Evidence of meeting #109 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was prices.
A recording is available from Parliament.
11:50 a.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Thank you.
Could you break down what groups in our society get disproportionately hit the hardest, in your opinion, by this carbon tax when it comes to buying food? We see that the carbon tax does have an effect on consumers when they're buying food because prices have gone up.
11:50 a.m.
Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
We can't say how the carbon tax is impacting people, because, again, we can't correlate the carbon tax with food prices, but we can certainly look at food inflation and demographics. Clearly, single-parent households and seniors with fixed incomes are largely hit. Right now, because of mortgage rates particularly, we're noticing in our data that millennials are hard hit. They are in the middle of that perfect storm of food inflation and shelter costs. It's the largest group we have in terms of generations.
11:55 a.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Absolutely. After eight years of this Liberal-NDP government, rents and mortgages have doubled. It's because of the high deficits. We know this through the Bank of Canada. The deficits fuelled inflation, and it had to raise the interest rates for that.
Moving on, when we're talking about shrinkflation, inflation and taxes have obviously led to producers shrinking the size of the servings of their products, but prices still remain high. How prevalent is this in the foods that are healthy?
11:55 a.m.
Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Just this year, we believe that over 20 products have been shrinkflated and are now taxed because of the size of the container. That's why we recommend that the zero-rated policy that is maintained by the CRA should be revised at this point. There are so many products.
In fact, I brought this one example. This is a Canadian-made, Halifax-made product called Made with Local. It is carried by Sobeys and Loblaws. This product is $3.75. There are basically five ingredients in that bar—five. It's natural, sustainable and made with local products. You add an extra tax on that at the teller. You pay 15% more on tax in Nova Scotia.
That's why we think some products.... A lot of Canadians think that, if it's taxed, it's unhealthy, but it's not necessarily. This product is very healthy.
11:55 a.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
I want to focus in a bit on that carbon tax, but not just specifically for food, because you made this argument about it affecting the supply chain and having a compounding effect.
When a single mom, as you said, is disproportionally affected by the carbon tax and the higher food inflation, it doesn't factor in the fact that for her to drive her kid around to sports or school, when she's filling up her gas, that price has gone up too because of the carbon tax. Also, the cost for her to heat her home has gone up.
Do you think all of these are factors that are also affecting those vulnerable people you mentioned?
October 19th, 2023 / 11:55 a.m.
Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
I can't comment on other sectors. We look only at food.
However, the one thing we've noticed is that Canadians are actually spending less on food, despite food inflation. Obviously, other things that cost more are really impacting families.
Right now, a lot of families are trading down. We just published a report about a month ago suggesting that almost 70% of Canadians are making nutritional compromises as a result of these financial pressures.
11:55 a.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Hallan. That's the time.
We now turn it over to MP Weiler, please.
11:55 a.m.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you, Chair.
I want to thank all the witnesses for being here in person and virtually.
I would like to ask my first questions of Professor Pineau.
You mentioned in your testimony some statistics on the types of vehicle purchases we're seeing in Canada. We know in Canada that the vast majority of electric vehicles we're seeing purchased are in two provinces. These are Quebec and my province of British Columbia.
I was hoping you might be able to expand on why that might be the case and what lessons that might have for the rest of Canada.
11:55 a.m.
Professor, Chair in Energy Sector Management, HEC Montréal, As an Individual
In the case of Quebec, it's obvious that the subsidy the Quebec government provides to buyers of EVs explains a lot. In B.C., I don't know exactly what the subsidy is that the provincial government gives in addition to the federal subsidy. The lesson that seems to be appearing is that, when you give money to people, it will help them buy specific types of cars.
I would personally not advise governments to provide more subsidies for EVs, but to put additional taxes on emitting cars, because we need to make Canadians switch from bigger cars to smaller cars, to make them save not only their own money but public money, and to raise the level of safety on the roads by decreasing the amount of congestion that is [Technical difficulty—Editor]. This is because while we are increasing the number of cars on the roads, the roads aren't growing by the same amount. We only have more congestion, and this is hurting Canadian productivity.
While it seems that subsidies would be good for EVs, I would say don't subsidize EVs, but put on a penalty. Increase the tax on larger vehicles that use more space and are not needed.
Of course, some people need these bigger trucks. If you are a plumber or if you work in the construction industry, then yes, you need a pickup truck. However, most pickup trucks are not sold to Canadians working in construction or to farmers. When you see trends in vehicles, they are for regular citizens who just like to have a big truck, but they don't pay for the congestion and they don't pay for the additional pollution.
This is why some kind of ecofiscal policy would help Canadians save money at the same time, by having them avoid making expensive choices while also helping the environment, which is a priority for many of us.
Noon
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
It is definitely.
Professor, that seems to me to be a very strong case for carbon pricing.
I am just curious. With an idea like that, do you see that as separate or additional? Do you see carbon pricing as being not the most effective tool or something that, perhaps, should be relied on solely?
Noon
Professor, Chair in Energy Sector Management, HEC Montréal, As an Individual
I don't think carbon pricing is the only tool. I think it's a very important tool.
