Finance Committee on March 25th, 2021

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

Okay, so that was in the fall. Do you happen to know where that figure is right now?

[Mathew Wilson]

We haven't done an updated survey since the fall, unfortunately.

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

I understand the challenges very well. We have many manufacturers here in London, where I am, and I can understand the call for continued support.

If you'll allow me, I'll play devil's advocate for a moment, because you also said in the presentation that you would advise the government to continue the wage subsidy for sectors like yours.

Just a few days ago, the following was said in The Globe and Mail, and I will quote directly. It's summarizing the recent findings of a StatsCan report:

The manufacturing sector, meanwhile, barely skipped a beat in the second wave. Manufacturing sales jumped 3.1 per cent in January—again, exceeding StatsCan's preliminary estimate—delivering the strongest growth since last July.

I want to see my manufacturers down here supported, but I'm also mindful of the fact that emergency programs, at some point, need to be tailored especially to those who are in special need. I'm very sympathetic to restaurants—Mr. Murphy's comments really stood out for me. However, for sectors that may not need continued support because they have seen a rebound, I worry that continued government support will lead to an unsustainable situation, if you know where I'm coming from.

Again, I'm just trying to play devil's advocate here.

What is your perspective on that?

[Mathew Wilson]

That's a great question. In fact, we've been working with the Department of Finance, Industry Canada and others in Ottawa for seven or eight months on exactly this scenario. We want to see the wage subsidy program wound down. We want to see all the programs wound down—I don't think anyone in the business community should say otherwise, anyway—but this has to be done in a way that is reflective of the economic growth of an individual company and not just broad-based data.

There are a couple of things in the data that always get problematic when you start looking at general data. First, there's no regional variation or sector variation in that, so there are very big swings in different parts of the manufacturing economy that are performing in different ways. Second, last year was not a good year and a lot of companies are building up inventory. In fact, about half of the growth is actually inventory buildup, which in manufacturing is not positive news. That means they're not selling it; they're just making it. We need to see sales increase, not just factory output increase.

I absolutely agree with everything you're saying, but let's not say across the board that everything is fine now and we cut it. I think we need to scale it appropriately to the companies that need the help, as you suggested, and remove those that are doing better. Frankly, it can't be a permanent crutch either. This shouldn't be a national program to sustain businesses that don't belong in business.

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

That provides some clarification. Thank you very much.

Mr. Murphy, we heard—I think it was two weeks ago—from the Canadian Federation of Independent Business. Dan Kelly presented here and brought forth a really startling figure: In Canada, the average small business has taken on 170,000 dollars' worth of debt in the pandemic. That is even higher for sectors that have been especially impacted, like the restaurant sector, the tourism sector and the hospitality sector writ large. I know you're from the east coast, but we have restaurants throughout the country, and in London they're struggling as well.

On debt levels taken on during the pandemic, can you speak to what you've seen in the hospitality sector since the onset of the pandemic? Does the figure resonate as even worse in your case? I'm certainly not looking for anything in particular. I wouldn't expect you to have data with you, for example, but what are you hearing? What are the stories? Is it exceeding $170,000? Is it in and around there?

I think it's good for the committee to know where the hospitality sector is in your part of the country. It probably mirrors where the rest of the country is.

[Kevin Murphy]

Thank you. It's a good question.

When you look at the Maritimes, we're similar when we look at Nova Scotia, New Brunswick and P.E.I., and even with Charlottetown, Halifax and Moncton. I would not want to be in downtown Toronto running a restaurant. I fully appreciate that they've been going about a year....

When I look at what's going on here, a lot of restaurants in Atlantic Canada are single-operator, owned by a husband and wife who run them. Everybody was very worried. They didn't want to take on more debt, because they couldn't afford to pay it back.

When a few programs came out, I think everybody in our world was looking at the programs and how you can take care of yourself first. When you say $170,000 in debt, I would think that the very small operator in Atlantic Canada will be looking at that $40,000 to $60,000 federal loan first. They would capitalize on that and use that.

Definitely the wage program was a big one. In Prince Edward Island, we had another program that the provincial government put out on interest relief on your debt. That was another piece. Everybody looked at the different options they had to help them get through it. With 2020, I think everybody was able to find a way to get through to now.

We're in our second winter with this. When you look at a seasonal operation, they lose their money, and in June they hope.... We're coming into this year. We don't predict this year. We're looking ourselves at about 70% to 75% of 2019's volume. That's what we predicted. Now, is it going to be better or worse? Who knows. However, you can't operate a business at that level.

