If that's ruled in order by the chair, I would like to move that, and I'll motivate it to some degree, if for no other reason than to give people a bit of a break before they hear my colleague Mr. Genuis.
We obviously know that this subamendment is not the only thing that will have us cross the impasse. We still have to agree on the date for clause-by-clause, but at least this is put on the table so that we may continue discussions while those of us who have to report back to our bosses—and we all have a boss—on the date of clause-by-clause.
My understanding is that the government would continue to prefer a date next week to end clause-by-clause, but I suspect that won't be acceptable to us. I won't make a final pronouncement on that. We are unable to agree to that date tonight. I'm hopeful that by noon tomorrow we might be able to agree to a reasonable clause-by-clause end date such that the bill may find its way out of the committee the following week.
Maybe that's a bit of hopeful foreshadowing of things to come. We could start clause-by-clause at the end of next week, and we could plan to finish it, potentially, on June 3, 4 or 5. That's up for discussion, and I wouldn't make any commitments from my side on that, although I hope that we would find an opportunity to come to an agreement so we can hear from witnesses.
I think it would not be advisable or a good precedent to set to have budget bills that are House instructed or programmed out of the committee without witness testimony or at least the only witness testimony occurring in the Senate. Although they do some wonderful work in the Senate, I think it's good to have witnesses appear in the House committee.
I'll just note as a matter of process that we gave unanimous consent as a committee to prestudy the bill. The bill's not even at committee yet. The notion that we were going to agree at some point to have the bill, which hasn't even been sent to committee yet, be out of committee by next week I think was a bit aggressive to begin with. Our position would be, if we can all move on our hardline positions, which I think both the government and the opposition have done at least as an initial point, we might be able to make sure we can get the bill out of committee with a couple weeks left for debate in the House, which I think is about normal for the budget bill.
Separately, as a matter of House procedure or the government's legislative agenda, this is the challenge with having late budgets. If the budget had been tabled when it was originally intended for in March and not been delayed, we would have had the bill much earlier. I think it would be wise for governments in the future to target tabling budgets certainly no later than March 31 but preferably before departmental spending reports come out and before provinces do their budgets. It also puts less pressure on the finance committee to review a 600-page bill and have witness testimony.
By the way, we've only had one round of witness testimony, one round from one party of witness testimony from officials. That's only been on the first three or four parts of the bill.
My colleagues in the Bloc and the NDP have not had an opportunity to ask any questions of officials, at least on the first parts of the bill, because we were into the programming motion right away. We are where we are, but I'm hoping that because the budget was later the government recognizes that we can't have only one week with the bill in committee.
We did agree in good faith to prestudy the bill. In previous years, we did not agree to prestudy the bill. That was a good-faith gesture on our part, because we did not need to agree to prestudy the bill. That is not a requirement, but with a 600-page bill, we thought: “Hey, you know what? That's a pretty good idea.”
That's the subamendment. We don't expect it is going to be acceptable to all parties this evening, but as I said, I hope we can get to an agreement by noon tomorrow—I understand that the NDP also has some desire to see this move forward so that we could get to witness testimony—such that we can hear from witnesses beginning next week. We'll probably have a few days where we'll have four to six hours of witness testimony.
For the moment, on the subamendment, as we're talking about witness testimony and Mr. Carney's appearance—or potential appearance, I should say, because it's an invitation, not a summons—we also have not heard from officials, which we'll have to finish. I'm not intent on over-complicating things, but there is also on notice a motion that we hear from the deputy minister of the Treasury Board and the deputy minister of finance.
Why? Well, I appreciate that we have subject matter experts showing up to talk about very specific provisions of the bill, but it is unclear to me that there's a lot of oversight of a bill of this size and of its impact on the operations of government. What do I mean by that? For every single budget bill that has been sent to this committee—I think this is the sixth in this Parliament—a member of the committee has asked how many people will be hired in the government to implement the policies in the budget. Every single response so far has been that it's more of a Treasury Board question. Then when you ask the people in Treasury Board, they say that it's really a finance question.
