Finance Committee on May 14th, 2020

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair, and thank you, Minister.

Minister, I want to ask you about municipalities. A few weeks ago, this committee heard from the Federation of Canadian Municipalities, which, as you know, has put forward a request to the federal government to receive in the neighbourhood of “at least”—that's what their letter said—$10 billion. What do you make of this ask? I wanted to get your thoughts on that.

From my perspective, it's interesting that their advocacy has failed to mention at all, really, the provinces, which is interesting, because obviously jurisdictionally the provinces have a key role in this. Municipalities exist as creatures of the provinces, as we all know.

Again, I just wanted to get your thoughts on the ask and the possible provincial role and need for that.

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you.

I think what we're seeing across the country in many, many different sectors, whether it be in business sectors or in levels of government, is really significant stress. So many people are impacted and so many things that we take as normal activities are impacted by the coronavirus challenge, so it is not a surprise that we're seeing some stresses at the municipal level. Obviously, our support of people has been critically important, because that's important for the municipal level. Our support of businesses is important, in terms of those businesses and municipalities.

I do think it's appropriate what you said in your remarks—that municipalities do work with provinces. I think it's important for us to say that we expect for that continuing relationship to stay strong and for provinces to be the funders for municipalities.

That said, we do know that we all need to work together in facing up to this challenge, and we are endeavouring to do that. When we get requests, we consider them carefully, because that's appropriate at this challenging time. This request, like all others, we'll be considering carefully, knowing, of course, that it's also critically important for the provinces to be stepping forward in that regard.

[Peter Fragiskatos, Liberal, London North Centre, ON]

What do you make, Minister, of the argument that is sometimes raised that suggests that the federal government ought to act and lead the way when it comes to providing emergency assistance relief to municipalities, because, at least as the argument goes, the federal government has greater fiscal capacity than provinces? What are your thoughts on that sort of reasoning?

[Bill Morneau, Liberal, Toronto Centre, ON]

Well, I would start by saying it's pretty clear that the federal government has led the way. The federal investments on behalf of people and businesses have been extremely significant. You've seen the direct support now—as I mentioned in my opening remarks—that's in excess of $150 billion.

There's very significant support from the federal government. It is true that the federal government had a strong fiscal position going into this, and we remain capable of dealing with this challenge on behalf of Canadians.

That said, I know that provinces also have the capacity to be an important part of this effort. We are seeing provinces recognize that. They're putting forward programs, in some cases, and that is also important.

The kinds of things we've done, which have been supporting provinces with things like the essential worker top-up or the support for commercial rent—both areas that are really provincial—have been important. The Bank of Canada supporting the issuance of debt from the provinces has been critically important for them in having access to capital.

We've provided significant support. We'll need to continue to work together on the challenges we face, and we need to consider different jurisdictions and levels of government as we move forward appropriately.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

With my last question, I want to ask you about the nature of this downturn. It is quite unique, in the sense that it has primarily impacted, at least at this point, the service sector. Previous downturns have mostly impacted the manufacturing and construction sector, and men, who disproportionately work in larger numbers in those sectors. This time it's the service sector, and hence—not exclusively—women seem to be impacted. At least that's what the data is showing us.

What does that imply, in your mind, as far as a recovery is concerned? What sorts of approaches are the federal government looking to introduce? Do you have any thoughts on what the current data means, from a recovery standpoint?

[Bill Morneau, Liberal, Toronto Centre, ON]

I think it is an important question. We are seeing that this challenge is hitting different segments of the population differently. It's hitting low-income workers, in many cases, in a more difficult way than higher-income workers, because many of those workers are losing hours, or the jobs they were occupying are not going on during the course of the COVID-19 crisis.

That was why the emergency response benefit was so important. We knew there were 5.7 million Canadians not attached to an employer who were initially going to be hit, and many of those workers have gone on the CERB.

As part of the recovery, fundamentally what we needed to do was protect those people, and then protect the companies through wage subsidies and credits so that those companies will be around to rehire and to expand afterwards.

