Finance Committee on Feb. 25th, 2021

[The Chair, Liberal, Wayne Easter]

I call the meeting to order. Welcome to meeting number 22 of the House of Commons Standing Committee on Finance. Pursuant to the committee's motion adopted on Friday, February 5 of this year, the committee is meeting to study all aspects of COVID-19 spending and programs.

Today's meeting is taking place in hybrid format pursuant to the House order of January 25 of this year. Therefore, members are attending in person in the room and remotely using the Zoom application.

The proceedings will be made available via the House of Commons website. The webcast will always show the person speaking rather than the entirety of the committee.

I would also remind folks that we're not to take screenshots, in accordance with the House of Commons rules.

I welcome the witnesses from across the country. If they could hold their remarks to about five minutes, that would be helpful. Then, after all witnesses have made their presentations, we will go to a series of rounds of questions with members.

I might point out as well that although the motion says “COVID-19 spending and programs”, if you have any brilliant ideas on where we should be going on spending when we put COVID-19 behind us, we're always open to that as well.

Before I start with the first witness, I'll clear up a little confusion I might have caused at the close of the meeting the other day in regard to next week. I don't think the day is established yet, and it's a constituency week. On whatever day it is, we will deal with Bill C-224, which is Mr. Ste-Marie's private member's bill. We will start clause-by-clause on that. That will be followed by Larry Maguire's private member's bill, and that will complete the day. Anyone who has witnesses for Mr. Maguire's bill, please have your witness list in to the clerk by Sunday night to give time to have them appear the following week.

The other day next week, we will have a public meeting with the law clerk relative to the motion that passed in an earlier session of this committee.

Mr. Kelly and Ms. MacEwen aren't here yet, so I guess we'll start with Mr. Mike Cassidy, with Coach Atlantic Maritime Bus.

The floor is yours.

[Mike Cassidy, Owner, Coach Atlantic Maritime Bus]

Thank you, Mr. Chair, and good afternoon to all.

I represent an industry that is highly capital intensive, has low margins and is very fragile: the bus and motorcoach industry across our country. In the last 15 years, we've had a consolidation. We've had a rationalization within our industry, with fewer and fewer motorcoach and bus operators working within our Canadian marketplace. Unfortunately, in the context of that type of industry, we've had COVID-19 in the last year and we have COVID-19 with us for 2021.

It's been devastating, not only for my company but for the industry. To put it in perspective, when I compare our 2019 financial statement results to 2020 and our projections for 2021, it is a bleak picture. We feel in our industry that 2021 is not going to be any better than 2020 and could be worse.

In 2019, our best year in the business, we did $42 million in gross sales, 50% of which—$21 million—was directly related to the tourism sector, cruise ship arrivals and multi-day tours. We did not have, in 2020, cruise ship arrivals or multi-day tours. We do not expect cruise ship and multi-day tours for 2021, so we have thousands of motorcoaches parked across this country with no work, and it's going to be two years back to back.

We are essential to tourism. We are essential to passenger travel. I realize that today nobody really needs a motorcoach, but we have to realize that in May 2022—what we're considering the rebound year—our buses are going to be essential again, as we are an economic driver in our country. It's something to think about.

When I look at our Maritime Bus intercity division—which we operate here in Nova Scotia, Prince Edward Island and New Brunswick—and at our municipal transit on Prince Edward Island, I see that we are down by over 50%. That's better than having no business at all, and the gratifying element of intercity transit is that our buses are on the road. We are providing essential services. We have time-sensitive parcel freight each and every day that has to be moved. We do blood work to make sure hospitals within our Maritime provinces have the blood that is needed out of the Canadian blood supply in Dartmouth, Nova Scotia. At least the buses are moving. Operating expenses are higher than revenue in this stressed COVID environment, but they are moving.

From $42 million in sales in 2019, we lost $33 million in gross revenue in 2020 and we're expecting in 2021 another $30 million lost in gross revenue. You ask, how do companies like ours survive? We definitely have to give credit to the programs of 2020. They were rolled out quickly. They were shotgun—I realize that—but by being quick and by being shotgun, they got money into our bank accounts.

We have the wage subsidy. We have the rent subsidy. That was very effective for our industry and a company like ours. We had the RRRF—the relief and recovery program—which was put in place fast, with no charter bank involvement at all and done through our regional development organizations. It was a perfect program.

