Finance Committee on April 23rd, 2020

[The Chair, Liberal, Wayne Easter]

Thank you, Gabriel.

We'll go to Mr. Julian and then Mr. Poilievre.

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

Thanks again to our witnesses.

I wanted to follow up on the comments by Mr. Lefebvre and ask Mr. Staniloff and Ms. Dennis the same question on interest rates. They haven't calmed down from our big banks. We're seeing mortgage deferrals, but they come with interest, penalties and all sorts of fees. All this does for restaurant owners is basically increase the pain by increasing the debt load.

Should the federal government be exercising the powers that it has to push the banks—and they've admitted they'll follow the law if the government does use the tools—to reduce these interest rates and reduce the interchange fees so that we have that shared sacrifice and restaurants don't go under because the banking industry isn't willing to play its part?

[Marc Staniloff]

There's no question. With interest rates, the Bank of Canada rate has come down to 0.25%. Long-term rates have not come down. I will tell you, though, that we have a couple of mortgages with BDC, and they did reduce their rate from, I think, 5.25% down to 3.05%, which was interesting. The problem is that they've been one of the toughest banks to deal with in terms of getting an interest rate deferral, which has been interesting.

Again, as I said, this deferral is great for the short term. It's just going to kill us in the long term. We need to figure out some type of abatement or some type of forgiveness on this. It has to be a long-term situation. We're all in this together, as I hear from everybody. Everybody always says that, and I don't disagree, because everybody on this panel is certainly feeling the pain. But we need to understand how the banks are going to step up and take a haircut. That's basically what it is. I don't know what that looks like, but it keeps me up at night knowing that we're deferring this stuff but it's not going away. It's interest on interest. That's what they're doing right now.

[Rose Dennis]

I echo the statements by Mr. Staniloff. Really, having these debts mount up and not be forgiven or worked through in an abatement process of some sort doesn't help the industry to be successful, let alone sustainable. When you have those things in mind, you also have a number of things that ripple out from that effect. It's not only sustainability in business. There are then health issues in regard to operators and owners, which lead to mental health issues that will put extra pressure on our health care system. A number of things ripple out besides business. That's something I wanted to address here as well, something that we really haven't talked much about today.

Really, we do see that it's desperate. It does need to happen. We need to see something so that these interest rates are gone, forgiven or worked through. I think it's quite critical.

[The Chair, Liberal, Wayne Easter]

Perhaps I could tag on here before I go to Mr. Poilievre.

One thing I'm hearing from the seasonal tourism industry here is that the wage subsidies end too soon. They have to spend a lot of capital to get in business, but the wage subsidy is going to end just before their season starts to roll, if it rolls at all.

What are your thoughts on that?

[Rose Dennis]

Yes, that's absolutely true. Tourism operators don't even know if they can open the doors if that wage subsidy isn't extended into the fall. There's a lot of capital invested, as you mentioned, Mr. Easter, just in opening the doors and getting things rolling, let alone hiring and knowing how many they can hire and how many they can support. This affects our unemployment rates. This affects our ability to provide good service and experiences. We do believe it's absolutely crucial that the wage subsidy is extended, especially with seasonal operators in mind.

Prince Edward Island doesn't have as much of the luxury that other provinces across Canada do in terms of having a really robust four-season situation. Especially when it comes to tourism and hospitality, we really rely on those summer months. As much as we've been trying to build out the other seasons, going into fall and winter experiences and spring, we're still not there yet. With this, it really does put an extra setback onto those goals that we had as a province.

Thank you for the opportunity to speak to that. We believe it is crucial to bring that forward into at least September.

[The Chair, Liberal, Wayne Easter]

We'll go to one question each from Mr. Poilievre and Mr. Fraser.

The floor is yours, Pierre. You're on.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you very much.

The government is likely to run a deficit of around $200 billion this year. Canada is the second most-indebted country in the G7, if you take into account public and private debt combined. Unlike many countries in the OECD that were paying off debt in the last four years, Canada was adding to it. Eventually, the bill is going to come due for all of this. We'll be even more indebted than we were going in.

Do any of the witnesses want to comment on how they are forecasting their future tax bills to pay for the enormous government deficits that are not only happening now but that preceded this crisis itself?

[The Chair, Liberal, Wayne Easter]

Who wants to take that one on? It is an issue.

