Finance Committee on Nov. 13th, 2023

Liberal

The Chair Liberal Peter Fonseca

Thank you.

The Clerk

We have a final participant, René Grenier.

René Grenier As an Individual

With nearly 170,000 members, the National Association of Federal Retirees is the largest advocacy organization for active members and retirees of the federal public service, the Canadian Armed Forces, the Royal Canadian Mounted Police and federally appointed judges.

The National Association of Federal Retirees wishes to make the following recommendations to the Standing Committee on Finance:

First, commit to long-term care standards and a national seniors strategy.

Second, fund and implement a drug insurance plan.

Third, support caregivers.

Fourth, guarantee fair outcomes for veterans.

Fifth, solve all Phoenix-related issues.

Sixth, add a pensioners representative to the board of directors of the Canada Pension Plan Investment Board.

Seventh, update federal retiree benefits.

Eighth, address cost‑of‑living issues.

Thank you.

Liberal

The Chair Liberal Peter Fonseca

Thank you.

Let us thank this excellent, diverse, passionate group of witnesses who came before our open mike to give us their statements, their testimony. It will make up part of our study and the report on our pre-budget consultations. We really thank you on behalf of this committee for doing that.

Bloc

Caroline Desbiens Bloc Beauport—Côte-de-Beaupré—Île dOrléans—Charlevoix, QC

A point of order, Mr. Chair. There's no interpretation.

Liberal

The Chair Liberal Peter Fonseca

We'll suspend for a second to make sure that interpretation is working.

Liberal

The Chair Liberal Peter Fonseca

We are back, everyone. I'm glad we have the interpretation working. We have to make sure it is always functioning and that everybody can receive messages in the language of their choice.

Again, I want to thank those who came to the open mike. We should give them a round of applause.

Some hon. members

Hear, hear!

Liberal

The Chair Liberal Peter Fonseca

They did an amazing job. We wish we could have them all at the table here.

We're going to hear from those with opening statements, and then we're going into questions from members. Let me introduce who we have with us here today.

From the Canadian Worker Co-op Federation, we have Hazel Corcoran, executive director.

From the Fédération des chambres de commerce du Québec, we have Charles Milliard, president and chief executive officer, and Mathieu Lavigne, director of public and economic affairs.

From the Manufacturiers et Exportateurs du Québec, we have Véronique Proulx, president and chief executive officer. I understand that Madame Proulx has to leave by 10 o'clock, so members, if you have questions for her, make sure you get them in by 10 o'clock.

Finally, from the Mouvement autonome et solidaire des sans-emploi, we have Benoit Lapointe, co-coordinator.

We're going to opening statements. We'll start with the Canadian Worker Co-op Federation, please.

Hazel Corcoran Executive Director, Canadian Worker Co-op Federation

Thank you very much, Mr. Chair.

Good morning.

My name is Hazel Corcoran, and I am executive director of the Canadian Worker Co‑op Federation.

On behalf of our 64 worker co‑ops across the country and the three Quebec federations that constitute our membership, I am pleased to be with you in this beautiful province, a province with a robust heritage and strong co‑operative culture.

There are over 250 worker co-operatives in various industries in Quebec alone, and a total of 440 worker co-operatives across Canada, ranging from the forestry sector and agriculture to food manufacturing, construction and the service sector. In fact, right here in Quebec City there are many worker co-ops, including, as one example, the Coopérative des techniciens ambulanciers du Québec, CTAQ, which provides paramedic services to Quebec City and Saguenay—Lac-Saint-Jean and has over 500 worker members.

To provide more background on the worker co-op model, a worker co-op is an employee-owned enterprise that follows co-operative principles such as democratic member control and concern for community. Worker co-operatives have a proven track record and a superior survival rate compared to other enterprises.

Over 100 studies across many countries have indicated that employee ownership is linked to increases in firm performance and productivity, greater job stability with fewer layoffs, significant potential to alleviate income inequality and improved quality of the workplace due to workers having greater control, more aligned incentives and increased skills development. In some ways, worker co-ops are similar to other forms of employee ownership; they are just the most democratic form of it. Worker co-operatives are well suited as a strategy for business succession, which is a huge concern as the baby boomer generation retires. Encouraging employee buyouts can help prevent the closure of locally based businesses, including many in rural communities. That is why we are so pleased to see the Government of Canada's interest in introducing employee ownership trusts in Canada and providing modest tax relief to such models in budget 2023.

