Finance Committee on May 1st, 2020

[The Chair, Liberal, Wayne Easter]

I will officially call the meeting to order.

Welcome to meeting number 24 of the House of Commons Standing Committee on Finance. Pursuant to the order of reference of Tuesday, March 24, the committee is meeting on the government’s response to the COVID-19 pandemic.

We have quite a number of witnesses here on this panel today, so without any formalities, I will start.

I ask that witnesses try to hold their remarks to five minutes, if they could. That will make it possible for us to get to most everyone during the questioning rounds.

We'll start with Jeffrey Booth, entrepreneur and author, as an individual.

Mr. Booth, go ahead. The floor is yours.

[Jeffrey Booth, Entrepreneur and Author, As an Individual]

Thank you for having me.

These are obviously important times as a response to COVID-19 and what the economic situation will look like in the future.

Before we talk about solutions, we really need to understand the problem we're trying to solve. The inflationary economic system that we have relied on all our lives is breaking down. COVID-19 only amplifies the phase transition.

For some time, two opposing forces have been competing against each other, moving in opposite directions. These forces are, one, the exponentially deflationary aspect of technology; and two, an inflationary monetary policy that's trying to overcome it. While we might not like these facts, it does not change them.

Technology advances are sweeping across society. They have been hugely beneficial. Your smart phone is a compelling example. It was invented only 13 years ago, but it is no longer just your phone: it is your camera, virtual assistant, map, music device and flashlight. For me, it's my guitar tuner, and there are hundreds of other applications that I pay very little for or that I get for free. More for less, and that gets better every year—that is the nature of technology.

As technology accelerates, from your phone across every industry, we can expect that type of step change in performance versus cost everywhere—automotive, agriculture, energy, health care, it doesn't matter. It will reshape them all, and in doing so, provide far better outcomes for society at dramatically reduced prices.

If technology makes everything cheaper and more abundant and is moving into every industry at blinding speed, it is logical to assume that prices should go down and that society should enjoy increasing benefits everywhere. The problem with that logic is that deflationary pressure makes it hard to pay debt back. As a consequence, current economic dogma has us on a growth and inflation trajectory at all costs.

In a desperate effort to achieve growth and inflation, which we hear about every day, and in the face of a structural change brought to us by technology, central banks, not only here but also all over the world, through artificial low interest rates and monetary policy, have only added more pain. Incentives designed to make cash less valuable and to encourage spending do just that. In doing so, they also discourage savings and encourage individuals and companies to take on additional debt and risk.

Because of that, debt is being added to society at a rate that is really hard to comprehend. Since 2000 the world has added $185 trillion of debt to achieve $46 trillion of global growth per year. Each year, more debt is added to achieve smaller growth rates as technology pushes the other way. This was before our current crisis, which has seen an explosive rise in debt while the economy shrinks. In itself, that debt burden must slow future growth, because taxes need to go up on a range of industries and households that will have to pay for it, which further restricts demand.

Because that debt has grown so large, central banks and governments continually bail out the existing system, not by desire but out of fear of letting the system fail and go through a disorderly unwind. It might be a better alternative in a set of bad choices. By doing so, society is forced to run on a treadmill, requiring more work to support ever-higher prices, which themselves have been inflated through monetary easing, artificially low interest rates and bailouts. The devastating irony of the bailouts is that they artificially keep prices high. The government then needs to allocate more to social programs for those left behind by the same high prices that it created in the first place.

For the wealthy and those with assets that are artificially boosted by this leverage, it has played out well. Assets, including real estate and stocks, are the beneficiaries, having run up in value far beyond what they would have been without the easing. For every person on the winning side of those decisions, there are many others on the losing side. Their costs of food, shelter, gas and education are rising because of policies designed to make their cash and wages less valuable.

Paradoxically, COVID-19 actually speeds up the adoption of technology and is driving the trend to lower prices faster. Technology companies are the beneficiaries. Consider just one example, the system we are using right now, Zoom, going from 10 million users to 300 million users in just over three months. Those additional 200 million people might not occupy the same amount of real estate on the other side of this pandemic. If that happens, real estate prices will fall, as will rents, creating additional deflationary pressure.

Therefore, we stand at a crossroads, similar to the one in 2008, only bigger, with calls for massive bailouts of taxpayer money to save the same system that was so clearly failing in the first place. Policy response is required and justified because too many people are going to get hurt otherwise. However, we need a new set of rules, one that starts with a far deeper understanding of the risks in using the same playbook that worked for a different time. Looking forward, productivity gains from technology advancements, especially in AI, will become so large that it will be impossible for central banks to counteract their effect.

