Finance Committee on Sept. 18th, 2018

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Wilson, and I do appreciate how you broke down the figures in chart form in your main submission. It's helpful.

From the Business-Higher Education Roundtable, we have Ms. Walker, executive director.

[Valerie Walker, Executive Director, Business-Higher Education Roundtable]

Mr. Chair and committee members, thank you for inviting me here today. The Business-Higher Education Roundtable, or BHER for short, brings together leaders from some of Canada's largest companies and top post-secondary institutions from all regions of the country and a wide array of industries.

Created by the Business Council of Canada in 2015, BHER has three central objectives: to assist young Canadians as they transition from school to work, to strengthen Canada's research and commercialization capacity, and to help employers adapt to the economy of the future.

When we think about Canada's economic future, there are a lot of uncertainties. Our biggest trading relationship is under a cloud, digital disruption is eliminating some jobs while creating others, and whether we like it or not, our population is aging. That's bound to create serious labour market and fiscal challenges.

In the face of this uncertainty, we believe it is time for the Government of Canada to focus on something that it can control: helping young Canadians prepare for the skills economy of tomorrow. We believe that the most efficient and effective way to prepare Canada's youth for the coming skills revolution is to embrace work-integrated learning or WIL. Our research shows that WIL experiences like co-ops, internships, apprenticeships and applied research projects provide meaningful learning opportunities for students and a pathway for career success.

My colleagues and I spent the summer building a coalition of more than 25 national organizations and associations representing students, employers and institutions, and all agree that now is the time to act. Now is the time to ensure that every post-secondary student in Canada has the opportunity to complete a meaningful work experience before they graduate. Because these groups all feel so strongly about the importance of WIL, they joined together to formally endorse BHER's recommendations to this committee, one of which is to recognize the need for a national WIL strategy.

What does this look like in practical terms? Right now roughly four out of 10 PSE students have an opportunity to participate in WIL. That gap in real numbers represents 150,000 students per year who do not. Therefore, they're missing out on that opportunity. A national WIL strategy would focus the efforts of employers, educators and governments, both federal and provincial, and it would allow us to achieve our goal of 100% WIL in the most effective and efficient way possible.

In recent days I've been asked questions that perhaps some of you are wondering about as well. Why should the Government of Canada get involved in this and how? My answer is pretty simple. The federal government is already involved in WIL. Budget 2016 committed $73 million through their student work placement program. This program provides funding to industry associations that in turn create WIL pilot programs, including wage subsidies, to employers who offer quality WIL placements.

The wait-list for participation in these pilots is long, and early evaluation outcomes are positive. We believe there's a huge opportunity to expand those programs that are already taking place, and to help us close that gap of 150,000. Employers and educators are already acting and they're willing to step up these efforts, but there is an important role for the federal government as well.

To get us there, we're asking the federal government to do four things. The first thing is to expand the programs that you are already funding to increase employer participation. These incentives are especially critical for small and medium-sized companies, and under-represented groups including first nations, Métis and Inuit students.

Second, we need to fund a national platform that helps connect employers, educators and students. This will increase the supply of quality placements that employers are able to offer, in turn motivating post-secondary institutions to adapt and build more WIL into their programs.

Third, build WIL into the innovation superclusters initiative and the economic strategy table recommendations. These initiatives already have committed industry leaders around the table, men and women who are anxious to help develop the talent pipeline they need to succeed.

Fourth, work with us. I'm not here today to ask you to create a strategy, and we're not looking for the government to do the heavy lifting. We need your support to get started. As I said off the top, we spent the summer building a broad coalition of partners ready to come together to execute this national WIL strategy that we've created. The federal government has an important role to play, but this is certainly not its responsibility alone.

We recognize and thank the Government of Canada for the commitments it has already made and urge you to continue creating new opportunities for young people, breaking down barriers that prevent Canadians from reaching their full potential.

Thank you for this opportunity to speak to you today. I'd be happy to answer questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Valerie.

We'll now turn to the Conference for Advanced Life Underwriting. Mr. Legault is the president and Mr. Wark is the tax adviser.

Mr. Legault, go ahead.

