Finance Committee on Sept. 26th, 2017

[Dr. Henri Rothschild]

I'm not sure it will. I don't know. I haven't looked at it in great detail.

I can tell you, however, that venture capital is not playing the same role it did 20 or 25 years ago in the growth of start-ups, simply because 20 or 25 years ago most of the start-ups were involved in what we can call “Internet technologies”, where exits were very fast. This aligned very well with the culture of the VC industry, where exits had to be early, and in many cases, dramatic. The words “home run” were used often in those cases.

It's too soon to tell how the proposed tax changes on small corporations can affect the investment in venture capital. I don't know the answer to that.

Given the strength of Canada in a number of fields—including the fact that most people would prefer to work here than in many other places, including the fact that our education base is solid, including the fact that everyone in this kind of economy wants to have a place in North America, and including the fact that Canada is increasingly competitive—we have strengths upon which to build.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you very much.

Mr. Cross, you've mentioned that we are in a difficult business environment right now. We have increased payroll taxes coming. We have increased carbon taxation coming. We have this new proposal. You were absolutely right when you said that people right now are fearful because they don't know what the rules are. Entrepreneurs love opportunity, but they also need certainty.

Is the latest proposal by the Liberal government having a direct impact on our economy and on whether people are hiring or making big investments?

[Philip Cross]

I wouldn't pick out any one government or any one measure. As I said, I don't think by themselves any of these measures are necessarily very harmful. I just think when you look at the wide range of increased taxation and regulation in almost all parts of the country at all levels of government....

I see today that Uber announced it was going to leave Montreal. That's not even anything to do with the provincial government. That's about fighting with the local government. We just seem as a society to be very resistant to innovation, and we don't seem to understand the negative consequences of a lot of our actions. Our actions may be motivated by a desire to do better for society, but there doesn't seem to be an understanding of what they do to the business and entrepreneurial community.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you very much.

Ms. Guy, thank you again for your testimony here today.

You talked about a universal basic income of some sort. Milton Friedman and Friedrich Hayek, both economists, said you could do something like that, but I'm afraid our demographics are far too old. If one were implemented, there would be a lot of impacts on our labour market. Has your organization done any research into what would happen to our labour market if suddenly there were a universal basic income for everyone?

[Sally Guy]

This is a question we get a lot, and that's why I addressed the benefit trap at the beginning of my comments. I just want to say that it's called a “benefit trap” because it's not a benefit choice. In traditional income support models, it becomes a trap; not working becomes the rational thing to do.

If there were a tailored model for Canada that took into account demographics and our population and our unique context, we wouldn't see that happening. The major leap for most people in terms of implementing a universal basic income is a sort of pessimism about human nature. If there's one thing social workers know—and I don't think you've called us as witnesses here because of our expertise in macroeconomics—it's that people want to contribute. They want to be valuable. They want to be productive in society. If they're given the tools to do so, they will. We know that if people are lifted above the poverty line, that goes right back into local businesses, like the mom-and-pop grocery store.

So no, we haven't done the economic research on it, although I would point you in the direction of the study that I cited, which is from the Roosevelt Institute in the U.S. I can actually provide that to the clerk afterwards as well.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Ms. Guy, I would like to continue talking about the universal-based income guarantee, which was raised by a number of political stakeholders in a leadership race that I am familiar with. Can you elaborate on the model you are proposing?

My other question in this regard is the feasibility of this model in Canada, in view of our federation and the fact that the provinces will have to be included in such an undertaking.

I would like to hear your thoughts on those two points.

[Sally Guy]

The thing people ask a lot when they're asking me this question is, what model do you think is best? Is the one they're testing in Scotland right now the best? Is the one they're doing in the Dutch city of Utrecht the best? Is the one in Barcelona the best? Is the one in Ontario the best?

I say, no, none of them is going to be the best for Canada. We don't think we have all of it figured out in terms of the way it should actually play out. What we do think we have is the idea that it needs to be universal. This means that everybody needs to at least be eligible for the benefit. That means that it could look different for different people in different provinces, or with different abilities, or all sorts of different things.

The analogy I like to use for it is our health care system, which is universal. We're all okay with the fact that not everyone is going to need a heart transplant, or not everyone is going to need chemotherapy, but we accept that the benefit to the people who are lucky enough to not need that kind of care is that they know it's there for them if they need it.

The way we're running income support programs in Canada right now would be equivalent to your needing to prove to your doctor, with documents over the past month, that you have cancer. “Here, Doctor, I tested my blood this many times, and I have cancer. Please treat me.” We need to move income support. The program we are proposing, a universal-based income guarantee, would be the same thing for income support as what we already have for health care in Canada.

