Do you share the opinion of the Parliamentary Budget Officer, as set out in his report?
Treasurer, Confédération des syndicats nationaux
I only had a quick look at the main points in today's papers. But from what I was able to gather, we agree with what the Parliamentary Budget Officer stated.
We object to cuts to both equalization and health transfers, especially given that, in 2007 or 2008, the federal Conservative government had endeavoured to correct the fiscal imbalance between the federal government and the provinces. From our standpoint, the effort wasn't entirely satisfactory, but it did represent a genuine effort on the federal government's part.
Since then, however, we have noticed that the health, social and equalization programs have been so heavily reviewed that the partial correction of the fiscal imbalance initiated in 2007 or 2008 has regressed completely. The aging population will clearly place tremendous demands on the provinces, while the federal government sits pretty.
Some ten years ago, the federal debt as a share of GDP was at 68%. Within four to five years, it is expected to drop to 25%. In short, the federal government is in great financial shape, and we believe it should sit down with the provinces to correct the fiscal imbalance.
NDP
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
Thank you, Mr. Caron.
I want to get back to R and D and the cultural shift that you spoke about, Mr. Hamdullahpur. I've been reading quite a bit about this, and looking at a great read, Start-up Nation, which talks about the Israeli progress in innovation and technology, and very specifically, not just the entrepreneurial spirit, but also the role of government.
You've talked about the cultural shift required within the private sector. We've actually stagnated or gone down with respect to our competitors, broadly speaking, as nation-states, in terms of private sector R and D. We are 15 out of 16, The Conference Board of Canada said last year. We've also slipped in public sector, and the role of government has also shifted.
This question is perhaps for Mr. Nantais, as well, because your industry is heavily involved, and Mr. Petrou, you may want to come in as well.
Whether it's aerospace, or the broad R and D sector, or auto specifically, the cultural shift that has gone on over the last 15 years has generally been to significantly lower the tax rate for most companies operating in Canada, and then there'd be a rollback into R and D. The Conference Board is saying that we're 15 out of 16 in private sector investment, and all R and D competitiveness comparisons for Canada in aerospace, in auto, and generally in R and D say that we're lagging behind.
If it's not working right now, aside from just a cultural shift, do you have specific recommendations for the committee to consider making to government to shift this culture? Does government's role have to make a difference, have to change the way we approach R and D in the country?
Chair, U15 Group of Canadian Research Universities
As you can appreciate, this is a very broad subject. If I could just confine it within our research in terms of the university's mandate, more and more investment and fundamental basic research is absolutely the way to get this started.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
How about basic research? There has been a general bias in the last couple of years towards commercialized research, that if research can't be commercialized, we don't invest. When you talk basic, that's a different thing, is it not?
Chair, U15 Group of Canadian Research Universities
I make this word bold and underline it several times because without investment in basic research, there could be no commercialization. I do not differentiate the research as basic, applied, or able to be commercialized, but we have to work at that level.
A good example is, we're talking about the automotive industry and fossil fuel dependency. The only way we can get ahead of this is to invest in energy storage systems, which require materials. The only way Canada can be a leader in this subject is to invest in, basically, nano-materials. From that basic research, there will be hundreds of leadership types of commercialization opportunities for us, but that is the level we need to start at.
I had lunch with Israel's minister of science and technology yesterday in Toronto and this was exactly the subject. How do we support institutions at the level that their research will be transformative, instead of trying to do the same thing with hundreds of others? This is the differentiation that U15 research-intensive universities are trying to bring forward.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Cullen.
I want to thank our guests for being here this afternoon.
Thank you very much everyone.
Thank you so much for your input into our pre-budget consultations 2014.
The meeting is adjourned.
