Finance Committee on Feb. 19th, 2016

[The Chair, Liberal, Wayne Easter]

Thank you very much.

I don't know if you were here or not, but we had a mental health discussion in the previous panel as well. We've had some throughout the week on the seriousness of mental health.

We'll turn to the U15 Group of Canadian Research Universities.

Mr. Hamdullahpur.

[Feridun Hamdullahpur, Chair, U15 Group of Canadian Research Universities]

Thank you, Mr. Chair.

My name is Feridun Hamdullahpur. Thank you for the opportunity to appear before the committee.

As chair of the U15, I'm here representing the group of Canada's research-intensive universities from across the country. I'm also president and vice-chancellor of the University of Waterloo.

To give you a sense of the scale of the U15, our 15 universities educate nearly 585,000 students and perform research worth $8.5 billion annually. That represents more than a quarter of all research, both academic and non-academic, in Canada. This combination of teaching and research makes Canada’s research-intensive universities a platform on which many of our country’s competitive advantages are built.

Research universities produce groundbreaking discoveries and are training sites for top research and innovation leaders for all sectors of the economy. They help attract and retain leading global talent and contribute expertise to a wide range of commercial and social endeavours.

Fuelled by discovery-driven research excellence, U15 institutions produce expertise that drives innovative Canadian businesses, informs public policy, and develops sustainable approaches that address our most pressing issues, from climate change to indigenous relations to natural resource development to clean technologies.

To ensure that Canada remains globally competitive with regard to innovation, we need to build on the foundations of research excellence. To this end, the U15 has two strategic and concrete suggestions for investment.

First, research investments from Canada’s three granting councils are the backbone of Canada’s research excellence. These investments support discovery-driven research, university/industry research partnerships, recruiting and retaining world-class researchers, and training Canada’s next generation of leaders. Since 2007, inflation has eroded federal funding to the tri-council by $176 million.

To ensure that Canada’s research excellence platform continues to support our innovation ecosystem, we propose that the government commit to increasing funding to the tri-council and the research support fund to their inflation-adjusted 2007-08 levels over the next four years and commit to indexing this funding moving forward.

The post-secondary sector is well poised to stimulate our economy with efficient and effective infrastructure upgrades. Our second proposal is to invest in Canada’s research infrastructure through the innovative campus infrastructure program. College and university campuses across the country have a wide range of infrastructure needs and upgrades that could improve health and safety, energy efficiency, and our capacity to undertake leading-edge research.

We surveyed our 15 universities this year and found an estimated $3.7 billion in shovel-ready on-campus projects, ranging from renewing and expanding teaching laboratories, arts centres, and libraries to upgrading heating systems, waste management systems, and on-campus lighting to improve energy efficiency. These projects have well-defined parameters and can be implemented in a timely fashion.

These investments will improve Canada’s capacity for groundbreaking research and strengthen our robust research environment, allowing Canada to attract and retain top talent, build strong research clusters, and foster the culture of innovation we need to prosper in a sustainable way.

I kept my remarks fairly brief in the interest of time, but I will be happy to answer your questions later on.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We turn now to the national president of Unifor, Mr. Dias.

[Jerry Dias, National President, Unifor]

Good afternoon, and thank you very much for receiving our organization, which represents 315,000 workers from coast to coast. Thank you very much for this opportunity.

My remarks will focus on two key aspects of our submission: the urgent need for infrastructure spending, and investment support for key strategic industries.

Public sector spending is a vital part of both Canadian prosperity and, through our social programs and safety net, our Canadian identity. Canada's social and physical infrastructure has suffered years of neglect and needs strengthening. Public investment in everything from child care and education to social housing and retirement security has a proven track record of alleviating poverty and widening opportunity.

Some estimates put Canada's physical infrastructure deficit in the tens of billions of dollars, while others estimate it running into the hundreds of billions of dollars. Either way, if Canada's going to make a transition to a green economy and if the growth process is to resume, the federal government must play an active role in encouraging innovation, sustainable investment, and clean technology.

Annual budgetary deficits of $25 billion over four years would leave Canada's debt-to-GDP ratio unchanged at roughly 31%. The debt-to-GDP ratio among the G7 is more than double that of Canada, which is why Unifor believes that even more federal government spending on social and physical infrastructure is fiscally justified.

