Finance Committee on April 30th, 2020

[The Chair, Liberal, Wayne Easter]

I'll call the meeting officially to order.

Welcome to meeting number 23 of the House of Commons Standing Committee on Finance. We're meeting pursuant to the order of reference of Tuesday, March 24, on the government's response to the COVID-19 pandemic.

Appearing before us today on behalf of the Minister of Finance is Sean Fraser, with the longest title in Parliament: Parliamentary Secretary to the Minister of Finance and to the Minister of Middle Class Prosperity and Associate Minister of Finance.

With Sean, after we hear from him for 45 minutes, are the witnesses from the Canada Revenue Agency: Ted Gallivan, assistant commissioner; Geoff Trueman, assistant commissioner; and Frank Vermaeten, assistant commissioner.

From the Department of Employment and Social Development, we have Alexis Conrad, assistant deputy minister. We have Cliff Groen, assistant deputy minister for Service Canada, and Andrew Brown, director general for employment insurance policy.

From the Department of Finance, we have officials Andrew Marsland—not a newcomer to this committee—senior assistant deputy minister; Evelyn Dancey, associate assistant deputy minister; Alison McDermott, associate assistant deputy minister; Suzy McDonald, associate assistant deputy minister, federal-provincial relations; Soren Halverson, associate assistant deputy minister, financial sector; and Nicolas Moreau, director general, funds management division.

We welcome and thank all the officials and Parliamentary Secretary Fraser for coming.

With that, we'll turn to you for some opening remarks, Mr. Fraser, and then go to the first round of questions for about 45 minutes. Following that, we'll turn to the officials on their own.

The floor is yours.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you kindly, Mr. Chair, and thank you to my committee colleagues.

At the outset of this appearance I'll extend the regrets of Ministers Morneau and Fortier, who were unable to join us here today, so you'll have to put up with me, I'm afraid.

Before I begin my prepared remarks, I want to offer an acknowledgement of the tragedies my home province of Nova Scotia has recently undergone. We've seen an unprecedented mass murder of innocent residents of our province and citizens of our country in recent weeks, and overnight we learned of the downing of a helicopter taking part in a NATO training exercise that to date has claimed the life of at least one resident of my province serving in the armed forces. To those families who are grieving, please note that our thoughts are with you during this time of extraordinary difficulty. Though we may not be able to mourn together, we have never been more together in some ways.

With that, Mr. Chair, I'd like to begin by thanking my committee colleagues for all their work during these unprecedented times, and I'd like to thank you for the invitation to join you at committee today.

Our government has been working very quickly on developing and implementing policies and programs to support Canadians impacted by the ongoing COVID-19 pandemic. We've rapidly rolled out historic measures for both workers and businesses, for families and young people and seniors. We continue to fine-tune some of those measures to respond to the concerns and needs of Canadians that reveal themselves as the facts change on the ground.

Over the past number of weeks, we've announced a series of broad economy-wide supports as part of Canada's COVID-19 economic response plan. I'm very pleased to be here today to provide members of this committee with the government's third biweekly report on our COVID-19 economic response.

The COVID-19 pandemic has had a devastating impact on Canada's economy. Extraordinary measures are required to respond to these challenging times. That's why the government has put in place Canada's COVID-19 economic response plan. This plan is the largest and most rapidly deployed peacetime investment in the history of our country. To help stabilize the economy, our plan is providing $146 billion in direct support to Canadian workers and businesses and more than $85 billion to meet liquidity needs of Canadian businesses and households through tax and customs duty payment deferrals.

I can't stress enough how important these actions are for supporting Canadian households and businesses through this economic shock. The measures we've been able to roll out include the Canada emergency response benefit, which is currently supporting millions of Canadians who have had to stop working as a result of this pandemic. As of Monday, more than seven million Canadians have applied to the CERB. I want to commend in particular the members of our public service for their incredible work in processing applications and rapidly getting money into the hands of Canadians who have suffered an interruption to their income.

In addition, the CERB was extended to seasonal workers who have exhausted their regular EI benefits and are unable to find a job due to the market conditions that have been caused by COVID-19.

Last week we also unveiled our $9-billion plan to specifically help students and recent graduates get through the next few months. Because of COVID-19, there aren't as many jobs available this summer for students as there appeared to be just a few short months ago. Without a job, it can be hard to pay for tuition as well as the day-to-day essentials. Therefore, we proposed the Canada emergency student benefit, which would give students $1,250 a month from May to August, with even more support for students with dependents or those living with disabilities.

