Evidence of meeting #213 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was newspapers.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Carmen Wyton  Chief Executive Officer, BILD Alberta Association
Kevin Lee  Chief Executive Officer, Canadian Home Builders' Association
Trevin Stratton  Chief Economist, Canadian Chamber of Commerce
Bob Cox  Chair, News Media Canada
Jan Waterous  Managing Partner, Norquay Ski Resort
Andrew Booth  Chief Commercial Officer, STEMCELL Technologies
Ian Lee  Associate Professor, Carleton University, As an Individual
Mary Van Buren  President, Canadian Construction Association
Dale Marshall  Manager, National Climate Program, Environmental Defence Canada
Pascale St-Onge  President, Fédération nationale des communications
Sandra Skivsky  Chair, National Trade Contractors Coalition of Canada
John Mark Keyes  Adjunct Professor, Faculty of Law, University of Ottawa, As an Individual
Anthony Furey  Columnist, Postmedia, As an Individual
Geza Banfai  Legal Counsel, National Trade Contractors Coalition of Canada
Louis Tremblay  Vice-President, Fédération nationale des communications

3:35 p.m.


The Chair Liberal Wayne Easter

I'll call the meeting to order.

For the record, pursuant to the order of reference of Tuesday, April 30, 2019, we're examining Bill C-97, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2019 and other measures.

Welcome to all the witnesses. We have seven on this panel. If you could hold it as tight as possible to five minutes, that would be dandy.

We'll start with Ms. Wyton, from the BILD Alberta Association.

Are you ready to go?

May 15th, 2019 / 3:35 p.m.

Carmen Wyton Chief Executive Officer, BILD Alberta Association

I'm ready to go.

Thank you very much for including me in today's meeting.

My name is Carmen Wyton and I'm the CEO of BILD Alberta, which is the Building Industry and Land Development Association of Alberta. BILD Alberta represents more than 1,800 member companies involved in residential construction, land development, renovations, trades, consulting and material supply.

I'm here to discuss housing affordability in Alberta, the implications of the national housing strategy and federal policies that are impacting jobs, the economy and the environment. The industry I represent is mostly small to medium-sized privately held businesses that employ more than 120,000 Albertans, provide $8.3 billion in wages and contribute $18.6 billion in economic activity.

These are Canadian employers whose livelihoods are being put at risk by policies created to address issues that are not relevant in Alberta.

Alberta's residential construction industry is in crisis. The majority of our members have reported layoffs of more than 20% of their staff and have significantly reduced work orders, while some have simply gone out of business.

There are three conditions that have resulted in a significant contraction of business, job loss and economic uncertainty. These are the 2017-18 mortgage rule changes, a historic oversupply of new housing inventory and building codes changes, especially related to energy efficiency.

With respect to mortgage rules, housing in Alberta's major cities is not the same as it is in Vancouver and Toronto. We are facing a historic high rate of unabsorbed housing. Since the introduction of those mortgage rules, the number of newly built but vacant homes has increased by 44%. The majority of these homes are single-family, semi-detached and row houses designed for young families, first-time homebuyers and those looking to moderately move up in the market.

We also know that 70% of Alberta households can comfortably afford homes priced at $300,000. Unlike Toronto and Vancouver, there are many desirable housing options in Alberta's major cities within that price range, but new mortgage rules are preventing working Albertans from qualifying. As a result, Alberta has a record high of 5,400 newly built unsold homes and a year-to-date decline in housing starts already reporting at 22% lower than in 2017.

If people don't buy, builders don't build and Albertans won't work.

As you consider housing for all Canadians, we ask that you bring back the 30-year mortgage, implement incentives for first-time homebuyers and facilitate regional variances in mortgage rules that will allow provincial financial institutions to provide for their local markets.

With respect to building codes, maintaining housing affordability is a central focus for BILD Alberta. We have concerns with the speed with which substantial shifts in building codes relative to energy efficiency are occurring. Alberta builders are already leaders in energy efficiency and have been providing innovative options that consumers want, and more importantly, that they can afford. The challenge with the current trajectory for energy efficiency and net zero by 2030 is the pace and uncertainty of associated costs.

