Finance Committee on Nov. 18th, 2014

[The Chair, Conservative, James Rajotte]

I call this meeting to order.

This is meeting no. 58 of the Standing Committee on Finance. I want to welcome all of our guests here this morning.

Pursuant to the order of reference of Monday, November 3, 2014, we are continuing with our study of Bill C-43, a second act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.

We're very pleased to have with us here this morning seven witnesses: the Association of Canadian Port Authorities, President Wendy Zatylny; Canada Without Poverty, Ms. Michèle Biss; the Canadian Cancer Society, Ms. Janice Gray; the Canadian Centre for Policy Alternatives, Mr. David Macdonald; the Canadian Payments Association, Mr. Gerry Gaetz; the Heart and Stroke Foundation of Canada, Mr. Tom McAllister; and from the Library of Parliament, Mr. Mostafa Askari.

Welcome to everyone and thank you all for being with us here this morning. You each have five minutes maximum for your opening statement and then we'll have questions from members.

We'll begin with the Association of Canadian Port Authorities.

[Wendy Zatylny, President, Association of Canadian Port Authorities]

Thank you, Mr. Chair. Good morning, committee members.

Thank you for the opportunity to speak with you today. As you noted, sir, my name is Wendy Zatylny and I'm the president of the Association of Canadian Port Authorities, representing the 18 port authorities that make up Canada's national ports system.

In the next five minutes of time that I have, I'd like to speak to the valuable role that ports play in facilitating trade and creating jobs in communities across Canada. I'll also speak to changes to the Canada Marine Act, as proposed in division 16 in Bill C-43. Finally, I'd like to take a few minutes to highlight the prebudget recommendations that we submitted to committee members.

First, let me begin by setting some context. Expanded trade agreements between Canada and international partners are making our world smaller. Traditional trade patterns are changing and competition to carry and receive cargo is intensifying. Navigating this new environment effectively is crucial to Canada's economy and our standard of living. Canada's ports are critically important to moving imports and exports around the world while creating jobs across Canada.

With 90% of everything that we buy and sell travelling by ship at some point in its life, maritime trade underpins the global economy. These are the goods that we depend on every day—cars, tools, resources, food, and medicines, to name just a few.

In total a combined 162 billion dollars' worth of goods are shipped or received through Canadian port authorities every year. Our ports handle nearly two-thirds of the country's waterborne cargo, contributing to job creation and economic growth and creating over 250,000 direct and indirect jobs that pay higher than average wages.

The expansion of port-based trade presents a remarkable opportunity for the Canadian economy. Trade agreements with Korea, the European Union, and other ongoing negotiations are creating new opportunities for Canadian businesses in key economic sectors.

However, we'll only be able to capitalize on this expanding global market through strengthened port facilities and improved supply chain efficiencies. It is for these reasons that we welcome the proposed changes to the Canada Marine Act.

The first amendment, respecting the treatment of federal real property, will provide administrative clarification that will enable Canadian port authorities to more effectively manage the potential acquisition of lands that support and fuel continued port growth.

The second amendment will help ensure greater regulatory oversight of port development projects by giving the federal government the ability to enact regulations that will provide additional safety and environmental protection measures. This can be done by referencing existing provincial regulations in areas where the federal government currently does not have jurisdiction.

Taken together, these amendments will further strengthen our ability to respond to current and projected trade needs as well as to create jobs and new economic development opportunities. But more still needs to be done. Canada is currently ranked 14th out of 155 countries when it comes to the quality and efficiency of our logistics infrastructure. In our view, 14th is simply not good enough for a G-7 country.

Our goal should be to break into the World Bank's top 10 in terms of supply chain efficiency and our prebudget submission calls for an intensified partnership with the Government of Canada to do just that. We have proposed working closer with Canada's trade commissioner service to develop a training program to better understand and utilize the value-add that is the national ports system. In a highly competitive and dynamic environment, speed and efficiency of cargo handling is key.

Our port authorities have invested intellectual and financial capital in working with supply chain partners to smooth out inefficiencies and speed cargo to its intended customers. This is an important facet of our global competitive advantage and should be reflected as such. It would also be beneficial to establish an interdepartmental working group to examine and resolve seemingly contradictory regulatory issues and barriers on a continuing basis, and finally we want to narrow the infrastructure gap that is preventing us from fully leveraging the benefits of Canada's trade agenda.

