Finance Committee on Oct. 5th, 2018

[Ann Decter]

For details on competitive advantage around universal child care, check with Martha Friendly on the next panel. I've seen her coming in and out. She's a leading expert in Canada on child care.

Generally, on child care, if it's good for employees, which we know it is, then it's going to be good for businesses. There's a lot of workplace child care that occurs. It's a huge support for families and keeps them going to work every day.

[The Chair, Liberal, Wayne Easter]

Mr. Fergus, this is your last question.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much.

My last question is for Ms. Lenton.

I have three children, who are now adults. They have all had international or national experiences. They left the province of Quebec for experiences related to their education and training. What those experiences have brought them is extraordinary. I am pleased to see that one of your recommendations is along those lines.

For the benefit of my colleagues, can you tell us more about why it is so important for students in Canada to take advantage of that opportunity? Traditionally, in terms of international experiences, Canadians are at the back of the pack compared to our competitors elsewhere in the world.

[Dr. Rhonda Lenton]

I'm really glad to be asked that question, because it is quite shocking that we have only such a small percentage of our students taking advantage of an international opportunity. What we consistently find from all of our surveys of employers is that they place a priority on their future employees having had hands-on experiential education opportunities and international exposure.

As with many of our sectors, education is global. This goes to a question earlier by MP Julian about equalizing across diversity, about making sure that everybody is on an equal playing field, ensuring that all university students have had an opportunity and had that international experience so that they're able to understand and be successful anywhere around the world.

Students now are travelling and need to be employable anywhere around the world. Having access to other languages, having access to those experiences.... We've also even found a relationship between that international opportunity and mental health. Students who go to different countries, who have that international exposure, often come back with a certain degree of maturity that helps them perform when they come back.

Having students going and coming back internationalizes the entire community of universities, even for those students who don't go. Anything the government can do to increase our students' opportunities to have that international experience will not only help their employability, but also help our educational base and our competitiveness worldwide.

[The Chair, Liberal, Wayne Easter]

With that, thank you to all of the witnesses for your presentations and for your responses to questions.

We will suspend until 10:45 for the second panel. The meeting is suspended.

[The Chair, Liberal, Wayne Easter]

I always hate to interrupt when there are a lot of good conversations going on, but we'll reconvene with our second panel for our pre-budget consultations for the 2019 budget.

We're missing a couple of members. I guess they'll be here shortly. I'll introduce who's here. I like to tell you who we represent and where we come from.

I'm Wayne Easter, the member of Parliament for the riding of Malpeque, Prince Edward Island. I'm with the government party.

I'll start with you, Peter.

[Peter Fragiskatos]

Good morning, everyone. I'm Peter Fragiskatos from London, Ontario. I'm thrilled to be with you this morning and am very much looking forward to your presentations. Thank you.

[The Chair, Liberal, Wayne Easter]

Francesco.

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

Thank you, Chair.

Good morning, everyone. Happy Friday.

I have the privilege of representing the riding of Vaughan—Woodbridge, which is directly attached to the lovely city of Toronto. It's kind of ubiquitous actually. You just kind of just walk from one city to the other. It's all good.

Welcome, and I look forward to hearing your briefs.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Good morning, my name is Greg Fergus. I am the member for Hull—Aylmer, a riding in Quebec, just across from Ottawa. I have been a member of the Standing Committee on Finance for over two years.

I am pleased to be here with you today.

[The Chair, Liberal, Wayne Easter]

Thank you, Greg.

Pat.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I'm Pat Kelly. I'm the member of Parliament for Calgary Rocky Ridge. I'm a member of the opposition, the Conservative caucus.

[Leona Alleslev]

I'm Leona Alleslev. I'm the member for Aurora—Oak Ridges—Richmond Hill.

[The Chair, Liberal, Wayne Easter]

Peter.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Good morning. Welcome.

My name is Peter Julian. I am the NDP member for New Westminster—Burnaby and the vice-chair of the committee.

[The Chair, Liberal, Wayne Easter]

Thank you all.

We'll start with Chris Summerville, co-chair of the Canadian Alliance on Mental Illness and Mental Health.

Welcome.

