Finance Committee on April 9th, 2020

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

Thanks, Mr. Chair.

Thanks to our two witnesses to close off the week. We hope that your families are safe and healthy.

My questions are for Mr. Macdonald. Thank you very much for your work, Mr. Macdonald, on the analysis of work done to date.

I want to start off with the CERB, the emergency response benefit.

Other countries have put in place a universal benefit. Jagmeet Singh, of course, has proposed as well that it go out to everybody rather than marshalling public servants to reject, as you remarked, a substantial number of people. You've identified 862,000 in your report. I believe you said that there are another 2.1 million who have part-time wages and therefore also don't qualify, so we may be talking about as many as three million Canadians.

Also, how urgent is it that we fill those gaps, that we repair the problems with how CERB is constructed? Those are my two questions, to start.

[The Chair, Liberal, Wayne Easter]

Mr. Macdonald, go ahead.

[David Macdonald]

I would state that the CERB, while closing in on a universal benefit, is not yet a universal benefit, given some of the constraints. For instance, March 15 was the point at which you had to become unemployed in order to access it. Another constraint was the requirement for $5,000 in earnings in the previous year, and another one was that your earnings had to have dropped to zero.

With one in five working Canadians receiving the CERB, assuming that there aren't that many duplicate applications, this is rapidly becoming a basic income for working-age Canadians.

We have a basic income already for seniors. It's called the guaranteed income supplement. As well, there is old age security, as you know. For families with children, the Canada child benefit, I would argue, formed a base income of sorts. I think that the emergency payments through the Canada child benefit as well as the GST credit structure or LIFT, which are coming out both this month and next month, are also important pieces of this. They would arguably form a basic income that's a bit more automatic in a sense.

I actually would like to see the GST emergency benefit extended, not just for a single month but for several months while the crisis lasts, because it doesn't go just to working-age Canadians but to all Canadians: seniors, families with children, working-age Canadians and so on.

In terms of the 2.1 million Canadians who've seen the majority of their hours cut between February and March, this is a substantial new group that does not have access to the CERB at present. There is some discussion now about allowing people whose hours have been reduced to only 10 a week or who now make, because of hours reduced, less than $500 a week to gain some form of access to the CERB. I think this will become increasingly important going into April and May, as the true impact of this COVID-19 crisis on the labour force survey becomes evident.

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

Thank you.

For my second question, you raised the issue of benefits, whether we're talking about supports for business or the wage subsidy, and ensuring that support, particularly to larger businesses, is dependent on maintaining benefits and making sure that the money is not being spent on dividends or stock buy-backs or executive bonuses. Other countries have done that, the U.S. most notably. How important is it to follow best practices on that account, ensuring that the supports are actually directed towards workers?

Finally, following up on Mr. Ste-Marie's question around the banking sector, since the federal government does have the ability to ensure that we are not seeing profiteering during this economic crisis, how important is it for the federal government to take action to ensure that more financial institutions are doing as Vancity is and waiving credit card interest, and far fewer are continuing to benefit from the crisis and from Canadians going into debt?

[The Chair, Liberal, Wayne Easter]

Mr. Macdonald, if you could tighten your answer to about a minute, that would be helpful.

[David Macdonald]

I can definitely do that, Mr. Chair. Thank you.

In terms of the wage subsidy, I think it is clear, but unless the federal government is clear that companies are not going to be paying out dividends and conducting share buy-backs, inevitably you will have bad actors in the same way that inevitably, if the federal government does not say that employers should make up that final 25% of employees' pay, you will end up with bad actors.

That's not to say that most businesses are going to do that, but I think it's easier if it's clear to everyone involved, including the federal government, businesses and workers, that these are benefits for workers and are not benefits for shareholders and not benefits for executives. Clarity would be helpful on that front.

Of course, publishing a list of who gets the money would also help transparency on that front.

[The Chair, Liberal, Wayne Easter]

Did you have a bit more to say, Mr. Macdonald? Go ahead.

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

You still have 30 seconds.

[David Macdonald]

I was just going to say that in terms of interest rates, I certainly think that targeting credit cards and payday loans, in particular, to substantially reduce their rates would be most beneficial.

For mortgages, it's much less. The interest rates there are already very low. If there is an interest in targeting interest rates, I think those are the places you'd want to target your efforts.

