Finance Committee on March 25th, 2021

[The Chair, Liberal, Wayne Easter]

This is your last question, Ed.

[Ed Fast, Conservative, Abbotsford, BC]

Ms. Besse, I have a question for you.

If I may be so bold as to ask you, has the pandemic impacted your bottom line, your profitability, at all?

[Shelley Besse]

We actually had a very strong year last year, but certainly, as did other financial institutions, we did see an increase in our estimated credit losses. That's the ECL that we provision potential credit losses on for the future.

[Ed Fast, Conservative, Abbotsford, BC]

However, it wasn't as bad as you might have expected it would be.

[Shelley Besse]

No, we've seen it improve since Q3 of last year.

[Ed Fast, Conservative, Abbotsford, BC]

Well, that's great news.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you, all, and I might say to you before I turn to the next questioner that, if any witnesses have something that's pertinent to add to the discussion on a question, you can raise your hand and hopefully I'll see you. If I don't see you, just yell.

Ms. Dzerowicz, you have six minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank all the presenters for their excellent presentations. Lots of information was covered.

I'm also going to start off with Mr. Wilson.

Mr. Wilson, you were very clear about what you felt needed to be done in terms of emergency programs moving forward, so thank you for that. In terms of the Canadian industrial strategy, if I recall correctly, the federal government invested quite a bit in trying to beef up our industrial capacity and our strategy over the last year. Can you maybe speak to that? Has that been beneficial to Canadian Manufacturers & Exporters?

[Mathew Wilson]

Yes, and I think the government has done quite a bit over the last number of years, but it tends to not be focused on all the right areas all the time, and that's fine; everyone has different priorities. There are really three challenges that the sector faces, and some of the programs help, but they don't help holistically.

I'll give you an example. The government has invested in a strategic innovation fund. It's a hugely important fund to drive investment in Canada, but it really only addresses the large investments of large multinational companies. That was the original design of it. There is no investment support program for everyone else, as a very specific example.

If you're looking to do half-a-million-dollar investment in manufacturing capacity in Saskatchewan, in southern Ontario or in New Brunswick, there really isn't much in the way of programs. There are some through the regional economic funds, but not at the same type of level and direct investment supports that the strategic innovation fund would see, so there are some really good programs out there, but they're not as comprehensive as they need to be to make the impact that we need to see.

That would be one very specific example. Other things like the training and skills issues, which are huge.... Mr. Fast asked about women. We've been doing a lot of work around that, like tax credits, and have called for things like tax credits and training. The federal government has put in place and has had for a number of years employer-driven training programs, but a lot of the more recent programs have gone directly to employees. The problem is that, if you're not supporting the investment through supporting training through the companies, it's very hard for the companies to invest in the technologies and do the training at the same time. We need much better direct support programs to get the training, and we need to continue and expand some of the ones that are there, including some of the excellent apprenticeship programs that have been put in place over the last couple of years.

There have been some good things. I'm certainly not going to sit here and say nothing's been good. There have been some very good things, but often it just kind of falls a little short.

The biggest thing, though, overall, is that we firmly believe Canada needs to set in place targets for growth. We should be setting, as we've seen in other parts of the world, specific targets for growth of what we want our sector to do and how we want to grow it and then measure change over time and address those changes. Just saying we want to do something, without measuring the change, tends to just leave the programs that maybe aren't meeting the end results that Canadians want or that the government itself wants.

[Julie Dzerowicz, Liberal, Davenport, ON]

Mr. Wilson, thank you so much for that. I'm glad you got into a little bit more of the details around the Canadian industrial strategy that you indicated we really need to focus attention on. As you know, we are trying to take a whole number of steps that will help us more successfully restart our economy and address a lot of the structural issues we had before.

If you have some very specific recommendations—because I know you mentioned the three areas, the IT, the skills and labour, as well as your communications in that last section—if you could send them along to us and be as specific as possible, I think that would be really helpful to us.