I think of our provincial and municipal transit, and the safe restart program to municipalities to help them with their transit operations. It was effective, and we hope that type of program will be extended on April 1. We hope the RRRF program will be extended on April 1. We are saying now that extending wage and rent subsidies for the hardest-hit industries has to be considered from June of this year. Those are the types of programs that got us to where we are now.

The huge losses we have experienced.... Last year, we had a six-month deferral with our chartered banks on principal, and that was a huge cash flow savings, but the industry has been decimated. It's devastating to look at the staff who are not with us. It's devastating to look at the financial results, but we have to be positive.

When I look at our industry, I look at intercity. I have always said that intercity is public transit on provincial highways, no different from public transit on municipal streets. Why can't intercity operators be eligible recipients of public transit infrastructure funds on a capital subsidy? Could we be recipients of safe restart programs? When we're in the rural areas, we are the public transit system for those areas. We were advocating, prior to COVID-19, that we should be eligible for similar programs to municipal transit.

Last week, we submitted for the preconsultations a brand new group called the coast-to-coast bus coalition, so we can re-establish intercity busing from the east to the west and throughout our country with a feeder system. I've always said that we need to reinstate the trans-Canada line. You need a trans-Canada bus line—companies aligning to move parcels and passengers. It's something we have to think about.

Then you get into these motorcoaches—the thousands that are sitting—and I ask you to consider this, please. When they are sitting, how do we get them ready, willing and able to go to work in May 2022? When it's the cruise ship ports, we all know that cruise ships don't dock if there are no buses on the wharf. Can we have a federal program of monies going into the ports? Can those ports have the discretionary power to administer those funds for strategic service providers to cruise ships? Could there be an arrival fee per passenger to help the ports administer funds for strategic service providers? Could there be a program put in place for motorcoaches? Could it be a $40,000 loan for each and every motorcoach? If you bring your buses back to work in 2022, 2023 or 2024, could it be forgivable? Bringing buses back ensures we are the economic provider that this industry has been so good at being: able to support many businesses but now asking for support.

I'll close by saying that—not just for my industry, the motorcoach industry, the tourism industry and highly impacted businesses, but for all industries—succession planning is something we are going to have to think about. Many of us in business are older. I am 67 this year. I did not expect that this was how I was going to finish my business career. I am committed to standing with my company and my three sons who are with me in this company, to make sure we get through and beyond COVID-19. However, with the stress, the strain and the responsibility, it's almost “enough is enough”. There should be good tax considerations for succession planning as we pass the torch on to the next generation.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cassidy.

Dan Kelly, I see you're here now. We'll go with you. You've been here lots of times. You know the process.

This is Dan Kelly, president and CEO of the Canadian Federation of Independent Business.

Dan, the floor is yours.

[Daniel Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business]

Thank you very much, Chair and members of the committee. It's great to be with you again.

I want to share with you some new data from CFIB—we just put some out this morning. Of course we also have a few recommendations for you.

A deck was sent around in English and French. You should have that, members of the committee. I wanted to walk you through that.

Businesses in Canada remain really shut down. On average across Canada, only 51% of businesses are fully open at this stage. The number is lowest in Ontario, while some provinces, particularly Atlantic Canada and some of the prairie provinces, are doing better than that.

On the staffing side, only about 40% of businesses are at normal levels of staffing, meaning 60% of them have fewer staff than is normal for them at this time of the year. Most concerning of all, only 25% of business have normal or better revenues than they usually do at this stage in the game.

Small businesses are deeply concerned about the economic repercussions of COVID. Of course, this started out as a health care emergency and quickly morphed into an economic emergency, but there are a great many worries on the part of small business owners, such as economic repercussions, consumer spending concerns even following COVID, the sluggish vaccine rollout, their business cash flow, debt and stress. These are some of the things small business owners are telling us.

I want to flag some brand new data that I mentioned we just put out today. One thing the committee should be very concerned about is the amount of COVID-related debt small businesses have incurred since the start of the pandemic. Right now, across Canada, it is $170,000 on average for a small firm in new COVID-related debt directly attributable to the pandemic. Bankers will tell you it's not that businesses have been rushing out and borrowing a whole bunch more money. It's typically unpaid bills that are the largest chunk of the debt. A lot of that is due to landlords, in part due to some of the failures of earlier rent relief programs. I agree with the previous speaker that the new rent support program is a much better version, but it's still not delivering in sufficient quantity to businesses that are being affected. That's $170,000 in debt, on average, across Canada.

