Finance Committee on May 20th, 2021

[Bob Masterson]

It does provide some opportunities, and certainly we have had three major investments in Canada that have participated in the strategic innovation fund to date, totalling, I believe, a proposed $9 billion. One of those investments was put on hold due to COVID. We'll see if it comes back. Therefore, the industry has experience with that.

The $30 billion number that I mentioned is how much investment, total investment, we should have seen come into our sector. Again, we don't expect the government to fund all the capital investments for our sector, but we expect it to create the conditions where that will come.

What I was providing was a historical example. We should have seen $30 billion. We've only seen $7 billion. It tells you that we're falling behind, so there's an urgent need for measures again.

The money in SIF, especially the net-zero accelerator, is very welcome. We have companies that will definitely take advantage of that—my point being, though, it's a minority of the facilities in Canada. We have to create a business environment where we can recapitalize. Getting to net-zero, we have to recapitalize not only our sector, but the mining sector and every other sector in the economy, and that means attracting domestic and foreign investment.

It's a big job, and SIF expenditures alone will not achieve that, as important as they are and as welcome as they are.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you so much for correcting me and correcting the record.

Mr. Kelly, thank you for your testimony. It's always fun to listen to your colourful testimony, I would say. You touched a little bit on the Canada recovery hiring benefit and how you think a lot of companies will find it useful as they transition out of other programs. As the details of this particular program are still being developed, what elements are essential to ensuring its effectiveness? Perhaps you could provide some comments on that.

[Daniel Kelly]

It is a very good program, largely designed on some previous programs that have existed in the past to try to get small businesses hiring again. Look, we predict at the CFIB that as the economy eventually reopens—Ontario is not making that easy—businesses will need to start to hire back some of their workers, but they won't have the money to do it. It will be really, really tight for businesses that have been closed for months on end to try to find the money when sales, we imagine, will begin to trickle back, not flood back.

This incentive, we believe, could be quite profound if broadly available. If the government puts too many restrictions on it, I think it will be, unfortunately, like so many government programs, more useful in concept than in reality. The government has said that it will follow essentially the same rules as the wage subsidy so that you'll be able to access it if you've had a sales decline. That makes sense. We're not opposed to that. It shouldn't be there for businesses if their revenue hasn't had any hit. They should not be subsidized by the Government of Canada. That makes sense, but we do worry that if....

This could be a good transition to get businesses off the wage subsidy onto the hiring incentive. I think a lot of the design principles that have been put in place are the right ones. To the government's credit, they've also asked the Canada Revenue Agency to administer the program. I'll issue a rare compliment: The CRA has been, I would say, one of the best agencies in government in ramping up programs to try to get them delivered to Canadians. The subsidy programs that have been administered by other government agencies, most notably BDC, have really, really been quite poor, whereas the CRA has done a good job.

[The Chair, Liberal, Wayne Easter]

You have time for a very, very quick question, Annie, and a quick answer.

[Annie Koutrakis, Liberal, Vimy, QC]

Okay. Great.

Thank you for that, Mr. Kelly. All of our agents worked really, really hard across all the agencies, but I know that CRA has done a phenomenal job.

I have a question for Restaurants Canada with regard to lower credit card interchange fees.

Can you comment on how these measures are expected to lower the cost of doing business, especially for businesses that are increasingly reliant on e-commerce?

[Olivier Bourbeau]

I may ask Chris to provide a little bit more clarity on that.

[The Chair, Liberal, Wayne Easter]

Chris, go ahead.

[Chris Elliott, Senior Economist, Restaurants Canada]

Good afternoon.

It's a great question. I know that interchange fees have been such a critical issue for a lot of restaurant operators. The big challenge, of course, is that a lot of times, those interchange fees exceed what the profit would be off of the sale of that receipt. Sometimes those fees can be so extraordinary that operators actually spend more money and go into a loss because of that. It's a situation where, especially at this time, with most operators operating at a loss, it's become a much more critical issue.

[The Chair, Liberal, Wayne Easter]

Okay. We'll end that session there.

We will go to Mr. Ste-Marie, followed by Mr. Julian.

You have six minutes, Gabriel.

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

Thank you, Mr. Chair.

Good afternoon. Once again, we have a fascinating panel.

My questions are for Ms. Lamonde.

Thank you for your presentation. It was very clear and well put together. You explained that the government had taken meaningful steps to support start-ups, but you were also critical of certain things, and that is what I would like to discuss.

What is the federal budget missing in terms of specific measures to help start-ups in the greater Montreal area?

[Liette Lamonde]

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

My main reason for being here today is to make parliamentarians aware that start-ups face a different reality, one that government programs need to take into account. For example, initially, the Canada emergency wage subsidy did not factor in the reality of start-ups. We spoke up quickly, and that changed.

What I'd like to see the government do is adopt a mindset, and consider how each program it introduces to support business is really going to help start-ups and how the program can be improved to do just that.

One of the missing government measures is support for a scale-up platform. That's what we need to move into the second phase, to grow and to benefit economically. It's simple: start-ups need funding, talent and customers. A range of services are available to help start-ups in the development phase, which can last two or three years. After that, though, they are on their own. That is when they need new skills, new funding and new markets in order to succeed.

