Finance Committee on Oct. 20th, 2016

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Roy.

Turning to questions, we're going with six-minute rounds. We went a little over in the earlier segment.

Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for their fine comments. We've heard a wide range of recommendations this morning, and I think they paint a good portrait of the realities in Quebec.

I'd like to start with the representatives of the Conseil québécois des entreprises adaptées. As I see it, the measure of a country is the opportunities it provides to those who need them most. I want to commend you for your efforts to that end. I believe we should follow Quebec's model, and I will certainly recommend that to my colleagues.

You said the funding under the Canada-Quebec agreement had not increased since 2004. Paul Martin was the finance minister back then. He raised the funding for persons with disabilities even during the years of deficit-cutting. I see that, in your brief, it says that Quebec increased its contribution under the agreement.

Can you repeat or explain to the committee to what extent and in what way these investments deliver a return? I'd also like to know what form that return on investment takes, be it money in government coffers or the impact on pension plans. To what extent can this type of investment benefit society?

[Raymond Gouin]

I hope I understand your question, Mr. MacKinnon.

When I was speaking earlier, I said that we see the adapted enterprise subsidy program as self-funding.

In fact, the study done by the economist Pierre Fortin and a few of his colleagues showed that, if the vast majority of persons with disabilities employed in our adapted enterprises were not working there, those individuals would most likely be recipients of social assistance for life.

What we have seen in Quebec—and I imagine the same is more or less true in the rest of the country—is that, even when youth with disabilities complete specialized training designed to support access to the workplace, they still have tremendous difficulty transitioning from the educational realm to the workplace.

They often wind up feeling marginalized and singled out. It's a very difficult time in their lives. What we've observed is that the vast majority of those young people with disabilities, or at least a good many of them—and, unfortunately, I don't have those numbers—end up living on social assistance even when they received training and education. It stems from the difficulty they have accessing the labour market. Just to clarify, I am referring to persons with disabilities considered to have severe functional limitations that prevent them from integrating into the labour market. It's important to understand what we are talking about, after all.

Obviously, a large number of persons with disabilities are able to access the regular job market given that their limitations are not too severe. The people we hire have severe employment limitations and, therefore, have a very hard time finding employment in so-called regular businesses. In some cases, they have no such opportunity. These individuals would otherwise be receiving social assistance benefits for life.

By hiring these people to work in our adapted enterprises, we put them on a path of social inclusion. They become consumers, taxpayers, and more active members of society because they find new communities in the companies they are placed in. They participate in society in a much more normal way, fulfilling meaningful roles that allow them to thrive and become fully contributing members.

As a result, a number of things happen. The government spends less on social assistance benefits and takes in more tax revenue, given that these workers have larger incomes, generate sales taxes, and contribute to the commercial activities of the adapted enterprises overall. Consequently, when you compare the amount the government is spending with the spinoff for society, it is clear that the program funds itself.

It has other equally important benefits, as well. They are harder to quantify, but include reduced health care costs and a lower demand for health care services, supportive care and attention, and follow up associated with this group of individuals. They find what they need in these adapted enterprises, in terms of support, training, and so forth.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you for the incredible work you do, including here at home, through Re-Source Intégration. It's just wonderful what's being done.

I'd like to come back to the issue of infrastructure, a frequent topic of discussion. Obviously, I would like to hear from Mr. Dorval or Mr. Brun on this subject, but I do have questions for all of you.

We are hearing a lot about the Canadian infrastructure bank, greater involvement in pension plans and retirement funds, the Canada Pension Plan Investment Board, and participation in new projects, such as Montreal's public transit plan, and even existing infrastructure such as airports.

Where do you stand on that, in terms of greater involvement by pension plans or the private sector overall?

[Yves-Thomas Dorval]

Thank you, Mr. Chair.

First of all, Canada's infrastructure is not mature; it is aging. The work that was done more than 30 years ago has to be done over again, including sanitation infrastructure, water mains, sewers, drinking water, and so forth.

There is also the infrastructure for moving people, as well as transporting merchandise and logistics, which are very important for economic growth.

Massive investments are clearly needed. This is timely because investing in infrastructure creates economic activity. It benefits suppliers, workers, and so forth. So it will stimulate economic growth. The Governor of the Bank of Canada said once again yesterday that Canada's projected economic growth is weaker than expected.