Our estimate at CFIB, based on our member data, is that one in six businesses across Canada is at significant risk of closing. That means there could be 181,000 fewer small, independently owned and operated businesses across the country that go bankrupt or wind down permanently, directly as a result of COVID and the damage they sustained over the course of the emergency. That would represent 2.4 million Canadian private sector jobs being taken out at the same time.

Data from StatsCan will tell you that in fact business bankruptcies to date are actually lower than is normal. They too have been affected by the COVID emergency. Many firms are existing right now on government subsidies, and as those subsidies start to be taken out of the economy—and we all hope one day we can replace subsidies with sales—many business owners are worried they're not going to make it, especially, as I shared previously, due to the amount of debt they've gained over the course of the pandemic. That's one in six businesses, or 181,000, on top of the 60,000 Canadian businesses that have already gone bankrupt over the last little while. That means there could be a full wipeout of 20% of Canada's small and medium-sized businesses.

The government has created a number of very helpful programs, and I credit the finance committee and the government itself—with opposition parties, of course, contributing to this as well—for the creation of many of these programs. It was slow. It was incomplete. There remain hundreds and hundreds of different exemptions and rules that have made tens of thousands of business owners slip through the cracks of the program, but many have been helped. Sixty-five per cent of our members have used the CEBA bank account, which has now been topped up to $60,000 loans. Fifty-nine per cent of our members have used the wage subsidy—the CEWS program.

The Canada emergency response benefit—CERB—or the new one under EI has been used by entrepreneurs themselves. Twenty-eight per cent of business owners have used those programs. However, even now only 26% of small businesses are able to use the rent support program, because there remain a number of significant gaps.

We've put forward six major recommendations. We've presented these to Finance. Let me just run through them quickly.

We're asking the government to extend and expand COVID support until the entire economy can recover, including reopening Canada's borders. Really, the sign that government can start to scale back subsidies is when federal and provincial governments can stop telling Canadians to stay at home. Until we're at that point, we would not advise ratcheting back the subsidies that are provided to businesses to keep them alive, because so many businesses need that face-to-face interaction with a customer in order to make a living.

We're asking you—we're pleading with you—to put a moratorium on any new taxes and costs to small businesses. We just can't handle them. We're unhappy that CPP premiums went up at the beginning of this year, in the middle of this terrible time. We're asking you to delay further increases in CPP and the increases planned for the carbon tax—or at least to provide a full rebate to the businesses that are affected by it—and to freeze the liquor tax escalation.

We really think that forgiving more small business debt is a chunk of the solution here, and there are pathways in existing programs. One-third of CEBA is now forgivable if you repay the balance. Something similar to that could be adopted with the new HASCAP program, which we think has some potential.

A hiring incentive would be a good idea as we transition from a shut-down economy to a reopened one. Cutting red tape should be made a priority, as should holding off on any consumer stimulus. I'm really worried that the government may embark upon a big consumer stimulus measure. While that might be helpful to some, if we do that too early, businesses that rely on face-to-face transactions, which have been the ones that have been hardest hit, will not benefit from it, because of course that money will be going to the parts of the economy that have remained open.

As I close, I also just want to commend the finance committee on the great recommendations in its recent report. Many of the all-party recommendations, as well as some that were put forward by the parties, make a lot of sense.

One of the ones I want to highlight, which we love, is making good on the Liberal party promise to small business owners to eliminate credit card processing fees on sales taxes. That, we believe, would save small businesses $500,000 a year. It was a promise in the 2019 Liberal party platform, but we've seen no signs of that proceeding and we urge the committee to keep the pressure up.

We strongly support Bill C-208, which the Conservatives have put forward. That would allow for the same tax benefits for parents selling their farm or small business to a child or family member. That's a great move and would be welcomed by farmers and business people across the country. We have listed a few others there as well, but I know we're tight on time.

Thank you, again, committee. A lot of good work has been done, and I'm happy to take any questions at the appropriate time.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Kelly.

When we go to questions, I have a note here from the interpreters. Can you hold your mike up a little closer to your mouth so they'll be able to hear a little more clearly?

We'll turn to Angella MacEwen, with the Canadian Union of Public Employees.

