Finance Committee on May 22nd, 2024

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

I have a point of order, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

I'm listening, Mr. Ste‑Marie.

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

I would like to share some information with my honourable colleague.

Obviously, if the people tuning in to the committee meeting have this information, they can pass it on to him, since he provided his email address.

However, I would like to remind him that the research service of the Library of Parliament provides outstanding service to all members of Parliament. I'm sure that, if he makes the request, he'll have the answer to his question within a few weeks.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

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

I believe I have actually asked them, but I will ask again.

That's a great point.

I have not been able to find it, and so I will ask the library. I will keep everyone updated too. Who knows how long I'll have the floor? Maybe in a couple of weeks I'll still have the floor, and we can give an update going forward.

Thank you very much for that point.

I'll continue reading. We'll start at “The stock”. I know I'm repeating, but it's just to make sure we don't miss anything.

It says:

The stock of non-residential capital [investment]...to the labour force peaked in the last quarter of 2015. By the first quarter of 2022, every type of capital was below that peak. Only engineering construction did not begin to decline shortly after 2015. It continued to grow through 2021, and its stock per available worker was down a comparatively small 1 percent by the first quarter of 2022. The stock of non-residential buildings per available worker fell between 2015 and 2020 before growing in 2021. The stocks of [intellectual property] and [machinery and equipment] per worker have been falling quite steadily since 2014.

I'll just pause there for a second.

There is an interaction between government spending and capital stocks as well, although, as the authors point out, it's far less clear than private investment. As any Keynesian would tell you, generally if there's expansionary fiscal and monetary policy, which there certainly has been over the last nine years—we've seen record deficits, record debt—you would actually expect productivity to increase, simply because the government is making substantial investments. They're in effect mortgaging the future for these. Because they're spending these dollars, you would expect at least a small uptick in productivity and in capital investment. The government is taking resources from the private sector and from future generations through borrowing, and employing them in the economy. In fact, it's absolutely essential that this happens; otherwise, you are shortchanging future generations, because we're spending this money but not getting any return back.

In fact, I was at Port Hope High School, and I told them, “Here's the reality, guys. We have a debt of $1.4 trillion. The reality is, given my likely lifespan, I will not be paying back a large portion of this debt in my life. However, you guys will, and eventually this will come to a head. Any time you talk to any politicians, I would highly recommend you ask about climate change, because I think it's important to have an environment, but the second question I would ask of nearly every politician would be how they are going to pay down this debt so that we don't get stuck with it”, because that's exactly what's going on right now.

It continues:

The declines in the stock of [manufacturing and equipment] and [intellectual property] per member of the workforce are particularly worrisome. Past research has identified [machinery and equipment] investment as particularly important for productivity growth—

The author cites several articles there.

—[Intellectual property] investment is a plausible indicator of Canada's likely future performance in a world where intangible capital is increasingly important.... Whatever special messages the recent [machinery and equipment] and [intellectual property] numbers may convey, the message from stocks of business capital overall is clear: the average member of Canada’s labour force began 2022 with less capital to work with than she or he had in 2015.

The interesting part is that while it's certainly not apparent to me that our Liberal Party elites get that, and even some of the folks on Bay Street don't seem to have figured that out, do you know who gets that? They are the workers on the factory floor.

Go to a factory nearly anywhere in your community and bring up Pierre Poilievre. I guarantee that you will get an incredible amount of support. You could do the same and mention Justin Trudeau, but you might want to have some earmuffs on or something, because some of the language you'll hear will likely not be appropriate.

They get it. They get it, whether intuitively or they've done the research and reading themselves. They are not being invested for. They are not being taken care of. They are not being dealt with fairly by this government, and the result is lower levels of investment and productivity. Oligopolies are getting wealthy. Some businesses are doing all right, but workers are getting the short end of the stick, and they realize it.