It is essential that a thorough cost-impact analysis is undertaken and variables associated with climate conditions across Canada are considered to avoid costly unintended consequences to home owners. We calculated that every $10,000 increase to a home removes 20,000 Alberta households from entry-level housing. A net zero ready home in Edmonton will be tens of thousands more and in northern Alberta it will be still more.

BILD Alberta fully supports a path to net zero homes. However, before moving forward with drastic shifts in energy efficiency, we need to take a prudent approach to determine cost impacts, implications on building science and consumer interests. Industry and government need to innovate together to find more cost-effective means to reach such levels of efficiency before they can be regulated.

Albertans simply cannot afford to go to such extremes without proof that there is market capacity, technical capabilities and consumer willingness to adapt.

In closing, the national housing strategy is largely focused on social and subsidized housing without consideration for the consequences of other federal policies, such as mortgage rules and building codes. Federal policies must reflect conditions relevant to all of Canada's largest cities and support housing for all Albertans and all Canadians.

3:35 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Carmen.

We're turning to Kevin Lee, CEO of the Canadian Home Builders' Association.

Welcome, Kevin.

3:40 p.m.

Kevin Lee Chief Executive Officer, Canadian Home Builders' Association

Thank you, Chair.

CHBA represents some 9,000 member companies from coast to coast and is the national voice of the residential construction sector.

BILD Alberta is the constituent association of CHBA, and as Carmen has spoken to the specifics of Alberta, I'll speak to the housing issues on a national basis that are found in Bill C-97.

From a guiding principles level, CHBA has one key amendment to recommend to the committee regarding the bill. Our recommendation relates directly to the issue of housing affordability, a top-of-mind issue for Canadians from coast to coast.

As all of you know, an ability to access home ownership affects constituents in all of your respective ridings, especially young and new Canadians who aspire to realize the dream of home ownership. Deteriorating market rate affordability also has severe impacts on housing initiatives for those in core housing need.

We therefore propose that the second paragraph of the preamble of the national housing strategy act be amended from the current wording, which reads, “Whereas access to affordable housing contributes to achieving beneficial social, economic, health and environmental outcomes”, and be adjusted to capture the full housing continuum, including market rate housing, as follows: “Whereas both housing affordability and access to affordable housing by those in need contributes to achieving beneficial social, economic, health and environmental outcomes”.

We feel that this amendment would better capture the true housing challenges facing Canadians, preventing a focus solely on social housing and instead also including addressing housing affordability for those seeking to join the middle class and home ownership.

Indeed, without addressing housing affordability, Canada's social housing challenges will get worse. The inability of renters to access home ownership is clogging up the housing continuum, limiting rental unit availability, driving up rents and causing more challenges for those in housing need as well as those organizations seeking to provide it.

For the national housing strategy to be complete, it must also address market-rate housing affordability, especially for first-time buyers. This is particularly true, given the affordability challenges now facing millennials and new Canadians. The strategy and government actions should address the issues driving up costs; smart mortgage rules that address risks, without locking too many Canadians that have home ownership; market rate housing supply; transit-oriented development and more.

Regarding smart mortgage rules, CHBA advises that the compounding effect of many more mortgage rule changes have now gone too far. We are seeing those effects in job losses, weakening economies and the financial challenges now facing millennials.

The proposed first-time homebuyer incentive is a potentially effective measure to expand both affordability and market accessibility for some, particularly those stuck perpetually in rental markets. CHBA has provided CMHC with our initial design recommendations accordingly.

The problem is that this incentive will not be in place until the fall at the earliest, leaving many markets with severe challenges this construction season, including having some buyers delay their purchases until the incentive is available. As well, even once in place, the incentive will still leave thousands of prospective and well-qualified first-time buyers on the sidelines because of the excessively stringent mortgage rules still in place, the impacts of which remain to play out.

We therefore continue to recommend two key additional steps to unlock the door to home ownership right now: adjust the stress test to reflect current economic conditions and restore 30-year amortization on insured mortgages for well-qualified first-time buyers seeking entry-level homes.

