Finance Committee on May 30th, 2016

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

Welcome, Minister. We are running a little late and we appreciate the fact you had a little difficulty getting here.

Appearing before the committee today, pursuant to order of reference of Tuesday, May 10, 2016, on Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures. is Minister Morneau, Minister of Finance. Welcome.

With the minister is Andrew Marsland, who's the senior assistant deputy minister, tax policy branch; Marta Morgan, associate deputy minister; and Nick Leswick. I'm not sure of your title, Nick, but welcome, all.

Minister, you have the floor, and then we'll go to questions.

[Bill Morneau, Liberal, Minister of Finance]

Thank you very much, Mr. Chairman.

For clarity, Nick Leswick is assistant deputy minister, economic and fiscal policy, and he's really good at his job too.

I want to thank you, Mr. Chair, and I want to say that I'm pleased to be here today to speak to the distinguished members of the Standing Committee on Finance about Bill C-15 and the investments that our government will make to strengthen the middle class and keep Canada's economy strong and growing for the long term.

The measures in the budget implementation bill will enable us to move forward on our ambitious economic agenda, designed to strengthen the middle class and ensure long-term growth by making smart, necessary investments in our country's future. It's a plan I was honoured to table in the House through our very first budget on March 22. Since that day, I have been telling Canada's story from coast to coast as well as in the United States, Europe, and most recently at the G7 finance ministers' meeting in Sendai, Japan.

Meetings like this one are a great opportunity to demonstrate Canada's leadership on important international issues and to send the message that Canada is back, that we're engaged, and that we're a global leader. In Japan, at the G20, at the IMF spring meetings on Wall Street, as elsewhere over the last two months, people kept telling me the same thing: “We really like what you're doing in Canada.”

Members may have read that the Financial Times called Canada a “glimmer of light”.The Wall Street Journal called Canada the poster child for the International Monetary Fund's global growth strategy. Christine Lagarde, head of the IMF, praised our approach.

Our budget earned these endorsements because, I firmly believe, our government is focused on exactly the right things, and it has answered the call of millions of Canadians, who have told us both before the budget and after that they want real change.

Even before the budget, our government set to work to create the conditions that help middle-class Canadians and their families. On December 7, 2015, we took a significant first step to strengthen the middle class by cutting taxes for nearly nine million Canadians.

In addition to the tax cut, we introduced the new Canada child benefit in budget 2016. This benefit is intended to help parents better support their most precious resource, their children.

The Canada child benefit is a simpler, more generous tax-free benefit for Canadians. It's also better targeted to those who need it most than the previously existing child benefits were.

It's estimated that about 300,000 fewer children will be living in poverty in the 2016-17 fiscal year compared with the 2014-15 fiscal year, once the Canada child benefit is in place. This means that families will have extra funds to help them afford cleats for their kids playing soccer or to attend summer camp. It means the increased likelihood of the numerous little things that make summer in childhood the carefree, refreshing time that it's meant to be.

This is a tangible measure that gives families across this country options, options they may not have had before. It represents the most significant social policy in a generation.

But this isn't the only significant social policy within the pages of this budget implementation bill. Equally important are those that help our most vulnerable citizens find renewed support for the unique challenges they may face.

There are three broad areas in this bill that reflect our actions in this regard.

The first is seniors.

Canada's retirement income system has been successful at reducing the incidence of poverty among Canadian seniors; however, some seniors continue to be at a heightened risk of living in a low-income situation.

The budget will help Canadians retire with security and dignity by making significant new investments that support them throughout their retirement years. These include resetting the age of eligibility for old age security and guaranteed income supplement benefits to 65 from 67, and for allowance benefits to 60 from 62 over the 2023 to 2029 period.

The passage of the bill will also increase the guaranteed income supplement top-up benefit by up to $947 annually for the most vulnerable single seniors, starting in July 2016.

The second area deals with Canadians who've fallen on hard times because of a loss of employment.

This bill proposes immediate action to enhance the employment insurance program so that out-of-work Canadians have the support they need while they look for their next job.

I'd particularly like to highlight that passage of the bill will extend EI regular benefits by five weeks to all eligible claimants in regions of the country that have experienced the sharpest and most severe increases in unemployment. We'll also extend employment insurance regular benefits by up to an additional 20 weeks for long-tenured workers in those regions.

I'd like to highlight another area where we'll provide much-needed support: veterans. We'll give back to those who've given so much in service to our country. Some $1.6 billion over five years will flow directly to veterans and their families in the form of higher direct payments. These enhancements deliver on mandate commitments and respond to recommendations from key stakeholders, including the veterans ombudsman.