In a study conducted with Transport Canada we determined a $5.3 billion funding gap exists in the amount of funds required to address both current and prospective port infrastructure needs. While port authorities are adept at creating multi-partner funding models, federal funding is nonetheless a critical component in ensuring many projects of strategic and national importance are able to proceed. While the Building Canada fund was helpful, a gap still exists. The time is now to pair Canada's 21st century trade agenda with 21st century transportation efficiencies. Our proposals will help position Canada as the world leader in transportation logistics.

Thank you again for the opportunity to speak with you today, and I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from Canada Without Poverty, please.

[Michèle Biss, Legal Education and Outreach Coordinator, Canada Without Poverty]

Good morning. Thank you for this opportunity and for inviting Canada Without Poverty to appear at these very important hearings.

I would like to provide some context as to why I am speaking on behalf of Canada Without Poverty today. CWP is a federally incorporated charitable organization dedicated to the elimination of poverty in Canada. Since our inception in 1971 as the National Anti-Poverty Organization we have been governed and guided by people with a direct, lived experience of poverty, whether in childhood or as adults.

Our constituents, our directors, and our supporters have all informed us that clauses 172 and 173 of Bill C-43 are of grave concern to them.

Our first concern is with respect to the role of the provinces. Clauses 172 and 173 of Bill C-43 erode a key national standard. They open the door for provinces to impose a minimum residency requirement before refugees can apply for social assistance, without any penalty on that province's CST payment.

The government has suggested that this is being done at the behest of the provinces, but quite frankly we know this to be false. For example, an Ontario government spokesperson told a reporter that they did not want the provisions in clauses 172 and 173 and were concerned that “a waiting period could impact people with legitimate refugee claims who are truly in need” and that these concerns had been communicated to the federal government.

The government has also suggested that this arrangement would allow the provinces more flexibility in the administration of social assistance. The erosion of a national standard that protects the basic needs of a vulnerable group is unnecessary to grant the provinces flexibility. Provincial governments currently have the ability to administer social assistance in whatever way they see fit, as long as it remains available to vulnerable groups. It is our view that the government is hiding behind the provinces. What is in fact going on here is that the federal government is offering a financial incentive to provinces as a means of having provinces implement the government's ideologically driven policies towards refugees.

Our second concern is with the impact these clauses will have on a particularly vulnerable group. I encourage the members of this committee to stand in the shoes of a refugee.

Imagine you are a woman who has left her home in Africa—say, for example, in Sudan—after enduring persecution in the form of physical violence because of a perceived political affiliation. Imagine that you arrive in Canada, a baby in tow, your friends and family thousands of kilometres away. You make your refugee claim, and then what? You're suffering trauma. You're afraid. You're alone. You know little about Canadian society. You have no means to access basic necessities: food, housing, personal necessities. How are you expected to survive?

Women, children, and men who have sought the safety of a stable democracy will be forced to rely on already overburdened social services, such as emergency shelters, food banks, and churches, and will be forced to live on the street, all of which is equally if not more costly to provinces and municipalities. The provisions in this bill are overreaching and do not distinguish between non-legitimate refugee claims and refugees who are fleeing real persecution, like the woman I just mentioned.

Lastly and most importantly, if adopted, these provisions will contravene Canada's international human rights obligation to refrain from taking retrogressive measures. In other words, it is a violation of international human rights law for Canada to undermine the social protections that guarantee human rights. In this case, access for refugees is currently protected. By passing these provisions and taking away that standard, the federal government is permitting provinces to undermine that standard and deny social assistance on a discriminatory basis.

For these reasons we ask the committee to recommend that clauses 172 and 173 be struck from Bill C-43.

Canada Without Poverty is not alone in this call. I have with me an open letter signed by a coalition of 160 organizations that also assert that these provisions are a violation of human rights and must not be passed. I have attached this letter to my written comments.

I encourage members to reflect on how history will see this moment. Canadians pride themselves on our international reputation as a safe haven for refugees who are fleeing persecution, a community of compassionate individuals.