By understanding the key structural change that technology has enabled, governments can step in and provide a transition to a very bright future for all Canadians. Not doing so would be analogous to Kodak trying to retain its film business while competing against digital cameras, or Blockbuster adding candy aisles to their stores to counter Netflix. Massive money will be wasted, and it will fail regardless. If that happens, more people in the end will be hurt.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Booth.

Turning to the Canadian Horticultural Council, Brian Gilroy, president; and Jan VanderHout, first vice-president.

[Brian Gilroy, President, Canadian Horticultural Council]

Thank you for the opportunity to be here. Thank you to the committee members for working under these extraordinary circumstances on behalf of Canadians.

My name is Brian Gilroy. I am the president of the Canadian Horticultural Council, which represents Canada's over 14,000 fruit and vegetable growers, producing over 120 different crops. I am also an apple grower from Meaford, Ontario.

As you can appreciate, our industry is very diverse. So, too, are the challenges we are facing in light of the COVID-19 pandemic. Certain subsectors in the fresh fruit and vegetable industry are facing very acute and immediate challenges. Some of them are potatoes and greenhouse vegetables, but I will defer to my colleagues to talk more about those specific challenges.

I want to start by saying that the CHC recognizes the safety of Canadians and the integrity of our health care system remains the government's number one priority. We appreciate the great efforts the government has made to keep us all safe, as well as the measures to keep our economy afloat during this difficult time. However, we are here today to point out that like most countries, Canada faces serious challenges on an issue that is essential to a strong health care system and a healthy population, and that is our national food security. We think this is an opportunity for the Government of Canada to continue to demonstrate how critically important our food supply and security is to Canada and to underline that governments have farmers' backs, to paraphrase the Prime Minister.

We are grateful to the federal government for its actions exempting international farm workers from travel restrictions. However, a number of obstacles have made the flow of critical workers untenable. Many farms will receive merely a portion of the workers they generally rely on. Without the guarantee of a reliable workforce, many growers are making decisions now as to whether it is practical, let alone possible, to plant crops or tend fruit trees.

Compounding these difficult decisions is the knowledge that they do not have a sufficient safety net behind them. Growing fruits and vegetables has significant input and overhead costs. Many growers just can't take on these costs without a guarantee that the risk will not push them into bankruptcy. Growers are not immune to risk and uncertainty. Year after year they take on the risks associated with Mother Nature, pest infestations and market volatility to make sure Canadians have an abundance of healthy fruits and vegetables, but in these extraordinary times, more than ever they need concrete assurance that the government will have their back.

The government has announced several measures, such as the emergency wage subsidy and the emergency business account. Unfortunately, many family farms will not meet the eligibility criteria. The $5 billion that went to Farm Credit Canada is not beneficial, as taking on debt will not help our growers recover or backstop their losses.

We understand that business risk management programs are there with the intention of protecting farmers from disastrous losses, but cuts to these programs and changes to the eligibility criteria have rendered the programs, namely AgriStability, ineffective for most farmers.

The CHC and the CFA have outlined their recommendations to the Minister of Agriculture and the Minister of Finance for immediate changes to business risk management programs to help see farmers through this crisis. We have requested that the AgriStability trigger be increased to 90% for the 2020 program year, or more generally the program year that covers the 2020 crop year for eligible horticulture farms, and that the program cover 85% of the losses below this trigger.

To cover any immediate extraordinary costs for growers, CHC has also requested an immediate injection of a minimum of 5% of a producer's 2018 allowable net sales into AgriInvest accounts and the waiving of the requirement for the grower to match the contribution. This would help give confidence to growers in the short term.

We have recommended that these emergency coverage measures should be coupled with the removal of the reference margin limit and that consideration be given to waiving the structural change provisions.

CHC is prepared to work with Agriculture and Agri-Food Canada to refine any of these recommendations and minimize the risk of any unintended consequences or moral hazard.

Again, I’d like to thank you for the opportunity to speak to you all today. I look forward to any questions you may have, and I will now turn it over to my colleague, Jan VanderHout.

[Jan VanderHout, First Vice-President, Canadian Horticultural Council]

Thank you for the opportunity to speak to you, and again thank you for your service to Canadians.

My name is Jan VanderHout, and I am the vice-president of CHC, as well as a greenhouse vegetable grower from Hamilton, Ontario.

As Brian mentioned, our sector is very diverse. While other crops are being planted in the ground, and tree fruits are starting to bloom, our greenhouses are in production. The majority of greenhouse operations are in full swing across the country.