Budget 2016 is about supporting the middle class now through helping Canadian families. It will continue to do so in the future by laying the foundation for long-term economic growth.

Canada's population is aging. The global economy is volatile. Oil prices are, of course, unpredictable. We need to take steps to improve competitiveness and productivity in Canada so we become drivers of our own success now and in a generation from now.

We need to ensure that the steps we take now will help our kids and our grandkids. The budget signals a number of areas known to do just that. The largest are in the important areas of infrastructure and innovation. Our $120-billion ten-year infrastructure plan and our innovation agenda will be articulated over the coming year. Once in place, they'll deliver a long-term boost to the Canadian economy. They'll create good jobs now and in the future.

Investments in public transit will also help mom and dad to get to work on time. Investments in green infrastructure will help to keep our water clean, and investments in housing will help entire communities to thrive. Investments in and a commitment to a more innovative economy mean jobs after graduation, a cleaner resource sector, and a strong Canadian presence for the world stage.

Infrastructure and innovation are just part of the underlying objective of the 2016 budget. This objective is the development of a robust growth strategy to create the conditions for long-term sustained and inclusive growth for the middle class and those working hard to join it.

This is a multi-dimensional task, one that brings together a number of growth-related initiatives going on inside and outside government. It's also a team effort. I'm proud to be working with my cabinet colleagues, including Ministers Freeland, Bains, Sohi, and Mihychuk on delivering this agenda.

We know we don't have all the answers. We're open to innovative new ideas. As we look to a long-term growth strategy, we know we have to find ways to do things differently.

Just a few weeks ago, I hosted the inaugural meeting of the new advisory council on economic growth to advise the government on key elements of our strategy. It was the first step toward figuring out what Canada will need to create and sustain long-term economic growth that benefits the middle class and those working hard to join it.

That's why this council has been tasked with finding solutions to some of our biggest challenges, things like how to transform innovative ideas into high-value goods and services that will help Canadians and Canadian businesses, how to ensure that the historic investments in infrastructure make it easier for Canadians to get to work on time or get their products to market, and what can be done today so Canadians can take advantage of the job opportunities of tomorrow.

I expect that budget 2017 will become the blueprint for this next chapter of Canada's economic growth and another step toward ensuring that when you have an economy that works for the middle class, you have a country that works for everyone. By working together, we can ensure all Canadians continue to enjoy a high and rising standard of living.

Mr. Chairman, it's been a highlight and honour to be able to promote our government's vision. I know we all believe that Canada is a place of opportunities where people can dream of a future in which their children can thrive and succeed. Through our budget, we're making investments that will leave Canada, our middle class, our cities, and our economy better off. We promised real change. We owe it to Canadians to make it happen.

Mr. Chair, I look forward to working with members of this committee, Parliament, and all Canadians as we implement our plan and position Canada for a brighter future.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Minister.

We'll go to five-minute rounds to get more people in.

Go ahead, Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you.

Thank you, Mr. Morneau and your officials for being here today.

One of the budget's highlights is the restoration of intergenerational equity in the Canada pension plan. The age of eligibility for the plan has been restored to 65.

Can you tell us about the impact of this measure? Is the change sustainable? Is the fund in good shape? In general, what will be the impact of restoring the age of eligibility to 65 from 67?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question.

I know that a number of Canadians find it difficult to have enough money for their retirement, especially people in the middle class and people who don't have a pension plan at work.

It's important for us to have a solution for people who will run into difficulties in the future. We know that it's possible. It's not very hard for a country as rich as Canada to have a retirement system that can help the people who need it the most.

That is why we decided it was necessary to change the decision of the previous government, which set the age of eligibility at 67, and to restore the age to 65. We know that we can do so without placing too much strain on the economy.

[Steven MacKinnon, Liberal, Gatineau, QC]

This budget is an equity budget. As you said, the establishment of the Canada child tax benefit is a major step forward for the country's social policy. These days, there are all sorts of families, and unfortunately, there are separations or divorces. We were able to speak with public servants who appeared before this committee to talk about how the government would determine the benefits or would allocate the benefits between parents who are unfortunately going through a separation or divorce.

In general, what have you done to ensure that custodial parents will benefit from this allowance equally?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question.

Let me start by saying the Canada child benefit is intended to help families, and it does exactly that. For nine out of 10 Canadian families with children, it's going to put them in a better situation. For families that are single families with children, it will put them in a better situation.

As a starting point, we're actually providing more money for families. The examples that we often use are, first of all, on average, those nine out of 10 families will have $2,300 more, and a woman earning $30,000 who has one child under six will get $6,400 more. Getting more money, in our estimation, is a very positive thing for families that are struggling to raise their children.

