Finance Committee on Oct. 29th, 2014

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

I'm asking because I took a look at your pre-budget brief, and I have a problem with your fourth recommendation, in particular.

You recommend that the federal government introduce experience-rated EI premiums for employers. So, you are recommending that employers in areas with high unemployment, such as in eastern Canada and eastern Quebec, pay higher EI premiums.

The reality is this. Eastern Quebec, particularly, and the Atlantic provinces, are already at a geographic and demographic disadvantage.

Since I was elected in 2011, I have tried to attract investment, and I am working with socioeconomic stakeholders to provide development and ensure that the region is less dependent on seasonal work, which is the current reality.

The high unemployment rate is due to a lack of investments and a significant economic dependence on seasonal work. In the winter, there is no work in agriculture and little work in forestry, tourism and fishing.

I have a lot of difficulty in considering a recommendation that seeks to increase the problems we have in attracting investment to high unemployment areas, as your recommendation does. Could you expand on your association's recommendation?

[Janet Annesley]

I would with pleasure. We think the EI program as is provides a disincentive for worker mobility and that treating the EI program more like a true insurance program would be helpful in terms of establishing more incentive.

I also outlined, and we outlined as part of our submission, detailed areas in which we think work experience and specific training as part of the EI program could help address some of the issues that you comment on. And in fact if workers were to get training and move to regions and get experience—for example, as an apprentice in a skilled trade on a project in Alberta or Newfoundland or British Columbia—and then have the opportunity to perhaps move back to their home, that would be of benefit.

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

You are proposing an increase to the premiums paid by employers who are trying to attract new investments and by those who work in the seasonal sector. In short, you want to reduce the opportunities for people in eastern Quebec, who often speak only French, are between 45 and 55 years of age, and have always worked in seasonal industries.

We are trying to reduce this dependence on seasonal work, but it is a lengthy process. Significant progress has been made in this area. Employment insurance reform as it has been applied has already caused an exodus from eastern Canada, and a measure like yours will mean that even more people will leave.

Once again, I would like to understand how a francophone from the Gaspé or the Lower St. Lawrence, who is 45 to 55 years old, will be encouraged to move to an area with a lower unemployment rate. Since you represent the Canadian Association of Petroleum Producers, I assume you would encourage people to go to Saskatchewan or Alberta. But they won't go.

[Janet Annesley]

Again, this is part of a package of changes that we think need to happen, which includes the skills training and the work experience. In fact, we'd love to see economic development in the region you're talking about.

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

By increasing payroll taxes, you are discouraging these regions that are trying to grow and creating a disadvantage for them compared to regions like Montreal, Quebec, Edmonton and Calgary.

[Janet Annesley]

Again, I think we're looking at a suite of recommendations, not just this one alone. We're looking at skills training that would provide value to the people in your region and that would provide an opportunity to acquire new skills to perhaps work in oil and gas within their own communities.

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

These changes would be massive, but the results would be very hypothetical.

Mr. Pineault, I would like to look at something different with you.

I am familiar with your previous work on macroeconomics. Yesterday, I asked some questions of three different business organizations: the Canadian Chamber of Commerce, the Canadian Federation of Independent Business and the Quebec Employers' Council.

These three organizations were asking us to reduce taxation—corporate taxes or payroll taxes, in particular—as well as employment insurance premiums. They also asked us to reduce or eliminate income tax for things dealing with income that comes out of intellectual property, a little like what Ireland does. At the same time, another thing they wanted us to do was increase our infrastructure investments. I asked them how we could reduce our income, increase our investments and balance the budget or even pay the debt. The organizations' spokespersons said that tax cuts pay for themselves because of economic growth.

Could you comment on that?

[Éric Pineault]

Yes, I can comment on that.

The economic assessment that we can make of the various income tax reduction programs for businesses show that tax cuts for the 1990s and 2000s, particularly for 2010, have not had an impact on the change in investment patterns, either in terms of volume or direction of the investment.

However, the major change we've seen is with the increase in liquid assets held by companies. The last time I checked, which was for the last quarter in 2013, Statistics Canada assessed that companies are sitting on liquid assets valued at $604 billion. These amounts have not been invested and are not earmarked for investment projects. The value of these liquid assets increases as the taxation rate decreases.

