Finance Committee on April 3rd, 2020

[Sherri Torjman]

I would agree with that. In fact I used that word “reconstruction” deliberately because it was a Second Word War post-war use of that word. During that time, it was referred to as “reconstruction”.

With respect to the first aspect of your question, if you read the eligibility criteria for the CERB, it says that the benefit is available for individuals who stopped work as a result of reasons related to COVID-19. To me that would be almost 100% of the population. I think we should allow people to apply, provide the benefits that they need so they can pay their rent and feed their families, and then maybe after the fact do some reconciliation through the income tax system, or whatever mechanism it might take, but not to worry about quibbling over eligibility criteria right now.

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

Thank you very much for that. I think we're in agreement then around the universal benefit. That is something that I think a lot of people are calling for across the country. I'm glad we're on the same wavelength. Hopefully the government will take notice and, when Parliament reconvenes, will make those tweaks.

Thank you, Mr. Chair.

[Sherri Torjman]

It effectively could become that.

Just one thing, are we including people over age 65? That's not clear to me because there's no age ceiling. I don't want to exclude anybody, and there are certainly a lot of people in precarious positions. That was one question that has been posed to me: We have old age security, GIS and a combination of CPP, so are we eligible because we're caring for a vulnerable child or an adult parent? That's not clear at the current time.

[The Chair, Liberal, Wayne Easter]

My understanding of that, and Sean Fraser can maybe fill us in a little later, is that OAS and the Canada pension plan are not considered earned income under the program. It wouldn't count against your earnings, but you would have had to earn $5,000 over the last year beyond what is in your pensions, etc.

We'll turn to the second round and we'll start with Mr. Cumming, Ms. Koutrakis, Mr. Cooper and then Ms. Dzerowicz.

You have a five-minute round, Mr. Cumming.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

Thank you to all of the witnesses for appearing today as we try to figure our way through this very difficult time for Canadians.

I want to start with Dr. Mintz. As you know it's a double whammy in Alberta and Saskatchewan. Not only do we have the crisis of COVID, but we also have the significant crisis of low oil prices and the resource sector being on its heels. The struggle is even greater in those two provinces.

Do you have any thoughts on what good public policy would be able to help those industries, in addition to the current programs that we're seeing with the wage subsidy programs, the loan programs, the BDC programs?

Could you give us any insights that you might have of something that might be able to help those provinces?

[Dr. Jack Mintz]

First of all, there are a couple of areas that I think one should pay some attention to. One is with respect to the sectors themselves. It's particularly important on the energy side, but I don't want to get into the view of picking one industry over another. You have to remember that some of the other commodity price-sensitive industries, such as mining and forestry, are also taking a significant hit right now.

On the other hand, agriculture is actually holding up quite well with good pricing, so they're not facing the same kinds of issues, although there are some other issues that have to be dealt with in respect to supporting agricultural food production, which is so critical to fill up all those shelves. We have to remember that there's a whole supply chain involved here, including the truckers and many other people who are involved.

As a result, there are two major strains that are involved—energy, of course, being the worse one with the major reduction in prices, which is going to take more than the COVID response. I think the government is going to have to be sensitive to the fact that there are going to be some industries that are going to take longer to come out of this. Energy will be one of them, and there may be some other ones too. Therefore, they are going to need to think of a package that's not going to be one size fits all sectors, but that may have to take into account the fact that some sectors may have a longer period, especially if they're sensitive to pricing that's impacted by inventory accumulation that will go along for a while.

The other issue, of course, on the energy side particularly, but also some others that one could talk about is that not all of the farms, for example, going into this crisis were in good shape. Some were fine. In principle, support for farms has to be provided in such a way that those farms that have good strength will be able to continue, but not in such a way as to try to keep bad farms operating.

That doesn't apply only to the energy sector. That could apply to others, including aerospace and others that may have been challenged at a point before even coming into this problem.

The other issue, I think, that needs to be dealt with is provincial government support for some of the provinces where there's been a huge drop in the revenues. I think the federal government should move very quickly on fixing the stabilization program, which has a cap of $200 per taxpayer and excludes royalties and has a number of other aspects to it. This would have been particularly important for Newfoundland, but also for some of the other commodity-based provinces that are getting very strongly hit in terms of their revenues right now, and yet, we have a program that is really not at all very sensitive, I think, to some of these changes.

It is particularly important for those commodity-based provinces that do not receive any equalization payments. Newfoundland is a good example.

[The Chair, Liberal, Wayne Easter]

Go ahead, James.