Really, it's emergency support for people, and providing a bridge for companies so we can come out of this with a capacity for people to go back to their old jobs—I hope—or, in some cases, move to new jobs that will be there because we've supported businesses.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll turn to Mr. Ste-Marie, and then on to Mr. Julian.

Gabriel, the floor is yours.

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

Hello, Minister. Thank you for appearing before the committee.

I also want to express my thanks and appreciation to all the officials who have joined the committee's virtual meeting.

Yesterday, the government announced the COVID-19 regional relief and recovery fund. With the other programs it's announced so far, the government started by presenting the terms. In this case, however, it announced the total amount. For Quebec, it's $211 million.

Should I take this to mean that the program will be first-come, first-served, so SMEs need to hurry up and apply?

[The Chair, Liberal, Wayne Easter]

Mr. Minister.

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Ste-Marie, could you tell me which program you're referring to?

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

I'm referring to the Economic Development Canada program that was announced yesterday by Minister Joly. It's called the COVID-19 regional relief and recovery fund, or RRRF for short.

[Bill Morneau, Liberal, Toronto Centre, ON]

Thank you.

Our approach focused on coming up with programs for small businesses, like the Canada emergency business account, which offers $40,000 loans.

We know that some companies won't qualify for the program due to their size and status. You mentioned another program that will help businesses that are still struggling. It's a unique program that was designed for small businesses forced to tackle a new challenge, a challenge that didn't exist before. We're going to continue with the credit approach for small businesses.

I hope we'll be able to give more details in the coming days.

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

All right, thank you.

I'd still like some clarification on the program that was announced yesterday, which totals about $900 million, including $211 million for Quebec. Do companies need to hurry up and apply to this program in case the approach that's used is first-come, first-served?

[Bill Morneau, Liberal, Toronto Centre, ON]

Our approach for this program is to go through the regional development agencies, and that's why each one has a certain amount to administer. Also, the application process is clear, which is important.

But there will be other programs too, and this is just one of the measures we're taking to help small businesses.

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

Thank you, and I'll change the subject.

Regarding the aid package for Air Canada, did the government make it a condition that the airline refund customers whose flights were cancelled?

[Bill Morneau, Liberal, Toronto Centre, ON]

We don't have packages specific to any particular company or sector. Rather, we've proposed a financing opportunity for large companies. Any company in any sector will be able to apply if it needs to. Our approach will require the company to explain its situation and how it will meet our conditions, which will be identical for every company, regardless of sector. We don't have an approach for any specific airline. Our approach is the same for all companies.

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

Thank you.

As demonstrated by your speech at the beginning of this committee meeting, for two months, the government has been piling on more and more announcements and new programs, not to mention changes to existing programs.

I think it would be appropriate to table an economic update by summertime. I'm envisioning a document that would provide a broad overview of the various programs that have been rolled out, outline the economic situation, and explain your department's working assumptions and the scenarios it's juggling. When the Parliamentary Budget Officer testified before the committee last Tuesday and was asked about this, he said this kind of update was urgently needed.

Are you planning to table an update in the next few weeks?

[Bill Morneau, Liberal, Toronto Centre, ON]

We believe transparency is very important. That's why you received a 30-page report today outlining our measures. We're making an effort to stay transparent. This crisis is obviously still in flux, and it's hard to make projections right now. We'll be able to do more once things stabilize.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Gabriel.

We turn now to Mr. Julian. We will have time in the next round for two more, before the minister has to leave. We will start that with Mr. Poilievre and then Ms. Dzerowicz.

Mr. Julian.

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

Thank you very much, Mr. Chair.

Thanks, Mr. Morneau, for being here yet again. You've been very accessible throughout this crisis. To you as well as to the families of the public servants who were here today, we hope that everyone in your households continues to be safe and healthy.

I'm going to ask some questions. I hope to have concise answers.