[Dr. Chris Summerville, Co-Chair, Canadian Alliance on Mental Illness and Mental Health]

Good morning, Mr. Chair and committee members. My name is Dr. Chris Summerville, and I am co-chair of the Canadian Alliance on Mental Illness and Mental Health, also known as CAMIMH.

Established in 1998, CAMIMH is the collective national voice for mental health as an alliance of 16 national mental health groups comprised of health care providers and organizations that represent people with mental illnesses, their families and their caregivers.

Continued economic growth in Canada will depend on having a productive workforce, so investments made in mental health will help ensure Canada's competitiveness in the future. The costs of mental illness to the economy and the workplace are significant when considering Canada's economic competitiveness. For example, 500,000 Canadians are unable to work due to a mental illness in a given week. The economic cost of mental health problems was measured in 2011 at $51 billion. Mental health issues account for more than $6 billion in losses due to absenteeism and presenteeism. Thus, while the cost of mental health and addiction problems on productivity in the workplace alone is about $20 billion annually, one third of this cost could be recovered if working Canadians had access to illness prevention as well as early identification and treatment.

Now, the stigma and discrimination associated with mental illness has decreased in recent years, but we still have a long way to go. As stigma is being reduced, we are seeing more people come forward for help. Unfortunately, mental health services and supports continue to be in short supply due to a lack of resources and a lack of capacity. Currently, those who cannot afford to pay for treatment end up on long wait-lists or do not get help at all.

CAMIMH believes the federal government has a role and responsibility to ensure that the people of Canada get better access to the mental health services they need to enjoy life satisfaction. In budget 2017 the federal government took a very important step in addressing the funding gaps between physical and mental health by targeting $5 billion over 10 years for mental health. CAMIMH is highly supportive of this commitment, yet we believe that long-term, sustainable and predictable funding is required to realize parity between physical and mental illness in Canada.

As the Mental Health Commission of Canada has discovered, mental health funding should be increased from 7% to 9% of total public health spending. CAMIMH agrees that 9% is the minimum level of public investment required to improve health outcomes and access to a range of public mental health programs and services. Some countries, in fact, spend 12% on mental health.

CAMIMH believes the federal government, in its national leadership role, should contribute a minimum of one out of every four health care dollars to the provinces and territories specifically to mental health. With the federal share increased to 25%, the annual federal investment to support increased access to mental health services would be an additional $777.5 million. CAMIMH strongly recommends that increased transfers be earmarked through a mental health transfer or a dedicated envelope to maximize accountability, transparency and impact.

Arguably, when it comes to accessing mental health services across Canada, the Canada Health Act is not being upheld. The capacity to deliver timely access is hampered by fragmented and poorly coordinated services and supports. Thus, the mental health system is in urgent need of improved integration. People with lived experience and their families and caregivers must be involved in the design and evaluation of an improved and recovery-focused mental health system.

An expanded use of collaborative care team-based practice has the potential to substantially increase the capacity of the system to see more patients across their lifespans and to deliver care where and when needed. This model, sometimes known as the “collaborative shared care model”, includes the service of not only physicians but also other mental health care providers, such as psychologists, social workers, peer support workers, psychiatric mental health nurses, counsellors and psychotherapists. Together, they work as a team to offer complementary services and supports to ensure that individuals receive the evidence-based care they need with a minimum of obstacles.

Accordingly, we believe the federal government should engage the provinces and territories in thinking through the system change that will deliver effective mental health care to more Canadians. Work has been done to consider how the successful innovations from countries like the United Kingdom and Australia could be adapted to Canada. These models have taken a more systemic approach to redressing needed mental health service gaps with promising results. Therefore, CAMIMH makes the following three recommendations.

One, the federal government should embrace the principle of mental health parity by assessing the equity of funding and delivery of mental health services against mental illness in areas of fiduciary and primary responsibility, including service delivery to indigenous peoples, veterans and Canadian Forces, federal inmates, Royal Canadian Mounted Police and public servants. The federal government should introduce what is known in many other countries as a “mental health parity act”. A mental health parity act affirms that mental health is valued and esteemed equally with physical health. Such an act guarantees parity for mental health and substance use disorder benefits by specifying that coverage must be provided at the same level as mental health coverage. A mental health parity act would help ensure that communities and workplaces through their policies, programs and benefits attend equally to mental and physical health.