That is why building a scale-up platform for Quebec is so essential. Without it, Quebec's ecosystem will remain one of small start-ups, and that's not what we want. We have much bigger plans for the future of our start-ups.

I mentioned customers, and the government has the ability to be a tremendous customer for start-ups. For that to happen, however, the government needs to make changes to its tendering process. It needs to listen to start-ups, taking the time to help them improve their technologies and adapt them to government requirements. Imagine what a boon it would be for a start-up to have the government as a customer. Landing a contract with the Government of Canada would give the start-up a reputation that would help it acquire more customers.

Those are two areas where improvement is needed.

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

Thank you. Those are two very interesting recommendations. First, you want a scale-up platform for start-ups in Quebec or Montreal, and second, you want better access to government contracts. That is duly noted. Let's hope the government incorporates your recommendations into its plan soon.

Obviously, the past 14 months have been extremely tough on just about every business, including start-ups.

How would you say the landscape has changed since the pandemic began? Are things better or worse? Do you know what the mood is on the ground?

[Liette Lamonde]

That's a great question. Thank you, Mr. Ste-Marie.

At the very beginning of the pandemic, in March, a survey revealed that 60% of start-ups had less than three months' worth of cash. Of course, we feared the worst. By mid-April, though, nearly two-thirds of start-ups had reprioritized and adjusted their business model. That's the beauty and strength of start-ups: they can pivot, adapt and reinvent themselves quickly. Not having a cumbersome structure means they can turn on a dime, as the saying goes.

That ability is the strength from which their innovation flows and has helped them survive the pandemic. Instead of being decimated, many start-ups have seized the opportunities created by the pandemic and are meeting new needs. For instance, MEDTEQ, in Montreal, is involved in a bunch of new projects aimed at solving problems that have emerged during the pandemic. Solutions are also materializing to help restaurants take orders and become take-out operations overnight.

I think start-ups will come through the crisis, but there's no doubt the wage subsidy has a lot to do with it. We are eager to see what comes next. That's when we will be in a position to get a better read on things.

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

Thank you.

Mr. Chair, do I have time for another question, or should I wait until my next turn?

[The Chair, Liberal, Wayne Easter]

You do. You have about a minute and 10 seconds.

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

All right.

An owner of a start-up told us it worried him that the NRC's industrial research assistance program, or IRAP, had not been renewed in the budget. He was concerned about what would happen to his company; he had relied on IRAP funding to run and grow his business in the months to come. He said it would be very unfortunate if he had to close his business right before he could carry it over the goal line.

Do you see a lot of start-ups in that boat, or is this an isolated case?

[Liette Lamonde]

I'm a bit surprised by the question. It seems to me the government had put additional funding towards IRAP, so I don't think the issue is widespread.

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

In that case, we will follow up with the business owner.

Those are all the questions I have.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both, very much.

We'll now go to Mr. Julian for six minutes, followed up by Pat Kelly.

Peter.

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

Thanks very much, Mr. Chair.

Thanks to all our witnesses for coming forward with very compelling testimony today. We hope that you and your families continue to be safe and healthy as this third wave hits.

My first question will be for Madame Drigola, Mr. Kelly and Monsieur Bourbeau because we are in the midst of a third wave, as you have all pointed out. Each of you has pointed out the importance of continuing supports.

We have a budget implementation act that basically does a victory lap. Within a very few weeks, we'll see massive slashing of supports. It just doesn't make sense at this critical time, and we've had witness after witness attest to that: that the government seems to be crying victory far too prematurely.

I'd like to know the consequences that you see in each of your organizations for businesses and restaurants if the government doesn't heed the call to amend the budget implementation act and put in place sector specific and more general measures that continue to assist businesses—small businesses, community businesses—as we continue to fight this pandemic.

[The Chair, Liberal, Wayne Easter]

Go ahead first, Mr. Bourbeau.

[Olivier Bourbeau]

Ladies first, please.

[The Chair, Liberal, Wayne Easter]

Okay. We'll go to Ms. Drigola.

[Alla Drigola]

Thank you.

You bring up an excellent point.

We saw after the first lockdown that the wage subsidy program, for example, helped about 50% of businesses, which are using it hire back about half of their workforces.

What we're seeing on the ground right now is very different from the message that's being presented to Canadians by the government in its being very cautious about rolling back restrictions. Maybe we could have some outdoor activities this summer. For indoor activities, we have to wait until the fall. However, at the same time, we're starting to taper back these programs that are so critical to helping businesses survive.

Without a question, these programs are excellent. The government did a phenomenal job of getting them out quickly, adapting them in response to what has been happening on the ground, getting all parliamentarians voting in favour of them and getting them implemented very quickly.

They work. We know they work. As you mentioned, organization after organization has come before you to say the same thing: that these really need to be maintained at their current rates through to the fall and probably even beyond for the hardest hit sectors that have that longer runway of recovery because they will see restrictions lifted at the very end of the pandemic. Absolutely, these rates need to be maintained. Without that, we'll see thousands more businesses close and millions of jobs lost.

[The Chair, Liberal, Wayne Easter]

Mr. Kelly.