Finance Committee on Feb. 18th, 2021

[Sean Fraser, Liberal, Central Nova, NS]

Since you mentioned the IMF, in the limited time that I have left, I believe it was the chief economist at the IMF, Gita Gopinath, who explained that because of the multiplier effect when you're dealing with economies at the effective lower bound of interest, public investment is not just economically sound but fiscally responsible in the circumstances, for the points you've made.

Mr. Chair, I believe that's pretty close to my time. Is there any time remaining?

[The Chair, Liberal, Wayne Easter]

You have a minute.

[Sean Fraser, Liberal, Central Nova, NS]

Excellent.

I have a final question for you, as a wrap-up. What have we learned?

The response was so effective in some ways, in the early days, that the expectations that Canadians now have looking forward are very high. They've seen that the government, with political will behind it, can actually implement benefits that roll out almost immediately to people in need.

Are there things we've learned about our systems through this emergency response that we'll be able to implement permanently on a go-forward basis?

[Alison McDermott]

That's a really big question and I think we'll be giving that a lot of thought.

One thing we know is that one of the reasons we had to go ahead with a fairly blunt approach to the emergency recovery benefit, the CERB, was that we had a failure of ESDC's EI system. I think we've learned the lesson that there would be many advantages to keeping up our existing employment insurance system so that we're prepared in this kind of event and we're not overwhelmed. However, in terms of the broader question, yes, we're definitely taking that back and doing a lot of thinking about our long-term policies as a result.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We'll turn to Mr. Ste-Marie, followed by Mr. Julian.

Gabriel.

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

Thank you, Mr. Chair.

I would like to begin by acknowledging and thanking each and every representative from each of the departments for being here. I also thank them, as Mr. Fraser said, for the important work they have done since the beginning of the pandemic. It's exceptional.

My questions are addressed to representatives of the Department of Finance and are related to an article by finance columnist Francis Vailles that appeared in today's La Presse. Mr. Vailles raises a really important question about the cost of vaccines. The article is entitled “An $11-billion mystery”. I hope that today we will be able to shed some light on this.

It refers us to line 1.4.1, vaccines and therapeutics, in the fall economic statement 2020, page 8. The forecast is roughly $14 billion, almost equally divided between this year and next year.

In the first category, “Support for Medical Research and Vaccine Developments (2020 Snapshot)”, an amount of approximately $1 billion is projected.

At the next line, “Further support for medical research and vaccine²”, $13 billion is allocated. The small superscript refers to this footnote: “Spending profile adjusted to reflect updated departmental requirements.” What does this include? Mr. Vailles did the math. He takes the average price of a dose of vaccine in Europe or the United States. He calculates two doses for each of the 38 million people and arrives at a total of $2 billion. Even with a slight increase in price, it is difficult to reach $3 billion.

This brings the total to $2 billion and the amount of additional support for medical research and vaccines to $13 billion. If we subtract $2 billion from $13 billion, we get $11 billion, hence the title of the article “An $11-billion mystery”. In his article, he digs deeper. He learns, for example, that $284 million is allocated to the transportation of vaccines and the purchase of freezers, including for the Department of Public Services and Procurement Canada. There is also $800 million this year and next year, or $1.6 billion, for the Canadian research component of the Department of Innovation. So we're still $9 billion short.

Could you explain this, please?

[The Chair, Liberal, Wayne Easter]

Who is brave enough to take that?

[Tushara Williams, Associate Assistant Deputy Minister, Federal-Provincial Relations and Social Policy Branch, Department of Finance]

I will, Mr. Chair.

What I can tell you is the overall breakdown for vaccines as is in the FES from last November. The total envelope is $14.3 billion: $13 billion of that is for medical research and vaccines; $1.2 billion is for another envelope of medical research; and $126 million is for biomanufacturing.

What I can say today is that the government announced $1 billion to secure access to vaccines up front, but there is an overall envelope, as you have noticed, for vaccines, vaccine supplies and medical research. That's the breakdown that I'm able to talk to you about today.

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

Thank you for your answer, but, with all due respect, we knew all that. It was in the article and it was written in the budget. So that doesn't solve the issue.

Mr. Vailles says that if you vaccinate everyone with two doses, the cost is $2 billion. However, $13 billion is shown in the table. Given what I've added, it comes to $9 billion.

So I'll take up the question he asks in the article. Has the government made a financial commitment to purchase too much vaccine, which it would be forced to pay for even if it were not needed?

[Tushara Williams]

What the government has done is that we have negotiated agreements with seven vaccine candidates, for a total of 429-million potential doses. I cannot comment from the Department of Finance's perspective as to whether we have too many doses or not. As you know, some of the vaccines—most of them—are still under approval, so we don't know whether they'll be regulated and approved to be used in the Canadian market.

