Finance Committee on May 17th, 2016

[Guy Parent]

Yes, thank you. I should correct that: I personally didn't want a transcript, but my communications team has them. We certainly have that information.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Good. Thank you very much.

I don't have that much time, so I just want to move to Ms. MacEwen.

You started to speak about how if the PPP program were to be changed or improved...and then your time ran out. It was a comment about independence or integrity. I'm not sure what it was, as you didn't finish your statement. Could you just maybe elaborate a little bit so that I know what you were asking for?

[Angella MacEwen]

The Canadian Union of Public Employees has done a lot of work around this. What we're asking for is comprehensive P3 accountability and transparency legislation.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

That was simple. Thank you.

Finally, Mr. Galimberti, I understand the dumping of steel from Asian markets, particularly China. In my previous life as a municipal councillor, we heard some concerns from industry about that quality as well. Is that a concern? Notwithstanding that I've heard your presentation and I completely understand the dumping issue, should we also be worried about the quality or integrity of this steel product, which can change from what it was in its original form. Is it a concern too that an unsuspecting buyer, lets say, doesn't realize that they're not buying a domestic product and that the product they are buying lacks quality assurances? Is that also something that you're concerned about or that your organization is looking at, or are you mainly dealing with just the trade aspect?

[Joseph Galimberti]

We're primarily focused on trade, but I would say there are enough actors and bad actors in the system that there is going to be an element of product that arrives here that is probably not going to be satisfactory. I'd certainly leave that with the building code folks, or the industries that end up being the end-users of this. I can speak to the domestic product, which is an extraordinarily high-quality product that is extensively monitored and tested, with tremendous investment. Whatever is arriving as imports....

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Great. Thank you.

[The Chair, Liberal, Wayne Easter]

We will cut it there. I will thank the witnesses.

I believe, Ms. Reynolds, that you are going to provide us with a paper as a result of a question on this side.

[Joyce Reynolds]

I'm going to have our economist look into it to see what he can do.

[The Chair, Liberal, Wayne Easter]

Mr. Galimberti, based on the discussion between Mr. McColeman and you, I believe you are aware that we will be holding pre-budget hearings in the fall. We hope those may be along the lines of what negative things impact growth and what positive things would improve growth. You might want to keep that in mind for the fall.

Ms. MacEwen, I think there were a couple of documents asked of you.

Thank you very much all of you for your presentations. We'll suspend for a couple of minutes while the next series of witnesses comes up.

[The Chair, Liberal, Wayne Easter]

I would ask the witnesses and members to come to the table. We will have to leave 10 minutes at the end of this session for the business of the committee.

We are starting this session with the Canadian Teachers' Federation, the PEI Coalition For Fair EI, and the Conference Board of Canada.

We will start with Mrs. Smith and Mr. McGahey from the Canadian Teachers' Federation. You have five minutes.

[Heather Smith, President, Canadian Teachers' Federation]

Thank you for the opportunity to address you regarding Bill C-15.

My name is Heather Smith, and I am president of the Canadian Teachers' Federation. With me here today is Bob McGahey, CTF director of advocacy and labour rights.

After our comments, we do have a written brief that expands on the points that we are going to make.

CTF is a bilingual, non-partisan alliance of provincial and territorial teachers' organizations in Canada. We represent over 200,000 teachers, and that number is growing. As a unified voice of teacher organizations in Canada on education and related social issues, we promote high-quality public education, the status of the teaching profession, and the freedom to learn.

The CTF is on record as being generally pleased with the progressive nature of the most recent federal budget. Teachers do, however, have some concerns about specific initiatives, especially as they relate to the improvement of mental health for students and teachers, the need for education to be a priority for the government's overseas development assistance, and the alleviation of child poverty.

We believe these issues should be government priorities. Our comments today focus on the alleviation of child poverty, and we look forward to future opportunities to comment more broadly on some of our other issues.

Turning to the child tax benefit, the alleviation of child poverty is of critical importance to teachers. Each day in our classrooms, Canadian teachers engage with children and youth who are hungry, tired, and struggling due to poverty.

The Canada child benefit program is a good first step towards alleviating child poverty. We agree with the rationale of the Dignity for All campaign's national anti-poverty plan, which calls for strong federal leadership in reducing and ultimately eliminating poverty. While the Canadian Teachers' Federation commends the government for taking action, we believe that more needs to be done.

With regard to the Canada child benefit, we recommend that, one, provisions be put in place to ensure the benefit is indexed to inflation and, two, the Government of Canada enter into agreements with the provinces and territories to ensure the benefit does not adversely affect entitlement to other social assistance programs.

