Finance Committee on May 16th, 2019

[The Chair, Liberal, Wayne Easter]

We will call the meeting to order.

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

We have quite a number of witnesses here this morning. If witnesses could keep their remarks to around five minutes, that would give us more time for questions.

We'll start with the Business Council of Canada, Mr. Kingston, vice-president of policy, international and fiscal.

Welcome back, Brian.

[Brian Kingston, Vice-President, Policy, International and Fiscal, Business Council of Canada]

Thanks for having me, Mr. Chair.

Committee members, thanks for the invitation to take part in your consultations on Bill C-97.

As you know, the Business Council of Canada represents the chief executives and entrepreneurs of 150 leading Canadian companies in all sectors and regions of the country. Our member companies employ 1.7 million Canadians and are responsible for most of Canada's exports, corporate philanthropy and private sector investment in R and D.

In the council's pre-budget submission, we asked the government to introduce a comprehensive strategy to improve competitiveness, diversify trade and attract private sector investment. Among other recommendations, we called on the government to undertake a comprehensive review of the tax system with the goal of strengthening the incentives for both investment and growth.

We therefore welcome the decision by the Government of Canada to allow temporary full expensing for investments in machinery and equipment as well as accelerated expensing for all other types of capital investment. We believe that this new measure will partially offset the negative impact on Canada's economy of recent U.S. tax changes while creating incentives for Canadian companies to make new job-creating investments. According to a recent survey of our members, 25% of respondents believe that the accelerated investment incentive will lead to an increase in capital spending at their companies.

We also welcome the introduction of the Canada training credit in budget 2019. It's no secret that competitive international pressures in new technologies are requiring workers to become more skilled more quickly. Recognizing these challenges, the Business Council of Canada has launched the business higher education round table, also known as BHER. We launched this in 2015 to connect businesses and post-secondary leaders and to help Canadians make the transition between school and work.

One key initiative under BHER is to help 100% of Canadian post-secondary education students get a work-integrated learning experience, and that's a co-op internship or applied research project. We believe the commitments that are made in budget 2019, including support for work-integrated learning and BHER specifically, are big steps in making Canada one of the most skilled countries in the world.

We also look forward to working with the government and consulting with our members regarding the design of the newly introduced Canada training benefit so it can achieve its goal of helping Canadians upgrade skills and remain active parts of the growing and changing economy.

Despite these positive announcements, we do believe that Canada still has competitiveness challenges that go much deeper than any single measure. We'll continue to urge the government to adopt a comprehensive strategy to foster business confidence, attract investment and enable the creation of new high-value jobs. This includes undertaking a comprehensive review of the tax system to both reform and simplify it and to restore our long-held tax advantage over the U.S.

In a recent survey of our CEOs, less than 10% of them expressed confidence in Canada's competitiveness. According to the survey, the tax and regulatory burdens, combined with concerns about talent, are the most important factors affecting company investment decisions and plans in Canada.

The federal budget confirmed that Canada's economy has slipped into low gear, underscoring the need for action to boost private sector confidence and ensure a future of good jobs and a high quality of life. With growth of only 1.2% forecast this year, we believe it's more important than ever for government to adopt a laser-like focus on economic growth and competitiveness.

Thank you very much for the opportunity to be here. I look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Brian.

We will turn to the Citizens for Public Justice with Darlene O'Leary, analyst, socio-economic policy.

Welcome, Darlene.

[Darlene O'Leary, Analyst, Socio-Economic Policy, Citizens for Public Justice]

Thank you, Mr. Chair. Thank you, all, for the opportunity to be here with you today.

My name is Darlene O'Leary. I'm the socio-economic policy analyst with Citizens for Public Justice. Citizens for Public Justice, or CPJ, is a national, faith-based charitable organization that works on Canadian public policy, primarily in the areas of poverty eradication in Canada, ecological justice and refugee rights.

CPJ engages in networks of organizations working on public policy, both secular and faith-based. With our partners, Canada without Poverty, we co-lead Dignity for All, a national campaign for a poverty-free Canada. For the past decade, CPJ and the Dignity for All campaign have called for the creation of a comprehensive and legislated national anti-poverty plan for Canada. Our campaign has been endorsed by close to 800 organizations and over 12,000 individuals across the country. Today I'll speak specifically about the part of Bill C-97 that includes division 20, the poverty reduction act.