While we grapple with other challenges associated with this pandemic, we have unfortunately seen how devastating an outbreak of COVID-19 can be on an operation. I’m sure most of you are aware of the situation at Greenhill Produce in Kent Bridge, Ontario. Despite taking all the necessary precautions recommended by public health, there has been an outbreak of COVID-19 among its full-time and temporary workers. Greenhill is now trying to salvage the harvest with a sliver of its regular workforce. The losses it will incur from this are not effectively covered under any business risk management program, and could amount to as much as $25 million lost on this one farm alone.

Simply put, we need your support for our growers to continue to take on these risks. We need to know you have our back as growers continue to serve on the front lines as essential workers. Canadian fruit and vegetable producers need assurances now that they should plant with confidence, and, in the event of a labour or supply chain issue caused by COVID-19, that they are not risking their farms.

We want to avoid situations where Canadian growers are forced to conclude that the economic and other risks to continuing operations are just too great. Canadians will be relying on our domestic growers more than ever, and more than ever our growers need meaningful safety nets behind them. As this committee examines ways to respond to this pandemic, we urge you to make our food security a top priority.

The federal government needs to make it clear that any grower who needs to isolate workers due to an outbreak, or has to scale back, shut down or curtail operations temporarily, will get the full support of the federal government during this pandemic.

Canadian fruit and vegetable growers are part of Canada's ongoing food supply solution. Help us to help you feed Canadians.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you both very much.

We turn to the City of Winnipeg's Scott Gillingham, councillor and chair of the city's finance committee.

Scott, the floor is yours.

[Scott Gillingham, Councillor and Chair of the Standing Policy Committee on Finance, City of Winnipeg]

Thank you very much.

Good afternoon from Winnipeg. Thank you for the opportunity to be with you, and thank you to each committee member for the ongoing work you do to serve Canadians at this most unique moment in our history. I'm particularly glad to be with my former Winnipeg city councillor colleague and now a committee member of yours, Marty Morantz.

I do appreciate this committee's interest in how COVID-19 is affecting Canadian municipalities. I will speak from my local perspective as Winnipeg city councillor and chairman of the Standing Policy Committee on Finance. In the five minutes allotted to me, I will break my comments into three sections: the impact that COVID-19 is having on Winnipeg's city services; our city's financial response; and what the senior levels of government can do to assist Winnipeg, and other Canadian municipalities, at this moment and in the wake of this pandemic.

COVID-19 continues to impact City of Winnipeg revenues, expenses and services. In keeping with Manitoba health guidelines, the city has adjusted the service levels to help flatten the curve. All city-owned and -operated recreation centres, pools, arenas, libraries, play structures, skateboard parks, athletic fields and the like are closed to the public. Winnipeg transit has instituted an enhanced cleaning program to help sanitize buses. Starting on Monday, May 4, transit service will be reduced across the city to an enhanced Saturday schedule. Transit ridership has dropped by 70% over the same time last year. Early numbers estimate a $6-million loss in transit this month.

Our assessment and taxation department and bylaw enforcement services have suspended all interior residential and commercial property inspections. Water meter inspections, removals and replacements and on-site meter reading by city staff have been suspended. With City of Winnipeg revenues down and expenses increasing in some departments, our burn rate currently is estimated to be at $12 million per month. To offer financial relief to property and business owners, city council in Winnipeg adopted a plan to waive penalties for unpaid property and business taxes for up to three months following their due date. The lost revenue to the city for providing these financial support options is estimated to be $5.2 million.

Let me move next to the City of Winnipeg's financial response to the impact of COVID-19. By mid-March it had become apparent that the pandemic would impact the city's finances, so Winnipeg's city council asked our corporate finance team to provide economic modelling of the pandemic's potential impact and to develop a corresponding crisis cash flow management plan. That plan was developed and made public last week. The cash flow management plan centres on maintaining the city's liquidity and effectively addressing any deficits in the general revenue fund. This will be achieved by a combination of financial levers to be pulled, including the reduction of expenses through service reductions and layoffs, the possibility of advancing the timing of planned debenture issuance, and the transfer from the financial stabilization reserve as necessary.

The cash flow plan has been set up with a series of financial levers that are categorized into three tiers. I won't go into those tiers right now. Suffice it to say that tier one levers have already been pulled, or soon will be pulled. That includes the temporary layoff of 674 non-permanent community services staff and the temporary layoff of 250 transit staff, mostly operators. Tier two and three levers will only be used if the pandemic drags on.

