Finance Committee on Oct. 26th, 2023

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

Members and witnesses, we're into our second round of questions, and timings are a little bit different in this round.

We're starting with five minutes for MP Lawrence.

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

Thank you to all the witnesses for being here. Everyone did a great job of presenting material and we really do appreciate you being here.

Unfortunately, as a committee, we have to make such weird transitions from one subject to another subject.

Mr. Asselin I'm going to talk to you a little bit about productivity. It's something that you've talked about. We've heard a lot about productivity from all sides of the table.

I don't wish to get into a partisan discussion; I just want to talk meat and potatoes here about productivity. One comment from your article entitled “New Trudeau cabinet, same old spending—this hurts the middle class” was, “Redistributing borrowed money may look virtuous, but at the end of the day it will make us all collectively poorer.” Then you go on to talk about the 23¢ on every dollar that goes towards debt servicing.

Can you talk about that and the impact of the government spending money? Although it might have the best intentions, it actually will hurt the most vulnerable in our society. Do you agree with that?

[Robert Asselin]

Thank you for the question, Mr. Chair.

I think it's fair to say that we do have a growth problem in this country and a business investment problem, which is obviously linked to productivity. The way to remediate this problem is to have pro-growth policies and a pro-growth framework that allow us to grow our economy, so that we can do all the good things that I think people around this table want to do for our economy and for Canadians.

In the absence of growth and in the absence of productivity enhancement in this country, unfortunately we'll just do deficit financing on every new measure. That leads to more debt servicing and to governments at some point making hard decisions on program cuts or raising taxes, which would decrease business investments.

The other thing I would say is that we live in a very competitive world. The U.S. has moved aggressively on the IRA. It has led to huge business investments. Here, I would say that we're still very tentative. All these tax credits the government put forward for the green transition are yet to be implemented. I cannot stress enough how important it is that we compete on a level playing field that allows business investments to grow.

Therefore, we need more business investments to do all the good things that we need to finance.

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

I think that's right. In listening to some of Mr. Morneau's comments, I think he would echo a lot of those comments with respect to the lack of growth.

Is it a bridge too far, Mr. Asselin, to say that if this government continues to spend at the rate that's ever growing, at 2.5% or beyond, that we're going to start to put at risk some of our social policies, social benefits and some of the things that Canadians hold dearest, if we don't get our spending under control?

[Robert Asselin]

I certainly don't like the trend we're on. As I said in my remarks, the big game-changer here is that interest rates are now higher than growth rates. That will affect the primary deficit, which will just grow by itself.

As I think Mr. Dodge explained to this group last week or previously, this is what happened in the nineties. We were not able to generate enough growth to reduce our deficit. Growth has to come first.

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

Thank you very much.

On the same topic of economic growth and innovation, I'm going to switch to Mr. Vronces.

I'm going to ask you a flippant question, but I think it's important to underscore your point because the government members don't seem to be able to understand this.

What year is it and what season are we in?

[Alex Vronces]

It's 2023 and it's looking like fall outside.

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

Okay, that's my understanding, too.

When did the government say it would have open banking legislation in front of us?

[Alex Vronces]

It was no later than the beginning of 2023.

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

We're well past the beginning of 2023.

Are you aware of any legislation that's been passed or put in front of the House of Commons with respect to open banking?

[Alex Vronces]

No legislation has been put forth.

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

Switching topics, but in the same vein, I don't think many Canadians understand this. Perhaps you can help explain this to Canadians.

I think most Canadians believe that when they use their Interac card or their credit card, it's in real time, that it's instantaneous. It's actually not, to my understanding. To use a colloquialism, it's a little bit like a duct-taped system, just to make those payments go through. Not only is that system weak and potentially vulnerable, it's also holding us back with respect to developing as an economy.

Is that true?

[The Chair, Liberal, Peter Fonseca]

I need a 15-second answer, because we're out of time.

[Alex Vronces]

Though a lot of these payments feel like they're being made in real time, they are not, and the institutions making them are essentially fronting money to one another, creating credit risk in the system.

[The Chair, Liberal, Peter Fonseca]

Thank you. That was 11 seconds, which was great.

Now we're going over to MP Baker for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

Thanks to all the witnesses for being here today. What a wonderful panel, and I wish I had at least five minutes with each of you, but I don't. I apologize to those who I won't have a chance to ask questions of, but know that we value your presentations and that we're listening to your responses to the questions of others as well.

Before I begin with the person I want to ask questions of, I will say that it's great to be here with a few folks who I know well, George Smitherman in particular. He's former deputy premier of Ontario and, as I recall, someone who grew up in my riding of Etobicoke Centre. He now lives in Etobicoke North, which I try not to hold against him. It's still a sore spot for me, but it's good to see you here, George.