The more direct way to answer your question is that the design of the Canada child benefit is exactly the same as the Canada child tax benefit that it's replacing. There is really no change in this regard. Given that there's no change, we don't believe this is an area of significant discussion. It will not be included in income and will not affect child support payments for divorced parents. We want that to be clear to Canadians who are trying to evaluate their new-found and better situation, because we recognize that this is of importance to them. This will be a benefit that will be significantly better for, as I said, a very large percentage of Canadians, and we're very pleased with this change.

[The Chair, Liberal, Wayne Easter]

There's time for a very small one.

[Steven MacKinnon, Liberal, Gatineau, QC]

Congratulations on making the benefit tax-free at both the federal and provincial levels. It's an additional advantage for Canadian families.

I would like to end by discussing growth, as you did.

You said that the 2016-17 fiscal year would be a time to assess growth opportunities. Can you tell us where, whether in innovation or in another sector, we should focus our efforts to find solutions to help the Canadian economy achieve a new growth rate?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you.

We know that, for Canada's future, our economic growth has not been strong enough in recent decades. In the previous decade, it was the lowest it has ever been. We also know that, given our demographic challenges, it's very important to invest in growth. In our budget, we described phase 1 of our infrastructure program, which will help the economy become more effective and efficient in the future. Going forward, we allocated about $11.5 billion and $14.9 billion to our infrastructure program for 2016-17 and 2017-18. This measure, in addition to the others, will result in a 0.5% increase in economic growth this year and a 1% increase next year. As a start, it's very significant.

You also asked me about the other measures. We decided to allocate $800 million to our innovation program. This amount will be used in the next four years to establish networks and clusters to improve our chances of creating a more vibrant economy.

For infrastructure and innovation, we will have more to say this year about phase 2 of our infrastructure program and additional measures.

I am also currently working with a council on economic growth.

[The Chair, Liberal, Wayne Easter]

I will have to stop you there, Minister.

We are into seven-minute rounds, instead of five.

Ms. Raitt, go ahead.

[Lisa Raitt, Conservative, Milton, ON]

Thank you, Minister.

I am going to start with the child care benefit that my colleague ended on.

Minister, I am a little concerned about what I see as some crosstalk in what you said. You started by telling us that the child care benefit was much better than what we had in the past, much more lucrative and rich, but then you said that the reason you didn't do any extra consultation on the federal child care or child support guidelines was that there wasn't any significance in the increase. Can you tell me which it is? Is it a significant change, or is it not a significant change? If it is a significant change, why did you not consult with the Canadian bar associations or interested groups, either formally or informally?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question. Either I misspoke or you misheard. In fact, what I believe I said was that the benefit is a very significant change for Canadians. It is an enormous change in terms of the outcomes for Canadian families. Nine out of ten families with children will have an average of $2,300 more per year. That is a significant amount for families. Low-income families will be in a significantly better position.

When I was referring to the design of the program, what I was specifically referring to was that the tax situation is not going to be different, so the CCB will not be included in income, which is the same situation as the Canada child tax benefit, so it will not affect child support payments for divorced parents.

That is important. We want to be very clear so that people are not in any way confused, because it is quite important for them to understand that this is a positive thing for them and it will not in any way impact those child support payments. That is positive.

[Lisa Raitt, Conservative, Milton, ON]

I understand, Minister, and you would understand, too, that there are two parts to the relationship: those who receive and those who pay. Those who are paying may have a different point of view as to whether or not it is a fair way to approach this lucrative and increased amount on the child care benefit.

I am going to ask you a few questions, Minister, if I could, about what you said about Canada being back, because I do find it interesting.

You did go to the G7, and you did go to the G20. At those two places, you specifically talked about the importance of stimulus, but I was more taken with what your German counterpart said. He said that high nervousness is apparent in financial markets and is fostered by huge government debt and excess liquidity. He stressed the need to reduce deficits and debt. I am wondering if you have a comment on what other things your German counterpart may have said about your approach.

[Bill Morneau, Liberal, Toronto Centre, ON]

Let me start by saying that I think it's important to be responsible when we sit in the House and we talk to Canadians. I want to again make sure Canadians understand, with respect to the Canada child benefit, that it will not be included in income and will not affect child support payments for divorced parents. The program is better for Canadian families. It helps those families that actually need money to raise their children.

I was proud to represent Canada at the G7, and I can say to you that at the G7 meeting we had an open and frank discussion among the countries there. There was not consensus there, but there was unanimity on the fact that we should all be focusing on growth.

The challenges to growth of the global economy are significant. We've seen a decline in the opportunities in some of the emerging economies around the world. We've seen a greater level of volatility in growth.