Two, in light of the 2017 investments in mental health, the federal government funding for mental health should increase from 7.2% of total public health spending to at least a minimum of 9%. That would be 25% for the federal government's share. As I mentioned, that would mean additional support of $777.5 million annually to provinces and territories to improve access to a range of mental health programs and services. CAMIMH strongly recommends that the funds be earmarked through a mental health transfer or through a dedicated envelope to maximize accountability, transparency and impact.

Finally, the federal government should engage the provinces and territories in thinking through the system change that will deliver effective mental health care to more Canadians by enhancing the capacity of mental health resources on primary care teams, or collaborative shared teams, and augmenting fee-for-service models through private and extended health care insurance. Thus, incentives should be created for employers to provide increased private and extended health care insurance.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Chris.

We'll turn now to the Childcare Resource and Research Unit.

Martha Friendly, welcome.

[Martha Friendly, Executive Director, Childcare Resource and Research Unit (CRRU)]

Thank you, members of the committee and Mr. Chairman.

I'm Martha Friendly, executive director of the Childcare Resource and Research Unit, which is a small policy research institute.

Actually, the August pre-budget brief of my group shows in detail how universal child care is essential to Canada's competitiveness, and why gender equality isn't possible without accessible quality child care for all. Further, not only is child care fundamental for women's economic security but Canada overall would derive substantial benefits by strengthening it. These arguments have been around for many years since the Royal Commission on the Status of Women argued the same back in 1970, but today we have abundant evidence to back these arguments up. In the written handout I've given you, I've described four recent studies making these points, but in the interest of time I won't read them. I'll be happy to answer some questions about them if you have them.

I want to start by saying that it's most welcome that the current government has re-engaged in child care. I commend the federal, provincial and territorial governments for crafting last year's multilateral agreement on early learning and child care for the federal budget commitment and the three-year action plans across Canada. I especially want to recognize the recently completed indigenous-led early learning and child care framework that's intended to address the needs and aspirations of indigenous communities. These were welcome and significant first steps in a multi-year process for building a high-quality, affordable, early learning and child care system to meet multiple goals: women's equality and economic security, children's well-being and development, and other social goals such as poverty reduction and social inclusion.

But I want to focus on the next phase of taking child care forward to become, as the 2016 federal budget called it, more than a convenience but a necessity. Looking to the end of the first three-year agreements under the multilateral framework, I want to note that these are a starting place. They set out the shared principles of accessibility, affordability, quality and inclusion, but they're not yet accompanied by sufficient federal funds or by the evidence-based implementation plans that are needed to deliver on their potential.

Thus I'm going to put forward three recommendations needed to move early learning and child care to success in the next phase. This process, by the way, should begin this coming year.

First of all, the current annual commitments do not ramp up adequately to account for the need for substantial service expansion. A gradual year-by-year increase in transfer payments to provinces, territories and indigenous communities is absolutely needed to support the service expansion that's needed to achieve any kind of reasonable accessibility. We recommend an allocation of $1 billion in 2019 with and additional $1 billion in each following year until accessibility targets are reached. Annual spending on a mature child care program reaches the international minimum benchmark of 1% of GDP about a year from now.

Second, to ensure that the substantial public funds are used effectively, we are calling for plans to operationalize the multilateral frameworks that are based on the best available evidence, and for these to be developed collaboratively by governments at all levels, with the full use of the expertise of the child care sector and the community of researchers.

Third, to support development of provincial-territorial child care systems across Canada, we envision a solid system-building strategy, again developed collaboratively and based on best evidence. At a minimum this should include first of all a child care workforce strategy, and, second, the creation of the much-needed infrastructure to support development of child care services and policy development. I would suggest that the federal government develop an early learning and child care secretariat to organize the collaboration on policy development, research and data, best practices, and innovation that are very much needed. The system-building also needs to reinstate the federal funding to rebuild the child care community's capacity, including the child care organizations that have long provided much of the infrastructure for child care across Canada.

Fourth, all of us most welcome that funds for a fourth system-building element, an early learning and child care data strategy, have already been committed in the 2017 federal budget.

