Evidence of meeting #25 for Finance in the 43rd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was crisis.
A recording is available from Parliament.
Vice-President, Oil Sands, Fiscal and Economic Policy, Canadian Association of Petroleum Producers
Sure.
In terms of recognition and support, what we are seeking, I would say, is recognition comparable to other jurisdictions for our performance on the environment and on social and governance-related matters. Recognize that our industry can be a key contributor to reducing global GHGs while developing our resources responsibly.
It's something we would like to see the federal government embrace and work on with us collaboratively to build prosperity.
Liberal
The Chair Liberal Wayne Easter
Okay, thank you.
With that, we'll have to close. We are about a minute over our time.
I want to thank all the witnesses for taking the time to make their presentations today. There has been a lot of policy coming out from government, and as I think everyone recognizes, there's a willingness to improve on the policy that's been released. These hearings are quite important to [Technical difficulty—Editor] criticism and suggestions up the line to be implemented into short- and long-term policy.
With that, we'll suspend the meeting for a couple of minutes while David brings in the other witnesses and checks their sound.
Thank you.
Liberal
The Chair Liberal Wayne Easter
I call the meeting back to order.
Witnesses, welcome to meeting number 25, panel number two, of the House of Commons Standing Committee on Finance.
I'll read the order of reference that we're operating under. 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 seven witnesses. To save time, we'll go right to the witnesses. I would ask witnesses to try to hold their comments very tightly, if they can, to five minutes so that we have plenty of time for questions.
We'll start with the Canadian Cancer Society. We have Andrea Seale, chief executive officer; and Kelly Masotti, director.
Andrea Seale Chief Executive Officer, Canadian Cancer Society
Good afternoon, and thank you very much for the opportunity to present to you today on the needs of the charitable sector and to share a perspective from one of this country's largest charities. My name is Andrea Seale. I'm the CEO of the Canadian Cancer Society.
The pandemic is testing us in more ways than we ever thought possible, and we're rising to the challenge on many fronts. It has exposed vulnerabilities and sharpened our focus. I'm very happy to see that so many of the people who support our most vulnerable have taken their rightful place as our real-life superheroes. Also, I'm happy to see that our health care system is evolving quickly, and elected officials such as you, and governments across the country, have really shown incredible leadership.
Charities are in a dire situation. It's estimated that registered charities in Canada will lose between $9.5 billion and $15.7 billion, and will lay off more than 100,000 staff as a result of the pandemic. Job losses in occupations related to the non-profit sector are already 1.4 times higher than in the rest of the economy.
The Canadian Cancer Society is one of the largest charitable organizations in the country, and I can truly tell you that we have never faced a greater financial challenge in our 80-year history. The hundreds of fundraising events that we have had to cancel across the country have led us to forecast a drop in donations of between $80 million and $100 million for the year ahead. That's roughly half of our budget. We have already laid off more than a third of our staff, and we've closed community offices across the country. With projections that the economic downturn will continue for some time, we're really being forced to overhaul and reduce programs.
Organizations in the charitable sector, as you all know, care for Canada's most vulnerable populations, and we fill in where the social safety net and our health care system fall short. I think charities are really too important to the fabric of Canada and to our global community to be forgotten during this crisis. The steps taken to date have been helpful, but are not enough.
The Canadian Cancer Society is the only national charitable organization that's dedicated to funding life-saving research on all cancers and to advancing cancer prevention health policy that saves millions of lives. We also provide essential support services to the one in two Canadians who will be diagnosed with cancer in their lifetime.
In addition to this mission, our organization, like so many others in the charitable sector, values efficiency and good management. We have led the consolidation of the cancer charity sector to reduce duplication and ensure donor dollars are well spent. We have amalgamated three of the largest cancer charities in the country in the last few years—that's with the Canadian Breast Cancer Foundation and Prostate Cancer Canada.
Since COVID-19, the services that we offer, like our toll-free helpline and our online peer support community, have been in very high demand. People with cancer are facing isolation and anxiety, as the pandemic is so greatly impacting the health care system they rely on. They're also isolated from their usual support networks. Their clinical trials are cancelled. Their treatment is being delayed. Some tell us that they feel as though they are collateral damage of the pandemic. Others say that they feel as though they're on the Titanic, and only those with COVID-19 are getting into the lifeboats.
