Finance Committee on Nov. 20th, 2023

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

MP Ste-Marie, you have five minutes.

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

Thank you, Mr. Chair.

Minister, I have a request and two questions for you. I will fire them off, and then, you can answer.

To begin with, could you please ask your officials to send the committee the finance department's projections pertaining to the GST rebate enhancement? How many more housing units will it generate? Are the projections based solely on Mike Moffatt's assessment, or does your department have more detailed analysis? That is my request.

Now for my two questions.

First, under Bill C‑56, the GST rebate applies to the construction of any rental housing but does not include any criteria for affordability. If I understand the bill correctly, you have the power to define affordability criteria in the regulations at a later time. Do you plan to do that? Does this measure apply to all rental housing?

Second, a lot of developers are a bit confused by the fact that Bill C‑56 does little to define certain things as they relate to coming into force. Some measures are deemed to have come into effect on September 14, 2023, but they aren't well defined. I'll give you an example, so you can enlighten us or, if need be, get back to us with a written answer.

Take a construction project. Say the foundation of the building is dug before September 14, 2023. The ground floor is commercial space, and everything above is rental units. Since the construction started—but only for the commercial space—the developer wants to know whether they can access the rebate. The digging started before Bill C‑56 came into force. People have questions about that.

In short, I want to know about the possible addition of affordability criteria through regulation, and the definition that would apply in the scenario I just described.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

All right.

Thank you for those very clear and specific questions about the bill we are here to discuss.

When it comes to affordability, we agree that we need programs to encourage the construction of affordable housing. We have such programs. In the fall economic statement, we set out an additional billion dollars precisely for that construction.

We believe it's important to look at supply as well. In Quebec and across Canada, more housing is needed. We believe measures are also needed to stimulate housing construction, period. The decision to eliminate the GST on the construction of rental housing is meant to encourage the construction of rental units overall.

I want to make two other points.

First, by creating more housing, we are helping everyone who is looking for an apartment, including those who have less. When more units are on the market, rents become more affordable.

Second, the measure is based on the construction of rental units. As you know, people who have to rent tend to have less money. By encouraging developers to build rental properties instead of condos, as you pointed out, we are helping those who are less fortunate. This will help make life more affordable.

We also understand that targeted measures are needed to support affordable housing.

In response to your second question, I wouldn't want to comment on a specific situation without having all the information. I don't think that's a good idea. However, we are happy to have a discussion with you. What I can tell you now is that I hope the intent behind the bill is clear: we want to encourage the construction of new units, not give money to people who were already building housing.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

This will be our final question for Minister Freeland.

It's MP Blaikie for five minutes.

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

Thank you, Mr. Chair.

I think the issue is this: There were a number of non-profit housing providers in the stream for which the federal government had approved some form of financing or funding. While those are already in the pipeline, they're not going to come to fruition without some kind of further financial help. Presumably, the government has a list of what these projects are and can calculate what it will cost.

Has your department done that calculation?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I understand the question, and I do understand the situation as, by the way, I know you do as well.

I want to be clear that, from my perspective, the single biggest objective of lifting the GST on purpose-built rentals.... This is really a supply measure. It is about saying that Canada is a growing country, so we need to build more homes and, in particular, we need to build more rentals. We think this is broadly helpful for all Canadians who rent. I want to be clear that this is a supply, supply, supply measure.

I take your point that we also need to have measures specifically focused on affordable housing. I agree with that point. We have a set of other programs specifically geared to the affordable housing sector.

My final point, as I said—I'll be super quick—is this: The macroenvironment is so important here. We're also focused on doing what we can to help...a positive direction in the macroenvironment. That will help all Canadians.

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

One issue is that the replenishment of some of those funds—which, as you say, contribute to building more affordable housing in Canada—announced in the fall economic statement is deferred for another two years. In the meantime, there is a considerable need. Steve Pomeroy is a housing policy expert in Canada. He said that, for every one unit we're building of affordable or social housing, we're losing 15. It seems to me that, at a relatively low cost and by attaching a rider to this initiative, we could ensure that some of the units the government is already bragging about in their numbers on affordable housing actually get built.

