Finance Committee on Nov. 5th, 2014

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That I understand, but you can see that the sequence of events leads one to believe that this particular program that we're discussing today, and the $550 million that's removed from the EI account to enable this program will not be included, obviously, because it will have been spent in the next 10 years if it's fully taken up. Is that right?

[François Masse]

The $550-million impact of this measure is going to be factored into the EI operating account, so that is correct. That will be—

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

It doesn't have to get replaced, I suppose is my question, at the end of that seven-year window.

[François Masse]

The EI operating account is the net revenue from EI premiums and the expenditure against the EI programs. This measure is going to be reducing the revenue from EI premiums, so it will have an impact on the net balance of the operating account.

I don't know if that answers that in full.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Yes, and I want to stay away from the weeds on this, but understand what the actual impact is. Does the $550 million that's being taken out of the EI account need to be replaced at the end of that seven years or not? That's my question.

[François Masse]

Are you asking if there's going to be a measure where...? Actually, I'm sorry, I'm not quite sure. I'm going to try to be as clear as I can, and let me know if it doesn't work out.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Let me try the question again. Maybe this will help for clarity.

In the past, concerns about the EI account have been that government has been able to go into it, take money out, and use it for general revenue. The government's initiative was to say that what goes into EI should be used for EI, and it balances itself out, but not every year per se, but over seven years.

My question is, is the $550-million initiative that's leaving the EI account going for something else? Is it part of that seven-year equation? Does it have to be put back in at some point, or does the clock start after the $550 million has gone out the door?

[François Masse]

It's actually going against EI premium revenue, so it's not leaving the EI operating account. It's accounted for in the EI operating account, so that is a bit clearer. Yes, it will be taken into account directly against the operating account balance.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Again, I want to say, as the chair has guided us away from advice to the minister, but because this is a little bit complicated—I'm not an EI expert, and I don't claim to be—if we could see a table that shows what that seven-year measurement and impact do just to make it more clear for committee members before we get to clause-by-clause, and I don't think it's in the documents that we've received so far, that would be very helpful. Is that possible?

[François Masse]

That's something I can look into doing, absolutely, yes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Okay.

You mentioned earlier about estimating the jobs impact. You said something about many factors being too risky to do an estimate, and the Department of Finance didn't do an estimate on what the jobs impact is. Can you repeat for me what you said?

[François Masse]

Absolutely. As with most initiatives, it's fairly difficult to isolate the forecasted incremental impact of the credit on job creation across the country. Many other factors also contribute to job creation by small businesses. For example, small business will benefit from improvements in general economic conditions, as well as concurrent policy initiatives such as the Canada job grant.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

What Finance doesn't want to do is say that if we do x in the economy, the result is y in terms of job creation. That's why there's not a jobs creation number produced, because of these other factors and variables that are going on, and that's risky to produce such a number.

[François Masse]

That's actually a statement of general fact. In general, it's very hard to put a specific job creation number on a policy measure. It can be done. There are risks associated with it, but it can be done.

What I'm saying is that in this specific case, this is not something that the Department of Finance has produced.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Because of those risks and the responsibility about being accurate. If the Department of Finance comes out and says 5,000 jobs, 50,000 jobs, we expect that to be fairly, if not very, accurate and to accommodate those risks and other factors that are going on in the economy.

[François Masse]

There are a number of reasons that come into play when Finance determines whether we're going to embark into a quantitative project and try to produce an estimate for a certain measure. That would be one factor. There are a number of other factors.

[The Chair, Conservative, James Rajotte]

One quick question.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I want to follow up on something Mr. Saxton said about this cut-off point and how some analysis has come from some economists.

Part of my concern about the analysis being relied on by the minister is that it's coming out of the CFIB, which employs one full-time economist. I assume the federal government employs more than one full-time economist.

[François Masse]

Just to be very clear, the CFIB number that's going around is a number about job creation. My comments earlier about the threshold effect may be similar to what the CFIB has put out. I'm not sure actually what their comments were, but that was not a CFIB analysis.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

In regard to the question around threshold, Mr. Saxton suggested that the incentive is not great enough as it is designed in this program to have a small business fire somebody in order to achieve this extra benefit. Did you agree with that statement? I think you did. I can't exactly remember your response.

[François Masse]

Yes, and the exact response was that on balance across the economy small businesses that are flourishing are expected to expand based on a number of factors, and that this measure is not expected to be creating a disincentive for growth.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So the reverse must also be true, that if the incentive to fire somebody is not high enough in this program, then the incentive to hire somebody based on all the myriad of factors facing a small business must also be true. How can one be true and not the other?

[François Masse]

What we're expecting is that on balance across the economy reducing the cost to businesses can be expected to create incentives for growing, including hiring people. That is on one hand what we said. I don't think that necessarily is contradictory with the other statement, and it's actually related.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

We're talking about the amount of the incentive. If you reduce business taxes by a dollar and say we're going to create a million jobs by just doing a dollar, someone would say it's not large enough to affect a business person's decisions to hire.

If the suggestion is that the disincentive created by dropping below this $15,000 threshold is not high enough to fire somebody, how can it be suggested that the reverse is suddenly true, even though the incentive is actually much higher to drop below this $15,000 line? The incentive going that way to reduce your payroll and get below the $15,000 is much higher than the one if you end up putting yourself above the $15,000 line.

[François Masse]

Again, here the challenge is the transition between the one specific example and the aggregate number. That's why we're saying that in the aggregate that measure is going to result in a cost reduction across 780,000 businesses of $550 million, and that in aggregate across the economy we're expecting for this measure to create incentives for small businesses to grow their operations.