So, in response to your stakeholders who appeared yesterday and if you accept their requests, you will nourish this increase in saving, which I call the “over-saving” of large corporations. Just for information, The Economist, which doesn't have a reputation for being a particularly leftist organization, published an article on Japan and South Korea. The article states that this “over-saving” by large corporations is a problem, especially in South Korea, where saving represents 34% of the GDP, which hinders economic growth. In Canada, it constitutes 32% of the GDP.

[The Chair, Conservative, James Rajotte]

Okay.

[Éric Pineault]

So you can't do both at the same time. Choices need to be made. the choice of reducing corporate taxes does not translate into additional investments or increased power...

[The Chair, Conservative, James Rajotte]

Excuse me, Mr. Pineault, but I must interrupt you. Thank you.

Thank you to Mr. Caron, as well.

We'll go to Mr. Keddy for seven minutes, please.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses here today.

This is a fascinating group and it's a fascinating discussion. We've got a dynamic here that we don't often get.

I can't help but ask the question to Mr. Pineault, that.... You know, if you look at 18% to 20% of the Canadian economy being based on the extractive sector, oil and gas in particular, I appreciate what you're saying that we really do need to look at that sector like a gold mine. Some day the last of the gold will be mined out of the ground. However, that's a long way away, so I think we have some time to plan for that. But I can't help but ask, if Toronto and the Toronto Region Board of Trade has 20% of the gross domestic product of Canada, we've got the same problem, with a big urban centre. If we had a catastrophe of any kind all of a sudden, there's 20% of your economy down. I'm a bit of the devil's advocate, but I just wanted to get that on the record.

I do have a specific question. Why don't we look at our extractive sector like a gold mine and then mine that last piece of gold out of the ground, and do it in as sustainable a way as possible? I think the oil and gas sector would agree with that.

[Éric Pineault]

Okay. I want to comment on the first number, then I'll get right away to the question afterwards.

There's a very big difference between one in five dollars in investments and one in five dollars in economic activity. One is a result, the other one is a motor. Investment is a motor in our economy, whereas GDP just measures the results. When I'm saying one in five investment dollars, I'm talking about the way the economy is building itself, the direction in which it's going.

It's very good that we have this sector that can be a motor in our economy, and I'm not here to say we should shut down this or that. I'm saying that you build in dependency and dependency engenders fragilities. I'm saying that in the current context these fragilities are...and there's two. There's the very short-term fragility linked to trade cycles, and then there's the more long-term fragility which is...Canada is in some form of environmental denial and that's fine, it's okay. I don't want to comment on that. But I think elsewhere the world is moving, and that's going to impact us at some point.

Now, getting back to the gold mine approach—

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Very quickly, please. I have limited time too.

[Éric Pineault]

The gold mine approach, I would agree if that was what we were doing. I don't think that we're doing that in the sense that our royalty system, the way we capture the oil rent in Canada, is very particular when compared to other countries that are doing that. Look at Norway. It is using it's oil rent to move out of carbon, and will be out by the time they run out of oil. We're not capturing the rent as efficiently, for a number of reasons, as other countries are.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you for that.

The difference between Canada and Norway is that Norway can see the end of their oil at this point, and we're a century away from seeing the end of our oil. That's a significant difference.

I have a question to the Canadian Association of Petroleum Producers, to Ms. Annesley. That was a good submission.

One of your statements is that we should “actively steward aboriginal consultation policy leadership, by supporting federal departments in embracing their consultation responsibilities, and implementing the Eyford report”.

I think the Eyford report was a good report. The difficulty I have—not with the report, but with that statement—is that it's not all up to the federal government. I realize that the association between first nations in Canada and the crown is a unique association. But where is the responsibility of industry? We have a huge resource of young men and women in aboriginal communities who can and should be the workforce of tomorrow. Where is the leadership coming from industry? Never mind waiting for the federal government or the provincial government or the municipality. Where is leadership from industry to embrace that?

[Janet Annesley]

Well, I think the oil sands offer an excellent example of that leadership. To date, some $8 billion worth of goods and services have been purchased from aboriginal entrepreneurs. A large part of that is as a result of the investments that oil sands producers have made in the training and the nurturing and the development of those companies. That continues today, to package projects especially so that companies of that size and with that expertise can bid on them and be successful in doing so. In addition, employing more than 1,100 aboriginal employees makes the oil sands industry the largest private sector employer of aboriginal people in this country.

