Finance Committee on April 15th, 2021

[Jacques Létourneau]

Great.

[The Chair, Liberal, Wayne Easter]

We'll turn to Patrick Sullivan, president and CEO of the Halifax Chamber of Commerce.

Mr. Sullivan, you're on.

[Patrick Sullivan, President and Chief Executive Officer, Halifax Chamber of Commerce]

Thank you very much, Mr. Chair, and thank you very much to the committee.

Good evening. I apologize in advance; I have a cold. It's just a cold. I've been COVID tested a number of times. I apologize if I cough during my presentation.

I've decided to make my presentation rather short tonight, so I don't believe I will take anywhere close to five minutes. I just want to make a very firm point.

My name is Patrick Sullivan. I'm the president and CEO of the Halifax Chamber of Commerce, which is a best-practice business advocacy organization that continuously strives to make Halifax an even more attractive city in which to live, work and play. Together with approximately 1,700 member businesses that represent over 65,000 employees, the chamber acts as a single powerful voice to promote local business interests.

I want to thank the federal government for its prompt and meaningful support for our business communities throughout the pandemic. Programs like the Canadian emergency business account, the Canadian emergency wage subsidy—which we utilized to retain our full-time staff—and the Canadian emergency rent subsidy were all crucial to the survival of many businesses, both large and small.

It's apparent, though, that while vaccines are rolling out throughout the country, many of our hardest-hit sectors, like tourism and hospitality, will once again feel the impacts of COVID-19 throughout the balance of 2021.

Businesses need predictability. They need a view of what that business can look like or will look like in order to plan for the coming months. We ask that the Canadian emergency wage subsidy and the Canadian emergency rent subsidy be extended until December 2021 so that those highly affected sectors can remain viable and return to full capacity in 2022. With over $1 billion lost in revenues in Nova Scotia during the 2020 tourism and hospitality high seasons, we must keep these sectors and businesses afloat, not only for the employment of many Canadians but also for our continued economic growth and recovery from COVID-19.

Thank you very much. I'd be happy to answer any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Sullivan.

We'll give Mr. Létourneau a little more time. We'll turn to the Hotel Association of Canada and Ms. Baker, vice-president for policy and public affairs.

Ms. Baker, welcome.

[Alana Baker, Vice-President, Policy and Public Affairs, Hotel Association of Canada]

Thank you, Mr. Chair.

Thank you for the invitation to appear before you today.

The people who work at Canada's hotels are just like every other Canadian: We want to get back to normal as soon as possible. However, our industry is unique.

We are in the business of bringing people together face to face at conventions and weddings, or just to visit family, and that's simply not possible right away. For our sector, the end of this pandemic will not happen quickly with the flip of a switch.

We continue to face a balancing act. On the positive side, a potential recovery is on the horizon, with vaccines under way that could lead to a possible domestic tourism recovery this summer for some segments, such as resorts.

In this scenario, if we get most Canadians vaccinated by June, the government will need to pivot quickly to allow for a safe reopening and invest in stimulating our recovery to maximize the summer tourism season, but the reality is that right now we find ourselves in a third wave. People are encouraged to stay home, domestic and international borders remain closed and bans on mass gatherings are still in place. Unfortunately, this means we will very likely lose the most important season for our industry again in 2021. In this scenario in which restrictions are still necessary for the summer, the government will need to provide financial support for the tourism and hospitality sectors to survive until a recovery is possible.

While most other sectors can bounce back quickly once restrictions are lifted, we cannot. Business travel will take time to pick up. International visitors come mostly in the summer, not the fall or the winter. The conferences and events that drive our business in the off season take months of planning and lead time. Most festival and event organizers have been forced to cancel any planned activities for this summer and fall.

The challenges we expect to encounter until the end of 2021 are not the result of individual business decisions. They are the result of the final stages of this pandemic. We have every confidence that once COVID is completely behind us, Canadian tourism will rebound and conventions and major events will resume, but that recovery will be further down the road for us and certainly won't be happening in a meaningful way this summer.

Until a recovery is possible for seasonal and events-based businesses, the wage and rent subsidy programs will remain a lifeline for hotels. As other sectors bounce back quickly after June, it is both prudent and practical for the government to tailor these support programs to sustain those industries most affected by the pandemic.

Our member survey from March showed that 70% of Canadian hotels will go out of business without an extension of the Canada emergency rent subsidy and the Canada emergency wage subsidy to the end of the year. Simply put, if the government does not extend these programs past June, we will lose major segments of the hotel industry.