The benefit of investments in infrastructure, if they are strategic and well-considered, is that they stimulate all economic activity.

Another benefit is that the investment backs something valuable, an asset. This is not bad debt; it has benefits.

To achieve this, the government wants to introduce programs. In the current context, major investments are needed for certain projects. We also note that retirement funds, whether the Caisse de dépôt et placement du Québec, the Ontario teachers' pension plan or federal public servants' employee pension plan, are also facing investment problems. Stock market returns are not what they used to be and, above all, bond yields and interest rates are quite low.

Infrastructure is also an investment vehicle and a good match for the various pension funds in question. So it is attractive for them to pursue this.

In Quebec, we saw that the caisse de dépôt was not allowed to do this. A special law had to be enacted to enable the caisse de dépôt to do this. It has to be done a certain way. It is not a question of the government guiding the investment; rather, the investment has to appeal to the private sector.

There is something interesting about the caisse de dépôt law. When an investment is made, there also has to be a private partner. As a result, it does not become a government order, but rather it has to be part of a profitable investment. In this sense, it is interesting that the private sector is joining forces with the public sector. If the private sector is not ready to invest, it could be because it is not a good investment, and vice versa.

A critical mass is needed for such increasingly large-scale projects. This applies to moving people, but in other sectors as well.

A report was tabled, or will be—in any case, there were leaks to the press—, the report of the consultative committee chaired by Mr. Barton. In any case, there is clearly some interest. How can we attract...

Why should the private and public sectors work together? We are not talking about a public-private partnership given the ownership of the infrastructure. The issue instead is the draw for investors and matching them with an institutional investor, in a relationship more similar to that of the market because, if there is no private interest, perhaps the return on investment is not good enough.

These aspects are extremely important. That is why we support this kind of initiative. In the case of the Réseau électrique métropolitain de Montréal, the organization responsible for Metropolitan Montreal's power grid, we see that the federal government needs to play a role, but not just the federal government. It is also important for other projects that could provide a boost, such as a faster rail link in a corridor in central Canada, which that we strongly support.

[The Chair, Liberal, Wayne Easter]

We'll have to cut it there, Mr. Dorval. We're substantially over.

Mr. Godin.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chair.

I would like to thank all the participants for laying out their game plans, so to speak.

My first question is for the representatives of the Conseil québécois des entreprises adaptées. Mr. Gouin and Ms. Brisson, I have just learned that we live in the same neighbourhood. I am very pleased to meet you for the first time, here at the Concorde.

In my opinion, with regard to your mission, I think the term “self-funding” does not do you justice because what you do is much more productive than that since it helps our community. I commend you on your mandate and encourage you to pursue it.

In order to properly assist you, could you tell me exactly what the council needs in terms of money to continue?

I will tell you my second question right away. How many companies are waiting? When requests are made, there has to be a problem, yet I do not see a problem in your operation. I would like more specific information.

[Raymond Gouin]

As to the amount of money, I would say the sky is the limit. In Quebec right now, there are just 130,000 people who are considered to have severe barriers to employment and who receive social assistance. We believe that a good many of those 130,000 people are unable to work for various reasons. For our part, I think we could help at least 5%, 6% or 7% of these people re-enter the labour market if we had the necessary resources and could create adapted jobs for them. That could take a considerable amount of money.

We have a specific project, which we outlined in our brief. It would create at least 1,200 new jobs over the next five years. That is regular growth. We would like the number of available or subsidized jobs in the provincial program to increase by 5% per year. Our brief includes some figures. It represents an additional $3.4 million in the first year, and it would be more in the following years, of course.

Your second question pertains to the number of companies that need assistance. We conducted a survey of our 42 members in early 2016. We asked them how many positions they would need to help them consolidate their current activities and whether they intended to develop plans to create adapted jobs in other sectors, in other regions or near their current regions.

The results showed that, over the next three years, 1,000 new positions could easily be created by the existing adapted companies. For our part, we think the existing adapted companies can generate thousands of new jobs. It is not necessary to create new adapted companies. The existing ones are ready to transfer their current staff, to set up in other regions, and to develop other places of business in order to make jobs available for persons with disabilities in those sectors.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you very much. As I have already said, your work is commendable and I encourage you to continue. Rest assured that your MP in your riding can represent you well.

