Evidence of meeting #13 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Mitch Davies  Senior Assistant Deputy Minister, Industry Sector, Department of Industry
Daryell Nowlan  Vice-President, Policy and Programs, Atlantic Canada Opportunities Agency
Bill Grandy  Director General, Programs, Atlantic Canada Opportunities Agency
Andrea Johnston  Assistant Deputy Minister, Innovation Canada, Department of Industry
Margaret Buist  Vice-President, Policy and Planning, Canadian Northern Economic Development Agency
Richard Botham  Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance
Andrew Hayes  Deputy Auditor General and Interim Commissioner of the Environment and Sustainable Development, Office of the Auditor General
Yves Giroux  Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Jason Jacques  Director General, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer

4:20 p.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

I want to turn to one other thing, if I have time, Mr. Chair.

In the private sector, which I like to call the real world of investing, when we use the word “investment”, we're looking for a return on investment, an ROI. It seems to be in government.... This was the same under the NDP in Manitoba. They would always use the word “investing” when it was spending taxpayer dollars on projects, but the reality is that the metrics around when government invests in private companies are not the same as when the private sector does it. If it were, you would be able to tell me, which is my question, what the return is on the investment of all monies invested through the strategic innovation fund.

4:20 p.m.

Senior Assistant Deputy Minister, Industry Sector, Department of Industry

Mitch Davies

I'll provide a general response, as I think it's—

4:20 p.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

There should be a number. In the private sector, if you invest a million dollars in something, based on whatever the cap rate is, you're looking for a return on investment, the financial return. What is the financial return on the $907 million invested in Ontario, the $62.25 per capita? What's the return on investment to the taxpayers of Canada for that investment in financial terms?

4:20 p.m.

Liberal

The Chair Liberal Wayne Easter

The floor is yours, Mr. Davies.

4:20 p.m.

Senior Assistant Deputy Minister, Industry Sector, Department of Industry

Mitch Davies

I would say that there's a degree of complexity in moving from a corporate income and balance sheet to determine the return on investment, which will be completely mathematical and about profit. In this case, we're talking about the overall Canadian welfare.

4:20 p.m.

Conservative

Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB

Is there no return on investment?

4:20 p.m.

Senior Assistant Deputy Minister, Industry Sector, Department of Industry

Mitch Davies

No, I would say it's a matter that's just much more empirically difficult. You don't sit with the same sort of accounting instruments and the same simple or narrow approach to answering that question.

I'm not trying to say this to be provocative, but if you think about the advanced research that's undertaken, some of these things appear to be small sums, and if you just evaluate it on a dollar return to the party that's granting the funding, you're not going to find a justification for it. The idea to fund folks to create the Internet probably didn't look like good business, but it is the underpinning of global growth, and we now all benefit from it, including all the private sector that's flourished.

I would say the kind of investment in R and D and support that we're talking about is the type that has that long-term benefit, but again, it's not evaluated in the same way. I think we have to rely on evidence about the effects of these kinds of initiatives, the effect of supporting, in a direct or indirect way, business activity, if it has a public benefit, and determine that from research rather than each specific deal.

4:25 p.m.

Liberal

The Chair Liberal Wayne Easter

I will end it there.

Mr. McLeod. This is the last round.

4:25 p.m.

Liberal

Michael McLeod Liberal Northwest Territories, NT

Mr. Chair, I want to ask a question to CanNor.

I want to first of all say that it was good to see that we finally locked in the CanNor program as an ongoing program. Very recently, we've started seeing a little more money trickling into the coffers there, too. I think we're at about $46 million for the three territories.

I also hear a lot from people who are applying for projects and looking for investment. A lot of times, the money is no longer there. It has been spent or has all been allocated. Could you provide the committee with information, with data, on how oversubscribed CanNor is and has been? If you can't do it today, then maybe you could give it to us later in writing.

4:25 p.m.

Vice-President, Policy and Planning, Canadian Northern Economic Development Agency

Margaret Buist

Thank you.

We just did an expression of interest for our funding this year, and you're correct that we have long-term funding now in budget 2019 through IDEANorth. CanNor's funds available for projects are about $46 million and ongoing. We have a number of different funds. We have the IDEANorth flagship program. We have nutrition funding. We have targeted indigenous entrepreneur funding.

This year's expression of interest was formed around our pan-territorial growth strategy, which was a made-in-the-north solution that went after four particular areas that northerners identified as areas that need attention for building the economy. Those were infrastructure, resource development, innovation and diversification, and skills.

In this year's expression of interest we received 325 project concepts with a total funding request of $225 million. Forty-six per cent of those were submitted by indigenous organizations, and 52% of projects were submitted by for-profit entities. It is a huge success for CanNor to have that kind of request. We still have to go through the vetting process. Not all of those will end up being eligible, but I think that answers the question of the oversubscription of our particular regional development agency.