However, while the government ponders its approaches to EOTs, we also request that the worker co-operative model be provided a level playing field to employee ownership trusts. We kindly ask that the government provide tax changes to worker co-ops that are comparable to those provided to employee ownership trusts.

More specifically, we recommend that the government add worker co-ops to qualifying conditions and definitions in the legislation, since worker co-ops are quite distinct from EOTs. Including language specific to them means they would be able to access these benefits and any future benefits.

Provide business owners who sell to worker co-operatives the same proposed extension, from five to 10 years, for capital gains reserves as those who sell to EOTs. In addition, as those who invest in worker co-ops themselves do not benefit from capital gains tax exemptions, we ask that you consider another tax change that could benefit worker co-ops specifically: Create a federal co-operative investment plan. A program to encourage investment in the sector through a tax deduction on the investment would support and grow the worker co-op sector.

Last, we are advocating that the government ensure entrepreneurs and businesses are not penalized when claiming the small business deduction simply because they are members of a co-operative operating in sectors other than agriculture and fisheries.

In 2016, with the passage of Bill C-29, the federal government brought in measures aimed at preventing multiplication of benefits derived from the SBD. An unintended consequence was that the provisions penalized Canadian-controlled private corporations that are members of co-operatives or whose shareholders are members of co-operatives, because they are now unfairly deemed to be a related party. Although co-ops were not specifically targeted by the measures, they and their members were affected negatively.

To sum up, although the work co‑op model has received little support from governments, it has made it possible to create thousands of high-value jobs in Quebec and the rest of Canada, while supporting workers in often vulnerable sectors.

Although we are pleased to see the Canadian government's interest in worker-shareholder trusts, the Canadian Worker Co‑operative Federation and its members seek equal consideration when it comes to applying tax changes and other incentives to those trusts.

I will be happy to answer your questions.

I want to thank the committee for this opportunity to take part in its pre-budget consultations.

9:10 a.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Ms. Corcoran.

Now we'll hear from the Fédération des chambres de commerce du Québec.

9:10 a.m.

Charles Milliard President and Chief Executive Officer, Fédération des chambres de commerce du Québec

Thank you, Mr. Chair.

Good morning, everyone.

My name is Charles Milliard. I am president and chief executive officer of the Fédération des chambres de commerce du Québec. With me is my friend and colleague Mathieu Lavigne, who is our director of public and economic affairs.

As you probably know, the federation represents nearly 50,000 businesses in Quebec and more than 120 chambers of commerce across the province. We are the largest network of businesses and business people in Quebec. We are both a federation of chambers of commerce and a provincial chamber of commerce, the Chambre de commerce du Québec.

All our members, both businesses and chambers of commerce, strive to achieve the same goal: to promote an innovative and competitive business environment and, especially, to make a substantive contribution to regional economic development across Quebec.

Thank you for having me here this morning to tell you what we would like to see in the federal government's 2024‑2025 budget. This past summer, we submitted our brief, which contained 11 specific and targeted recommendations. A more exhaustive version will follow as part of the consultations conducted by the Department of Finance. Allow me to focus on three themes this morning: labour, the economic development of all regions of Quebec and the state of public finances and taxation.

We will begin with the first theme: the labour shortage.

As you know, for some years now, all of Quebec's economic sectors have been coping with the biggest challenge there is: a labour shortage. This situation, I should mention, is the combined result of an aging population and a strong and resilient economy.

However, this undue pressure on the labour market will continue to intensify in the next few years. The labour shortage will be a cause for concern for another decade or so.

According to the Institut national de santé publique du Québec, 25% of Quebec's population, one quarter of the population, will be 65 years of age or more in 2030. As we all know, the province's birth rate has generally been trending downward since 2013.

As the pool of native Quebec workers continues to decline in the coming years, immigration clearly appears to be a prime solution and occupies an important position in meeting our labour needs. However, other responses are also available: more effective promotion of student internships, a more effective approach to continuing training for our workers and stronger incentives for experienced workers to extend their careers.

The federal government has a role to play in all these areas. That is why we are making four recommendations this morning: promptly announce investments to be made in placement programs for students across Canada until 2030; replace the Canadian training credit with a new voluntary continuing training savings plan, which I would be pleased to discuss with you during the question period; introduce more robust measures to raise the average retirement age; and—an interesting suggestion to make—reinvest in Canadian embassies in North Africa to reduce processing times for immigration files from those regions, which as we know, greatly contribute to the international economic francophonie.