[The Chair, Liberal, Wayne Easter]

Thank you both.

The next four will be Mr. Cumming, Ms. Koutrakis, Mr. Morantz and Mr. Fraser.

Mr. Cumming, go ahead. No?

Okay, could we go with Mr. Morantz? Marty, unmute your button.

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

Sure, Mr. Chair. My question is for Mr. Wilson.

I just want to turn your mind away from resources for a second—although those are a huge topic, of course, and there's lots of work we need to do there—to the current plight of Canadian charities. We know that Canadian charities do a great deal of work for Canadians, and they've been hurt particularly hard during this crisis.

I was wondering what thoughts you might have in terms of what a government could do to free up Canadians to donate in larger amounts to charities. One of the ideas I've been pushing since I was elected for in October is allowing donations to charities of shares in privately held corporations or private real estate and allowing for an exemption to the capital gains tax. That's just one idea, but I wonder if we could collect your thoughts around what we could do to assist charities, what you think of that idea, and whether you have any other suggestions.

[W. Brett Wilson]

Certainly, and I appreciate that. Again, I can go on record as having given more to charity than my own income for most of the last 20 years. I have been very fortunate to have had significant gains in a number of public companies and private companies.

There's a gentleman named Doug...Donald K. Macdonald, I believe, who's been pushing for many years to have capital gains tax wiped out on any shares that are donated. It's very similar—

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

It was Donald K. Johnson, actually. I've talked to him.

[W. Brett Wilson]

Yes, that's the one.

The other place where that applies is in Canadian cultural property. When someone donates something of significance to Canada, it's defined as cultural property, and there's no capital gain on the donation. There is simply a receipt for the donation.

We need ways that we could accelerate and encourage larger donations. I'm talking hundreds of thousands to millions of dollars, and these are out there. I know that because I'm on the phone raising money many times a year, and the money is out there.

Just encourage that at this time would be probably one of the great opportunities. We just canvassed the eight women's shelters in Calgary to ask them exactly what they need, because I need to understand what they're short of, and I will go about raising money for all of them. We just canvassed every one of them, and they have all seen the tap turn off. The regular flow of money and in-kind donations—just everything—has dried up.

Calgary is a microcosm of what happens in Canada. Charities are struggling, so as you've just proposed, we need to do something to accelerate, to trigger, to put people's thoughts back to....

Will we recover? I'm a believer in Canada. I'm a believer in all things we do. There will be a recovery from COVID and there will be a recovery in the oil prices, so I'm already looking at who will need help and how I can help them.

To the thought that we could do something to accelerate or trigger that, yes, please.

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

Thank you for that. I wholeheartedly agree, and we need to keep pressing on that issue for charities.

On another matter, looking forward to a recovery, one idea that has been floated is that instead of having a centrally planned government stimulus program when we come out of the recovery, we could just unleash the power of private capital by, for example, having a temporary exemption on the capital gains tax on the sale of publicly traded shares for a limited period of time.

I am curious to know your thoughts on that and how massive an injection of capital it could mean to the economy if a policy like that were to be implemented.

[W. Brett Wilson]

That's a good question. As much as I like that concept, the problem is one of timing. The number of people who have large unrealized gains in their portfolios, whether in Calgary or Alberta or Canada, is down substantially, so I think using that as a trigger for economic stimulus might be for the medium term, the medium term being one to three years. The short term is what we need to address.

For example, I am taking one of my companies into the province of Alberta, looking for $100 million to $200 million dollars of economic stimulus to assist in building critical infrastructure and jobs. There's a conversation we'll be having, but that's instantaneous use of capital.

Unfortunately, I don't think the timing is right for simply reducing the tax rate on unrealized gains. I like the concept; I think the timing is suspect relative to its utility. We need cash and we need it now.

[The Chair, Liberal, Wayne Easter]

Okay, I'll have to end it there.

Thank you, Marty and Brett.

I'll turn to Ms. Koutrakis and then Mr. Cumming, if he's on. If he's not, we'll go to Mr. Poilievre.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair, and before I run out of time, I want to take this opportunity to wish everybody a happy Easter and a happy Passover.