Let's not change that.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Cancer Society, please.

[Janice Gray, Manager, Lottery, Canadian Cancer Society]

Thank you, Mr. Chair and honourable members.

I'm pleased to be here on behalf of the Canadian Cancer Society to support Bill C-43 as it relates to the amendment that would allow us the use of computers to conduct and manage our lotteries.

Prior to joining the Canadian Cancer Society four years ago, I managed provincial lotteries for over 20 years at both the Ontario Lottery and Gaming Corporation and British Columbia Lottery Corporation. As I learned about the charitable lottery sector, I was shocked by the restrictions that disallowed the use of computers, based on a clause written in 1984. No one at that time could have predicted the pervasive use of computers in our everyday life and the extent to which we would rely on the efficiency and speed of doing business via the Internet.

Allowing charitable organizations to use computers and other modern technologies in their lottery sales, operations and draws, would increase our overall revenue dedicated to our mission work and improve customer service to the level our supporters expect. Every dollar saved on administrative costs is a dollar that goes to our life-saving work. We take very seriously our responsibility to keep our administrative costs at a minimum and manage our operations as efficiently as possible, so that we can distribute the maximum revenue to our various missions.

We also want to make sure that everything is as easy as possible for our customers, while minimizing our costs. I manage the lottery day to day, and it's very difficult to explain to a customer why we are unable to send their ticket or tax receipt by email, even though they ask us to. The time-consuming, costly and paper-heavy processes we currently use make our organizations look outdated, not environmentally conscious, and inefficient overall. This does not instill confidence in our supporters and will make acquiring new, younger customers even more difficult in the future.

The changes proposed would impact our current process at numerous points in the transaction with the customer. Depending on the charity, the savings could be well over $100,000 for only one lottery on even simply one of these touch points. Add in the cost for postage, labour, paper, etc., and the impact is significant. If you extrapolate that over all of the lotteries in the country, the savings are in the millions each year. This is money that could be used to enhance the lives of Canadians, with no cost to government or the taxpayer.

The net revenue from Canadian Cancer Society's lottery program goes directly to fund life-saving research into over 200 types of cancer. Since 2001, we have raised over $65 million for cancer research from our lotteries. Today, we can only afford to fund about 25% of the approved research grants that are submitted. Every dollar saved through improved efficiencies means more funds for cancer research and moves us closer to a potential cure.

We would also like to express our thanks to the federal government for including this amendment in the budget, and ask that you please support the amendment and help us move into the next generation of charitable lotteries and the associated additional funds for the benefit of all Canadians.

Mr. Chair and honourable members, thank you for allowing me a platform to present on behalf of the Canadian charitable lottery sector. I'm happy to answer any questions you might have.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Canadian Centre for Policy Alternatives, please.

[David Macdonald, Senior Economist, Canadian Centre for Policy Alternatives]

Thank you, Mr. Chair, and I thank the members for the invitation to speak before the finance committee today.

I would like to confine my remarks to the small business job credit as proposed in the omnibus bill under discussion. I'm concerned that the credit is not optimally structured for the desired result. If the desired result is incentivizing small business toward job creation, the credit could actually be much better designed, and I'd like to suggest some changes to that credit today that would make it much more targeted so that hopefully it would have a much greater impact.

As presently constructed, the cost per job of this credit is quite high. In 2016 the cost per job created will be $500,000 per job created. In 2015 it will be much higher, at $1.4 million per job created, as estimated using the multipliers from Finance Canada and the Parliamentary Budget Office.

The cost per job is high for three reasons. First, the incentives are too small. Second, the targeting is poor, and third, there is a harsh cut-off at $15,000 in EI contributions for businesses. These can be modified to better target the small business job credit such that it does create jobs.

First of all, the incentive for job creation is vanishingly small. Imagine a store, if you will, at your local mall that is running a winter promotion. If you spend $100 on a winter coat, they will give you 39¢ back. This is an incredibly small incentive. It is an incentive but an incredibly small one. The reason it is so small, despite the fact the program is expensive at $550 million over two years, is that the deadweight loss in the program is incredibly large. The credit is received by all small businesses, irrespective of action. Whether they hire employees, fire employees, or remain at the same employment levels, they still get the credit.