As a final comment about Winnipeg's cash flow management plan, I want to emphasize that we made the determination to proceed with the city's recently adopted 2020 capital growth program. The city's capital budget is set to invest $370 million in important projects. This investment will assist to stimulate the struggling local economy and is estimated to provide over 2,300 jobs. To make significant cuts to the city's 2020 capital budget would further exacerbate the challenges our local economy is facing. This capital program will also provide significant taxation revenues for senior levels of government at this critical time.

That brings me finally to the topic of what senior levels of government can do to assist Winnipeg and other Canadian municipalities at this moment and also in the wake of this pandemic. Right now cities are facing significant financial pressure on our operating budgets.

The federal government could assist municipalities with, first of all, cash funding that allows municipalities the discretion to direct those funds where needed, whether that's to operating or capital budgets. Winnipeg supports the call of the Federation of Canadian Municipalities for emergency operating funding for municipalities nationwide to keep essential services running and Canadians safe and supported.

The federal government could also ensure that the flow of federal funds, whether operating or capital, does not get hung up or slowed down at the federal or provincial level. If I may be so bold, the funds in existing federal programs for capital projects—for example, the investing in Canada infrastructure program—need to flow to municipalities faster.

In my experience—and I've been on council for six years—it takes too long for monies to get out the door and into the ground. By contrast, the federal gas tax program has been and remains an effective financing tool for municipalities, as the funds flow fairly quickly.

Looking ahead, in the wake of this pandemic, the federal government should see municipalities as vital partners in restoring Canada’s economy. The City of Winnipeg and all Canadian municipalities, I’m sure, want to be a key partners in the reopening and recovery of our local economies. We're willing to work with both the federal and the provincial governments to restore Canada’s economy.

My final comment is that the federal government should work with municipalities and provinces towards establishing a new long-term, predictable, growth-oriented funding model for the municipalities. Locally, for example, if the City of Winnipeg has base funding level certainty for present and future years from senior levels of government, it allows council to plan the delivery of city services and capital investment with a longer-term view in mind. That in turn enables council to provide a greater level of predictability to our residents and taxpayers and to our funding partners on taxation, fee and service levels for the coming years.

Once again, I thank you for the opportunity you've given me to provide comments today.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Scott.

Elizabeth May, you had put your hand up. Did you have a point you wanted to make?

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

I wanted to ask a question of Jeffrey Booth if that's all right.

[The Chair, Liberal, Wayne Easter]

We'll wait until we get all the witnesses in and get you on later.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

We're turning to Imagine Canada, with Bruce MacDonald, president and CEO.

Go ahead, Bruce.

[Bruce MacDonald, President and Chief Executive Officer, Imagine Canada]

Thank you, Mr. Chair and committee members, for the opportunity to testify during this unprecedented and trying time of crisis.

As in most sectors, charities, non-profits and social enterprises have been seriously affected by the COVID-19 crisis. Organizations that have not been forced to temporarily suspend operations because of physical distancing measures are facing significant challenges. Revenues are declining while, in most cases, the demand for services has increased even for organizations not considered to be on the front line.

They have also had to drastically change how they deliver their services. We surveyed charitable organizations about their experiences during the pandemic. We are still analyzing the results, but preliminary data show that COVID-19 has had and will continue to have a significant impact on this sector.

Seven out of 10 charities report a drop in revenues, with the average organization's revenues dropping by 30%. This compares to the 2008-09 recession when less than a third reported revenue losses and a percentage loss was in the single digits. Nearly a third and more than a half anticipate they need to lay off more staff, or begin layoffs where they haven't already. Almost half of charities report difficulty in engaging volunteers because of reduced availability, significant programming changes or the lack of personal protective equipment.

More than half of organizations anticipate their financial situation will further deteriorate over the next few months. At the same time, between 35% and 40% of organizations and almost half of larger organizations have seen increased demand for their services. To meet this demand they have rapidly innovated and adapted. In-person sessions, where possible, have been moved online and a surprising number of organizations, almost half, have actually developed new programs to meet demand, despite the serious challenges they face.

To date, the federal government has invested a great deal in helping individuals, businesses and organizations weather the storm. Many charities and non-profits may qualify for the Canada emergency wage subsidy and some have been able to access the Canada emergency business account. Neither of these, of course, is available to the almost 50% of organizations that don't have paid staff.

It's too early to say how many might benefit from temporary rent reductions or the support the government has announced for arts, culture and amateur sport. Rather troubling, though, we've already heard from organizations whose landlords refused to participate in the rent assistance program.

Funds have also been announced to help organizations serving some of the most vulnerable Canadians. We appreciate the specific investments that have been made in organizations providing front-line services to the most vulnerable people and communities. But these measures aren't sufficient if we want to maintain the vital social infrastructure across this country. At the outset of the crisis we engaged voluntary private sector expertise to work with us to estimate the impact of three to six months of physical distancing measures. We projected a financial impact of between $9.5 billion to almost $16 billion for registered charities alone and layoffs of between 117,000 and 194,000 people.