The stress test has excessively suppressed the market. Between it and rising interest rates, CHBA estimates that 147,000 potential buyers have been knocked out of the market since it was introduced.

As well, while some suggest the impact of the stress test is now fading, our data tells us differently. The Bank of Canada's most recent forecast shows a 0.3% decline in Canada's GDP for 2019 directly associated with housing activity, amounting to a drop of about $6.7 billion. What is worrisome is that this is the fourth downward revision recently by the bank, based on greater than expected declining housing trends that were not anticipated by the bank's model previously. Our data confirms this and points to the continuing slide caused by the compounding mortgage rule changes.

Since the beginning of 2019, we have surveyed members on two occasions on the effects of the stress test. In January, our members reported a 33% drop in first-time homebuyer activity this past year. This drop in buyers has yet to fully play out in terms of housing starts. The second survey in April revealed that some 65% of the 300 CHBA member companies responding have already laid off staff, and 40% expect to lay off more workers in the next few months, this at a time when the government recognizes that we need more, not less, housing supply.

Our recommendations to adjust the stress test and restore 30-year insured mortgages for first-time buyers, which, like the incentive program, could even have an income-to-price ceiling, would get the continuum and industry functioning properly again, without increasing risk excessively.

In short, it's time for the national housing strategy to address not only those in core housing need but the housing aspirations of hundreds of thousands of well-qualified buyers currently locked out of the market. This affects not only their financial prospects but those of local economies and jobs across Canada.

Thank you. I would be happy to answer questions afterwards.

3:45 p.m.


The Chair Liberal Wayne Easter

Thank you, Kevin.

There's some agreement between those two submissions. That doesn't always happen.

Now we'll turn to Mr. Stratton, chief economist with the Canadian Chamber of Commerce.

Go ahead, Trevin.

3:45 p.m.

Dr. Trevin Stratton Chief Economist, Canadian Chamber of Commerce

Thank you, Mr. Chair and members of the committee. lt's a pleasure to be here today.

For billions of people throughout the world, Canada stands as a symbol of hope and opportunity. However, we cannot afford to take our prosperity for granted. Every day, the businesses that drive our economy are making hard decisions about how to preserve jobs or create new ones, whether to invest here or abroad, and how to respond to competition that grows more intense by the day. The decisions that they make determine the future of our communities and our country.

Canadian businesses are making these decisions in an economy that recently hit a soft patch. While job growth has been strong, we can do much better in other areas. The Canadian economy has been at a standstill since October 2018, with no growth over this period. Business investment fell 2.9% in the last quarter of 2018. ln the first quarter of this year, Canada recorded its largest quarterly trade deficit in almost three years. Recently, the Bank of Canada marked down its growth forecast for 2019 to 1.2% real GDP, a far cry from the 3% growth we saw only two years ago.

While some of the causes of this anemic growth are out of the government's control, we do control tax policy, and Canadian businesses are pleased to see the implementation of targeted accelerated capital cost allowance measures in this budget bill. These measures will help promote Canadian business investment, particularly in a manufacturing sector that is still grappling with the impact of the illegal and illegitimate tariffs imposed by the U.S. on Canadian steel and aluminum.

While these measures are helpful in the short term, the Canadian business community does not think that they go far enough to resolve our competitiveness issues. These tax writeoffs can be more broad-based to provide targeted support to other sectors of our economy, such as our struggling natural resources industries.

These measures do not address the need for a comprehensive review of our cumbersome and uncompetitive tax system. Last fall, our 450 local chambers of commerce overwhelmingly supported a policy resolution asking for a tax review. ln December, this very committee recommended that an expert panel conduct such a review. Canadian businesses speak with one voice on this issue, and they are still waiting for government action.

Compounding the challenges created by our tax system are the federal debt and deficit. This budget implementation bill does not include a federal plan to put an end to Ottawa's deficit. Canadian businesses are calling on the government to present concrete plans with firm deadlines for returning the federal books to balance. lt is simply irresponsible for our generation to continue to spend and to send the bill to our kids.

