Finance Committee on April 10th, 2017

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

We're pleased today to have the Minister of Finance here. We will deal with two issues: the main estimates for 2017-18 under Standing Order 81(4) and, under Standing Order 108(2), a briefing on budget 2017.

I believe members are aware that the minister and the deputy minister, Paul Rochon, are here for the first hour on both issues. Following that, we will turn to officials in the second hour of our meeting.

Mr. Minister, I'm not sure if you have an opening statement or not, but we'll turn the floor over to you. Welcome. It's a pleasure to have you here.

[Bill Morneau, Liberal, Minister of Finance]

Thank you, Mr. Chair. Yes, I do have an opening statement.

Thank you, committee members, for having me here today. I'm very pleased to be here to talk about budget 2017, “Building a Strong Middle Class”, and how it will help Canadians.

I want to begin by thanking the members of this committee for your hard work in putting together recommendations for budget 2017. Your recommendations this year focused on the theme of what we can do to grow the Canadian economy. They were informed by presentations from nearly 300 groups and individuals and more than 400 online submissions, with ideas from Canadians from all walks of life from across our great country.

Your work is vital to our budget process. You help us in making sure that we're doing our job and addressing the needs of Canadians.

Our second budget represents another step in our government's long-term plan to create jobs and more opportunity for the middle class and those working hard to join it.

When we formed the government about a year and a half ago, we promised Canadians to put middle-class families first. That's exactly what we've done.

We started by asking the wealthiest 1% in our country to pay a little more so that we could cut taxes for the middle class.

Then we introduced the new Canada child benefit. This tax-free benefit is simpler, more generous, and better targeted to help those who need it than the previous child benefit system was.

We then reached an historic agreement with the provinces to help people to retire with more dignity by strengthening the Canada pension plan.

We went even further to support Canadian families by investing $6 billion over 10 years for home care, and $5 billion over 10 years to support mental health initiatives. To date, 12 provinces and territories have accepted the federal offer and received their share of this investment in home care and mental health.

In short, we took the necessary first steps to restore hope to the middle class, and we did that by putting people first.

We are making small investments to help people make better use of their skills, revitalize their communities, and ensure sustainable economic growth.

The measures we have taken so far are having a meaningful and positive impact on the economy and Canadians.

Optimism is on the rise, and with good reason. Forecasters are expecting Canada's economy to grow even faster in the next two years. In the last eight months alone, the Canadian economy has created over a quarter of a million full-time jobs.

We understand that despite these positive signs, people are still anxious about the future. The economy is changing. Global markets are shifting. Automation is on the rise. Canadians want to be assured that their hard work will pay off with a better future for their kids and their grandkids.

That's why budget 2017 puts Canada's skilled, talented, and creative people at the heart of a more innovative future economy. That is why we're not just creating the jobs of today, but are getting people ready for the jobs of tomorrow, because the next job should be a better job. We call it our innovation and skills plan.

With it, we'll support a culture of lifelong learning to help workers adapt to the changing demands of our time. We recognize that we need to do more to help Canada's workers learn, adapt, and have good jobs throughout their working lives.

Budget 2017 significantly boosts federal support through the labour market transfer agreements with the provinces and territories by $2.7 billion over six years.

For Canadians looking for work, this means more opportunities to upgrade their skills, gain experience, or get help to start their own business. For Canadians who have lost their jobs, we'll make it easier for EI claimants to pursue self-funded training while remaining eligible for their benefits.

For Canadians going back to school for retraining, budget 2017 will expand eligibility for Canada student grants so that each year an additional 10,000 part-time students and a further 13,000 students with dependent children can get the financial help they need to pursue a post-secondary education.

At the same time, we're taking action to give our young people the best possible start to their careers.

We are making investments to promote science, technology, engineering, and math, particularly among young women, girls, and indigenous youth, as early as elementary school.

We'll also invest to help make coding a basic skill that our children learn along with reading and writing. To help more young Canadians, including vulnerable youth, make the transition from school to work and to get a strong start on their careers, we'll invest in the youth employment strategy. This comprehensive set of skills and training measures will help Canadians at every stage of their career make Canada's greatest resource—our people—even greater.

But budget 2017 goes further.

Our plan seeks to make Canada a world-class centre for innovation, in part by shining a spotlight on specific sectors such as the digital, clean technology, and agrifood industries.