[Raymond Gouin]

Yes.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

My next question is for Mr. Brun, from the Mouvement Desjardins.

You said in your presentation that household debt is a major concern.

A measure has been implemented just recently by the current government, specifically by the Minister of Finance. This measure is a way to control urban markets, such as in Toronto and Vancouver.

I would like to know what impact this measure could have on specific regions, in your opinion. This measure reduces buyers' ability to purchase their first house. It was implemented just a few days ago, so it is brand new. We know it will have impacts. I would like to hear your opinion on that.

[Bernard Brun]

Thank you for the question.

Yes, the measures are very recent and they include a number of components. One of them is intended to close a tax loophole. That was primarily directed at foreign investors. It has been well received on the whole, because it had become clear that certain investors had an undue tax advantage. It heated up the market unnecessarily, as you said, and also exacerbates the whole problem of access to housing.

Other measures have been announced, such as a test to determine how much pressure buyers can withstand. This means evaluating their ability to pay a higher interest rate over five years.

As a result, we are seeing a slight cooling of the real estate market. There is a contradiction of sorts, though, since this measure also limits buyers' access.

There is quite a contradiction right now. Interest rates are so low that, unfortunately, good citizens, who are careful and save money, are penalized. For example, people who did not buy a property quickly enough, when interest rates were kept low, who thought they would eventually increase, have seen property values increase much more than any additional amount they could have saved for a down payment.

That is why the government is now addressing housing affordability. That is also why I said, on behalf of the Mouvement Desjardins, that I urge the government to be extremely careful with tightening measures. The tax loophole is an excellent measure. Protecting people against themselves by applying a test for a potential hike in interest rates is extremely important. Before any further measures are taken, however, I think the impact of the current measures must be assessed, over a few months or a certain period of time. The impact of the measures taken must be assessed, and then any further action must be in small increments. Otherwise, the aftermath, the potential drop in property values or in economic activity, could outweigh the benefits of additional measures.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Godin and Mr. Brun.

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I could have asked Mr. Gouin and Ms. Brisson my first question, regarding investments with a much higher rate of return.

I will ask Ms. Ravon and Ms. Roy the question now. I want to try to convince the committee members that these investments will be good for our society.

With regard to a national day care program, do you have any figures for the committee as to the return on each dollar invested? In my opinion, every dollar invested in a day care program would give the government more than a dollar in return, owing to a higher labour force participation rate, especially among women. Do you have any figures on that?

[Lauren Ravon]

Yes, absolutely. Some very interesting studies have been conducted in Quebec and we mention them in the report. I could give it to you at the end of the meeting.

We see an effect not only in terms of greater access to employment for women, reduced poverty rates, higher incomes, but also an increase in GDP. For Quebec, the studies were conducted in 2008 and 2011. They conclude that the costs of the provincial day care program are much lower than the additional revenue generated for Quebec's economy. Studies of this kind, conducted in Scandinavian countries, conclude the same thing. In general, not only do the programs pay for themselves, but they also create economic growth.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I hope that information is helpful to the committee.

Moreover, do you have figures that would allow the committee to gauge the return on investment of job-readiness training, which helps people access the labour market?

[Valérie Roy]

Thank you for the question.

We have been trying for years to gauge the return on investment in practical terms. The most recent studies we conducted, with other job-readiness groups in Quebec, have shown that every dollar invested has a return of approximately $2.80. The return on investment is considerable. As Ms. Ravon said, it not only pays for itself, but it also creates economic growth.

I would note quickly that it is often very difficult to demonstrate the return on investment of programs, such as in my sector of job-readiness. We are dealing with quantitative data, reports that organizations have to provide to government. So the provincial or federal government has some quantitative data. There is, however, a tremendous amount of qualitative data that also has to be considered in order to better gauge the return on investment and the benefit to society of helping people, who at first glance face barriers to employment, enter and stay in the labour market.

This is a challenge for many of our colleagues in other socioeconomic sectors. I think we must take the time to get a clear picture of the return on investment and then offer more targeted programs and services accordingly.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

Those are three very practical proposals that will enable the committee to consider the issue at greater length and, we hope, recommend that the government invest in this.

