Finance Committee on June 11th, 2020

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

Thank you. I appreciate the technical reasoning.

I asked about that, because I have heard from a number of constituents who use their personal account that they've obviously had difficulties obtaining the support of CEBA, and they need it right now. I know this matter is being looked at. The minister has been very good on this and is seized with the issue, but I raise it on behalf of constituents, because they have worked hard. It has made very good business sense for them to have a personal account rather than a business account. They could not have predicted COVID-19. They could not have predicted the requirement that our government put in place with respect to CEBA privileging the business account over the personal account. I just raise it because I have heard it a number of times in the constituency. However, as I said, the minister has been quite strong on this.

We as a government continue to adapt to fill in the gaps. We are flying the plane and building it at the same time.

There is something else I want to ask, and this is for any official who wishes to take it.

You would, of course, have seen the recent changes that were introduced by the CMHC when it comes to mortgage rules, and specifically the lending requirements that are in place when it comes to securing CMHC support for insuring mortgages. To what extent is the Department of Finance concerned about household debt and its potential negative impact on the economy?

I know this has always been a concern. It's been a concern in finance. It was a concern on the part of the former governor of the Bank of Canada, and that was pre-COVID-19. With COVID-19 and its impact on the economy, I wonder if anyone from the Department of Finance could speak to what this all means for household debt levels that have seen Canadians already in a very difficult position when it comes to making mortgage payments.

[The Chair, Liberal, Wayne Easter]

Mr. Leswick.

[Nicholas Leswick, Assistant Deputy Minister, Economic and Fiscal Policy Branch, Department of Finance]

Obviously, this has been highlighted as a key risk to the Canadian economy going into COVID-19. I think the fundamentals are pretty clear to everybody. Canadians were bearing a pretty heavy debt load in relation to their income. Probably the best flagship measure is the debt-to-income ratio that Canadian households carried into the crisis.

For fundamental reasons, we wanted to have a lower debt load so that when we endured the crisis, Canadians would be able to smooth their consumption effectively by taking on more debt. In that position, we've endured the crisis. Notwithstanding some of the very generous government support programs, Canadians are going to have to take on more debt to fund not just their essential needs, but some non-essential needs, such as paying insurance or putting gas in their car. That debt level is going to creep higher.

Just on a nominal basis, there isn't some optimal level of debt for any household to carry. I think we're probably overly fixated on the number. In the same context, Canadians' ability to service that debt will be relaxed with lower interest rates and longer amortization periods or mortgage deferrals.

It's definitely something we need to keep our eye on. As we recover through this crisis there will be another crisis around the corner, and the same expectation will be that Canadians will have the opportunity to deleverage. Then, when they need to make ends meet during the next crisis, they might have to take on more debt at that point in time. It's something we always keep our eye on, but we do it, I think, in balance with other vulnerability metrics.

[The Chair, Liberal, Wayne Easter]

We will go a little bit over. We'll take a couple of minutes for Mr. Cumming and a couple of minutes for Mr. Fraser.

James.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

My question will be for the Department of Finance. I raised it with the minister as well.

There's a specific example of a company that cannot get access to the CEWS. In April, we raised the idea of having Finance look at using different metrics for revenue calculation.

Specifically, this business receives a flow-through with insurance premiums. It flows through, they make no margin on it, but it keeps the revenues quite high. They really make their money on transactional...when there are claims. They make money off their claims cost, which is a very small portion of revenue. As you can imagine, with doctors' offices closed and the volume of claims going through, it's gone down, but they still have to maintain all their staff because they're able to do this.

Would Finance consider in this case some different form of metric? This is a business that has really been hit hard because of the lack of administrative fees, which are really the real revenue of their business, not the flow-through on the insurance premiums.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Marsland.

[Andrew Marsland]

I can't comment on a specific employer's circumstances. I would like to understand better the exact circumstances, so perhaps I could ask the member to provide them to us and we will take a look at them with the Canada Revenue Agency.

[James Cumming, Conservative, Edmonton Centre, AB]

Okay. I'll send that directly to you, Mr. Marsland.

Do I have time for one more?

[The Chair, Liberal, Wayne Easter]

You have time for a quick question, James.

[James Cumming, Conservative, Edmonton Centre, AB]

Mr. Carter, this is a fairly new program for your entity. How are you staffing up, or how are you putting a management team in place to deal with the LEEFF loan program?

[Michael Carter]

We've done several things. We hired a president who joined us just before the end of May. We have put together a board of directors, which includes several experienced financial people headed by Sandra Rosch, who is an experienced financial executive.

In terms of employees, we are providing Canada Development Investment Corporation employees, on a part-time basis, temporarily. We are relying primarily on financial and legal advisers we have hired, and we are infilling behind that. We have hired three additional people and we have plans to hire more.

How many we need depends to a large extent on how many loans we end up putting out, which of course at this stage we don't know.

[The Chair, Liberal, Wayne Easter]

Thank you. That's good information to have.

Mr. Fraser, you'll wrap it up.

[Sean Fraser, Liberal, Central Nova, NS]

Thanks very much, Mr. Chair.

My question is for Mr. Gallivan, to build on a previous response he gave. It has to do with the recent additional powers to prevent fraud in the Canada emergency response benefit.

The calls I was getting early on at the constituency office involved individuals who weren't aware that their EI claim was automatically going to be processed as the CERB claim; individuals who maybe got an unexpected call back to work after they had applied, or people who made a simple mistake and didn't realize they weren't supposed to apply.

It would be very helpful for you to confirm unequivocally that those are not the people who will be prosecuted with the threat of imprisonment but, as you said before, it will target individuals who are running criminal organizations at scale. If you could add clarity, I think the public would greatly benefit from that, to ensure those honest mistakes are not going to be punished with the full weight of the law.

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

Mr. Chair, it seems that Mr. Gallivan has been disconnected.

Let me provide assurances that these measures would be for absolutely egregious cases, as Mr. Gallivan pointed out, organized crime. We have absolutely no interest in those who have made mistakes or have interpreted the attestation a different way. That's not what this is about. This is for the egregious cases of scale where we have individuals who are unequivocally trying to get the benefit illegally. They're going after 100, 200 or 300 CERB payments. It's that type of thing. Those kinds of egregious cases are really what we're after. It's definitely not anyone who would make a mistake.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you, Mr. Chair.

I have one final question.

Mr. Leswick, you suggested that some of these kinds of programs will be responsive not only to this crisis, but to some potential future crisis. I'm curious about one of the things we haven't really dug into. We've had some conversations at this committee about the extension of existing benefits. We've not had many conversations about the preservation of the structures that administer these benefits should they be needed in some future crisis.

I'm curious if you have thoughts on what it would take for the federal government to put structures in place that could be used automatically to stabilize the economy in the future, should another crisis of this nature arise.

[Nicholas Leswick]

I think a lot of lessons are to be learned and obviously there will be, and I think I undersell it to say, a post-mortem on what the crisis has taught us. Looking forward, structural changes to things like employment insurance and what we've learned around the interaction between the CERB and the self-employed and even our operational capacity to stand up systems and deliver benefits at this intense cadence, with CRA being front and centre.... I guess that will be collected to make structural policy in government going forward.

[The Chair, Liberal, Wayne Easter]

Thank you.

As a reminder for members, the deadline for witnesses for the general panel on June 18 is now noon, eastern time, on June 15.

I know every two weeks we see most of you folks. The new addition this time is Mr. Carter. Thank you very much for taking the time to give us the background information and for assisting Canadians as you all do your best to do. Thank you for appearing today.

With that, the meeting is adjourned. Thank you all.