Finance Committee on Nov. 2nd, 2016

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

This is pursuant to Standing Order 108(2), a study of the fall economic statement for 2016, which I think all of us in this room heard in the House yesterday. I understand, Minister, you'll likely have a short statement, and then we'll go to questions.

I want to remind people that we have to be out of here absolutely at two o'clock. We need to get to question period, and especially the Minister needs to get to question period.

Mr. Morneau, the floor is yours.

[Bill Morneau, Liberal, Minister of Finance]

I want to thank you, and in light of the fact that we need to get out of here by 2 o'clock, I've kept my remarks to 58 minutes.

[Some hon. members]

Oh, oh!

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you, Mr. Chair. It's a pleasure for me to address this committee.

Yesterday in the House of Commons I introduced the fall economic statement for 2016. It builds on the initial steps taken in Budget 2016 to create long-term economic growth by strengthening and growing the middle class. After all, when we take steps to grow the middle class, it benefits everyone. Consumer demand becomes stronger and businesses can invest with confidence, creating more jobs.

With more and better-paying jobs comes more opportunity. There's more left over each month for Canadians to save for the kids' education, plan for a dignified retirement, and feel more secure about their futures. Best of all, it makes the whole economy stronger, more resilient, and far more able to transform into the economy of the future.

I'm happy to report that we've made some pretty incredible progress so far.

Over the last year alone, we have implemented a tax cut for the middle class, which we have helped to finance by raising taxes on the wealthiest 1%.

We have brought in a simplified, tax-free and more generous Canada Child Benefit. Nine out of ten Canadian families now receive more benefits for their children than they did a year ago, which helps raise hundreds of thousands of Canadian children out of poverty.

We have kept our promise to help Canadians enjoy a secure retirement by strengthening the Canada Pension Plan. We have started to make historic investments in public transportation, green infrastructure and social infrastructure. These investments are helping to create well-paid jobs today while strengthening Canada's future economy.

In addition, we have made it easier for our young people to access university or college by increasing Canadian scholarships and by helping new graduates to transition into the job market. This gives them more breathing room before they have to start repaying their Canadian student loans.

Now it's time to take the next steps in our plan to strengthen the middle class and grow the economy. Since the last budget, private sector forecasters have on average revised down their outlook for real gross domestic product growth in Canada. For 2016 as a whole, private sector economists now expect real GDP growth of 1.2%, lower than the 1.4% forecast in Budget 2016. This is set against a backdrop of slow growth around the world due to factors such as slower-than-expected growth in the United States and the uncertainty surrounding the U.K.'s Brexit vote.

Now more than ever, we need investments that bring sustained and shared growth. Though we intend to use our fiscal capacity to meet that objective, we will do so responsibly so that we can maintain our low-debt advantage.

Our fall economic statement reflects our understanding that we must make the right investments today to deliver a brighter and more prosperous future for Canadians. That's just what confident and ambitious countries do.

Yesterday I announced that we're building on our first phase of infrastructure funding by proposing an additional $81 billion, bringing total federal investments in Canada's communities to more than $180 billion over 11 years. This is unprecedented in Canada's history.

We'll also establish a new Canada infrastructure bank to provide innovative financing for these future projects. The Canada infrastructure bank will be responsible for investing at least $35 billion in large infrastructure projects, projects that might otherwise not get done. The projects funded from this bank will create thousands of jobs and attract as much as $4 to $5 in private capital for every tax dollar invested.

To prosper in the future, we also need to hone Canada's competitive edge. For a hundred years, Canada's been a trading nation, but the world we know has become more competitive, so we have to work a little harder to make sure we remain a global player that can meet the demands of tomorrow.

Therefore, it's time for us to make clear to the world that Canada is here to play. In fact, we're here to lead. We're going to allocate $218 million over five years for a new invest-in-Canada hub and hire more trade commissioners abroad to make Canada top of mind for foreign investors. This hub will be up and running by the end of 2017. It will operate globally and in co-operation with federal, provincial, and municipal partners, and while we're out there promoting Canada, we'll also take steps to make sure our legislative framework accommodates investment, making it clear to both Canadians and to potential investors just how we can work together to create jobs and opportunities for everyone.