That said, I am very impressed by the mission of companies in the social economy and cooperatives. I am very much in support of that. Could the federal government do more to encourage the creation of companies in the social economy and cooperatives?

I think that, if an entrepreneur has an idea to launch a company, to become incorporated, their first reflex is not necessarily to create a cooperative or a company in the social economy in their sphere of activity. It is no doubt more complex and difficult to do. How could the government facilitate the creation of that kind of company so there are more of them instead of just companies, as we often heard this week, whose sole objective is to make money to give their shareholders at the end of the year?

[Michael Toye]

Thank you for the question.

I think the reflex for alternatives, especially among young entrepreneurs looking for collective enterprises, social entrepreneurship, is really taking off in universities and colleges. People are looking for alternatives, whether it's B corps, co-ops, or social enterprises.

What we found in our analysis of the existing programs, and was the reason for our recommendation related to opening up small and medium enterprise programs offered by the federal government, was that only about 10% have actual regulatory or legislative barriers to serving social enterprises, non-profits, or co-operatives, but the major problem is demystification, right?

Among the public in general but especially the employees, the public servants working in those programs, there's a reluctance to be serving in non-profit because it's a different structure, a different approach, and they're not sure they're eligible.

We're recommending there, in fact, be an effort of education, an awareness-raising. The fact is that collective enterprises have double the five- and 10-year survival rate of traditional SME start-ups. There's an extremely viable business structure that has, in addition, tremendous social and economic benefits for local communities.

Another very positive step forward was the inclusion of social innovation and social enterprise in Innovation, Science and Economic Development Canada's new innovation strategy, at least in the consultations so far.

We have great hopes that this is a new step forward in terms of opening up what used to be Industry Canada's programs and interest, support for a co-op movement and others, and I think there's a lot of potential.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

In my remaining time—

[The Chair, Liberal, Wayne Easter]

We'll have to end it there.

Mr. Sorbara.

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

Good morning, Chair, and good morning, everyone. It's great to be here.

I'm going to give a minute or so of my time over to Mr. MacKinnon. We have five minutes, right?

[The Chair, Liberal, Wayne Easter]

We'll have time for a couple of extra questions at the end, so we'll give Mr. MacKinnon and someone on this side a chance later.

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

Thank you.

To the Desjardins Group, good morning gentlemen.

Having covered Desjardins Group in a case for many years on the bond desk, I'm familiar with your structure, the shareholders' equity, and the whole bit with regard to Desjardins.

I want to get your view on the housing market. Many people in Canada comment on the debt ratio, debt to disposable income, but the same commentators, or many of them, don't comment on the net worth of Canadians, even if you take out the real estate assets and you just look at the net worth of financial assets. It's kind of double accounting, two sides of the balance sheet. Really there are three, but two sides for now.

I want to get your view on that, in terms of the fact we are spending a lot of time looking at this one ratio, but we're not spending a lot of time looking at a few other ratios to determine the strength of the Canadian consumer or the Canadian household.

I'd like to hear your view of the changes that were made, and what impact they may have on Quebec, specifically rural Quebec, the area outside of greater Montreal and greater Quebec City.

[Bernard Brun]

Thank you for the question.

First, I must say that your first comment regarding debt ratios is very relevant. We know that household debt has increased substantially in recent years. The ratio currently sits at about 170%. We must certainly bear in mind the value of assets as compared to debt level. The value of these assets has increased, however, which reassures our groups of economists overall. That is also reflected in our economic studies.

The issue is instead the risk of loss of value. If the assets acquired drop in value, this could cause some vulnerability. Right now, we consider the ratio to be acceptable.

With regard to the measures that have been announced and implemented, I would say that there are in fact practical impacts on the real estate market, specifically on the Quebec market, which affects the Mouvement Desjardins. Since these measures were just announced on October 3, we cannot yet provide details or know exactly what the impact will be. I would say, however, that there will be a substantial impact, that is, a substantial decrease in mortgages. To your colleague's point, this could further limit access to ownership. The government will no doubt have to take measures to offset this in order to make it easier for people to purchase a home.