In conclusion, I just want to emphasize that when we make progress towards gender equality, everyone benefits. But progress towards gender equality and its benefits for everyone are going to continue to be impeded if we don't develop the universally accessible child care system that has so long been elusive for most Canadians.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Martha.

I will just point out, because I didn't do it at the beginning, that members do have these submissions that were presented by mid-August. They are on their iPads, or whatever it might be—

[Martha Friendly]

Yes, I checked that. Thank you.

[The Chair, Liberal, Wayne Easter]

—so they'll be referring to them from time to time.

From Colleges Ontario, we have Mr. Agnew from Seneca College.

[David Agnew, President, Seneca College, Colleges Ontario]

Thank you very much, Mr. Chair and honourable members.

My name is David Agnew. I'm president of Seneca, which is one of Canada's largest colleges. We have campuses here in Toronto and in York region, just north of Toronto, and in Peterborough. But today I'm here on behalf of Colleges Ontario, the association that's the voice of 24 publicly assisted colleges across the province.

I'm a past chair of Colleges Ontario, but I'm currently on the board of both Colleges and Institutes Canada and Polytechics Canada, both of which have submitted briefs to you in these pre-budget hearings. You have the brief, as the chair said, from Colleges Ontario, and I hope you noticed the consistency across the recommendations from all three associations representing colleges, polytechnics, institutes and CEGEPs across the country.

We are the institutions of higher education that have always been hard-wired to the needs of industry employers in our communities. In this rapidly changing economic environment, our role is more crucial than ever as we prepare our students for the jobs of today and tomorrow. We do so by staying really close to the community of employers, engaging experts and leaders from across literally all economic sectors, both public and private.

Our partners provide work-integrated learning opportunities for our students. They act as curriculum and program advisers; they give us access to leading-edge equipment and software; and, very importantly, they hire our graduates. So, yes, we're educating a new generation of high school graduates, a large number of students who need to augment their general university education, with a professional career-focused credential from a college or a polytechnic. But, increasingly, we're also the way that mid-career employees, either voluntarily or involuntarily, need to modernize or refocus their skills. Of course, colleges and polytechnics are now the destination of literally tens of thousands of international students, many of whom want to stay with their Canadian-earned credential to help contribute to this country's future.

For the purpose of this presentation, since you have the brief, I want to focus on just two of the recommendations in the Colleges Ontario submission.

For our applied research recommendation, I want to illustrate it with an example from Seneca's work. Two years ago we were approached by a small firm based in Richmond Hill in York region. It's called Medical Confidence. It's a kind of navigation service for patients who need to eventually be matched with a specialist for their condition or disease. Working with a team of students and faculty from Seneca, they've developed a machine-learning algorithm that vastly improved their workflow by automating it from a very manual process to an automated process. As a result, Medical Confidence had a big insurance client on a pilot and they signed a multi-year contract. They've expanded. Their revenues have just about doubled and they're hiring about 10 new employees.

When we speak of the impact of applied research, there are hundreds of these kinds of success stories across the country. For a remarkably small investment, the federal government can unleash even more of the ingenuity, energy and talent of our students and faculty. Just looking at Ontario, we see about 1,600 firms, most of them small and medium-sized enterprises, become more innovative with the help of colleges. Of course, many of them are in the key sectors of manufacturing, like Medical Confidence, in digital or environmental products and services. With support from the government, we can do even more. That's why we're asking the government to invest $40 million a year—that's “million”, not “billion”—in new funding for applied research at colleges.

The second recommendation I'd like to focus on is the request to have a second round of the post-secondary strategic investment fund, or SIF. Seneca is one of the grateful recipients of a SIF investment. In fact, Mr. Fergus was at the ground-breaking for the new centre for innovation, technology and entrepreneurship, as the parliamentary secretary to the minister of infrastructure. We have matched it on a two-to-one basis—our two, your one—to build that centre. It's an extraordinary building that will live up to its name. As the expanded home of our campus incubator, our engineering and mechatronics hub, and our new data analytics research centre, it will be opening in December.

Like many of our colleague institutions, thanks to SIF we are creating terrific, purpose-built spaces for students to learn and innovate, for faculty to teach and mentor, and for industry partners to engage and grow. The first round of SIF also helped us reduce carbon emissions with energy-efficiency measures, and colleges continue to play a leading role in Canada's action plan on climate change. This includes everything from developing new programs that prepare students for the low-carbon economy to capital improvements on our campuses that move us towards net-zero emissions.

