Finance Committee on Nov. 19th, 2013

[The Chair, Conservative, James Rajotte]

I call to order meeting number 7 of the Standing Committee on Finance. Pursuant to Standing Order 83.1, we are continuing our pre-budget consultations 2013.

Colleagues, we have two panels here today of an hour and a half each. In the first panel we have a professor from the University of Toronto, Dr. David Hulchanski. Welcome.

Next, we have

Mr. Girard, from the Agence métropolitaine de transport.

Welcome to the committee.

We also have from the Canadian Real Estate Association, Mr. Gary Simonsen. From Sunnybrook Health Sciences Centre, we have the president and CEO, Dr. Barry McLellan. From the Tourism Industry Association of Canada, we have Mr. David Goldstein. Welcome.

I think we are still waiting for our contact in Calgary via video conference, Mr. Justin Smith from the Calgary Chamber of Commerce. Hopefully he will be tied in here shortly.

Gentlemen, you all have five minutes maximum for an opening statement. I will hold you to that fairly rigorously.

We'll start with Professor Hulchanski, please.

[Dr. David Hulchanski, Professor, University of Toronto, As an Individual]

Thank you.

I'm pleased to have been invited.

In a democracy, government budgets reflect democratic compromise. This is true in most western democracies where voters are proportionately represented in Parliament based on election outcomes. As we know, this is not true in the case of Canada, where 39% or 40% of the vote is usually enough to capture a majority of seats in Parliament.

Since the mid-1980s, Canadian minority governments with a majority of seats in Parliament have not simply allowed, but actually assisted, the redistribution of income from middle-income groups to higher income groups. When we compare ourselves to 15 wealthy western democracies, Canada ranks near the bottom in measures of income equality—in my brief I have a figure from the OECD showing that—and in measures of the role of government in assisting those in need. I have two figures in my brief showing that. Thus far, Canada is doing nothing to halt the upward redistribution of income and wealth. Government budgets, economic policies, and labour market policies are responsible for much of this upward redistribution of income and wealth. The result is an increasingly polarized society in which a minority of very high-income individuals, households, and neighbourhoods co-exist with an increasing majority of low-income individuals, households, and neighbourhoods. I have two figures that show this for Canadian metropolitan areas, where the middle-income group and middle-income neighbourhoods are becoming far less numerous than they have been in the past. Fortunately, these trends are reversible. They are not inevitable, but the outcome of choices we make annually in our federal, provincial, and municipal budgets.

I have three recommendations for doing better, starting now.

One, do not make income inequality and income polarization worse. Some examples are that we not double contribution limits to tax-free savings accounts; do not introduce income splitting; and do not allow the temporary foreign worker program to expand in large urban centres, which is where most foreign workers go. Toronto has 19% and Montreal and Vancouver have 10% each of the temporary foreign worker population. This program adds competition to the bottom of the wage spectrum, reducing the likelihood of wage gains at the bottom, which is where we need them.

Two, promote income equality by assisting with the biggest budget item for low-income Canadians, which is housing. First of all, simply spend the money already allocated for affordable housing; this is the $253 million annually that the federal government committed for investment in affordable housing programs, which is to be matched by provinces and territories, producing almost half a billion dollars annually. I understand there has been no allocation of this federal funding since the March 2013 budget. While occasional funding such as this is helpful, proper planning for meeting housing needs must begin by developing and implementing a national housing strategy. This should be done within one year in cooperation with the provinces and territories, municipal representatives, the private sector, aboriginal people, and NGOs.

Three, and finally, reduce income inequality by reducing poverty. For example, enhance the Canada Pension Plan; increase employment insurance payments and introduce new rules to make the system fairer for all Canadians; make major new investments in the working income tax benefit; introduce a national care agenda, including child care and elder care; and join with the provinces and territories to create a national, anti-poverty strategy with real goals and measurable objectives.