It's relevant because the government is projecting that it will reduce the size of the civil service by 5,000 people over the next few years. That represents about 20% of the government's own spending objective, yet in fact, every single year, the government starts the year by saying that by the end of the year there will be fewer civil servants working for the government than there were at the beginning of the year. Yet when the numbers come in and the departmental spending plans come in, what ends up happening is that it's not the case. They say, “Oh no, we grew the number of people that were working for the government, but next year we will reduce them.”
Since that represents 20% of the government's savings objectives, we should actually have some accountability from the departments—plural—that are responsible for delivering on that, including the Treasury Board and the finance department. Every time there's a measure in the budget.... For example, last year there was $400 million for CRA, the government said, which I applauded, at least from a transparency perspective. This represented 4,000 employees. Whenever there's a measure in the budget that allocates money, there is money for operations to deliver the program, and then there's money for the program itself. Maybe it's giving cheques. Maybe it's giving grants. Maybe it's increasing the child care benefit. Maybe it's increasing the GST credit.
The government should have an idea, when it says a program is going to cost x million, they should know how many people are going to be hired. How are they keeping track of all this? It's unclear to me, and we have not received satisfactory answers, either in the budget lock-up or in any hearing we've had so far, about how many people are required to be hired to carry out the measures in the bill, especially since the government's planning on reducing the head count over the next couple of years.
CRA is getting $180 million just to write cheques and send cheques to small businesses. That requires hiring a significant number of people. By the way, CRA is getting another $350 million, approximately, to improve call centre performance. That obviously requires a number of people.
If the government is hiring another few thousand people in CRA, and they've said they're going to reduce the overall head count by 5,000, that means they actually have to reduce the overall head count by 5,000 plus however many people they have to hire to carry out or implement the bill.
It's unclear to me that there's actually anybody paying attention on the government side to this, because every single year the same thing happens at the end, when we get the departmental spending reports. Even the Parliamentary Budget Officer thinks the full-time equivalent projections that the government has are not credible, because every year they're wrong, and they're wrong by a lot. Instead of dropping, they actually go up by 5,000 or 10,000.
I don't think that those at Treasury Board or the finance department are actually managing this as best as they could. Since it represents 20% of the government's savings objectives, I think they should be accountable for the people plan, and every department should have a people plan.
However, we'll go back to the timing. Because the budget comes out after the departmental spending reports, departments are making their people plan without actually knowing what's in the budget they have to implement, so there's a disconnect.
I don't really like a fixed budget date, but I would support a fixed budget window. It certainly would give our very hard-working civil servants a little bit more predictability in their lives. It would give the committee more time to review this budget bill or any budget bill. Also, we would have a better handle on what people are required to implement, the various proposals, programs or ideas in the budget which the government would like to implement and execute on. We also would give provinces more opportunity to understand what they might be getting if there are changes to the transfer payments or what have you.
Since we did want to talk about, and the motion talks about, what's in budget 2024, and we did not have an opportunity to talk to witnesses, here are some of the questions I have.
I'll start first by saying I actually applaud Mr. Leblanc, who I think is a very capable individual in the Department of Finance. I asked him some questions about the child care benefit being clawed back for parents who have lost a child, a very unfortunate circumstances, but it happens. It must be absolutely devastating for a family to receive a letter from the CRA six to 12 months after they have lost a child asking for child care benefit overpayments to be paid back.
There was an Order Paper question asking the government in January how much money was clawed back from overpayments in child care benefits from families who have suffered a loss of a child. The answer received to the Order Paper question was that it was impossible for the government to provide that information.
However, Mr. Leblanc, when he was at committee, quite clearly said that they know exactly how many families it affects. I think he said it affects 1,500. That's how they came up with how much it would cost the government to provide a six-month grace period for families who lose a child.
I fully support this measure, by the way. I think it's important to support families in their time of need. That is why I originally asked for that figure in the Order Paper question to begin with. The CRA decided they didn't have that information when a member of Parliament asked for it, but when the government asked for it, they quite freely gave it to them. I raised a point of privilege on this in the House. As I like to say, I kept the receipts. I had the question I asked and I had the answer I received from the CRA.
I would also recommend this to the government: Instead of requiring a family to notify the CRA of the death of an individual, why don't they just allow Service Canada, who receives a copy of the death notice for other programs, to give that over to the CRA so that there is no additional burden placed on the family? That would just be a reasonable common-sense thing to do.
