Finance Committee on March 12th, 2020

[The Chair, Liberal, Wayne Easter]

I can balance you and Pierre out.

[Sean Fraser, Liberal, Central Nova, NS]

Dr. Mintz, at the very end of your final response, you finished by explaining that there might be some instances where targeted grants in the innovation space may be an effective strategy, though it may buck the ordinary trend. I'm curious if you have guidance for us on whether there's going to be a preferred strategy to target those kinds of grants to maximize productivity or growth. Where should we be looking?

[Dr. Jack Mintz]

I do like the IRAP. In fact, I have talked to some start-up companies that have qualified for some of the various government programs. One of the interesting things that I've talked to some of the entrepreneurs about is that they got a lot of help vis-à-vis business plans when going through the process. In fact, this kind of struck me as something better than research and development tax credits that are just given to companies where—who knows?—there's no business plan involved or anything like that.

For a long time, a lot of people—including economists and others—might have argued that it's better to have tax credits than to have grants because governments go through politics and they start giving to friends and things like that. There is a lot of history of that. Let's be honest. It's true, but if you run a very competent program that is based on scientific and financial expertise to make the determination, then I think it's a much better way of proceeding compared to just giving blanket tax credits to all sorts of different industries.

I see this happen in the United States, where most of the money is actually done through grants and not as much on the tax side. Over the years I've become more enamoured with the grant process, as long as it's handled in an effective way.

[The Chair, Liberal, Wayne Easter]

Ms. Paish, you wanted to step in for a minute. Then we'll go to Mr. Desilets.

[Sue Paish]

I will just add to what Dr. Mintz has said. I wholeheartedly support the notion of IRAP. If we want to build ecosystems, we have to help companies go beyond understanding how to build business plans and help them understand and learn how to compete, how to grow, how to attract customers and how to build new products. There's a series; it's a continuum. IRAP is very helpful for very small organizations that start up. Once they learn the power of a business plan, and—as Steve has said—the power of not just having a good idea but being able to demonstrate it, then there's a new level of learning that needs to go on, which is different from IRAP.

One thing we're seeing in the organization that we run is the learning that goes on when you put small companies in an environment with big companies, with research and development and with some of our folks. It really challenges some of the thinking and some of the planning.

There is not a slingshot approach to this. If you want to build an ecosystem, you need to have an ecosystem approach that understands how companies grow and evolve. You need to define success.

[The Chair, Liberal, Wayne Easter]

Thank you all for that discussion.

Mr. Desilets has the floor.

[Luc Desilets, Bloc, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

I thank all our witnesses for joining us.

My question is for Ms. Cormier, of Connexion Matawinie. An article published in the November 2019 issue of the Nouvelliste says that the relationship between Maskicom and Bell Canada is fairly complex, even difficult, long and painful. The situation is apparently the same for the Maskinongé RCM and the Laurentides RCM.

I would like you to briefly tell us about your relationship with that telecommunications giant.

[Caroline Cormier]

Mr. Desilets, thank you for your question, which is very relevant.

Last Wednesday, I submitted a brief to the CRTC that describes all the obstacles we are facing in Matawinie related to telecommunications giants like Bell Canada. Those issues are experienced by the RCMs you mentioned, but also by the Bécancour RCM.

Bell is really lengthening the process we have to follow and thereby slowing down the permit-obtaining process. With a project like ours, which covers a distance of 2,700 kilometres in the Matawinie region, we have to ask Bell for a building permit for each of the 55,000 planned telephone poles. We are rather putting in requests for groups of 50 poles, but you can calculate that the number of requests we must submit remains huge. Bell has three months to respond to us.

So the speed at which permits are obtained is not very high. I would say that what is slowing down the project the most is not the obtaining of governments' or MPs' support, but rather the difficulties we are having in connecting to the telephone poles that belong to Bell Canada.

I know that Maskicom has appeared in the media. We decided to take another approach and to document our problems in a public brief that we sent to the CRTC and that anyone can read. It is a 36-page novel, with supporting photos and charts. Since April 2019, we have applied for more than 600 permits from Bell, but we have only received 68.

So our project is being slowed down by telecommunications giants, which are creating obstacles for us.

[Luc Desilets, Bloc, Rivière-des-Mille-Îles, QC]

I will continue in the same vein.

In your opinion, how important would a federal subsidy like those of the connect to innovate program be for Matawinie?

[Caroline Cormier]

Currently, if there were no subscriptions and our network was fully funded by municipalities, that would mean a $40 annual increase over 25 years in every citizen's property taxes. Therefore, a government subsidy would help lighten that financial burden—citizens would still have to pay for their Internet access, whether they like it or not—in addition to helping regional businesses and attracting new businesses to set up in the region.

Our territory is large and beautiful. I am talking about Matawinie, but I would say that, across all regions—be it in Quebec, Ontario, the Maritimes or Alberta—rural communities don't have access to high-speed Internet. Therefore, that hampers those regions' economic development.

[Luc Desilets, Bloc, Rivière-des-Mille-Îles, QC]

Okay.

Could you explain to us the process elected officials and the community had to follow to create your organization?

[Caroline Cormier]

The Matawinie RCM has made many representations over the past few years, especially to the Quebec government, but also to private telecommunications companies to get them to set up in Matawinie, but without being limited to serving only the main street of municipalities.

The 15 mayors met and decided to build a shared network that will belong to them—a type of community project that is really the RCM's project.