How's that?

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

That's interesting. Thank you.

My next question will be to Monsieur Lemaire.

A great deal has been said about innovation around the table today.

I was wondering to what extent innovation can help resolve the labour market issues in the fruit and vegetable industry. Owing to the harvests in this industry, the labour requirements are intensive.

To what extent could the government help you to make a shift toward as much innovation as possible in the fields, which might help you deal with the labour shortage?

[Ron Lemaire]

Innovation is extremely important in driving the labour discussion. Three weeks ago I was in Hong Kong presenting a document on disruptive technology and how it can help drive our entire sector. There is a range of new tools that can support harvesting and picking.

I had an opportunity two weeks ago to visit a new innovation centre in Salinas, California, where they've created an innovation hub—a brand new, amazing facility—that has supported the development of new tools and new products that farmers can develop, and not only farmers but full supply chains.

When you look at innovation, then, it could be tools within a repack shed, it could be tools within the retail outlet, or it could be tools within a wholesale outlet. Looking at labour in the field, it could be something as simple as weeding.

There is an organization, which we had a chance to see, in California that is testing an electronic weeder. For what would normally take a crew of 30, they have two people operating a machine that takes real-time photos of the plant, identifies whether it's a weed or not, and can weed the area in less time than a human workforce can move through.

Those types of technologies exist. Not everything can at this point be harvested mechanically. There are new technologies for apple picking, berries, and so on. They need further development. That's where the opportunity rests: in taking disruptive technologies that are in initial stages and—going back to the comments earlier around commercialization—taking them to the next step. How do we actually implement and deliver and commercialize them across the sector? Labour is one component.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair, and welcome everybody. Thank you for your presentations.

We're going with the theme of innovation and improving the social fabric from the social workers' perspective and ensuring that we have a good supply of labour for our agricultural community. Let's start on the theme of innovation.

We as a government have put forward the supercluster strategy, and we'll be finding the results of it. We know how important innovation is and that it leads to increasing investments and ultimately a higher standard of living. I would like to hear the thoughts of the three individuals—Mr. Cross, CCI, and Mr. Rothschild—on our supercluster strategy and how it will take us, hopefully, to a better place in terms of investment levels in our economy.

Can you start, Mr. Cross, and we'll work our way along—quickly, please?

[Philip Cross]

It's hard to evaluate, since the details haven't been rolled out. I think it's encouraging that the government recognizes and identifies innovation and investment as priorities. We'll see how it delivers them.

[Dr. Henri Rothschild]

As we see it, the superclusters initiative addresses a deficiency in Canada in the area of industrial innovation, in the same way, for example, that the Israelis addressed the lack of regional markets as a deficiency.

What's our deficiency? We are not as interconnected a society as we need to be in order to have an innovation culture. Again, I can compare us to Israel, where there is a complete integration of the academic, industrial, government, and community structures, so that people are one and the same community. They know each other. Successive managers within the Israel Innovation Authority have had vast industry experience, many of them internationally. It's the same community.

The clusters are an attempt to create that community within regions in areas of technological focus so that we can overcome a deficiency in the way we're structured, in the same way, for example, that the MaRS Discovery District in Toronto was established to achieve the same thing.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Rothschild.

Mr. Boucher, please, quickly.

[Pierre Boucher]

If I may, Mr. Chair, at the outset I'd like to talk about the superclusters infrastructure perspective. The clusters were brought about in the budget passed in 2016, and infrastructure was not part of that. They identified sectors, and infrastructure was not part of that. This year, they announced infrastructure, and we basically were given six weeks to do the work that others had taken two years to put together.

You had to produce your letter of intent, and then you had to guarantee $125 million in matching funds, which is absolutely not possible. That said, we still proceeded with the letter of intent. We hope to engage with government to see how they can address our issue there, because it's not possible to guarantee that kind of support when you have to build your consortia, identify the the project you want to invest in, and so on.

I think the superclusters have a lot of potential. At the same time, this creates a problem for some sectors, because it has to do with culture. For R and D you can spend the money, but you have to start with culture. You have to make sure the sector you're touching on meets the requirements of the clients. It has to be client-based. The consortia being built may not necessarily include all of the client base. For example, as I said in my presentation, provincial and municipal governments own billions of dollars of assets in construction, and the money they would spend cannot be accounted for in terms of matching funds. It's the construction industry that has to put up that money, and in many respects, it's not the innovation in itself that will come about that will serve them well.