Unifor recommends that the federal government significantly increase its infrastructure spending program. The timeline for infrastructure spending should be expedited in order to provide much-needed stimulus. Aspects of that program should include provisions for made-in-Canada materials and inputs, including sustainable building materials; local hiring requirements, especially among vulnerable communities such as minorities, young workers, women in skilled trades, and aboriginal workers; the removal of any prerequisite for private sector involvement as a condition for federal funding support; and steps to improve accessible transportation for Canadians with disabilities.

A common thread among Canada's diverse advanced manufacturing industries over the past decade has been the nearly complete absence of federal leadership. This was at a time when more than 450,000 manufacturing jobs were lost, nearly one-quarter of Canada's industrial base. Unifor calls for a national strategy in key areas of advanced manufacturing that would nurture Canadian production, foster international competitiveness, and secure future prosperity.

With regard to auto assembly and parts, Unifor recommends better integrating the federal and provincial investment attraction efforts, including the development of a one-stop system to win new investment in Canadian assembly and parts plants. Canada's investment incentives must be competitive and efficient, with flexible rules and procedures and sensible fiscal and tax features.

Export Development Canada's top priority must be attracting and supporting investments in Canadian-based factories rather than foreign ones. The fact that Export Development loaned Volkswagen $526 million to invest in their Mexican facilities in no way enhances Canadian jobs.

The federal government should take a cautious approach to the Trans-Pacific Partnership, with the understanding that major defects in the agreement will need to be renegotiated. The fact that the tariffs come off Japanese cars in five years, yet don't come off in the United States for 25 to 30 years, is a disaster for the industry. When the presidents of Ford, General Motors, and Chrysler here in Canada say to Minister Freeland that it is a bad deal for the auto industry, I would suggest this isn't scaremongering on behalf of Unifor. If you look at the direct and indirect jobs in Ontario, you see that these are people who create almost half a million jobs.

In aerospace, Unifor recommends using government research and development support, as well as investment support, to ensure that production and key product development programs are undertaken in Canada.

The Canadian content spinoff benefits in production offsets arising from the procurement of military and civilian aircraft should be maximized. Under the F-35 deal, we really got away from the way that we've done business historically, as we deal with regional offsets. I would suggest to you that the premise of regional offsets and their history is why we have such a strong sector here in Canada, everywhere from IMP on the east coast to Cascade on the west coast.

Unifor also recommends providing support to anchor firms such as Bombardier to ensure stability while major programs are successfully brought to market.

I'm listening to those who say the government should not invest in Bombardier. The argument is that somehow we have invested $2 billion in Bombardier over the last 50 years and they've only paid back $500 million in royalties. Nobody talks about the fact that last year alone Bombardier paid $700 million in income tax and that the workers paid $600 million. Nobody talks about the fact that in 30 years Bombardier alone has paid $17 billion in taxes, not to mention the billions more paid by the employees. I would suggest that if we are going to talk about an economy that includes strong manufacturing jobs, you have to invest as a nation.

[The Chair, Liberal, Wayne Easter]

Jerry, if you could, please sum up fairly quickly.

[Jerry Dias]

I will be very quick.

For natural resources, we need a multidimensional strategy in key industries such as oil and gas, mining, and forestry that would manage Canada's abundant resource wealth in a socially inclusive and ecologically responsible manner. Such a strategy would deepen linkages between extraction, domestic upgrading, and consumption, thus maximizing the economic benefits to Canada.

I have much more to say, but hopefully I'll have the opportunity to say it during questions.

Thank you very much for your time.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Dias.

We turn to Villa Rosa Inc.

Go ahead, Ms. Pidlaski.

[Mary Pidlaski, Board Member, Villa Rosa Inc.]

Thank you for having me here today. I'm Mary Pidlaski. I'm here as a board member from Villa Rosa Inc., in Winnipeg. It's a non-profit organization. It's a convalescent home for unwed mothers. It's been around since the late 1800s, serving women who may live there while they choose to parent or to place their child for adoption.

It will help to explain a little on how I became involved with them.

I grew up in suburban Winnipeg, in a middle-class family with two parents. I was an A+ student, but somehow things didn't go as planned, and I ended up as a ward of Child and Family Services by the time I was 14. I lived in group homes until I was 16, and I rented my first apartment shortly afterward through a program called independent living. However, it was when I moved into a group home that things really took a turn.

If I was not behaving well beforehand, it jumped to an entirely new level when I was mixed with others who had a worse upbringing than my own. My marks in school plummeted, and on more than one occasion my experimentation with substances extended to a place that it could have ended my life. I felt that I had not much to live for, and struggled with the fact that the people who worked where I lived got to go home to a very different life at the end of the day.