Finally, we'll keep investing in people, helping firms grow so they can create more good Canadian jobs. Our global talent strategy will do just that. We'll help innovative Canadian firms to scale up and grow by attracting global knowledge workers with specialized in-demand skills.

We'll remove barriers so that top global talent can fill temporary positions here in Canada, helping them grow and giving our workers access to international expertise. I know members of this committee will appreciate that our fall economic statement also contains measures to provide greater accountability for government spending, to put an end to secrecy at the Board of Internal Economy, and to ensure the independence of Statistics Canada and the parliamentary budget officer.

I also want to reiterate what I said in the House yesterday and thank members of the committee for the work you're doing on pre-budget consultations and for your service to Canadians. I look forward to continuing our work with all of you towards a strong middle class and a better tomorrow.

In conclusion, I would say that one year ago, Canadians asked for real change.

Over the next year, I will continue to promote our economic vision and perfect our plan to help Canadians in a way that represents their perspectives and hopes for the future. I am looking forward to reporting our results to all Canadians when we table Budget 2017 and present the next steps of our plan to help the middle class move forward.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Minister Morneau, and welcome, Deputy Rochon.

We'll now go to questions, starting with Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Chair.

Minister, Deputy Minister, I would like to thank you for being here today. I would also like to welcome you once again to the Standing Committee on Finance.

During our pre-budget consultations over the last few weeks, we heard from the Governor of the Bank of Canada, the CEO of the Canada Pension Plan Investment Board, and the Parliamentary Budget Officer, as well as yourself. It is clear that the OECD economies are sluggish and that it is difficult to stimulate growth.

Mr. Minister, under the circumstances, I am glad that you have decided to take such bold measures. You have opted to invest in infrastructure, both with our provincial and municipal partners and with this new tool to fund infrastructure projects, the Canadian Infrastructure Bank. I would like to commend you on this open-minded choice. The current situation is not a conventional one and such measures are necessary.

Could you tell us more about this decision to focus on infrastructure as a way to spur growth. Why do you choose infrastructure out of all the potential options? At this point in time, in Canada, why is this the best way to increase the rate of growth?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question.

I would like to start by saying that you are right. Our economic situation is indeed more difficult because of the global situation and the weak growth of the American economy. That's why we need to make significant investments for Canada and Canadians.

Yesterday, we presented our long-term program. However, in our 2016 budget, we have already taken our first step toward helping Canadian families. That step was very important. Given their concerns, middle-class Canadians need to understand how growth will be positive for their families. That is why we decided to lower taxes on the middle class and create the Canada Child Benefit. In that way, people will be able to imagine a better future for their families than has been possible over the last ten years.

With regard to our long-term plan, we now know that it is very important to invest in our future. Canada has a good record thanks to initiatives that were taken during the 1990s and the very early 2000s. Our situation allows us to invest precisely because our debt to GDP ratio is lower than the other G7 countries. That is where our country is now. We know that investing in infrastructure is the best way to increase the economic impacts. These types of investments will create immediate growth and also make the economy more productive in the future.

That is why we have chosen, both now and in the future, to invest significantly in infrastructure. Moreover, we have decided to broaden the scope of our efforts by setting up a national infrastructure bank. The bank will allow pension funds and institutional investors to work with us to improve Canada's outlook for the future.

[The Chair, Liberal, Wayne Easter]

Please be very quick.

[Steven MacKinnon, Liberal, Gatineau, QC]

In response to your speech, yesterday we witnessed expressions of orthodoxy from our friends on the other side of the House. Some of them insist upon a balanced budget and have raised the possibility of tax increases.

Yet you have just told us about lower taxes for the middle class. At this time, are taxes going up?

