Finance Committee on Oct. 21st, 2016

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

Thank you.

Now, on the green investment bank, I think it's a fantastic idea and I am very happy to hear that today. Just to be clear, the number you suggested was an investment of $2 billion by the government, which would attract $10 billion from the private sector for the capital that this bank would need to start.

[Lorraine Becker]

That's right. The low-carbon economy fund was already included in budget 2016 for deployment in budget 2017; $2 billion was allocated over four years.

We recommend, instead of spending that money on grants and subsidies, investing that money to create assets on the government's balance sheet by using the money to capitalize a green bank, which would attract private dollars at probably one to four. That would create $10 billion of investment in the clean growth economy.

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

So that we are clear and so that the committee knows, help us know how to make that recommendation. When would the return on that investment be seen by the government?

[Lorraine Becker]

At the end of the first reporting year after funds are deployed there will be a return on the initial investment. Normally it's a five- to seven-year investment cycle, at the end of which investments can be divested and the money reinvested. You thus have a cumulus of leverage of up to 23 times over three cycles.

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

That's fantastic. Let me ask the financial executives, where can we find the recommendation to simplify the tax rules?

[Michael Conway]

We would be very pleased to send you it. We presented some information to several previous FINA panels.

There are various things. At a previous panel I had a little bit of fun, because I came with a document that was about 15 pages long and was called the “temporary act to finance the First World War”. Then I pulled out a document, a book by CCH, that is about 3,800 pages long. It's our current tax act. It has been many, many governments since there has a been a comprehensive review of the Income Tax Act.

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

I agree that we should do that.

[Michael Conway]

We have lots of recommendations, including consolidated tax returns. We're one of the only countries in the world that doesn't do consolidated tax returns.

The interesting thing about that is that large firms effectively do it through employing consultants because they can afford it, and smaller businesses can't afford to do all the machinations that are required to effectively have consolidated tax returns, so they're disadvantaged.

There are many things. I would be very pleased to send the information on to the committee.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

I have to cut you there. You're considerably over time, Pierre.

Mr. MacKinnon will be quite happy to hear that you're asking for an overall review of the Income Tax Act. He talks about it pretty nearly every day.

Before I go to Mr. Sorbara, for the green infrastructure bank you're talking of capital, to begin with, of really $10 billion. How would that work? I think we all understand ordinary banks. How would this work in practice? Does somebody go in with a green plan to get a loan?

Could you expand on that a little bit?

[Lorraine Becker]

Green banks are not banks that take deposits from individuals. They operate like investment banks, and so they syndicate deals with large investors.

A green investment bank for Canada would operate at the wholesale level. Green banks can be retail level or wholesale level. A green bank for Canada would operate at the wholesale level, syndicating deals with large institutional investors and large-project developers.

As an example, the UK Green Investment Bank markets the offshore wind sector, and our own Enbridge, a company from Calgary, has invested in partnership with the UK Green Investment Bank in the offshore sector in a total deal worth $2 billion, of which Enbridge invested $750 million.

[The Chair, Liberal, Wayne Easter]

Thank you.

Francesco, the floor is yours.

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

Thank you, Mr. Chair.

Thank you, everyone, for your presentations.

I want to start off with the Canadian Stem Cell Foundation with a quick question, if you can provide some colour concerning your comment about our research prowess and—I don't want to say the word failure—the inability to have that research prowess translated into the commercialization of those activities.

I know the ask; my understanding is it's $50 million, for a total of $500 million in federal funds over 10 years. Stepping back from the ask, what's the greatest barrier preventing this research prowess from being turned into commercialization of products and services?

[James Price]

First of all, I don't want to suggest that we haven't had commercial success. Allen Eaves leads a company called STEMCELL Technologies that 20 years ago came out of research in his lab at the BC Cancer Agency. Over the last 20 years it has been growing to the point where it's approaching $200 million in revenue. It employs 800 people and exports its product, and 95% of its sales come from outside of Canada. So we do have some successes. The point we're making is that we're really at a threshold, and other jurisdictions have realized that, where oftentimes the science was a lot of hope, but in the last decade we've seen more and more therapies move into clinical trials. We've seen countries and jurisdictions rally around trying to attract more clinical trials to their jurisdictions.

I think one of the biggest barriers we've had in Canada has been that we have started almost always with academic research first. We've developed a really strong capability. By any academic measure, Canada is one of the top two or three countries in the world. What we're asking in our initiative is that we need to re-engage the private sector, whether it be private equity, or the industrial sector, or working with the health charities, to support the translation of that into clinical trials. In Canada, we have very few institutional industry-led clinical trials that are happening in this area and there's a lot more that we can do there. So part of our request, and a big portion of our request, is to be supporting some of those early-stage clinical trials.

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

Are there rules in place from, say, Health Canada, or an affiliated agency that makes it harder to conduct these trials versus the other jurisdictions?

[James Price]

There are. We've had some good progress with Health Canada even as we've started our advocacy efforts around the strategy. Within the strategy, we were looking at streamlining some of the regulatory processes around advanced cell therapies. They were typically regulated much like drugs. We've seen other jurisdictions, such as Japan, that have completely looked at cell therapies as a different category.