A better approach, I would suggest to members, is that businesses only receive this credit if their EI deductions and therefore their payroll is increased by some figure, say more than 2% from the previous year. That is to say businesses would explicitly have to take action to receive the credit. That is to say they would have to increase their payrolls, hire more people, or pay their present employees more. This could significantly increase the value of the benefit from 39¢ per $100 to probably in the neighbourhood of $20 to $30 per $100, creating a much greater incentive.

The program, as it's currently stated, is poorly targeted, because it is essentially targeted to microbusinesses. Three out of the four top categories of microbusinesses are small offices of professionals, that is to say consultants, other professionals, and doctors' offices, which have limited capacity for more hiring. These one-person firms would receive value under this credit that they would likely not use for new hiring.

My third concern is that there is a cliff created for this credit at $15,000 of EI premiums paid. This, I would argue, is going to have unintended consequences. For instance, if a business has EI deductions of $15,000 in 2015, they would get the maximum credit of $2,200. However, if their have EI deductions of $15,001 in 2015, they will get nothing. So one additional $1 completely eliminates the credit.

This creates unintended consequences. If a business is below the cap, there is an incentive to remain below the cap to retain the credit and not expand. If the business is slightly above the cap, there is a strong incentive to in fact reduce payroll, either by laying employees off, cutting their hours, or cutting their pay in order to get slightly below the cap in order to retain the benefits of the program. This effect is actually seen in the small business tax rate for small corporations in Canada, where you see a higher blip of companies declaring slightly under the line in order to maintain the tax benefits.

I would argue that a better approach instead of a cliff at $15,000 is to have a phase-out, which is common in most benefit programs of this type.

I'd also encourage members to better target this program toward areas of higher unemployment, for instance, toward youth, who have higher unemployment, as well as to encourage businesses to hire employees not exclusively at minimum wage, which is likely what would happen in this case, but instead at those making more than minimum wage.

On a final point, I'd like to remind members that given the economic multipliers, as published by Finance Canada in 2009, support for the unemployed actually has three to four times more job creation impact than decreasing EI premium changes, which is what's proposed for this job credit. Only two in five unemployed Canadians today can access the EI system and retain its benefits, so I would argue that a better use of this money could well be to standardize and decrease the minimum number of hours worked to access the EI system.

Thank you very much, members, for your attention. I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Payments Association.

[Gerry Gaetz, President and Chief Executive Officer, Canadian Payments Association]

Good morning.

I'm Gerry Gaetz, the president and CEO. I want to thank the committee for inviting the Canadian Payments Association to contribute to your study of Bill C-43.

I have a very brief opening statement to situate the Canadian Payments Association and to explain the relevance and importance of division 26 contained in the bill.

The Canadian Payments Association is Canada's main financial market infrastructure. We design and operate Canada's national clearing and settlement systems for payments. Financial institutions rely on our systems to settle with finality their daily payment clearing balances on the books of the Bank of Canada. Canadians, businesses, governments, and financial institutions count on our systems to clear and settle payments, such as cheques, preauthorized debits, direct deposits, bill payments, payments made at point of sale, and wire payments. Last year, the CPA cleared and settled $44 trillion, or about $170 billion on average every business day.

We're guided by public policy objectives of safety and soundness, efficiency, and the interests of users, including Canadians. These objectives are enshrined in the Canadian Payments Act. Financial institutions that are engaged in the business of payments are required to be members of the Canadian Payments Association, and they completely fund our operations. Today our membership stands at 113 financial institutions.

Our focus at the CPA is ensuring that these financial claims between member institutions can be settled efficiently and without risk. In addition to technical infrastructure, we develop rules and standards that, together with the Canadian Payments Act, provide a strong legal framework for the payments of today and tomorrow.

Bill C-43 introduces important amendments to the Canadian Payments Act and the Payment Clearing and Settlement Act. Amendments to the Canadian Payments Act in particular bring about changes to the governance of the CPA. We believe that they will enhance the governance, overall functioning, and accountability of the CPA, thereby helping us to better fulfill our forward-looking strategy for the continued modernization of what is already a strong financial system and payment system in Canada.