Welcome, Angella.

[Angella MacEwen, Senior Economist, National Services, Canadian Union of Public Employees]

Thank you very much.

Thanks for inviting the Canadian Union of Public Employees to present to the committee. We're Canada’s largest union, with over 700,000 members. Our members work in a broad cross-section of the economy, such as health care, education, municipalities, libraries, universities, social services, public utilities, emergency services, transportation and airlines.

The current moment is unlike any previous economic recession or depression that Canada has seen. In this environment, it's essential that we continue to put absolute priority on the health of Canadians, which includes income supports to help households make ends meet and continued support of public services to meet their needs. This will not just help to contain the pandemic, but will also ensure that our economy, our small businesses and our communities can bounce back faster once the public health crisis has ended.

The federal government acted quickly to put supports in place at the beginning of the pandemic, such as the emergency response benefit, the wage subsidy and other liquidity programs. These made a real difference for millions of people in Canada. We think there is some room for improvement on the transparency, particularly of corporate supports. To ensure the effectiveness and fairness of public spending, we think the federal government should strengthen conditions and improve transparency and accountability.

Some of the ways in which you could do this include making public more information about how public money is being spent; include clauses that mandate labour protections for workers, including protections for benefits and the implementation of health and safety protocols; include penalties if these clauses are not upheld; and ensure protection for whistle-blowers. As well, where there is a union in the workplace, include them in the negotiations for wage subsidies and other supports. Also, for up to a year after corporations have received public subsidies or loans, we recommend that the government implement prohibitions on dividends, capital distributions and share repurchases and implement clear and transparent executive compensation restrictions.

In terms of stimulus, we think it's really important to prioritize spending. Even though the federal government is forecasting a significant deficit for this fiscal year, we don't think that's any reason to panic or pull back now. The rate for 30-year federal government bonds, as you all know, is at 2%, and 10-year bonds are below 1%. The Bank of Canada is supporting both federal and provincial governments by purchasing bonds directly and in secondary markets, ensuring that governments have a willing lender at low cost. This expands the supply of money that can be directed to public use. Arguably, the cost of borrowing compared to the return on the investment you make is a good fiscal guideline for this moment—better, perhaps, than debt-to-GDP ratio or other proposals currently on the table.

The federal government has the ability and the responsibility to shoulder the majority of the cost of the pandemic response and recovery, as well as a higher share of social spending going forward. Public investments in sectors such as health care, child care, livable communities and energy-efficient buildings will have a stronger impact on economic growth, alongside lower inequality and improved well-being. This recession is different. It has affected different industries, occupations and communities—especially women, low-income service workers, racialized workers and migrant workers—much more severely, so the federal government should take into account the ways that the pandemic has had an unequal impact and should design solutions in partnership with those hard-hit communities.

It seems clear to us that our economic recovery depends on the recovery of the care economy. Women’s economic participation plummeted to levels not seen in 30 years as COVID-19 shut down the economy and many workers were forced to leave their paid work to care for loved ones. Investment in the care economy, including health care, child care and social services, will have social and economic returns far higher than the current cost of borrowing. A vibrant, accessible care sector ensures that everyone can participate in the workforce, which will be essential throughout the economic recovery. Government investment in care improves labour market outcomes for women and improves productivity, allowing governments to recoup those upfront costs later on.

We note that quality public infrastructure is also essential for increasing the productivity of Canadian people and businesses. We strongly support increased funding for public transit, affordable housing and social, community and green infrastructure. All of these are important components of a healthy economic recovery.

We think the government, in order to fund the recovery, should consider tax fairness. Tax cuts since 2000 have reduced federal revenues by over $50 billion annually, and the major beneficiaries of these tax cuts have been large corporations and the wealthiest Canadians. These cuts have left a huge hole in federal budgets and had a ripple effect across provincial budgets as the federal government has stepped back from funding essential public services.

As an example, one of the first priorities of this government, after being re-elected in 2019, was to introduce another $6-billion tax cut that primarily benefited higher-income families. We recommend that the federal government reverse this regressive tax cut. That would save it $3 billion now and $6 billion per year when the cut was fully phased in.