[Guy Legault, President, Conference for Advanced Life Underwriting]

Thank you, Mr. Chairman.

CALU was very pleased to accept your invitation to present its recommendations for the 2019 budget.

To begin, let me tell you a bit about our organization.

CALU has 670 industry leading members including insurance and financial advisors as well as accounting, tax, legal and actuarial experts.

Our goal is to protect Canadians' financial future through sound long-term planning. Canadians rely on the expertise of these professionals for their investments so they can live a more secure and prosperous life.

Through a strategic partnership with Advocis, CALU represents the interests of more than 13,000 advisors on advanced planning issues to protect the financial future of millions of Canadians. Our advisors support small and medium-sized businesses by providing expert advice on essential financial products such as investment and retirement solutions, employee benefit programs, and life, critical illness, and disability insurance.

It is from this perspective that we prepared our brief, which addresses three themes. I will get straight to it.

We have highlighted in previous pre-budget submissions the pending long-term care crisis in Canada. As Canadians live longer, they are more likely to be managing a chronic disease. They will need some degree of long-term care support in their homes or in institutional settings. Anyone who has cared for an aging parent is acutely aware of both the emotional and financial toll. CALU is working with the financial services industry to explore initiatives to educate Canadians on their funding obligations for long-term care and identify suitable investment in risk-based product solutions.

We believe the federal government has a leadership role to play on the issue. Specifically, we suggest that the federal government undertake a number of initiatives. These could include convening a federal-provincial-territorial ministers committee to identify and develop a national approach for dealing with long-term care funding, and holding a national stakeholders symposium to discuss and debate seniors issues and develop appropriate recommendations.

I would like to turn briefly to the 2018 budget commitment regarding the implementation of national pharmacare. We are currently working on this critical issue. We will have more to say in the months to come. In general terms, we believe a national approach should strive to close the gap for those without drug benefits while maintaining existing systems of coverage. We also caution, however, that funding a national program must be carefully considered and taxation of group health insurance premiums not be considered as a means of funding this program.

Mr. Chair, we sincerely appreciate discussions with you and other parliamentarians over the past year with respect to the taxation of private corporations, as you've heard from the previous panellists. This is an important issue for not only our members but all Canadian business owners. While CALU appreciates the government's response to concerns expressed during the consultation period relating to the tax on split income, or TOSI, and passive investment rules, we believe the government needs to make further changes as part of a commitment to undertake a comprehensive review of the system governing private corporations. This would give immediate reassurance to the small business community and ensure in the longer term that tax rules continue to support the growth of the small business sector in Canada.

Our submission identifies six specific areas that could be part of any such review. These include the tax on split income rules; passive investments and small business deductions; employee benefits for employees of a small business; tax integration; intergenerational transfers of a business; and tax competitiveness with the United States.

My colleague Kevin Wark and I would be pleased to go into further detail during the question period.

The tax changes announced over a year ago radically changed the tax regime for SMEs. We must always ensure that the regime is fair, consistent, and predictable, so that SME owners can invest in their business, save for retirement, and support their family and community.

Thank you for your attention.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Legault.

We'll hear one more brief before we go to vote.

From Diabetes Canada we have Ms. Hanson, director of federal affairs.

[Kimberley Hanson, Director, Federal Affairs, Government Relations and Public Policy, Diabetes Canada]

Good morning. Thank you, members of the committee, for the opportunity to speak with you today.

A hundred years ago, two of my great-aunts died of untreatable type 1 diabetes. Shortly thereafter, Canada's Dr. Banting discovered insulin and saved the lives of millions, including mine. While I'm grateful for the life-saving innovations, there are still immense challenges to living with chronic disease.

I was diagnosed with diabetes when I was 20. Living with the disease since then has taught me many valuable lessons, but it has also taken a toll. Imagine going to work every day feeling like you have the flu. That's the reality for many people with diabetes, and it affects our economic productivity. Just a couple of years ago, I had to leave a job because my employer would not accommodate the effects that diabetes has on me. My experience is far from unique.