These three affordable categories of measures are important first steps that can be taken right now. These and similar measures each succeeding year will stop the redistribution of income from the majority at the bottom to the minority at the top, and eventually lead to a much fairer society.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Mr. Girard, you have the floor.

[Nicolas Girard, Chief Executive Officer, Agence métropolitaine de transport]

Mr. Chair, members of the committee, good morning.

I am happy to have the opportunity to speak to you today on behalf of the Agence métropolitaine de transport, but in particular to talk about prosperity, particularly that of the Montreal metropolitan area.

The federal government will have important decisions to make in the coming months, which will have a decisive impact on the prosperity of the entire region. I am referring here to the new Champlain Bridge and to the implementation of a light rail transit system in the downtown A10 corridor, and to the federal funds that will be allocated to this.

Created in 1996, the mission of the Agence métropolitaine de transport is to increase public transit services so as to improve the efficiency of people's movements in the Montreal metropolitan area. To execute its mission, the agency plans and operates five commuter train lines—soon there will be a sixth—and promotes public transit.

In our Vision 2020 strategic plan, we set ourselves the objective of increasing ridership on the metropolitan public transit network by 33%, by increasing trips from 480 million, the 2011 figure, to 640 million in 2020.

We have a number of projects, including extending the subway, the east train and the Pie-IX BRT. All of these projects represent an investment of over $16.8 billion over a period of 10 years.

We talk about money a lot. However, recent studies have clearly shown that investing in public transit generates many economic benefits and contributes in a structuring way to the wealth and dynamic character of the city of Montreal. As proof, I would simply mention that in 2009, public transit generated value added for the Quebec economy in the order of $1.1 billion, and supported 14,000 jobs. A dollar invested in public transit has an impact—

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Mr. Chair, I have a point of order.

[The Chair, Conservative, James Rajotte]

Go ahead, Mr. Jean.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I'm sorry, but if the witness could slow down a little bit, it would be helpful. He's speaking as quickly as I do in English. I know it's impossible for the translators to keep up, and so I'm missing words.

[The Chair, Conservative, James Rajotte]

Yes. Okay.

[Nicolas Girard]

I am going to continue, Mr. Chair.

A dollar invested in public transit has an economic impact that is three times greater than in private automobile transport. One of the main obstacles to economic development is the very high cost of traffic congestion; the Department of Transport assesses this cost at close to $3 billion. It is time to take the necessary steps to reverse this trend that is harmful to our economy.

Which brings me to the Champlain Bridge. You all know to what extent this bridge is crucial for the Montreal region. Every day, 160,000 cars and more than 17,000 trucks cross it to go to Montreal or the South Shore. It is the busiest bridge in Canada. It is one of the important components of the continental trade gateway. Every year, 20 billion dollars' worth of goods exchanged between Canada and the United States cross that bridge, and that represents 7% of Quebec's GDP. In addition, 20,000 people use the dedicated bus lane during rush hours. Every morning, more public transit users than drivers cross the bridge.

This dedicated lane, which was commissioned in 1978 and was supposed to be temporary, reached full capacity several years ago. A needs assessment showed clearly that something must be done in the downtown/A10 corridor to deal with the current public transit issues.

After an analysis of the various preliminary options, light rail transit was shown to be the best one. LRT provides quick, safe, accessible and reliable service, and makes it possible to increase public transit use. It also blends perfectly into the urban environment and makes it possible to provide service to a vast clientele, while reducing greenhouse gases.

That is why the Government of Quebec chose LRT for the new Champlain Bridge. It announced the creation of a project office and entrusted the responsibility for bringing this project to fruition to the Agence métropolitaine de transport (AMT). There is a consensus on this project in the greater Montreal metropolitan area. Both municipal representatives and the partners of the Champlain Bridge subscribe to the positions of the Government of Quebec regarding the replacement of the Champlain Bridge. This support focuses particularly on the choice of LRT for the future bridge, and the hope that the work will be supported by federal funds; there is also a concern with regard to tolls and the repercussions they could have on mobility in the Montreal region.