I will only briefly mention employment insurance, as I believe colleagues from the Canadian Labour Congress have expanded on this, and more information is contained in our brief.

The recommendations are, though, that categories of workers be eliminated from the EI program and all workers be treated equally under the system, and that claimants be provided with a choice regarding the duration of the waiting period so that they may choose to waive the waiting period entirely, take a one-week waiting period, or take the two-week waiting period.

Lastly, I want to focus on the school supplies tax credit. First, as a bit of context, the Canadian Teachers' Federation firmly believes that governments have a responsibility to fully fund the education system so that all children and youth have access to an equitable, quality, publicly funded public education.

Teachers should not have to subsidize the system, yet we know that chronic underfunding has led to a situation in which teachers are spending significant amounts of money to support student learning. A 2010 CTF national study confirmed that out-of-pocket expenditures by educators for classroom materials or class-related activities averaged $453 per educator, and that figure is increasing.

Given that teachers have been subsidizing the education system for years now, the CTF does appreciate that teachers will now be reimbursed at least for some of their out-of-pocket expenses. To improve the credit, however, the CTF has two main suggestions. The first is that Bill C-15 be amended to remove the requirement of a written certificate from employers. This change would recognize the professional judgment of teachers, who are in the best position to determine what needs to be purchased. It would also prevent the potential blurring of this credit with other taxation provisions provided to goods required as conditions of employment.

Our second suggestion is that the list of prescribed items in Bill C-15 be amended to include a subsection E stating “other non-consumable educational resources“. We suggest this addition, as we do not believe it's possible or helpful to enumerate an exhaustive list of the non-consumable items a professional teacher may deem necessary to support student learning in the diverse K-to-12 classrooms across our country.

Thank you for your attention, and I welcome your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Smith.

Turning to, Ms. MacKay, from the PEI Coalition For Fair EI, welcome. It's always good to have another Islander in Ottawa.

[Lori MacKay, Chair, PEI Coalition For Fair EI]

Of course.

The PEI Coalition For Fair EI would like to thank the members of the committee for hearing from us. I am pleased to be able to appear before you on behalf of the coalition. We formed this coalition with community groups, citizens, and unions as a response to the 2012 changes to the employment insurance program by the previous government.

The 2012 changes were incredibly punitive to workers in the seasonal industries on Prince Edward Island, and largely still remain so after Bill C-15 was introduced. Some improvements were made, but little for seasonal industries.

The PEI Coalition continues to call on the Liberal government to fulfill its election promise to completely reverse all of the 2012 EI changes. This has not yet been done despite the Minister of Labour's comments in the House of Commons.

We welcome the changes to reduce entrance hours and the reduction of one week from the waiting period for some EI recipients, as was announced in Bill C-15, but they do little to help seasonal workers. The reduction of one week from the waiting period will certainly help to get much needed funds into the hands of unemployed workers who do not use their full number of weeks of benefits, but it will not be helpful to the many seasonal workers in Prince Edward Island who do not have enough insurance to last the entire period of unemployment, especially since 2012. This change means that they will run out of benefits one week sooner.

Bill C-15's response to the downturn in the oil industry, in giving an additional five weeks of benefits to regions that have experienced a 2% increase in unemployment in the last year, certainly will help some workers, but definitely not all that are affected. It creates an unfair gap.

The budget completely ignores P.E.I. and our neighbouring provinces, New Brunswick and Nova Scotia, who lost the additional five weeks in 2012. Despite the fact that P.E.I. has an 11.5% unemployment rate—the second highest in the country, and up 1% from last year in April—this budget bill did not return the five weeks lost. Now the many displaced oil workers from Prince Edward Island are returning home without the five additional weeks that their co-workers are receiving, despite the fact they are returning to areas of higher unemployment and access to fewer jobs—unless of course they're returning to Newfoundland.

Just as important as the need to return the five weeks of additional benefit to our province is the need to immediately remove the additional zone for Prince Edward Island. P.E.I. was always considered one economic zone for the purposes of EI for a reason. Despite the fact that P.E.I. has two cities, with our population size of only146,000, we are a rural economy when it comes to jobs.

There is no large industry that gives much more access to jobs in one part of the province than another, but in February 2014 our province was divided into two zones: urban and rural. This meant that those living in the urban zone had far fewer weeks and less benefits than those in the rural zone, despite the fact the folks living in the urban zone do not have access to more jobs.