For now, there is a pot of money that has been set aside for vaccine procurement and vaccine supplies. Right now, what we can talk about publicly is the $1 billion that has been allocated to secure access to upfront vaccines from the seven companies.

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

Thank you for your answer.

I'm happy with the announcement of this billion dollars, but it's everything else that is a mystery, hence the title of the article.

From what I understand you to say, the additional $13 billion will be used to cover doses from the seven pharmaceutical companies. The government chose to put it in the budget. Is that correct?

If not, what does this $13 billion represent?

[Tushara Williams]

With regard to the $13 billion, part of it is for vaccines, part of it is for medical research and part of it is for vaccine supplies.

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

Thank you, but you told me.

Can you explain the details? How many billions of dollars are given to each? If not, it's too vague. It's a fuzzy category, and that's worrisome.

The government and the department must be transparent before the committee.

[Tushara Williams]

I understand that it's vague right now, but part of the reason is that this is commercially sensitive information, which is pricing. Health Canada and the Public Health Agency, together with Public Services and Procurement Canada, are still in the process of finalizing some of the terms of the agreements. This is why we are unable to give you a detailed breakdown right now.

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

Thank you.

Mr. Chair, do I have a minute left?

[The Chair, Liberal, Wayne Easter]

This is the last question, Gabriel.

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

I'll come back to this in the next round.

In my opinion, it is very important for the committee to be able to understand what is behind this mystery and this envelope. I understand that our meeting is being broadcast publicly and that some issues may be sensitive.

When I speak next, I will ask for an in camera meeting to find out the details regarding the $13 billion. It is important that we understand them. This will allow the government and the departments to be fully transparent before the committee.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We will turn now to Mr. Julian, who will be followed by Mr. Falk.

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

Thanks, Mr. Chair.

Thanks to our dedicated public servants. We appreciate deeply your dedication during this pandemic, and we hope that you and your families continue to remain safe and healthy during this very difficult time. We appreciate your availability today.

I'll get right into it. First off, I would like to say that an in camera session on the distribution of vaccine contracts is something that I support as well.

I'd like to start off with questions around the CERB repayment.

It wasn't considered a “nudge” by my constituents, people who received the bills at the end of December stating that they owed money on CERB repayment—thousands of dollars. People took this as almost catastrophic in terms of their personal finances, as they struggle to put food on the table throughout the pandemic. The government eventually relented, a few days ago, and said that self-employed people don't have to make that CERB repayment, because it was essentially redefining the category.

I'd like to know how many Canadians who received that payment notice in December are still not covered by the exemption for the self-employed that was announced in February.

[The Chair, Liberal, Wayne Easter]

Who wants to take that on?

Are you directing the question to any specific person?

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

It's to the department that issued the notices.

[Ted Gallivan, Assistant Commissioner, Compliance Programs Branch, Canada Revenue Agency]

I think it would be that the vast majority were not covered by the scenario of the gross versus net, and again, I take the point on the letter from the CRA being intimidating. I think the intent was to put people who may be in a position to pay back the government on notice as soon as possible, to minimize the final financial hardship it could have.

I can get back with a firm number, but I would say the vast majority of the recipients of that letter were in different scenarios.

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

Thank you, Mr. Gallivan. I think those figures would be helpful, so if you could come back to the committee on that, it would be much appreciated.

I'll move on to the finance department and the wage subsidy.

On the Canada emergency wage subsidy, we're aware—because the Financial Post did a lot of digging—that dozens of profitable Canadian corporations have used the wage subsidy for dividend payments, stock buybacks and executive bonuses. Other countries prohibited that. Canada seemed to discourage that.

I wonder what the department estimate is of the sum total of monies spent from the wage subsidy on those three categories—stock buybacks, executive bonuses and dividend payments—and what steps the department is taking to get that money from taxpayers back.

[Miodrag Jovanovic]

I will take that question.

First, as to the total of the CEWS that has been used to pay dividends or to do share buybacks, we do not have that estimate, primarily because we don't have that information right now. That would require access to tax returns and financial statements, and that cannot be done clearly now and there would probably some important challenges in being able to make that assessment.

What I would like to do, and that will be the answer to your second question, is to get back to why we observed that in a way. The wage subsidy was designed to be responsive. The reason the eligibility is based on a month-over-month comparison is to make sure that the subsidy is responsive to sudden drops in business activities, particularly in the environment of a crisis where there would be lockdowns and restrictions imposed.

However, that also means that you might have a situation where a firm rebounds quickly from a bad month, and after a while, overall, might present sound financial statements, while at the same time having benefited from the CEWS. That's not an unexpected outcome given the design of that measure.

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

I'm sorry to interrupt. I have a ton of questions and we've only two hours with you.

Basically what you're suggesting is that the department doesn't see any reason to follow up on this. Am I summarizing that correctly?