My next question is for Ms. Besse. I want to say huge thanks to you for your approach in terms of being flexible in the support that you provided to small businesses. I really appreciate your sharing your story. In my neck of the woods, we have heard of different financial institutions not being as flexible in approaches, and that has been really problematic.

You indicated that there's not one business that has failed due to the pandemic, and I know you've attributed it to your approach. My question for you is this: To what extent do you feel that federal government supports also helped to ensure that these businesses didn't fail?

[Shelley Besse]

Yes, that's a great question, and I would say, hands down, the government programs certainly assisted our members. If I look at the number of members who take advantage of our CEBA program, we have completed, up to today, just under 3,600 CEBA loans, so we've been helping our members that way.

In our hospitality sector—which was, as Mr. Murphy shared, very hard hit—they had to make some really tough decisions in their operations, looking at closing down some properties in order to focus on others and scaling back operations, but we worked really closely with them and used the co-lending program to also assist them.

I am aware that some of our members have also used the wage subsidy. That has been helpful for them, but we've had no members use the BCAP, which is a program in partnership with EDC. I suspect that, as we come over the next few months, we will have some members take up the HASCAP, the highly affected sector financing as well.

[The Chair, Liberal, Wayne Easter]

You have one last question, Julie.

[Julie Dzerowicz, Liberal, Davenport, ON]

My last question is for Mr. Littler.

Mr. Fast went exactly where I wanted to go, which was around insolvency. We're actually hoping not to see a lot of insolvency. My question for you—because we haven't had that much discussion on the finance committee on this—is around.... Is there a policy change or an adjustment that we could make to ensure that we are as supportive as we can be for those who are falling along that line, so that maybe we can help them sustain themselves a little longer so they actually don't fall below the line?

If you have any thoughts on that, I'd be grateful.

[Karl Littler]

Sure. I have all kinds of thoughts on input costs and how that could be affected. Some of that is probably not within the purview of the finance committee, but obviously you have a broad brief, so I could come back to that.

One of the areas of challenge, actually, is in HASCAP. HASCAP requires basically that you be down 50% for three consecutive months in the last eight, but the challenge was that retail has waxed and waned. There was a very big hit in March, April and May of 2020, and then there was some recovery up until the fall, and then of course we hit the second wave of this, and there were a bunch of shutdowns again.

Unfortunately for a lot of retail members, they don't actually get the three months in the last eight the way that it counts. It actually excludes them by about a month. We've raised that issue, obviously, with the Department of Finance. We recognize there are even more deeply affected sectors, but it is an oddity of the design that the way the three in eight works just squeezes most retailers out of eligibility.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We're turning to Mr. Ste-Marie, followed by Mr. Julian.

Gabriel, go ahead.

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

Thank you, Mr. Chair.

I'd like to begin by welcoming and thanking all the witnesses for their presentations and answers to questions. We have a really interesting panel. I sincerely hope that the solutions put forward will be taken up by the government to better respond to the measures generated by the pandemic.

I'd like to welcome my colleague Pam Damoff, who is with us today.

Since my time is limited, my questions will be for the representatives of the Association des stations de ski du Québec and Mr. Ross, from the Collectif Échec aux paradis fiscaux. I also have a second round. I hope to be able to ask the essential questions during this precious time.

Mr. Juneau, thank you for your presentation. I clearly understood the importance of extending the Canada emergency wage subsidy. I also learned that loans are accumulating and that, although they are useful, the level of debt is becoming unsustainable. So there have to be other measures besides loans. I also learned of the difficulty that ski resorts are experiencing because they are affiliated with municipalities and therefore don't have access to these subsidies because of an unfortunate rule. This should be changed.

I'll ask you to go back to your requests in general, but I would first like to know something. You said that there was a ski season. How did that work out this year, given the health restrictions? Was it profitable, or was it more about not losing business? The restaurants at the ski resorts were closed and there was no access inside. What did it look like?

[Yves Juneau]

Thank you very much for your question, Mr. Ste-Marie.