For this project to become a reality, we are missing an essential partner: the federal government. It must contribute financially to the realization of the project. We are counting on the new Building Canada program, in particular on the so-called “merit-based” fund, which has a $4-billion envelope.

Last week, the Government of Quebec released its position and its intention to ask for its fair share of this fund, i.e. $1 billion. It confirmed that this subsidy would be entirely allocated to LRT on the new Champlain Bridge. The new bridge will have the necessary infrastructure to host the LRT, which will link the South Shore to downtown Montreal and most certainly contribute to the prosperity and safety of the greater Montreal region and of Quebec as a whole.

We thus have two recommendations to make to the committee. First, in light of the construction of the new Champlain Bridge, the federal government must work in close cooperation with the Government of Quebec to plan the realization of this new bridge, taking into account the implementation of a light rail transit system.

Secondly, the federal government must commit to funding its part of the LRT through the “merit-based” fund of the Building Canada program, by contributing $1 billion. This bridge is very important for the economy of Quebec and the greater metropolitan area. We hope that the federal government will be a partner in this project and that it will subscribe to the consensus of the greater metropolitan area.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Girard.

Next we'll have Mr. Simonsen, please.

[Gary Simonsen, Chief Executive Officer, Canadian Real Estate Association]

Good morning and thank you, Mr. Chair.

On behalf of our over 107,000 realtor members, I'd like to thank the committee for the invitation to appear today.

Like MPs our members do work that connects them very closely to their respective communities. Similarly, our goal is to make communities across Canada better, safer, and stronger. Our recommendations carefully consider the fiscal limits of the current economic environment and can be implemented at little or no net cost while delivering economic spinoff benefits and creating jobs.

A balanced and stable real estate market is a crucial pillar of a strong economy. This year resale housing transactions will generate an estimated $22.3 billion in consumer spinoff spending and create more than 175,000 jobs.

Buying a home is the largest financial decision most Canadians will make in their lives. Increasing their financial understanding about this purchase is a crucial component of long-term housing market stability. This is why we have taken a great and active interest in financial literacy and have collaborated with the Financial Consumer Agency of Canada on the Homebuyers' Road Map, something we just provided to the clerk for distribution.

One of the most important government measures that support responsible home ownership is the Home Buyer's Plan. According to a recent Nanos Research survey, 65.5% of Canadians believe the Home Buyer's Plan plan is a valuable tool for Canadians interested in buying a home. The plan allows home buyers to borrow up to $25,000 from their RRSP for a down payment.

Since its implementation in 1992 the plan has made home ownership an affordable reality for over 2.6 million Canadians. Unfortunately inflation is slowly eroding the plan's purchasing power. A home buyer today is receiving $1,600 less value from the plan than did a home buyer in 2009. By 2015 this value will hit almost $2,500. This is why we're asking for the Home Buyer's Plan withdrawal limit to be indexed to the consumer price index in $2,500 increments. Over time this will maintain—not increase, but maintain—the plan's buying power. Importantly, there is no cost associated with this recommendation until 2016, at which time the cost would be $7.5 million.

We also share the view that vulnerable Canadians should be supported with a homebuyer's plan. Allowing its use after job relocation, the death of a spouse, or a marital breakdown, or in order to accommodate an elderly family member would help individuals maintain home ownership through significant life changes by easing affordability concerns.

This responds to a need we heard expressed at this table during our last pre-budget consultation appearance and also by our members. This proposal meets that need by allowing Canadians to borrow from their own savings rather than depend on government funding.

Finally to encourage community reinvestment, small investors should be allowed to defer recapture of previously claimed depreciation on income properties. This is technically known as “capital cost allowance recapture”. It is a benefit that is similar to one large developers already enjoy. Allowing this deferral for those who choose to reinvest proceeds of a sale into a new building would unleash a chain reaction of economic, environmental, and community-renewal benefits. Third-party costing research demonstrates that the net cost of this proposal is only $12 million in the first year and that it would be net revenue-positive in year two since capital gains tax would be collected on the increased value of any property sold using this deferral.