At the same time, we're creating and extending up to 116,000 jobs and other opportunities for young people in sectors that need an extra hand right now or that are on the front line of our pandemic. If students want to volunteer to help in the fight against the spread of COVID-19, they could be eligible for a grant through the new Canada student service grant of between $1,000 and $5,000.

To help protect jobs and help businesses that are significantly impacted by this crisis keep their workers, we introduced the Canada emergency wage subsidy. This subsidy provides a 75% wage subsidy, up to $847 a week per employee, to employers who have been significantly impacted by this pandemic. Applications opened just this week, and on the very first day 44,000 applicants submitted applications.

We're also making sure that small businesses get the support they need. They are, after all, the heart of so many of our communities across Canada, and we're taking targeted action to make sure they can weather this crisis. The Canada emergency business account, CEBA, is providing small businesses with interest-free loans of up to $40,000, with 25% of that amount being forgivable. This money is helping small businesses stay strong throughout this crisis. To date, almost half a million applications have been approved, totalling more than $18 billion in support for Canada's small businesses.

We know that some small businesses have been significantly impacted. Some even had to temporarily close for public health reasons. Last week we announced the Canada emergency commercial rent assistance program to help the hardest-hit businesses in Canada with a 75% lower rent for small businesses that have been impacted by COVID-19. This program provides qualifying property owners with a 50% forgivable loan, in exchange for their providing a rent reduction of at least 75% to tenants who pay less than $50,000 a month in rent or who have been forced to close because of COVID-19 or had their revenues drop by at least 70%.

We've taken these actions because we know that supporting Canadian workers and Canadian businesses throughout this crisis means our economy is going to be well positioned to rebound quickly when the time is right.

We need to make sure that workers in all corners of the country are getting the support they need. Communities across Canada rely on businesses staying strong throughout this crisis. That's why we are investing $675 million to give small and medium-sized businesses financing support through Canada's regional development agencies, like ACOA in my home region of Atlantic Canada. Nowhere is the need for small businesses to provide jobs, goods and services clearer than in rural communities like the ones that I represent, so we're also making investments in the community futures programs to help small businesses survive this period of difficulty.

We know that workers in our western provinces and Newfoundland have been suffering with the global shocks to oil prices as well. We introduced two new programs that will create jobs while making significant investments in keeping our environment clean: cleaning up orphaned wells and reducing carbon pollution.

We know that the cancellations of summer festivals and sporting events has left many of our artists without chances to perform and athletes without opportunities to play. This is why we have created the COVID-19 emergency support fund for cultural, heritage and support organizations. It will provide $500 million to address the financial needs of organizations in these sectors so that they can continue to support artists and athletes.

In this unprecedented time, we will continue to carefully monitor all developments related to COVID-19. We are going to work hard to ensure that businesses get the support they need and that families can stay afloat. The measures that our government is putting in place are there to help as many Canadians as possible as quickly as possible. We all know that life during the pandemic continues to evolve. The immediate needs of Canadians are and will remain our priority.

Thank you for your time and for the work you are doing on behalf of all Canadians. These are difficult times, but we can and we will get through them together.

Thank you so much. I look forward to handling any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Fraser.

Mr. Poilievre, you have six minutes. Go ahead.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you, Mr. Parliamentary Secretary, for being with us today.

As you know, the Province of Quebec now has plans to begin reopening its economy. Saskatchewan has similar plans. Other provinces are likely to follow. The challenge, though, is that as these provinces start to open their economies, the federal programs that your government has designed have trip lines in place that will close them back up.

Let me explain. For example, if someone on the emergency response benefit earns more than $1,000, they lose their $2,000 benefit, which amounts to an effective tax rate of 200%. There are similar trip lines for businesses that are getting rental assistance or wage subsidies, or students who are getting the emergency income support. All of these trip lines effectively ban Canadian workers and businesses from going back and earning money.

Has your government come up with any plans to address these trip lines, so that when Canadians are given the all clear to work, they are not punished financially for doing so?

[Sean Fraser, Liberal, Central Nova, NS]

Thank you for the question.

Through you, Mr. Chair, I respectfully disagree with one of the premises upon which this question has been based. I've had the opportunity, over the past number of weeks, to speak with hundreds or potentially thousands of Canadians. One of the overwhelming things that I've picked up is that by and large, Canadians are looking forward, more than anything, to working, to being productive members of our society. It would be an extraordinarily rare occurrence to find a Canadian who would rather stay at home and collect the benefit than return to work and enhance their own career and contribute to their community.