The federal government, through the following fair tax measures, could increase revenues by over $50 billion without increasing tax rates on middle- and low-income Canadians. Restoring the federal corporate tax rate to 21% would raise $13 billion. Eliminating wasteful and regressive tax loopholes would raise another $14 billion. Cracking down on tax avoidance by taxing multinational corporations based on their real economic activities would raise over $8 billion. A wealth tax of 1% on estates over $20 million and an inheritance tax on estates over $5 million could raise another $8 billion. A financial activities tax on compensation and profits in the financial sector could raise $7 billion. As well, we recommend an excess profits tax to ensure that those who have been lucky enough to benefit from the pandemic, such as Canada’s big banks, which are announcing record profits, pay their fair share of the cost of supporting those who were not so lucky—those Dan Kelly was just talking about, who are about to go bankrupt.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. MacEwen.

We turn now to Michelin Canada and Andrew Mutch, president.

The floor is yours.

[Andrew Mutch, President, Michelin Canada]

Honourable Chairman Easter and members of the committee, my name is Andrew Mutch, and I'm the president of Michelin North America (Canada) Incorporated. It is an honour to appear before you today on behalf of my great company.

Dedicated to the improvement of sustainable mobility, Michelin designs, manufactures and sells tires for every type of vehicle, including airplanes, automobiles, bicycles, farm equipment, heavy-duty trucks and motorcycles. In addition to tires, the company also publishes travel guides, hotel and restaurant guides, maps and road atlases.

Michelin has a long and distinguished history in Canada. In 1969, Nova Scotia was selected as Michelin's first North American operation, establishing sites in Pictou County and Bridgewater, which opened in 1971. A third facility, in Waterville, opened in 1982.

Today, Michelin Canada employs approximately 3,500 employees across our three plants in the province. We also employ an additional 130 people at our marketing sales office, based in Quebec, as well as field and support sales positions across Canada.

Michelin plays a vital role in the economy of Nova Scotia in particular. We are the largest private sector employer, and our tires represent the second-largest export from the province. In an ordinary year, that's more than five million tires.

Michelin is deeply committed to Canada and to contributing to the economic well-being of its people.

As everyone knows, COVID-19 has had a devastating impact on our country and on the automotive industry as a whole. The impact of COVID on Michelin specifically was rapid and significant. For the first time in our 50-year history in Nova Scotia, we were facing a sizable potential layoff. In my 34 years with the company, I have never experienced a situation like this.

Throughout the pandemic, we've been guided by our strong Michelin values. We focused on three things: taking care of our people, taking care of our customers and our business, and taking care of our communities.

Since the beginning, we've had an unwavering focus on the safety of our people. Early in the pandemic, we developed and implemented numerous protocols to ensure our employees' health and well-being. These included mandatory masking, physical distancing, extra cleaning protocols, screening for symptoms and many more. We are extremely proud that our facilities have remained a safe place to work throughout this pandemic.

We also minimized the negative impact to our employees with the assistance provided by the federal government's wage subsidy program. This enabled us to keep our employees connected to the workplace during operational slowdowns, while also enabling them to retain their benefits and to continue their pension contributions. We are proud to report that we have been able to recall all our employees now and have even hired additional workforce since last July, bringing our total employment numbers above pre-COVID levels.

Commercially, we saw an unprecedented impact on our sales. Our overall revenue dropped and commercial signals were clearly uncertain, but we needed to ensure that we were in a position to rebound quickly in response to any market upticks. CEWS helped us ensure that we could bring employees back to work as quickly as possible when the market showed signs of recovery.

In addition to mitigating the economic impact as the largest employer in Nova Scotia, we also felt we had an important role to play from a community support perspective. Among other things, early in the pandemic, Michelin was able to donate 200,000 masks to frontline health care workers and long-term care homes in Nova Scotia and Quebec. We were proud to show our community leadership in this time of crisis.

However, COVID is not over. We are working diligently every day to keep our plants and communities safe while meeting the needs of our customers and contributing to Canada's economy. The CEWS program was crucial in enabling us to do that and to minimize the financial impact to our employees and their families. We sincerely appreciate the responsiveness of the federal government in delivering the program that enabled us to retain our employees and then to begin to ramp back our business to normal levels. I have no doubt this program was instrumental in allowing us to reduce the impact of COVID on our employees, on our company and on our communities. For this we are grateful.

Thank you for the opportunity to appear before you today. I look forward to answering any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Mutch.

Lauren van den Berg, executive vice-president of Restaurants Canada, go ahead. The floor is yours.