Right now they're told, “You still have to fill out all this paperwork. You still have to provide us notice. But we won't force you to do it right away. We'll let you do it later.” I'm wondering why we just don't tell them, “Look, you have a six-month grace period. We'll let you continue to collect for six months the child care benefit.” By the way, six months of the child care benefit wouldn't even cover two-thirds of the cost of an average funeral. Why don't we tell them that they don't have to do anything, because we will just get a notice from Service Canada and take care of the rest? That would be absolutely reasonable and compassionate.
I applaud Mr. Leblanc for providing me with the answer I needed to make a point of privilege in the House. It's not the only time CRA has frustrated a member of Parliament from getting the answers to a question they should have.
Then there's the Canada carbon rebate for small businesses. The CRA, as I mentioned earlier, is getting $180 million to administer the program and write cheques to small businesses in order to return to them proceeds from the carbon tax. Businesses have been waiting for five years for a rebate that they've been promised. They still have to wait until next year to receive the cheques. The government is going to spend $180 million on administering this program. It seems to me that it's a bit of a big number to write some cheques.
Additionally, it looks like they're just making an assumption in that the cheques will be based on the number of employees a small business has. This is all data that the CRA already has. They have the number of employees that receive a T4. They may also have the number of contract workers that a business has. It can't be that hard to take the pool of money, divide it by the number of employees who work at small businesses, multiply the number of employees that each small business has and either write a cheque or, maybe even better yet, let them hold it against their taxes payable so that we can avoid this administrative cost.
Conservatives have another idea. You can save the $180 million altogether if you just get rid of the carbon tax to begin with. You don't even have to spend money on administration. That would be by far the easier approach. Recognizing, however, that we do not have a majority of the votes in the House of Commons to enact that common-sense plan, certainly the CRA could do it a little bit more efficiently with $180 million. They do not need $180 million to write cheques.
We did get to ask the officials about the homebuyers' plan limit increase. I'm still a bit puzzled as to why Conservatives are asking questions about this homebuyers' plan limit increase. The only people who have money in their RRSPs are generally people who are in the upper income brackets, and certainly the people who have enough money that they can afford to take double the amount out of their homebuyers' plan are in, likely, the highest income bracket.
The government, by its own figures, suggests that only 13,000 people will benefit from this change over the next five years, which is not that many people per year. The government is making it seem like this change is one of the biggest, most monumental changes that's happened to make housing more affordable for people, but all the government's doing is giving a massive tax preference to people at the highest income levels. For some reason I'm surprised that Conservatives are the only ones asking questions about who those people are. I look forward to the answers we get back from the department on what the median income is of these 13,000 people over five years, but I can tell you that data from StatsCan suggests that the only people who are able to max out their RRSP contributions on an annual basis for any consistent period of time such that they could build up $60,000 in that plan are people who are taxed in the highest tax bracket. It's the highest income earners who are going to benefit from this, so I'm surprised that other parties are not also focusing in on this, but I guess that's just the way it is.
I'd like to ask Mr. Carney as well about the underused housing tax. The government initially said that the underused housing tax will bring in $200 million in year one and then $175 million in every year thereafter. We learned that the government already spent $59 million in administering the tax, including hiring 300 people, but has only assessed—not collected, just assessed—$49 million in penalties. The government is literally spending more money on administering the tax than the tax is bringing in. That's a net negative, and the government believed it originally was going to bring in $175 million a year. In the budget, the government does not adjust its revenue expectations for the underused housing tax. I don't understand how that's not being restated because there is no way, based on the current construct, that the government is going to be collecting anywhere close to what it believed.
The Parliamentary Budget Officer said that it might collect $130 million, but even then it only assessed 49 million dollars' worth of penalties, so that doesn't even include any objections or second thoughts or people who will challenge the assessment to begin with. By the way, the underused housing tax is already layered on top of local municipal or provincial vacant housing taxes, so the government's not actually changing any behaviour with their tax; they're just getting in on the tax game. It's not making housing more affordable or bringing more supply into market because, in these areas where there's already a second tax or an initial tax by a municipal or provincial government, that behavioural impact has already been felt.
When we get the officials back, as part of our 12 hours of witness testimony....
We also find it interesting that OSFI is going to require that pension plans report their assets by jurisdiction. It's very interesting.