The second important theme that I want to address this morning is the economic development of Quebec's regions.

The Quebec and Canadian economy is strong when all regions contribute fully to its development. To ensure that happens, we need logistical and transportation infrastructure that is modern and worthy of a G7 country and that enables workers, entrepreneurs and goods to circulate freely within our borders.

On this point, I want to note that one of our recommendations has already been realized. We are very pleased that the federal government has confirmed additional funding of $150 million for the expansion of the Port of Montreal at Contrecœur. This is excellent news for such a strategic project.

Similarly, we strongly recommend that the government immediately set aside the necessary funding to build the high-frequency or high-speed rail line linking Quebec City, Montreal and Ontario with an accelerated schedule for completion. We also recommend that it enhance the airports capital assistance program in the Canadian regions and reduce the high tariff rates charged to air carriers that use Canadian airports.

Furthermore, to maximize the impact of the new green industries developing in all our regions, we recommend that tax and financial incentives associated with Canada's plan for a clean economy be contingent on flexible criteria related to content supplied by Canada or allies, that is to say, from free-trading Canadian partners.

Lastly, I come to the final theme for this morning, the state of our public finances and taxation.

We think it is essential that the government submit a plan for balancing the budget within five years.

We would also like Canada to draw on the example of the Quebec government, which this week reiterated its commitment to maintain a balanced budget until 2027‑2028. I say that in an apolitical way. It's a good source of inspiration for Canadian parliamentarians.

I will conclude my presentation by naming, in quick succession, a few topics on which we think the committee should focus its attention. First, the government should make incremental innovations eligible for the scientific research and experimental development incentive program, the review report of which the government should be releasing very soon. We also recommend that it introduce an equipment modernization and cyber security tax credit. Lastly, it is important to ensure that the new national drug insurance plan supplements the present Quebec system in order to maintain flexibility.

Thank you.

9:15 a.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Mr. Milliard.

I now yield the floor to the representative of the Manufacturiers et Exportateurs du Québec.

9:15 a.m.

Véronique Proulx President and Chief Executive Officer, Manufacturiers et Exportateurs du Québec

Mr. Chair, members of the Standing Committee on Finance, I am pleased to be with you today to present the recommendations of the Manufacturiers et Exportateurs du Québec regarding the 2024‑2025 budget.

Canadian Manufacturers and Exporters, which we are part of, submitted its pre-budget submission earlier this year. Today I will focus on the recommendations that are most relevant for Quebec manufacturers given the challenges we have in the province. My presentation will be in French, but I will be happy to answer any questions in English afterwards.

The manufacturing sector represents 13,000 businesses. Our activities generate 12.8% of Quebec's gross domestic product, which, to date, makes us the biggest contributor to Quebec's GDP. We are also major exporters: manufactured goods constitute 86.8% of Quebec exports.

The economic situation across Canada is uncertain and unpredictable. The federal government can count on Quebec and Canadian manufacturers to support the economy, but they must be given the necessary tools to do so. Today I am going to outline some of our recommendations, divided into four major themes.

The first of those themes is labour and access to talent.

There are nearly 22,000 vacant positions in Québec's manufacturing sector. That fact is still the greatest drag on both manufacturers' growth and, it's important to note, on investment. There are 16,000 temporary foreign workers in our sector in Quebec. Quebec manufacturers use the temporary foreign workers program.

To address this situation, we have two recommendations.

First, we need to align the immigration system with the needs of manufacturers. More specifically, we want the government to be able to select more welders, electrical engineers and mechanical engineering technicians so that economic immigration can serve Quebec and Canadian manufacturers.

The second recommendation concerns housing. There is a housing crisis all across Quebec. The major manufacturers will invest in housing, by both purchasing and renovating, in order to house their workers. As you can understand, however, these kinds of investments are harder for small and medium-sized manufacturing businesses to make. We therefore ask that the government accelerate investment and cooperate with the provinces and municipalities so that we can quickly build more housing across Quebec and maintain our manufacturing operations in the regions.

The second major theme is stimulating investment.

Canada ranks second last for non-residential investment among the countries of the Organisation for Economic Co‑operation an Development. We now invest less in this area than we did in 2014, which means that we have experienced negative growth since that year.

