Finance Committee on Sept. 28th, 2016

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Thank you very much.

I've got a couple of questions to Mr. Brakel.

I'm going to focus a little bit on productivity versus your proposal to increase investment in skills and education. In the absence of jobs, the unemployment rate is increasing. We seem to have problems picking up the economy because of job creation. As we've seen so far, there is no job creation policy or strategy that you have in place right now. Asking for investment in skills and education has to do with a complete strategy of job creation. How do you see that's going to work together...and also in the lack of productivity, which is a known problem in Canada, probably for the longest time?

[Hendrik Brakel]

I think the challenge is that we'd be looking at how to improve productivity and growth of Canada. As Craig alluded to, it's not just a Canadian problem. The OECD is looking at all the rich countries and saying we're sort of stuck in a low-growth trap. How do we get out of that? They have a specific menu of investments and things that have a high multiplier. We could look at specific education programs and specific infrastructure spending, which does create those higher productivity investments. I think the investments in skills and innovation is the stuff that's going to have the long-term benefits for the Canadian economy. It's a whole lot of things.

[Craig Alexander]

When we look at the labour market, we see an interesting dynamic. We have businesses that say they're not really willing to invest in the current market, and about half of them are saying they're not willing to invest because demand is weak. You can certainly understand that from a micro level. If you're an individual company, you don't have orders coming in, you're not going to invest in a lot of additional capacity, you're not going to expand your labour force.

The lack of demand is a functional challenge. It's very difficult to deal with because, as I tried to emphasize, a lot of the weakness that we have in Canada is actually because we're a small, open economy and the world economy is having a difficult time. However, you then get some interesting observations about some of the things that are taking place. For example, we are seeing more industries that are actually bumping up into capacity constraints. Surely businesses that are running into capacity constraints should be investing more in capital, and also hiring more workers to expand their business, but they're not doing it.

Last week, we had a speech from Bank of Canada Governor Poloz, who emphasized that maybe businesses need to lower the rate of return that they expect on investment in a low-rate environment. I think there's an element of truth to that. However, we shouldn't put the onus just on businesses because there are barriers to investment and growth.

One of the examples that I tried to highlight was the fact that we have about a quarter of employers that are actually saying they can't find the skilled workers they need. There are two ways of addressing that. In the short run, you can bring in foreign talent in order to fill those roles to allow the growth. At the end of the day, though, what you really want from a long-term perspective is you want the education system and the skills system to actually create workers with the skills that the businesses need. I think the productivity story is all connected to this because your economy is not going to be productive if businesses aren't investing, and your economy is not going to be productive if businesses can't find the workers with the skills they need.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

I think bringing investment on board into the country.... I mean, you can't ask business to lower their expectation of profit, because if they lose money, they can lose big, and that's a risky road for them to take.

What can the government do? Instead of investing its own money and having the private sector do so, what can we do?

I guess lowering the tax on business is one of the solutions in that case.

[Craig Alexander]

I think Canada has very competitive business tax rates. I think there are other barriers, though, to investment and growth. The regulatory environment is a good example.

I'm going to give a provincial example. One of the things I was a little surprised by was to find that Ontario has twice as many regulations as B.C. I actually think B.C. is a well-regulated economy, so why does Ontario need twice as many regulations?

To me, this illustrates an impediment to growth.

[The Chair, Liberal, Wayne Easter]

I'll cut it there.

Mr. Sorbara, you have five minutes.

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

Okay, let's use it efficiently.

We'll go to the chamber of commerce first.

On productivity in Canada, we know where we're at. Job growth has not been strong. We need to get this inertia out of our system and get us going again.

On the innovation side—and innovation is a cliché word—would you recommend just two policies or programs that you think with innovation we could hit a double, a triple, or even a home run?