Today, we saw the Canada pension plan release its annual statement. It showed, I think, about an 8% overall blended return. This is interesting in the context that the government believes pension plans should invest more in Canada. That's an interesting discussion, but when you look at the CPP's results and the 8% blended return, the assets it held in Canada delivered only a 4.2% return.
In theory, if the government were to require pension plans to hold 100% of their assets in Canada, they would have almost half the investment returns they currently do. It is only going to hurt pensioners if we require these pension funds, by regulation, to hold more Canadian assets.
They may choose to do so if they find the right investment opportunity. I think the government should be more focused on creating an investment opportunity whereby pension funds want to invest in Canada and want to stay here because we've created a climate that will provide appropriate returns. If you're looking just at the CPP results, its Canadian assets returned only 4.2%. Its U.S. assets, I think, returned 8%. Its Latin American assets returned 7%. Europe gave a 4% return.
We also need to be careful about market distortions of pension plans, because what will end up happening is.... Canada, basically, is very highly leveraged to financial services, commodities and utilities, as an example. What will happen is that if pension funds are forced to hold more Canadian assets, first, it will drive up the prices of Canadian assets to potentially distorting levels. Second, because we're not diversified as an economy, the pension plans will be less diversified than they were previously.
I suppose I'm glad the government has not done regulation and is just doing a consultation, but these are some things we should talk about certainly with Mr. Carney, who may have a view on this, given his very extensive experience as a central bank governor in two G7 countries, here obviously and in the U.K.
The budget also talks about the Financial Consumer Agency of Canada and consumer-driven banking. I would question whether the FCAC is the most appropriate organization to be providing more resources to. Why do I say that?
It was shown that during the pandemic, the FCAC received over 2,000 customer complaints about people's interactions with their banks, and it didn't follow up on a single one. I'm not sure that giving an agency that is already struggling with fulfilling parts of its mandate more to do is going to lead to positive outcomes, but it would be great to hear from some witnesses about open banking and the benefits it may provide to Canadians.
One thing we still have not.... Open finance is not payments modernization, which is a whole separate thing. It would enable more competition in the payment space to drastically reduce transaction fees, which would have ongoing benefits for the economy.
In part 4, division 18, page 123 of that large package, this is a section about providing the Office of the Superintendent of Financial Institutions a maximum amount of money that it can be advanced from the consolidated revenue fund. Currently, it looks like the OSFI, as it's often called, can draw or be advanced up to $40 million. The government would like to make that a $100-million draw. The theory is that this $40 million was enacted and has been in place since 1987, and so $100 million is just normalizing that to today's dollars.
I would have a lot of questions about this for OSFI, but as I mentioned in the last meeting, we have not heard from OSFI at this committee in over a year. We have a mortgage crisis in terms of costs and affordability, but there are increasing delinquency rates, although not at crisis levels yet, and OSFI still seems to be ducking the committee. We have lots of questions for OSFI. Hopefully we'll have it back here someday.
I would like to know why OSFI requires an extra $60 million to draw upon from the consolidated revenue fund. OSFI has been, I'll just say it, a rogue agency. It has been growing and growing and growing and growing. It has been doing things well beyond its mandate. It has taken some very hard-line positions. Its positions also run counter to the government's own positions. It's been growing its head count substantially. For example, a few years ago, as I think I mentioned the other day, it had three or four people working in its climate change division, and now it has 30. Climate change does not appear anywhere in OSFI's mandate. It spent time working with the Bank of Canada.
In fairness to OSFI, it has to be aware of climate risks, no doubt, as that poses some threat to financial institutions or more importantly, insurance companies. Of course they should be aware of it. However, the fact is that they have 30 people now working on that file when you have Canadians who've been addicted and fed significant amounts of debt from financial institutions. There's rampant mortgage fraud—I give OSFI credit for actually calling out mortgage fraud—but they haven't, other than asking the government to do something about it, done anything about it themselves. Presumably mortgage fraud represents at least in the short term a much more imminent risk to the financial system, especially as people are renewing mortgages or are maybe unable to renew mortgages.
