Finance Committee on Oct. 5th, 2023

[Chris Aylward]

Certainly pay in the federal government is complex; there's no question about that. Hiring more pay advisers does help, but there is a retention period with pay advisers. The government has to consider what incentives it's going to come up with to retain these pay advisers, because you can't simply hire a pay adviser today and expect them to perform all the duties, including complex cases, within a couple of months. It takes two years to be fully trained to take on complex cases in the pay environment.

Certainly, incentives for retention are needed, because there is a serious retention issue with pay advisers.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

I know earlier in the year, of course, there was the culmination of a round of collective bargaining that I certainly don't think went as it should have. I don't think the government should have waited to the point that federal civil servants were prepared to walk out in a rather unprecedented way, or at least in a way we have not seen for a long time.

I'm wondering how the issues that were at stake in bargaining affect retention and affect the federal government's ability not only to deliver on fixing this payroll system issue but also, more generally, to deliver on public services.

How does the government retain the expertise that it needs to do a good job when its position in respect of its workforce is to try to argue for substandard wage increases in the economy we're experiencing, and to not bargain respectfully when it comes to some of those workplace challenges that all workplaces, including the federal service, are facing in the postpandemic era?

[Chris Aylward]

Certainly retention is a problem overall in the government.

Again, when the current government basically forces its workforce out on strike for decent wages and decent working conditions, obviously that just frustrates workers, and it then causes workers to start looking elsewhere. When you look at certain bargaining groups within the federal public service, and when you look at what the private sector pays people to do the same job, a lot of the federal public sector workers are underpaid when you look across the board at the private sector.

I know a lot of our members are looking elsewhere and wanting to leave the public service. They thought public life was their career, and they are now realizing that maybe it's not, simply because of the working conditions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Aylward and MP Blaikie.

Thank you, of course, to all our public service for their service and their hard work.

We are moving into our second round of questions. At this time, the timing will change.

We have five minutes now for MP Lawrence, please.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

That's perfect.

First, if I don't have misinformation here, I believe it is the chair's birthday. Is that correct?

[The Chair, Liberal, Peter Fonseca]

Yes, it is my birthday.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Happy birthday, Mr. Chair.

[Voices]

Here, here!

[The Chair, Liberal, Peter Fonseca]

Thank you.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Happy 30th.

Mr. Aylward, I want to apologize for laughing. I wasn't laughing at the.... I have tremendous respect for public service workers. The only reason I was laughing is that it's absolutely deadpan embarrassing that a G7 country can't pay its workers. I apologize, but the laughter was out of embarrassment for our country.

Thank you for that.

I want to talk to you a bit, Mr. Cross, about inflation and a piece you wrote in which you talked about combatting inflation. Of course, we've heard a lot about the Bank of Canada. The last time this came around in the 1970s and 1980s, as Mr. Dehejia talked about, it was cured by very high interest rates put in place by Mr. Volcker in the United States.

One of the cures, as we've heard from Mr. Macklem, is that he's had to increase interest rates, but you also talked about how fiscal policy or government spending has an impact on that. You even talked about how, in the 1980s, part of the reason they were able to get inflation under control was that the government reduced spending.

I was wondering if you could comment a bit, Mr. Cross, about the impact that fiscal policy can have on inflation.

[Philip Cross]

It's not just fiscal policy; there's a wide range of government actions that influence prices. Excessive regulation pushes up prices every bit as much as excess government spending.

I remember that when I was at Statistics Canada in 1980, we were grappling with trying to understand inflation and how to bring it down. One of the innovations we brought about was that we introduced something called the regulated price index for the CPI. We looked at that portion of the CPI that was controlled by government directly, through taxation, through rent controls or through controlled marketing boards.

It turns out that one of the problems in bringing down inflation in the early 1980s was that while the market portion of the CPI was coming down rapidly, the regulated, government-controlled portion of inflation was very slow to come down. That might be something worth looking at again in the current context.

I suspect we're seeing an adjustment in a lot of the market parts of the economy, but in a lot of the government-controlled economy, price increases are just rolling along without any awareness of the impact this is having on ordinary people.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

My concern is that, as opposed to a couple of years ago when we heard “low for long”, we're now starting to hear from some experts that we may have “high for long”. We may have structural inflation. I think you referred to 2025. I've heard even longer than that.

I'm going to give you an analogy. You guys are much smarter than me, but for a simple politician like me, inflation is largely the product of demand being out of equilibrium or out of whack with supply, meaning that there are more people who want things than there are things available. Halloween is coming up, so let's use the example of pumpkins. We have 100 pumpkins and 200 people who want them. The result is that the price goes up. My thinking as a simple politician is this: Why don't we just increase the number of pumpkins to bring supply in line with demand?

Does that make sense to you, from a simple politician here?

[Philip Cross]

It makes sense in a very simple way. The problem is that it's very hard to change supply in the short term. It takes years of investment, for example, to build more housing or to find more oil and gas. Some of these projects in the energy sector take 10 years. It's not like you can just snap your fingers and bingo, there's more supply of energy or housing tomorrow.