The government deserves credit for rolling out these programs quickly and for providing tailored debt solutions to the hardest hit. These programs are the reason we still have an industry today, but our members are reeling from the worst year in their history, and they are facing the second-worst year in 2021 with very little hope that we will have a summer season. Now is not the time to pull away from the sectors that will lag behind through no fault of their own.

We heard a strong commitment to support the hardest-hit businesses in the Speech from the Throne and the fall economic statement. In the upcoming federal budget, we need to hear a clear commitment that the government will support our sector through to the end of the pandemic and the end of 2021.

Specifically, we need to see an extension and enhancement of CEWS at 75%, targeting hard-hit industries until the end of 2021, and an extension and enhancement of the CERS program for hard-hit businesses, including deeper support for medium-sized businesses. That commitment in the budget would give our businesses the confidence and predictability they need to get to the other side.

Canadians want to and will travel again. When the time comes, Canada's hotels will be ready. We have invested in an industry-wide enhanced standard of health and safety protocols and remain committed to the health and safety of our guests and employees. We are ready to continue supporting essential travel, hosting events like hockey tournaments and weddings, and we are ready to welcome back guests when restrictions are lifted; but without continued government support and tailored relief measures, many hard-hit businesses like ours will fail. That means long-term unemployment and a lost capacity for the anchor businesses, like the hotels that enable tourism here in Canada, the most beautiful country in the world.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Baker.

We will go back to Mr. Létourneau, president, CSN.

The floor is yours, Jacques.

[Jacques Létourneau]

Thank you, Mr. Chair.

I'm pleased to appear before you today to address issues related to the pandemic and the various measures that the Canadian government has taken to support workers.

We'd like to begin by commending the Canadian government for its efforts so far to support people hard hit by the health and economic crisis.

At the Confédération des syndicats nationaux, or CSN, we represent people from the cultural and hospitality sectors. Ms. Baker talked about the importance of supporting the hotel industry. It's clear to a labour organization like the CSN that the Canadian government must continue to take advantage of low interest rates and borrow to support the working class. It must maintain wage subsidy programs so that the cultural, tourism and hospitality industries can weather this extremely difficult crisis for everyone.

The CSN, like the Government of Quebec and the other provinces and territories recently did, is asking the federal government to increase the Canada health transfer from 22% to 35% of provincial and territorial health expenditures. We believe that the current crisis, particularly in the health and social services network, requires major new investments, especially since we are going to see an aging population in the coming years, in Quebec and elsewhere in Canada.

We believe that the provinces must be given the financial means to create more housing, whether in the form of residential and long-term care centres, or in the form of housing co-operatives. We could even innovate. In Quebec, new ideas have been proposed to address the issue of housing for seniors.

So, at the CSN, we stand behind the Canadian provinces in calling for a substantial increase in the Canada health transfer.

Also, as I mentioned, assistance programs for workers must continue. I think the federal government needs to take this opportunity to reform the employment insurance program in Canada. The crisis has shown that all workers, whether self-employed, non-standard workers or seasonal workers, are not currently covered by the EI program. The crisis must be used to modernize it and improve coverage for non-standard workers. We think that the federal government should reform employment insurance.

As far as economic recovery is concerned, as a central labour body, we are choosing a recovery that will also be green, in other words a recovery that will take into account the importance of sustainable development. We have labour-sponsored funds in Quebec. At the CSN, we have Fondaction, which invests in companies that are going green. We must take advantage of the current crisis to reorient the national economy and make a transition to much greener production methods that will allow us to reduce our greenhouse gas footprint.

On the manufacturing and industrial side, in a more targeted way in Quebec, we represent the Davie shipyard workers. For several years now, the federal government has been telling us that the National Shipbuilding Strategy must take the Davie shipyard into consideration. There's also the whole issue of the contract for Diefenbaker, the famous polar icebreaker, which was to be awarded to the Davie shipyard. For the greater Quebec City region, and even for Quebec in general, a shipyard integrated with the National Shipbuilding Strategy represents thousands of direct and indirect jobs.

Those are essentially the comments I wanted to make in the five minutes allotted to us. Again, we thank you for listening. We assure you that we are available to you should you wish to discuss further issues relating to public finance or social and economic development.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Jacques. I expect there will be some questions.

Before I turn to the last witness, the people in the lineup for questions will be Mr. Falk, Mr. Fragiskatos, Mr. Ste-Marie and Mr. Masse.

We turn now to our last witness, from the Organisation for Economic Co-operation and Development. Philip Hemmings is head of the Canada desk, economics department.

Welcome, Mr. Hemmings. The floor is yours.

[Philip Hemmings, Head of Canada Desk, Economics Department, Organisation for Economic Co-operation and Development]

Good afternoon. Thank you for this opportunity to appear before the Standing Committee on Finance.

