Finance Committee on April 30th, 2020

[Soren Halverson, Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

As the parliamentary secretary noted, it is certainly an area that we're hearing about. As he also indicated, we have criteria in place. I can't really speak specifically to how we would go about modifying those to bring in start-ups. It's the kind of conjecture that I can't speak to. I can say, though, as was indicated by the parliamentary secretary, that there are a number of alternatives in place in the form of support through the IRAP—

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

Yes. I'm speaking specifically to the CEBA, though. Thank you.

What percentage of Canadian small businesses don't currently qualify for the CEBA program?

[Soren Halverson]

Looking at the small business statistics that are produced by ISED, there are around 1.2 million businesses, if my memory serves me correctly, with employment between one and 99. We think that just over a million businesses have access to the program, based on the current thresholds. There are some nuances going on in terms of how sole proprietors, for example, fit into that mix, but our best information is that we're covering a pretty broad swath of the universe of small businesses, particularly those that employ individuals.

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

Turning to the wage subsidy for a second, I want to get clarification. In the first period, you have to have a revenue loss of 15% to qualify for the wage subsidy. Then in the second period, you have to have a revenue loss of 30% to qualify for it.

What happens when a business applies and has a 15% revenue loss, so they qualify, and then applies in the next period or the period after that and doesn't have a 30% revenue loss? Do they get kicked off the program and have to lay off their employees?

[Andrew Marsland, Senior Assistant Deputy Minister, Tax Policy Branch, Department of Finance]

Thank you.

On the way the wage subsidy is structured, you're of course correct that the first reference period, from March to March or using some other metric that's allowed by the legislation, requires a 15% drop in revenue. There is a rule in the framework legislation that essentially deems that you qualify in the second period if you qualified in the first period. The purpose of that rule is to provide added certainty to an employer so you don't get fluctuating in and out. That would automatically qualify you for the second period. If a business didn't qualify in the first period but qualified in the second period, it would be deemed qualified in the third period.

There is a smoothing mechanism in there that helps deal with the risks you identify.

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

I have just one last question, Mr. Chair.

On the CERB, I have been hearing, contrary to Mr. Fraser's comments.... In fact, yesterday I had a meeting with a major grocery store chain, and it said that out of the 400 people hired just after the CERB came out, two-thirds didn't show up for work. Clearly counterintuitive behavioural change is being caused by that program.

I'm also wondering about accountability. The PBO said today that the CERB is a $40-billion program. Yesterday, Parliament agreed that there would be accountability in the student benefit by requiring students to attest to the fact that they had at least done a job search. Why not have similar accountability requirements in the CERB as well, so that we avoid these unintended consequences?

[The Chair, Liberal, Wayne Easter]

Who wants to give that a shot?

Ms. McDonald, go ahead.

[Suzy McDonald, Associate Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

I can start, Mr. Chair, and then perhaps colleagues would like to add on later.

The idea of the CERB was to create an income replacement for people who had stopped working. As the parliamentary secretary indicated, we have since changed it to allow people to earn up to $1,000 so they can have an income and still draw down on the CERB. I think the question becomes whether or not that entices people to go into the workplace. Again, the idea was for the CERB to be an income replacement for people who had lost their jobs in the context of the pandemic, and we continue to provide that.

There is an attestation that people need to attest to. They need to re-attest every month that they continue to be without income or continue to have not more than $1,000 in income.

We are looking at other things to make sure that people can and will return to the workplace. These include working with provinces and territories on a wage subsidy or a top-up and continuing those discussions.

Perhaps ESDC would like to offer more on that.

[The Chair, Liberal, Wayne Easter]

Does anybody from ESDC want to comment?

[Andrew Brown, Director General, Employment Insurance Policy, Skills and Employment, Department of Employment and Social Development]

Just to echo what we heard from the parliamentary secretary earlier, we are continuing to review the programs and are looking to make adjustments as required.

One of the other things that's really important to recall with the Canada emergency response benefit is that it responds to a broad number of situations and not just those situations where the person's work has been interrupted because, for example, it was temporarily shut down. It's also responding to those situations where people are off work to provide care for children or family, or who could be sick themselves as a result of COVID-19. There may be reasons, even when they're being recalled to work, that they are not able to do so.

[The Chair, Liberal, Wayne Easter]

Okay, thank you all on that round.

I would just add to officials on Marty's point, I have some employers in the fertilizer business who are having some difficulty getting employees this spring. You did say “make adjustments as required”, so I would keep that in mind. There needs to be some pressure to ensure that work is the priority, because we can't have a healthy economy if people aren't willing to get out there and do the work. I know some of these jobs are tough. I worked in a fertilizer plant myself.

With that we will turn to Ms. Koutrakis.

[Annie Koutrakis, Liberal, Vimy, QC]

I want to thank everyone today for appearing before this panel. It's a great conversation, which I am enjoying and I'm sure everyone is along with me.

I also wanted to extend my sincere condolences to everyone in the province of Nova Scotia and to thank Mr. Fraser for a wonderful presentation.

As my colleague Julie Dzerowicz referenced today's PBO analysis earlier, I will refer to it as well. This question is directed to the Department of Finance.

Today's PBO COVID-19 scenario analysis paints a picture of significantly reduced GDP growth and high rates of unemployment. That being said, it has been noted that our government's healthy balance sheet, something Mr. Fraser also discussed earlier today in his testimony, as well as historically low interest rates, allow the federal government to invest. The PBO notes that fiscal stimulus may be required to support the economy following the crisis.

It has also been suggested that investments in infrastructure development may be an effective form of economic stimulus. How impactful do you believe infrastructure projects could be in the recovery of the post-COVID economy and what further role can the federal government play in supporting these projects?