When I was last here, Mr. Fergus rightly observed that diabetes is a scourge. It directly affects one in three Canadians and costs our health care system $27 billion each year. It's growing in prevalence, and costs are rising at a rate of about 40% per decade now and showing no signs of slowing. It claims thousands of Canadian lives and disables tens of thousands more each year. It affects indigenous Canadians far more adversely.

What we are doing now to address this epidemic is, quite simply, not working. That's why Diabetes Canada and nearly 100 partner organizations believe that Canada needs a nationwide strategy to prevent and manage diabetes now. In simple terms, Canada is failing its citizens and unnecessarily jeopardizing their health the longer we wait to develop and implement a national strategy. It's not just our community that thinks this is the best approach. A national strategy is a best practice widely recommended by the World Health Organization and other global leaders.

Diabetes 360° is that strategy. It is based on the hugely successful 90-90-90 model implemented globally to combat HIV/AIDS, and it is the product of collaboration among 120 stakeholders, including nine provinces.

Developed over more than a year of rigorous effort, Diabetes 360° contains evidence-based recommendations aimed at improving patient outcomes. It will enhance the prevention, screening and management of diabetes to achieve better health for Canadians. It will reduce unnecessary health care spending by billions of dollars, improve the lives of millions of Canadians, and protect Canada's productivity and competitiveness.

Diabetes 360° can save our health care system billions of dollars in both the short and long terms. For example, if every Canadian who has prediabetes had access to the proven diabetes prevention program, every year we could prevent more than 100,000 Canadians from receiving a diagnosis of diabetes. If we improve the care that those already living with diabetes receive, research shows that we could prevent a minimum of 5,000 amputations and 35,000 hospitalizations every year. That would save $18 billion in the next decade alone.

There are also significant savings to be realized by Canadian businesses. According to Benefits Canada magazine, employees living with diabetes cost their employers an average of $1,500 per year in lost productivity and a further $1,500 per year in additional benefit costs. Preventing those 100,000 Canadians per year from developing diabetes will save Canadian businesses a further $18 billion in the next decade.

Canada's economic prosperity depends on a healthy workforce. Not a day goes by that we aren't bombarded by alarming accounts of our labour shortage and resulting concerns about productivity, innovation and global influence. Many of the five million Canadians living with diabetes today are of working age, and we know that the effects of living with this challenging disease impede their ability to fully participate in the workforce. For employees who must take disability leave because of their diabetes, their leaves are on average 15% longer, and many remain on disability until death.

The implementation of Diabetes 360° recommendations can ensure Canada's economic health at the same time that it ensures our physical health. To implement these recommendations, Diabetes Canada suggests that a seven-year national partnership be created. The partnership will collaborate with provinces and territories, civil society and the private sector to prioritize and implement programs to achieve Diabetes 360° targets and then sunset: a realistic and evidence-based approach that can work for Canada.

For a strategic investment of $150 million over seven years, the federal government can achieve at least $36 billion in cost reductions, ensure the future health and prosperity of Canadians, and truly make a difference for Canadians affected by diabetes, Canadians just like me.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Hanson.

We will go to vote and come back for the other two presentations.

The meeting is suspended until after the vote.

[The Chair, Liberal, Wayne Easter]

We are going to reconvene.

Thank you, folks, for your patience. It's funny how these votes happen once in a while.

From Oxfam Canada, we have Ms. Sarosi, policy manager.

Thank you very much. The floor is yours.

[Diana Sarosi, Policy Manager, Oxfam Canada]

Dear committee members, thank you for the opportunity to present Oxfam's recommendations for Canada's next federal budget.

At Oxfam Canada, we put women's rights and gender justice at the heart of everything we do both here at home and in our work with some of the poorest communities around the world.

I would like to start by providing a glimpse into the lives of women who are at the bottom of the economic ladder. Tasmia, a medical doctor, came to Canada in April 2017 from Bangladesh under the skilled visa program. After months of searching for a job, she found employment in a cosmetics factory, but at eight months pregnant was laid off being just five hours short of 600 hours needed to be eligible for parental leave. Tasmia tried to convince her employer to give her one more day but to no avail. Now that her child is born, she is struggling to juggle work and care for her baby, being ineligible for child care subsidies as she can find only part-time work.