In an open letter sent to the honourable Minister Jean-Yves Duclos in February, sponsored by CPJ, Canada without Poverty and Campaign 2000 and signed by over 500 organizations and individuals, we outlined our position on the poverty reduction act and made specific recommendations to strengthen the legislation. As you know, this act, previously Bill C-87, was tabled in Parliament and went to second reading before being added without amendments to the budget implementation act.

We recommend that the poverty reduction act reflect Canada's international human rights commitments, including the commitment that Canada has made in adopting the United Nations sustainable development goals. The targets and timelines identified currently in the legislation reflect the minimum goals set out by the SDGs to reduce poverty rates by 20% by 2020 and by 50% by 2030.

ESDC is using the 2015 market basket measure rates as a starting point for these targets. However, the first SDG goal to which Canada has committed is no poverty. We recommend that the legislation be amended to reflect this as the ultimate goal with a much more ambitious timeline. Otherwise, we are failing to honour our international commitments and are implicitly claiming that it is acceptable to leave behind those remaining in poverty once the minimum goals are achieved.

We also recommend that the legislation be amended to affirm economic and social rights as ratified by Canada in international human rights law.

In addition, the legislation recognizes the new official poverty line as a market basket measure, or MBM. While the legislation indicates that the MBM be subject to regular review, it should ensure that review takes place no longer than every three years. It should also include public input to ensure that the costing of items identified as part of the basket of necessities reflects the actual costs experienced by low-income households and that the basket include an adequate and appropriate range of costs.

The current MBM base has not been updated since 2011, with a slight adjustment in 2012, though it is currently under review. That means the costs being calculated now, for example, the cost of shelter, are vastly underestimated for some communities. Given that the MBM could now be used to establish eligibility and access to needed programs and benefits for low-income people, regular and public reviews are essential.

The legislation should also recognize that no one measure of low income or costs captures the full reality of poverty. A range of publicly available data sets should be included in assessing progress in achieving targets.

Further, the new national advisory council on poverty is being established to advise and report to the minister and engage with the public in reviewing the progress of the federal poverty reduction strategy. For this council to be effective, it must be independent, adequately resourced and given authority to make recommendations and require remedial action for compliance with economic and social rights. There must be a transparent process for appointment of council members, including establishing criteria for qualifications, such as expertise focused on poverty eradication, people with lived experience of poverty and regional representation.

We recommend that proposed section 11 of the poverty reduction act, which authorizes the dissolution of the council once poverty has been reduced by 50% of 2015 levels, be removed or amended to ensure an ongoing mandate for the council to oversee a goal of sustained poverty eradication.

In addition to this legislation, we hope to see the federal government work in partnership with indigenous governments to co-develop initiatives to ensure accountability in the implementation of remedies for distinctive barriers faced by first nations, Métis and Inuit people living in poverty.

Further elaboration of our recommendations is available in the open letter and in the brief we submitted to the committee to contribute to this study.

Thank you very much for your attention.

[The Chair, Liberal, Wayne Easter]

Thank you, Darlene.

Next is General Contractors Alliance of Canada, with Mr. Ainley, chair, and Mr. Côté, vice-chair. Welcome to you both.

Go ahead.

[Matt Ainley, Chair, General Contractors Alliance of Canada]

Thank you very much for having us at the committee meeting today.

We are the General Contractors Alliance of Canada. We are a national organization made up of over 450 general contractors across Canada. We build over 85% of the institutional, commercial and light industrial construction completed in our country on an annualized basis. Member companies range in size from small regional contractors to the 10 largest contractors in Canada.

The GCAC is a strong supporter of prompt payment in Canada and has developed extensive expertise on this subject through its involvement in the provincial prompt payment movement. Through provincial general contractor associations and local chapters, the GCAC and its member companies have been working with provincial governments in Ontario, Quebec and Saskatchewan to draft prompt payment legislation that achieves the objectives of both the government and industry.