The map used to divide our island makes absolutely no sense. There are two cities in P.E.I. with federal government jobs in both. One city is considered urban and the other city rural.

I'll use an example of an area our chair knows well. One small fishing community, North Rustico, located close to the tourist area of Cavendish, is located in rural Prince Edward Island. Its neighbour, only four kilometres away, Mayfield, with many workers from the fishing industry and the tourist industry, and farther from the city of Charlottetown, is considered urban. Workers working side by side in jobs, and making the same money for the same number of weeks, are getting treated very differently when it comes to EI benefits.

The new zone on P.E.I. must be removed immediately. It doesn't work, and it pits Islander against Islander.

To conclude my opening remarks, seasonal workers have been unfairly treated by the last government, and Bill C-15 does little to rectify the situation. We need a jobs strategy in this country that recognizes that some industries are seasonal, but that workers want full-time year-round work.

The planned reduction of EI premiums must be stopped. The experience of the sudden downturn in the oil industry, and the natural disaster of the wild fires in Fort McMurray, highlight the extreme importance of a fully funded EI program for our capitalist economy.

I will be happy to answer any questions the committee members might have.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. MacKay.

Mr. Hodgson, with the Conference Board of Canada, you have five minutes.

[Glen Hodgson, Senior Vice-President and Chief Economist, Conference Board of Canada]

Thank you very much, Mr. Chairman.

Committee members, it's nice to be back again.

I thought I could most add value to the committee's hearings by talking about things from a macro perspective and linking the budget to economic growth. I have four points I want to make on that front.

First of all, Canadian growth remains anemic. That's the nicest word I can come up with. Alberta is in a recession, which will probably be a little worse in the near term thanks to the Fort McMurray fires. It may be a bit better towards the back end of the year. Newfoundland is also struggling with a recession. Saskatchewan is growing fairly weakly. There are some pockets of stronger growth. B.C. will probably have growth of around 2.7% this year, and with Ontario, Manitoba, and Nova Scotia, these are the four provinces we list as the strong growth areas. You get a very uneven story across the country.

The single-most depressing variable in our forecast is private investment growth, which we see contracting for the second consecutive year. In fact, our capital base at the end of this year in the private sector may be smaller than it was three years ago. That's a concern for ongoing growth, for productivity, for competitiveness for our economies. I'll come back to that.

Secondly, I think I said in the pre-budget period that some rebalancing of macroeconomic policy was warranted. Most macroeconomists agreed. In fact, the Bank of Canada said that it was probably time for the fiscal authorities to step up a bit because we were effectively pushing on a string. The rebalancing that's gone on in the last six months was generally supported by macroeconomist people in my field.

On the budget itself, our estimate is that the budget will add a bit to growth both this year and next year. We had actually anticipated certain actions in our pre-budget forecast, so we've added 0.2% to growth this year, 0.1% to growth next year. However, the growth effect fades. In fact, it's important to note that you can only stimulate for so long through fiscal deficits, because the effect does fade after two or three years.

Frankly, I'd also like to commend Minister Morneau. The budget is based on really prudent assumptions. I know he's been criticized by some. There are some who think, for example, that the deficit may end up being much smaller than was forecast. Given the uncertainty with things like oil prices, not knowing where inflation is going, I have advised finance ministers for about a decade now to be prudent in their assumptions, and if they're going to surprise people, surprise them on the upside. I actually like prudent assumptions, building a contingency into the budget. If we end up having a deficit which is only half the size, I think that's actually good news. It means we have to borrow half as much on a going-forward basis.

The real issue for me is the long term. I do think that the federal budget has to get reanchored at some point, for fiscal credibility, for credible management. That's certainly the advice I gave to Minister Morneau: I would like to see what your plan is in year three, four, and five for the debt-to-GDP ratio. We don't automatically have to go back to balanced budgets, but I do think that over time you have to be aware what your stock of debt is and how you're managing that, because there is an opportunity cost to running deficits year after year. The federal government will spend about $27 billion this year on interest alone. That's 9% of the federal budget. The more you run deficits, the more debt you'll have built up and the more you're going to squeeze out other programs. That's really the fundamental economic reason for having a long-term plan for your fiscal strategy.

On growth itself, we think 2% is now the new normal for Canada. In fact, 2% growth would be a good year, based on what's happened in the last three or four years. There's no easy path to stronger growth. We think infrastructure investment is a really important element, but it should complement and not be a substitute for private investment. I mentioned earlier that we're troubled by the private investment growth numbers that we're seeing. Infrastructure investment by the public sector can fill in for a while, but it can't fill in forever. It has to build a foundation for stronger private investment growth going forward.