While their needs have never been greater, our reduced fundraising dollars mean that we're struggling to provide them with support to make the difference we know we need to make for those living with cancer.
Cancer is not taking a break during the pandemic, and of course neither are we. We are here to help take pressure off the health care system and to help patients cope. We see the need extending for many months as the health care system deals with the backlog.
I ask you to please consider the requests that you've heard from Imagine Canada and from other leaders in the charitable sector, and also from the Canadian Cancer Society in our submission to this committee, which targets the important needs of people with cancer and their caregivers. Specifically, we are seeking funding to work in partnership with government to continue to provide these support services for the million-plus Canadians who are living with, and beyond, cancer.
We're really here to help.
I'm looking forward to any questions, and I really thank you for listening.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Andrea.
Turning then to the Centre for Israel and Jewish Affairs, we have Shimon Koffler Fogel, president and CEO.
Shimon Koffler Fogel President and Chief Executive Officer, Centre for Israel and Jewish Affairs
Thank you, Mr. Chairman and members of the committee, for welcoming CIJA's participation in this important conversation.
The Centre for Israel and Jewish Affairs, known widely as CIJA, is the advocacy agent of the Jewish Federations of Canada. We're a national, non-partisan, non-profit organization representing over 150,000 Jewish Canadians affiliated through local federations from coast to coast.
Federations are in many ways the United Way of the Jewish community. They're a one-stop shop for philanthropic giving, enabling community members to support the diversity of charitable projects. Canada's Jewish federations collectively raise well over $120 million every year for services, programs and initiatives to support the most vulnerable Canadians from all walks of life.
The beneficiaries include people with disabilities, low-income families, seniors, Holocaust survivors, youth, education and cultural programs, and in the wake of this pandemic, emergency initiatives and programs to support those impacted by COVID-19.
Jewish federations are the central pillar of Jewish life in Canada, sustaining our vibrant community. The service agencies and community institutions they support have been conducting essential front-line work since this crisis began.
I'd be remiss by not beginning with a strong expression of deep appreciation to the government officials, ministers, members of Parliament and political staff who have worked countless hours to design and implement programs that we're discussing here today. The government has to be commended for the work it has done. It has saved millions of Canadians from financial ruin and worse, as we combat the COVID-19 pandemic.
It's in that spirit that I appear here today to address constructively several shortcomings in the programs and offer our solutions to them.
As was the case during past crises, Canadians should come together during this time with the understanding the government alone cannot resolve this crisis. We all have to collectively step up to the plate and work together to help the most vulnerable among us to get through this unprecedented challenge.
The strength of the partnerships among government, civil society, the private sector and the charitable and not-for-profit sectors will determine the extent to which Canadians are able to get through this crisis and move toward recovery and renewal.
In the spirit of partnership, I would like to highlight a number of areas where government programs and the partnership between government and front-line community-led initiatives can be strengthened.
The first issue is the accessibility of the Canada emergency wage subsidy for the not-for-profit and charitable sector, which remains largely excluded from this crucial program due to eligibility requirements. The requirement to demonstrate a 30% reduction in revenue within a one-month period is causing a serious challenge within the sector.
This sector survives on seasonal fundraising campaigns, donations and grants. Fluctuating revenue streams make it exceedingly difficult to demonstrate the required 30% reduction in revenue within a one-month time frame, and seasonal businesses such as summer camps and schools are in a similarly perilous position in their ability to demonstrate this reduction in revenue.
Our recommendation is to allow organizations and seasonal businesses unable to demonstrate this reduction within one month to receive the subsidy based on a 12-month period. If after 12 months they don't meet the 30% reduction, they will pay back a prorated amount based on the differential between the 30% and their actual shortfall.
I'd like to highlight two ways in which the shortcomings of CEWS eligibility will directly impact our population, one which has been largely absent from the conversation about CEWS, and that's our children. Twice they will be affected by these shortcomings: first during the school year and then during the summer.