If you're not prepared to do that, is the government going to take those units out of its talking points for how many units of affordable and social housing the national housing strategy is building, or can we do something to save those units and ensure they get built so that the talking points are true?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I think the concern we share, at heart, is to have more homes built in Canada, especially more rental homes, with a particular and additional concern for affordable housing. You know very well that there is a suite of programs in place to support the building of more affordable housing. If the core of your message is that we need to continue to do more, I agree with that. I agree with that on housing, broadly.

I think you've seen this in the sequence of measures this fall. We started with GST on purpose-built rentals. Then you saw the housing accelerator fund rolled out in city after city. You then saw us add $20 billion to the CMB program to provide even more financing for housing construction. Then you saw some additional measures in the fall economic statement.

Do I think we have more work to do to get at that core point? I totally agree we do. I think we have to work on a number of fronts at the same time.

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

Going forward, the GST rebate will help some non-profit projects pencil out that otherwise wouldn't.

My question is this: Where the government has already committed funds and those projects aren't going ahead, does that become lapsed funding? Is this a consideration for the housing department in meeting its 3% savings target? Why is it that we can't get this help to allow projects already seen as valuable and approved for some kind of financial assistance by the federal government to be seen through to completion?

What happens to the money that has been committed then? Does it just go back into government coffers as part of spending control, or does it get carried forward so new projects...? I think that would be unfortunate, because Canadians are losing time and money in the delay.

Why not help the projects that are ready to go by including them in the GST rebate?

[The Chair, Liberal, Peter Fonseca]

A final, super-short answer, Minister, is what I need.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

If I have to keep it super-short, I'll just say that we need to focus on three things at the same time: supply, supply and supply. We have to have a particular focus on affordable housing. We have to do all of this in the context of an economic plan that creates jobs and growth in a fiscally responsible way. That's how we do the right thing when it comes to the macroenvironment in Canada.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie, and—

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

Mr. Chair, I have a quick point of order. I want to put it on the record, and then we'll let the minister go.

In the rounds here, it was six across and five across, which disadvantaged the Conservative Party.

[The Chair, Liberal, Peter Fonseca]

I'll speak to that, MP Lawrence.

You would know this. That's what we always do in our committee when we don't have enough time for a full second round. We truncate the second round and we add the time equally. We've done it since the beginning. We've always done it. We've done it for two years now. That's how we roll here on this committee. I think it's a good way, and it allows all members to have some time.

Thank you, Minister, for your testimony on Bill C-56. We really appreciate your time.

Now, we are going to go into transition. We are going to suspend here for a few minutes as Minister Champagne gets ready to come to the table.

Thank you.

We're suspended.

[The Chair, Liberal, Peter Fonseca]

We are back. I call this meeting back to order.

Pursuant to the order of reference of Thursday, November 23, 2023, the committee is resuming its study on Bill C-56, an act to amend the Excise Tax Act and the Competition Act.

I would like to welcome our witnesses with us here today. We have the Minister of Innovation, Science and Industry, the Honourable François-Philippe Champagne.

Welcome, Minister.

Joining the minister is the Department of Industry senior assistant deputy minister, strategy and innovation policy sector, Mark Schaan.

Minister, you'll provide members with opening remarks, and then the members will have an opportunity to ask you questions over the next hour.

Minister, the floor is yours.

[François-Philippe Champagne, Liberal, Minister of Innovation]

Thank you very much, Mr. Chair.

I think it's my first time at your esteemed committee. I feel privileged to be here today.

Good afternoon everyone.

It is a pleasure to be able to speak today to the Competition Act amendments contained in Bill C‑56, the affordable housing and groceries act.

Competition drives innovation. I think every member would agree. It lowers prices and encourages better product quality and choice. That's what we want for Canadians.

Our competition framework needs to be updated to keep up with today's reality. This is why we've introduced Bill C-56, which includes some of the most significant reforms to the Competition Act since 1986, some 37 years ago.

As I said, over the past decades, markets have greatly changed due to digitization and globalization. We have seen corporate consolidation and an imbalanced distribution of economic power in our country.

Delivering on the government’s commitment to undertake a formal review of the law and its enforcement regime, I launched the consultation on the future of competition policy in Canada, in November 2022.

The consultations were extensive and very comprehensive. They lasted 120 days, with five round tables across Canada. We received more than 400 submissions from Canadians and stakeholder organizations.

