Finance Committee on May 19th, 2020

[Christopher Sheppard-Buote]

I'll start, and Jocelyn can finish up.

The concern for us was twofold. First, the requirement for some, and not for others, to stop what they were doing, reach out to almost 100 members across this country during a pandemic and ask for data and actual numbers was the first portion that was extremely challenging for us. It was not only the amount; it was the fact that we were forced to create a proposal during a pandemic and then apply and compete for $15 million of over $300 million in this fund. We submitted a proposal to Canada with figures based on actual data, based on reality, that I would assume very few agencies or associations could do right now.

Jocelyn can tell you what that number is, and I'll pass it over to her, but it was a twofold issue.

[Jocelyn Formsma]

Our proposal alone was for $15 million—or just under that, about $14.9 million—for urgent, immediate costs covering staffing, capacity, personal protective equipment, the infrastructure costs of renting equipment such as handwashing stations and porta-potties, fuel and vehicles, because they're delivering food and supplies to people, as well as modifications to the centres, both sanitization supplies and cleaning services, as well as food for the food banks' kitchens and delivery.

We also put in support for coordination. We have people who are social workers, executive directors and administrators who now have to respond to a pandemic with no public health background. We wanted to be able to hire some expertise to help guide us through what we should or shouldn't be doing and then be able to connect with each other to do that coordination by just having one staff alone to coordinate the donations that were coming in, food donations, gift cards and those kinds of things.

We also needed support for technology, upgrades to equipment, tablets and phones, both for the staff to move to a virtual environment and for loaning to community members such as elders to combat social isolation, or to young people and families.

Then we also included some support for accessing mental health and to do what we're calling program adaptation.

All of those components, which were based on actual costs that friendship centres were already spending, were the $14.9 million. While friendship centres are accessing other federal government supports, for example the wage subsidy for small businesses, a lot of the food security funds didn't come to friendship centres, so what happened is that friendship centres had to apply for $1,000 here, $5,000 there or $10,000 there. We have some friendship centre EDs who are just exhausted from applying for small grants and also helping community members apply, in a safe way, for CERB and other benefits they have access to.

So, yes, there has been a lot. A lot of the benefits have just kind of flown over our heads and we haven't been able to really grasp a significant portion that would help us do the work we were doing.

[The Chair, Liberal, Wayne Easter]

We will have to end that round there, Peter. You're a little over.

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

I still have a minute left, according to my watch.

[The Chair, Liberal, Wayne Easter]

No, you don't. Your watch is wrong. You will have a second round anyway, Peter.

I believe Ms. Wardle is still on her phone trying to sort this out, so we'll come back to you a little further down the road, Gabriel.

[The Clerk]

I think it should be fine, Mr. Chair. Maybe we can confirm with Ms. Wardle, but I think it's fine now.

[The Chair, Liberal, Wayne Easter]

Okay. We'll go back to Mr. Ste-Marie. Ms. Wardle has two phones going there.

Go ahead, Gabriel.

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

Thank you, Mr. Chair.

I'll ask my question again. The Institut du Québec is asking that the aerospace industry be recognized as a strategic industry.

In concrete terms, this means that specific programs need to be developed for it and that it must not be allowed to collapse.

Does your association agree with those conclusions?

[Janet Wardle]

Thank you for your patience, first of all. I appreciate it.

Absolutely, we agree with it. We have been working on vision 2025, because we realized that the industry was already starting to have issues prior to COVID-19. Now that COVID-19 has hit and people are not flying, the industry is slowly crumbling around us. We definitely need a sectoral strategy to help move us forward, keep 215,000 employees employed and allow that 25.5 billion dollars' worth of economy to keep going. As I said, we had realized there was an issue, and that's why we put forward vision 2025 last year.

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

Thank you.

Should the government ensure that the replacement of fighter jets produces significant spinoffs, so that military contracts partly compensate for the foreseeable difficulties of civil aviation?

[Janet Wardle]

I can speak on behalf of just my company. MHI Canada has been working with the government on this procurement policy, trying to move forward, whether it's defence or space, and realizing that we have the ability to put a team Canada approach together and work alongside all companies in Canada to bring the work to Canada from those organizations and build our economy even more—whether that's with technology, whether that's green—in order for us to innovate. Yes, we would absolutely benefit as a country from that defence policy moving forward.

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

Air transport and aerospace are intertwined. Rather than giving a blank cheque to the airlines, shouldn't the government instead ensure that public funds have a spinoff here at home?

I'll give you two examples. First, we could do as France has done and demand a plan to green our fleet. As we know, Mirabel produces the most energy-efficient airliner in the world, and greener airlines mean a more prosperous aerospace sector here at home. Then, we could follow the United States and require the repatriation of certain heavy maintenance activities that have been outsourced.

[Janet Wardle]

With regard to repatriation, we want to somewhat avoid the non-exporting because our aerospace industry is 80% export. If we start looking at not exporting or importing items into Canada, it could have a worse effect on our aerospace industry than it would on others. I absolutely agree that we need to have that sectoral strategy. In our vision 2025, one of the biggest concentrations was going green and being sustainable. There's a company in Vancouver that already has e-planes. I know that Mirabel and Bombardier are working on a plane that's more sustainable and environmentally friendly. We're proud to be part of that platform.

We know that we have to support innovation, specifically innovation with regard to the environment. We want to be the leaders, but we need the government's support to help us be the leaders in that industry. The first thing we need to do is get people flying.