Lae Lee, on the other hand, paid a smuggler to leave Myanmar for Thailand when she was 21 years old, hoping for a better future. After six years working on a rubber plantation, she found work as a hotel housekeeper. Despite her extremely long hours and back-breaking work, it is impossible for her to save money. Strapped for money and time, she had no choice but to send her two children, now six and eleven years old, back to Myanmar to stay with relatives. She hasn't seen her children in four years.

These stories are heartbreaking, but sadly not uncommon. Too many women around the world are stuck in jobs like these. They work so hard yet they cannot escape poverty.

At the other end of the spectrum are the super-rich who continue to accumulate excessive amounts of wealth. Last year, of all the wealth created globally, 82% went to the richest 1% of the global population while the 3.7 billion people who make up the poorest 50% of the world's population saw no increase in their wealth at all, nothing. Here in Canada, the richest 1% saw their wealth increase by 32%, and Canadian billionaire fortunes grew by a staggering $28 billion in just one year.

Inequality is one of today's greatest challenges, obstructing poverty reduction and sustainable development. It undermines social, environmental and economic sustainability and fuels poverty, insecurity, conflict and xenophobia. Inequality is bad for everyone but it is especially bad for women, who are being exploited providing endless hours of free and cheap labour.

We know economic inequality and gender inequality are inextricably linked. To make progress, we must tackle both simultaneously. It is for these reasons that the federal government must invest in making economic growth truly inclusive and in advancing gender equality.

Oxfam Canada would like to highlight a couple of the recommendations it recently submitted to the finance committee.

The first is to invest in women's economic equality in Canada. The International Monetary Fund recently conducted a study that demonstrated that increasing female labour participation is critical for Canada's economic growth and it made the case for Canada to invest in child care to free up women's time for productive labour. The study predicted that the cost of child care would be fully compensated for by the growth in GDP, yet Canada continues to spend less on child care than any other OECD country does, a meagre 0.2% of GDP, way below the OECD's recommended target of 1%.

Investing in child care is the most effective and transformative investment the federal government can make to engage women more productively in the Canadian economy. It's the best bet for closing the economic gap between men and women and significantly advancing women's economic security. We are calling on the government to, first, invest $1 billion in 2019-20 in child care and to move towards universal child care by setting a 10-year timetable for reaching the OECD target of 1% of GDP. This should include enacting national legislation grounding child care in universality, quality and comprehensiveness, and protecting caregivers' rights.

The second is to demonstrate global leadership on women's rights. Around the world, hard-won gains to advance gender equality are under threat. In this context, it is critical that Canada continue to champion gender equality especially in areas that align with its values and commitment to human rights.

However, leadership requires resources. Last year's budget announcement of an additional $2 billion over five years in international assistance was welcomed, but this amount will do little to budge Canada's current aid-to-GNI ratio of 0.26% or improve its ranking on international assistance among OECD peers, where Canada currently ranks 16th.

We're calling on the government to develop a robust 10-year plan to achieve the UN aid target of 0.7% of gross national income and make investments in two particular areas: $700 million a year over 10 years, starting in 2020, in sexual and reproductive health and rights; and $220 million a year over 10 years in women's organizations and feminist movements.

In closing, I would like to encourage you, honourable members of the finance committee, to show leadership as well. Earlier this year, you received a letter signed by 50 Canadian women's rights organizations calling on you to include gender equality as a topic in your call for pre-budget consultation submissions, and ensuring that at least 15% of witnesses in the pre-budget consultation hearings are feminist or women's rights organizations. Women's voices must be front and centre when it comes to governments making decisions that affect their lives. You have the opportunity and responsibility to ensure that women's voices are heard.

Thank you so much.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Turning now to the U15 Group of Canadian Research Universities, we have Mr. Patry, executive director.

[Gilles Patry, Executive Director, U15 Group of Canadian Research Universities]

Thank you, Mr. Chair.

I would like first to thank you for inviting me to present the measures that the federal government could take to encourage Canadians to contribute to economic growth in a changing economic environment.

We are in a period of strong international competition. A key focus of our economic strategy must be a workforce that is among the most effective, creative, adaptable and innovative in the world.