We all agreed that in each country's specific situation they should take whatever measures are most appropriate. We identified three different areas that countries might want to focus on: structural reform efforts, monetary policy, and fiscal policy. We recognized that different countries are in different positions from which to take those different measures.

Canada, as it turns out—happily, for our country—is in the best net debt-to-GDP position of all G7 countries, so we are in the best position to make fiscal investments. As you probably know, back in the 1990s our net debt-to-GDP ratio was reduced dramatically under the Chrétien and Martin governments. That puts us in a position where we can make those kinds of investments.

I will tell you that the kinds of investments we're making, which are fiscal investments, are appropriate for us, and I know the members around the G7 table would understand that those are the kinds of things we should be doing with our fiscal position. They are, by the way, similar to what's being done in six out of the seven G7 countries.

[Lisa Raitt, Conservative, Milton, ON]

Minister, President Obama also said, on the fringes of this conference, that the G7 leaders were committed to completing the TPP agreement by the end of the year. I do note in this document that there's no help for dairy farmers should this come to light. Do you have some kind of contingency put aside for this?

[Bill Morneau, Liberal, Toronto Centre, ON]

We—as I know you've heard us say—are committed to free trade. We believe it's important that Canadians have a role in consideration of the trans-Pacific partnership. It's for this reason that we've been out consulting with Canadians on their views. Those discussions are ongoing, and we think they've been very fruitful.

As we move forward in those discussions, we will listen to Canadians. Only at a later stage will we consider whether and how any decisions would be taken in response to that TPP deal. As it's not yet ratified, we do not have any sort of contingency in our budget in that regard.

[Lisa Raitt, Conservative, Milton, ON]

Thank you.

Minister, I noticed in the newspaper this morning that you're going to be convening or attending a meeting with the provincial ministers regarding increases to CPP. You mentioned that there was a country that is looking at stimulus spending. That, of course, is Japan.

Are you concerned about an increase in taxes having the same effect it had in Japan when they did it in April 2014 and, coupled with the deficit spending they undertook at that point in time, it actually drove that country into a recession?

[Bill Morneau, Liberal, Toronto Centre, ON]

Let me step back and say that we believe that enabling Canadians to retire in dignity is important. We recognize that with the decline in the number of, and participation in, defined benefit plans across the country, as well as with the emerging challenge of new companies that don't provide those kinds of plans, many Canadians are not in programs that will allow them to have a retirement that will come up to their expectations.

It's in this regard that we've committed to enhancing the Canada pension plan. We began that work in December. I'm looking forward to working in June, together with the provinces, to see if we can move forward on that.

Also, I want to be very clear here that we are not considering anything that would ever be called “payroll taxes”. What we're considering is putting in place an enhanced Canada pension plan that would allow investments in the future retirement of Canadians. This is something that will improve their situation in the future and help our economy to be more successful. We think it's the right thing to do for the Canadians of tomorrow to make sure they have an appropriate retirement possibility.

[The Chair, Liberal, Wayne Easter]

Thank you, Minister.

Mr. Caron is next.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Good afternoon, Minister. Welcome.

I would like to speak a bit about employment insurance.

As you know, for this bill, the government decided to choose 12 regions that will be eligible for extended employment insurance benefits. According to the definition provided, the unemployment rate in these regions must have risen by 2% over three months without showing significant signs of recovery. I will not list the 12 regions. However, we now know that southern interior British Columbia, southern Saskatchewan, and Edmonton are eligible. According to the data published, Thunder Bay, Yellowknife, Regina, and Prince Edward Island may be eligible shortly.

I have a question.

The bill currently lists 12 regions. Do you plan on adding, one at a time, each region that becomes eligible? Isn't this method, which involves changing the bill as Statistics Canada releases its statistics, relatively ineffective?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question.

As you know, we made a number of changes to the employment insurance system through our budget. We first made improvements for new entrants or re-entrants. We also changed the system by reducing the two-week waiting period to one week. These two changes were made across the country.

As you said, we decided to introduce a temporary measure to improve the situation in parts of the country where the unemployment rate had quickly increased by 2%. Along with the 12 targeted regions, we applied this temporary measure to three other regions. We then decided that these would be our last changes to the employment insurance system. We therefore made changes to the entire system and changes for these 15 regions, which will be our last changes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

So, if these four other regions that I mentioned become eligible under the definition, they will not be included in the five-week extension program. Is that what you are telling me?

[Bill Morneau, Liberal, Toronto Centre, ON]

Yes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Okay.

A professor, Trevor Tombe, said the following, and I will repeat it in English because I have the quote in English in front of me.