With respect to the CERB, we did learn early on that this program, which provides $2,000 of direct income support, needed to be tweaked to protect the ability of those who have lost their primary source of income to continue to earn some money. With respect to the issue you raised around students, I note that students who qualify for this income support benefit also qualify for the Canada student service grant, which will enable them to earn up to $5,000 toward their education should they volunteer.

We worked very carefully to design programs that help Canadians in their time of need and at the same time encourage them to continue to contribute to our communities.

[Pierre Poilievre, Conservative, Carleton, ON]

With respect, no one is disputing that Canadians want to work or that businesses want to operate, but you can understand why some workers would be legitimately fearful of going back to work, triggering the end of their benefit, and then finding out that their employer goes bankrupt in these terrible times, or that the lockdown is reinstated, at which point they would have neither a benefit nor a wage. It would be logical for many people, many hard-working and honest people, to avoid going over that $1,000 trip line in order to protect their own financial security. No one is suggesting that such a person would be wrong to do so.

Similarly, businesses receiving the rental subsidy have to ensure that they keep their revenues down at least 70%. For many of them, the subsidy will be worth more than their earnings. Many of them will face an impossible decision: If they get their business running up to, say, 50%, they lose their rental subsidy and they can't afford to pay their rent. These are unintended consequences, but you can understand how they put legitimate, hard-working people in an incredible dilemma.

Is your government open to suggestions to remove these trip lines so people can perform at their full potential without being penalized for it?

[Sean Fraser, Liberal, Central Nova, NS]

I understand the question. I still have some disagreement with the premise, as I outlined in my previous response. However, one of the things you will have noticed.... And I'd like to thank members of all parties for their thoughtful contributions to the policy development process, because it has allowed us to pick up where these trip lines may exist through the policy development process and cure them as we go, to the extent that, at some point in the near future, we find ourselves with the public health emergency partially behind us and Canadians en masse changing their behaviour towards how they go to work and what motivates them to do so. We're going to have to continue to refine the policies we have in place now to meet the needs of not only Canadian households but the broader economy as well.

To your question, yes, there will continue to be opportunities for input and a willingness on the government's part to be flexible where we need to adjust policy. That said, to date the policies we have rolled out have largely been successful. They are more ambitious than those of most other countries in the world and have delivered benefits in a timely way. We've been able to do this because we were so open to feedback from different perspectives. It allowed us to spot these so-called trip lines and remove them, for the most part, before they caused trouble for wide swaths of the Canadian population.

[The Chair, Liberal, Wayne Easter]

You have time for a final short question, Pierre.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

I appreciate your openness. I think that we do have to work together on this, because a lot of well-meaning business owners and workers who desperately need the assistance that government is providing because of the shutdown will fear that they could lose that assistance if they do the right thing and cross these arbitrary thresholds. We're going to have to find a way to remove that, or else a lot of very hard-working and decent people are going to be prevented from going back and fully participating in the economy.

[The Chair, Liberal, Wayne Easter]

Mr. Fraser, do you want to add something?

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much. I appreciate that, which was largely a reiteration of the previous point.

Perhaps on the need to collaborate, I will say that despite the fact that we've had some enjoyable debates in the House of Commons, I have found that my colleague has been helpful not only on this committee but in some of our other conversations, and so have some of the MPs who represent different parties.

I think it's important to acknowledge that all members of this committee and members of Parliament have an open door in their ability to contact the ministers responsible for different portfolios, and to contact as may be appropriate for issues pertaining to the finance portfolio. It doesn't mean that we're necessarily going to agree on every single policy suggestion, but I do want to communicate that we have an open door to identify and clear some of these so-called trip lines, should they present real problems to the Canadian economy.

[The Chair, Liberal, Wayne Easter]

Thank you both for that. I'll give you the list of speakers so everyone knows. We can probably get five more in.

Next up on the six-minute rounds will be Ms. Dzerowicz, followed by Mr. Ste-Marie and Mr. Julian. Then we will go to Mr. Cooper and Mr. Fragiskatos, which might take us to the 45 minutes.

Ms. Dzerowicz, you're up.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I know you can't see me, but I can see you. A huge thanks to the Zoom team, who heroically tried to make me show my face, but we haven't been able to do it.