The prompt payment portion of Bill C-97 is a welcome piece of legislation for the GCAC and our industry. We thank the government for working with us on this legislation, as it will make the Canadian construction industry more competitive and efficient.

Our comments today are practically based and are focused on making the bill workable, and this is an important point, so that the objectives of the bill are actually delivered as intended. We have developed a short list of recommendations.

First, proposed section 9, on submission of a proper invoice, should have a clause that would give Her Majesty and the contractor the ability, if all parties agreed, to negotiate, revise and resubmit the proper invoice within the 21-day review period while maintaining the original proper invoice submission date.

Negotiating and revising a monthly invoice is a normal industry practice, and maintaining this practice would significantly reduce adjudications. The provinces of Ontario, Quebec and Saskatchewan have adopted this practice. Consistency across the country is an objective of the industry.

The second point is on proposed section 16, regarding adjudication. A significant part of this function would be left to the regulations and is in the body of the act. The act should include two specific points in proposed section 16.

First is the definition of what can be adjudicated, including non-payment of a proper invoice and the cost of services or materials provided under a contract, including change orders, whether approved or not, and proposed change orders. Over 50% of construction non-payment issues are a result of a failure to pay change orders promptly. Ontario, Quebec and Saskatchewan have recognized this issue with their definition included in their acts. It also keeps the definition consistent from one jurisdiction to another.

Second is the ability of a contractor to consolidate the same or related adjudications in one adjudication, to be heard by one adjudicator at the same time. It's a key point. This would prevent the same adjudicated issue from being heard by two different adjudicators who might not render the same decision, thereby putting one party in an unfair financial position.

Our third point is that as Bill C-97 is currently drafted, there is no provision to deal with the specific needs of public-private partnership projects, or P3s, as they are called. The federal government has an active P3 building program. It will face issues with the lending market that currently funds P3 projects in our country. The Construction Act in Ontario has developed specific clauses with lenders and P3 companies that have properly dealt with the needs of lenders on P3 projects. The GCAC strongly encourages the government to include these in Bill C-97.

Proposed subsection 9(4), on submission of a proper invoice, refers to “verification of the construction work”. This would create confusion, as it is unclear what is meant by “verification”, as such a term is not a customary construction term. Additionally, there is no reference to a proper invoice. The GCAC proposes revising this drafting to say “certification of the proper invoice”, which includes a reference to the proper invoice and includes the term “certification”, as it is a customary construction term that is understood by our industry.

Bruce Reynolds and Sharon Vogel put together a consultation report for PSPC. It was a very good report. It went around the world and established best practices and what worked and what didn't work. It was very thorough. It outlines a number of recommendations for justice, PSPC and the government. The points we've made in our report to you are included in that report. There are many others, but these are the key ones.

The report gets to the heart of prompt payment and puts together a methodology that is really key to the success of this piece of legislation actually working in the field. That's the key part that we're trying to distinguish for you today. These changes are small, but they'll have a big impact on the day-to-day operation of the act, how the act is going to execute itself. It's not a contract; it's for when problems hit contracts. Having these pieces in place will allow those problems to resolve very quickly.

We're big supporters of the legislation. We thank the government for including it.

We look forward to questions. Thanks for hearing us.

[The Chair, Liberal, Wayne Easter]

Thank you, Matt.

We'll turn to the Green Budget Coalition, with Mr. Van Iterson, manager, and Ms. Gue, co-chair.

The floor is yours.

[Andrew Van Iterson, Manager, Green Budget Coalition]

Mr. Chairman and honourable committee members, thank you for inviting the Green Budget Coalition to speak to you today about Bill C-97.

Lisa Gue, aside from being the co-chair of the Green Budget Coalition, is the senior researcher and analyst, science and policy, for the David Suzuki Foundation.

The Green Budget Coalition, active since 1999, brings together the expertise of 22 of Canada's leading environmental organizations, collectively representing over one million Canadians, to identify budgetary opportunities to advance environmental sustainability in Canada.

Today I will provide brief feedback on the 2019 budget, and then focus on the investment in zero-emission vehicles, as well as proposed changes to the Pest Control Products Act in Bill C-97.