This presentation draws largely on the OECD economic survey of Canada that was published on March 11. Our report is generally positive about the suite of economic policy measures that was introduced in 2020 and the subsequent evolution of those measures. The initial policy response was viewed as being appropriately rapid. The steps taken were also seen as having performed a reasonably good job in ensuring income support to those households and businesses most severely affected.

Canada was ranked as having one of the largest packages of fiscal support in an international comparison the OECD made in autumn of last year. Canada's package at that time, when we added it up, was worth around 13 percentage points of GDP. Other countries with large fiscal packages in this comparison were Italy, Germany, Australia and Japan. We'd also underscore that prudent fiscal policy in Canada over past years has helped provide scope for this sizable fiscal support.

Canada's menu of support has become more targeted, which is welcome. Notably, there has been the transition from the Canada emergency response benefit to the more focused benefits, including the Canada recovery benefit, the CRB. To be sure, there will be scope for technical improvements to some of these schemes that are still operating. For instance, our report flags that the 50% clawback rate of the CRB could perhaps be dissuasive to individuals in returning to employment.

Our report emphasizes that for the time being, a focus on keeping these supplementary channels of support open is appropriate to help economic recovery. Financial assistance for households should ensure gaps and support are covered. For businesses, continued focus is needed on nurturing their recovery.

It is worth emphasizing, I think, that, even with the retention of supplementary support, the very large deficit generated in 2020 will partially unwind. The shift back from blanket support suggests smaller outlays. Also the recovery process itself, unless reversed by another shock, will bring deficit reduction through revenue increases and diminished spending demands.

The crisis has raised a question as to whether the safety net provisions available in normal times are adequate. The recent commitment to introduce automatic tax filing for simple returns, partly so that more low-income households receive the tax credits as well, is welcome. In addition, permanent change to income support may be required to make social safety nets more reliable, timely and effective. This is challenging to implement. Our report suggests that one route would be for provinces and territories to upgrade their safety net welfare provisions, possibly with financial assistance from the federal government.

In principle, a guaranteed income scheme offers another solution; however, our report concludes that such a scheme is likely to be overly expensive and may reduce incentives to work. While support programs should remain on offer while the economy is fragile, a clear and transparent road map for preventing a spiralling public debt burden is needed. Canada's past record in federal deficit and debt suggests that, to date, broadly defined fiscal rules have worked adequately; however, a more precise rule may provide a useful anchor for reining in the debt burden. Our survey and previous ones have specifically suggested the introduction of a numerical debt-to-GDP target.

Finally, I think it's worth underscoring—and this is something emphasized in our report—that a successful post-COVID economy also requires structural reforms that do not necessarily involve direct fiscal costs. To help the business sector, our report urges faster progress in particular on the removal of non-tariff barriers between provinces. It also supports continued attention to the competitiveness and quality of telecommunication services. In addition, it identifies scope for improving business insolvency processes. For households, the report advocates the creation of more affordable housing through measures that encourage the building of more homes, for instance, through lighter planning regulation.

This brings my introductory comments to an end.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Hemmings, and thank you all for your presentations this afternoon.

We'll start with Mr. Falk. You have a six-minute round.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

I'll start off by thanking all the witnesses. The presentations were very interesting. Thank you for coming to the committee today.

Mr. Hemmings, I'd like to start with you. I was quite fascinated by the information that you provided. One of the things you provided was the necessity for a plan. Can you elaborate on that a little more? How important is it for the government to come up with a plan for reopening the economy? What should be some of the fiscal anchors inside that plan?

[Philip Hemmings]

As I mentioned, the near-term priority has to remain the recovery of the economy. We underscore the importance of keeping these supplementary support programs open until the economy really is on a firm footing. However, we emphasize that there is a need to look towards a fiscal plan that ensures that you don't have a spiralling public debt further out.

[Ted Falk, Conservative, Provencher, MB]

Okay.

There was a report today that house prices, year over year in Canada, have risen by over 30%. That's problematic, especially when you talk about affordable housing.

Would you have any recommendations for that?

[Philip Hemmings]

Yes. Canada is among countries—the other country I work in is Norway, and there are other examples around the world at the moment—where the house prices have continued to rise quite steeply through the pandemic.

What we're facing here is this classic situation in which, in order to help the economy, the interest rates have been reduced. This further fuels the already fairly strong increases you had in prices before the crisis. Overall, household incomes have been supported, so the demand for housing has continued.

As I mentioned, among our solutions to this, our long-term calls are often for efforts to try to increase the supply of housing. One move there could be to try to look at building and planning regulations to see if there are ways of allowing for more accommodation to be built that way.