Bill C‑56 contains important amendments that give the Competition Bureau increased powers. We focused on prioritizing these changes because we knew they would have a real and significant impact on Canada’s retail grocery sector, which needs greater competition and, certainly, more choice for consumers.

It's very simple, colleagues. The bill makes three key amendments. The first one is to allow the bureau to seek subpoenas to compel information when conducting market studies. Second, we will repeal the so-called efficiencies defence, which currently allows harmful mergers to proceed, even if they don't benefit Canadians. Third, we'll expand the scope of reviewable agreements that could harm competition, such as restrictive covenants you find in leases when you have a large grocery store that collaborates with the landlord to block a small grocery store from coming in nearby.

Let me talk a bit about market studies.

The purpose of market studies conducted by the Competition Bureau is to better understand competitive dynamics and make recommendations to government. Currently, the bureau cannot compel companies to provide information outside a law enforcement investigation. As a result, the studies it releases may be missing important information.

This deficiency was made clear by the bureau’s recent retail grocery market study. The bureau did not benefit from the full co-operation of the major grocery chains for its study, and the Standing Committee on Agriculture and Agri-Food recently recommended that this gap be remedied.

A large number of submissions to the public consultation were also in favour of granting formal information-gathering powers for market studies.

However, many stakeholders insisted that any framework that would be put in place should also provide safeguards to avoid fishing expeditions and undue burdens on companies. Our proposed framework takes these concerns into account, and it balances the need for the collection of vital information with reasonable safeguards to protect businesses.

On the so-called efficiencies defence, as you would recall, Mr. Chair, that's quite a unique and highly criticized feature of our competition law regime. It currently protects a merger that harms competition so long as generated corporate efficiencies offset the harm to competition.

Think about that for a moment. Why should we allow mergers that demonstrably harm competition in this country? That's the question we need to ask ourselves.

In our consultation, we heard that this exception was possibly the single-largest weakness in a law that had failed to rein in corporate concentration, including in the grocery sector.

The elimination of the efficiencies defence will give priority to the protection of competition in merger review. I would say to my esteemed colleagues that it is time for corporate mergers that don't benefit Canadians to be consigned to the history books.

Next is vertical collaboration.

However, agreements between non-competing entities, such as landlord and tenant, also known as vertical agreements, are outside the scope of the bureau’s review of potentially anticompetitive agreements.

An example of the kind of agreement that we want to stop is the use of what we call “land controls”, such as restrictive covenants that can prevent new grocery stores from setting up shop across our country. This hurts competition and can even lead to food deserts, when the original tenant leaves a particular location. This is, simply put, unacceptable, and I hope every member of this committee thinks so too. We will ensure that these agreements, whose very purpose is to restrict competition, will be reviewable.

In conclusion, the bill will benefit Canadians with an empowered Competition Bureau, enable greater competition, bring more transparency to markets, block harmful mergers and ensure the bureau can review all forms of anti-competitive agreements. I think what we want, and what every Canadian wants, is less consolidation, more competition and better prices for Canadians.

With that, Mr. Chair, I will be more than happy to take questions from my esteemed colleagues.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister Champagne. Thank you for coming before our committee on Bill C-56.

We are now getting into our first round of questions. In this round, each party is going to have up to six minutes to ask you questions.

We are starting with MP Williams, please, for the first six minutes.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

Thank you, Minister, for being here.

I want to start by thanking you for taking my private member's bill on eliminating the efficiencies defence. The Competition Bureau hasn't intervened yet, but I promise not to have it intervene. It's great to see that we have some good ideas for competition in this bill.

Minister, I want to start with something you said on September 19 in the House of Commons. You said, “One thing that was clear yesterday with the major grocery chains from across the country is that we must not allow any measure to affect our farmers, the small and medium-sized businesses across the country that contribute to the food chain.”

We talk about competition. We talk about all the elements that add costs up the chain, and this bill is called the affordable housing and grocery act. We have taxes on our farmers, on our manufacturers, on our truckers and on our storage facilities, cold storage specifically, that get added to all the food bills and then get added, of course, to the grocery bill.

Minister, do you agree with a tax freeze on the Canadian food supply chain, yes or no?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

First of all, Mr. Chair, I want to thank Mr. Williams. I'm proud to say that, for once, the Conservatives have sided with government to abolish the efficiencies defence. It shows the work of this committee. I want to thank Mr. Williams, because he indeed has put forward a private member's bill that would do that.