4:25 p.m.

Liberal

Michael McLeod Liberal Northwest Territories, NT

Thank you for that.

I also wanted to ask how the effectiveness of the agency's grants and contributions is evaluated. What are the performance indicators that are used to measure program outcomes?

4:25 p.m.

Vice-President, Policy and Planning, Canadian Northern Economic Development Agency

Margaret Buist

We go through some regular evaluations, and, as I mentioned earlier, we talk about the way in which we evaluate the applications that come to us. We also do evaluations of the success of our funding. Previous evaluations show that every $1 million that's invested by the agency has led to an overall increase of $2.2 million in territorial gross domestic product and contributed to 18 person-years of full-time employment. We do have some burgeoning statistics about how successful our funding is in terms of contributing to the northern economies.

4:25 p.m.

Liberal

Michael McLeod Liberal Northwest Territories, NT

I wanted to point out, and I'm sure you know this, that doing business in the north is a lot different from doing business in the south. It's a lot more expensive.

Can you quickly tell us what your agency is doing to support economic growth and diversification, both in our regional centres and also in our smaller communities?

4:25 p.m.

Vice-President, Policy and Planning, Canadian Northern Economic Development Agency

Margaret Buist

Sure.

Since 2015, CanNor has approved $170.9 million in funding for 388 projects across all three territories, resulting in the creation of 1,500 jobs. Those numbers may sound small to some of you, but the north, with all three territories, has a population of about 114,000 people, so that's not an insignificant contribution. In your territory alone, in the the Northwest Territories, we've sponsored 90 projects worth $45 million.

We still have significant challenges to overcome, such as the decline of mining and exploration in the Northwest Territories. We work very closely with our territorial partners, the governments and our indigenous economic development organizations to try to look at things like diversifying the economy in the north to anticipate the downturn in the diamond mines of NWT, for example.

4:30 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

In the Library of Parliament paper that was prepared, there is a chart on page 7 that outlines how we compare with our major competitors in the G7. I think that's an important chart for members to look at. It shows that we are the fifth-lowest in the G7 following France, the United Kingdom, the United States and Italy. I think that's a factor that we need to consider as well.

Ms. Johnston, I think there were several questions that perhaps you could provide further information on. Mr. Cooper asked for a list related to a particular project that he was talking about. You could provide that to the clerk. I believe Mr. Fragiskatos had a question, if finance can provide it, on the unemployment and debt-to-GDP ratios.

There's been a lot of discussion here on cost, taxation and investment. I wonder, Mr. Davies or someone, if you could give us further information on maybe the comparative return on strategic public investments, if there's a way of doing that, because it's always a question: Is government getting a return for the dollars spent on investment in a number of areas? I think it would be helpful to us if you could find some way to give us your perspective on the comparative return on strategic public investment. Please provide what you can.

With that, I want to thank each and every one of you for coming forward.

We'll take a five-minute suspension while we get ready for the next panel.

Thank you very much.

4:35 p.m.

Liberal

The Chair Liberal Wayne Easter

We will reconvene and continue our study of corporate subsidies.

We welcome to this panel, from the Office of the Auditor General, Andrew Hayes, deputy auditor general, and Heather Miller, principal; and from the Office of the Parliamentary Budget Officer, Mr. Giroux, PBO, and Mr. Jacques, director general.

With that, we'll open the floor.

Do any of you have opening remarks?

Mr. Hayes first, and then Mr. Giroux.

March 10th, 2020 / 4:35 p.m.

Andrew Hayes Deputy Auditor General and Interim Commissioner of the Environment and Sustainable Development, Office of the Auditor General

Mr. Chair, thank you for this opportunity to appear before your committee to discuss our audit reports on fossil fuel subsidies. Joining me at the table is Heather Miller, the principal who was responsible for our most recent audits on this subject.

Fossil fuels are a non-renewable source of energy, including coal, oil and natural gas. While playing an important role in Canada's economy, they can have a negative impact on the environment and on the health of Canadians.

In 2009, Canada and the other G20 countries committed to phase out and rationalize inefficient fossil fuel subsidies. In November 2015, the Prime Minister instructed the Minister of Finance and the Minister of Environment and Climate Change to work together to fulfill our G20 commitment and phase out subsidies for the fossil fuel industry over the medium term.

In June 2016, Canada committed to phasing out inefficient fossil fuel subsidies by 2025. The Department of Finance was responsible for identifying the tax measures covered by the commitment, while Environment and Climate Change Canada managed the process to identify non-tax measures.

We recently presented three reports on this issue: one in 2017 and two in 2019. The audits examined whether Finance Canada and Environment and Climate Change Canada supported decision-making in order to meet Canada's commitment to phase out inefficient fossil-fuel subsidies.