The Green Budget Coalition was particularly pleased that budget 2019 increased funding to address climate change by including $1 billion in support of building energy efficiency and four measures to support zero-emission vehicles. The budget also provided some details on the peer review process with Argentina of federal fossil fuel subsidies, and we are hopeful that this peer review process will assist the government in finally eliminating subsidies and non-tax support to fossil fuels.

In addition, we were pleased to see renewed funding for contaminated sites cleanup, and new funding for food policy, energy data and first nations water and waste-water infrastructure.

Turning to zero-emission vehicles, or ZEVs, approximately one-quarter of Canada's greenhouse gas emissions originate in the transportation sector. The Green Budget Coalition recommended investments to accelerate the transition to ZEVs. We need a smart strategy that helps more people buy clean cars, not only to reduce harmful emissions but also to strategically position the entire auto manufacturing industry to grow with the global transition to electric vehicles.

We were pleased to see the commitment to national targets for zero-emission vehicle sales ramping up to 100% by 2040, backed by a $300-million investment for a three-year purchase incentive program. We expect this to immediately make purchasing electric vehicles more affordable and appealing across Canada. However, it is not clear that $300 million will be sufficient over a three-year period; additional funding might be needed in budget 2020 or 2021.

We also appreciated the $130-million investment in charging stations and the proposal for businesses to be able to write off 100% of the ZEV purchase price in one year, a strong incentive for high-distance businesses such as delivery and taxi companies and school bus companies to buy more zero-emission vehicles.

However, I would highlight that the Green Budget Coalition recommended a two-pronged approach, combining purchase incentives with mandatory sales targets for zero-emission vehicles. The budget announced that Transport Canada will work with automakers to secure voluntary sales targets. We believe regulated sales targets will be necessary to complement budget 2019's funding measures to ensure a sufficient supply of ZEVs for Canadians.

Finally, I would draw your attention to proposed amendments to the Pest Control Products Act in part 4 of Bill C-97. The Green Budget Coalition has highlighted the need for increased investment to enable Health Canada's Pest Management Regulatory Agency, the PMRA, to deliver on its legislative obligations for post-market review of pesticides in Canada, to ensure risks to health and the environment are not unacceptable. Unfortunately, budget 2019 does not adequately address the budget crunch at PMRA. While we understand these proposed legislative changes to the Pest Control Products Act are intended to improve efficiencies, it is important that this effort not undercut the environmental and public health purposes of the act or interfere with sound decision-making.

GBC member organizations are concerned that the proposed provisions as drafted could limit public participation and reduce transparency, potentially leading to unacceptable health or environmental risks. To address this, these Green Budget Coalition members have proposed discrete amendments to maintain existing legislative guarantees of consultation and accountability and prevent further erosion of public confidence in federal pesticide regulation.

To conclude, thank you again for inviting the Green Budget Coalition to appear today. We look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Andrew.

From Mortgage Professionals Canada, we have Mr. Taylor, president and CEO, and Mr. Wolfe, chair of the board of directors.

Welcome to you both.

[Paul Taylor, President and Chief Executive Officer, Mortgage Professionals Canada]

Thank you.

Mr. Chair, committee members, good morning.

Mortgage Professionals Canada has more than 11,500 members across Canada, and I want to thank you on their behalf for giving us an opportunity to comment on Bill C-97 and the 2019 federal budget.

My name is Paul Taylor. I'm the president and CEO. With me today is Michael Wolfe, regional vice-president of residential credit for western Canada at Equitable Bank. He is also currently serving as the chair of the board of directors for Mortgage Professionals Canada.

As many on this committee know, since last year we've been asking for a number of changes to the mortgage macroprudential rules, but primarily for a reduction in the mortgage stress tests, a reintroduction of the mortgage insurance-eligible 30-year amortization for first-time buyers, a stress test exemption for borrowers who have paid as agreed to their first term and who wish to renew with a different lender, and an increase in the RRSP withdrawal limit on the first-time homebuyers plan, which was actually addressed in the budget.

These requests were made in the interest of supporting access to home ownership for younger, aspiring middle-class Canadians, whose long-term economic well-being has been disproportionately disadvantaged by the current regulatory requirements.

The federal budget contains measures that address our concerns, and our comments today will focus primarily on that subject.