Many of us here today are sitting in home offices while our children sit in a virtual Zoom classroom. The school year has continued, albeit online, because public schools have retained their teaching staff. The situation with private schools, however, is different.
There are numerous reasons parents send their children to private schools. It may be that they believe in a school's educational philosophy, or the child may have unique learning needs, or the parents may seek to preserve their child's cultural and linguistic heritage as part of our multicultural mosaic. These parents are increasingly struggling to pay tuition. The reason is the high cost. Private schools, which rely on revenue from tuition to pay teachers, specialists and other core educational staff, are experiencing mounting financial pressure. Even a virtual classroom needs a teacher.
Accessing CEWS would alleviate this pressure; however, CEWS eligibility has become muddled when it comes to private schools.
Because of a contradiction in the criteria set out by the government, private schools are being erroneously categorized as public institutions because the criteria do not differentiate between public and private schools. Private schools, however, are not public institutions nor are they funded in the same ways as public schools. Many of them are registered charities or not-for-profits, which are eligible for CEWS. It is noteworthy that the current government criteria differentiate between public and private universities. The same clarification should be made for public and private schools
Compounding this issue are instances of CRA officials giving contradictory advice directly to private schools. This is a dire issue for many parents. We cannot allow students to be denied access to quality education because their school was unable to retain its teaching staff through the pandemic period due to the ambiguity in the wage subsidy program.
The second instance of children being impacted by the shortcomings of the wage subsidy is quickly approaching—summer camp and summer schools. These providers of formative experiences, environmental education and lasting memories for our children are struggling to meet the requirements necessary to access CEWS, just as not-for-profits and charities are.
As seasonal businesses, summer camps are caught in a perilous situation: They make the majority of their revenue within only a few months. This means thousands of children may be home this summer, including children from low-income families who, through financial assistance, could access the same experiences as other children, and those with physical or developmental disabilities who experience the joys of summer camp through specialized programs.
For camps to be closed due to the health risks stemming from COVID-19 is understandable; for the entire camping industry to be financially ruined because their revenue structure makes them ineligible for CEWS is not.
The wage subsidy was meant to provide necessary assistance to Canadian employers, including not-for-profits, charities and seasonal businesses. Whether they are restricted by the required one-month loss in revenue or the unclear wording in the eligibility criteria, it is vital that government rectify these issues in order to avoid an unintended negative impact on Canadian children.
The second issue is the rapidly increasing demand on the services of not-for-profits and charities. This increase is occurring alongside a reduction in resources, donations and employees. The widening gap between the demand and the resources will directly impact the most vulnerable in our communities. The needs of the not-for-profit and charitable sector must not be an afterthought. The sector is central in our ability to get through this crisis and will be a pillar in our rebuilding.
The $350 million provided by the emergency community support fund is an important step, but more must be done. We are recommending the establishment of a direct granting program of approximately $4 billion to $6 billion to ensure the critical services provided by these organizations and agencies can continue. A strategic investment in this sector would benefit all Canadians and would ease the burden on governments at all levels.
Having established the centrality of the charitable and not-for-profit sector, I offer our third and final recommendation: support for charitable giving. This reinforces the importance of the vital partnership between government and individual Canadians in getting our country back on its feet. The feeling of civic obligation and community values is strong among Canadians, and those who are able to provide assistance are asking how they can do so. Now is the time to harness this energy and generosity of spirit. The government has a crucial role to play in encouraging all Canadians to support charitable organizations, even those Canadians who, because of the crisis, have diminished capacity to give. This can be achieved by temporarily enhancing the tax credit for charitable giving, which would provide a lifeline for charities struggling to continue operations at a time when their services are needed most.
A second way is through a donor matching program whereby the government matches donations from Canadians to the charitable sector.
Both of these options would provide crucial assistance to the sector while empowering Canadians to partner with the government and support the most vulnerable among us through this unprecedented crisis and towards recovery.
Mr. Chair, once again I'd like to thank committee members for considering our perspective and for your dedication to ensuring that public policy effectively supports the charitable sector. I too would welcome any questions, comments or reflections.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Fogel.