I mentioned that their decisions are running counter to the government. You can have two kinds of mortgages in this country, at least with respect to insurance: uninsured mortgages and insured mortgages. Uninsured mortgages mean that the borrower puts down more than 20% of the total value of the home. They are not required to have insurance when they take out that mortgage. Uninsured mortgage holders are required to have mortgage insurance, default insurance, such that if the borrower defaults, CMHC or one of the other insurance companies will provide insurance to the lender.
The government actually agrees with what it has done. It said that if you have an insured mortgage, when you come up for renewal, you can shop your mortgage around to get the lowest mortgage rate without having to redo the stress test. That makes sense. It promotes competition. It might help somebody get 20 or 30 basis points off a mortgage if they're able to shop it. OSFI has not agreed to implement that same rule for uninsured mortgages. For the life of me, I can't understand why, for two reasons.
First, primarily by definition, an uninsured mortgage holder is less likely to default because they have significantly more equity in their house than the insured mortgage holder. There's no additional risk of default. In fact, there's much less risk of default. This is something I would like Mr. Carney's view on. He would have a very specific view, because he sat on the SAC, the senior advisory committee, as governor of the Bank of Canada and as Finance's representative, I understand, when he was in the Department of Finance. He would have talked about financial stability. He was the chair of the Financial Stability Board.
I would like to understand why OSFI is limiting Canadians' ability to shop a mortgage around when there's no real risk to the system in allowing this to happen. It means banks will then have to compete for the business. By doing so, consumers will have more options to get a lower interest rate. What we are seeing right now are bank retention rates for customers being the highest they have ever been. That means people are not shopping around. They're unable to shop around, because they have to go through the stress test. The stress test is not just signing one piece of paper and you go through the stress test. It's getting a significant number of documents together and submitting them for follow-up questions, such as T4s and notices of assessment from the CRA. By the way, that's another point in time where mortgage fraud and the doctoring of documents can happen. OSFI is ignoring the government's own policy decision.
It is also ignoring the Competition Bureau's recommendation to allow uninsured mortgage holders to shop a mortgage without having to do a stress test. The Competition Bureau wrote that recommendation, and OSFI even wrote about why it's been declined. It didn't really make much sense. You could put some guardrails around it, especially if a borrower—or borrowers, I should say, if there are multiple individuals—has been making payments on time and is still on the same amortization schedule. After five years, they have that much more equity built up in the home. By definition, as we just talked about, uninsured mortgage holders have at least 20% equity in the house because they put at least 20% equity down.
It absolutely blows my mind that OSFI is forcing less competition in the banking sector and forcing people to pay higher rates when they've been asked specifically by the Competition Bureau. The government has taken a policy decision for insured mortgage holders that gives them that relief. The government has allowed, frankly, the creation of two classes of mortgage holders. What's going to end up happening is that the uninsured mortgage holders, because they cannot leave their bank, will end up subsidizing the competition that happens for the insured mortgage holders.
It's a complete perverse result when the clients with lower risk end up paying higher rates for these mortgages.
We asked the Competition Bureau and, actually, we also asked FCAC whether they have the ability to check the mortgage rates of insureds and uninsureds because they should be monitoring it.
As an aside about the Competition Bureau, I'm curious—I'm going to write a letter to them—as to whether the Competition Bureau has powers to do market studies where the government has implemented subsidy programs. For example, with the green energy retrofit program, I wonder what's happened to the price of heat pumps since the government decided to subsidize them. The government in its infinite wisdom thinks it's a great idea for everyone to have a heat pump. Okay, sure, let's agree. How will we accomplish that?
The government's choice has been to allow the customer to pay. The customer has to fill out a bunch of paperwork. By the way, it takes a significant amount of time to do this. Then the government will approve or disapprove your installation and then send you a rebate for a certain amount of the price of the heat pump.
Not only does it create a lot of bureaucracy to implement this program—for which there are tons of administrative costs—the government is spending way more on heat pumps than it probably could.
What if, in an alternate universe, the government said that it was going to buy 300,000 heat pumps? It went to the manufacturers of the heat pumps and said, “Great news. We're in the market to buy 300,000 heat pumps. We're going to make you compete to sell the heat pumps to us for a discount.”
Instead, we subsidize the total amount. We see this all the time. We've seen this in the U.S. with the subsidies for electric vehicles. Guess what happened to the price of electric vehicles when the subsidies came in. Yes, they increased.