David, you're on.

[David Lefebvre]

I can give a quick answer to your question, Member of Parliament Poilievre.

It's an excellent question, because of course there's going to be a bill with this, but right now, in terms of emergency measures and making sure businesses stay on, it also makes sure that some taxes are going to be paid and that some things are going to be contributed by our industry, which is something that is important. We represent something like 4% of the GDP, which is also a massive amount of taxes, both at the corporate level and also at the personal level, which our employees and our owners pay.

Restaurants Canada definitely has been an advocate for progrowth measures, both budgetary and in terms of investments, and those measures definitely will need to accompany any kind of recovery that will need to be put forward. We recognize that. One way we think we can do it is to make sure that as many of us survive....

[The Chair, Liberal, Wayne Easter]

With that, we will go for the wrap-up to a basement in New Glasgow and Mr. Fraser.

Go ahead, Sean.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you so much, Mr. Chair.

First, I'll begin with a comment for Ms. Dennis, who made the point about insurable hours for seasonal workers and said that they may not be able to build up to qualify for EI. I want her to know that I've spent the morning on the phone with fishermen in Nova Scotia. They've made this point very clear. There are people who have an emergency benefit who typically rely on the income they earn over the course of the summer to build up their access to EI to carry them through to the next season. I wanted to acknowledge the point and let you know, Ms. Dennis, that I am working on it.

My question is for you, Mr. Staniloff. You mentioned that there might be some room for a subsidy to encourage travel or other measures to incentivize the tourism industry to bounce back. One of the things I'm hearing in conversations with people in my own community is that they are going to be more inclined to travel locally when conditions allow, because they are quite worried about travelling to another jurisdiction where they've not been paying attention to the success of the health and safety measures.

I'm curious to know if you think there's an opportunity for us to create some sort of incentive to have Canadians travel in their own province, in their own community, while we wait for the global tourism and travel industry to really get back to what normal used to be.

[Marc Staniloff]

Absolutely. I did mention that I think we have to look at Destination Canada and really promote travel in Canada and spending money in Canada. There's no question about it. A lot of my hotels are in tertiary markets. I really cater to the rubber tire traffic, and I'm going to, hopefully, benefit quite a bit from that, as opposed to the larger hotels, the group business and airport-located hotels.

I certainly think we need to really focus on just how to get people travelling in Canada and spending dollars in Canada. To me, it's a no-brainer. I think we really need to focus on that right across the whole country. My hotels are located shore to shore. I have hotels on Vancouver Island. I have hotels out in St. John's, Newfoundland. I'm a big promoter of staying in Canada.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

I believe, Mr. Staniloff, that it was you who mentioned earlier that there's a double whammy, if I could put it that way, with the oil and gas industry where it is now. I used to work a fair bit in Alberta and Saskatchewan. Pretty nearly all of those smaller hotels in those smaller towns, right up to Fort St. John, Dawson Creek and everywhere, depend on the oil and gas industry, not the hospitality industry as such.

[Marc Staniloff]

It's amazing. A large number of my hotels, certainly in Alberta and Saskatchewan, are in resource-rich communities. We've been having issues since 2014. At some of my hotels, I've seen my revenues drop by 66% from 2014 to 2016, with zero recovery, and now we're at today and adding to that the COVID. It's going to be impossible to recover. Some of these hotels I don't think can ever recover. A bunch of these hotels are going to be demolished. There's going to be a lot of fallout from this.

[The Chair, Liberal, Wayne Easter]

Yes. The government did make an oil and gas announcement the other day. It will go some distance, but there's a long distance to go. We recognize that.

With that, I want to thank everyone for their presentations and for responding to our questions. Thank you for taking the time. Your information, I can tell you, is being heard and will be put up the line by members of all parties.

Thank you, Elizabeth. I'm sorry that we didn't get to you with a question. Maybe in the next round we will.

With that, we will have to suspend for a couple of minutes while we test the speaker connections for the next panel.

Again, thank you.

[The Chair, Liberal, Wayne Easter]

We're now in panel number two of meeting number 21 of the House of Commons Standing Committee on Finance, and we're operating under the order of reference of Tuesday, March 24, on the government's response to the COVID-19 crisis and pandemic. We are continuing to look at constructive criticism, I guess you could say, in areas where there needs to be greater solutions as we move ahead to try get through the pandemic and get the economy back to near normal again, hopefully, at some point.