Also, Sean, I send a huge thanks to you for not only your extraordinarily hard work but also for your opening comments today. I too want to join in and say that my thoughts and heart are with Nova Scotia today, as well as with the Canadian Armed Forces and all those affected by the helicopter crash and the tragedy we heard about last night and this morning.

I have a two-part question. The first part is in regard to something that the Parliamentary Budget Officer said today, which was that the deficit in Canada is likely to top $252 billion. This is a huge number. How do you think Canadians should be interpreting this number? What do you want to be saying to Canadians at this time?

The second part of my question is about something you alluded to in your answers to Mr. Poilievre. My understanding is that Canada has been the most generous in terms of its emergency relief programs, and the fastest in terms of getting dollars into the hands of people. Can we continue to be as generous moving forward?

[Sean Fraser, Liberal, Central Nova, NS]

I'll give two themes to the response: First, yes, we can afford this; second, we cannot afford not to. There is a cost to everything, including inaction, and perhaps I'll start there.

The absence of serious and substantial federal government intervention in the present circumstances had the potential to lead to a widespread collapse of households and businesses in communities from coast to coast to coast. If you can imagine what it would be like if houses were being foreclosed upon, businesses were being shut down and people didn't have a workplace to return to at the end of this public health emergency, the cost would hardly be able to be measured in dollars.

Conversely, the cost of the action we've taken can be measured. I've mentioned the magnitude of some of the measures we've implemented to date. The PBO report points out where the cost could go. He also noted in his report that Canada is positioned well to respond to a challenge such as this and will remain in a position to continue to respond should the need demand it.

One of the reasons we're in a particularly healthy fiscal position that enables us to use the firepower we've set aside for a crisis such as this is that, going into this crisis, Canada actually had the lowest debt-to-GDP ratio of any G7 economy. We were coming in at our lowest rate of unemployment and our highest job rate, and frankly, the lowest poverty rate we've had since we started keeping track of those statistics more than 40 years ago.

During his testimony at this committee just a few weeks ago, the governor of the Bank of Canada likened our economy to that of an Olympic athlete, I think it was, who was dealing with this virus, and saying that someone who is that fit is more likely to come out of this virus in better shape than a person who has a pre-existing respiratory illness.

Because of our healthy fiscal position heading into this crisis, Canada is able to offer a world-class response in both magnitude and timeliness, and I dare say that the cost of inaction would greatly outweigh the cost of responding in the manner in which you've seen the government take action in the past few weeks.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much.

My second question is about the $9-billion package that we've announced and that has now passed in the House of Commons this week in Bill C-15. I'm enormously proud and grateful and I think it's necessary for us to be supporting our students to ensure that they continue to have the finances to continue with their post-secondary education and their career efforts.

There are some concerns that the package might provide disincentives for students to be take jobs that need to be filled during the summer period. How would you respond to that?

[Sean Fraser, Liberal, Central Nova, NS]

Thanks for the question. It builds on Mr. Poilievre's intervention at the beginning of this meeting.

As a quick digression, my first political job was as the student union president at St. FX. I was one of those students who used to show up on Parliament Hill to advocate for additional supports for students. When I was in that role, we were begging the government for an intervention much smaller by orders of magnitude than what we've seen in the past few weeks.

The issue around a disincentive to work is perhaps nowhere less true than when it comes to students, who value work experience often as much as the paycheque that comes with the jobs they work at in the summer.

I'll note in particular that some students will still be working this summer. We've made a great effort to create additional positions—116,000 positions—to help students achieve the level of work experience to kick-start their careers. However, there are quite a few students—tens of thousands or hundreds of thousands across Canada—who are facing an economy that is not as rosy as it appeared to be just a few short months ago. We have to recognize that they too have ordinary costs of living that are coming due, whether that's rent or electricity, and also have the added challenge of saving up for the next semester or to start paying off student loans.

Some of the things we've done include putting a moratorium on student loan payments for the next six months. We have included an income support, yes, but to provide an additional incentive to work for those who want to work but can't find a job, we've also created the new Canada service grant, which allows students to take part in activities that will help with the fight against COVID-19. This will provide them with work experience and a grant of up to $5,000 to help with their education.

I see I'm running out of time, so I'll cut it off there, but please know that we want to support students both with the cost of living and by encouraging them to work while we help them save for school at the same time.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll turn to Gabriel Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

As Ms. Dzerowicz and Mr. Fraser have done, I would like to say that our thoughts are with the families of the victims of the Nova Scotia killings, and with the families and colleagues of the victims and members of the forces who went missing in the helicopter crash.