Despite this, I always had an interest in the arts, dance specifically. One summer, I attended a work experience program through the YMCA that was recommended by one of the workers. I made $700, and I saved every penny. I went to the Royal Winnipeg Ballet School on registration day, and I lied about my past experience. I registered for the most classes that a person could register for in a week for the entire next year, but I came up short in my funds. I'm still not sure how this happened, but somehow Child and Family Services teamed together with my parents, and each came up with another $700 to pay for my tuition.

The teachers very quickly learned that I had little experience but that I worked really hard. I wanted it badly, and by the end of the year I had acquired a scholarship to continue my studies. I was able to become a leader to my peers, and my teachers taught me to leave my problems outside the door. I think that without a strong connection to family, there will always be challenges, but I don't think family has to be your biological one. Dance was like that family that always welcomed me back.

Eventually, I left Winnipeg to dance professionally elsewhere, and I did so for a time, but some of these unhealthy behaviours crept back and I needed to go back to Winnipeg. I found out that I was pregnant the day I returned, and I tried to live with my family, but it was not a healthy situation. Someone had recommended Villa Rosa, and I applied. It must have been the next day or two when I moved in.

The first parts were somewhat of a blur, but some of the things I gained from being there were that I had been afraid to find out how many credits I needed to graduate. I only needed two. They helped me with that, and I graduated from high school. I bonded with a roommate who had a similar situation. I ate healthy food, learned parenting skills, and I feel I learned the best practices for raising my child, who is now 13. Consistently, I had this help. Villa was always there for me, and I still feel that support today.

After this, I had to navigate through welfare systems, low-income housing, and subsidized day care programs. Being in that situation, I did feel it was somewhat degrading, as there is a stigma involved. I'd hear, “People on welfare abuse the system. Why should we give them money? I work hard, and they should too.”

There is not a lot of incentive for a person to get off welfare. I was someone who always had a job while I was on social assistance, but much of my money was given back to them. One year, I made $8,000 for myself and my son. It's hard for me to imagine that a person would abuse a system like that, because that's almost not even possible.

At one point, I received an amazing job offer teaching dance through one of our school divisions, but I was unable to find the day care that I needed with the schedule that the job was offering. At the time, I was not living at Villa Rosa anymore, but I still had support, and one of the workers was trying to help me find ways to get more training and further my life. We discovered that just across the hall in the same building as the employment and income assistance office was a Service Canada program that I could apply for to further my training, which I did. I was able to acquire much more employment. Eventually I taught myself and got myself out of poverty, but I found it odd that one side of the building would have no idea what was happening on the other side of the building.

I've been on faculty at the Royal Winnipeg Ballet school. I've been a fully certified Stott Pilates instructor. Much of my training has come from the support of the government and the people who have worked in those programs.

Today I'm a realtor. I have been selling homes for seven years, and I focus on how I can help another person. Many months are quiet, and I've learned to keep busy through volunteer work. I've always wanted to give back, and someone at Villa Rosa suggested that I apply. That's how I came to be a board member there, and I am so glad I did.

I'm in a leadership program through the Chamber of Commerce, and we're learning about many of the amazing inner workings of our city. If these programs hadn't existed and someone hadn't believed in me, I wouldn't be contributing to society today. I'm not even sure I would be alive.

I'm so glad that you have let me share my story today. I hope that this may help some other families and that I can be somewhat of a voice for them. I feel that a strong bond, a strong connection to each other, creates a healthy society, and I wonder if we can start by fixing the person while they are still in the womb.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Pidlaski, and congratulations to you.

We will turn to WestJet Airlines Ltd. Go ahead, Mr. Gibbons.

[Andy Gibbons, Director, Government Relations and Regulatory Affairs, WestJet Airlines Ltd.]

Thank you very much, Mr. Chair.

Let me begin by thanking members of the committee for the invitation to appear today. We encourage all parliamentarians to take an interest in commercial aviation, given how critically important it is to our communities from coast to coast to coast.

There are some issues this committee can assist with in budget 2016, and I will get to them, but first I would like to provide a bit of an overview of our growth in investments and the challenges we face in 2016.