With that, we'll start with the witnesses. I would ask witnesses to try to hold their presentations to about five minutes. That will give us more time to delve into the issues from the members' perspectives.

Starting us off, as an individual and a business owner, we have Mr. Elsaadi.

Mr. Elsaadi, the floor is yours.

[Salah Elsaadi, Business Owner, As an Individual]

First of all, thank you for giving me this great opportunity to speak in the committee today. My name is Salah Elsaadi. I own three businesses in the city of Ottawa, two of them on Sparks Street downtown, a hair salon and a crêperie, and another one, a construction business in the south end. I live in Nepean—Carleton. I support all these communities through taxes and businesses.

On the point I've been discussing with my friends and a lot of businesses, I know that the government is helping them with their costs, with loans of $40,000, for businesses of $20,000 up to $1.5 million. It's still a loan, you know, whether people get it or not. I talked to the bank. It's more like you're applying for credit in terms of whether you're able to get it or not, but I talked to the bank, and I said that it's sponsored by the government and they should get it.

But there's a big issue here. A lot of small businesses get their money as dividends at the end of the year. A husband and wife or two partners pull a cheque every month from their corporation, and this money goes every month toward their salaries. At the end of the year, their accountant writes it for them as a dividend to save taxes, because they've already paid high property taxes, higher end.... Those people are not able to get the help of this $40,000 loan. Again, as I said, it's a loan. It's not giving away money. They have to give it. I see that the government is talking about giving a few months for the commercial property to help the landlords for their tenants. It's great, but it's always in the short term.

As I said, I have two businesses in the city of Ottawa, and I live in the city. One of my businesses on Sparks Street is the crêperie that we opened last May. I will give some history for what businesses I think will survive. Visitors come from Mexico, United States and China and all over the world. I believe that all the Canadian cities from coast to coast will be suffering because there will be no visitors. The long term for this business will be suffering. I believe the government has to work toward the long term. All of this is for short-term businesses all the time. It is not talking about how to help businesses over the long term.

This is one of my points. It is to help those people who get dividends and to think about how we are going to survive. In Ottawa and Montreal, businesses run due to visitors. All the hotels are shutting down. I'll give you some history. I was the chairman of the Sparks Street BIA, if you are familiar with it. I ran the festival from 2005 to almost 2015. I created all these festivals and brought a lot of visitors to the city. With 2020, this business is not able to survive. I'm not talking just about Ottawa. I would also say that about Quebec City and Montreal.

On the Canadian economy, I know the government is doing a good job, but we still have to think about how to push toward help. Hotels and the streets downtown are empty. Businesses are empty. The government now, as you all know, is working from home. What happens after we go back to business? Social distancing...? Also, maybe 50% or more are going to stay home, and there will be no visitors and nothing coming out to push the economy. This is one of the main issues that I think businesses are facing now and will face in the long term.

I've run my businesses since 1994. I've worked with different businesses, especially one of them I would call a tourism and event business. Two of my businesses were in that area. My third business, which is in construction, caters to locals, and I think it will keep going.

People now are fearful. I've talked to customers outside who don't want to talk to us. They don't know what will happen next. I know it's something that we are all suffering with, so what I think I would like from the government is to see it consider the businesses that get their salaries as a dividend, not as a T4. Not everybody gets a T4.

The second point is on the cities, the big cities like Montreal, Ottawa, Toronto, Vancouver and Halifax. Every city in Canada depends on visitors, and now we're not going to be able to have them. That's what we have to focus on for the next year, I would say.

I sent a letter to our landlord. I said we have to focus on business, not for the next four months or six months but from now until next May, to see how we can survive.

[The Chair, Liberal, Wayne Easter]

Thank you. Mr. Elsaadi.

We'll turn now to the Canadian Cattlemen's Association, president Bob Lowe and executive vice-president Dennis Laycraft.

Go ahead.

[Bob Lowe, President, Canadian Cattlemen's Association]

We'd like to thank you for allowing us to appear before this committee.

My name is Bob Lowe, and I'm a rancher and feedlot operator in southern Alberta. I am also the current president of the Canadian Cattlemen's Association, the national voice of Canada's 60,000 beef operations. With me is Dennis Laycraft, the executive vice-president of the CCA.