Turning then to the Congress of Aboriginal Peoples, we have Chief Robert Bertrand.
Bob, a former colleague in the House of Commons, the floor is yours.
National Chief Robert Bertrand Congress of Aboriginal Peoples
Good afternoon, Mr. Chair, committee members and fellow witnesses.
My name is Robert Bertrand. I'm the national chief of the Congress of Aboriginal Peoples, or CAP, as we like to call it.
I would like to extend my thanks for this invitation and to those who have worked to bring us here this afternoon.
Mr. Chair, we appreciate your invitation to appear.
We would also like to thank Peter Julian for his recent work in Parliament to ensure that the urban indigenous population is heard.
Since 1971, CAP has fought for the rights, interests and needs of off-reserve status and non-status Indians, Métis and southern Inuit people.
In 2016, in the CAP/Daniels decision, the Supreme Court unanimously ruled that non-status and Métis people are Indians under the Constitution and that this is an area of federal responsibility. In 2018, CAP signed a renewed political accord with the Government of Canada to ensure our people are included in federal policy.
CAP is the national voice for our 10 provincial and territorial affiliates. They work with their respective provincial and territorial governments to advocate for their constituents. They are service providers in areas such as housing, education, employment and language, among others.
Our communities have been historically known as a forgotten people. This has not changed, even during the present pandemic. In the past, this term referred to the indigenous peoples excluded from the Indian Act, treaties and land claim agreements. Today, we also have to add to the list those who are excluded from the government's distinction-based approach.
In March, the government announced a $305-million support package for indigenous peoples dealing with the COVID-19 pandemic. Of this amount, $290 million was designated for distinction-based organizations, which represents about 500,000 indigenous people across Canada. Less than 5%, or $15 million, was designated for supporting off-reserve and urban indigenous populations, a group of over one million people.
Fifteen dollars per person is not enough for any meaningful support programs for one of the most marginalized groups in Canada. I don't need to reiterate the poverty and chronic health issues, the over-policing and the discrimination faced by our indigenous people.
CAP was told that it will only receive $250,000 after a competitive bureaucratic process that pitted off-reserve organizations against each other. This amount would be enough to provide those in need among our people with approximately three dollars. That is per capita.
We were encouraged to hear the government acknowledge that the initial $15 million for urban indigenous communities was insufficient. CAP said as much when the funding levels were announced back in March.
Despite the promise of more funding, we are left with a few pressing questions. First, how much more will be made available? Second, when is it going to reach our people, who have been waiting since mid-March? Finally, when will the government address the distinction-based approach that created this problem in the first place and include all the national indigenous organizations as equal?
Our people should have known about funding levels and timelines months ago. Implementing programs takes time, time that is wasted while people's health and lives are threatened.
The distinction-based model continues to be a problem and a barrier for our constituents with more recent announcements.
New funding is rolled out without representatives of urban indigenous peoples being consulted. Government has announced another $70 million in distinction-based indigenous student aid funding that our constituents will not be able to access. Also, $306 million in indigenous business support is flowing through groups that exclude most of our membership as well.
What CAP is asking is that all indigenous peoples be considered when creating public policy. We urge federal and provincial/territorial governments to engage CAP, our PTOs and our constituents to design programs, rather than restricting access to only a handful of organizations.
Mr. Chair, I appreciate the opportunity to speak to you today, because consultation on issues that impact all indigenous people is something that CAP strives for in our work as a national indigenous organization. Mr. Chair, we will not be forgotten.
Meegwetch. Merci. Thank you very much.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Bob.
We're turning to H & R Block Canada, Incorporated. We have Peter Davis, associate vice-president for government and stakeholder relations.
Please go ahead.
Peter Davis Associate Vice-President, Government and Stakeholder Relations, H&R Block Canada, Inc.
Thank you, Mr. Chairman, and I thank you and the committee members for the opportunity to appear before you today.
Our company is the largest assisted tax preparation firm in Canada. During tax season, we have approximately 1,100 service locations, both company and independent franchises, with nearly 10,000 associates operating coast to coast to assist Canadians with their taxes year-round.