My questions are going to be for Mr. Macdonald, and I also want to share some really great news. I saw some numbers that are just unbelievable. I know many of my colleagues on the panel have already discussed this, but as of 4 p.m. today, we have had just under 460,000 new CERB applications. The total of new applications for the week was just under three million, and since March 15, our public servants, who are working so hard, have processed 5.47 million applications.

I've received countless messages from my constituents in Vimy, who are thrilled that they've already started to receive the money. What a nice way for them to celebrate Holy Week.

For my first question I'm going back to the mortgage question, Mr. Macdonald. How could the banks relieve the pressure on everyone who's borrowing in the next few months, while ensuring that the impact on them is gradual and does not then put them in jeopardy when the crisis is over? In your opinion, can this be done, and can it be done consistently with clear criteria followed by all the banks?

[David Macdonald]

It is fairly incredible that 5.5 million applications could have been processed in two weeks. It does speak, I think, to the need that Canadians have for this type of support. I don't think the labour force survey fully captured that when it came out today. I think we'll see how high the unemployment rate is when the April data comes out in May.

In terms of reducing pressure on mortgage holders, and what we could do for this or about this, we do have a precursor to this, more in the U.S. than in Canada. When the financial crisis hit the U.S., it was primarily due to residential mortgages. We can learn from the U.S. about what worked and what didn't, in terms of attempting to keep people in their homes as opposed to having them lose their homes and having their credit ratings wrecked for seven years. Largely, what happened was the latter, not the former. People were kicked out of their homes, they went bankrupt and their credit ratings were wrecked with long-term ramifications.

What could have happened, and had happened elsewhere, was that government played a role in helping homeowners renegotiate mortgages as needed. This isn't a deferral, but it is a changing of the terms of the contract with the banks in terms of their mortgages, spacing out the payments over a longer period, having to be slightly lower for some period and then increasing later on. Potentially, folks get jobs back and the labour markets improve.

I think at this point, as much as I or anyone else loves to hate the banks, this is something that really needs to be done in coordination with the federal government. I would say the provincial governments, but it's the federal government that should be in a position to start making plans towards renegotiating mortgages if people stop making payments on them.

[The Chair, Liberal, Wayne Easter]

We will have a quick question from Annie, please.

[Annie Koutrakis, Liberal, Vimy, QC]

I would like your thoughts on the Canada emergency wage subsidy with the announcements that came yesterday from Air Canada, which just rehired 16,000 employees, and WestJet, which rehired 6,400 workers. Can you give us your thoughts on that, and on the overall success? It may have been rolled out a little late, but what are your thoughts on that?

[David Macdonald]

It sounds like this is exactly what the program was designed for. It was to help businesses, which would have laid their employees off, to hire them back. Well, in a sense hire them back—the federal government is paying the payroll—but it's connected to the companies for which they are working. As we try to turn the economy back on when the COVID threat passes, however long that takes, we need to try to maintain worker-employer relationships if we can. One of the challenges with so many people applying for the CERB, instead of being scooped up by the wage subsidy program, is that these folks now are disconnected from their previous employment places. If those small businesses want to restart rapidly when non-essential businesses are allowed to reopen, those workers may not be available to work there. One of the benefits of a wage subsidy program is that it maintains the relationship between the employer and the employee.

If those workers are fully working for that company, and the employer decides not to top up the 25%, that's where I become somewhat concerned that employees might see a threat of a 25% wage cut in order to stay employed or be unemployed. I think that's where it would help if the federal government was clear on that point. I know that these programs are being developed on the fly, so additional clarity on that point would help to weed out bad actors.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

We will have to split the remaining time, so that will mean four minutes each for Mr. Cumming and Mr. Fraser to wrap it up.

Mr. Cumming.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

Thank you to the witnesses.

I want to focus my questions on Mr. Wilson. I don't have to tell you, Mr. Wilson, as a proud Albertan like you, that the resource sector has been hit pretty hard in Alberta, and COVID has been thrown on top of that. With that said, we've got this unbelievably strategic sector that has really helped Canada through a lot of difficult times. Even though we have a price war going on right now, it strikes me that, when we come out of COVID, we should be able to take advantage of this strategic asset.

What do you think has to happen in government policy to make sure that the resource sector can help fuel our recovery and encourage investment back into Canada?