I appreciate and thank you for your time and consideration this morning.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll go to Mr. McLellan now, please.

[Dr. Barry McLellan, President and Chief Executive Officer, Sunnybrook Health Sciences Centre]

Good morning, and thank you for the opportunity to address you today.

I have structured my presentation on our proposal to create an innovative brain sciences centre at Sunnybrook around four questions.

First, why is it important at this time to be focusing even more attention on diseases of the brain and mind?

Disorders of the brain, including stroke, dementias, and brain tumours, and disorders of the mind, including depression and anxiety disorders, are intimately interconnected, and represent the greatest health care challenges of the coming generation. By 2030 the social and economic burden of diseases of the brain and mind will eclipse all other diseases combined.

Second, what is behind the concept of a brain sciences centre?

Disorders of the brain and mind cross many disciplines, and cannot be fully understood through the work of just one clinical or research specialty. Sunnybrook's brain sciences program is guided by the philosophy that only through cross-discipline and interprofessional collaboration will we find answers to these disorders that plague so many.

Our psychiatric and neuroscience experts will work side by side in a collaboration of education, research, and patient care in a world-class brain sciences centre in the heart of one of Canada's leading academic health sciences centres. This innovative initiative will create a different kind of facility, one that will mitigate the stigma of mental illness through its enhanced integration with the mainstream of health care. Research and education will be embedded directly into the leading-edge treatment offered at the centre.

The establishment of an innovative brain sciences centre will send a clear message: those suffering from disorders of the brain and mind are no different from those with heart disease or cancer, and they deserve the best comprehensive care possible within one of the country's best health sciences centres.

Third, why site a world-class brain sciences centre at Sunnybrook?

One of Canada's largest research and teaching hospitals, Sunnybrook delivers care to more than 1.2 million patients a year. Sunnybrook's strategic priorities are internationally renowned for delivering highly specialized care, and leading in the discoveries and innovations they make, the teaching and learning opportunities they provide, and the unparalleled level of care they deliver.

We have a track record of leadership in disorders of the brain and mind, including our mood and anxiety program, our youth bipolar program, the Frederick W. Thompson Anxiety Disorders Centre, the Heart and Stroke Foundation Centre for Stroke Recovery, and the Toronto Dementia Research Alliance.

We are developing and applying new technology to cure the ravages of diseases of the central nervous system. Technology developed at Sunnybrook enables neurosurgeons to see through the skull and into the brain, and then destroy diseased tissue with extraordinary precision without making a single scalpel cut.

Next up is technology that immediately stops strokes as they're happening and prevents dementia from advancing. Our scientists have developed non-invasive methods to deliver therapies into the brain, including stem cell therapy, gene therapy, and immune therapy to treat disease otherwise untreatable. Sunnybrook is the only place in the world bringing this all together.

Finally, what is the ask and the value proposition?

The total cost of the transformative infrastructure to bring the brain sciences centre to life is $60 million. The ask of the Government of Canada is for a $30-million investment, with the remaining $30 million coming from a combination of private philanthropy and provincial participation.

What's the value proposition? It's creating the only facility in eastern Canada that seamlessly incorporates all aspects of mental health and related brain sciences under one roof; advancing the development of a national network of brain sciences centres of excellence, including the University of British Columbia's Centre for Brain Health; expanding and building new linkages across Canada for research, education, and treatment; and finally, leveraging current collaboration between Sunnybrook's brain sciences program and such other leading research centres as UBC's Centre for Brain Health and the Hotchkiss Brain Institute in Calgary.

In summary, we're dedicated to addressing the health care needs of the brain and the mind, today and tomorrow, in this unique multidisciplinary facility.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from Mr. Goldstein, please.

[David Goldstein, President and Chief Executive Officer, Tourism Industry Association of Canada]

Mr. Chair, members of the committee, thank you for the opportunity to be here with you today and to be part of this important dialogue on the Canadian economy.