Many significant investment projects are unfortunately being delayed or cancelled in the current economic context. We recommend several measures in our brief to address this situation. I will briefly present four of them to you. First of all, the government should introduce a 10% investment tax credit, as is being done in Quebec and the Atlantic provinces. Second, it should extend the accelerated investment incentive. If we want to stimulate investment now, in a context of uncertainty, we need to encourage businesses to do so. Third, the government should also extend and recapitalize the strategic innovation fund and commit at least $2.5 billion a year to it. Fourth and last, it should enhance and reform the scientific research and experimental development tax incentives program. That's particularly important for Quebec's aerospace industry.

Exports are the third theme of our recommendations.

We need to increase exports. However, it's often difficult for businesses to enter international markets. They must be a known quantity and have had contracts here in Canada. Which is why we recommend that the federal government review its procurement policies and eliminate the lowest bidder rule to enable our businesses, which are competitive, to access public contracts. These are businesses that produce here in Canada in compliance with environmental and occupational health and safety standards. They must be given a chance to bid for and access public contracts.

We must also provide better support for small and medium-sized manufacturing businesses. Only 1,000 of the 13,000 manufacturing businesses in Quebec have more than 100 employees. However, the 12,000 businesses with fewer than 100 employees need export assistance. They need to be provided with better support and more programs to mitigate the risks associated with their initial forays into international markets.

The fourth and final major theme is the fight against climate change.

The big challenge in the next few years will be to decarbonize activities. Quebec and Canadian manufacturers want to contribute to the federal government's carbon-neutrality objectives and to be part of the solution. However, they need more support and predictability, as well as key measures, in view of the investments that will be required.

More than a year ago, the U.S. government announced a range of tax measures under its Inflation Reduction Act. Here in Canada, we are still awaiting the measures the federal government announced to materialize. For a year now, businesses operating on both sides of the border haven't even had to wonder on which side of the border to invest their money to decarbonize their operations: they know it's better to do it on the American side. Consequently, the government must expedite implementation of the five tax credits previously announced and ensure that those programs are predictable and more broadly based to stimulate investment in Quebec and Canada.

Thank you very much. I will be pleased to answer your questions.

9:20 a.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Ms. Proulx.

Now we'll go to the Mouvement autonome et solidaire des sans-emploi.

9:20 a.m.

Benoit Lapointe Co-coordinator, Mouvement autonome et solidaire des sans-emploi

Mr. Chair and members of the committee, good morning.

Thank you for inviting us here today to outline the investments that need to be made to improve Canada's employment insurance plan. Our complete arguments for a thorough reform of the plan are laid out in our brief.

These days, as we have all seen, whatever happens on the other side of the world has an impact on our economy here at home. Climate change is also destabilizing natural-resource-based businesses and our economy as a whole. These events and phenomena are beyond our control, but a good employment insurance plan is one of the essential tools we can use to offset their consequences and provide some security and stability to the entire population of this country.

Choosing an employment insurance plan can also help us avoid tragedies. The Mouvement autonome et solidaire des sans-emploi, or MASSE, would like to express its condolences to the families of the three fishermen from the community of Blanc-Sablon who recently died. We will not forget them.

It isn't right that, in a G7 country in 2023, people should need to risk their lives in a storm at sea because they need to accumulate 595, 665 or 700 hours of work to qualify for employment insurance in their region and then hope to survive on benefits that won't even last the entire off-season. We, as a country, have the resources to correct this situation. It's a matter of priorities. If people want to eat seafood in Ottawa, someone has to fish for it off the east coast. However, no one should have to risk his life trying to qualify for employment insurance just to fill our plates.

There are a few simple solutions for considerably improving the plan starting in 2024, while we introduce the full reform that we have been promised.

In 2020, thanks to the Statistics Canada Simulation database, the Institut de recherche et d'informations socioéconomiques, or IRIS, determined that the introduction of a single eligibility threshold of 350 hours or 13 weeks of work would make it possible to redistribute approximately $1.7 billion in benefits to unemployed workers. That would help maintain the economic vitality of many communities and prevent more than 90,000 households from falling into poverty.

I would also note that it is possible to establish a single threshold. The government did it during the pandemic. We also think that the regional unemployment rate isn't an indicator of the number of jobs available in a region. We therefore request that this requirement be dropped.

The measure of establishing a single threshold of 35 weeks of benefits for eligible individuals would cost the employment insurance fund approximately $1.2 billion annually. That lower threshold is a relatively inexpensive measure that would avoid the black hole of employment insurance for thousands of families. As I said earlier, it could save lives.