What's the government doing? The government's actually just paying more to corporations, which, by the way, are price gouging.
I would think my NDP colleagues would be interested in trying to figure out—we talk about price gouging in other circumstances—why we are not talking about, when the government decides to subsidize a product or a program and subsidizes the purchase of something, what actually happens to the price of that thing once the government implements the subsidy.
I can tell you there is example after example of the price of the thing, whether that's an electric vehicle or the heat pump, going up. Now, some of that might be related to supply chain issues, no doubt, but I'm wondering whether the Competition Bureau has the powers to conduct market studies. If the government is making all these monumental changes to Competition Act, maybe we should consider putting that on the table as a power that the Competition Bureau should have, if it doesn't have it today.
Now I'll turn to the measures related to public debt and the borrowing of money, which is division 40 of the bill. The Financial Administration Act provides the Minister of Finance's authorities related to public debt and the borrowing of money. The FAA provides authority for the minister to enter into any contract or agreement for the purpose of carrying out this role. There's a risk the minister's authority to enter into public debt-related goods and services contracts could be viewed as subject to procurement restrictions.
In division 40, proposed section 4 amends the Borrowing Authority Act to increase the maximum borrowing authority permitted under the act. It would amend the FAA to clarify the exemption of public debt-related contracts from the procurement regulations.
The maximum borrowing amount was set at $1.8 billion in May 2021, and the 2024-25 debt management strategy released as part of budget 2024 estimates a debt stock of $1.789 billion by the end of the fiscal year. The current maximum is $1.8 billion, and the government's own numbers are putting the total debt stock at $1.78 billion, which is very, very close.
We've reached $1.8 billion far faster than we ever expected to for multiple reasons. Obviously, the big one is that the government is continuing to spend at a much higher level. It spent much more during COVID, frankly, than it needed to. What did the Parliamentary Budget Officer say? Wasn't it that 40% of the spending during COVID wasn't actually on COVID? Even Mr. Carney suggested that pandemic supports went on longer than they needed to. That would also be another wonderful question to ask the governor.
The other issue is that the government negligently borrowed money at the short end of the curve during COVID such that 60% of the borrowing of the government happened in notes that had maturities of three years or less. When the governor of the Bank of Canada at the time said that interest rates would remain “low for a long time” but weren't going any lower, the government did not lock in low rates.
This cost the government money by not locking in low rates. There's no question about it. However, to be fair, because the Bank of Canada was purchasing most of the debt, if the government had issued longer-term notes and the Bank of Canada was the only purchaser of that debt, then the Bank of Canada losses we're seeing today would be much higher, which is also a reason why QE, quantitative easing, was a really bad idea.
Now, I'm not an absolutist, in the sense that we should have some flexibility. In the very early days of COVID, when the Province of Newfoundland, I think it was, did a bond issuance and it went no bid, the Bank of Canada had to step in to keep a functioning bond market happening. However, when it was clear that the government's fiscal plan was incredibly stimulative, the bank enabled that government spending by not requiring the private sector to absorb most of that debt. What would have happened is that the private sector would have said, “You're borrowing too much money. We're going to demand a little bit more of an interest rate for that.” That might have curtailed the government's spending decisions. That's how markets work.
For all these individuals out here—and I see the Twitterverse is full of experts, obviously—this notion that there was no market for long-term notes is complete baloney. Mexico issued long-term notes. The government of Austria issued a 100-year note, and other countries didn't engage in QE, Switzerland being a notable example.
By the way, what's the inflation rate in Switzerland? It barely ticked above 2.5% for the entire last three years.
The government is claiming some kind of victory, because inflation has been below 3% for four months. We've had 44 months of inflation over 3%, and we've had four months of.... Maybe it was not quite 44 months, but probably at least 42 or 43 months. Four of those months had inflation below 3%, and the rest of them had inflation well above 3%. The governor of the Bank of Canada said in his owns words that high interest rates hurt vulnerable Canadians the most.
Even if inflation were to drop to 2% today, even if inflation were to drop to 1% tomorrow, that would not mean prices would go down. All that means is prices stop going up. All of the pain that we see in the economy with affordability today will remain. Things won't be getting more affordable. The prices will just stop going up, which means people won't be getting relief.