[Bill Morneau, Liberal, Toronto Centre, ON]

As I stated yesterday, it is important for us to lower taxes for the middle class. We have decided that their circumstances must be improved. It is true that we have changed the tax rate for the wealthiest among us. We did add a taxation level for the top 1%, but, at the same time, we reduced taxes for nine million Canadians. On average, that means a person living alone this year will have $330 more in their pocket. That amount will be $540 for families. In short, we did make some tax changes; we lowered them. That was an important step for Canadian families.

[The Chair, Liberal, Wayne Easter]

Thank you, Minister.

We'll turn to the official opposition and Mr. Deltell.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair, and Mr. Minister, I'm very honoured to see you here.

I would also like to welcome the deputy minister.

Mr. Minister, let me begin by congratulating you for your effort to speak French. If you wish, we can continue this discussion in the language.

Since I do not have much time, I'm going to ask you a few short questions. I would ask that your answers be short as well. Will you agree to provide short answers to short questions?

[Bill Morneau, Liberal, Toronto Centre, ON]

We shall see. It will depend on the context.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

I know someone else who once said, “We shall see”, but that is another story.

Mr. Minister, when do you expect to reach a zero deficit?

[Bill Morneau, Liberal, Toronto Centre, ON]

Our decision really is to invest in Canada. These investments will help Canadian families. That is our priority. We have decided that it is very important to be fiscally prudent. That is why we have explained to Canadians how important the debt to GDP ratio is, and that it will decrease over the course of our mandate.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

With respect to a return to a zero deficit, yesterday, the Chamber of Commerce of Metropolitan Montreal stated that it was a test of Canada's credibility.

So I will repeat the question. On which date and in which year do you expect to return to a balanced budget?

[Bill Morneau, Liberal, Toronto Centre, ON]

Could you tell me precisely what the desirable debt to GDP ratio is, in your opinion? Currently, we have the lowest ratio among the G7 countries.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Minister—

[Bill Morneau, Liberal, Toronto Centre, ON]

We understand how important it is to be fiscally prudent, and our program calls for that. At the same time, we will be making investments to help our economy. All over the world, people feel that our program is truly the best one to improve our current circumstances.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Those are not—

[Bill Morneau, Liberal, Toronto Centre, ON]

That is why Christine Lagarde, Managing Director of the International Monetary Fund, said the following:

she hopes that our programs go viral around the world because she recognizes that's what's needed in a time of low economic growth.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

I would like to remind you that neither Ms. Lagarde, nor any foreign citizens at all, will have to pay off the debt you plan to impose upon Canadians.

There is another reality to consider when you talk about the debt to GDP ratio. In that respect, I thank you for your tribute to the Conservative Government's legacy in leaving you a house in order.

I will ask you the question once again. In precisely which year do you expect to return to a balanced budget? This is the third time I am asking the question. We want you to give us a date.

[Bill Morneau, Liberal, Toronto Centre, ON]

Perhaps I can say in English as well as in French that we have every expectation that our program will, in fact, be the right program for Canada. We're investing in our economy. We're being fiscally prudent as we do that. We will ensure that our level of debt to GDP declines during the term of our mandate.

We know that Canadians voted for us because they want to see a higher level of growth in the future than they saw over the last decade, and that's what we're working to engineer. We're working to make a better Canada for middle-class Canadians and those who want to see a better future for their children.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Minister, with all my respect, Canadians voted for you on behalf of a program. In your program, you talked about a small deficit of $10 billion for a few years, and in the fourth year getting back to zero deficit. I'm asking for the fourth time the same question, in French or in English, whatever you want: what is the date you propose to have an equilibrium, a deficit of zero? What is the date?

[Bill Morneau, Liberal, Toronto Centre, ON]

Well, what I'll say again is fiscal prudence is important. With a particularly good balance sheet, we should be doing what we need to do for the future of Canada and for all of our children to make sure we actually have an economy that grows, provides jobs, and provides opportunities. That's what we're focused on. We're going to do that in a fiscally responsible way by continuing to grow the economy and continuing to reduce the level of debt to GDP over time.