One thing I would add is that we don't have much of this in our report because it's really not clear at the moment, but it's going to be very interesting to see what happens to the geography of housing demand in the next while. We know there's going to be some sort of permanent shift towards more teleworking. The scale of that and the nature of it will be quite interesting, and the impacts on the housing markets will be interesting.

[Ted Falk, Conservative, Provencher, MB]

Thank you for that insight.

Ms. Baker, in your pre-budget submission to this committee you talked about the anxiety being experienced among many of your employees and also the fear that a lot of your long-term experienced staff were going to be seeking employment outside the industry.

How are things looking on that front from the Hotel Association's perspective?

[Alana Baker]

You're absolutely right. Our employees are scared and anxious about their future employment prospects. We employ some of Canada's most vulnerable populations: 60% are women, and we have millennials, immigrants and visible minorities. All of these vulnerable groups have been disproportionately impacted by this pandemic.

They're scared for the future. Many are facing limited retraining options as a result of language skill barriers and other socio-economic factors that we need to take into consideration. The future of our industry right now is, frankly, uncertain.

As I said, we find ourselves in a third wave situation. If we don't have extensions and enhancements to these critical programs, 70% of our hotels will be forced to close their doors. That leaves our employees, of course, in a very vulnerable situation. We need these extensions and enhancements so that we can hang on to our employees and get to the other side, so that they do have a future that they can look forward to.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

You talked about the need to be able to respond quickly when this current wave passes. You're very optimistic that your business will return, that your hotels again will see occupancy.

How important is it for the government to have a plan for accommodating that in a timely manner?

[Alana Baker]

It's very important. It's critical to reopening. Of course, the borders play a role in that, and things such as bans on mass gatherings. We do need a framework that gives some certainty about reopening safely, and as soon as possible. That is indeed critical.

Hotels are critical pieces of infrastructure in our communities. When people get the permission structure and the encouragement from government to move around safely, we are going to be ready to do that, but again, without these critical support programs in place, our hotels won't be standing.

We need to have a plan in place that gives us the predictability we need to ensure that we can keep our doors open and that we are indeed ready when Canadians are able to start travelling again. We are confident that Canadians want to travel and we know that Canadians want to travel. We've all been in this position for over a year now. People are anxious and eager to start moving around again. When restrictions are lifted, we need to make sure that our hotels are standing to be able to accommodate them.

[The Chair, Liberal, Wayne Easter]

You can have a last quick question, Ted.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

Mr. Hemmings, you talked about the fiscal anchor of the debt-to-GDP ratio. Is that the measurement the government should be looking at?

[Philip Hemmings]

It's one way of ensuring that you bring public debt under control.

Historically, Canada seems to have, in a way, done reasonably well through a mechanism of fairly broad fiscal targets. They're not terribly precisely defined. That kind of system can work if there's sufficient political will behind those broad objectives. It can also be useful to additionally have more precise fiscal rules. This can help governments keep things on track.

Our recommendation is that this could be thought of to help bring the public debt burden down from the levels it's reached with the crisis.

[Ted Falk, Conservative, Provencher, MB]

Thanks, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you all on that round.

We have Mr. Fragiskatos, followed by Mr. Ste-Marie.

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

Thank you, Mr. Chair.

Thank you, Mr. Hemmings, for your presentation. It was very interesting. I always appreciate hearing from the OECD. Your reports are great, and the committee is better off when we have a chance to hear testimony from an organization of your stature.

When you were speaking, I was reminded of the presentation given the other day here at the this committee, virtually, by the Canadian Chamber of Commerce. The chamber made the argument—I can summarize it—that basically they expect that pent-up demand on the Canadian economy will be such that, post-pandemic, it will sustain long-term economic growth in a very real and significant way. The advice that the chamber gave was that the federal government should therefore look at investing in areas that will boost Canada's competitiveness and productivity. Their examples included research and development, broadband expansion and interprovincial trade barriers, which you've mentioned here at the committee.

I heard something along those lines in your presentation. Did I understand you correctly? If so, could you expand on that?

[Philip Hemmings]

I think there seems to be quite a strong consensus—not just at the OECD, but the IMF as well, and also within Canada—that if there could be faster progress on identifying where these interprovincial trade barriers barriers can be reduced, it would be good for the Canadian economy in the long term.

Canada's not alone in needing to pay attention to ensuring access to affordable, good-quality broadband. It's a mixture of policy on competitive markets, but of course there also is a public investment dimension to it, especially when it comes to the infrastructure for remote areas and so on and so forth. It's quite a complicated policy area.