I'll give you two examples.

Budget 2017 takes action to help ensure that Canada is positioned to take part in breakthroughs in fields like artificial intelligence. We believe that Canada will be a world leader in artificial intelligence. That's why we're launching the pan-Canadian artificial intelligence strategy. This strategy will promote collaboration between Canada's main centres of expertise and will position companies, especially Canada's new companies, together with the new Vector Institute, at the cutting edge of artificial intelligence research.

Second, in agrifood we're positioned for success. We know that by the year 2050, global demand for food is expected to double.

This represents a golden opportunity for us. Our agriculture and agrifood sector already supports more than two million jobs and accounts for more than 6% of the country's gross domestic product.

That means more demand for prairie canola, Atlantic crab and lobster, and B.C. berries. It also means more jobs in the fields of southwestern Ontario and on the maple syrup farms in Quebec's Eastern Townships. Through budget 2017 we'll help farmers, producers, and processors build their businesses globally and help all Canadians get the most out of the innovative economy.

Through budget 2017, the government is also taking action to make our neighbourhoods better, healthier places to live. Total federal investments in infrastructure now top $180 billion over 12 years.

Part of that money will go to improving access to early learning and child care, with a $7-billion investment over 10 years. The goal is to support and create more high-quality, affordable child care spaces across the country, especially for those families most in need.

Canadians will also have better access to housing that meets their needs through the new national housing strategy, to which the government is committing more than $11.2 billion over 11 years to help build, renew, and repair Canada's stock of affordable housing.

To support the next phase of ambitious public transit projects, the government will invest $20.1 billion over 11 years to bilateral agreements with provinces and territories. By investing in infrastructure now, we can strengthen and grow the middle class, create good, well-paying jobs, and make Canada an even better place to call home.

As we prepare Canadians for the economy of tomorrow and help them access the tools they need to succeed today, our government is continuing its efforts to ensure that our tax system is fair.

All Canadians must pay their fair share of tax. The government will continue to improve tax fairness for Canadian families by closing loopholes, eliminating measures that disproportionately favour the wealthy, and cracking down on tax evasion so that every Canadian has a real and fair chance at success.

Over the last 18 months, we've seen positive signs that our plan is working, but we can and will do more to help the middle class and those working hard to join it. As we remain focused on growth, it won't just be for growth's sake.

We are committed to making sure that all, not just the wealthiest, Canadians benefit from that growth.

We will help families feel better about the future of their kids and their grandkids.

Thank you. I welcome your questions.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Minister.

We will go to five-minute rounds, if we could get agreement on that, to try to get everybody in.

We'll start with Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Chair.

I, too, would like to welcome you to the committee, Minister.

From the measures the government has taken, we can see that your two budgets have had a positive impact. However, the public transit tax credit is one of the measures that people in my riding are concerned about, as am I.

As you are aware, Mr. Morneau, my riding is across the river, so you could say I was a local MP. I take the bus and use public transit regularly. After the previous government introduced the tax credit, I must say that I never saw public transit ridership go up.

Could you explain to the committee, and to all Canadians, why you decided to eliminate the public transit tax credit?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question. You raise a very important point.

As you know, we explained a year ago that it was important for our government to review how our tax system worked. We determined that it was necessary to look at every single measure to make sure that it was fair and effective and did what it was meant to.

We have looked at a number of considerations over the past year, and we determined that the public transit tax credit was originally meant to increase the number of people who use public transit. The idea was also to generate a positive environmental impact. In view of that, we determined that the measure was not effective because, in actual fact, it was not serving its purpose.

We therefore felt that it was more important to invest in public transit networks across the country in order to actually encourage more people to use public transit and thus benefit the environment. For that reason, we took a long view and invested more than $20 billion in public transit networks.

We intend to work with municipalities and provinces to identify projects that will produce the necessary benefits. That is our goal. We will continue to assess measures to make sure that they are working and have a place in our tax system. In this case, we found another way to achieve the same goal and have a greater impact on Canadians.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

That's wonderful.

Minister, my second question pertains to the Canada child benefit. On the weekend, I travelled all over my riding and connected with an old friend who volunteers for the Society of Saint Vincent de Paul. Many of my fellow members at the table are familiar with the good work that the people in that organization do.