As the crisis unfolds those early projections are proving to be, if anything, optimistic. The measures for which charities and non-profits are eligible are unlikely to fill even half of that financial gap. What we need from the federal government are measures that address the unique characteristics of charities and non-profits; things like counter-cyclical demand for services, revenue streams that greatly fluctuate throughout the year or the role that volunteers play. We also need a commitment to the social infrastructure in our communities, to the organizations that provide services that would otherwise fall to government.

I want to focus on a proposal for an emergency grant program that we submitted to the government. This would see the government commit sufficient funds to preserve the sector. Eligibility would be based on organizational need rather than government picking winners and losers. Delivery mechanisms would prioritize speed in getting funds to organizations. We estimate that around $6 billion in emergency funding is still urgently needed. This may sound like a great deal and in normal circumstances we'd be loath to suggest such a number. The cost of doing nothing is even greater. Canadians have spent generations building a sector that delivers services more efficiently and effectively than government, that provides good jobs in every community and contributes enormously to our quality of life.

Take a moment to imagine your communities without charities and non-profits; without the support for people with disabilities or chronic health conditions; without amateur sports, youth groups or other organizations for children; without food banks or services for poverty; without places of worship; without settlement services for newcomers; without museums, theatres or cultural festivals. I could go on.

What would it cost us to replace what we may lose? Because that's what's at stake here. If we lose significant parts of the social and community infrastructure we've built up over generations, it will take years and far greater investment to rebuild it than what it will take to preserve it today. The government has yet to decide on our proposal, but as members of the finance committee, as members of Parliament and as the voices in your communities, you can have an enormous impact on that decision. I urge you to use that influence.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thanks very much, Bruce.

We have, from the Migrant Workers Centre, Natalie Drolet, executive director and staff lawyer.

Natalie, five minutes, if you could.

[Natalie Drolet, Executive Director and Staff Lawyer, Migrant Workers Centre]

Thank you for the opportunity to appear before you today.

I wish you all a happy International Workers' Day. It is fitting that I will be speaking about the impacts of the COVID-19 crisis on some of the most vulnerable workers in Canada, migrant and undocumented workers.

I am representing the Migrant Workers Centre, a non-profit organization based in Vancouver that is dedicated to legal advocacy for migrant workers. Established in 1986, the organization facilitates access to justice for migrant workers through the provision of free legal advice and representation, public legal education, law and policy reform, and test case litigation.

Migrant workers grow the food we eat and make sure that it reaches our shelves. They build our homes, schools and workplaces, and keep these spaces clean and safe. They take care of our children, the elderly, those who are sick and those with disabilities. They are some of the heroes we have been applauding every night: the health care workers, and the grocery store clerks, the cleaners, the care workers, the truckers and the agricultural workers. The COVID-19 crisis has shown us how essential these front-line heroes are and the level to which our society depends on migrant workers to perform these low-wage jobs.

In order for temporary foreign workers to apply for a work permit in Canada, the temporary foreign worker program requires that they must first secure a job offer, employment contract, and labour market impact assessment from a Canadian employer. This process can take anywhere from seven to 12 months.

They receive work permits that authorize them to work for a single employer, in a single job and in a single location. If they lose their job, they have to start the process all over again. In the meantime, they can’t work.

This system makes migrant workers uniquely vulnerable to abuse. They often face low wages, unsafe working conditions and overcrowded housing. They don’t speak up, for fear of losing their job. The COVID-19 pandemic has only exacerbated their vulnerability.

Our organization has heard from hundreds of migrant workers since the start of the COVID-19 pandemic. These workers are at risk of becoming undocumented because of this crisis. To date, Immigration, Refugees and Citizenship Canada has failed to offer any solutions for migrant workers.

We're seeing more temporary foreign workers losing their jobs, and they can’t work because they have employer-specific work permits. These workers want to work. We have clients who are health care workers who want to be on the front lines of the crisis, but they can’t. We have clients who want to work on farms, but they can’t.

Temporary foreign workers who are losing their jobs can’t secure a new labour market impact assessment to renew their work permit.

If a migrant worker has lost their job due to COVID-19 and still has status in Canada, they can apply for the CERB. However, if their work permit expires, they lose status in Canada and they become ineligible for the CERB.

If they lose status, they are in an impossible situation. They can’t work to support their families, they can’t apply for employment insurance without status, they can’t apply for the CERB without a SIN, and they can’t leave Canada. We've had numerous workers in this situation approach our office and we've had to tell them that there are no viable legal options for them to work or to renew their status, or for income support during this crisis.