[Hendrik Brakel]

Canada is very good at research and development. We have incredible universities. We're really good at R and D. Our challenge is that we don't commercialize enough products, so it's to have those incentives to have big businesses creating products here in Canada. That's why we recommend the innovation box. If you build or create a product here in Canada—some sort of patent—the taxes on the revenues coming from that patent would be taxed at a much lower rate.

The other thing we think about are incentives in venture capital, in order to create that group of investors who reward new companies and start-ups. We think the investment tax credit in B.C. would be really helpful. We also think maybe an exemption on certain capital gains, like the exempt capital gains on TFSAs.... Why not exempt the capital gains if you're investing in a high-risk start-up?

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

This is to the Canadian Home Builders' Association.

I live in an oasis. I'm from York region. It's busy. The builders are very busy there. The problem is that there are not enough tradespeople. This is like that catch-22 situation. We don't have enough tradespeople, but we have people who aren't working. Even with the folks in Alberta who unfortunately have lost their jobs, the folks who are returning to Ontario aren't even sufficient. You're not just going to move from Alberta to Ontario and resettle, because there's a little discrepancy there. It's very expensive to move into York region and some places in Toronto.

I've been pushing in terms of how we get more people, more young people into the trades. The term I once heard was “parity of esteem”, if I can use that.

Are there any pilot projects that we can advocate for or latch on to? I think in the next 10 years, maybe even less.... I have great relationships with both the builders and the unions, and I hear it from both sides, that in the next years we're going to lose a wealth of experience. It's like losing that senior management but you have no middle managers coming up the ranks who are learning. We need to do something about it.

I know this is provincial-federal combined, but there has to be something we can do.

Could you spend 20 seconds on that?

[Kevin Lee]

You're absolutely right.

We're going to lose 118,000 workers over the next decade in residential construction. Some of them are in apprenticeable trades and some of them are not. A lot of them are just skilled workers, and that's common in every industry. What we need to do is encourage people to get into skilled work and skilled trades.

We're doing work with Colleges and Institutes Canada. There is a role for the federal government to promote that kind of thing and guide people, and not as a second choice. You don't go to college to study a trade and get into skilled work because you couldn't get into university; you go there because it's just as good as going to university.

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

The remuneration for a welder or carpenter foreman is actually a lot better than a lot of the other occupations that people may think about.

Mr. Blakely, I will continue to advocate for that mobility.

[Robert Blakely]

Thank you very much.

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

I think it's something worthy we need to look at.

[Robert Blakely]

The thing you said about parity of esteem—I have four university degrees and three journeyman's tickets. The journeyman's tickets mean I can do something. The others are nice to have.

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

My father was a sheet-metal worker and a carpenter, and he's retired now, so I understand where you're coming from.

Mr. Alexander, I do disagree with you in terms of the fiscal anchor being debt to GDP. As an economist and someone who has worked in finance for 25 years I look at debt to GDP as a ratio for financial flexibility across the board, whether it's G7, G20, or whatever measure.

I agree with your comment on labour productivity being weak. I would love to hear your comment on the investment climate and how we can make sure that's going in the right trajectory. I think it is, but it always can be better.

[The Chair, Liberal, Wayne Easter]

If you can sum that up in about 30 seconds, that would be great.

[Craig Alexander]

I strongly believe that a road map as to how the federal government is going to balance the books would be helpful from a business confidence point of view. I think there are concerns on the part of businesses when governments are running deficits. They aren't concerned about the fact a government runs deficits, if it's financially sound. They worry about the potential that down the road it could ultimately lead to higher taxes.

I still would argue that one way of improving business confidence is to lay out a road map, as to how to balance over a sensible length of time.

On the debt to GDP, very quickly, I think it tells you about fiscal capacity. As I said, in the current environment I support targeted fiscal stimulus. I just think the debt-to-GDP ratio is a poor fiscal anchor. It's the language and the focus that's used. That's why I think it's really important to lay out a plan and a trajectory that will get us back to balance over the medium term.

[The Chair, Liberal, Wayne Easter]

Thank you very much. My apologies for tightening it up a little.