First, we thank the government for implementing an increase in the homebuyers' RRSP withdrawal limit from $25,000 to $35,000. This increase is appropriate. The previous limit has been in place since the 1990s. Perhaps of even greater societal value, beginning next year the program will expand to include those who have experienced the breakdown of a marriage or a common-law relationship. We're very encouraged by this and believe it will assist people in those circumstances to find footing in a new home much more quickly. It's a good change.

The newly announced and highlighted first-time homebuyer incentive program we feel will likely not provide the support to the marketplace that is needed. Briefly, the new program aims to share equity in a home for qualifying purchasers. CMHC will own either 5% of the home if it's existing residential stock, or 10% if it's newly constructed, through a shared equity mortgage.

Because CMHC owns 5% or 10% of the home, the purchasers' monthly living expenses will be reduced because the traditional insured mortgage they take will be smaller, reduced proportionately by the size of CMHC's ownership. The difficulty we see with the program is that it doesn't assist anyone to qualify to purchase a home who wouldn't already have otherwise qualified.

Further, those who do qualify need to be comfortable with the government sharing ownership of their home. The prospective purchasers must also understand that the government will share in the appreciation or depreciation of the home at the time they come to sell it. Given that the purchasers won't require the program to qualify to purchase a home anyway, frankly, we see quite limited take-up from those who would be able to take advantage.

Additionally, the program restricts qualification to purchasers whose households earn less than $120,000 annually and limits the collective mortgage sizes to four times the actual household income. All things being equal in today's market, a family with reasonable credit would generally qualify for a traditional insured mortgage of around 4.7 or 4.8 times their household income. The new program actually further reduces the potential eligible homes, especially for those at the bottom end of the income bracket.

[Michael Wolfe, Chair, Board of Directors, Mortgage Professionals Canada]

Thanks, Paul.

In our view, the new program is an academic approach to solving a problem that, based on precedence, is expected to have limited uptake. For comparison purposes, the concept behind the federal program will be familiar to B.C. legislators. The B.C. homeowner mortgage and equity partnership program ended March 31, 2018, just 15 months after it was introduced, due to its low participation rate. As the B.C. government stated when ending the scheme, “When the program was first introduced, it was anticipated it would provide 42,000 loans over a three-year [time horizon], however, as of January 31, 2018, there were fewer than 3,000 loans approved.”

A similar fate may be the future for the first-time homebuyers incentive program. While the federal program is not quite the same structure, some could argue that the B.C. program was more appealing to would-be home purchasers, providing interest-free mortgages with no required payments for the first five years. Loans of up to 5% for homes purchased under $750,000 were permitted, a considerably higher value than the maximum purchase price possible through the first-time homebuyers incentive program. In discussions with our lender and insurer members, an additional consideration identified is the very considerable IT infrastructure spending required to enable the program. Across the mortgage lending industry, the combined total expense will be significant. The required timeline to implement operational and technical changes is also creating concern in our community. We suspect that upon reflection, the required industry investment will prove excessive with the limited take-up received.

To our knowledge, the program was conceived and announced without significant industry consultation. As such, we have no understanding of the assumptions made to support the claim that the program will encourage 40,000 new first-time homebuyers to enter the market every year. This estimate seems unrealistic, given the limited take-up of past programs. We acknowledge that a number of details are still to come. For these reasons, we continue to recommend the reintroduction of a 30-year amortized insured mortgage for first-time homebuyers as a more practical, accessible and assistive measure. We are pleased that the leader of the NDP has publicly supported this suggestion.

We were disappointed not to see in the budget any amendments to the stress tests, given the continued reductions in real estate transactions across Canada, the significant price erosions now taking place in many regions and the highlighting of issues by members of this committee and senior officials of all political stripes who anticipated some adjustment to B-20. Critics have said that our recommended amendments will add fuel to house price inflation in hot markets. In our view, we're simply asking for a reduction in the suppression of activity we are witnessing with the stress test at its current benchmark or 2% level. We feel that a 75-point basis test would bring greater equilibrium to market activity, improving activity without adding excessive demand back into the market.