I'm going to start with the fact that we all know, which is that families are struggling and that small businesses are struggling, and yet the programs that the government has rolled out haven't provided the universal supports that many people were hoping for, and therefore many people can't access the CERB and many small business owners can't access the wage subsidy or access the commercial rent relief. There are conditions that limit those programs.

That's why there is some concern with the LEEFF, which is the new program that you've announced. There's that contradiction because, despite the fact that other countries, like the United Kingdom, have banned executive bonuses, stock buybacks and dividend payments because of their use of public funds, in Canada, the approach that you're suggesting taking is simply to cap those. What are you capping in terms of executive bonuses? Are they capped at $1 million or $2 million? How much are you budgeting for this new program?

[Bill Morneau, Liberal, Toronto Centre, ON]

There were a number of statements there, so maybe I can start with the first premise.

We've taken the view that what we need to do during the COVID-19 crisis is to make sure we're helping the people and the businesses impacted by this crisis. That's why our programs have been specifically directed towards those people.

I think what can be seen in application is that our approach is having exactly the desired impact. The emergency response benefit is a good example. There are now more than 7.5 million Canadians who have come onto this program, so we're seeing a very significant application. Through the emergency business account 600,000 businesses are now getting this $40,000 small business loan. The broad support is there. It's specifically targeted to the businesses or individuals needing it.

With respect to the direct question at the end, on the large employer emergency financing facility, we see that's quite important to help businesses that employ many Canadians to bridge through this time. We've done that, but we've put conditions. I think what you'll see is that our conditions are as strict as or stricter than those in other countries. We are, in fact, not allowing share buybacks or dividends for companies that come forward on this. We are going to have limitations on executive compensation, which I will be able to roll out as we work through those, that will be as strict as or stricter than those in other countries. Similarly, we've said that businesses need to protect workers through collective bargaining responsibilities and pensions.

We see these conditions as critically important. We see preserving our economy as critically important. We think this will help.

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

I would disagree with your answer regarding how what we are doing compared to what other countries are doing and best practices, but I'll move on to another issue.

Other countries have actually limited the use of public funds to companies that use overseas tax havens. With the rollout of the LEEFF we have seen this week, you said specifically it is only those companies convicted of tax evasion. I'm tempted to ask very cheekily how many companies involved in the Panama Papers, in the Paradise Papers, or in the Isle of Man scam have actually been convicted of tax evasion. But we know the answer. It's absolutely zero. Over 90% of Canada's largest companies use overseas tax havens, companies like Cargill, that have been involved in the worst COVID-19 outbreak in the country. Cargill uses an overseas tax haven.

Many of the companies in the Paradise Papers and the Panama Papers use overseas tax havens. Can you confirm that if those companies, like Cargill, meet the other criteria, despite this open practice of using overseas tax havens, they will qualify for use of the LEEFF?

[Bill Morneau, Liberal, Toronto Centre, ON]

Well, I think it's important to consider the aspects of this program that will guard against these challenges. You just pointed out one. Of course, companies that are convicted of tax evasion will not be eligible. But we've also been working together internationally to make sure the ability of companies to move money around, what's called base erosion and profit shifting, is more limited. That's actually reducing the scope for people to do the things without actually causing themselves to run afoul of the laws. That has been an important part of what we're doing.

Also, the condition in this new large enterprise facility will be that the money that goes is actually required to be used for Canadian operations, Canadian investments and protecting Canadian workers. That's an explicit condition of what we're doing here.

We've guarded against this, Peter, in multiple ways. Obviously, the work we've been doing for years has been reducing the ability of firms to do this. We're limiting it to those firms that have not run afoul of the law, and we're also focusing the investments, so they must be in Canada, for Canadian investments and for Canadian employees. Fundamentally we're trying to make sure that Canadian employment at these large organizations stays vibrant as we go through this challenging time.

[The Chair, Liberal, Wayne Easter]

Sorry, Peter, we are over time.

We turn now to the five-minute round with Mr. Poilievre and Ms. Dzerowicz, and then we'll have to let the minister get on to other things.

Mr. Poilievre, the floor is yours.