With us personally, when you look at our company, absolutely we've taken on more debt. We used whatever programs we could to say to ourselves that it is sustainable and that we can pay it back.

When I look at the group around the table, the 25 business people and what they're doing, $100,000 to $150,000 would not be out of line. What they're asking themselves now is whether they would be better staying closed in 2021 than opening. They're planning hiring right now. Well, the next month they either have to hire or they don't hire. To ramp up most of these businesses, they're going to invest $25,000 to $50,000 to do that.

I know one our colleagues, Shaw's Hotel—one of the oldest hotels in the country, out of Brackley Beach—figured it would cost $125,000 to $150,000 to stay shut: Don't open. Don't employ a person. You know what? He opened last year because of the programs.

That's why I think that, for us, it's to get the message to seasonal operators sooner rather than later of what the answer is. If it's no, then they can at least plan. If it's yes, they're going to say let's get at it. We all want to be in business. We all want to open.

Another fact is that last year, when we shut down, we laid off 500 employees in three days. We did not do a summer hire last year. That's sad, because it was students who were getting affected there. Now, hopefully, we'll be back next year.

[The Chair, Liberal, Wayne Easter]

We'll have to move on.

We will go to one question from Mr. Ste-Marie, one from Mr. Julian, one from Ms. Jansen and one from Mr. McLeod, and then I believe Pam wanted in.

Mr. Ste-Marie, go ahead.

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

Thank you, Mr. Chair.

Mr. Ross, thank you for your presentation and the work you and the Collectif are doing. Your work is essential to achieving greater fairness in society.

I really enjoyed your testimony about the importance of taxing the tech giants and receiving royalties. Frankly, as you rightly said, the government missed an opportunity when they announced that they were going to do it after the pandemic. It should have been done before the pandemic, to level the playing field between the tech giants and other businesses.

I know that Quebec has already started collecting tax. Can you tell us about that?

Also, in your presentation, you had some criticism of the OECD. What is that criticism? Was it Canada's inaction on tax havens or on the tech giants?

[William Ross]

Thank you, Mr. Ste-Marie.

With respect to the OECD, the first criticism I had in mind in my presentation is mostly about negotiations going back and forth. It means that the international community never reaches a consensus and all countries, including Canada, lose out independently of one another. If Canada had followed the lead of France and Spain, we could have passed a tax bill on our own, indicating what measures we intended to take. Then, if an international consensus had been reached, Canada would have joined in. Nothing was stopping us from doing so.

The United States retaliated against France and Spain, but if 20 countries had each done the same on their own, the United States would have ended up as unilateral. The international community has already reached a consensus on the need to tax these activities based on where they take place, not where the companies are registered. So that's one thing regarding the OECD.

Second, we know that the OECD grew out of the American Marshall Plan and has always tended to see itself on the progressive side of history when implementing its policies. However, it has consistently turned a blind eye where it really matters over the years. In the fight against tax havens, our objectives of being transparency and sharing data are always half measures.

That's the case for Canada, which participates in country-by-country reporting. It's actually hard for researchers, activists and journalists to gain access to that data. The transparency issue has been raised, but as long as civil society has no access to the data, then transparency is not enough. The government can always keep its own cards close to its chest.

But this isn't a poker game. We want the straight goods, and we want to know what's really happening out there.

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

Thank you, Mr. Ross.

[The Chair, Liberal, Wayne Easter]

Okay, we'll have to move on to Mr. Julian for one question.

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

Thanks to our witnesses. It's very interesting.

Ms. Besse, I'd like to ask you about the difference credit unions make. You've given us some very impressive figures. Of course, I'm a member of a number of local credit unions. Our Vancity Savings dropped its credit card interest rate to 0%. Community Savings dropped its line of credit to 0%. What difference does it make when credit unions step up like this?

I also have an associated question. Credit unions initially had difficulty accessing the liquidity supports that were offered through federal institutions. How much of an impact did that have on the response of your credit union on behalf of its members during this pandemic?

[Shelley Besse]

I'm going to pass the first question to Kendall, my colleague, to answer. He's the president of our Island Savings region, and I think he can give a good perspective.

[The Chair, Liberal, Wayne Easter]

Kendall, go ahead.

[Kendall Gross, President, Island Savings, First West Credit Union]

Sure. Thank you for the question.