We started consultation. I would say this particular clause is really an anomaly if you look at the OECD countries. I think we're the only country in the world to have anything close to that. I'm happy to say that collaboration like this is what we want see in legislation. We have seen other pieces of legislation that are key.

You will have seen that we have reformed the Investment Canada Act. Now we're looking, obviously, at the Competition Act. The type of work that Mr. Williams has been doing, and the fact that the Conservatives support that particular clause and, I would think, the bill, is what we want to see. I'm proud to see that the Conservatives have sided with the government on something so crucial.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Minister. You didn't answer my question, but that's okay.

I think what we're missing on this.... I just want to talk about tax for a minute. When we talk about competition, we also talk about competition in terms of lowering costs as much as we can.

Your own government this year, when we look at the last four years, is collecting $52.1 billion in GST revenue. That is up from four years ago and $37.4 billion. That is a 139% increase in GST. When we look at grocery stores, most Canadians listening at home won't even know they pay GST at grocery stores, but they are. They're paying a billion dollars per year at the grocery store. Some of them won't see it because I know there's another phenomenon: Not only are they seeing taxes, but they are seeing all their groceries shrink.

Minister, when we talk about grocery taxes and we talk about shrinkflation, what specifically in this bill is going to tackle both of those?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I'm happy for those Canadians who are watching, and Mr. Williams will be happy to be able to clip that I congratulated him for having worked with us on removing the efficiencies defence. You can clip that, and I'll be happy to support it.

What I want to say is that I think what my honourable colleagues in this committee understand is that the best way to stabilize prices in Canada, whether it is mid- to long term, is more competition. It is true in the grocery sector. It is true in many other sectors of our economy. That is why these particular provisions are key in order to provide more affordability, more choices and more innovation in the country.

To come to your point about shrinkflation, you'll be happy to see, Mr. Williams, that soon we will be taking action with respect to the practices we've seen. We have looked at best practices in France and the U.K. I've been talking to colleagues around the world. I am also talking to colleagues in Washington because, as you know, this is not unique to the Canadian market, this issue of shrinkflation.

For colleagues who don't know, it's basically keeping the same package but reducing the number of grams, for example, in a box of pasta. It's very difficult for consumers to realize whether they are getting the same bargain, a better bargain or a worse bargain for what they're paying.

I think you will see soon, Mr. Williams, and I think you will be happy, that we're going to tackle that specifically to better inform consumers and make sure that Canadian law is respected.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Minister.

One thing that has come out—and this has come from the industry, so we are really focused on the industry, the manufacturers, the farmers and the truckers—is that there's a plastic package ban coming. The Supreme Court deemed it unconstitutional. We'll see what happens.

In the grocery store, that's going to mean the elimination of all plastic in the fruit and vegetable and prepared food sections. The industry has come back to say that it is going to cost the grocery industry $6 billion, which will mean a 30% increase in food costs.

Can you comment on that? I am sure you know. You met with the grocers. They've expressed it to us. I'm sure they expressed it to you. How is that going to make companies more competitive with food prices in Canada?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I think that somehow, Mr. Williams, we can do both. We can both protect the environment and have more affordability and competition in the country.

To your point, I have talked to the industry, not only to the large manufacturers and grocers but also to the industry writ large. I understand. I have been engaging with them to listen to their concerns and to make sure that while we, on the one hand, protect the environment and also have meaningful regulations that continue to protect consumers, we will, at the same time, maintain competition in this country.

I would say that this bill is probably a cornerstone in terms of affordability and how we can help Canadian consumers. That's why I'm so happy and keen to see you at the committee today.

[Ryan Williams, Conservative, Bay of Quinte, ON]

I have a last question, Minister, a real quick one.

You've brought in a grocery code of conduct, but you didn't make it mandatory, which means that it's useless, really, right now. Do you have plans to make it mandatory and make the grocers abide by that code of conduct?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Mr. Chair, I won't take any credit, really, for the grocery code of conduct. I have to give credit to those who deserve it. This was an industry-led code of conduct co-chaired by Minister Lamontagne from Quebec. My colleague Minister MacAulay has spent two years working on that.

My job, Minister.... I mean, sir. I was about to give you an upgrade today.