In areas in which we've had the ability to move forward, I think the oil sands industry is an example of success. Indeed, the federal government, the provincial government, and the industry have worked collaboratively to address certain land claims and other issues around the Fort McKay First Nation and others. It's that kind of thinking that we think needs to be applied in a broader sense along the right of way of pipeline projects.

Now, of course benefits are different in that case, in that there is not the immediate proximity to resource development and jobs are of a different nature. But we think it's exactly that kind of reconciliation, if you will, with first nations—with the federal government, industry, the province, and the communities themselves at the table—that needs to happen.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you.

I would have to say that there is an opportunity here; there is not a challenge. There is real opportunity: the first nations are looking for opportunity; oil and gas have to be transported to market. There is no reason that both groups can't work together, along with government, of course, which has to be a player.

This is to Mr. Egan, concerning natural gas. You have an absolutely stunning chart on the cost of space heating a home and heating water with natural gas versus with propane, electricity, or heating oil. I have to be honest with you; I didn't realize there was that much difference.

I come from a very small community in rural Nova Scotia. How do we extend natural gas pipelines into remoter and more rural parts of Canada, and can it be done?

[The Chair, Conservative, James Rajotte]

You have about 20 seconds for that answer. You may have to say it is to be continued.

[Timothy Egan]

You do it carefully, and it can be done.

In the case of Nova Scotia, Heritage Gas is doing it. They have a franchise agreement in place in the province and they're working on that right now.

There are all kinds of specific examples whereby, in the case that the economic formula that is used by any regulator does not work, it is possible to engage other partners in government—federal, provincial, or municipal—or industrial consumers to assist in the effort to build out that system. Red Lake is an example I talked about. There are many others I'd be happy to share with you.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Hsu, please, for seven minutes.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you very much, Mr. Chair.

I'd like to start with a question for Mr. Gill.

You mentioned in your presentation that inadequate transportation infrastructure is costing Toronto something like $11 billion a year in lost economic activity. I'd like to do a little calculation, if you'll bear with me, and just ask if you would agree with it.

Let's just take one-tenth of that $11 billion a year, so $1 billion a year. We know that the Government of Canada can borrow money at about 3% per year. Let's say we borrow it for 30 years and we pay off 3% of the principle every year. So 3% plus 3%, that's about 6%. That means that Canada could borrow $15 billion and pay it off over roughly 30 years to spend on infrastructure, which is about roughly the size of the Building Canada plan. It seems to me that on just one-tenth of the lost economic opportunity from Toronto transportation infrastructure you could spend the whole Building Canada plan, and that would be a good investment. To me that suggests you could spend a lot more than the Building Canada plan if you could pay for $15 billion of spending from just 10% of the lost economic activity because of poor transportation infrastructure in one city, Toronto.

Would you agree with that calculation? And would you agree that we could spend more on infrastructure and get a good return on that spending?

[Patrick Gill]

Certainly investing in transportation infrastructure over other capital projects will give you the biggest result. The best example is how when you repair the sewers underneath the city, you're just creating a job; you're not improving productivity necessarily, whereas when you build a subway or build an LRT, you're not only creating that construction job; you're also producing the flow of goods and people.

A substantial amount of money has been put on the table through the Building Canada plan. As those projects are prioritized, bearing in mind transportation infrastructure first as a main targeted asset, certainly the sooner we can address this problem with additional resources, the better it will be for the country as a whole.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay. Thank you.

I have a question for Ms. Annesley.

You spoke about the demand for skilled labour and the need for temporary foreign workers. But something you did not address, which I wanted to give you a chance to address, is interprovincial mobility of skilled tradespeople. When I talk to skilled tradespeople in my riding of Kingston and the Islands, I hear that there are some barriers to mobility. I am wondering if you or your organization have asked the government to think about subsidizing some of these costs, which may not be apparent at first glance, or about subsidizing the interprovincial mobility of skilled trades before we rely too much, or perhaps to relieve the pressure of relying, on the temporary foreign worker program.

[Janet Annesley]

Thank you for raising interprovincial mobility. It is absolutely crucial. We have in the past, for example, joined with Canada's Building Trades Unions to ask government to let workers who are travelling for work deduct the costs of that travel from their income tax. Those types of programs are small. Then in terms of broader systemic changes that are needed, there needs to be more discussion, especially as far as apprentices are concerned, to manage the keeping of apprentice books so that apprentices can move between provinces with greater ease and get credit for their hours. Also, in anything below the Red Seal level there needs to be ongoing discussion between the provinces to enhance worker mobility at that level.