In terms of vehicles, we need to go beyond. Congestion with EVs isn't good for either the economy or the environment. Although EVs will not emit carbon when they're used, there are still problems with having a lot of EVs or bigger EVs. When we look at the electricity consumption of SUVs that are EVs, it is twice that of a regular car that is an EV.
We cannot afford, at this point in time in Canada, to switch to EVs and have bigger EVs. That would increase the electricity consumption. We are in a situation where we cannot afford to just grow the electricity consumption to a level that makes it very hard to actually build infrastructure. We need to keep the EVs smaller. That's why I think a tax specific to larger cars, including larger EVs, would be appropriate to make sure we go towards a very efficient, more efficient fleet of cars.
Noon
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thanks for that.
You spoke a little bit, as well, about the increase in the housing size and the number of people living in houses. Of course with bigger houses, you often have higher heating costs. I think one of the areas in which we have the biggest opportunity to reduce emissions in Canada, while also saving people money, is in switching to electric heating of homes. However, if we're talking about electric heating of homes and switching to electric vehicles, that's going to put additional demand on our electrical grid.
I was hoping you might be able to speak to what you see as the increased demand on our grid that we're likely going to see by 2050 and what types of policies the federal government should be pursuing to ensure that type of electricity production is going to be non-emitting.
Noon
Professor, Chair in Energy Sector Management, HEC Montréal, As an Individual
That's very important.
In buildings, we should not actually think only in terms of electrification. Building efficiency is extremely important, and we don't have, in Canada, a stock of buildings that are efficient. We should look at deep retrofits for buildings. That cannot happen overnight. It will have to be over 10 years.
We need to increase the rate of deep retrofitting of our buildings, especially to avoid a big jump in electricity consumption. It will be extremely difficult to build the clean electricity infrastructure to supply all our homes if they are electrified.
It is important to, first and foremost, think in terms of a retrofit, which is extremely good for the Canadian construction industry. These are local materials and local workers who will help Canadians to actually live in buildings that are more comfortable. When you have a strong thermal envelope and a well-insulated building, it is more comfortable. That will save everyone money over time because they will then reduce their heating bills, and Canadians are sensitive to these recurring heating bills.
If we do work on the stock of buildings by improving their energy efficiency, then we'll, at the same time, solve some of the problems of increasing electricity production and help Canadians save on energy, which would be good in both aspects.
For the clean—
Noon
Liberal
The Chair Liberal Peter Fonseca
Thank you.
Thank you, MP Weiler.
We were well over time, but I'm sure there will be another opportunity.
Now we'll hear questions from MP Ste-Marie.
12:05 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
First of all, I would like to say good afternoon to all the witnesses, who are an extraordinary group.
Dr. Charlebois, thank you for all the work you and your team do. We follow it closely. The same goes for Mr. Pineau, Dr. Stanford and Mr. Dachis. It's very interesting.
ACTRA representatives are fighting a very important battle, and we're with them all the way. Let's hope the situation changes. I would also like to thank the CSN representatives for being here in person. Thank you.
My question is for Mr. Duceppe. ACTRA referred to the use of scabs. Unlike Quebec, there is still no anti-scab legislation at the federal level. When the Bloc Québécois was created, its first bill dealt with that. Thanks to pressure from the NDP, the government has committed to introducing a bill on this in the near future.
Why is it important to have federal anti-scab legislation?
12:05 p.m.
Treasurer, Confédération des syndicats nationaux
This is important federally, as it was important in Quebec. It was done many years ago in Quebec.
Basically, it's so there is a proper balance of power. Unions are sometimes accused of wanting to create a labour dispute. That's not the goal. The goal is to have a settlement, and therefore to have proper negotiations. The best way to do that is to have the right balance of power.
For the balance of power to be correct, it must not be impossible for one party to gain an unfair advantage over the other.
That's why we need anti-scab legislation.
12:05 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
Toward the end of your opening remarks, you referred to Mr. Pineau's speech.
We just had a very interesting and important exchange on the electrification of transportation. You said we shouldn't forget public transit. Right now, public transit is experiencing major difficulties.
Can you tell us more about what's needed to better support public transit?
12:05 p.m.
Treasurer, Confédération des syndicats nationaux
I'll let Mr. Bélanger round out other aspects, but I'll start.
There was the pandemic. We won't go back over events, but if we compare the situation in Europe with the one in Canada—
For years, there's been talk about a high-speed train, the famous train between Quebec City and Windsor. I know that there's always money in the budget to fund studies, but I think that studies have been funded for decades, and nothing concrete has happened.
I'm going to talk about transportation companies in Quebec, because that's what I know best. Beyond that, since the pandemic, Quebec's transportation companies have experienced some financial difficulties. We need to be able to improve transportation so that it is efficient. That's fundamental to changing habits. If the global model is that everyone has a big electric vehicle, we won't have a planet. We won't be able to reach that level. So we need to work on building efficient public transit. To do that, we need to be able to improve the supply; to improve supply, we need financial assistance.
This investment is important. At the same time, we have to ensure that our investments go to companies that make transport, companies that make railcars.
