Finance Committee on May 15th, 2017

[Bill Morneau, Liberal, Toronto Centre, ON]

There are projects that can generate revenues, such as the REM in Montreal. This will give an investor the opportunity to carry out a viable project, thereby creating more jobs in Montreal and allowing this city to help its citizens. This is a good example of a project that demonstrates what can be done with the Infrastructure Bank.

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

There has to be a user-pays element.

[The Chair, Liberal, Wayne Easter]

Pierre, I'll have to cut you both off there. We're considerably over time. We went over a little on all three questioners so we will have to suspend for the vote. Coming back we'll have time for five questioners: Ms. O'Connell, Mr. Albas, Mr. Grewal, Mr. Liepert, and Mr. Badawey.

We will suspend until after the votes.

[The Chair, Liberal, Wayne Easter]

We will reconvene. Thank you all for making quick work of a vote.

We'll continue with five-minute rounds.

Ms. O'Connell.

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

Thank you, Mr. Chair, and thank you, Minister, for being here today.

I want to speak about agriculture, and in particular your economic advisory panel. When we heard from them, it was in regard to their second report outlining Canada's potential and opportunity for agriculture growth and agrifood growth.

I was extremely happy today when, in my riding, Transport Canada released a new Pickering agricultural lease renewal strategy, something that hadn't been updated in more than 20 years. For 40 years, prime class 1 farmland has been underutilized in my riding of Pickering. Today, finally, allowing the types of investment in agriculture in my community through 10-year leases, beginning in 2018, will allow farmers to actually plan out crops, and properly work toward the types of investments they need.

Could you elaborate on the types of investments and priorities around agriculture in budget 2017?

[Bill Morneau, Liberal, Toronto Centre, ON]

The work in your riding, in particular, around the Pickering agricultural lease renewal strategy is going to have a huge impact. I know your advocacy in that regard is going to make a real difference for farmers in your riding. For us, more broadly across the country, obviously focusing on where Canada has a comparative advantage is critically important.

Our advisory council on economic growth really looked at the places where, in our country, we have already an advantage, and have the possibility for making additional investments to really improve our standing internationally. The agricultural sector is an obvious one. Looking at the possibility to expand on an already successful area of export is important. That's why we've moved forward with measures to help that sector.

Our broad approach will be to think about how we can make farmers more effective now, and how we can ensure there are policies that allow our agricultural sector to be successful in the future. We know this will provide us with real opportunity moving forward across the country, and obviously in places where we have big farming communities like in your riding.

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

Mr. Chair, I was going to talk about the infrastructure bank, but I think we've heard a lot about that, and I want to make sure, in my amount of time, that we touch on health care. Last Thursday, this committee had hearings, and we were talking about mental health investments, in particular.

I want to talk about those investments in this budget regarding health care, and the work you're doing with other ministers, Minister Philpott for example, in working with the provinces and territories to ensure that mental health is being addressed across this country.

[Bill Morneau, Liberal, Toronto Centre, ON]

It's quite helpful because we haven't spent enough time, I don't think, talking about the significant health care investments in budget 2017. In getting to what was really a co-operative way to work with the provinces, we've set ourselves up for continuing success in health care over the longer term. We know Canadians would like to see more significant investments in some specific places where there are big challenges, and the two that we identified were mental health and in-home care.

The agreements we came to allow us to continue our approach to be a partner with the provinces on health care, broadly speaking, but also to focus our efforts in those areas.

In the mental health area, which you referenced, Minister Philpott and the Department of Health will be working together with the provinces to ensure that we actually have a measurable impact on mental health in the provinces by identifying actions and investments each province will make that will have an impact on improving mental health outcomes in the provinces. The significant investments we've made will make a real difference for people across the country in an area where we know so many people are challenged.

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

Do I have more time?

[The Chair, Liberal, Wayne Easter]

You have time for a very quick one.

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

I will get back to the infrastructure bank, because, given my background in municipal government, I can't not. With regard to the infrastructure bank, I've heard feedback from mayors and municipalities about the ability to complete projects that they might never have been able to complete. I'll give you an example from my riding. My community is in a suburb of Toronto. A lot of people work in Toronto, and having transit that crosses borders can be quite difficult. Can you maybe elaborate on the infrastructure bank and the opportunities to have these really transformational types of infrastructure that maybe one municipality or one area couldn't have done alone?

[Bill Morneau, Liberal, Toronto Centre, ON]

I think this is a particularly important thing to think about with the Canada infrastructure bank. We've identified that we have significant infrastructure needs in our country, more significant than any one level of government can get at. In fact, we believe they are more significant than all levels of the government can get at even together. So although we're making a very enormous investment in infrastructure, $180 billion over a dozen years, and even with the additional investment of municipalities and provinces, which will increase that amount, there will still be projects that won't get done, and they won't get done for a number of reasons.

One is that they might just be too big for any level of government to take on. Another might be, as you suggested, that as we go through the traditional way of identifying projects, which often come from municipalities through the provinces for consideration, the ones that go past one municipality into multiple municipalities might not actually be highest on the list of things to do. By looking at projects that are bigger, that transcend boundaries, and that display the opportunities for successful investment, we can actually get things done that might not otherwise get done. The kind of project you're talking about might be a perfect example. Transit such as you're talking about will often have revenue opportunities attached to it. It will require big investments by multiple jurisdictions, and it's very susceptible to creating opportunities for outside investors. I think that's the sort of project we'll get at together with our new bank and provinces and municipalities, which we might not get at otherwise.