I think we had a lot of information put on the table. Thank you for your submissions that you sent in as well. They are being read and analysis is being done on them.

Thank you very much for coming. We'll suspend for a few minutes, and the next group can come forward.

[The Chair, Liberal, Wayne Easter]

We'll reconvene. As folks know, we're doing the pre-budget consultations in advance of the 2017 budget.

Thank you for coming a little early, there will be one more to come, I believe. We are tightening up the afternoon schedule a fair bit because there are votes in the House at about six o'clock. Rather than have you wait for us to come back for questions, we're trying to fit everybody in, go to little shorter, more concise questions, and get everything we can on the record that way. If you could hold your remarks to five minutes that would be helpful.

My apologies, I have to leave at about 5:15 as well for a debate in the House.

We'll start with Polytechnics Canada, Ms. Robinson. Welcome.

[Nobina Robinson, Chief Executive Officer, Polytechnics Canada]

Thank you.

Low economic growth does not have to be Canada's fate despite the rapid changes around us, but low growth is our destiny unless we change with the times.

Technology has changed the global economy, our demographics; our workforce has changed; yet our policies for data, talent, and innovation largely remain the same. We need data that can tell us not where we were five years ago, but where we are now and where we are going tomorrow.

We need fewer programs for Canadians to get a general education when they want a specific job, and more programs that give the specific knowledge and know-how they need to get the jobs they seek. We need an innovation strategy that doesn't tell firms that they need to work to commercialize more ideas, but listens to the ideas on how commercialization actually works. It's time to do things differently.

A polytechnic institution does do things differently. It combines the practical, hands-on approach of a college education with the in-depth study usually associated with university programs. Our graduates have seamless transitions from education to employment fostered by experiential learning opportunities. Polytechnic-applied research is driven by solving industry-identified problems with industry-friendly IP policies.

My association represents leading, research-intensive, publicly funded polytechnics, colleges, and institutes of technology. So we offer our thanks, Mr. Chairman and committee members, for having us here.

While our written submission and recommendations in front of you are specific, I will now speak to the higher order challenges they address: our call for action on data, talent, and innovation. Let's start with data.

Economics 101 tells us that successful markets need good information; however, we are failing to successfully produce the necessary data to match people to skills, to jobs. We see stalled start-ups that think they have to look abroad for expensive talent, and cohorts of young people trained in Canada's best institutions working jobs far below their skill sets. In short, poor information results in poor public policy and in market failures.

To solve this problem, we need to better leverage and share existing data about the labour market and invest in gathering data to fill the glaring gaps all Canadians face when forecasting the jobs and the job market of the future.

Canada urgently needs an inclusive talent strategy that moves past elitist and hierarchal notions of what education and training should be. The best and brightest must now apply to all types of graduates in all professions and locations.

Much of our innovation gap is an education gap. The lack of alignment between the employer demand for skills and the supply of graduates in the labour market is a long-standing challenge. Today it takes longer for young people to launch careers or existing workers to launch second careers, even while firms struggle to find the talent to compete and innovate. Our submission recommends several measures to begin to fix our talent ecosystem.

Finally, innovation is a topic that is getting much attention today, as it almost always has when discussing Canada's productivity and aspirations for growth. Yet we continue to erroneously conflate innovation with breakthrough science, and thus we have failed to develop distinct strategies for either. This is the recipe for underperformance. We have invested heavily, but failed to get the desired results for business, for research, or workers.

Canada's innovation performance is subpar because we lack policies and programs that respond to industry demand for innovation. Instead we push ideas, graduates, and programs on industry that aren't aligned to their needs and won't help them grow.

In particular, many small and mid-sized firms want to innovate, but lack the supports they need. Others require time-sensitive solutions to their innovative ideas. Polytechnics excel at providing these kinds of supports, yet they receive only 1.7% of total federal support for higher education R and D.

It's time to ramp up the supports to business by utilizing the innovation capacity of polytechnics and colleges.