Recently, Canada has been reaping the benefits of our investments in research and innovation. Google, Facebook, Tesla, Amazon and other global-leading companies have made major investments in Canada because of our unique research expertise, our highly educated workforce, our exceptional quality of life, and our focus on diversity and inclusion.

The numbers tell an important story. According to StatsCan, between 2013 and 2017, Canada netted 212,000 new full-time jobs. However, these gains were not evenly distributed: 581,000 new full-time jobs were created among those with a bachelor or graduate degree, while 343,000 jobs were lost among those without any post-secondary education. The employment rate of graduates with a master's or Ph.D. grew by 20% over that same period resulting in an unemployment rate of slightly over 4%.

This reflects a tight labour market. It is also one that Canada is ill-equipped to respond to. Canada ranks 26th in the OECD when it comes to the proportion of our workforce with a graduate degree. Closing this talent gap, especially in the face of increasing demand, is both an opportunity and a challenge for Canada. It will take time, making action all the more urgent.

The good news is that important investments in basic research from budget 2018, as well as those from previous budgets, will make important contributions towards this goal.

Accordingly, we are recommending a set of measures that are focused on young people, a set of measures to support graduate students, improve their training and research environment, and give them the skills they need to compete.

To increase the proportion of our workforce with graduate degrees, we need to ensure that graduate students are adequately supported. Canada's core scholarship programs have stagnated in numbers and value for more than 10 years. The U15 was pleased with the government's commitment to review the scholarship and fellowship program as part of budget 2018. In that spirit, and in accordance with the 2017 fundamental science review, we recommend that the scholarships and fellowships program be increased by $140 million per year over the next four years.

The quality of the research and learning environment of our students is dependent on how governments support the full cost of research, what many of you and us also call the indirect cost. Currently, the design of the indirect cost funding formula means that some 30 universities in the country receive much less than their full cost of research. These 30 universities conduct 95% of the research and train the vast majority of Canada's graduate students. If research-intensive universities are to attract the best students and professors, and invest in activities that support our ability to commercialize research and partner with industry, it is important that the government make an effort to address the full cost of research for all universities.

As we work to increase the proportion of people with graduate degrees, we should also seize the opportunity to develop additional skills that are essential in an innovative, globally connected economy. That is why The U15 2019 pre-budget submission recommends the following student-focused strategic investments.

One, encourage and support students wishing to benefit from an international learning and research experience. Two, support graduate students and faculty members in bringing cutting-edge discoveries to market by providing them with robust entrepreneurship training and opportunities. Three, expand the undergraduate student research awards program to all councils in an effort to give undergraduate students experience working on cutting-edge research projects across all disciplines. Finally, the U15 supports BHER's proposal for expanding work-integrated learning, which you heard about from my colleague previously.

Once again, I thank you for your time and look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Patry.

I wonder if committee members would be okay with going to 12 o'clock, with a hard stop there. That's 15 minutes over normal. Are we okay with that?

[Some hon. members]

Agreed.

[The Chair, Liberal, Wayne Easter]

Okay. We will get eight questioners, for about four and a half minutes each.

Mr. McLeod is first.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thank you to all of the presenters who are here today. I appreciate all of the information you're providing us.

I represent the Northwest Territories and over half of my population is indigenous, so I'm going to go right to the Assembly of First Nations.

I'm very happy to see the submission you've made. You've raised concerns over many issues that are important to my constituents: all-season roads, language, education, employment and training. All of these things are very important to us.

We have many issues. It has been recognized that we have the highest per capita crime rate in the country. We probably have the second-highest rate of crowding in housing. We have probably the highest suicide rates in the country. Also, homelessness is a real big issue for us.

I'm really happy that you brought this budget forward, but I'm wondering if your cost estimates for the issues you've raised and for other things include communities north of 60, given the relationship between the northern first nations and the AFN.

[Daniel Wilson]

Thank you for the question.

Yes, in our presentations, we do absolutely calculate the representation of first nations in both of the territories, and I would like to highlight something. I had an opportunity to spend some quality time with the Dene Nation not very long ago, discussing the challenge with regard to the financial structure in the Northwest Territories specifically.