I will now turn to my three recommendations.

One, during the pandemic, every worker in Canada should have equal access to the CERB and health care. Open up the CERB to people with expired social insurance numbers. Issue a temporary SIN to anyone who applies for the CERB, which can be done by suspending the requirement for a work permit in order to get one.

All workers should be treated equally in our country regardless of their country of origin or their immigration status. All workers impacted by COVID-19 should be able to apply for the CERB.

Two, workers need an open work permit to be able to work in the jobs that are available during the pandemic and to maintain their status in Canada. Immigration, Refugees and Citizenship Canada should automatically renew their work permits to an open work permit.

Workers with secure status will be less afraid to speak up about any health and safety concerns in their workplaces, which will reduce the spread of COVID-19. Many COVID-19 outbreaks have been in workplaces that rely in part on temporary foreign workers. We’ve all seen the media reports about these continuing outbreaks.

Three, Immigration, Refugees and Citizenship Canada should create a new permanent residency program for migrant and undocumented workers and allow them to apply for an open work permit while they're waiting for their applications to process.

Even though they are performing essential work that Canadians depend on, many of these workers have no way of becoming permanent residents of Canada. The only way to come out of this crisis is to do it together and ensure that no one is left behind. Migrant and undocumented workers are the heroes doing the dangerous jobs and putting their lives on the line for us.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Natalie.

There are two more witnesses to go and then we'll go to questions.

With MTY Food Group Incorporated, we have Jason Brading, chief operating officer.

[Jason Brading, Chief Operating Officer, Quick Service Restaurants, MTY Food Group Inc.]

Hello, everyone, and good afternoon. I'm happy to be here with all of you today, and I thank the committee for listening to our concerns.

MTY is a Canadian restaurant company operating some 7,000 franchise locations around the globe under many well-known banners, with over half operating here in Canada, and proudly employing over 45,000 Canadians. As a franchiser of multiple brands operating multiple styles of restaurants, from full-service dining rooms to quick-service take-outs and everything in between, we are uniquely positioned to fully understand first-hand the impact COVID-19 is having on all manner of restaurant businesses during this pandemic.

Of our 3,500 Canadian locations, nearly two-thirds are fully closed and have seen more than 20,000 employees lose—

[The Clerk of the Committee, Mr. David Gagnon]

I'm sorry to interrupt, Mr. Chair, but we're having problems with the sound. It seems to be cutting out. Maybe we can start again to see if it's resolved. We had to stop interpretation.

[The Chair, Liberal, Wayne Easter]

Okay.

Jason, could you speak a little more clearly? Interpretation wasn't picking you up.

[Jason Brading]

Of our 3,500 Canadian locations, nearly two-thirds are fully closed and have seen more than 20,000 employees lose their employment. Of the 1,400 that remain open, which are only able to offer take-out and delivery to our guests, sales are down a dramatic 50%.

It is no secret that our industry already functions on an incredibly tight profit margin, typically around 5% to 7%, and so no extravagant accounting is required to understand that without significant assistance, a majority of our small business owners are at serious risk of not surviving this pandemic.

While the reopening date for dining rooms and shopping malls is as yet unclear in most provinces, our focus today is to facilitate and promote a viable business case for our franchisees to reopen for take-out and delivery. For this to occur, we require governments to offer relief programs that will be flexible and accessible to as many restaurant owners as possible, but also extended beyond June to the months following the reopening of dining rooms and malls, where seating capacity will be restricted and traffic reduced.

Canada's emergency commercial rent assistance program, CECRA, while providing some hope to small business operators is clearly too narrow a program, relying on the voluntary participation of landlords, who must have mortgages to qualify, which eliminates some of the biggest landlords in Canada, who do not use mortgages as their financial instrument of choice. It is equally punitive to those business owners trying to keep their doors open, who, while working hard every day, run the risk of creating comparable sales in excess of 30%, a threshold for disqualification of CECRA, which is far too low, in our opinion.

We firmly believe that having small essential businesses open to the public, with proper safety protocols in place, serving their communities, is the best possible scenario for all Canadians. Penalizing anyone who is making that effort every day is simply wrong, and we ask that consideration be given to modifying the program so as to include these open and operating small business owners who manage through grit and determination to reach sales higher than the 30% threshold set to date in CECRA and to expand the qualifying criteria for landlords.