As they do every year, they organized an event to help underprivileged families with children. My friend told me that, this year, they noticed that the number of low-income individuals seeking assistance for their children had dropped and that it was thanks to the Canada child benefit.

Have you seen the difference that the Canada child benefit is making in the day-to-day lives of people in need across the country?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you.

We have heard stories like those all over the country. The Canada child benefit has made a tremendous difference for Canadian families. The rate of child poverty is expected to be about 40% lower than it was in 2014. That is hugely significant. The figures are really impressive: 300,000 children will be better off this year and not living in poverty. That is a major improvement. We continue to keep a close eye on how families are doing across the country. We have no doubt that we have made a huge difference in their lives.

We now have a plan to create more jobs for families. This will put them in a better position so they can plan for a brighter future.

We had to start by looking at how we could help families, and help them we have. We will continue to pursue measures to that end. What we can do now is create even more jobs for families.

[The Chair, Liberal, Wayne Easter]

Thank you, Minister.

Mr. Deltell will go a little longer than five minutes to keep it balanced.

Go ahead. The floor is yours.

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

Thank you so much, Chair.

My fellow members, it is always a pleasure to see you.

Minister, it is lovely to see you as well.

Right off the bat, I want to applaud the Minister of Finance for his French skills; the calibre of his French is always so good. Although it may have been poor form, my poking fun at the minister's French skills in the past was merely a political response to the fact that, when I asked questions, I didn't get the answers I was hoping for. Now that that's clear, let's get down to business.

Our party is very concerned about how the current government is handling public finances. Basically, its approach is to say that it can borrow money, technically speaking, without really knowing what the impact will be on the country's deficit or debt. The government's approach is to borrow money.

As I said earlier in the House, no household breadwinner or business owner could survive by constantly relying on their line of credit. The bill has to be paid eventually; no one can live above their means forever.

My question for the minister is quite simple. When exactly will Canada return to a balanced budget?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you.

I think it's very important to explain what we, as a government, are trying to do for the economy. Given the state of the global economy and the country's changing demographics, the biggest challenge facing the government is economic growth. At the beginning of our mandate, it was clear that the problematic numbers were attributable to our rate of economic growth. That is why we decided that the most important thing we could do for Canadian families all over the country was to make investments. We had to invest, first, in families and, second, in the country's future.

We began taking measures to put families in a better situation and help them become more optimistic about the future. The unemployment rate has gone down, so the approach has worked well. We also made investments in the future. An optimistic country has to invest to improve its situation. We have the best balance sheet in the G7, and we can make significant investments to improve our situation. Fortunately, things are starting to get better. Already, all families are better off thanks to job creation efforts. Our economic growth outlook is now more positive than it used to be.

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

Actually, the thing that was quite clear at the beginning of the government's mandate was that the Liberal Party had been elected on the promise that it would return the country to a balanced budget in 2019. Every Canadian following these proceedings will appreciate that, once again, I asked for an exact date as to when we would return to a balanced budget. The minister is forthcoming with fine explanations, but not an exact date.

I could ask the question 25 times, as I have in the past. I did so 16 times before the budget was tabled and have yet to receive an answer.

If the minister is unable to give us an exact date, then, I would ask this. Will Canada return to a balanced budget in the short, medium, or long term?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I'd like to be very clear on this. We are in the situation that we are in right now. The reason the deficit was higher than we expected when we came into office was that there was low growth. Fully half of the deficit that we delivered in our first budget was due to lower-than-expected growth. As we think about that situation, we deal with the actual problem. By dealing with the actual problem, we are increasing the growth rate of this country.

Our starting point was to make sure that Canadians felt optimistic about the future. The good news is that with a much lower level of unemployment now, with the best growth in new jobs that we've seen in over a decade, we now have a sense of optimism. The other good news is that we're now starting to see more positive growth rates. That is exactly what we need to do to deal with getting great jobs for Canadians, having more optimistic futures, and, over the long term, ensuring that we can continue to reduce the amount of net debt against our GDP, which we know is the most important measure as we think about our fiscal capacity.

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

Mr. Speaker, this is a brand new political and economic policy. Canadians feel optimistic. Is that the way to run the country? Not really. So this is why we are very concerned. The minister can't answer a simple question about when Canada will get back to a budget balanced. It can't give a timetable, a horizon for when Canada will get back to budgetary balance, in the long term, medium term, or short term. The minister can't answer. We are very concerned.