Again, for the record, my name is David Goldstein. I'm president and CEO of the Tourism Industry Association of Canada, representing the full cross-section of Canada's travel and tourism sector, with a focus on growing Canada's international competiveness as a global destination.

Our sector, which is primarily made up of small and medium-sized businesses, generates annual revenues to the Canadian economy of $82 billion.

[The Chair, Conservative, James Rajotte]

Sorry, there are no pictures allowed during a committee hearing.

[David Goldstein]

We employ over 600,000 people in every riding across the country, including over 204,000 Canadians aged 25 and under, making our sector the largest employer of young Canadians.

Generating $17.4 billion last year in international currency exchange from international visitors, travel is Canada's largest service export sector. Travel and tourism is a vibrant industry, operating in every riding across Canada. According to the Conference Board of Canada reports, travel and tourism was one of the most resilient industries during the recession, with relatively few bankruptcies or job losses.

The industry is by no means in dire straits but is in need of course correction to seize growth opportunities for today and to ensure our sustainability for the future.

Receipts were up over 7% last year, out-pacing the Canadian economy, but this masked a very disturbing overreliance on our Canadian domestic market. Currently, 80% of travel revenue is derived from Canadians travelling within Canada, and that's up from 65% just a decade ago. Furthermore, our overreliance on the domestic market is at risk as Brand USA and other countries' tourism marketing boards are significantly increasing their marketing investment to lure the Canadian traveller abroad.

The good news is that the global opportunity is enormous. Travel and tourism is out-pacing nearly every other sector of the global economy, but Canada is lagging behind. Last year, Canada's inbound visitor growth was only 1.7%, less than half the global average of 4%. Simply keeping pace with the global growth of 4% is effectively the Canadian virtue of shooting for bronze. It would add half a billion dollars to our economy and over $150 million to government revenues.

In order to get to the 4% international average, Canada needs a balanced strategy that focuses on the higher-volume mature markets, primarily the U.S. and Western Europe, and the high-growth emerging markets such as China, India, Mexico, and Brazil. Given time, these emerging markets will mature and deliver significant returns, but at present, emerging market growth continues to be impeded by structural barriers like visa requirements, aviation cost structure, and air access issues.

TIAC is working within the federal tourism strategy to resolve the policy barriers restricting growth in these emerging markets, but at the end of the day none of these markets will surpass the U.S. market.

To that end, we believe that we are presenting a partnering opportunity for the government and industry to grow traditional markets where we have visa exemption and where we have available airlift. Central to this will be creating an opportunity to re-engage the U.S. market—a renewed national brand campaign.

Since 2002, Canada has lost almost 3.5 million overnight visits annually from the U.S. Many of the structural barriers facing the U.S. market have been overcome or minimized. Our currency is stabilizing below par; U.S. passport ownership has doubled. Now it's sitting at over 120 million passport holders. The border is thinning, and we have open air links to major American centres. The American economy is rebounding, and U.S. outbound travel is up over 6%, of which we only received 2.5% last year.

Americans continue to travel as their economy recovers. Outbound travel is more likely to grow to Canada, but we must step forward to seize at least our fair share of that lucrative opportunity.

Unfortunately, our resources to extend the Canada brand through the Canadian Tourism Commission are spread too thinly across key markets, and cuts to the CTC have forced the withdrawal of the Canada brand in the U.S. market. In response, TIAC is proposing a new, strategically aligned, fully-matched CTC-led marketing plan of co-investment with the federal government. Called Connecting America, it is aimed at U.S. leisure travel.

This proposed three-year pilot would create a $35-million federal co-investment plan, with matching funds from the tourism sector. It would be aimed at U.S.-Canadian markets that have direct or air-ground access.

A joint investment in Connecting America will produce dividends immediately. CTC projections estimate that with a first-year loan, we can attract 440,000 more Americans, who will spend approximately $250 million. This will include over 150 million hotel-room nights, driving $300 million in incremental government revenue.