Another key issue for companies like Tim Hortons, Subway, Recipe and many other franchising and umbrella companies like our own, MTY, is the uncertainty of not having our franchisees qualify for CECRA assistance because we risk being considered outside the criteria due to our combined sales exceeding the $20-million threshold. Individual subtenants should be qualified for CECRA notwithstanding the size of their franchisor.

The other principal issue at play, which is preventing our progress, is the different emergency response benefits being offered to Canadians. While we fully support and appreciate all the aid provided in this critical time, we also want the committee to be aware that we have experienced first-hand in the emergency aid the negative effect of people being kept at home rather than accepting available employment. While the decree of isolation was the cornerstone of flattening the COVID-19 spread, one we fully agree with and support, if we want to see our economy reopen, then we must recognize the negative effect the emergency aid programs can have on Canada's productivity and its ability to move us economically past this pandemic.

Conversely, however, extending the Canada emergency wage subsidy program beyond the current cut-off date will encourage a swift return of staff to work and support the financial burden on restaurant operators in particular.

In closing, we want to impress upon the committee the severe impact and fragile state our industry finds itself in today as a result of this pandemic. We respectfully ask the committee to seriously consider modifications to the CECRA program as outlined and to closely consider extending the Canada emergency wage subsidy program to encourage rehiring of staff and financially supporting our small business operators for the benefit of our economy.

Thank you for your time here today and for consideration of our concerns raised.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Jason.

Before I go to our last witness, the second Jason on the panel, I will just give a heads-up that the first round of questions will be Mr. Poilievre, Mr. Sorbara, Mr. Ste-Marie and then Mr. Julian.

We'll turn to the Prince Edward Island Potato Board and Jason Webster.

Welcome, Jason. The floor is yours.

[Jason Webster, Potato Farmer, Prince Edward Island Potato Board]

Good afternoon, Chairman Easter and honourable members. I want to thank you for the opportunity to come to speak to you all today.

My name is Jason Webster, and I am speaking on behalf of the Prince Edward Island Potato Board today. Our board represents 180-plus potato farmers in our province, working together to ensure long-term profitability and sustainability, including the financial and environmental sustainability of our industry. We work with other potato organizations in Canada and the U.S., including the Canadian Potato Council, the United Potato Growers of Canada and the United Potato Growers of America, as well as other farm organizations here in P.E.I.

The board asked me to speak today because we wanted to share with you a farmer's personal perspective on the impact of COVID-19 on our farm and our industry. I'll also share with you some comments on the federal government's response to the pandemic to date.

I'd like to give you some quick background on me and our farm. Our farm name is MWM Farms Limited. We operate here in Middleton, Prince Edward Island. Our farm's primary source of income is potato production, coupled with rotation crops of grain, peas and mustard. We grow seed potatoes, table potatoes and processing potatoes, with the bulk of our production in the processing sector.

As a little background on our industry—we'd be happy to provide more details on this—in a nutshell, when COVID-19 hit, we went from a tight potato supply situation in North America to get through the rest of the marketing season, to a nosedive in the demand for frozen potato products and fresh potatoes that normally move through restaurants and food service channels. As a result, processors advised farmers to move potatoes they had grown under contract for them to alternate markets, if they could. Most of us could not find other market channels. However, just the notion of that additional volume of potatoes suddenly becoming available to fresh markets puts a downward pressure on prices in that market. The same thing is happening all over Europe.

Many of us were suddenly trying to figure out the financial impact on our farms. Those contracted potatoes were now worth little to nothing. On our farm, we currently have 17 million potatoes of contract in our warehouses that are worth over $2 million. We are also possibly looking at an environmental issue in terms of how to dispose of this 2019 crop of potatoes, plus any plant health issues if tons of potatoes were being piled outside for disposal or for livestock feed.

At this point in P.E.I., we think we have a possible solution to our processing of the 2019 volume, which is good.

If you add this to a high level of uncertainty on the part of the processors and everyone else in terms of what the demand might be for the 2020 crops, there are lots of major unknowns that impact the decisions we have to make on our farms late in the day when normally those cropping decisions are already made.

We learned yesterday that a processor only wants to plant 85% of the volume that we grew for them last year. That impacts us in several ways. We also grow seed potatoes, so we will need fewer of them to plant, with a lower contract volume. Other growers we normally sell seed potatoes to are also cutting back on their orders.

So far, we have 500,000 pounds of seed that will no longer have a home, with a value of close to $100,000. On our farm, we will have to carry the fixed costs on a smaller acreage over our production base. That puts us at a financial disadvantage even before we plant the crop.

In addition, who knows whether this pandemic will be over by this fall, or in a year's time or even in two years' time. There is a lot to deal with, including our preoccupation with healthily and safely helping our families and employees so that they can get the crop planted, grown and harvested while respecting all the public health advisories. It's been nerve-racking, and it's far from over.