I do think there's scope for rethinking our tax system and for tax reform.

Mr. Chairman, I've noticed your comments in the media about tax reform. I think you and I are on the same page. It probably is time to have a rethink of our tax system to see whether we can do things that will actually strengthen the growth potential of our economy. I'd be happy to talk about that, if you're interested.

Free trade agreements also add a little to our growth potential. It's a small amount, but I do think in our long-term interests we have to find ways to reach out and connect with the rest of the global economy. Of course, things like innovation strategies will be part of the growth plan. Ultimately, we need growth in private investment and also stronger productivity growth, if we're to have stronger economic growth down the road.

I'll offer that as my opening comments.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Turning to questions, we'll go to five minutes instead of seven, starting with Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Chair.

For the record, Mr. Easter is not the only Islander in the room.

[Voices]

Oh, oh!

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. McGahey and Ms. Smith for coming.

My first question is for Ms. Smith. I would like you to expand on your comments, particularly in respect of child poverty.

We're very proud of the new Canada child benefit, the fact that it will take several hundred thousand children out of poverty, and of our government's role in doing that. Can you perhaps comment on the positive effects on learning for children entering the classroom, whether from a nutritional point of view, a cognitive point of view, and others, when you see children emerging from poverty?

[Heather Smith]

I can tell you that I was a teacher—a teaching principal, actually—in rural New Brunswick until June of 2015, so I know very well the effects of poverty on a child's learning. When you have children arriving at school without having had breakfast or perhaps not a healthy supper the night before, their last thoughts are on learning. Their thoughts are on food. Your brain just does not work properly if it's not had sufficient sustenance.

I know that in our school and in many schools there are breakfast programs. There are schools that are fundraising in order to have enough or that are applying for grants that will supplement any provincial budget that they may have for food. We're providing breakfasts, we're providing lunches, and we're ensuring that kids do not go hungry—or we're hoping to. There are even places where children are given backpacks of food to take home for the weekend.

Schools are doing that and community groups are doing that, because we know the importance of food for learning. Your brain just doesn't work properly unless you have it, and the thoughts of a child are not on what the task at hand is but on their belly that's rumbling.

[Steven MacKinnon, Liberal, Gatineau, QC]

As a long-term economic growth strategy, it sounds like a pretty good one.

[Heather Smith]

Well, it certainly does. If we're not going to put our support behind our youth, then I think the future of our country is certainly in jeopardy.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you very much.

Mr. Hodgson, I'll turn to you. This committee I think always appreciates your insights and advice. I know that as we debate Bill C-15 and subsequent budgets and economic strategies for the country, a number of us feel there are a couple of ways in which we can contribute. You touched on a couple of them.

You speak of the “new normal”, of “anemic” growth, and also of taxation and the need for tax reform in the country. They converge in this way, and I'd like you to expand on this, if you would. What are the regulatory, institutional, fiscal, or other impediments to growth in the country? How might we rearrange those tools and perhaps lighten the load in terms of regulation or taxation in order to achieve or accelerate growth beyond this new normal?

[Glen Hodgson]

I think for today's purposes, I'll touch on two things.

The mandate of this committee is to examine all things fiscal, so let's talk a bit about tax.

As a starting point, are we taxing the right things? Economists would prefer to tax consumption rather than taxing work effort or investment, for example. We've built up a huge array of tax expenditures.

Last time, Mr. Chairman, I mentioned the over $100 billion in leakage, and then the Department of Finance put out a paper three days later confirming that there's about $100 billion of leakage. That's a lot of lost revenue that could be directed towards lower tax rates, for example, as part of the tax system.

I believe that we should be taxing carbon, for example. There's a question about whether the federal government, in addition to the three provinces—soon to be four—that are doing that, should be trying to shift the balance in our economy towards a lower-carbon economy down the road. I think there's a lot of scope to rethink the tax system in its entirety or piece by piece, but we've built it up piece by piece, so maybe this is the time to take a wide view.

I'll pick up your prompt. I do think there are things we could do to reduce barriers within the country to the interprovincial mobility of goods, capital, and ideas. The past government actually took this on. I think there's more to do. Anything we could do to ensure that we have a single Canadian market, a national federation, by reducing what are often really subtle regulatory barriers between sectors and regions would be a step ahead.

I've spent most of my 12 years at the Conference Board trying to think about what a national growth strategy would look like, and those are just two examples.

[The Chair, Liberal, Wayne Easter]

We're out of time.