They were quite clear that the devolution that occurred of responsibility to the territorial government is not aligning with the needs of the actual first nation governments. The consequences are a series of policy or regulatory decisions that don't apply the funding in the same way that they would south of 60 for first nations across the country.

A consequence, for example, is with regard to housing, where decisions are made to set affordable housing cut-off limits at a certain level and leave the rest to the market. You end up with housing in a first nation community that is unoccupied to the point of going into disuse, because the cut-off is too high for most earners.

[Michael McLeod, Liberal, Northwest Territories, NT]

I don't know if I agree with you.

We heard a presentation from a delegation just before you, from Jeff Morrison, who is with the Canadian Housing and Renewal Association, and they are calling for an indigenous strategy. That's as a result of $1.5 billion being invested in this space, in national indigenous organizations, and that is not flowing to all of the members, even though you count all of our members as part of your delegation. As your membership, we're still looking for another way to flow money. I'm nervous that we're creating another Indian Affairs that's almost the same as what's in place now, but held by the AFN.

There are many things that need to be sorted out in terms of how the money flows in the north. We're dealing with a lot of social issues as a result of having a poor economy in the north. As we talk about reconciliation, we can't really have reconciliation without economic reconciliation. How does the AFN view that? How are we going to tackle that?

[Daniel Wilson]

The work we're doing with regard to a new fiscal relationship between the Government of Canada and first nation governments is entirely aligned with supporting those specific first nation governments in exercising direct accountability to their citizens. The funding that is available flows directly through those governments, as they choose to aggregate or not, so that the decisions are made by the government closest to the actual citizen. That is not a structure that has existed in the history of the country since contact, really.

This is a work in progress but we have taken some initial steps. What we're hoping to do is to change that structure to wrest control over that decision-making from centralized bureaucracies of any kind—and I can assure you that the AFN certainly does not want to become a new INAC—and actually provide that power to the first nation governments so that they can make those decisions and they receive the funding directly, and their citizens hold them to account for results.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you. I was hoping that was where you were going to go, because we need to see direct funding flowed to the first nations and not through organizations and conduits that are going to take part of the money and then try to filter the rest out.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. McCauley.

[Kelly McCauley, Conservative, Edmonton West, AB]

That was a very good comment at the end there about direct delivery of the funds, Mr. McLeod. I like that.

Gentlemen and ladies, thanks for joining us today.

Mr. Legault, I just want to ask you to expand a bit.

Mr. Wark, do you want to expand a bit on some of your comments? You were talking about the changes to the small business tax that came about. We heard from other witnesses about a possible coming storm when the audits of the small businesses that are having their taxes changed under the new format start rolling in, and about how it's hurting small businesses. I wonder if you could just expand a bit more on that.

[Guy Legault]

Actually a lot of our members are also accountants and the main active members are tax advisers, so they are small businesses themselves. They will be affected. Their clients will be affected. Through our network we've heard that the ongoing cost to deal with the additional compliance for a small business will be between $5,000 and $10,000 a year with an additional investment this year, in year one. As we've heard from previous witnesses, companies are not ready. Small businesses are not ready yet. There is a lot of complexity and a lot of questions that are still outstanding, and people are not quite ready.

[Kelly McCauley, Conservative, Edmonton West, AB]

Are you saying $5,000 to $10,000 next year and an added bump this year for the start of it?

Mr. Wark.

[Kevin Wark, Tax Adviser, Conference for Advanced Life Underwriting]

The issue this year will be restructuring arrangements that are currently in place that complied with the law the way it was at the time but that now need to be restructured. For example, if people have put in place family trusts, they need to be wound down or restructured. If they have certain corporate share structures, they need to create new classes of shares. All of that requires engaging your accountant and your lawyer to implement it.

[Kelly McCauley, Conservative, Edmonton West, AB]

What do you think will be, for your members, the negative outcomes of that, besides coughing up that extra $10,000 on top of higher CPP, taxes, higher minimum wages, etc.? There is the lost productivity as well of winding down corporations and of restarting. I've chatted with several members who have said, “We're just going to retire and fold things up at age 60 rather than continue.” Are you getting that kind of feedback from your members with regard to the negative impact of these tax changes?