Last, regarding stress tests, I'll offer a word on our recommendation to permit borrowers who wish to move their mortgage at renewal to be exempted from the stress test. This is a supportive measure to ensure that Canadians who have a proven history of paying as agreed are able to access competitive interest rates and product offerings and not be restricted solely to their incumbent lender's renewal offer. Maintaining this provision is anti-competitive and anti-consumer.

Thank you for your time this morning and for providing us with the opportunity to share our thoughts and perspectives. We're happy to take any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you, Paul and Michael.

Next is the Smart Prosperity Institute. Mr. Elgie is the executive chair.

Go ahead.

[Professor Stewart Elgie, Executive Chair, Smart Prosperity Institute]

I have a few slides that I will pass around in case anyone wants to see them. There are some pretty slides. I apologize; they're only in English.

I'm going to speak in English today.

I am a professor of law and economics at the University of Ottawa and also a member of the federal government's economic strategy table for the resource sectors.

Today I am here as the chair of Smart Prosperity Institute, wearing two hats. It is Canada's largest environment economy research network, doing world-class research on clean innovation, resource efficiency and ways to drive both environmental performance and boost competitiveness at the same time. I am also the co-chair of a leaders initiative that has 28 CEOs from all sectors across the economy, including oil, mining and banking, who have put out a vision to make Canada a world leader in clean growth and innovation and a road map to get there.

The premise of my remarks today is that clean growth and innovation is a vital economic opportunity for Canada, but don't take my word for it. Radical environmentalists such as the Mackenzie Institute, the OECD, the World Economic Forum and the Business Council of Canada have put out reports in the last few years saying that. Countries that are leaders in energy efficiency, low-carbon production and innovation will be the most competitive in the decades ahead. It's a $35-trillion global economic opportunity across all sectors of the economy that we can't afford to miss.

That was also a finding of Canada's economic strategy table. It found that clean growth is a major opportunity for all parts of the economy because markets and investors are demanding it and it's where profits will lie. This was not just for clean tech, which we hear a lot about. There is indeed a fast-growing market which will be $2.5 trillion soon, and Canada is well positioned for it if we can overcome barriers. Also for the resource sectors, Canada's core economic strength, clean growth is a $3.6-trillion opportunity for them.

Turning to the budget, how can it advance clean growth and capture these opportunities? I have three points.

The first is transportation. It accounts for 24% of our greenhouse gas emissions and is also a big part of our economy. The budget invests in electric vehicle adoption through a $5,000 consumer incentive, a 100% tax writeoff for businesses, and the building of charging stations. One should always question whether a subsidy is a smart economic investment. In this case I think there is a good argument that it is. The government has historically provided incentives to support promising new technologies as their cost curves come down. We did this with the oil sands, and investing in the vehicles of the future seems like an equally good investment.

I have included a couple of charts to show that experience in three different provinces shows that incentives are effective. In Ontario, B.C. and Quebec they have more than doubled demand for electric vehicles.

I have two cautions. One is, don't overspend. You can provide too much of an incentive and you get diminishing marginal returns. I think $5,000, which is lower than the one we've seen in Quebec and Ontario, is right, given that the technology costs are coming down and getting closer to cost-competitiveness. Update it to make sure that as battery costs come down, your incentive is appropriate.

My second point is reforming how we regulate to drive competitiveness and innovation. This was the number one recommendation of the Barton growth council and the economic strategy table.

Canada ranks middle of the pack for developed countries in both the efficiency of our regulations and our environmental performance. That's not good. This is the low-hanging fruit for driving clean growth and competitiveness, the economic strategy tables found. The fall economic statement and the budget announce some of the recommendations: the external advisory committee and a centre for regulatory innovation. Those are good, but it falls short of what the Barton committee and the economic strategy tables recommended.

They recommended that we need an independent council with its own expert capacity to drive Canada toward world-class regulation for competitiveness and innovation. I would encourage you to go further and create that kind of independent capacity, which is different from simply putting more capacity in government. We need both. Reforming regulations is vital, but it's hard.

Tax incentives for clean growth were also a key recommendation of the economic strategy table both to keep pace with the U.S. cuts and also to spur investment in clean technology, at two stages: early-stage growing firms and also with adoption of technology by mature, large firms.