One thing is for sure, and that's that, given the rising cost of living in recent years, unemployed workers can't support themselves on only 55% of their normal income. That income must be sharply increased. If the benefit rate is raised to 70%, rather than maintained at the current rate of 55%, the additional benefit amounts remitted would total $4.7 billion.

Of course, many options are available to the Minister of Finance to finance these measures.

First, the return of the government contribution equal to 20% of the total amount of employer and employee contributions would add approximately $5 billion to the fund annually. And that's not an impossible measure, since that kind of contribution was made until 1990.

Second, savings of approximately $2 billion could be achieved every year by ending funding for employability programs from the EI fund. We at MASSE believe that employer and employee contributions should not be used to fund those programs.

It should also be borne in mind that there was a time, not long ago, when the contribution rate was approximately 3% of salary. It's less than half that today. Given the rule requiring that the fund must have a zero balance every 7 years, the fund seems fated to be less and less suited to the needs of unemployed Canadians. If, every time the fund showed a small surplus, those amounts were used to improve the plan rather than to offer contributors very minor reductions calculated in fractions of a percentage point, the plan could be sustainably improved and a new balance could then be established by achieving, in the long term, a more accessible, fair, universal and non-discriminatory plan.

I would recall that $57 billion was removed from the employment insurance fund in 2008. And let's remember that Mr. Duceppe demanded to know where unemployed workers' money had gone.

In addition, approximately $20 billion was taken from the fund in recent years and used to fund the Canada emergency response benefit.

If those amounts removed from the fund were recovered, the employment insurance plan would have a cushion that could be used to fund the proposed improvements as it gradually found its new balance.

The plan is currently underfunded and exacerbates the inequalities within our society. Canada's workers deserve better than that. Everyone who contributed should be entitled to benefits if they become unemployed.

Surely it's possible to make choices in the 2024 budget that will improve the present plan. The employment insurance plan may find its budgetary balance in its improved version. The choice is political, not financial.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Mr. Lapointe.

Members and witnesses, we're now going to get into questions as quickly as we can because we want to get as many questions out as we possibly can. In our first round of questions, each of the parties is going to have up to six minutes to ask questions. Remember that Madame Proulx has to leave by 10 o'clock, but we should get through this first round.

MP Paul-Hus will have the floor for six minutes.

Conservative

Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC

Thank you, Mr. Chair.

Good morning, everyone. Welcome to Quebec City.

My first question is for Ms. Proulx.

We have before us various proposals for improving the process. I'd like to know what impact inflation is having on Quebec's manufacturing sector.

President and Chief Executive Officer, Manufacturiers et Exportateurs du Québec

Véronique Proulx

The first thing is that all costs have sharply risen for businesses, whether it be wages, inputs or transportation. Costs are up, but we can't always pass them on to consumers.

Debt service has risen as well. For businesses that have loans and lines of credit, what working capital they had is now being used to cover debt and rising costs. That brings me back to the idea of delayed or cancelled investment projects because businesses don't necessarily have the flexibility they need to take action and make planned investments.

Conservative

Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC

Earlier you said there were currently 22,000 vacant positions. Is negative growth occurring as a result of inflation? Are businesses nevertheless recruiting? Is inflation impeding growth?

There are two parts to this. If people say there short of employees, that's theoretically because they need them.

President and Chief Executive Officer, Manufacturiers et Exportateurs du Québec

Véronique Proulx

There are actually two points here. I'd say that businesses are cautious about investment, just as they are for hiring. However, they've suffered so much from the labour shortage in recent years that they're making every effort to retain their employees and not to lay them off. They're also very much aware of the fact that the situation could change in a year or two. The demographics will continue to do what they do. There will always be a need for labour in the short term, but especially in the long term.

Conservative

Pierre Paul-Hus Conservative Charlesbourg—Haute-Saint-Charles, QC

Everyone is asking for new programs, but there's often a problem with bureaucratic hurdles. Entrepreneurs often complain about too many bureaucratic hurdles with the federal government, in particular.

Can you cite any examples of bureaucratic hurdles that could be removed to facilitate matters for manufacturers and exporters?

President and Chief Executive Officer, Manufacturiers et Exportateurs du Québec

Véronique Proulx

You have to look at the measures set forth in the U.S. Inflation Reduction Act compared to what has been proposed here to date. Draft legislation has been introduced to establish two tax credits, but there's a lack of predictability and it's complex. On the American side, on the other hand, it's easy to understand, and you can easily plan return on investment. These are parameters put in place by the federal government that make it really hard to operationalize the investment.