While the Canadian Chamber of Commerce welcomed the announcements to improve our regulatory system in the fall economic update and this year's federal budget, we are concerned about the slow movement and progress in setting up these instruments. Unfortunately, our system is broken. lt is complex, unclear and unpredictable. The overlap of regulations across different levels of government is stifling investment and preventing us from getting our natural resources to global markets.

This is not just a sectoral or a regional issue. Every single Canadian has a stake in making sure that we don't continue to be a nation of builders that can't get anything built.

The measures to address competitiveness in this bill are a positive first step, but they fall short of what is needed. Without a thriving business sector, our economic growth suffers, our prosperity declines, and our governments lack the resources to build our roads, hospitals and schools, and to provide social services. ln short, for Canada to succeed, our businesses must also be successful. There is a lot more work to be done.

Thank you for the opportunity to meet with you this morning. l look forward to our discussion.

3:45 p.m.


The Chair Liberal Wayne Easter

Thank you, Trevin.

Now we'll turn to Mr. Cox, chair of News Media Canada.

Go ahead.

3:45 p.m.

Bob Cox Chair, News Media Canada

Thank you, Mr. Chairman.

I'm here today on behalf of 700 daily and community newspapers across the country to address budget measures aimed at supporting Canadian journalism.

The budget measures are very important to daily and community newspapers and we strongly support them. They will help preserve newsrooms while we develop new business models.

lt is important to remember that people across the country still depend on their newspapers. We do not have a readership problem. We have a revenue problem. News Media Canada just released a survey which found that 88% of Canadians read newspapers in some form every week.

The day after we released the study, employees at the Globe and Mail learned that the newspaper needs to reduce its labour costs by $10 million annually. The same day, the Toronto Star released financial results that noted the company cut 32 positions during the first quarter of this year.

lt's not just the big companies. A week earlier, the Westman Journal closed in my home province of Manitoba. We have lost 20% of the community newspapers in Saskatchewan in the past two years.

All of us are engaged in transforming our business models so we can continue to fulfill the key role that a free press must play in a healthy democracy. However, these business models need time to develop. They include new features such as paid digital subscriptions and charitable donations. During the transition, we are finding it increasingly difficult to preserve our capacity to gather the news and information that our communities depend on.

At my own newspaper, the Winnipeg Free Press, there were 110 newsroom staff when I became editor 14 years ago. Today there are 55 editorial employees.

We used to cover much of what moved in Winnipeg. Right now, the Manitoba government is conducting a comprehensive review of the kindergarten to grade 12 education system. Neither the Free Press nor any other news media outlet in Manitoba has a single reporter who covers education regularly.

The 25% refundable labour tax credit in the budget for newsroom employees could allow the Free Press to hire 15 or 20 additional reporters and restore coverage of areas such as the public education system.

The personal income tax credit for digital subscriptions would help boost the future base of our business: a paying digital audience.

The possibility of some journalistic organizations receiving charitable donations that Canadians may claim as tax deductions establishes yet another source of support for news organizations that was unavailable in the past.

These measures have been called a bailout by some. I would suggest that this crowd knows very little about the business of operating a newspaper.

My company has an expense budget of $62 million this year. We have estimated the labour tax credit might give us $1 million annually. That is 1.6% of our expense budget. It will not bail us out. We will have to save ourselves, but the tax credit will preserve our newsrooms in the interim.

There has also been the suggestion that newspapers will be beholden to the federal government, not independent, and more likely to give favourable coverage. Well, I have not noticed this happening since the program was announced last fall. Even I cannot get journalists to write what I want, and I sign their paycheques.

Indeed, I have to commend this government or any government that would offer this kind of assistance to journalists. The role of a truly independent press is to expose and criticize. Any legitimate government helping the press is doing so in the interests of democracy, not in the hopes of getting good headlines.

As well, the process outlined in the budget will ensure the program is independent.

We would urge the government to move quickly to set up an independent panel of experts to assist in implementing the measures, including recommending eligibility criteria. We cannot hire anyone or count on new funding until the panel has reported and the program is operating.

Many of our members have raised specific points about budget measures and are anxious to express their views to the panel.

ln conclusion, these budget measures are welcomed by the daily and community newspapers that I am representing here today. I look forward to your questions.