[Lauren van den Berg, Executive Vice-President, Government Relations, Restaurants Canada]

Thank you so much, Mr. Chair.

Good afternoon, everyone. Thank you so much for having me here today. It's lovely to see some familiar Zoom faces.

I'd like to use our time here to walk you through a quick overview of what the restaurant industry has gone through since the start of this apocalypse, as well as what we are uniquely situated to do to help kick-start Canada's economic engine as part of our proposed recovery plan.

A deck has been shared with you, which I will walk you through right now. If you turn to the slide labelled “Pre-Tax Profit Margins”, we can dive right in.

Restaurants and the many small and medium-sized businesses that make up the Canadian food service sector are a critical pillar of our culture, economy and local communities. Before the pandemic struck, our industry comprised over 98,000 establishments from coast to coast to coast, contributing 4% to the country's total GDP. We served about 22 million customers each and every day.

Most Canadians don't realize that even during the best of times, the average food service establishment keeps less than 50 cents of every $10 spent on a restaurant meal. The rest goes right back into the economy.

As we are now nearly a year into the COVID-19 crisis, we believe that now is the time to reflect on what's worked and also maybe what hasn't. We need to begin paving the way for a post-pandemic future that will ensure that as many restaurants as possible are still left in the picture, so that they can continue feeding Canada's recovery, both literally and figuratively.

Two decades of growth were erased in two months at this time last year. Essentially, our industry fell off a cliff and then broke both legs. The truth is, we're still struggling. Prior to the pandemic, the food service sector was Canada's fourth-largest employer. We directly employed 1.2 million people. However, our industry lost more jobs in the first six weeks of the pandemic than the entire Canadian economy lost during the 2008-09 recession. No other industry has come close to facing this level of shortfall. There are still more than 380,000 fewer jobs in the Canadian food service sector than there were in February 2020. Meanwhile, all the other industries have recovered at least 85% of their pandemic job losses.

I want to touch on the fact that we really believe that now, more than ever, is the time to make doing business as easy as possible. Because we were hit first and hit hardest by this apocalypse, we are uniquely situated to serve as that fiscal anchor to guide our economic recovery, because we are job creators. With investments in support programs specifically for employers, our industry can make every subsidy or grant dollar go that much further.

In our chart of recommendations, I'd like to highlight some of the key pillars of our recovery plan. This will be shared with you once it has finished making its way through the translation hoops. As we transition through the remainder of the COVID-19 pandemic and toward a strong and resilient recovery, there needs to be an evolution from emergency measures to a framework that supports business continuity and a favourable economic relaunch condition for the longer term.

With regard to the wage subsidy, we believe there are some enhancements and recalculations that should be made to the program to ensure that it's responding to the evolving economic and public health climate. Our restaurant relief model, which utilizes 2019 sales values as an essential and sustainable baseline, will allow our operators to stretch every dollar and truly invest in local communities by being a job creator across the country. Under this restaurant relief model, we're proposing that the wage subsidy equal 1.6 times the decline in 2019 sales, with appropriate adjustments made for new businesses that opened in 2020, up to a maximum of 75%. We are also recommending that the wage subsidy then be extended through April 1, 2022.

Looking at the rent subsidy piece now, we believe that the eligibility requirements for this subsidy program need to reflect the diverse and innovative food service business models. As currently drafted, the rent subsidy program does not capture the operational realities of multi-unit restaurants and, as a result, unintentionally leaves out many small and medium-sized business operators who are still struggling to survive this crisis. We are therefore recommending that the $300,000 cap on multi-unit operations across the country be eliminated and, instead, calculated on a per-location basis, again with appropriate adjustments made for new businesses that opened in 2020. We are also recommending that the rent and wage subsidy programs be extended through April 1, 2022.

Restaurant operators are resilient and resourceful, but they cannot continue to operate at a loss for months on end. If we want to build back a stronger, sustainable economy that continues to reflect our country's incredible diversity, our industry is the best place to start, and our restaurant relief model is the best way to do it.

I'll close by saying that, literally and figuratively, we believe restaurants are key to feeding Canada's economic recovery.

Thank you so much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. van den Berg. Those are shocking numbers, I will admit.

Before I turn to Teamsters Canada, I'll give you the lineup for the first rounds of questions. It will be Mr. Kelly first, Mr. Fraser second and then Mr. Ste-Marie and Mr. Julian.