[The Chair, Liberal, Wayne Easter]

Gabriel, you have a minute.

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

Thank you, Mr. Chair.

Air Canada announced that it would retire 79 older aircraft rather than pay to keep them in flying condition while grounded.

Over the next few months, thousands of aircraft could be taken out of service.

Wouldn't this be an opportunity to develop the embryonic aircraft recycling industry we already have?

[Janet Wardle]

It absolutely could be. Again, we need to get on the forefront. That could be a bridge to help us, but we need to have that long-term sectoral strategy to move us forward. We need to get people flying. We need to spend money on innovation and environmental.... Absolutely, that could be a bridge to get us there and to help our industry survive until we receive those orders.

Keep in mind that our long lead times make us so different from everybody else. What's affecting everybody now is going to affect us in the fall. For every month that we're closed down, we're not going to catch up for another year. I can speak for us. We closed on March 29. We are going to reopen fully in July. We're not going to recover back to normal for two years. Our lead times are a deterrent for us to get back to being healthy. That could be that bridge to get us from now to where we need to be in that sectoral strategy.

[The Chair, Liberal, Wayne Easter]

Okay, we'll have to end it there.

Ms. Wardle, there's a lesson for Mr. Ste-Marie here. If he'd just ask the same question three times in the House, he'd finally get an answer.

We'll go on to Mr. Morantz, and then Ms. Koutrakis.

Marty.

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

Thank you, Mr. Chair.

I'm going to direct my questions initially to Ms. Wardle.

It goes without saying that the aerospace industry is hugely important to the Canadian economy. I think you mentioned that it's a $25-billion industry. It has a particularly immediate effect in my riding. My riding has companies in it like Boeing, StandardAero, Magellan, Cadorath, Nav Canada and the Winnipeg Richardson International Airport.

In a meeting recently, one of these companies told me that it is looking at laying off close to 15% of its workforce. Is this something that you're seeing across the country? To what extent are we seeing layoffs right now in the industry?

[Janet Wardle]

That company is pretty lucky. If they are in defence programs, they are pretty stable, so 10% to 15% is probably what they are going to see. For any commercial programs.... Again, our company is looking at close to 40%.

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

Focusing on the COVID crisis, which is what this committee has been struck to discuss right now, a number of government programs have been announced. They are at different stages, and they are designed to help businesses big and small. The larger business programs circle around what is called the BCAP, the business credit availability program, administered by BDC and EDC, and a new program that was recently announced is called LEEFF—we're now in this world of acronyms—which stands for “large employer emergency financing facility”. That one is looking for eligible companies that have $300 million in revenue and, as a minimum, financing lending requirements of $60 million.

I'm wondering if there is any uptake for these programs, including the wage subsidy, in the aerospace industry.

[Janet Wardle]

I can speak on the wage subsidy, for sure. The fact that the government has extended that to August has been a great relief for a lot of aerospace companies. Again, due to those long lead times, we're not going to see some of the effects of what's happening to us until the fall. We appreciate the government extending it until August. We're hoping that it is also going to extend into the fall time frame; that's what we see right now.

We haven't been able to talk to our members to any extent on the other programs. I know my company can't take advantage of them because we're owned by a company outside Canada. We're still going through some red tape there. We haven't had a chance to talk to the other companies to see if they can take advantage of some of them, but a lot of our companies that are in the AIAC are small to medium enterprises, so again, LEEFF won't work.

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

I appreciate that.

I want to turn to Mr. Greenspon for a second, if I have time, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

You have two minutes.

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

Mr. Greenspon, just out of curiosity.... I know you have written extensively about the 1990s—Paul Martin and Jean Chrétien and that era. I want to turn your attention to some of the similarities that might exist between Paul Martin's 1995 budget and what's happening now. The PBO projects that the federal debt likely will exceed a trillion dollars because of the crisis. We had the governor of the Bank of Canada here and the PBO saying they believe that interest rates are also going to rise. We see debt-to-GDP ratios rivalling what finance minister Martin was dealing with in the 1990s.

Do you think that Mr. Morneau will find himself in a position where he has to take some of the drastic austerity measures that Paul Martin had to take to get finances in order in the 1990s?

[Edward Greenspon]

I would like to thank you for that question, but it puts me in a very difficult position here. I will tell you what I can in terms of the comparisons. Certainly, the debt-to-GDP ratio by 1995 was higher than what we're seeing now. It was approaching 70%: 67% or 68%. On a federal level, interest rates were much higher, so the debt was pushing out. I remember that, between 1994 and 1995, $6 billion of spending moved from what you would call good, purposeful spending to paying for debt, most of it outside the country to foreigners: $3 billion because of rising interest rates and $3 billion because the stock of debt had gone up about $40 billion.

I think that, in that way, we were working off a base that was much more damaged than we are so far in this situation, even with the PBO projections, which say that the debt-to-GDP ratio will go into the 40s. However, the deficit numbers are remarkable. They can be compared in any way only to the Second World War, to 1945. I think one very interesting anomaly that people might want to keep an eye on—I don't think it will be exactly the same—is that in 1945 we had the largest deficit-to-GDP in the history of Canada, and in 1947 we had the largest surplus. In a situation that may be a one-time affair, there was a capacity to turn it off fairly quickly. I expect this will be harder to unwind, as we're seeing a lot of need out there and a lot of damage that's going to go on for a while.