The fall economic statement had 100% accelerated capital cost allowance for clean technologies, which builds on the carbon tax by adding a tax cut for the same firms that are investing in low-carbon technologies. That's good. It doubles the effect and helps competitiveness. The problem is it's limited to just 19 specific clean technologies. It misses most of Canada's clean technology firms.

What you should do is expand it to cover all low-carbon technologies. Firms like Nova Scotia's CarbonCure, which is reinjecting carbon back into cement, for example, isn't captured by these 19 specific technologies, so expand it to cover all low-carbon technologies and, indeed, all clean technologies. If you want our resource sectors to be leaders in water efficiency and air pollution reduction, let's roll the incentive out to all those things, as the U.K. and the Netherlands have done.

I would add that the part of the budget bill about fossil fuel subsidy reform, which is a G7 commitment and is good, needs to be careful to distinguish those incentives for the oil and gas industry that support cleaner production. We don't want to be phasing those out. You actually want incentives to support cleaner production. They tend to all get rolled together when people put these lists out. Don't eliminate incentives for the oil industry to support clean production.

Last, the one big gap in terms of tax credits is that the economic strategy tables also recommended an investor tax credit to support early stage clean-tech innovative firms. This is what's known as the valley of death in terms of technology investment start-up. New Brunswick, B.C. and Alberta all have 30% investor tax credits for small growing firms and they work really well. We recommended the same federally. It hasn't made it into the budget yet.

The other advantage is that we've put $2 billion to support public investment through BDC, EDC and SDTC in these firms. This will pull in the private capital to leverage those public dollars, which is the end game you want. I would recommend that as a priority for budget 2020.

Clean growth is an opportunity we can't afford to miss. The government has a key role to play, as we've done in other areas like free trade and deficit reduction.

Thank you for the efforts you're making, and keep going.

[The Chair, Liberal, Wayne Easter]

Thank you, Stewart.

We will now hear from Surety Association of Canada. We have Mr. Ness, president, and Mr. Cadieux, manager, business development.

Welcome. The floor is yours.

[Steven Ness, President, Surety Association of Canada]

Thank you, Mr. Chair and honourable members of the committee.

Our comments today are in relation to division 26, part 4, which deals with prompt payment in the construction industry.

I'm Steve Ness. The Surety Association represents the firms that guarantee the performance and payment obligations of project contractors. We protect taxpayers, as well as subcontractors and suppliers, from losses that arise from contractor failure. As the people who are called in to clean up the mess when a contractor becomes insolvent, we are strong and vocal supporters of any measure that brings about prompt payment in the construction industry, and we applaud the government for this initiative.

Our friends at GCAC mentioned the report by Reynolds and Vogel. It's 53 recommendations formed the basis of this legislation. It's a very good report, but there was one key area that was not addressed in that report: the impact of project contractor insolvency on the payments of subcontractors and suppliers down the chain. The reason it wasn't addressed is that the authors just didn't have the time to explore it thoroughly. One of the recommendations in that report was that further consultations be undertaken to find a way to address that risk. Of course, with the upcoming election, time was tight for the government as well, and there simply wasn't enough of it to undertake those consultations.

This measure, as it stands, includes nothing, no provisions, to address that risk of insolvency and to address how to complete the project and pay the bills. We're here today to propose a solution. The authors of the report, by the way, did recognize the importance of addressing the insolvency risk. I'll quote directly from that report. If a project contractor “becomes insolvent, there is significant risk that those further down the construction pyramid...will not be paid.”

For our part, we submit to this committee today that there can be no prompt payment without first ensuring certainty of payment, and that the insolvency of a project contractor is the most serious impediment to that payment certainty. In other words, if there ain't no money to pay ya, it doesn't matter how prompt the payment requirements are.

In our written brief, which I think all of you have, we talk about the role of surety bonds in addressing that insolvency risk. We set out the reasons why the bonds are the best and really, we would argue, the only remedy that effectively addresses that risk. By the way, I should point out here that with all this talk about insolvency, it's real. It's not hypothetical. It's not remote. In 2018, our industry paid out more than half a billion dollars in losses arising from construction insolvencies, and that included the largest single contractor loss in our industry's history.