Once we have reimbursed the $60 million, which is not going to happen overnight, we will reinvest the benefits in our 15 communities, which will be able to develop economically thanks to this fibre optic network that will belong to them. So our project is the result of collaborative efforts by 15 municipalities, each of which have their own separate reality, but which decided to collaborate. We have followed the same principle as that of the Bécancour RCM project, in the Trois-Rivières region. I also know that a project underway in the York Township in Ontario is following the same approach as us.

[Luc Desilets, Bloc, Rivière-des-Mille-Îles, QC]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you.

I have a quick question, Caroline. Who do you have to apply to for these permits for each pole? Where do you apply? Is it a federal or provincial or...?

[Caroline Cormier]

We are sending our requests to the consortium Duss, of which Bell Canada is a member, and Bell is responding to us. We have tried to establish connections with the CRTC to speed up the process, but the next step will be the notice of publication that must be submitted by April 24. Usually, however, everything is done through that internal platform used by Bell Canada.

[The Chair, Liberal, Wayne Easter]

So it's Bell itself that decides whether they'll give you a permit on their pole.

[Caroline Cormier]

Yes.

[The Chair, Liberal, Wayne Easter]

There are some obligations there. I know we went through that in P.E.I.

Are you at liberty to tell us how much rent you had to pay on each pole? You don't have to if it's commercially confidential.

[Caroline Cormier]

The process is so cumbersome that we no longer really know to whom to speak, and that ends up slowing down the obtaining of permits. That is unfortunate because taxpayers' money is being used to refurbish a network that covers all of Quebec and Ontario. We have to pay for that.

[The Chair, Liberal, Wayne Easter]

The reason I ask is that I remember the previous government, this government and the government before the previous government. I remember in about 1998 when John Manley said we'd be the most connected country in the world. We're still far, far from being connected in rural areas. Bell Aliant, or Bell, is a problem.

I know they have lots of money from both levels of government in my territory, and I can tell you how we operate in P.E.I. A permit is granted, yes, and a second pole has to be put in between each one, and another company will run that Internet system sometimes, and it's worked reasonably well, but there is absolutely no way that a permit can't be granted in 30 days. That's ridiculous. I might talk to you offline.

Mr. Julian is next.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I thank all our witnesses for being here and for contributing a great deal to our study.

I am going to start with Mr. Cross and Mr. Mintz.

I think there's a public perception accented around the Loblaws subsidy. Loblaws is a very profitable corporation. There was $12 million given for fridges. I know in my riding people talked about that. There's this very profitable company that's getting a subsidy for fridges when people in my riding are struggling to find affordable housing. There's no pharmacare, so people are struggling to pay for their medication, and there isn't child care. It's all of these things, and indigenous communities don't even have access to clean drinking water, yet this subsidy was given to a very profitable corporation. When we look at loan forgiveness as well, we see that General Motors had well over $1 billion in loans, which they never had to repay, at the same time shutting down Oshawa with that loss of jobs.

I wanted to ask both of you this. What is your sense of the public perception of these subsidies, and whether people feel this is a fair way to proceed when they're struggling to make ends meet?

I'll start with you, Mr. Cross.

[Philip Cross]

Maybe I'll start. I'll be very short because I want Jack to have as much time as possible, since he's much more authoritative on this and most other points on economics that I am.

What's the public perception? The NDP first raised this as a major national issue, I believe, in the 1972 or 1974 campaign. Here we are, almost 50 years later, and never mind that we still don't have a good grasp on the extent of corporate subsidies and certainly don't have a good evaluation of them overall. It's easy to cite examples of where it pays off, as fellow witnesses have testified, but that has to be weighed against all the obvious failures, or the instances in which they're just subsidizing activity that would have taken place in corporations anyway.

I think overall the public sense is that this isn't a good expenditure of public dollars even if, obviously, specific actors within industry are extremely enthusiastic about it.

I'll leave the rest of the time for Jack to answer.

[Dr. Jack Mintz]

Well, I haven't taken a poll to talk about political views on it, but I think what your point raises goes back, I think, to the heart of the question: What's the point of the business subsidies in the first place?

Today we're hearing a lot about the positive stuff. Even I would argue that supporting innovation is an appropriate thing to do. You need to have, actually, an ecosystem for innovation, which includes a whole bunch of things. It's not just the grant itself. I think a number of things have been done right in Canada, although I would say that right now our personal tax system is a serious issue in terms of discouraging innovation. In fact, some of the calculations I've shown—and I can give those to your committee, if you'd like—show that small businesses in the United States are now taxed less heavily than large businesses, once you include not just the corporate income tax but also the personal income tax. It's important to keep that in the count.

To get to your point specifically, it goes to the question: What's the point of the subsidy? I totally agree with you. I don't see any economic rationale that Loblaws needed to get a subsidy to buy some refrigerators. They could do it themselves. The question is that this was a climate change policy. If you have a proper carbon tax and a carbon price, which we now have in Canada, Loblaws will make that investment itself in order to reduce some of the carbon costs.

That's all you need to do. We don't need to have all these subsidies thrown around. I think this one was really quite wrong.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay. Thank you very much for that.

Now I want to raise the mother of all corporate subsidies, which is the Trans Mountain boondoggle. Now at over $17 billion, it is running—

[The Chair, Liberal, Wayne Easter]

I thought we had that discussion the other day. It's an asset.