Turning to Teamsters Canada, we have Mariam Abou-Dib, director of government affairs.

Mr. Clerk, did we lose the Teamsters?

[The Clerk of the Committee, Mr. Alexandre Roger]

She's in the meeting, but her camera's not open and she's muted, so I don't know if she's behind her screen.

[The Chair, Liberal, Wayne Easter]

Just watch for her, Mr. Clerk, and when she comes back on we will let her in to make her presentation. You can have IT contact her and we'll go from there.

For a six-minute round, Mr. Kelly, you're up.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I'm going to start with the other Mr. Kelly on our call.

I will ask you to comment a little further on what your members are going through, particularly with the news that was reported today about the debt levels of small businesses. An average $175,000 debt per small business is a staggering number, and the fact is that a significant portion of this debt is not public aid money at low rates or forgivable. It's not bank debt at historically low rates, but is in fact unpaid commitments that may threaten to bring down tens of thousands of these businesses.

Could you comment on the details of what this debt crisis among small businesses really means at ground level?

[Daniel Kelly]

Pat Kelly is my grandfather's name too.

We are really worried about the levels of debt that businesses are incurring. As I was saying in my commentary, there is a growing sense that the momentum—in terms of getting government support programs amended, changed and fixed—seems to be evaporating in government right now. I think there's a sense that we've got the supports in place, so let's just keep them going a bit longer and then we'll be done.

The economic damage we've seen so far is a tiny portion of what we will be seeing in the days ahead, even with a robust recovery, COVID coming to an end soon and reopening happening. It's beginning to happen in most provinces other than in Ontario, where the government has done a terrible job. We're starting to see some signs of life, but I can tell you that businesses, when they reopen, are going to be looking at their bills and at their income in May, June and the summer, and they'll be lucky to be able to pay their current expenses, let alone trying to make a dent in the $170,000 in COVID-related debt that they will have inherited.

All those bills for back rent and for inventory that a restaurant has had to chuck or that, in a retail setting, they perhaps have had to sell at fire sale prices.... Those costs have not gone away. They're not going to be forgiven in most circumstances, and they'll be an anchor around the necks of the business owners, dragging them under as the economy begins to recover. Then we'll wonder what the heck went on.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

You raised a really important point around the cracks in all the various aid programs. We've raised many of them right from the beginning. The government responded to many of the problems that the opposition raised and made many adjustments to things like CEBA and other programs, yet there remain businesses that have fallen through the cracks. We all hear about it in our own ridings, especially businesses that were maybe brand new, about to open in March 2020 having already drained all their savings and expended all their capital to get started.

Could you comment on these specific failings? Here's your chance; you have the parliamentary secretary for finance on the call. Go ahead and tell the government what the problems are with their aid programs.

[Daniel Kelly]

I agree with your assessment. The government has been moving to fix, based on feedback, in real time. I don't fault government for not getting these programs out. I fault it for the slowness in some of them, but I don't fault it for not getting them all right the very first day. This is a new emergency and there has been an open avenue and lots of dialogue happening—far more than was the case prior to the pandemic.

That effort has slowed completely. New businesses were promised by the Prime Minister in May 2020 that they would be given access to government support programs, and there's not been a single movement on that to allow small firms to access CEBA, CERS, the wage subsidy, or HASCAP. That needs to change. New businesses with $500,000 or $600,000 in investments to start up a restaurant came on stream in April, were shut down, opened for a couple of months, then shut down again. They've been ineligible for every single one of the federal programs, and while there's been talk about fixing that, there's been no action at all.

There are other program failures: with the rent subsidy, for example. One of the requirements to use the rent subsidy program is that as a business owner, you have to pay your entire rent bill. Let's say your rent is $10,000 a month, and the rent subsidy is going to deliver you $4,000. That's great; you're happy to get that. It will help you address some of the gap, but if you don't have the $6,000 to pay your landlord you cannot use the rent subsidy in its current structure. We've raised this with government. Even landlords are saying to allow the tenant to get the $4,000 and pay them with that, because it will reduce the debt they're experiencing. There's been no movement on that.