Mr. Fraser, my questions will focus on assistance for big business and banks. Last Saturday, economic columnist Michel Girard suggested linking this assistance to 10 conditions. I would like to know the government's position and your reaction to that.

The first condition is that the company receiving government assistance must not use tax havens in any way in the course of its commercial activities, either directly or indirectly, that is to say, through commercial allies that are established in tax havens.

What is the government's position on this?

[Sean Fraser, Liberal, Central Nova, NS]

First, thank you for your kind and sincere thoughts for the victims from my home province.

My initial reaction is that I expect there are many things my colleague and I agree on, but there is one area where we may need to distinguish our positions from one another a little.

Certainly when it comes to illegal tax evasion, I expect we both believe measures should be implemented to prevent that kind of illegal abuse. However, in other situations, while companies may play within the rules, the rules may not provide a sense of justice to certain individuals. We should be working together in a nonpartisan way to help advance rules that limit the kinds of practices that we don't think are appropriate. However, we can place ourselves in a very dangerous position if we're not careful about how we craft these policies. I find that a simple solution for many of these complex problems doesn't actually pan out in reality.

The wage subsidy, for example, is a program designed to ensure that support reaches directly to workers and families. That program may run through large employers but is ultimately for the benefit of workers. What we can't do is put in a rule that may on its face sound like it's pursuing a laudable objective but has the consequence of denying income to workers who are actually able to maintain a position of employment throughout this crisis.

I very respectfully suggest that the devil may be in the details. When it comes to some of the programs, I would certainly rather tackle the tax avoidance or tax evasion issue, but not at the cost of providing support to workers who may otherwise go hungry.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you. Your position is very clear.

The second condition for aid to large enterprises is as follows.

If the government assistance takes the form of a grant, in return the company would have to transfer a share of its capital stock, that is a block of shares proportional to the amount injected, to the government. Thus, once the crisis is over, when the recipient company recovers on the stock market, we, the taxpayers, could enjoy a return on our collective investment.

What is the government's position on this suggestion?

[Sean Fraser, Liberal, Central Nova, NS]

A number of programs have been advanced at different times in our history, both in Canada and around the world, that have seen governments take equity stakes in companies. As a rule of thumb, I find that government is not as good at running businesses as businesses are that have their own skin in the game.

To date, the supports we have designed have not been treated like investments that the government is making with a view to earning money. They are investments that we have made to ensure certain social circumstances don't become apparent. We're trying to essentially adopt a mindset that households are too big to fail and that businesses need to be protected. Our goal at present is not to buy securities in businesses that are in trouble; our goal is to support those who are in dire need of support to avoid the circumstance of not being able to afford the cost of living or to support businesses may be forced to close permanently.

To the extent that you or your colleagues from the Bloc or other parties have helpful suggestions on where taking an equity stake in certain kinds of troubled businesses may be appropriate, I'd be interested to consider those proposals in further detail, but until I have firm details before me to consider, it's hard to pass judgment on the appropriateness of any one particular proposal.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

Here is a third condition. The company's senior management would have to significantly reduce its compensation for a year or more if the return to normal operations is delayed.

Could the government consider requiring large companies that have received assistance to commit to reducing their executive compensation?

[Sean Fraser, Liberal, Central Nova, NS]

Again, nothing has been taken off the table in terms of our economic response to help households and businesses weather this time of unprecedented difficulty, and again, I hesitate to pass judgment on this particular suggestion in the absence of specific detail.

I do, however, want to acknowledge that it could be a difficult pill for a number of Canadians to swallow if they see the government extending major supports to businesses during a year when a CEO takes a significant bonus that may be extraordinarily large, particularly when that amount doesn't reflect the reality of so many Canadians and the budgets that they're accustomed to working within.

I would reiterate the invitation to my colleague from the Bloc Québécois to pass along any helpful suggestions he may have on how some of these issues can be tackled. We want to ensure that our process not only helps Canadians, but helps Canadians understand how we're trying to target support to people in need. We want the programs that we put forward to inspire a sense of fairness at the same time.

Therefore, to the extent my colleague has helpful suggestions on how we may achieve those ends, please know that you have an open invitation to contact me as you have previously.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll go to Mr. Julian, and then he'll followed by Mr. Cooper.