3:50 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Cox.

We'll turn now to Ms. Waterous, managing partner of Norquay Ski Resort.


3:50 p.m.

Jan Waterous Managing Partner, Norquay Ski Resort

Thank you.

I'm going to quickly address the primary purpose for Norquay's invitation today, and then I will provide a brief summary of what Norquay has done since to address one of the initiatives identified in the 2013 site guidelines: the feasibility of creating aerial transit between the town of Banff and Norquay ski hill.

To begin, we confirm that Norquay is supportive of the government amending schedule 5 of the Canada National Parks Act to update Norquay's lease to reflect the 2013 Norquay site guidelines. These amendments are detailed in the documentation deposited in the Alberta land titles office in Calgary, Alberta, and we request no amendments.

With that out of the way, I'll now speak to my family's efforts to explore the feasibility of creating aerial transit to Norquay and other green initiatives as part of our science-based approach to vehicle and visitor management, which includes the creation of an eco-transit hub at the Banff train station.

By way of background, I have been a resident of Banff for 22 years. During that time, my family, like so many of our neighbours, has grown increasingly concerned about traffic congestion and parking in the town and around the national park. In fact, as the years went by, it was commonplace to hear members of our community say, “What are they going to do about it?” One day, we stopped and asked ourselves, “Just exactly who is this 'they'?”

You see, there have been many great ideas put forth over the years by various levels of government and private stakeholders to address park congestion, but what became clear to us is that these same groups lacked the real estate and the infrastructure to create meaningful change. For example, intercept parking was identified in 1979 as official Banff town policy, yet 40 years later, not a single intercept parking lot has been built, because the real estate simply was not available.

Passenger rail between Calgary and Banff was discontinued in 1990 because VIA Rail's ridership was suffering due to poor on-time performance as a result of freight understandably being prioritized over passenger trains on the single track.

As well, aerial transit to Norquay, despite being identified for at least 30 years as infrastructure that could enhance the environment of the important Cascade wildlife corridor that runs right through the Norquay access road, had never even had a chance to come to fruition, because the ownership of the Norquay ski hill and the Banff train station had never in Banff's history been in the same hands.

Those initiatives all struck us as transformative, so about four years ago, my family and I decided to become part of the “they” and essentially stand on the shoulders of other people's great ideas and see if we could assist in advancing all three initiatives.

First, my family bought the multi-decade lease to the Banff train station, and subsequently purchased the multi-decade lease for the 32 acres of land that surround the Banff train station, with the sole purpose of creating intercept parking for our community. I am proud to say that Banff's first-ever 500-car, free-of-charge intercept parking lot is under construction now and is scheduled to open this summer.

Second, we've been working to assemble the approximate $800 million in private and public capital to build a Calgary-Banff dedicated passenger rail line within the existing CP Rail corridor. We have been making very encouraging progress in this regard.

Third, last year we bought the Norquay lease, so the possibility of building aerial transit between the train station and the Norquay hill could finally be explored. Since then, we have had experts conduct science-based research on the potential wildlife benefits of a gondola, as a forerunner to conducting a Parks Canada environmental impact assessment to determine if the gondola creates the required substantial environmental gain.

As an extension of these initiatives, on March 25 I stood before Banff town council and proposed that it consider adopting a resident-only vehicle pass for the national park, whereby all day visitors to Banff park for free at one of two intercept lots at the train station that together would offer 2,500 parking stalls.

In this scenario, hotel guests would park at their respective hotel accommodations and both groups would use only buses and shuttles to reach points of interest around the broader national park. Essentially, Banff National Park would become car-free.

Recognizing that a genuine partnership is necessary for a resident-only vehicle pass to truly succeed, I also proposed to town council that, should the town agree to its implementation and upon the gondola becoming operational, my family will lease both intercept lots to the Town of Banff for 30 years for free.

My family firmly believes that the combination of intercept parking, aerial transit to Norquay, the reinstatement of passenger rail and the implementation of a resident-only vehicle pass will create a national model for green transit for other towns and cities across Canada to emulate.