I'll give you one example, if I may—

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Boucher. I want to move on, because I want to quickly ask Mr. Lemaire a question.

[The Chair, Liberal, Wayne Easter]

Yes, very quickly. You have 40 seconds.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

On the supply of labour, how critical are we on that in terms of ensuring sufficient resources for people to harvest, for people to get food to the market?

[Ron Lemaire]

It does come down to regions. It is an ongoing challenge every year. Every year, we see growers leaving crop on the tree or in the ground because they don't have the labour resources to pull it out. I can quantify those numbers after this meeting, but there is a challenge.

[The Chair, Liberal, Wayne Easter]

Mr. Boucher, I'll give you an opportunity to finish your answer, but tie in both your presentation and the presentation from Mr. Cross. He said, “This reflects a persistent weakness in government intervention, which rarely re-examines the rationale behind regulations for its ongoing relevance decades later.”

In your presentation, you have some startling numbers in terms of where Canada ranks, but on innovation and doing things very differently from the current way we do it, how do you suggest you get there? You may be able to bring your example in on that point.

[Pierre Boucher]

Mr. Chair, I will give you one example.

You can have money spent on R and D. The delivery arm of that is most critical. If you have programs responsible for some aspects of it that are geared towards a certain date with an amount of money, where people have to respond based on the program that has to meet those deadlines, you're missing an opportunity for the industry members to come together, identify for themselves the challenges they have that are linked to the clients they serve, and then how to best deliver on those innovative ideas and solutions that need to be put to market.

Also, we find that sometimes spending more money in the same kind of structural environment that we're in is a problem. The current government said from the get-go that there was going to be a review of the programs we have in place. We haven't seen that. I don't want to be all that critical, but I think there has to be a change in some respects in some areas.

The other thing is that when the government was elected, the Prime Minister sent mandate letters to the ministers stating that innovation had to be industry-led and that industry had to work with the provinces, municipalities, indigenous people, and academia.

The ecosystems you have, like ours—and Monsieur Lemaire mentioned the associations—we have created those ecosystems. Ours, for example—and I've mentioned who they represent—the value chain of the construction industry, collectively does $25 billion a year and has the strength, knowledge, and connections to know what's best.

As well, Mr. Chair, the one example I was going to give is that if you go to a supercluster and decide to study the curing of concrete in cold climates, the result of that is significant in many respects to owners, because they want the concrete to cure rapidly and in a safe way to be embedded in their projects. The people who would be funding this don't necessarily benefit from it, because it's a commodity that you collectively put into a structure.

Again, it will depend on what the client needs are. They need to be defined by those ecosystems that have been put in place. What we're thinking about is that incubators and industry-led funds in innovation would serve them better than having strict program guidelines set in place that may not serve everybody equally.

[The Chair, Liberal, Wayne Easter]

I'll have to stop you there.

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

My questions are mostly for Madam Guy and Mr. Cross.

I want to talk about that universal basic income guarantee, which is also called the negative income tax. My questions are a bit different from those so far. This comes from Friedman's 1962 book, Capitalism and Freedom. I have read the Roosevelt Institute's proposal. In it, though, they go away from the Friedman ideal, which is that you do away with the civil servants who are managing the welfare programs, who are having to vet whether the person should be eligible or not. They say that you would take those savings and give them to the poor, to those who truly need them and who are trapped.

You kept referring to the poverty trap, to being stuck in a situation where the rational choice is to choose not to work, because otherwise you will lose your benefits. You mentioned that your organization was going to do a study that you were going to put out. Are you going to be calculating the savings made possible by the elimination of these benefit programs and by substituting some type of minimum income or negative income tax guarantee program? That was the Friedman idea in its purest form. It was the substitution effect.

[Sally Guy]

We don't go so far as to calculate the savings, because we know that for every different province, different things would be replaced or changed. We also know that in the model we're proposing the tax brackets would have to change.

Really, we do think there would be savings. Let me be clear about that. We think there would be significant savings. We know that the current income support system is around $200 billion. We don't think it would be that high. We think it would make obsolete income support. It wouldn't make obsolete some other things we need for people, but we do think it could totally replace that.

The main thing about what we are proposing is that it would change from means-testing the bottom, which is such an administrative burden.... Not only is it stigmatizing, but it's administration heavy. It would change from means-testing to just taxing the top. We already have progressive taxation, and we think this could go through the CRA, so no and yes would be the two parts.