The CPA has been fully engaged in the process leading up to the drafting and tabling of the amendments. Let me highlight a few of the key changes. A smaller, more independent board of directors will support a broader, more inclusive representation of the payments ecosystem. The Minister of Finance will retain the power to disapprove rules made by the CPA, but the bylaw approval process has been made more efficient with a new category of administrative bylaws that require only CPA board approval rather than the current practice of requiring ministerial approval. As well, the act will contain a new accountability framework, including a five-year corporate plan approved by the Minister of Finance, an annual report, and directive power for the minister.

Since the first reading of Bill C-43 in the House on October 23, we've had a chance to examine the provisions in more detail and discuss next steps with the Department of Finance, particularly around the drafting of the regulations. I'd like to highlight a couple of important areas with respect to those regulations.

One area is that we believe the regulations should specify a timely process for the minister's approval of the CPA's annual submission. This is because the CPA operates systems and infrastructure critical to the day-to-day functioning of the financial system.

Finally, under the Canadian Payments Act, the minister has oversight and directive power over the CPA. Under the Payment Clearing and Settlement Act, the governor of the Bank of Canada has oversight over the CPA's systems. Under Bill C-43, this Bank of Canada oversight will be expanded to our second system's infrastructure, if the governor believes this to be in the public interest. It will be important to ensure that the potential duplication and oversight does not impede our ability to review rules and make changes required to respond to the interests of users.

CPA is working diligently to ensure a speedy and smooth transition to this new governance framework, which we believe will help the CPA be more effective overall in achieving its mandate.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Heart and Stroke Foundation of Canada.

[Tom McAllister, Chief Executive Officer, Ontario, Heart and Stroke Foundation of Canada]

Thank you.

Mr. Chair, and honourable members, I am pleased to be here on behalf of the Heart and Stroke Foundation to address the positive developments in Bill C-43, particularly regarding the amendment to the Criminal Code that will now allow charities to use a computer to help run their lotteries. As you may be aware, the Heart and Stroke Foundation is a national volunteer-based charity supported by more than 140,000 volunteers and close to two million donors. The aim of the Heart and Stroke Foundation is to create healthy lives free of heart disease and stroke. We can do this through the advancement of research and the promotion of healthy living. Our lottery programs are a vital source of revenue to achieve our mission goals.

Despite an impressive 75% reduction in the death rate from heart disease and stroke over the last 60 years since our inception, every seven minutes, someone in Canada dies from one of these diseases. This is unacceptable, given that it amounts to 66,000 deaths each year. Heart disease and stroke are the leading cause of hospitalization and the second leading cause of death in Canada.

Major charities—we ourselves, the Canadian Cancer Society whom you've just heard from, and others such as SickKids Foundation, the Children's Hospital of Eastern Ontario, and the London Health Sciences—had requested that Budget 2014 include an amendment to paragraph 207(4)(c) of the Criminal Code of Canada. Through our collective efforts and discussions with parliamentarians and officials, this change was included in the budget and announced in February 2014.

We are extremely pleased to see this inclusion in the BIA because of the positive benefits it brings to our ability to raise needed funds to advance our mission. We are very pleased that the amendment will now allow charitable organizations to use computers and other modern technologies in their lottery sales and operations as well as in draws.

The provincial gaming organizations have always been able to use computers and online technologies to run their lotteries. Conversely, because of an outdated Criminal Code restriction, until now charities had to rely on costly, labour-intensive, manual processes. This has come at the cost of our ability to efficiently and effectively reach the consumer, whose expectations, which understandably have been established by other industries and the growth of e-commerce, make the charitable sector processes and practices appear to be quite antiquated.

We are confident that the proposed changes will enable the sector to better demonstrate that we operate in the most effective and efficient way possible. The amendment will result, in our estimation, in savings of millions of dollars each year across all Canadian charities that run lotteries, through the ability to transact online and minimize our dependency on printing, mailing, and the associated risks of human error. This is money that can be redirected to the collective mission activities, to the benefit of all Canadians. In our case, it will afford us the potential to invest further in life-saving research and health promotion.