[Evelyn Dancey, Associate Assistant Deputy Minister, Economic Development and Corporate Finance Branch, Department of Finance]

Perhaps I could start on that question. I work in the area of Finance Canada with policy responsibility for domestic economic development.

In the first instance, we are the part of the department that looks across the infrastructure programming at the federal level. I absolutely agree with your point that federal infrastructure spending has a number of times been a solid source of stimulus measures. It's certainly part of the playbook for the Government of Canada in terms of helping to support economic growth, particularly after a major disruption.

We are currently working very hard to think about the best measures to bring forward at the best time in light of the unfolding public health guidance. The science is telling us how to slowly restart the economy and integrate workers, for example, back at job sites.

Just to conclude, I absolutely take the point about infrastructure. It would be something we would continue to think about as a potential stimulus measure. We probably have some time between now and then as we see the progression of the virus.

[Annie Koutrakis, Liberal, Vimy, QC]

I also have a question for the CRA.

The C.D. Howe Institute's crisis working group has pointed to high CERB application rates as an indicator that workers are being incentivized to leave their jobs in exchange for support through the emergency response benefit. It also goes on to suggest that the implementation of the CEWS may result in a decline in CERB applications, as more employees choose to remain with their employer.

Are high CERB application rates a cause for concern, and should action be taken by the government if CERB applications do not decline following the implementation of the CEWS? What steps will be taken to ensure a smooth transition as individuals receiving the CERB return to work?

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Vermaeten.

[Frank Vermaeten, Assistant Commissioner, Assessment, Benefit and Service Branch, Canada Revenue Agency]

Thanks for that question.

We're certainly monitoring very closely and have very good data on CERB applications and also those receiving the CERB. The same can be said for CEWS. As people are subsidized by CEWS, employers will be providing, of course, T4 information and everything with respect to the earnings of those people. We'll be monitoring that carefully and looking at what happens to CERB applications on a macro basis when we look at how many people are on CEWS and how many of those are newly rehired, and the CERB applications on a micro level. We'll be monitoring that with respect to the policy that would go forward to the Department of Finance.

[The Chair, Liberal, Wayne Easter]

Thank you all.

We'll now turn to Mr. Brunelle-Duceppe, followed by Mr. Julian.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

The people of Lac-Saint-Jean and I stand with the people of Nova Scotia who are affected by the recent tragedies. It was important to me to say that.

Mr. Marsland will probably be able to answer my first question, which relates to regulation 14 (c) of the $40,000 emergency business loan application. It says that elected officials do not have access to this loan if they control a business. Does the department plan to change the definition of "political office" in the upcoming regulation?

Will this problem be fixed?

[Soren Halverson]

Indeed an adjustment has been made to the attestation to clarify that the constraint is put in place for federal elected representatives only. For others, there is no such constraint anymore. I think if that's not in place yet in terms of the online attestation forms that applicants are seeing, it will be very soon because we just went out to financial institutions with that adjustment. We went out yesterday I believe, so it may take them a couple of days to put it through their IT systems.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

All right. So that has been changed in the regulation. This is going to change things considerably. Thank you very much.

I would now like to ask you a question about the Canadian student emergency benefit, or CESB. Mr. Marsland could also answer it.

Has anyone in the department calculated how many hours of work per week a student would have to accumulate to earn an amount equivalent to the CESB?

[Alexis Conrad, Assistant Deputy Minister, Learning Branch, Department of Employment and Social Development]

Thank you for the question.

One of the key features of the act is that a lot of the financial details are actually going to be in the regulations, and a lot of those details will be rolling out in the coming days. What we are doing right now is assessing those variables to make sure that the benefit actually meets the needs of students and doesn't disincent work.

Back to the point that was made earlier, we do believe that the vast majority of students want to work and we'll make every effort to get them connected with available jobs, but we do want to make sure that they have the opportunity to get jobs and to get the benefit when they cannot find work.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

I agree that everyone wants to work. On the other hand, I know very well that students know how to count. When I was working during the summer, I wanted to have as much money as possible in my account.

We did the math: it would take 44 hours at minimum wage to match the amount a student who is eligible for CESB and works only 19 hours a week would receive. A lot of jobs are only 35 hours a week. We're not saying that students don't want to work, but we know they want to make as much money as possible before they start school again in September.

I think it's really important for the department and the government to do these calculations. They have to try to find a solution so that students do not refuse to work, especially since the government has just created a lot of jobs through the Canada summer jobs program. However, these are probably all jobs that only offer 35 hours a week, and in which students will earn less money than if they only work 19 hours a week and still receive the CESB.

Will the government put in place a process for students who are looking for work? What mechanisms are you considering to allow students to prove that they are looking for work? Could you give me a brief explanation of that, please?

[Alexis Conrad]

The first step will be an attestation. The students need to attest legally that they are looking for work. Through the regulatory process and other measures, we will also connect them with various job services and connections to employment, because that's the gap we want to fill. Employers in agricultural and other areas are desperately looking for people to work for a period of time. We want to make sure that connection is made. We know lots of students use those services now, but the more we can do to highlight them, the better we will do.

Also the government has announced changes to the Canada summer jobs program to change the eligibility to make sure that students can find work in different styles through that. There is a concerted effort by the government to connect students with jobs and to make sure they have the opportunities they need, both for the financial reasons but also for the work experience.

[Alexis Brunelle-Duceppe, Bloc, Lac-Saint-Jean, QC]

So there will be a check to ascertain that they are looking for a job. However, do you believe that you have the human resources needed to verify that that is the case for all students who apply?

[Alexis Conrad]

Obviously I can't speak to how the departments will look at the compliance, other than to say the act does authorize the minister to verify any information. That is part of our plan.