In 2017 and 2019, we asked the departments to explain how they defined “inefficient fossil fuel subsidies” and whether they had identified inefficient tax and non-tax subsidies. Without a clear definition, the departments cannot identify which fossil fuel subsidies are inefficient and which should be considered for phase-out.

ln 2017, we found that the Department of Finance Canada had not defined what an inefficient fossil fuel tax subsidy was, nor could the department tell us how many there were. At the time, we could not provide assurance that the department analyzed the social, economic, and environmental aspects of all tax measures to support informed decision-making.

As a result, we followed up on this issue in 2019 and found that the Department of Finance Canada did not have a clear and meaningful definition of inefficient. We also found that, although some tax subsidies for fossil fuels were eliminated, the department's assessments focused almost exclusively on fiscal and economic considerations. lt did not consider how economic, social, and environmental factors, which are the components of sustainable development, were integrated into the decision-making on fossil fuel subsidies over the short, medium, and long terms.

I would like to turn now to Environment and Climate Change Canada.

In 2017, the department developed a plan to guide the initial stages of its work. However, it did not know the extent of federal non-tax measures that could be inefficient fossil fuel subsidies. In 2019, the department's work to identify inefficient non-tax subsidies for fossil fuels was still incomplete and not rigorous.

The department considered only 23 of more than 200 federal organizations to compile an inventory of potential non-tax subsidies. The department did not include all regulatory organizations with mandates in the fossil fuel sector, nor did it include all research granting organizations or publicly funded projects. In our view, this is partly because the department used unclear definitions to guide its determinations.

Without having clear definitions of inefficient fossil fuel subsidies, and without providing decision-makers with advice that is based on complete assessments, the departments cannot ensure that they are providing the support needed for Canada to meet its commitment by 2025.

The Department of Finance and Environment and Climate Change Canada did not agree with our 2019 recommendations to clarify their definitions of “inefficient”; however, Environment and Climate Change Canada did agree with our other two recommendations on the identification and assessment of potential subsidies.

Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.

Thank you.

4:40 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, Mr. Hayes. That should give us something to chew on, I would think.

Mr. Giroux, the floor is yours.

4:45 p.m.

Yves Giroux Parliamentary Budget Officer, Office of the Parliamentary Budget Officer

Thank you.

Good afternoon Mr. Chair, vice-chairs and members of the committee. Thank you for the invitation to appear before you today, our first official appearance of the 43rd Parliament before this committee. We are pleased to be here today to discuss the committee's study on corporate subsidies.

As you mentioned, Mr. Chair, with me today I have Jason Jacques, director general, casting and budgetary analysis. I take credit for the good work and often assign blame to him for mistakes we might make. It hasn't happened yet, but if it does, that's a big part of the arrangement Jason and I have.

Under the Parliament of Canada Act, I am mandated to support Parliament by providing analysis of macro-economic and fiscal policy for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability.

Some of you may know that the act also states that this committee can request that I undertake research into and analysis of matters relating to the nation's finances or economy. This special legislative provision is only available to the four committees listed in the act, which in addition to this committee, include the Standing Senate Committee on National Finance; the House of Commons Standing Committee on Public Accounts; and the House of Commons Standing Committee on Government Operations and Estimates.

In the 42nd Parliament, this committee benefited from this legislative provision by passing a motion to engage my office to prepare a regular economic and fiscal outlook. These types of motions not only allow my office to provide advance notice of the publication to facilitate committee scheduling and follow-up but also more importantly allow us to share our reports with committee members under embargo prior to publication, which provides members with the opportunity to conduct early in-depth analysis and review.

Jason and I will be pleased to discuss any suggestions you may have regarding how my office can best serve and support the work of this committee for this study and throughout the 43rd Parliament.

Although my office has not published any specific analysis of corporate subsidies, Jason and I will be pleased to answer your questions on this topic or any other issues of interest to the committee.

Thank you.

4:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you very much, Mr. Giroux.

We will go to five-minute rounds to try to get at least eight members on, with a little flexibility for a little more than five minutes.

Mr. Poilievre, you are first.

4:45 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Does your office, Mr. Giroux, have any models that correlate the tax burden to the number of jobs in the economy?

4:45 p.m.

Parliamentary Budget Officer, Office of the Parliamentary Budget Officer

Yves Giroux

We do have models that are macro models that simulate the impact of certain tax policies or certain policies generally speaking. They show the impact of taking certain elements down or putting certain elements up to determine the impact on the economy.

4:45 p.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Right.

Can you tell us the total amount the Government of Canada spends on what is colloquially called “corporate welfare”?

4:45 p.m.

Parliamentary Budget Officer, Office of the Parliamentary Budget Officer

Yves Giroux

I don't have that number off the top of my head.

Do you, Jason?

4:45 p.m.

Jason Jacques Director General, Costing and Budgetary Analysis, Office of the Parliamentary Budget Officer

I think the challenge you pointed out by using the word “colloquially” is that there is generally no set definition with respect to corporate welfare.