As you know, Canada's charitable sector plays an important role in enhancing Canadians' lives by conducting life-saving research, providing crucial social and community services, and undertaking important initiatives in such areas as health promotion, sports and recreation, and arts and culture. These organizations help Canadians address the numerous health, social, and economic challenges they face on a daily basis. Allowing charitable organizations to make better, more efficient use of their funds is in the best interest of all Canadians.

To this end, it is our hope that the provinces will move to allow this pending federal amendment to be adopted expeditiously. The federal government wants charities to find innovative solutions that will make them more efficient and sustainable. The federal government is also committed to removing any unnecessary red tape or regulations that impede these solutions. Making this amendment provides just such a solution.

By implementing this change, the federal government would significantly enhance Canada's research capacity, make charities more efficient, and encourage and support Canadians in their efforts to become and stay healthy. It will allow charities to conduct business in a manner increasingly expected by consumers; that is, online and in real time.

Mr. Chair, members of this committee, thank you for your time. I look forward to your questions and to the discussion with you in a few minutes.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the assistant parliamentary budget officer, please.

[Mostafa Askari, Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament]

Thank you.

Good morning, Chair, Vice-Chair, and members of the committee.

Thank you for the invitation to appear before the committee today.

I will make a few brief remarks to set the context for the questions that you may have regarding the small business job credit.

While PBO shares parliamentarians' concerns with the cost-effectiveness of the small business job credit in improving employment outcomes, I would like to stress the importance of the bigger picture.

This proposal and any proposal that would affect the premium rate paid by employers or employees acts against the legislation that has been established over recent years for the purpose of detaching the EI program from discretionary policy decisions and ensuring that the contributions from workers are used only for expenses of the EI program.

Following a number of interventions in the premium-rate setting process, in 2012, Bill C-38 provided for the premium rate to move to a 7-year break-even rate after the account came into balance. The Economic Action Plan Act, No. 2, 2013, Bill C-4, amended the Employment Insurance Act to freeze the EI premium rate at $1.88 in 2014, 2015 and 2016. The policy announcement was accompanied by a report from the chief actuary updating the status of the EI operating account.

With the data in this report, PBO was able to show that barring a significant unexpected economic decline, a rate of 1.88 in 2015 and 2016 would be a premium rate increase compared to the rates that would have been set prior to Bill C-4, and that it would contribute considerable extra revenue to the budget outlook over the period of 2015-16 to 2016-17.

The PBO reported this in its fall economic and fiscal outlook update on October 25, 2013, and updated it in its October 2014 economic and fiscal update.

The government has never provided an explanation for why the premium rate is set well above the level required to eliminate the surplus in the EI operating account in 2015 and 2016 or why the break-even rate is not set immediately after the account goes into surplus in 2015. This is contrary to the government's stated objective of having a transparent premium-rate setting process.

It is important to underline that, given the requirement that the premium rate is set to balance the operating account over a seven-year period, any changes to the premium rate now must be offset by a change in the opposite direction later, and any impact that the rate change has on job creation today will be offset in the future. This applies to the small business job credit.

According to the PBO's estimate, this measure has a small temporary impact on the level of employment of 800 jobs in 2016, but this increase will be offset by a slightly higher than required EI premium rate for all employers and employees when the government sets the seven-year break-even rate in 2017 or earlier.

I am pleased to answer any questions you may have on this topic.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you kindly for your presentation.

We will move to members' questions.

To our witnesses, if you want to use your earpieces, I would recommend that, both for translation and for hearing in this room.

We will start with Mr. Rankin for seven minutes, please.

[Murray Rankin, NDP, Victoria, BC]

Thank you, Chair.

Thank you to all of the witnesses for appearing this morning, bright and early. I appreciate your being here.

I'd like to ask, if I could, Mr. Macdonald, first, from the Canadian Centre for Policy Alternatives.... There was a lot of commonality between your presentation and that of Mr. Askari, the assistant parliamentary budget officer, but in a sense he went further. Your point, if I may summarize it, is that the small business job tax credit is inadequate. Its incentives are too small.

You had an alternative, which was to get people to use payroll numbers to administer the program, if we're going to go there, but you said in conclusion that we would have done a lot better in attaining the objective if we used greater support for employment insurance itself. I think you didn't complete that last thought. You didn't have time. Could you elaborate on why you think you'd have more impact with that recommendation than by using the small business job tax credit?