We want to build on this success and with your help we will.

I would be more than pleased to speak more fully about these recommendations or the others contained in our brief and answer any questions you may have.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, David.

Turning to Deloitte Canada, Mr. Alexander and Mr. Smith, welcome.

I believe you are starting, Mr. Smith.

[Michael Smith, National Mergers and Acquisitions Leader, Tax, Deloitte Canada]

Good morning. Thank you for having me and my colleague, Craig Alexander, here today. For background, Craig is Deloitte Canada's chief economist and I'm a tax partner who practises in the area of M and A in Calgary. I also lead our national tax office within Deloitte.

Since 2011 we at Deloitte have been communicating our views on issues that matter through our Canada 175 program, a multi-year research initiative designed to spark vital discussion amongst Canada's businesses, governments and citizens about Canada's future.

We are convinced that Canada will remain the best place in the world to live and work in 2042 when we reach our next major milestone marking the 175th anniversary of Canada's Confederation.

Canadian businesses will play a critical role in achieving that vision, harnessing innovation, creating new opportunities and proudly expressing Canadian values, but they won't do it alone. Governments must act as a critical partner in creating conditions for productive and thriving businesses to emerge.

In Deloitte's submission to this committee we will outline four broad areas that we believe government should focus its efforts and investment on in the next federal budget. Today I want to focus in greater detail on an element in those areas, namely tax policy.

Canadian tax policy can play an important role in helping Canada to be more productive and globally competitive by creating a tax ecosystem capable of fostering innovation and investment, while at the same time looking at ways to allocate the tax burden across elements of the economy in a fair and equitable manner.

Importantly, tax policy is also an area in which other countries are competing with Canada to attract investment dollars as well as attract top talent. We see OECD countries across the board moving forward on tax competitiveness in three key areas. First is reducing corporate tax rates; second is reducing personal tax rates; and third is providing incentives for innovation. My remarks today will focus on these areas.

First, as a relatively small open economy, Canada must make itself a competitive choice for capital investment. Businesses are increasingly mobile and investors face a choice when deciding where to invest. Corporate income tax rates are a strategic consideration when foreign investors are looking at investment.

In recent years Canada enjoyed a significant corporate tax rate advantage relative to our largest trading partner, the United States, but as a result of U.S. tax reform, our competitive tax advantage is now gone. In fact, we're now at a slight disadvantage.

While restoring the quantum of our old advantage is too costly to consider, we would recommend some rate reduction in coordination with the provinces to restore some competitive advantage.

Second, in order to scale and to thrive, Canadian companies need access to the best global talent to meet our labour needs, particularly in emerging and high-growth industries. We believe that Canada's personal income tax rates should be competitive with those of our international trading partners.

At 53.5% our top rate is now significantly higher than most of our global trading partners', and the threshold for reaching that top rate is much lower than those in many of those countries. A significant difference in personal tax rates may discourage immigration to Canada and make it much more challenging for Canadian businesses to recruit top talent, as well as retain top domestic talent.

In this vein we recommend coordinating with the provinces to reduce the top rate to 50% and/or consider increasing the threshold at which the top rate is reached.

Third, we feel there's opportunity to improve our competitive advantage regarding innovation. Global competition to attract R and D spending has increased significantly in recent years. Not only are countries adopting or expanding R and D incentives for such activities, but they are also now providing new tax incentives to encourage commercialization of that R and D. One example of this is the patent box. It's a mechanism that allows corporate income tax related to the sale of patented products to be taxed at significantly lower rates than those applied to regular business income. This preferential treatment of intellectual property provides firms with stronger incentives to innovate and commercialize in jurisdictions that provide those incentives.

Canada's poor performance in R and D spending, despite our strong publication credentials, suggests that our leading-edge academic discoveries are not reaching the point of commercialization. To encourage companies to commercialize and retain patents in Canada, we recommend that the government study whether the patent box regime should be implemented in Canada at the federal level.

Deloitte is committed to playing a key role in shaping Canada's future. We look forward to your questions.