On February 29, we'll proudly be celebrating our 20th anniversary of operations. On that day 20 years ago, our route map consisted of three airplanes and five cities. We had roughly 200 employees, all of them taking a chance by coming to work for a small western start-up airline. At our headquarters in Calgary there's a wall that lists all of the airlines in Canada that have gone bankrupt. It's a big wall. In fact, the average lifespan of an airline in Canada created after 1990 is 3.5 years. Not only did we buck that trend, we have flourished, to the benefit of Canadians. In 1996, only 16% of Canadians took a flight on an annual basis. Today that number is over 35%. Our record of market stimulation has been profound.

Today our numbers are a tad improved; with nearly 12,000 employees, we have 600 flights a day. In 2015 we flew over 20 million guests for the first time. Our fleet consists of approximately 145 aircraft, ranging from Bombardier Q400s, manufactured at Downsview in Toronto, to Boeing 737s. Our new wide-body 767s will begin service to London's Gatwick Airport this May from five Canadian cities, including Winnipeg, which I note because it will be that city's first transatlantic flight since 2008. This is the kind of critical connectivity we are bringing to Canadian communities.

Given that we're discussing the upcoming federal budget, I would like to comment on the current challenge we face as an Alberta-based airline.

We have felt the effect of a softened demand and sluggish economy. About 25% of our entire system capacity originates in Alberta, and over 40% of our overall system capacity touches Alberta. This led in January to a temporary shifting of some of our capacity from the west to central and eastern Canada. Overall our growth will continue this year with new services and new destinations, but we are closely monitoring the situation in our home province.

We continue to take costs out of our system. This is a major challenge and focus. In 2015 our overall profit was $368 million. This translates into roughly $18 a guest. This number of $18 a guest is not something widely understood, and it informs our perspective on how we see the role of government in our sector.

Our industry is eagerly awaiting the release of David Emerson's review of the Canada Transportation Act. We have made a thorough submission that covers every aspect of commercial aviation, but for the purposes of this committee, I'd like to highlight what we see as the number one issue that government can address.

For WestJet, aviation cost structure is the single most important public policy issue facing commercial aviation going forward. It limits our ability to fulfill our role as an overall economic catalyst for the economy, consumers, and communities large and small. We find ourselves increasingly undermined by escalations in either the cost to access airport infrastructure or in charges applied to consumers to support facilities and government services. We believe the cost gap to be widening, thanks to a rigid adherence to the uniquely Canadian user-pay principle for aviation services, which is used to justify everything from steadily increasing airport improvement fees to an air travellers security charge that is exponentially larger than the U.S. equivalent.

We recommend that this committee recognize the stimulative nature of our investments on the Canadian economy and recommend in its report that the government make aviation cost structure a priority issue. We are seeking the establishment of a senior level government-industry working group to take a close and focused look at the competitiveness of commercial aviation in Canada.

I would also like to note we are in support of the recommendations made by our industry association, the National Airlines Council of Canada. Specifically, we would welcome increased funding to CATSA, but more than that, we are asking that revenue the government collects from the air travellers security charge be tied directly to funding for screening services.

Also, continued streamlining of border processing and security screening at our airports is becoming increasingly important for our sector to compete overall. We would also welcome government's support in these areas.

Thank you for your time and consideration this afternoon. I'd be pleased to take your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, to you and to all of the witnesses.

The first round of questioning goes to Ms. O'Connell. You have seven minutes.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair, and thank you all for your presentations.

Mr. Dias, I am going to start with you. Apprenticeships have actually come up a lot in our marathon sessions over the last four days, and you touched on several. In fact, you touched on one that is very important to me and one that we haven't really heard about: getting people with disabilities into the workforce.

I'm from Ontario, so I know it is different in different provinces. You tied it directly with infrastructure investment. How do you and your membership see it in terms of tying it directly to an apprenticeship opportunity?

What I have heard, certainly from building trades, is that they will provide a lot of the training, but they cannot get certified because there are not a lot of apprenticeship spots. These individuals can't actually then operate in the workforce.

Is that the same kind of problem that you're seeing? How do we help fix this through infrastructure investments?

[Jerry Dias]

The apprenticeship model in Canada needs to be overhauled and the funding of the apprenticeship program also needs to be overhauled. Let me give you an example.

We have put into place some unique programs with progressive employers. Irving Shipbuilding is an example. We put into place a program that assists women in going into trades, and through it 25 women are now starting as welders in the Irving Shipbuilding facilities, which is predominantly male.