As a result of the COVID-19 global pandemic, this tax season has been like no other in Canadian history. Throughout this crisis, H&R Block Canada has remained in frequent communication with the Canada Revenue Agency to ensure Canadians are still able to file.
In the early days of the crisis, our company immediately responded by implementing additional sanitary and social distancing measures in all of our locations. Once the full implications of COVID-19 were announced by public heath officials, H&R Block Canada’s office network transitioned to a national drop-off model, thereby allowing Canadians to safely and securely drop off their tax documents at any of our locations, where they could be prepared and filed by our tax professionals. This approach has allowed us to establish a balance of safety by ensuring social distancing while being able to continue serving Canadians with filing their taxes in a safe and efficient manner.
In mid-April, H&R Block Canada deployed nationwide an “Upload from Home” service that permits Canadians to upload their tax documents to a secure online portal, where their returns can be prepared and filed virtually by our tax professionals, all from the comfort and safety of their homes.
Our upload from home and national drop-off services would not be possible this tax season were it not for the CRA’s willingness to take important steps to permit our industry to better assist Canadians with their taxes during the crisis. For example, in late March, the CRA announced its intention to begin recognizing electronic signatures for the T183 form, which previously had to be signed in person by millions of Canadians every year to authorize tax preparers to file their taxes.
Tax-Filer Empowerment Canada, the leading industry association for Canada’s tax preparation and software industry, has closely collaborated with the CRA and other key government stakeholders to advance the use of electronic signatures in tax filing.
According to government statistics, in the 2019 calendar year, nearly 17.5 million Canadians filed their taxes with the assistance of a tax preparer, representing nearly 58% of the tax-filing population. Taking this into consideration, it is paramount during this time of social distancing and staying at home that Canadians have the option to work virtually with a tax preparer to have their taxes prepared and filed.
Given the breadth of the challenges that our country and the world are currently facing resulting from COVID-19, why is H&R Block Canada investing considerable resources to develop new approaches for Canadians to file and working to raise awareness on the importance of filing?
Simply put, many Canadians unfortunately find themselves out of work as a result of business closures stemming from COVID-19 and need immediate access to financial support. It is now more important than ever that Canadians file their taxes in order to receive their refunds and benefits. In 2019, the average refund received by Canadians was $1,800. This equates to almost one month of full support under the Government of Canada’s new emergency response benefit.
For many Canadians, their tax refund will be a significant financial support to help them manage everyday life through this crisis. It is for this reason that H&R Block Canada has been strongly advocating to provincial governments and the Government of Canada that tax preparation be deemed an essential service. I am pleased to report that as of today, tax preparation remains a permitted service in all provinces throughout Canada.
With under a month left in Canada’s extended tax season, government statistics indicate that at the end of this April, over five million fewer Canadians had filed their taxes compared to last year. It is likely that of these five million, some are lower-income Canadians, particularly since COVID-19 has resulted in the closure of tax clinics throughout Canada. To fill this critical gap, H&R Block Canada recommends that the Government of Canada closely collaborate with Tax-Filer Empowerment Canada and other industry stakeholders to determine how best to ensure lower-income Canadians file their taxes in order to ensure they do not forgo their benefits.
To this end, some initiatives to consider may be a joint government/industry awareness-raising campaign to encourage lower-income Canadians to file. In addition, there may be opportunities worth exploring for industry to work with the federal government to support virtual tax clinics.
The message I would like to leave with this committee today is that Canada’s tax filing system has stood up remarkably well in the face of the COVID-19 global pandemic, and the CRA has been responsive to industry input to implement measures to better assist Canadians with filing this tax season.
We recommend that this committee also support collaborative efforts between the federal government and the tax preparation and software industry to ensure that Canada's most vulnerable are able to file their taxes and receive their benefits in a timely manner.
On behalf of H&R Block Canada, thank you again, Mr. Chair and committee members, for the opportunity to appear.
I'd be pleased to answer any questions that committee members may have.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Peter.
Turning to the Heart and Stroke Foundation of Canada, Doug Roth, chief executive officer, and Manuel Arango, former neighbour in the West Block or somewhere.