Thank you for your time today. I really appreciate it.

4 p.m.


The Chair Liberal Wayne Easter

Thanks very much, Ms. Waterous.

From STEMCELL Technologies, we have Mr. Booth, chief commercial officer.


4 p.m.

Andrew Booth Chief Commercial Officer, STEMCELL Technologies

Good afternoon, Mr. Chairman and members of the committee.

My name is Andrew Booth and I'm the chief commercial officer at STEMCELL Technologies. I appreciate the invitation to address you here today.

STEMCELL is Canada's largest biotech company. We have over 1,400 employees worldwide, with over 1,000 in our headquarters in Vancouver. Our catalogue of over 3,000 products is used by research scientists, universities and pharmaceutical companies around the world, enabling life sciences research.

Business has been good. Fiscal 2018 revenues were approximately $200 million and we hired over 350 people. We're on track to increase revenues another 25% in this fiscal year. We added over 125 employees in the last quarter alone. We have 90 open positions today and a plan to hire over 3,000 more people in the coming 10 years. We're a proudly diverse, proudly high tech and also proudly Canadian company.

In short, when the Minister of Innovation, Science and Economic Development, Navdeep Bains, talks about building Canadian anchor companies, he's talking about companies like ours. Indeed, Minister Bains has visited our facility in Vancouver, as have Minister Champagne, Minister Sajjan, MPs Terry Beech and Pamela Goldsmith-Jones, as well as MPs Michael Chong and Erin O'Toole. I believe all would agree that STEMCELL is a role model Canadian company that is succeeding globally.

We are, in large part, believers of the government's innovation agenda. That said, there are still disconnects between the stated goals and the means taken to achieve them. Bill C-97 is a case in point. Specifically, we would like to bring your attention to the changes that the bill recommends to the scientific research and economic development tax credits, or SR and ED. We believe it was an excellent decision to remove the so-called profit cap on the enhanced SR and ED credits and associated refundable portion of the SR and ED system. It should help self-funded companies grow without undue investor pressure to exit at an early stage. This may, in turn, result in fewer companies moving intellectual property and corporate headquarters outside of Canada.

Unfortunately, the government has missed an opportunity in failing to also address SR and ED's taxable capital measurement. It is our view that this was a mistake. The taxable capital measurement reflects a “small is beautiful” approach to innovation, which does not align well with the government's stated goals to grow and keep world-leading tech firms here in Canada. It also tilts the playing field away from companies that have larger capital investments in things like manufacturing, infrastructure and test equipment. These companies are inherently stickier and more likely to endure in Canada over time.

We would propose replacing the taxable capital cap with a sliding scale where a 1% enhanced SR and ED credit is granted to companies that reinvest half a per cent of their gross revenues into SR and ED-eligible research and development. This enhanced credit would be capped at a maximum of 20% above the base rate for those companies that invest 10% of revenues or more into R and D.

As small and medium-sized enterprises generally reinvest higher proportions of available revenues in R and D, the government could continue to encourage the start-up community without reducing incentives for larger firms, which continue to invest and grow into anchor companies. At STEMCELL alone, we would estimate that this change would result in the immediate hiring of 20 to 25 research scientists.

By making slight adjustments to the technical nuts and bolts of the policy, the federal government can better support Canadian tech companies of all sizes. This will help develop and maintain not only economic value and jobs in this country, but also the sort of intellectual property portfolios that will be the true engines of the economy in the 21st century.

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

4 p.m.


The Chair Liberal Wayne Easter

Thank you very much, Mr. Booth.

Next we have, as an individual, Ian Lee, associate professor at Carleton.

4 p.m.

Dr. Ian Lee Associate Professor, Carleton University, As an Individual

Thank you, Mr. Chair.

I thank the finance committee for inviting me.

First, here are my disclosures, because I'm an individual: I don't consult directly or indirectly with any corporation, association, NGO, union, government or person anywhere. Second, I don't have any investments of any kind, in any industry, so I have no conflicts of interest. Third, I do not belong to, or donate funds, directly or indirectly, to any political party.