In Ontario, which is the only province to date that has enacted similar legislation, they recognize this, and the Ontario measure includes mandatory performance and payment bonds on all public work.

What we're recommending today is that the legislation be tweaked to add a one sentence placeholder to proposed section 23 that would enable the Governor-in-Council to prescribe regulations that address that risk of insolvency through performance and payment bonds. We're not proposing a hard amendment to the legislation to make surety bonds mandatory, as they did in Ontario. We are only proposing that the government be provided with the flexibility to address that real risk at a later date within the framework of the act. It will also provide the time for that additional consultation and consideration. Again, this would be in keeping with the recommendation of the Reynolds report.

Why is it important? Well, this will allow the government to finish the job and allow subcontractors and suppliers to enjoy both the certainty as well as the promptness of payment. Looking down the road, should the government choose to bring in regulations around that, it will also mean that there will be consistency with other measures, notably Ontario's which does include that right now, and consistency across the country, we believe, is important. It will also, in addition to protecting the subcontractors and suppliers, protect the taxpayers. It will see that the projects are completed without any additional cost to government.

It is consistent with existing federal policy. For PSPC, Defence Construction Canada and all the big users of construction services, most of the work that they contract right now is already done under bonds as best practice and recognized as best practice.

Finally, it's in keeping with the stated purpose of the act as set out in part 4.

With that, I'll wrap it up, Mr. Chair.

Thank you to the members of the committee, and I welcome any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you very much for all those presentations.

I think we have the time to go to six-minute rounds in our first set. As you can see, there are about five different topics here, so it's all across the map.

Mr. Sorbara, you're up.

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

Thank you, Mr. Chair.

Welcome, everyone, and thank you all for your presentations. Excuse me if I don't get to all of you this morning.

I want to start off with the Surety Association of Canada. Thank you for your presentation today and for bringing this up.

In Ontario currently, there is an entity in the construction industry, AGC, that is insolvent. Can you describe the importance of having the certainty of payment for the subs in that situation and provide light to the members here on why it's so important to have this sentence inserted into the BIA?

[Steven Ness]

Thank you, Mr. Sorbara.

Yes, Mr. Sorbara is referring to a Toronto-based contractor. In the Toronto area alone, they had 12 major contracts on the go. They've gone into insolvency. Our member surety has moved in. As of the end of 2018, they had paid out, just to trades and suppliers, about a quarter of a billion dollars. Those are small businesses, small trade contractors, electrical and mechanical, that otherwise would have been left high and dry. Many of them would likely have gone out of business without that.

The feedback we've received is that the payment has been prompt, and the jobs are now on the way to being completed or moving toward completion. Without that, again, a great deal of economic upheaval would have been brought down on the local community. As I said in my remarks, that risk is real. It happens every day, and we're the guys who see the results when we have to move in and clean up after these messes occur.

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

With that, are the projects being completed and generally on time?

[Steven Ness]

Yes, that's right. There's always going to be some delay when a contractor fails. You can't magically bring them back online the next day, but our members moved in, got new contractors and got things back. Some of them are going to be completed within their existing schedules, which is pretty good going.

[The Chair, Liberal, Wayne Easter]

I'll just interrupt for a second. I won't take the time from you, Francesco.

If somebody else wants to come in on any of these points, just raise your hand, and we'll let you in, whether you're in agreement or opposition. That goes with the exception of these guys in the—

[Voices]

Oh, oh!

[The Chair, Liberal, Wayne Easter]

Mr. Sorbara.

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

No, no, I'm going to stop there, I think.

The work that Reynolds and Vogel have completed for the Province of Ontario is a standard we should all strive to achieve. We know that a majority of the general contract work that is undertaken in Canada, done and completed with all the RFPs, is done through the provinces. The federal government is a small sliver, but our standard is obviously going to be one that provinces that have not adopted prompt payment are going to look to.

I think this material you have provided is enlightening to ensure certainty of payment in the case of insolvency. We're living through a real-life situation, a real-life example now in the province of Ontario where we'll probably hit half a billion dollars this year, if we have not already.

[Steven Ness]

We have already.