Go ahead, Doug.
Doug Roth Chief Executive Officer, Heart and Stroke Foundation of Canada
Mr. Chair, members of the committee, thank you for the invitation.
I'd like to speak briefly on three topics today: first of all, Heart and Stroke's work during the pandemic; second, the financial impact to our sector and to ourselves; and third, the impact of federal incentives to date and the need for further investments.
The current pandemic has demonstrated that our work is needed more than ever. Those who are living with conditions of heart disease and stroke are among the most vulnerable and have the highest mortality rates from COVID-19. Our teams have worked to pivot quickly to meet the needs of both patients and their caregivers. Through webinars, web-based tools, videos, direct outreach and our online peer-to-peer communities, we have been a source of credible, easy-to-understand information and guidance for our populations to stay safe, eat healthily and access key services during this pandemic.
We have also seen alarming drops in patients going to emergency rooms. Therefore, as a result, we've been raising public awareness for Canadians who are experiencing signs of heart disease and stroke that, if they see these signs, it's absolutely critical that they get emergency medical attention right away.
Next, I want to highlight the financial strain on our sector and on our organization. This will highlight some of the other comments that you've heard today. Health charities, as a subset of the sector, our coalition together has $670 million in revenue a year. We employ 2,500 Canadians and we support 2.9 million patients. To date, the health charities in our coalition are being impacted by a 50% revenue drop due to fundraising efforts impacted by COVID-19 as well as economic hardships.
At Heart and Stroke, following the public health guidelines, we have, as others, cancelled all of our in-person fundraising events, which was a direct hit this spring and summer of over $25 million to our budget. As well, like others, we're seeing an immediate drop to fundraising sources outside of our event-based fundraising. Our annual research budget this year, which would have been $33 million, is heavily at risk and, like others, we have been forced to make very difficult decisions about staffing. Last month, we laid off over 200 employees, which was about 45% of our staff. As Andrea Seale mentioned in her comments a few minutes ago, in our 60-plus years as a leading health charity, we've never seen the financial hardship that we're seeing right now.
We are greatly appreciative of assistance delivered by the federal government, both the wage subsidy program and the emergency community support fund. The wage subsidy program is absolutely being helpful. It's allowed us to keep more staff than we otherwise could, but clearly not all, as I've mentioned. We're in early discussions to see if potentially some of our programs might qualify for the community support fund. Unfortunately, many of our core costs are not being supported. Rent is an example, and while we thank the federal government for bringing forward the emergency rental assistance program, the reality is that it doesn't benefit us and many others.
As you probably know, you need to have a 70% drop in revenue, you can't be an organization with over $20 million in revenue and your landlord needs to subsidize some of your payments. That means that Heart and Stroke doesn't qualify, but also many other charities don't qualify. Our hope is that, in the same way after the wage subsidy was announced and then our sector was consulted, and the stipulations were adapted, there could be similar discussions on the rent program as well.
As you heard last week from Imagine Canada's testimony, the charitable sector overall needs $8 billion to $10 billion in what we're calling emergency stabilization funding. We strongly support this request at Heart and Stroke, and in addition to both the wage subsidy and the community support funds, there are other specific initiatives that we believe could make a real difference for the charitable and non-profit sector.
Three examples of those initiatives would be, first, a grants and contribution program designed to cover immediate and urgent core costs and health research programs. Second, similar to what Shimon mentioned, a mechanism that would further incentivize Canadians to be more generous in donations, whether—as he mentioned as well—through a matching program or through increasing the donation tax credit, we'd be in favour of that to help Canadians be more generous.
Third, we see that there could potentially be a carve-out of the overall stabilization fund that could support health charities specifically. In particular, our Health Charities Coalition is seeking direct investments of up to $28 million per month, representing the revenues lost of the entire coalition each month since March 2020. This investment would allow our staff to continue to support patients, to look at restarting our fundraising and to protect our gains in research. This support would allow our organizations to recover and to be a health and economic success story.
Thank you for your consideration. I look forward to the discussion.