Yes, it would employ our workers. They would be good jobs. It would also reduce pollution. As I said, it's high time we made a change.
12:05 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
Would you like to answer my question, too, Mr. Bélanger?
12:05 p.m.
François Bélanger Advisor, Research and Status of Women, Confédération des syndicats nationaux
That explanation is fairly complete. I would add that in a post-pandemic environment, ridership is not yet back to where it was before. It's important for governments to be able to provide support for both capital and operations, at least in the current period. This is very important.
Beyond that, I'd say that the provision of services is the main driving force behind the operation of a public transit system. I live in the Montreal area and know many people who aren't well off. In a city like Montreal, these people live as close as 4 to 10 kilometres from their workplace. Right now, whether they're students or just starting out in their careers, they've chosen to buy a car to get around Montreal. That's an aberration. Perhaps they had other options. These are special cases that demonstrate the need for coordinated investments in this sector by all levels of government.
It's all very well to introduce carbon taxes, bonus-malus schemes or any number of other fiscal or complicated measures, but the primary solution for reducing GHG emissions from transport…. In Quebec, of course, given our reliance on hydroelectric power, transportation is the main contributor to GHG emissions. For all regions, we absolutely need an efficient public transit system. Despite the investments we're seeing, there's still a lot to be done. For example, there's the REM, and there's been talk about a tramway in Quebec City for 10 years.
We see the money going into the Quebec government's budgets, commitments and the Quebec infrastructure plan, or PQI, but it has to translate not only into figures in the budgets, but also into concrete measures and actions. We can see that things aren't moving fast enough, and that congestion and pollution problems are getting worse.
12:10 p.m.
Liberal
12:10 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much, Mr. Chair.
Thank you to all our witnesses for being with us today. I echo the sentiments of my colleagues. It's a great panel, with a lot of important points made.
Dr. Stanford, I want to direct my initial questions to you.
There are a lot of political voices in Ottawa who would say that we want higher productivity so that means we need higher business investment and that means we need lower taxes. As a political argument, it has the virtue of being simple, but it often doesn't fit the facts. What we've seen since the turn of the century is a drastic reduction in the corporate tax rate, outsized corporate profits and large capital reserves for large Canadian corporations, even as we see lower business investment and lower productivity.
I'm wondering if you could help to provide some insight into how, despite the fact that we've had an aggressive corporate tax reduction policy in Canada for a long time, the output hasn't been higher business investment and productivity, but actually less business investment and less productivity.
12:10 p.m.
Economist and Director, Centre for Future Work
Thank you, Mr. Blaikie.
Yes, I accept the first two links in that chain that you mapped out at the beginning. We do need higher productivity. Productivity is a virtue, and we all want to be as efficient as we can.
Now, productivity on its own doesn't necessarily mean we benefit from it. There is often an assumption made—and I think Ben, to some extent, made that in his opening remarks—that higher productivity automatically means higher wages for Canadian workers, and that's absolutely not true.
It creates the space to pay higher wages without having any impact on profit margins, but whether the higher wages result or not depends on the institutions of the labour market that shape wage growth. There's no guarantee that higher productivity will lead to higher wages, but it creates some space. If we combine it with trade unions, collective bargaining and strong minimum wages, then we can translate higher productivity into higher wages.
I agree fully with Ben and others that higher investment in machinery, equipment and technology is one key feature of strong productivity growth over time. Canada's performance on machinery and equipment investment has been miserable since the turn of the century. In fact, since about the year 2000, the share of Canada's GDP that has gone into machinery and equipment investment by Canadian businesses has fallen roughly in half, from about 6% on average during the latter decades of the 20th century, to about 3% today.
That timing coincides perfectly with the reductions in corporate income taxes that were implemented first by then federal finance minister Paul Martin and echoed in many provinces by reductions in the provincial tax rate. I've done research that's been published in the Canadian Tax Journal and other outlets showing that there's no statistical correlation between reductions in across-the-board corporate income taxes and higher business investment.
What we need is more focused, tailored and contingent fiscal tools to try to elicit more business investment. Rather than just giving big wads of extra money back to the corporate sector with no strings attached, we're better off having targeted measures, such as an investment tax credit—that's an idea I support—where you have to pay to play, if you like, and the companies get the benefit only if in fact they invest.
The proactive measures by government to stimulate investment in targeted strategic areas, such as the made-in-Canada clean energy subsidies that I mentioned in my remarks, are also another approach. International comparisons have shown that investment by the public sector, in partnership with private business, targeted to particular projects—what my fellow student Mariana Mazzucato calls “mission-oriented innovation” programs—can have a more positive impact than no-strings-attached and across-the-board tax cuts.
More business investment is a good idea, but just dangling a bigger carrot in front of the corporate sector is not going to win that.
12:15 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much for that, Dr. Stanford.
I wonder if you want to speak a bit about the announcement for the newest investment tax credits that came in the budget and last year's fall economic statement, and the importance of attaching conditions like prevailing wage conditions to those investment tax credits to ensure the benefit of the tax credit doesn't just go to increasing corporate profit margins but to ensuring the people doing the work are also getting their fair share of the additional wealth that's being generated through those investments.