Let's just say that we were constantly changing gears this year. Of course, we had health measures in place. We were the first sector in the province of Quebec that had to introduce alert levels. Some resorts were in orange zones, others in red zones. For most of the season, Mr. Ryan operated in a red zone. That meant that the restaurants were closed, as were ski schools for the major part of the season. As a result, sales of ski lessons dropped by 42% in Quebec. That's significant for us because those lessons represent an introduction to the sport and to the way to practice it safely. So we certainly had losses.

The situation varied with the nature of the resorts. Small resorts were the most affected and we are actually asking for resorts in that category to be able to use the Canada Emergency Wage Subsidy. Large resorts are the ones like Tremblant and Bromont. As you know, Tremblant's clients come from Ontario, the United States, Latin America and the United Kingdom. There, we are talking about a 50% drop in revenue this year. Bromont sold 100,000 fewer ski passes. So the large resorts were certainly affected.

We were saying earlier that the program administered by the Alliance de l'industrie touristique du Quebec could help companies establish systems to look after their clients. Those larger resorts were not able to take advantage of it because, before the pandemic, their bottom line was higher than $10 million. That ceiling was a criterion that meant that the program was not accessible to companies with more than $10 million in revenue. For example, Mr. Ryan was able to take advantage of it but the resorts that I've just named were not eligible. In our opinion, just out of fairness, and considering the impact of the pandemic, compensation measures should be available to those resorts.

I hope that this outlines and clarifies the situation for you.

Do you have anything to add, Mr. Ryan.?

[Jean-Michel Ryan, Chairman of the Board and Chief Executive Officer of Mont Sutton, Association des stations de ski du Québec]

No, Mr. Juneau.

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

Thank you, duly noted. Let's hope that that will be changed.

There are several ski hills in my constituency, like Ski Montcalm, Rawdon, Val Saint-Côme, Saint-Côme, Mont-Garceau and La Réserve at Saint-Donat-de-Montcalm. I say that with some pride, although I have no longer had the time to take advantage of them since I have been in politics. The representatives of those companies say that profitability varies greatly from year to year, because it depends on the weather.

Do the variations in annual income and the need to show a decrease in income over the previous year pose a problem in qualifying for the emergency wage subsidy and other similar programs?

Do you have any other comments about the existing programs?

[Yves Juneau]

It is a little difficult for us at the moment, because some ski resorts have sold season passes. Essentially, this year's income comes from day passes, which were very limited—and Mr. Ryan will be able to tell us about his experience—and from season passes. In some resorts, 22% of the purchasers have not used their product. That means that the products will be deferred for a year, meaning no sales next year. The calculation method is more difficult for seasonal concerns like ours, given the restrictions of having income spread out monthly and because our companies pre-sell. That is one of our difficulties.

Certainly, this year, we can clearly measure the effect of the pandemic on the sales of day passes and ski schools. Some aspects of the companies have been very affected and others have had better results. In general, this year, sales of passes increased by 3% in Quebec overall, which is very positive. However, we have not yet had to deal with any requests for reimbursement.

[The Chair, Liberal, Wayne Easter]

Mr. Ryan, did you want to add something?

[Jean-Michel Ryan]

Yes, here is what I would like to add.

Let me give you the example of Mont Sutton, where restaurant income dropped by 75%. In addition to that variation in income, and given that all resorts closed in March last year, there were huge losses in income in the last part of the ski season. Then the summer season began. For most resorts, that is really a time when money is spent and no income generally comes in. This year's ski season is over, and, once again, our expenses have reached a certain level.

For a number of resorts, the 22% of unused, deferred income, as Mr. Juneau mentioned, represents expenses that they cannot make. They have to protect that income for next season. That once more weakens a company's ability to do upgrades or to reinvest and continue its progress into the future. These are also important arguments for maintaining the emergency wage subsidy beyond June. It's very important for ski resorts and tourist businesses.

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

Thank you,

Mr. Roche, I am not forgetting you. We will talk on my second round.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

If either of you sees a fellow skiing on your slopes who is wearing a bow tie, it's probably Gabriel.

Mr. Julian, go ahead.