Liberal
The Chair Liberal Wayne Easter
Thank you, Doug.
Now we have the National Airlines Council of Canada, Mike McNaney, president and CEO.
Go ahead. The floor is yours.
Mike McNaney President and Chief Executive Officer, National Airlines Council of Canada
Thank you, Mr. Chair.
I want to begin by thanking the committee for the opportunity to appear as a witness today as you continue your hearings concerning the pandemic.
The National Airlines Council of Canada represents Canada's largest airlines: Air Canada, Air Transat, Jazz Aviation LP and WestJet. We promote safe, sustainable and competitive air travel—
Liberal
The Chair Liberal Wayne Easter
Mike, I have to interrupt for a second. Could you slow down a little and speak a wee bit louder?
President and Chief Executive Officer, National Airlines Council of Canada
As an airline, Mr. Chair, I'm trying to bring us in on time, but I'll slow it down.
President and Chief Executive Officer, National Airlines Council of Canada
We promote safe, sustainable and competitive air travel by advocating for the development of policies, regulations and legislation to foster a world-class transportation system. Collectively, our member airlines carry over 80 million passengers annually, directly employ over 60,000 people, and are a critical component of Canada's overall air transport and tourism sector, which supports more than 630,000 jobs.
Our industry is reeling from the pandemic. It is a crisis unlike any we have experienced before. We have approximately 90% of capacity eliminated from the marketplace. There are billions of dollars' worth of aircraft sitting parked on the ground. Thousands of employees have been impacted. Little revenue is coming in and carriers are burning through cash. There's also no clear path forward, no clear path ahead, as to when and how things may start slowly to improve.
A strong Canadian aviation sector is critical for our overall economic recovery. We support tens of thousands of jobs across every region of the country, in communities large and small, and across every sector of the economy.
Every job in every industry is, of course, important. The strategic significance of aviation lies in its well-established ability to support and promote economic growth across all sectors of the economy. Countries around the world have recognized this fact and have announced various initiatives over the past several weeks to support the sector, precisely because they will be relying on aviation to play a critical role in their economic recovery.
In Canada, our industry has been very appreciative of the broad support measures the government has introduced, in particular the wage subsidy support program, which our members are utilizing. Over the past several weeks the federal government has noted publicly that it is examining measures to support particularly hard-hit industries, including airlines. We are asking the government to move quickly and provide the industry with its plans.
It is important to note that as we entered 2020, after years of continuous investment in new aircraft, new routes and increased frequency to communities large and small across the country, our economy was more connected through aviation than it has ever been to communities across Canada and the world, with all the economic and social benefits that entails. This expansion required the successful investment of billions of dollars in capital, in employees, in operations and in suppliers in every region of the country.
We are in this crisis today not because of bad decisions by companies that have led to financial difficulty, but because of the economic chaos caused by the pandemic, as well as the closing of borders and the imposition of travel restrictions. Aviation is hit particularly hard, as the government has noted, because it is very capital-intensive and is of course also a highly regulated business for obvious safety and operational reasons.
As we've seen demonstrated by our G7 partners, as well as our trading partners around the world, the industry will not get through this unprecedented crisis without government involvement.
To close, our members are focused on working with the government and this parliamentary committee to support a process that allows us to begin moving back to what aviation is meant to do: support the employment of hundreds of thousands of Canadians across the country in communities large and small; support our economic growth and connectivity, not just within Canada but to the world; and aggressively support our overall recovery from the pandemic.
Thank you for the opportunity to appear. I look forward to your questions.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. McNaney.
Turning to the last witness then, we have Karl Littler of the Retail Council of Canada.
Karl, you're on.
Karl Littler Vice-President, Public Affairs, Retail Council of Canada
Thank you, Mr. Chairman.
I want to thank the committee for today’s opportunity to present a retail perspective amidst this crisis.
For those unfamiliar with the Retail Council, we represent small, medium and large retail businesses with a presence in every community across the country. Our members’ sales represent over 70% of retail [Technical difficulty—Editor]. Since 1962, we represent more than 45,000 storefronts in all formats, including department, grocery, specialty, discount, independent retailers and online merchants. Lastly, and importantly in this context, retail employs over two million Canadians, making ours the largest private employment sector in Canada.