We were asked to comment today on the federal government's response to COVID-19. There were positive measures, and I can share those with you later if time permits. Beyond those generic measures, there has been nothing specific to agriculture, and that's a major gap.

We fully support the request made to Minister Bibeau last week by the Canadian Potato Council, including processing potatoes and storage. We're wondering about assistance on an urgent basis to deal with the 2019 potato crop that was contracted with Canadian potato growers for use in processing plants, but for which markets have collapsed due to the public health-mandated closure of quick-service restaurants and other food services, resulting from the COVID-19 pandemic.

The Government of Canada is urged to consider the purchase of a significant portion of the remaining storage inventory of both processing potatoes and seed potatoes, and cover the disposal costs of the potatoes that cannot find a market.

Concerning assistance for seed growers, given major reductions in 2020 processing contracts and acres planted, seed potato sales have been reduced or cancelled. Seed growers are the foundation of our industry. A loss of sales this late in the season leaves them with no opportunity to seek alternative markets.

In terms of improvements to the business risk management programs available to Canadian potato farmers, the Government of P.E.I. stepped up last week with respect to the AgriStability program. They announced that they will pay the provincial portion of the cost to increase the coverage level from 70% to 85%, and they will remove the reference margin limit. They are offering interim payments of up to 75% to get funding into producers' hands in a timely manner. As well, under the AgriAssurance program—or “crop insurance”, as we call it—they are offering a 10% discount on the producer's share of insurance premiums.

The changes to AgriStability and crop insurance are being done for both 2020 and 2021. We'd like to see the Government of Canada at least match these commitments. Consideration should be given to waiving the structural change provisions in the AgriStability program for farms in the 2020 and 2021 program years if they have to reduce production acres as a result of the collapsed demand for processing potatoes, food service potatoes, fresh potatoes and/or an associated decline of seed potato demand.

Next is support to help farmers survive production cuts. As I mentioned earlier, potato farms' business plans are built around growing a certain number of acres sustainably. Overhead costs must still be covered, even if operating costs can be reduced via reduced production. We ask that government recognize this negative impact and seek ways to help farmers stay in business so that they continue to produce food for Canadians once the pandemic has ended and the demand returns to more normal levels.

For farmers in this situation of reduced production, could the Government of Canada also support them by covering the interest for those farms when they have to delay repayment of loans, whether that's with the FCC, commercial banks, credit unions and/or trade credits? Or, could the advance payments program become interest-free for the full $400,000, rather than the first $100,000, and could there be extended repayment terms for the advance?

While perhaps it is not as immediate a financial impact, we would also like to urge Agriculture and Agri-Food Canada to conduct field research in 2020. It is currently on hold due to COVID-19. We feel that AAFC, like farmers, can find ways to get the job done while putting measures in place to protect themselves and their staff. COVID-19 has shown us how fragile the food system is in Canada and the U.S. Decisions being made by farmers now in the midst of all this uncertainty will impact consumers in six to 12 months' time.

Our government has provided assistance to many segments of the economy and to vulnerable Canadians to help mitigate the financial hardships arising from the pandemic. That assistance has been needed, and we're glad our government has done that. We need similar consideration for the potato and agriculture sectors.

Thanks to all of you for the opportunity to address you today. We also thank you for the work you are doing on behalf of Canadians and our country in these difficult times.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Jason.

We'll hold all the rounds at five minutes, I believe, to get everybody on.

Mr. Poilievre, do you want to start, please?

[Pierre Poilievre, Conservative, Carleton, ON]

Yes.

Thank you very much to all the witnesses.

Mr. Booth, I want to start with you. I think you provided a very unique and interesting perspective. For the last several years, opinion leaders, bankers and government leaders have been telling us that the way to prosperity is through debt-financed consumption.

Last week, we had embarrassing testimony from the Governor of the Bank of Canada—thankfully, the outgoing governor—who, as you might know, has supported an unprecedented engorgement of debt-fuelled consumption during his time as governor and encouraged governments to take on more debt in so-called good times. That runs counter to the Keynesian theory that you pay off debt in the good times to have surpluses in the good times and buffer yourself against the bad times.

I asked the governor if he could tell us what the total debt was of Canadian households, businesses and governments in Canada, and he didn't know, which I found astounding for someone in his position. He is basically the top banker. You'd think he would know about—

[The Clerk]

I'm really sorry to interrupt here, Mr. Poilievre. I think the sound is not loud enough for the interpreters. I wonder if you can speak closer to your mike. I'm sorry about this.