Chief Bernard, it's wonderful to see you here and all the others as well. Thank you.

I going to start with Mr. Asselin.

Sometimes what happens when the Governor of the Bank of Canada or anyone else speaks, there are certain MPs who have selective hearing. They hear the things that they want to hear and maybe don't hear the things they don't want to hear.

We've had the Bank of Canada governor come to this committee multiple times, and he's spoken here and publicly about what's caused inflation. What's he's talked about is the war in Ukraine and the impact that's had on food and energy prices around the world. He's talked about supply chain bottlenecks post-COVID. He's talked about extreme weather events that have caused droughts and floods that impacted our agriculture sector around the world. He and many others have come to this committee, and they are objective, non-partisan experts on the economy saying that these are the major causes of inflation.

Would you agree with that?

[Robert Asselin]

I would agree that they were major components to inflation rising, and all the ones you mention, I think, are correct.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

It's interesting, because we had someone who is an expert in agriculture and the price of food come to speak with us. I think it was the last meeting that we had here last week. He echoed what we just talked about, but he talked about how the cause of food inflation that Canadians are feeling in particular, which is the area I hear the most concerns about from my constituents in Etobicoke Centre, is primarily caused by these factors. I think it's important to note that.

You've talked a little bit today about the fiscal future and that you'd like to see restraint. I think the challenge that I have as a member of Parliament is that most of my constituents, but also, I think, other folks who are sitting here today.... We hear from a lot of folks here. I hear from a lot of folks in my community who say that we need to invest in more here. We've heard from the chief. We've heard from the Business Council of Canada. We've heard from Oxfam and others. There are a lot of demands for government to increase spending in certain areas, and there are existing programs that people depend on.

To get to the fiscal position that you're suggesting, what are the things you would have recommended that we not spend money on or that we should not spend money on going forward that we are spending money on? What should be cut? That is what I'm asking.

[Robert Asselin]

It is for the elected government to decide where it wants to put its focus in terms of spending priorities. What I'm saying is that, going forward, the fiscal framework that has a structural deficit in the context of high interest rates and rising going forward will put these very important priorities—I agree with you, they all are important—in jeopardy, so this is what we want to preserve. We want to preserve health care. We want to preserve post-secondary education. We want to preserve international aid. By spending more, unfortunately, you will put these things in jeopardy, in my opinion.

I'm not here to say to the government where they need to cut. What I am saying is that the trajectory of spending right now is not sustainable.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

The corollary to that is, if we followed your advice, we would have to find something to cut. You're presenting a problem, but what is the solution?

[Robert Asselin]

The first solution is to grow the economy higher than what we have right now, which is stagnation. Because inflation was high, the Bank of Canada had to do a lot of work here, but going forward, a growth rate, a real GDP of 1% or below 2% , will make it very difficult for the government to finance the things it wants.

Again, I'd love to have all these great social programs sustainable and protected, but without growth in a high-interest rate environment, we will struggle to keep them in place, unfortunately.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Is that my time?

[The Chair, Liberal, Peter Fonseca]

Yes, that is your time, MP Baker.

We are going to MP Ste-Marie for two and a half minutes, please.

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

Thank you, Chair.

I welcome my colleagues and all the witnesses, whom I thank for being here today. I also apologize for arriving so abruptly.

Mr. Baker, I regret having a chairman who is so strict with committee members. I think he's just as strict with witnesses.

Madame Pelletier‑Marcotte, I believe you had started to tell us about the recommendations regarding decarbonization or the carbon footprint as it relates to Canadian bank portfolios.

Could you expand on that?

[Léa Pelletier-Marcotte]

Indeed, last fall, Oxfam-Québec published a report on the carbon footprint of Canada's banks and major deposit-taking institutions.

We realized that, if they were a sovereign country, they would be the world's fifth-largest emitter of greenhouse gases, not just because of their day‑to‑day activities or energy sources, but because of the emissions they finance. This would place them behind the USA, China, India and Russia.

We're asking the federal government to take the lead and be ambitious about how we regulate the banking sector, since it's not moving forward on its own. We're asking for a little nudge through legislative and regulatory measures that would force financial institutions to be more ambitious and disclose the full carbon footprint of all their portfolios, including their investment portfolio.

We also want Canada, like the European Union, to adopt a green taxonomy that clearly defines terms like “sustainable” and “green” and is transparent to Canadian consumers and savers.

An expert panel examined the issue of sustainable finance in 2019 and made several recommendations, which were not adopted in full. We recommend that they be adopted in their entirety.

There's also a bill before the Senate, Bill S‑243, which is progressing slowly. It's not perfect, but it would be a good start nonetheless.

We also want recognition that polluting investments in polluting industries present a significant financial risk to Canada's economic vitality.