Retail is by no means unique in being severely challenged by COVID-19. Where we think retail is distinct is that there are two very different situations faced by the main parts of our sector, which we can title “essential” on the one hand and “discretionary” on the other.
The essential part of our industry has robust revenues in this environment, particularly in grocery and pharmacy. They face a multitude of operational challenges, including supply chain issues, HR issues, PPE sourcing and adaptation of workplaces with major increases in their cost structure, but their viability is not in question.
By contrast, the discretionary part of our sector, ranging from apparel to furniture and appliances, electronics, toys, books and so on, has been devastated by the COVID-19 crisis. This is partly due to shifting consumer spending and reduced incomes for citizens, but primarily because of being shuttered by order of public authorities.
Some derive limited income from e-commerce, but with constraints on curbside activity in the two largest provinces and the consumer focus on essentials, e-commerce revenues are a pale shadow of their former income from bricks and mortar operations. Colloquially, they are often referred to as retail stores, and of course, it is their very stores that have been lost to them in this period. It is on that topic that I would like to speak today.
RCC and its members greatly appreciate the effort that the government has put into programs like CERB and CEWS to provide income safeguards for Canadians to help avert much wider layoffs and allow the rehiring of many employees, but the reality is that, with limited or no income from operations, retailers can’t keep going simply by receiving generous assistance to pay employees. Even with taxes and, in some cases, utilities deferred, the meter continues to run on their rent even when nobody is coming through the door.
The CECRA program is an important step for severely impaired small retailers but one that is limited by enterprise size, rental footprint and a 70% income loss threshold. When CECRA was announced on April 24, the Prime Minister stated, “We’ll also have more to say in the coming days about rent support for larger businesses”.
Sticking the landing of that policy decision is critical, not only to larger retailers but also to those smaller retailers who do not fit within the parameters of the CECRA program. Simply put, retailers without income or severely reduced revenues have no ability to pay rent. Not only does this jeopardize their tenure in the very stores they will need in order to emerge from this crisis. It jeopardizes many of the million-plus jobs in the discretionary retail sector.
Non-payment of rent also ripples through a complex ecosystem involving commercial real estate, individual and institutional investors, pension beneficiaries and governments, especially municipalities that are dependent on the commercial tax base.
There may be a misconception that large retailers are sitting on a pool of cash. In reality, most entered the crisis with 30 to 60 days' worth of cash on hand, most of which has been exhausted already. Retailers’ ability to turn to commercial debt solutions is exceedingly limited. Unless a retailer owns its own real estate, its only securitizable assets are its account receivables and its inventory. At the moment, receivables are at or close to zero.
As to inventories, many are seasonal, and most are locked up in stores and warehouses. It's uncertain when they can be sold and whether consumers will have the income or the orientation to spend on discretionary items. In those circumstances, commercial loans are unavailable or they are so expensive interest-wise that retailers will not be able to carry that burden into the recovery period, especially when competing against international e-commerce juggernauts. That’s why it is critical that the government orient part of the additional liquidity that it spoke to, and can provide, to a purpose-built loan program on reasonable terms, allowing retailers the time to dig themselves out of the hole and repay those loans.
We understand that there's limited fiscal capacity to provide grants to industry. The federal government's capacity to borrow at lower rates of interest and to profile loan repayment in keeping with economic recovery is the essential element.
If anyone tries to tell you that there are big distinctions here between small, mid-sized and large retailers on this, the absence of revenues, the ticking meter of rental costs and the inability to borrow on reasonable terms affect the whole sector. If you have 10 employees or 10,000, the difference is essentially just one of scale, with the latter simply being a thousand times as large.
Thank you.
Liberal
The Chair Liberal Wayne Easter
Thank you very much for that, Karl.
Thank you, witnesses, for your presentations. We will go to six-minute rounds first. I think we have the time.
We'll start with Mr. Morantz and then have Ms. Koutrakis, Mr. Ste-Marie and Mr. Julian.
Marty, you're on.