[The Chair, Liberal, Wayne Easter]

Thank you, Minister and Ms. O'Connell.

Mr. Albas, you have slightly more than five minutes.

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

Thank you, Mr. Minister, for being here with your deputies today. We certainly appreciate your presence. I would like to just touch on the infrastructure bank. It should probably be called an infrastructure corporation, because it won't be providing bank services so to speak.

Minister, just to put this in context, right now I'm hearing from insurance companies that say OSFI's new capital requirements for them to invest in Canadian infrastructure are going in the opposite direction of the rhetoric of your government. They're saying right now that as of January 2018, the new capital requirements will actually make it more difficult for Canadian insurance companies, which have traditionally invested billions—I think $70 billion—in Canadian infrastructure. Can you explain why you are so gung-ho on an infrastructure bank that basically is to attract foreign investment while at the same time actually making it more difficult for Canadian companies to invest in Canadian infrastructure?

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you for the question. I think this is actually a useful thing for us to talk about. The two things you're bringing up we see as entirely separate. As we think about the capital requirements for banks and for insurance companies, we're thinking about the requirements those institutions have in order to protect the people who are, in the case of the banks, putting their deposits into the banks, or, in the case of insurance companies, buying policies. We expect there to be capital requirements, because we want to make sure that banks or insurance companies have the long-term sustainability they need in order to pay out those depositors or those policyholders when the time comes. That is the sole way we're going to look at those capital requirements. With respect to the way those institutions decide to invest their money, that will be based on those capital requirements they have. That's the approach.

To the second part of your question, the Canada infrastructure bank is an entirely different body. This body is not a body for which there will be depositors, in that classic sense, or policyholders. Instead its goal is to increase the amount of infrastructure investment that goes on by using outside capital to come in on a project-by-project basis.

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

The outside capital, though, Minister—and this goes back to Mr. Poilievre's point earlier—won't be subject to the same rules about how much capital they need to have in reserve. Is that correct? They won't be bound by the same rules we're going to be expecting of insurance companies come January 2018.

[Bill Morneau, Liberal, Toronto Centre, ON]

That is absolutely correct. We're talking about two separate things. An insurance company's capital requirement rules are based on the actual goal of that institution; whereas our goal, as the prudential regulator of those institutions, is thinking about protecting the people within them. The Canada infrastructure bank is actually looking to do something quite different.

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

If you can't make sure that there are proper reserves for those companies that will be investing in these projects, Minister, what happens if a project goes bust? What happens when that money has to be paid back either through a loan guaranteed by the government or through financing by the taxpayer? Won't taxpayers end up holding the bag in that case, especially if they're not regulated at the same level as Canadian insurance companies and banks?

[Bill Morneau, Liberal, Toronto Centre, ON]

Again, this is a separate kind of institution. The projects we're talking about will be projects investors will come to invest in because they will see a business opportunity there. They'll see the business opportunity because there will be an opportunity for perhaps their pensioners, who could well be Canadians invested in the pension fund, to take advantage of those streams of income.

If, for example, there were a project in which one particular investor, for some reason or another, didn't stay involved in that project, the continuing business attributes of the investment would be there, meaning that it would still be possible for another investor to come in—

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

However, there will be two separate rules: one where the taxpayer ends up holding the bag; and another that is tightly regulated, with capital put in place. I just disagree with that kind of thinking, Minister. We should be encouraging Canadians to invest in Canada.

I'd like to move to excise duties.

[Bill Morneau, Liberal, Toronto Centre, ON]

No, you're entirely confusing the nature of what we're trying to do here, and just to be clear—

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

Minister, are you aware that the excise duties on wine have increased by 125% since 1980 and that the new measures you are proposing will basically be 2% per year forever? That's going to take a lot of investment out of wineries, microbrewers, and brewers of spirits across this great country. They are very sensitive to excise changes.

Minister, have you done any work to see what this will do to jobs and investment? In this country right now, we are at the lowest level of business investment since 1981. Minister, have you done the homework on this particular sector, on how sensitive it is, considering they pay all the other taxes? By the way, excise ends up being paid provincially as well as federally, then you add the GST or HST, depending on where you're making it. Minister, there are going to be increases right across the board. Have you done the homework?

[Bill Morneau, Liberal, Toronto Centre, ON]

Let me come back to the first part of your comment to say, once again, that the Canada infrastructure bank, on a project-by-project basis, will seek outside investors. That is exactly what we hope to do in order to increase the amount of infrastructure investment in this country. The advantage will be that we will have outside investors. This will allow us to do more, and it is entirely separate and distinct from banking or insurance company regulation. The two should not in any way be confused.

With respect to the decision to not allow excise tax to decline over time, we've decided that what we will do is ensure that inflation, which occurs in our economy, as you may know, will be considered, because the excise taxes will be subject to inflation, just as other aspects of our economy are subject to inflation. That, we believe, is an approach that will be a long-term positive and will make excise taxes more predictable over time.

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

Minister, excise taxes are ad valorem, so as the price of the wine goes up, particularly for inflationary reasons...

[The Chair, Liberal, Wayne Easter]

Dan, we're substantially over time.