In regard to one of the things Health Canada has recently done, when we were talking with industry and developing a strategy, we first approved several cell therapy products here in Canada, but they haven't been commercialized here and the clinical trials haven't happened here. It's because we haven't had clarity around what the requirements are to move from a phase one to a phase two to a phase three trial. Health Canada has now released guidelines that were sitting on the shelf for quite some time. Those guidelines are there and they've now committed to work with us in industry to review those guidelines every six months. That has been one of the impediments to industry doing their trials here. We're working through that. There are more steps that we can take in terms of looking at this as a different class.

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

I want to make a few more comments.

Mr. Conway, I'm looking at your recommendations. There are a number of them that I agree with as an economist and someone who has worked in finance for about 25 years. We do need to make sure we keep our fiscal capacity in good stead. We need to ensure that. Today we're starting to debate the CPP legislation in the House, so there will be some details there for the next two or three days. Our innovation agenda, which I applaud, and our infrastructure agenda, which we need, will make those key investments to make our economy more productive. I want to assure you on that basis, so it's more of a comment.

Ms. Ng, regarding the EI system, I've read reports and we've seen reports from everywhere, whether it be the Mowat Centre or a number of different institutes. We've made a lot of changes and I think we've improved a lot of things, but we've heard from a number of commentators over the last couple of days that there are still a number of deficiencies.

If you could pick one or two improvements that you would want to implement immediately, I'd like to hear about that. Excuse the term of my words, but sometimes I think we just need to blow the system up and do it from scratch; or let me say, take it apart and do it from scratch.

Can you comment on that, please?

[Dr. Winnie Ng]

I think part of the piece right now is saying, if we take a look at the GTA area, that we only have one in every five unemployed workers receiving benefits. Something systemically is flawed within the system when the ones who need it more are not accessing it. Lowering the hours is one of the key pieces, but there is also the benefits level. Most of the time, when workers are on the verge of getting laid off, hours are reduced, and the benefit level is 55% based on the reduced income of those last weeks. It's not a living wage, and it aggravates and creates more stress, which leads to cancer and other health situations.

To me, these are part of the systemic pieces. The Liberal government in its election platform talked about the need to provide income security to workers in the changing labour market, and to me these are the key points.

The other piece is that, if we take into recognition that in the GTA, where we have many newcomers, many immigrants who speak English as a second language, accessing services through Service Canada has been most challenging. There's no personal contact, and then people are made to jump through hoops just to access the benefit.

Then, the appeal system has been flawed from the start.

Those are parts of the piece that we think need our urgent review.

[The Chair, Liberal, Wayne Easter]

Your time is up.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

My time has come, I guess, Mr. Chair.

I can't ask questions of everyone, but I would like to say, Mr. Simon, that I wish you success. I know that music is a remarkable part of many Canadians' lives. I hope that your argument is well heard.

I'd like to go to Mr. Conway quickly.

Mr. Conway, with regard to a review of the tax act, who should be doing that review? Should it be a panel of parliamentarians, or do you believe it should be a group of non-partisan experts who would submit a final report? How would you slice that?

[Michael Conway]

In previous testimony, I was asked whether it should be a royal commission or a task force, etc., and I said it frankly doesn't matter how it's done as long as it is done.

But to answer your question, I think it should be mainly with representation from across the system of interested parties. We have to make it more efficient for both sides of the table. Businesses are spending all kinds of money, and the government too, administering this mountain of regulations, some of which are at cross-purposes with each other. Businesses like clarity, certainty, and effectiveness. If we boil it down, I think there should be representatives of government, representatives of business, and we're certainly willing to assist.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I appreciate that.

Concerning your comments earlier with Mr. Deltell, I have to say that I agree. Even the IPCC in a recent report has cited that the countries that are the wealthiest are the ones that have the best outcomes in terms of technology, in terms of health, in terms of dealing with climate change.

I'm just going to move down to Ms. Becker.

Ms. Becker, I'm not convinced yet of your proposal, but let's just that if such a bank were to happen, why would we want to build a stand-alone crown corporation that would take five years to establish itself and to put together protocols and then have the problem that there would only be one location and that of course they would need to open up branches across the country? Why wouldn't we use BDC, which has an established clientele and established presence, or Farm Credit Canada, which can tailor its programs to do exactly what you're talking about? Why a stand-alone entity?

[Lorraine Becker]

There are five things that are required by the low-carbon economy for success in scaling up financing. Those things are focused on domestic projects, on mature technologies, on low-carbon technology specifically, use of varied financial instruments, and—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Why wouldn't groups like BDC or Farm Credit Canada, which already are established, be able to offer those things?

[Lorraine Becker]

Not one of those current institutions offers all of the elements that the low-carbon transition requires, specifically. There is a committee that has been established by finance involving representatives from EDC, BDC, and SDTC to look at optimizing the services in this area, and they are coming up against some barriers in their mandates. Their mandates do not allow them to do this.