You're reviewing the gargantuan budget implementation bill. I will not use up my scarce minutes on this topic, except to state that I am in complete agreement with Andrew Coyne on the topic of omnibus bills. They are most unfortunate because he thinks, and I think, they're hostile to democracy. Enough said.

There's so much to say, and so little time with this bill, so I decided to focus on one item that received precious little discussion, I think, and that is the seeming march forward to what is called a national pharmacare program in Canada.

First, we have to clear up terminological obfuscation, and engineered urban legends.

It has been stated repeatedly by supporters of a national pharmacare program that Canada is the only OECD country in the world without any pharmacare program. This is factually and statistically false.

CIHI, which, as everyone in this room knows, was established by former Liberal prime minister Paul Martin, collects and publishes superb statistics on all things health care. They've published an annual report on prescription drug spending in Canada for several years, with data going all the way back to 1985. It shows that approximately 45% of all prescription drugs in Canada, which cost around $30 billion in aggregate, are paid for by provincial health ministries with targeted pharmacare programs.

Restated, Canada has a very generous targeted provincial pharmacare program in every province. In plain English, “targeted” means it's based on needs measured by income, as many of our social programs are, including day care and tuition, in some provinces.

It's false and wrong to state that there is no pharmacare program in Canada, when CIHI's 2018 report on prescription drug spending states that $14.4 billion was paid for by provincial health care budgets for prescription drugs. Those who claim we don't have one are in complete denial concerning the massive empirical provincial government support.

The key finding of the 2018, and most recent, report is that $14.4 billion, or 42.7%, of all prescribed drug spending in Canada is financed by the public sector as distinct from individuals or private insurance.

This is, again, from CIHI. I'm reading it word for word, “About 1 in 4 Canadians (22.7%) received benefits from a public drug program in 2017. Individuals living in low-income and rural/remote neighbourhoods were more likely to have received benefits.” The third key finding was, “In 2017, the 2.3% of individuals for whom a drug program paid $10,000 or more accounted for more than one-third of spending (36.6%).”

The advisory report of the current government— I'm just going to focus on the one, and then go forward—found that too many Canadians cannot afford the prescription drugs they need. They estimated that 7.5 million Canadians, or 20%, are currently uninsured or under-insured. I have done work with the Macdonald-Laurier Institute. They've calculated it at 10%. Right now, I think it's fair to say that somewhere between 10% and 20% of Canadians, that is, somewhere between 4.5 million and 7.5 million Canadians, are uninsured or under-insured.

4:05 p.m.


The Chair Liberal Wayne Easter

Ian, I would ask you to slow down a bit. There's no copy in the booth to work from, and you may be going a little fast for the translation.

4:05 p.m.

Associate Professor, Carleton University, As an Individual

Dr. Ian Lee

Okay. I will slow down a bit then.

Let's just drill into those numbers—the 10% to 20%. We know that they are not poor, to use very blunt, direct English, and we know that they are not old, i.e., over 65—nobody should be offended; I'm not and I'm over 65. We know that because they would be covered under existing provincial programs, and they are not covered, so there's a gap. There's no denial that there's a gap.

This segment probably works for small firms that cannot afford group health care benefits, or they are self-employed, or they are in the gig economy—the millennials—but the key point is that they are a subset of the entire population and not the total population. Restated, this is a problem that affects a small number of Canadians, 10% to 20%, and this suggests a targeted solution, not a universal solution that will cost $20 billion a year.

Very quickly—and then I'll be wrapping up—what's wrong with a universal solution? Everything. It involves providing free prescription drugs to very high-income people in Canada, such as.... How about all the MPs in this room? Each one of you is in the top quintile. Before you think I'm picking on you, let's go to the next category: professors. We are very well paid, and we are overwhelmingly in the top quintile. Then there are public servants, especially senior public servants earning $200,000 to $400,000 a year—and we want to give them free drugs. How about superior court judges in Canada earning in the top quintile of $300,000 a year? The most egregious of all are medical doctors making half a million to a million dollars a year—and we want to give them free drugs.

Every millennial should be furious and ready to riot on this.

The PBO estimates that a universal pharmacare program will cost about $20 billion a year more or, as Kevin Page noted, a 2% increase in the GST.