To start I would like to stress that we strongly believe that if current challenges are strategically addressed, the Canadian beef industry will emerge as a key recovery sector post-COVID-19. However, we cannot take the current challenges lightly, and they must be addressed urgently, as the beef industry is the foundation of jobs for 228,000 Canadians and it contributes $17 billion to the Canadian economy.

As you've likely seen in the news, challenges brought forward by COVID-19 have resulted in a number of Canadian and American meat processing facilities significantly reducing their processing capacity. The scale of the impact is daunting. The Cargill plant in High River alone slaughters just under 40% of the total Canadian production. Every day they are not operating about 4,500 head of cattle are being backed up in the beef supply system. Prices are falling and costs of keeping cattle for longer than intended are mounting. To further compound the problem, other facilities have also had to reduce their processing capacity to adapt to COVID-19, and these challenges are in addition to the shortages we were already facing in eastern Canada. For beef producers, this has resulted in limited options on when and where cattle can be marketed, increasing costs of keeping cattle on farm for longer periods of time and severe market volatility.

We have already seen the value of a single market ready beef animal drop 30%, or over $500, for the week of April 12, 2020. Without some intervention, we estimate that losses will grow by an additional $500 million by the end of June. With such stark losses, one cannot help but relate this to the hard times of BSE in the early 2000s, which resulted in fundamental changes to Canada's beef industry, including the loss of 27,000 beef operations and the related loss of five million acres of Canada's endangered northern great plains.

It's not only processing capacity that has become a challenge, but the main risk management tool that we use in the beef industry, price insurance, has seen the premiums jump from what used to be $10 to $15 per animal to over $70 per animal. This is especially difficult for our young producers, who carry higher debt loads and need this insurance to be able to access loans from banks.

We have put forward to the federal government a set of policy solutions that support market stability and enable sound business decisions to continue to be made across our sector. The time to implement these policies is now, before it's too late.

Our first recommendation is to establish a set-aside program that will address the severe processing shortage by putting a set number of cattle on a maintenance diet rather than the growth diet they would normally be on. This will help better match the number of cattle ready to market with the amount of processing capacity available. This flexible policy tool was used successfully during the BSE years. It brings market stability and avoids a potential market crash.

We also recommend addressing the sky-high premiums that have made our main risk management tool, price insurance, unusable, as well as making the tool available in the Atlantic provinces. As I mentioned previously, this is very important to our young and new producers.

We also recommend adapting the advance payments program, similar to what was done for canola producers last year, to provide added liquidity and flexibility. This will enable cattle producers to market their commodity at the best time and actually make reinvestments in their herd. This three-legged stool approach of set-aside, livestock price insurance and adaptations to the advance payments program is a proactive set of tools that together will address the challenges being faced by different parts of our industry.

I would like to stress that our recommended approach will help avoid costly payouts from the AgriStability program, which is helpful for addressing losses but is more reactive in nature. Our recommendations will save government money and get the beef industry back to growth faster.

I would also emphasize that the current funding programs announced in CERB, wage subsidies, loan programs or otherwise are almost entirely unusable by our industry. Furthermore, the existing suite of business risk management programs come nowhere near being able to address the current challenges we are facing. We need smart policies implemented that are proactive and address the unique nature of agriculture and the pandemic.

We would emphasize that the beef industry can be a growth industry for the Canadian economy as we emerge from the COVID-19 pandemic. We have robust international access and our Canadian product is in high demand. However, if beef producers aren't able to make sound business decisions due to market volatility, the beef industry will emerge from COVID-19 in difficult shape, just as many other Canadian businesses.

Thanks.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Bob.

Before I go to Dan Kelly, I'll just say that I've seen some letters from the Canadian Cattlemen's Association that went to various ministers. I assume you sent those three proposals to the clerk of the finance committee as well, just to give the full explanation.

[Bob Lowe]

Okay. If we haven't done that, we will.

[The Chair, Liberal, Wayne Easter]

Thank you.

John Barlow, you're the first questioner. Do you want to give your microphone a little test? Give us a little comment on where you're from and what the weather is like.

[John Barlow, Conservative, Foothills, AB]

Hello, everyone. Thanks for having me.

Bob and Dennis, it's good to see a couple of constituents.

I am in High River, Alberta. The weather is sunny, but it's a little stressful down here.