Over the three-year pilot, the campaign will drive 2.65 million visitors, an estimated $1.5 billion in incremental tourism spending. That is why today we are hoping for one key recommendation from the committee. Our hope is that the committee will broadly recommend federal marketing investment to allow the Canadian Tourism Commission and our partners to forcefully drive the Canadian brand back into the U.S. market. More specifically, we believe that the Connecting America co-investment campaign is the right mechanism.

In conclusion, it should be noted that in 2002 Canada ranked seventh in the world in inbound visitation. In 2012, we ranked 16th. We believe that breaking down barriers and aggressively promoting the Canada brand internationally will allow us to surpass the international average of 4% visitor growth and enable Canada to get back into the top 10 by 2017.

We have provided additional information for members of the committee and we look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Goldstein.

I understand that we're still having technical issues between ourselves in Ottawa and Mr. Smith in Calgary, so I am going to go to members' questions at this point.

We'll begin with Ms. Nash for five minutes, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Welcome to all the witnesses today.

I only have five minutes to ask all of you questions, so I'll do my best within the time allotted.

I'd like to begin with you, Professor Hulchanski. I was interested in your comments about Canada ranking near the bottom of the 15 similarly wealthy western democracies, because we hear a lot from the current government about how we are the best of the G-7. What I take from your comments is that we may be the best, but many of the people within our society are actually not doing very well at all.

I know you've done a lot of work on identifying the changes in income and what that means for the racialization of poverty, the suburbanization of poverty.

Is reducing inequality essential to a sustained, strong overall economy?

[Dr. David Hulchanski]

The answer is yes, and it's been well proven, particularly by people who study health in a very broad way, the health of a society. These 12 other countries like Canada that are equally strong economically but are way more equal have way better outcomes in all kinds of measures for all people in society, not just low-income people. More equal societies are healthier societies, as defined in a very broad way in terms of crime and, of course, physical health and mental health, and so on. That has been established.

We sadly compare ourselves to the United States too often. They're at the bottom of the list of 15 on almost any OECD measure that we consider an important measure of success. So you're right on that.

[Peggy Nash, NDP, Parkdale—High Park, ON]

There are two areas I'd like to drill down on a little further. One is the area of housing.

I know that in the community I represent, Parkdale—High Park, we have a number of people who contact our office regularly with concerns that they're on a waiting list for subsidized housing—I think the waiting list is about 70,000 families now in the City of Toronto—or that they just can't make ends meet. If they pay their rent, they don't have enough money to feed their family for the coming month, and many of these people are working full time.

You say there's $253 million committed annually by the government for affordable housing, and it's not getting spent. Can you possibly speculate why that would be?

[Dr. David Hulchanski]

No. It was announced.

Today'sToronto Star has an op-ed by Michael Shapcott, which explains that $253 million. People involved cannot even get answers from the senior government officials about that money, why nothing is happening. Many of the provinces are ready to go. This was a commitment in last year's budget, so simply doing that will help a lot.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Well, it would be hard for me to explain to my constituents that the money is sitting there when they can't afford to pay their bills, that it's not being spent by the federal government. Clearly, we need to get action on that.

I only have one minute left, and I'm sorry I have other questions too, but I'd just like to stay with this. On the issue of temporary foreign workers and employment insurance, I see 19% of the foreign workers are going to Toronto. We already have relatively high unemployment in Toronto. I note that fewer than 40% of unemployed workers can get employment insurance. This seems like a crazy situation. What do we do in Toronto to get good quality jobs?

I'd like to get to the tourism piece as well because I think that's part of it, but what's your solution here?

[Dr. David Hulchanski]

For good quality jobs, we have to lift up the bottom wage. It's been the growth of the service sector over these 20, 30 years.... Canadians can afford to pay a bit more for the average goods they buy. Strengthening our labour laws and lifting that bottom up little by little will make a really big difference.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay, thank you.