[James Cumming, Conservative, Edmonton Centre, AB]

I want to pick up on another comment, Dr. Mintz. You talked about the wage subsidy program and the portal and methodology of delivery.

What I'm hearing about from most small and medium-sized businesses is the speed to capital. They are very, very concerned about the length of time between getting this portal set up and the application process and all the things that would happen around that. Do you think there's an opportunity here to use a program more along the lines of what we've seen in the U.S.? They use the banks and offer it as an interim debt, and the wage subsidy could roll back to the banks. So, really, you can fund a payroll fairly quickly—almost immediately—and then deal with the wage subsidy as a receivable to the bank, or to pay back the bank, or use some methodology to try to speed up this process.

Do you have any thoughts on that?

[Dr. Jack Mintz]

That's exactly the idea I had in mind—using the banking system more. That could actually provide much more immediate relief. I think this idea that we're going to hold that money for six weeks is not the best, just because we need to create a portal that.... Who knows how fast things will be done? I assume they'll get done in six weeks.

I think there are many small businesses, particularly, that are running out of room. We have to remember that wage subsidy does handle wages but that's not the only cost to small businesses. They have either rental or other payments that they have to make for their property. They have utility bills, property taxes and a whole bunch of things. A number of the provinces are trying to respond on some of those things, but that's one of the reasons why holding up the money is still problematic.

On top of it, they have to put up 25% of the cost of the wages unless they get some sort of a vague.... It's not very clear about how they get forgiveness on that. A lot of them may not be able to wait six weeks for a portal to be created. I think it's an immediate requirement or, I would say, an immediate move should be made to try to get a faster way of getting money to small businesses rather than waiting for a portal to be created in another six weeks.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you both.

We'll go to Ms. Koutrakis and then Mr. Cooper. I think I put Mr. Cumming and Mr. Cooper out of order. Mr. Cooper, you're next after Ms. Koutrakis.

Go ahead, Annie.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

I would like to start by saying thank you to all the witnesses for having taken the time to participate and present on today's finance committee meeting and I hope that everyone is staying healthy and safe during this extremely challenging and unprecedented period.

I believe that we can all agree that the government is putting programs in place that would typically take up to a year or more to roll out and we're doing it in weeks. Of course, nothing will be perfect, but if I may paraphrase, perfection is the enemy of the very good.

I'd like to ask several questions, but I will begin by asking two. One will be addressed to Ms. Torjman and a second will be addressed to Ms. Spinks.

Ms. Torjman, you have quite a bit of experience working with different levels of government, and your field of expertise straddles both federal and provincial jurisdictions, as well as matters devoted to territories and municipalities. We are in a crisis situation and we need coordination and co-operation between the different levels of government, which we've seen so far.

In your opinion, how can the federal government continue to support provincial, territorial and local efforts with the views that we all have the same objective, which is making sure that Canadians are safe, healthy and economically secure?

My second question is for Ms. Spinks. Another item I want to touch upon is the charitable sector that, in addition to government, serves vulnerable families. In my home province of Quebec, for example, the provincial government has organized a common volunteer registry to assist charitable organizations, notably food banks. Our Prime Minister made a huge announcement today to help the food banks—to the tune of $100 million—cope with a surge in demand.

Is there anything, in your view, that the federal government can do with such organizations while still promoting strict adherence to public health guidelines?

[The Chair, Liberal, Wayne Easter]

We'll start with Ms. Torjman and then go to Ms. Spinks.

Ms. Torjman.

[Sherri Torjman]

Thank you very much, Ms. Koutrakis, for your excellent questions.

With respect to how governments can work together, this may touch on your second question to some extent too. There are many groups of people who are particularly vulnerable during COVID-19. I'm thinking about people with disabilities, families living with children with autism, for example, and people struggling with mental health issues. This is one area around which we can really have a terrific federal, provincial, territorial and local response if we work together around helping some of the particularly vulnerable populations.

For example, as we were saying, the charitable sector is struggling a lot. The announcements today were fantastic, and it would be nice to be able to build on those announcements for the charitable sector and to extend them.

Here are some examples of what could be done for vulnerable families. It would be very helpful if the governments could work together to provide some guidelines for safe volunteering and safe assistance to vulnerable people, because governments at provincial levels, and federally as well, are now calling for volunteers. That's essential right now, because the donations to voluntary organizations are dropping, but people are worried about doing that. How can we help vulnerable families and vulnerable individuals through safe volunteering? So there's a health aspect. In terms of what the federal government might do, the CERB could be extended to people caring for individuals with severe disabilities. That would take the pressure off a lot of the respite services that are struggling right now. Those are a few.

