Finance Committee on Nov. 18th, 2014

[Mark Adler, Conservative, York Centre, ON]

Thank you very much, Mr. Chair.

Thank you all for being here today. We appreciate your input. We've had a very robust discussion over the last little while on Bill C-43.

I have a couple of questions that I would first of all like to address to Mr. Askari.

As you know, our new small business job credit will lower EI premiums by 15% and save small businesses more than $550 million over the next two years. First of all, do you agree that this is real money that small businesses can use to defray the cost of hiring new workers and to take advantage of emerging economic opportunities?

[Mostafa Askari]

The amount is really small.

At the firm level, the maximum that a business can get from this is $2,200. This is a company that would have a payroll of about $600,000 a year. An amount of $2,200 for a firm that has a $600,000 payroll is not really the kind of money that would affect their decision-making process, or hiring or firing decisions.

Also, if you want to hire an employee, with the assumption of a $50,000 salary, that would save the business only about $195, based on this credit. It's not big enough to create any kind of incentive.

[Mark Adler, Conservative, York Centre, ON]

The Canadian Federation of Independent Business, which represents 109,000 small businesses across the country, says that our new small business job credit will create 25,000 person-years of employment.

I'm curious as to why your job estimates would vary so greatly from theirs.

[Mostafa Askari]

Well, it's a good question.

Some of it is that we don't know exactly how they came up with the 25,000 job-years. That requires a period of time that you have to maintain those jobs. This is a temporary measure, so it's not clear how you can maintain that kind of an impact over a 10-year or 15-year period.

Also, they have used a multiplier that is different from ours, and that happens. There are different ranges for the multipliers that might be used. The Department of Finance's multipliers, from our point of view, are more the official measure of the impact of various stimulus measures on the economy.

[Mark Adler, Conservative, York Centre, ON]

Are these Finance multipliers, or your own?

[Mostafa Askari]

Finance multipliers

[Mark Adler, Conservative, York Centre, ON]

Okay.

We are lowering payroll taxes for 90% of businesses, and the Liberals and the NDP are supporting a 45-day work year that will drastically increase premiums, by some 35%, at a cost of $4 billion. Our government will not attack job creators with massive tax hikes, so in your opinion would the $4-billion Liberal and NDP employment insurance scheme create 25,000 new jobs?

[Mostafa Askari]

Well, sir, again, as I said, if we maintain the current Employment Insurance Act, on that basis, no measure under this act that uses the proceeds from the EI premiums can have any permanent job impact, whether negative or positive. It has to be offset over time.

[Mark Adler, Conservative, York Centre, ON]

Okay. Thank you.

I want to move on to Mr. Gaetz.

With regard to the new division 27 about the Payments Clearing and Settlement Act changes, how will these changes impact the payments industry?

[Gerry Gaetz]

The changes are aimed primarily at introducing a more balanced governance to the Canadian Payments Association and stronger oversight of critical market infrastructures, so I would say that there are two main areas. One is ensuring that any market infrastructure, and by that I mean Canadian Payments Association as a market infrastructure, clearing essentially all of the value of payments every day in the economy, and other market infrastructures such as securities, Canadian depository securities, and derivatives market infrastructures, have the kind of oversight that they should have to ensure that they operate safely.

The other aspect of the changes relates to having a balanced view in terms of how we move forward with modernizing the payment system in Canada, a view that balances the public policy objectives of safety, soundness, and efficiency, and meeting the needs of users.

Those are the two main areas.

[Mark Adler, Conservative, York Centre, ON]

So there were certain gaps within the current regulatory regime that you see division 27 as rectifying.

[Gerry Gaetz]

I would say on the safety and soundness side, it's more about strengthening, whether you call that a gap or really rising to international global standards for oversight. That's the key element on that side. Then on the governance side, it's about having a good, embodied, entrenched, balanced view, at least for the Canadian Payments Association, on our board.

[Mark Adler, Conservative, York Centre, ON]

Do you agree that the Bank of Canada needs more tools to respond to risk and to ensure clear and greater oversight on various payment systems?

[Gerry Gaetz]

If Canada is to operate consistently with global standards, it would be required for the Bank of Canada to be able to do that.

[Mark Adler, Conservative, York Centre, ON]

You would agree with that.

[Gerry Gaetz]

Yes.

[Mark Adler, Conservative, York Centre, ON]

Thank you very much.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Adler.

I'm going to take the next round as the chair.

I wanted to start off with the Heart and Stroke Foundation and the Canadian Cancer Society. This is more of a comment from me, but you're free to comment in response.

As you know, this committee has done an awful lot of work on charity work, your sector's work, with colleagues like Peter Braid, and former finance minister Jim Flaherty on this issue, so I'm very pleased with what is happening in this budget implementation act. I do have to say, though—and Mr. McAllister, I like your example as well—that your sector is one of the best in terms of adopting ICT. It is. As someone who donates to charities, it is one of the best sectors I can find in terms of the adoption of ICT. I just want to commend your sector for that. I don't know if you have a short comment on that, either one of you, but I just want to commend you for that.

[Janice Gray]

Thanks.

[Tom McAllister]

Thanks.

[Voices]

Oh, oh!

[Tom McAllister]

I think that qualifies as short.

[The Chair, Conservative, James Rajotte]

Second, I'll address the Canadian Payments Association.

Mr. Gaetz, you said it and you have to actually repeat it. Last year the CPA cleared and settled $44 trillion or $170 billion on average every business day, and you almost said it modestly. That is an astonishing achievement for your model and obviously for your organization.

One clarification in follow-up to the other questions you've had is you pointed out that, at a minimum, two of the member directors should represent member institutions designated as domestic systemically important banks, a category of institution that collectively accounts for over 80% of payment transactions in CPA funding.

So in terms of the voting, just to clarify, the large institution carries the same vote as a smaller institution, but in order to address the systemic issue, two of the directors will be from the larger institutions.

Can you address that issue?

[Gerry Gaetz]

Yes. Thank you for the question. That's a very important element because the largest financial institutions in Canada carry the lion's share of the risk for payment transactions. They also carry the cost of my organization, the running of my organization, and the modernizing of the systems. Because the payment system is like a network and all of the players are connected, it's really important that we have those views represented at the board table.

[The Chair, Conservative, James Rajotte]

How many organizations would be considered domestic, systemically important banks?