A polytechnic education builds a resilient and resourceful workforce, to quote the Prime Minister. Our recommendations go against long-held Canadian orthodoxy but different approaches to data, talent and innovation are needed to avoid a destiny of low growth.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Robinson.

We're now turning to the Canadian Urban Transit Association, Mr. Leclerc.

[Patrick Leclerc, President and Chief Executive Officer, Canadian Urban Transit Association]

Mr. Chair and members of the committee, thank you for the invitation to appear before the House of Commons Standing Committee on Finance.

My name is Patrick Leclerc, and I'm the president and chief executive officer of the Canadian Urban Transit Association, or CUTA.

The Canadian Urban Transit Association, CUTA, is a collective and influential voice of public transit and integrated urban mobility in Canada. Our members include transit systems, manufacturers and suppliers, and government agencies from coast to coast. CUTA members represent over 95% of total transit ridership across the country. The Canadian transit industry is a $14-billion industry that employs about 75,000 people.

I'd like to recognize and thank the Government of Canada for the increased role it has played in public transit over the last 15 years. The investment generated a number of spinoff benefits such as greater access to high-quality jobs, social inclusion, a cleaner environment, and healthier and more sustainable communities.

It's through long-term and dedicated investment that local governments can build dynamic and vibrant communities. The recent public transit infrastructure fund, worth $20 billion over the next 10 years, as well as the permanent $1-billion transit fund announced in budget 2015, are exactly the kinds of funding that we need to face the challenges of urban growth and an aging population.

In order to leverage this unique opportunity to build sustainable communities for the next generation, CUTA recommends that the government convene an expert advisory panel to help establish program parameters of these new funds. This panel would work hand in hand with the government to find the right balance between flexibility and industry best practices, in order to ensure greater transparency and accountability in the way these funds are invested.

One of the key concepts that should be at the heart of the new transit infrastructure program is transit-oriented development. By building transit-oriented communities, active transportation and public transit play a greater role in connecting people, including the most vulnerable ones, to employment opportunities, educational institutions, and health care facilities.

The economic case for investing in transit has been demonstrated time and time again. For instance, in a study conducted by the University of Toronto, Steven Farber found that people living outside of the downtown core of Toronto can access only 5% to 10% of the jobs to which car owners have access and fewer than 5% outside the city of Toronto. According to Farber, the key to closing the gap in accessibility to jobs is in beefing up public transportation.

In addition to providing greater access to good quality jobs, public transit helps the middle class save money that can then be reinvested in other areas of the economy.

Transportation is the second-largest expense of Canadian households. While transit alone may not be a suitable option for many Canadians, it offers the opportunity to millions of Canadian families to own only one car instead of two, which helps them save about $10,000 annually.

Another economic benefit of investing in public transit is to reduce traffic congestion and increase productivity. It's estimated that traffic congestion costs the country over $10 billion annually in lost productivity. This is why the government should include measures as part of its transit infrastructure program, in collaboration with provinces and municipalities, that will favour a modal shift from single-occupancy vehicles to active transportation, public transit, car sharing, and car pooling. Effective measures that have been implemented in other countries include fiscal incentives and programs for employees to use transit for their commute to work, as well as mobility pricing.

On this last point, we believe that the time is right to initiate a serious and evidence-based discussion with all stakeholders on that overall approach to mobility pricing.

Public transit also helps the Canadian manufacturing sector advance. Investments in research and development in the public transit industry are essential to maintain our competitive advantage.

Despite a difficult economic environment, our members have maintained high levels of investments in research, development and innovation. They have increased their North American market share and created industrial clusters in Quebec, Ontario, Manitoba and British Columbia.

The CUTA is encouraging the government to support the development of advanced technology in the public transit industry through an innovation budget aimed at collaborative research, development and demonstration projects.

Together we have the opportunity to make Canada a world leader in transit research and innovation.

Thank you again for this opportunity. I look forward to answering your questions.