We have just negotiated with Ford, General Motors, and Chrysler. We are now in the process of bargaining, negotiating, and training for the next generation, based on the technological changes in the auto industry. Among that program is also a program for women in trades, where we are encouraging women to take an apprenticeship.

So how do we strengthen the apprenticeship opportunities? How do we put into place a system that will encourage employers? As an example, we can certainly use the employment insurance system as an opportunity to pay employees who are going through the educational aspect of the apprenticeship. When apprentices are in school, I believe that they should be paid out of the employment insurance fund. Why? It's because it is the next step of development.

You will find that those types of impediments cause employers to balk. They don't mind paying if a person is physically producing something within a manufacturing environment or a workplace, but they're reluctant to invest in the months and months of academic time, so if we're talking about workers with disabilities, we need to identify the trades and the opportunities that would be very important for not only workers with disabilities, but for a whole host of workers in Canada who need assistance.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

My next question is to you as well. It's in regard to the auto industry.

I'm from Durham and Oshawa—not Oshawa specifically, but when I was on municipal council, my counterparts often raised this point. I have been learning a lot from John Oliver, who is my seatmate in the House.

One of the ideas that has been talked about or that has been casually brought up is the idea of streamlining the process in Canada. For example, there is Mexico, I think. I could be wrong, so this is where I want some clarification.

There's almost a one-stop shop for government agencies. For companies that want to invest or build, a lot of the time it's just so much easier in places where they don't have to go through potentially three or four levels of government, depending where you are.

Is there a more developed position on this that I can better understand? If you can, could you summarize that?

[Jerry Dias]

There's no question that one frustration in the auto industry has been the numerous bureaucratic channels that one would have to go through in order to have the discussions on investment. The system that is in place today federally is one of taxable, repayable loans, which the auto industry considers a joke. If they borrow $1 billion, the first thing they have to do is pay tax on it. The reality is that people keep away from the process that's in place.

We have now put into place Ray Tanguay, a former Toyota executive, to help put into place a process that is exactly what you're talking about. We need a one-stop shop. That's what they have in Mexico and that's what they have in the United States. It's a question of harmonizing the process in order to attract the investment and then streamline the operation.

The process is starting, but obviously the next step is needed. We would hope that in the first federal budget, the government will give a message to the auto industry that you're once again interested in enhancing this industry, because the auto industry has felt neglected for quite a few years.

[The Chair, Liberal, Wayne Easter]

You have time for one more question, Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you. It's to Mr. Gibbons.

I was trying to write this down, and I'm not sure if I missed a point. I think you said that of the two biggest impediments or cost factors in the aviation cost structure, one is the user fee-based system. This is in the sense that airlines are charged for landing, for example, and then for the screening.

To sum it up in a simple way, this ultimately has to be passed on to the consumer, right? This is where there's the small profit margin. Am I understanding this correctly?

[Andy Gibbons]

Essentially, yes. Many components go into the aviation cost structure. It's like a bowl of soup; there are all kinds of ingredients. We want the government's leadership to take a look at all of those different elements and make sure that our partners in airports and in government are all aligned on that objective, because it is so critical.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

There are infrastructure improvement costs as well, in terms of the massive costs not just for expansion but also for improvement of the already existing infrastructure and the burden that then puts on the industry. Am I understanding correctly?

[Andy Gibbons]

Basically, yes. We find that airport improvement fees are going up at a very high rate. The World Economic Forum in 2015 released its international competitiveness report for our sector. Canada was number one in aviation infrastructure, so that's an accomplishment. Airports were divested 20 years ago, so that's a job well done. We have quality infrastructure. Unfortunately, we were 138th in competitiveness on taxes and fees. We're saying we should start working on that area. Let's tackle that and put some processes in place to make sure we can bring that up to the world-class standard we all want.

[The Chair, Liberal, Wayne Easter]

Thank you, Jennifer.

Mr. Liepert is next.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Mr. Scholz, on behalf of my two colleagues here, I want to assure you that the Conservative caucus will continue to stand up, as it has, for pipelines such as Energy East. I'll let others at the table answer your request for support.

It's February 19, 2016. It should be the height of the drilling season in western Canada. Can you tell me approximately how many rigs are active today?

[Mark Scholz]

There are approximately 160 drilling rigs working today, out of a fleet of about 750. In terms of comparison, there were about 300 at the same time last year, and then in 2014 around 500.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

In your estimation, we may never get back to 500, but....

I'm sorry, what was the second number you said for two years ago?

[Mark Scholz]

There were about 500 rigs.