That's why in the very short term—because people are suffering in the short term—the Bank of Canada's number one tool is reducing demand. It can do that very quickly and efficiently, through higher interest rates.

I would also mention in passing that, to the degree we don't get follow-up from governments, when governments try to fight what the Bank of Canada is doing and increase transfer payments and send cheques to people—quite understandably as they are trying to help people—there doesn't seem to be an awareness that this actually just makes the Bank of Canada's job more difficult. If the Bank of Canada is left alone to fight inflation, then it's going to have to act more aggressively. That's going to impact people, and debtors in particular.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

We are now going to MP Baker, please, for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Mr. Chair, and thank you to all the witnesses for being here. We appreciate it.

Many witnesses have something to offer in the context of our study. As my colleague Gabriel Ste-Marie said, we won't be able to ask all the witnesses questions, but we thank them for their suggestions. We will certainly consider what they have said today and the documents they have submitted to the committee.

I'd like to start with the Council of Canadian Innovators, if I may, and continue along the lines of what my colleague Ms. Thompson was asking earlier.

One of the things that have been announced is the Canada innovation corporation. I'm wondering if you could comment on how you see the potential of this corporation to scale up businesses and help to commercialize research and innovation, boost and promote Canadian intellectual property and more.

[Nicholas Schiavo]

Yes. If the corporation achieves its full potential, as has been announced in the blueprint in the messaging from government, I think it will be a radical departure from previous innovation programs. I think the devil is in the details, and there are lots of nuances there.

One thing that CCI has been very involved with is providing any support we can to the Department of Finance as they get ready to launch this corporation in full, particularly in terms of the leadership. We've been told that the chair and the CEO of the corporation will be from industry. We think that's very important, and we think they have to have a good understanding of the intangible economy, the innovation economy, in order to see this as an evolution of IRAP, which will be assumed in this corporation.

We're eager to see some movement on that. We can't wait another year. This was promised years ago. We're looking forward to some announcements on that.

[Laurent Carbonneau]

Perhaps I could expand slightly. When you look at the history of innovation programming in this country, it's focused, really, on the inputs and on crude outputs, which is to say that if we're spending research dollars, then innovation will come. Too often in Canada that just hasn't been the case, so to take a very commercialization-focused approach is, as Nick said, a fairly substantial departure from what's been done before.

I think it is a very interesting model. There is a lot of good evidence from abroad. Of course, it was built on the model of the Israeli Office of the Chief Scientist and on Business Finland, which have both been quite successful as peripheral agencies with a broad mandate to pursue change in a way that is insulated from core day-to-day government. That has worked well—in very different countries as well, I should add. In that sense, we think that's the right model to look at, and we're encouraged, as Nick said.

It is crucially important that the leadership of that corporation be sensitive to industry and be from industry. I think that very often in this country—and I say this with great respect— the post-secondary education institutions have not been the key to unlocking productivity in this country and are going along on a simple research focus. I will say research is an essential component of innovation, but in itself, it is not innovation. Turning research and insights into products that we export and sell, and that drive wealth and productivity growth in this country, is the essential ingredient that we're missing, and we hope this will go some way to address that.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

We have to go from research to commercialization—that's what you're saying—and we need to make sure we reap the benefits of the commercialization.

[Laurent Carbonneau]

Exactly.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

In my remaining minute, one thing that has been proposed is clawbacks to ensure that IP stays in Canada. You gentlemen spoke in your presentation and to Ms. Thompson about the importance not just of IP being developed in Canada, but also of what we talked about just a moment ago, which is that the IP—the rents, I think you called them—the economic benefits of that remain in Canada. It doesn't just get taken by a company to the United States or another country for the economic benefits to be reaped there.

What are your thoughts on those proposed clawbacks to ensure that IP remains in Canada?

[Nicholas Schiavo]

I would use the term “payback”, to do a little sloganeering there.

We're in support. If Canadian taxpayers are going to invest in these companies and in this intellectual property, and the intellectual property is then going to take flight, then they should be required to pay that investment back to Canadians in multiples. This is what's expected of private investors.

We are in support of that. We're eager to see that implemented into the corporation.

[Laurent Carbonneau]

I mentioned the foreign models earlier that this is based on. That is the case in those jurisdictions as well. In that sense, it's an established practice. We think, as Nick said, that's a very good step.

I will also say on a quick personal note, because I didn't say it earlier: I was a staffer in this place for some years, and it was very fun to be on the other side of the table. I want to thank the committee for inviting us today.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you.

That's a great way to end it.

[The Chair, Liberal, Peter Fonseca]

It is a great way to end it today. Welcome back to the table.

On that note we'll move over to the Bloc, with MP Ste-Marie for two and a half minutes.

Please go ahead.

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

Thank you, Mr. Chair.

First of all, I want to apologize to Ms. Girash from the Public Service Alliance of Canada. Since we are in a small space, I did not see the card indicating that she is a witness. My apologies, Ms. Girash.

Mr. Lopez-Asselin, if I am not mistaken, you started to talk to us about the general anti-avoidance rule. Can you continue to explain the recommendations made by your collective?