We haven't talked about the private sector role at all in this. It would be really nice for all governments to engage actively with the private sector, as they've done on the health side, in trying to get some private corporations to pair with charitable organizations and the charitable sector, to work together as a real “team Canada”, where you might have a pairing of a charitable organization with the private sector, or even to match the donations of Canadians. We might want to give some special tax credits to Canadians.

Those are some areas around which we can really model some excellent federal, provincial, territorial and local co-operation.

[The Chair, Liberal, Wayne Easter]

Can we turn to Ms. Spinks? You'll wrap up this round, Ms. Spinks.

[Nora Spinks]

Yes, thank you for your questions, Ms. Koutrakis. I agree with Sherri about looking at ways in which we can incentivize people to make donations, to continue to participate in supporting the charitable sector. As I mentioned in my opening remarks, the weaknesses of every system are magnified and amplified when there's a crisis, and I think one of the weaknesses in the charitable sector that we've seen is the inability of charitable organizations to maintain services in this kind of crisis. That leads us to the reinvention of the sector post-pandemic, and looking at ways in which we can restructure the charitable sector.

My organization is a charitable non-profit organization, and we happen to have been set up with an endowment fund with vision and wisdom years ago, so we can continue to do our work. We don't have to worry about our lights going off or having to lay off our staff. We're one of the lucky few in the sector who are able to do that, but it's because we have the infrastructure to do so. I think communicating these leading practices that create stability and security in the system will allow us to learn from the weaknesses that have been magnified in this particular situation. I do think there are ways—

[The Chair, Liberal, Wayne Easter]

Thank you. We're substantially over time on that question. We'll go back to Mr. Cooper, and then Ms. Dzerowicz.

Michael.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you, Mr. Chair. I'll direct my questions to Dr. Mintz.

Dr. Mintz, I just want to flesh out a little more on the wage subsidy, and in particular the criterion of a 30% drop in gross revenue. You noted correctly that it creates some unfairness. You cited businesses with small profit margins. Of course there have been start-ups, seasonal businesses, businesses that have significant fluctuations in revenue, and then just the practical reality that a number of small businesses don't readily keep track of monthly revenues.

While you stated that you understand the rationale underlying the 30% criterion, it seems that you would agree that it's not necessarily the best metric. In that regard, I'd be curious to know what you think would be a better metric.

[Dr. Jack Mintz]

I think there would have to be some rough justice no matter what you do. We have data on the typical margins in the retail sector, for example, versus manufacturing, etc. What could have been done perhaps is to have some differential rules around that. For example, you might say 10% on the retail side, 15% or whatever. I'm not quite sure of the number; I haven't tried to do these kinds of calculations. It may be that some sectors tend to have much lower margins; they have a lot of fixed costs that are not subject to the wage subsidy. You may want to have some differentiation with respect to that.

The other approach is to take a more expansive view. Instead of just subsidizing wages, subsidize some of the other fixed costs. The intent of the wage subsidy program, and why I like it, is it keeps individuals attached to their companies and may actually keep them working. In fact, I'm on the board of a charitable organization. We were talking about this earlier on. Their people are still working, but they're getting [Technical difficulty—Editor] revenues, as you could kind of expect—not yet, by the way—but they do have some other expenses they have to cover and things like that. In some ways, if I look back at it, probably I would have tried to take a more general approach on costs rather than simply looking at wages, which is why the idea of the GST refund is not a bad idea, because it's very general. It goes to the whole [Technical difficulty—Editor] regardless of the type of cost structure of the firm. The problem with it is that not all firms have to pay GST, or pay much less compared to others, so I think we may need to look at that very carefully.

Also, we may need to do much more averaging over a six-month period or give a choice between, let's say, March, but maybe use more of an averaging, because I think there's going to be some unfairness. There may be, for example, firms that don't collect that much money in March and April, but then have a lot coming in June. In the charitable sector, they tend to get a lot of donations before Christmas, so they may not actually have that much of a reduction in revenue if you use that as [Technical difficulty—Editor].

Those are a couple of ideas anyway.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you. That's quite helpful.

Moving on, in your opening remarks you touched on a few points. One of them, the last point, was the work that's required to get the economy going again and the issues arising when we get back to work, so I'll allow you to use this time to elaborate on this point.

Also, as you answer that, as we look ahead, once we get through this crisis, this public health crisis, would you see a benefit to a capital gains exemption for taxes for a certain period to encourage investment and entrepreneurship?