[David Macdonald]

Sure. Thank you very much for the question.

The argument to be made for support for unemployed people as opposed to support for decreases in EI premium changes comes from the economic multiplier numbers published by Finance Canada in the 2009 budget. Those Finance Canada numbers were used to estimate the stimulus impact of the measures in 2009-10.

If you compare the impact of spending $1, for instance, on support for low-income individuals versus spending $1 on EI premium changes—or reduction in EI premiums—you'll find that, depending on whether it's year one or year three, or how far out you go, in all cases the impact on spending that dollar on low-income Canadians is much greater than spending it on EI premium decreases. The ratio is about three to four times, depending on which timeframe you're looking at. That's the basis of those comments.

If members are interested in an EI premium change per se, and are not interested necessarily in expanding benefits for unemployed Canadians, the argument that I would make is that the program could be much better designed if instead of providing the incentive to all businesses, it only provided the incentive to businesses that increased their EI contributions from last year. That is to say, they expanded the amount that they paid into EI, which, by implication, means they're expanding their payroll either by hiring people or paying their employees more.

[Murray Rankin, NDP, Victoria, BC]

Mr. Askari, I found your presentation really stimulating. In your remarks you stressed the importance not just of the concern about the cost-effectiveness of the small business job credit—exactly what we heard from Mr. Macdonald, 39¢ for the $100 coat was his analogy—but you went beyond that and said the bigger picture is that these proposals would affect the premium rate paid by employers or employees. It acts against legislation to detach the EI program from discretionary policy decisions. By that I guess you mean that the government's getting back into the discretionary policy decisions and not leaving the premium rate alone. Is that what I'm understanding? If so, why would that be done?

[Mostafa Askari]

The way that the program is structured is that as soon as there is an accumulated balance in the account, the rate is supposed to be set in a way that this balance disappears. The break-even rate over the seven-year period would maintain a relatively stable premium rate and there wouldn't be any accumulative surplus or deficit in the account over that period.

What I meant by what I said was that any changes that you make to that account now, and the premium rate now.... As of right now the rate is frozen at 1.88 for 2015-16. That rate, based on our estimate, and Finance Canada's estimate, actually, is higher than what you need to balance the account. So that higher rate has to be offset in the future by a lower rate. If you reduce that rate now through a credit, for example, for a small business, essentially you will have to offset that in the future. So there is really no discretionary room in the account if you maintain the current legislation.

[Murray Rankin, NDP, Victoria, BC]

So you point out that the government has never provided an explanation for why the premium rate is set well above what's required, and then you go on to say that this is contrary to the government's stated objective of having a transparent premium rate-setting process. Why? Why would they act contrary to their objective of a transparent premium rate-setting process?

[Mostafa Askari]

This is a question that we have asked in the past. According to the Department of Finance's own numbers in the fiscal update, the account will be in surplus in 2015 and 2016. There is really no reason as far as the Employment Insurance Act is concerned to keep the rate at 1.88, because there is an accumulative surplus, so it can be reduced. So far we have not seen that plan to reduce the rate in 2015 and 2016, and we don't really know exactly what the reason or what the justification for that is.

[Murray Rankin, NDP, Victoria, BC]

There's been no policy justification advanced for keeping it higher than it needs to be.

[Mostafa Askari]

That's right. The only explanation that we have heard was for fiscal planning purposes, but we don't know exactly to what end.

[Murray Rankin, NDP, Victoria, BC]

Thank you.

I'd like to, in my last minute, go to Ms. Biss if I could.

We had a very compelling testimony from another group on the same issue yesterday, and we were engaged very much on both sides of the aisle. You talked about the program being “overreaching”. That was the word you used. Why did you use that expression?

[Michèle Biss]

Thank you very much for the question.

There are a few reasons why we would say that, but I'll focus on this reason. The provisions have been put forward by the government as a way to stop people who are illegitimate refugees or refugee claimants who might be unsuccessful. But the reality is that this bill is going to catch both individuals who will later be successful in their refugee claims and individuals who might not be successful in their claims. Basically it's a very large group of people we're looking at and it overreaches based on who will actually be caught by these sections.