How can anyone support the exploitation of low-income and modest-income citizens who will be paying the increased taxes to fund free drugs for the most privileged members of society: MPs, professors, public servants, judges and doctors?

In conclusion, there is strong support in public opinion polls for a pharma plan that targets those most in need. However, in my opinion, there is not majority support for a universal pharmacare program that involves providing free drugs to professors, MPs, MDs, judges and public servants.

Instead of exploiting low-income and modest-income people to provide free prescription drugs to high-income people, we must maintain and refine a targeted pharmacare program that will provide assistance only to those who need help: low-income and modest-income people.

The late Justice Brandeis of the U.S. Supreme Court famously said that sunshine is the most powerful disinfectant of all. This is because most Canadians are unaware that the most privileged and the most highly paid in all of Canada are the largest beneficiaries of a national universal pharmacare program.

Thank you.

4:10 p.m.


The Chair Liberal Wayne Easter

Thank you, Mr. Lee.

We will go to five-minute rounds.

Just before we go to Ms. Bendayan, does anybody know if the vote is still on at 6 p.m.?

4:10 p.m.


Francesco Sorbara Liberal Vaughan—Woodbridge, ON

It's cancelled.

4:10 p.m.


The Chair Liberal Wayne Easter

It's cancelled.

4:10 p.m.


Francesco Sorbara Liberal Vaughan—Woodbridge, ON

It's rescheduled.

4:10 p.m.


The Chair Liberal Wayne Easter

Okay. Otherwise, we would have had to try to move the other panel up earlier if they were here.

Ms. Bendayan, the floor is yours for five minutes.

4:10 p.m.


Rachel Bendayan Liberal Outremont, QC

Thank you very much, Mr. Chair.

Thank you to all of the witnesses for their very interesting testimony.

My first question is for you, Mr. Booth.

I read with great interest the brief that was circulated to committee members. I'm not a tax expert by any means, so I'm looking for you to enlighten us on some of your recommendations.

I am a lawyer, however, and I was interested in the third option proposed, albeit in the alternative, with respect to an IP retention threshold for SR and ED. I note you propose that the capital threshold be replaced with a type of IP retention threshold that would grant enhanced SR and ED credits in proportion to the amount of IP held by a firm in Canada relative to the IP it holds in the rest of the world.

You can correct me if I'm wrong, but I believe that many companies, such as your own, that are deep into R and D are export intense. A lot of your clients would be around the world. In that case, you would need IP in the countries to which you export.

How would that particular proposal work for companies that are exporting internationally?

4:10 p.m.

Chief Commercial Officer, STEMCELL Technologies

Andrew Booth

I think the important point here is where Canada has not succeeded in the past is by commercializing intellectual property-backed products from Canada. While we do have registered intellectual property or patents that are recognized by the USPTO or the European Patent Office, those patents are held and owned by our Canadian legal entity, and we then commercialize them from here. I think that retention of intellectual property here and then the repatriation of the profits associated with it where the IP ownership resides is important.

That's not to say you need to give your distributors, or even owned distribution entities that are subsidiaries, a licence to sell to end-users, but if the core IP is owned here in Canada and the products are commercialized in Canada, that's the kind of IP ownership we're talking about when we talk about retention.

You're correct that only 3% of our revenues are in Canada, so 97% of our products are exported.

That intellectual property is one of the options, and I commend the efforts put behind developing a committee to study intellectual property and keep intellectual property in Canada. I think it is very important that Canada has an intellectual property strategy, so I would applaud the work that's being done towards developing that strategy for the long term in the economy of the 21st century.

4:15 p.m.


Rachel Bendayan Liberal Outremont, QC

That's excellent.

Your main recommendation is to propose a revenue reinvestment threshold, which would allow a company to make their own decisions about reinvestment.

4:15 p.m.

Chief Commercial Officer, STEMCELL Technologies

Andrew Booth

Yes, and for that reinvestment to have access to the credit, you need to reinvest in intellectual property in Canada, which of course then generates IP. It's more of a leading indicator of where intellectual property is than the third suggestion.