[The Vice-Chair, Conservative, Ron Liepert]

Thank you.

Ms. Blackstock.

[Dr. Cindy Blackstock, Executive Director, First Nations Child and Family Caring Society of Canada]

Good afternoon, members. It's an honour to be here on the unceded territory of the Algonquin Nation and in the presence of the national chief and the other delegates at the table.

In 2007 I stood with the Assembly of First Nations and we had to file a human rights complaint against the federal government to get them to treat little children on reserves equally because the federal government was so substantially and so consciously underfunding these services with dire results, resulting in another generation of first nations children being unnecessarily separated from their families. It was a repetition of the dark chapter of residential schools.

I would have never anticipated that the federal government would have fought that case so vigorously for nine years. They fought it when its own documents showed that it was providing significantly less to first nations children than all other children in the country received, despite its documents showing the perils of the deprivation of breathing equipment to four-year-old kids because they were from first nations.

On January 26 of this year the Canadian Human Rights Tribunal issued a landmark decision, the only decision we know about in the western industrialized world, that found a federal government racially discriminating against 163,000 first nations children. The tribunal ordered it to stop. Like many of you around the table when the ministers of justice and indigenous affairs welcomed the decision, I breathed a sigh of relief. Here we are now, in September, and the tribunal held jurisdiction over the federal government, concerned as it was about the repeated pattern of the federal government not acting on recommendations that were clearly before it to reform.

In April, unsatisfied with the federal government's progress in implementing the decision to stop this racial discrimination against children, the Canadian Human Rights Tribunal issued a further compliance order against the federal government and ordered it to implement something called Jordan's principle immediately, so that first nations children can access government services on the same terms. The timing of April is important because that means that the tribunal had at its disposal budget 2016. You will remember, members, that I was here at that time, and I said that it fell sufficiently short of what was needed.

Once more, I hoped the federal government would move with dispatch to ensure that they followed the law and they remediated racial discrimination against children. That failed to happen, and on September 16 a second compliance order was issued by the Canadian Human Rights Tribunal for the federal government's failure to remediate the discrimination. I think we can all agree around this table that it's unconscionable that a nation such as ours that promotes human rights and that values human decency would racially discriminate against children. It's also illegal that the government has failed to comply with three legal orders. What I'm suggesting to you is not discretionary funding. It is something that the government is under court order to do. The burden is with the federal government to prove that the racial discrimination has stopped. It's not enough to make an announcement. You have to prove that it has remediated the discrimination at the level of children.

I have two quick points here. I've included a substantial brief citing the decisions and the relevant sections of those decisions, and on the final page of the brief the action needed. To put it briefly, the Canadian government needs to follow the law. It needs to stop racially discriminating against children. It needs to release—in our estimation for this year alone—the shortfall of $155 million. It also needs to deliver training to senior staff and to members of Parliament on the Truth and Reconciliation Commission, and on these tribunal decisions, so people are in a position to act differently in the spirit of the Prime Minister's commitments toward the calls to action. Remember, this is the number one call to action for the Truth and Reconciliation Commission.

The other is that the Government of Canada must fully comply with this definition of Jordan's principle. Currently the federal government is using a definition of Jordan's principle by limiting equitable access for children's services only to children with disabilities and critical short-term illnesses. Who in Canada would be willing to have their child only treated equitably if they were so disadvantaged that they had a critical illness and a disability? It makes no sense.

The other piece is the compliance with the release of the data. The tribunal has found it so difficult to get the data to support the federal government's contention that it has taken adequate action. It has actually had to order the federal government to provide that data. The first deadline is this Friday; the second one, October 31.

In summary, I think we're better than this as a country. We are better than leaving children behind. At this committee your task is to balance the priorities, but if you choose not to treat children equally, then I want you to consider heartily, what are the children losing to? What's more important than them?

Thank you very much.

[The Vice-Chair, Conservative, Ron Liepert]

Thank you.

Mr. Roberts.