Just yesterday the government fixed a couple of small details of the rent subsidy—some of the problems we were facing with comparator months—but there are a lot of gaps there. The same problems exist with the wage subsidy. Tons of businesses have slipped though the cracks in the CEBA loan program. Some of them are too small, so the micro-sized businesses have been squeezed out. There is a list as long as my arm of businesses that unfortunately, while anxious to get some of these useful programs, cannot because the rules don't allow them to do that.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

We'll go on to Mr. Fraser for six minutes.

[Sean Fraser, Liberal, Central Nova, NS]

Thanks very much.

Given the local connection, I'll start with Mr. Mutch, who is here from Michelin North America. Andrew, thanks for being here; we really appreciate it. You spoke a bit about the importance of the wage subsidy program, not just to your company but to the people who work there. I remember those early days, starting to talk about the EI work-sharing program, and eventually seeing you guys on the wage subsidy.

In your remarks you highlighted the importance of the wage subsidy, and you mentioned there would have been more severe impacts had it not been there. Have you considered any of the potential scenarios to give you an idea of where you would be today, or the impact it would have had on your business, had the wage subsidy not been there for you?

[Andrew Mutch]

You're exactly right; the impact we saw was unprecedented in our history in Nova Scotia, for sure. Our revenue dropped precipitously, and we knew we had to act. Early in the process we looked to see what was available to us. As CEWS became more available and was rolled out, that looked like the program that would help us maintain our viability and keep our employees engaged with our company; we could manage our way through that one.

The potential for the significance of it was unprecedented, and we were very concerned about our ability to keep pace with this and not to get into layoffs and all the ramifications they would have on our employees and our families and our communities. We were happy to see the program become available to us and that it could work out.

[Sean Fraser, Liberal, Central Nova, NS]

I'm curious. You mentioned you're now back to better than pre-pandemic employment levels because there's been some new hiring.

One of the things that jump out at me when I look at the province-to-province job statistics from Statistics Canada is that Nova Scotia is back to about 95% of pre-pandemic employment levels. I'm curious to know whether the cases of job growth you've experienced would be the same if you were in an area where the public health situation maybe didn't allow you to ramp back up as quickly.

Has your presence in Nova Scotia, because of the public health response, allowed you to rebound more quickly?

[Andrew Mutch]

Absolutely. The infection rate in Nova Scotia has been among the lowest in the world, and has very much been under control. That has become a strategic advantage for us.

We're a worldwide company. Look at other areas of the world and you can see how impacted they have been by much higher infection rates than we are seeing. We have been greatly advantaged by the way the pandemic has been under control in Nova Scotia. That absolutely has helped us to recover and be where we are today.

Had infection rates been much higher, it would have been much more difficult to recruit and hire people and have the operations that we have today.

[Sean Fraser, Liberal, Central Nova, NS]

Thanks very much.

I have a quick question for Mr. Cassidy.

One of the things I couldn't help but notice is that you kind of presented an easy fix for us. We announced a lot of money recently for transit. If we allowed intercity provincial highway transit, as you framed it, to be eligible in the same way that municipal transit systems are for the recently announced funding for public transit, would that more or less solve your problem?

[Mike Cassidy]

Yes, there is no question. I saw nods when I was speaking. Public transit on provincial highways is no different from public transit on municipal streets. We took delivery of municipal transit buses this week. They're $550,000, on average, for a typical municipal bus. A motorcoach today is $610,000.

We have always said that you could have a capital subsidy for your operating rolling stock—a one-time subsidy where those buses have a 10- to 12-year useful life. We all know how hard it is to ask for operating subsidies each and every year. With the capital subsidy, if we could mirror that in intercity transit in a way that is similar to municipal, we could be in a position as owner-operators where we would not have to pay monies and cash flow for principal and interest. We would have monies available for operating costs.

We feel that having eligibility under the public transit infrastructure fund include intercity transit is a perfect recommendation.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you.

Mr. Kelly, thank you for the work you've done through this pandemic. Despite certain criticisms, which I appreciate and have jotted down, I really appreciate the advice that CFIB has provided from the outside of this pandemic. You focused heavily on solutions to small and medium-sized business debt.

Obviously government subsidies can't carry on in perpetuity. The private sector is going to play an important role at a certain point in time.

I'm curious whether you have any thoughts on the role that could be played by an equity tax credit of limited duration to help with the economic recovery—to help some of these businesses that may not otherwise survive not just get back on their feet but grow in a healthy way once it's safe to do so.