[The Chair, Liberal, Wayne Easter]

Mr. Minister.

[Bill Morneau, Liberal, Toronto Centre, ON]

We completely disagree with the member. Let me say that unemployment statistics are not just statistics, so when we say that we've created 276,000 new jobs over the last 12 months, 81% of them full-time, those are not just statistics; those are families that have jobs. Every one of those families with a full-time job is feeling more optimistic. Every one of those families that's feeling more optimistic is more likely to put kids in piano lessons or in hockey camp or do the things that it wants to do as a family. That is what's helping our economy to be successful.

As we look towards what we can invest in the future, it's about having optimistic families that are making investments in the future, investments in their children, investments in themselves, so they can improve their own skills and make all of us wealthier because the economy will be more successful. That is exactly what we're trying to achieve. The good news for all of us, even those who don't agree with our plan, is that it's working, so it's going to be better for you too.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Mr. Dusseault, go ahead for six minutes.

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

Thank you, Mr. Chair.

Minister, thank you for being with us today. I am certain that the Liberal Party's platform and promises matter a great deal to you and that, as Minister of Finance, you feel strongly about sticking to them.

With that in mind, I'm going to hone in on a number of areas where the budget falls short. I want to begin by bringing up an element in a recent NDP motion that you supported; it was on March 8. The motion sought to cap the stock option deduction loophole, which benefits the wealthiest members of society.

You mentioned, in your opening remarks, that you had reviewed federal tax expenditures over the past year in order to identify provisions in the Income Tax Act that needed fixing.

You supported the NDP motion. Why, then, in Budget 2017, did you not cap the stock option deduction loophole, which benefits the wealthiest members of society?

[Bill Morneau, Liberal, Toronto Centre, ON]

We reviewed the largest expenditures, focusing especially on the increasing number of private companies being used by individuals seeking more beneficial tax treatment. That was a very important element. We are trying to make the tax system fairer by making sure that no one can engage in tax planning that benefits them more than their neighbour. That was the most important thing for us. We know we can make changes to the tax system so that people cannot get away with paying less taxes than their neighbour. We know that is possible, so we decided to conduct consultations, after which, we will introduce changes that will create a fairer tax system. That is what matters to us most.

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

Does that mean you do not intend to honour that Liberal Party promise in the near future? Right now, are you flat-out refusing to close that particular tax loophole, or do you remain open to the idea?

[Bill Morneau, Liberal, Toronto Centre, ON]

We will continue looking for ways to achieve an effective and fair system that works. I want to be clear: the government wants to make absolutely certain that everyone pays their fair share. We invested $444 million in Budget 2016 to combat tax evasion, and we have done the same in this year's budget. That way, we can be sure that people are paying their fair share. We will keep looking for ways to achieve tax fairness, right up until the end of our mandate.

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

Thank you.

I have a question on another topic. It recently came to light that Canada's banks are engaging in marketing practices that are questionable, sometimes deceptive, and even illegal. I'm not sure whether you heard about the revelations uncovered by CBC/Radio-Canada. Bank employees said that they were pressured to sell financial products, using questionable methods in some cases.

What do you make of such marketing practices by banks? What have you done to make sure they obey the law?

[Bill Morneau, Liberal, Toronto Centre, ON]

Just to be clear, I'll respond in English. We believe it's very important that the banking system treat its customers appropriately. The Financial Consumer Agency of Canada and the Office of the Superintendent of Financial Institutions are looking into banking practices. We are going to make sure that they have the resources to do so. We're standing very close by to make sure they are in fact reviewing those banking practices. We think it is important for us to consider this and to assure us that people are not being pushed into products that are inappropriate for their situation. We take it seriously, and I'm encouraged that the Financial Consumer Agency and OSFI have moved forward as quickly as they have—and, as I said, we will remain focused on this issue.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Pierre. We went a little over time with all three speakers.

Ms. O'Connell, go ahead for five minutes.

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

Thank you, Mr. Chair.

Thank you, Minister, for being here. I want to touch on a highlight in this budget that we haven't seen before, the gender lens that was included in it.

During this process, were there any surprises that maybe affected policy, since you were taking a different approach with this budget? What does this mean in the future policy-wise, when a gender lens in budget decisions will now determine what those decisions mean for different people in this country?