[Dr. Jack Mintz]

I do think that coming out of this pandemic, and the longer it is and if there is a resurgence next fall, there's going to be a huge amount of damage to the economy. We're going to have to start thinking about what, in public policies, we could do that would be growth-oriented. We need to be very careful about how we develop our policies.

One thing is that we should not be trying to just pump up consumption. That is not the way to grow the economy. What we're going to have to do is to start building up investments.

I'm not a fan of capital gains exemptions. I'm not going to be going that route myself. I think that certainly, major tax reform, which I think can help for investment and be focused on growth in a very, very diversified way so we're not picking winners and losers amongst industries, can be one type of issue. Regulations are another.

As we knew going into this, we had transportation lock-ups in January and February. We had very poor growth in January. It came out, but nobody really noticed it this week. We need to start thinking more about growth opportunities. Frankly, if we don't get the growth coming back—and I don't think we will, because even coming out of this particular issue, this pandemic, it's going to take some time to relax rules. We're probably going to end up investing more in health capacity, which I think is important. We're already talking about potentially making sure certain essential supplies are available in the country, although you can also do that through something called inventory accumulation. We've spent a lot of money on defence in case of a war against other people, but we can also think about having supplies available for any type of pandemic or epidemic that might hit.

That also costs money. That's going to be a very significant expense for government. Then on top of it, we will have now all of a sudden accumulated a huge amount of gross debt. It has already, at the federal, provincial and municipal levels, reached close to 100%. After this whole situation, if we're running federal and provincial deficits that are in the order of, let's say, 15% to 20% of the economy—I'm not sure if they're going to be that high—we will be pushing our gross debt as a share of GDP up to levels that we haven't seen for over two decades. I think we're going to need to do a lot of repair work, but a lot of it could be addressed through growth, which I think is going to be a major focus for public policy at that time, as will security. That will be another one.

[The Chair, Liberal, Wayne Easter]

Okay. We'll have to end this one around here.

Ms. Dzerowicz and then Mr. Ste-Marie.

Ms. Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much. I want to thank everyone not only for their excellent presentations but for this really, really excellent conversation.

I'm just going to start off with a comment to Mr. Fortin.

Mr. Fortin, I'm very blessed in my riding of Davenport to have a lot of artists, creators, and those working in the cultural industries. Much of what you mentioned in your presentation is very much something I've been hearing loud and clear from artists in my area.

You mentioned that many artists feel abandoned. I and many of my colleagues have been articulating that this is an area and a gap that has been identified that we have to address. I want to let you know that it is something that is heard loud and clear by our Finance officials, by our federal government. I know they are trying to work on some solutions.

Thank you for your presentation. It's very important.

Ms. Spinks, 43% of people in my riding of Davenport were actually born in another country and their first language actually isn't English or French. Your comment around language barriers and about many people feeling unsettled, particularly those whose first language isn't English or French, has really piqued my curiosity.

Something that I know the federal government has done is to put in a $30-million advertising campaign. I know it's in multiple languages. It's meant to go into ethnic media. I wonder if you might have any other ideas for us in terms of how we can better communicate to some of our communities whose first language isn't French or English.

[The Chair, Liberal, Wayne Easter]

Okay, go ahead.

[Nora Spinks]

It's a great question, and it's one of the things we're looking at. In the research we're asking people where they get their information from. Is it better to have it on paper, to get it digitally, or to get it from a friend or a trusted adviser?

What we're finding so far across all demographics is that if the information comes from a friend, a relative, a trusted source, people are not only more likely to receive it, but they also understand it, because if they have questions, they're able to ask those questions immediately. It's not just a matter of buying ads; it's a matter of making sure that people get the information in a timely manner and receive it from people they trust, whether through their faith communities, their extended family, their settlement services or their immigrant services or their lawyers—from multiple sources.

If we're able to do that, then I think we'll start to see not only their receipt of the information go up, but also their anxiety levels go down.

[Julie Dzerowicz, Liberal, Davenport, ON]

I appreciate that and I think that's information I'll definitely be passing along.

Any information you have around needing us to do some additional work around those who have language barriers, if you could pass it along to us in terms of the data that Mr. Poilievre had mentioned at the beginning, I'd be very grateful.

I have one last question for Ms. Torjman.

Ms. Torjman, you said something that I have been a little worried about. You said that between the interface of our introduction of the first tranche of programs for small businesses and our second tranche for small businesses, I think there were a number of small businesses or businesses that laid off people very quickly and technically, I think they didn't quite follow the rules. I think it's left many owners of small businesses a bit vulnerable.

I wonder if you might talk for maybe 30 seconds on that. Maybe you have a solution for us or something we should be looking at or thinking about right now so we can move forward and help them address this.