Certainly as a credit union, our whole reason for being is not only to serve our members but to support our communities and the communities we do business in. We do that in many different ways. Our profits go back to our members or our communities in varying ways, but we've also certainly spent a lot of time and effort and rapidly responded at the outset of COVID-19 with specific funding and support for our various communities. We've done that in different ways. I look back and I can give you example after example of how that support has made a difference, not only for our specific members, but for our communities.

One good example of a creative way we've done that is that we had a very specific program called “Get a Meal Give a Meal” that focused on our business members, on shop local and our various communities, and on our food bank, where we subsidized meals and provided a donation. Those are various ways that we support, and it's made an incredible difference in our community.

I hope that answered the question.

[The Chair, Liberal, Wayne Easter]

Okay.

Was there a second question, Ms. Besse?

[Shelley Besse]

Yes, I believe you were asking about access to liquidity.

I can only comment based on First West. Certainly we were in a very strong liquidity position prior to the pandemic, so I'm not aware of the delay. I know we did access the programs for assistance as we moved forward in the pandemic, and our treasury team worked through that.

[The Chair, Liberal, Wayne Easter]

Okay.

We'll move on to Mrs. Jansen and then to Mr. McLeod, and we'll soon have to wrap it up.

Mrs. Jansen, could we have a single question, please?

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Yes. Thank you.

Mr. Littler, we've heard from previous testimony here at the finance committee that the average small business has taken on $170,000 in non-bank debt during the pandemic. We also heard at our last meeting that small businesses are being denied HASCAP loans because they can't provide a revenue projection.

Unfortunately, the government has absolutely no concrete plan with any sort of benchmarks for a safe reopening, making it impossible for these businesses to be able to project revenue. That means banks are refusing to approve loans for highly affected sector credit availability because—surprise, surprise—these businesses are too high-risk.

It appears to me that this program, HASCAP, is about to join the growing list as yet one more Liberal program failure.

What sorts of safe reopening benchmarks do your retailers need to be able to see to secure their future? Also, would you agree that the 4% interest rate being charged by the HASCAP loan program is unreasonably higher than what the Bank of Canada and every other Canadian is able to access?

[Karl Littler]

I am not deeply familiar with HASCAP, in large measure because, as I've noted, most retailers would not qualify for it as they wouldn't meet the three months of sub-50% revenue within the prior eight months. Therefore, we have not delved into it as deeply as others have.

Certainly that is a challenge in our space, because there are certain forms of retail that are obviously running on fumes. I think particularly of the apparel and footwear businesses, and so on. They might not quite, in all instances, meet the HASCAP criteria as they are. Therefore, thinking about the ambit of those criteria is certainly something that could be done.

In terms of a 4% interest rate, I'm not sure I'm qualified to judge what market rates would be. I suspect that for retailers saddled with a bunch of seasonal inventory, whose prospects might be challenging depending on their environment, that might be deemed to be priced relatively reasonably, given that the assumption of risk is on the government side, so I don't think I could speak to that.

I do believe a couple of the programs do not allow inventory into the mix of their assessment of what can be funded, and obviously that is a significant challenge in the retail space.

Those would be a couple of areas that I would look at.

[The Chair, Liberal, Wayne Easter]

Mr. McLeod, go ahead.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair. I have just a couple of short questions.

First of all, thank you to the presenters today for the very good information.

One question is for the First West Credit Union. For Canadian credit unions, how much of an increase have you seen in the number of individuals or businesses defaulting on their loan payments relative to 2019?

The second question is, have the credit unions been affected differently than the larger financial institutions, and how did the credit unions address these differences, if they were there?

[Shelley Besse]

Thank you, MP McLeod.

On the first question, I think you were saying default or delinquency. I can only comment on First West's experience. What I would share with you is that we are seeing historically low delinquency rates, significantly below what we've seen in the past.

As it relates to how credit unions are performing, again I can only speak to First West, but I would just say that we have a very strong liquidity capital and capital position, and certainly have had a good fiscal year this past year.

Other than that, I can't really comment on the performance of others.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you.

I know Ms. Damoff came to ask a question.

Pam, I'll give you a minute.

[Pam Damoff, Liberal, Oakville North—Burlington, ON]

Thanks, Chair.

Mr. Wilson, I was really fascinated by what you were talking about, getting more women in manufacturing.

I run a program here called “Young Women in Leadership”, and I had Jean Lucas, from Eco Waste Solutions, offer to take young women into her business. We had a hard time getting these high school students to go to Eco Waste Solutions. When they went, they actually loved it.

Is there anything the government could do to support your program to get more women in manufacturing, recognizing that women have been disproportionately impacted by the pandemic?