I would be embarrassed if I were a New Democratic Party member, because they're supposed to stand up for the workers. It's not just a fluke. It's not just because the leader of the official opposition is a great communicator, which he is; it's because there's a truth that's being revealed that the NDP and the Liberals don't care about Canadian workers, because if they did, they would immediately start putting in policies and procedures and tax policies that ramp up capital investment so that our workers are given a fair deal, because they can't earn the wages that they should earn without proper amounts of capital investment.

Our federal government is failing. These Liberals are failing to put in place the policies, and the NDP sign on to this. It's embarrassing to their legacy. It truly is.

I try not to speak that strongly, especially about my colleagues. I know that their hearts are all in the right place, but the reality is that the most vulnerable are going to food banks, and Canadian workers are getting the short end of the stick.

I'll just use unparliamentary language. If they want to do a point of order, they can. Canadian workers are being screwed.

I'll continue reading:

We would like to compare Canada's capital-stock numbers over longer periods and against comparable numbers abroad—

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I have a point of order, Chair.

lf the honourable colleague would love to yield the floor to me, I would gladly take over. I could explain to him and the folks on the opposition side how Canadian workers are way ahead under our plan and how we are moving the economy forward here, not only in Ontario but across Canada.

If you'd love to yield the floor, I'd love to take over.

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

I would—

[Ryan Turnbull, Liberal, Whitby, ON]

I have a point of order, Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Sorbara.

MP Lawrence, you may continue. After that, I have MP Morantz and then MP Hallan.

[Ryan Turnbull, Liberal, Whitby, ON]

Chair, I have a point of order, though.

Standing Order 18 is about order and decorum. I note that the member used offensive words and language. I would just ask him to retract that statement.

Thanks.

[The Chair, Liberal, Peter Fonseca]

Thank you, PS Turnbull. I apologize; I did not hear you.

Are you willing to withdraw those remarks?

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

I'll just withdraw them.

[The Chair, Liberal, Peter Fonseca]

Okay. They've been withdrawn.

Thank you, MP Lawrence.

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

We would like to compare Canada’s capital-stock numbers over longer periods and against comparable numbers abroad. These particular numbers, however, exist in Canada only since 2009, and are not available for many other countries. Comparisons over longer periods and with other countries are easier using a related flow measure: gross business investment. Figure 4 shows the Canadian numbers for the three types of this investment tracked by Statistics Canada and most other national statistical agencies: non-residential structures (both buildings and engineering), M&E and IP products since 1990.

Absent any changes in estimated depreciation and write-offs for existing capital, changes in gross investment should line up with inflections in net capital stock. As the net stock figures would lead us to expect, the gross investment figures show relative strength in non-residential structures before mid-decade along with weaker performance in M&E and IPP.

During the second part of the 2010s—

I assume the author refers to 2015; it's interesting language, but okay.

—investment in structures and M&E per member of the workforce declined, and investment in IPP flatlined.

I'll read that again; that's incredibly compelling.

During the second part of the 2010s, investment in structures and M&E per member of the workforce declined, and investment in IPP flatlined. In 2021, notwithstanding a modest rise in non-residential structures and M&E investment from quarter to quarter — a rise sadly not evident in IPP — the starting point for the year was so low that per-available-worker investment in 2021 dollars in Canada was only about $11,900. That is down one quarter from its peak of $16,000 in 2014—

That's amazing, eh?

—and barely above the 2009 trough of $11,300....

Basically, our investment per worker has flatlined in intellectual property since 2009. Pretty soon we'll have members in the House of Commons who were born in 2009.

We're going to move to the next section here: “Canada’s Performance Against Competitors Abroad”.

The growing importance of intangible assets, and the declining materials intensity of economic activity generally, might mean that the warning signals from weak standard measures of capital formation are less alarming than they would have been in the past. These trends affect many countries, so we look now to see how Canada’s experience compares with that of the United States and other OECD countries with comparable data (those shown in Figure 2). Is capital investment trending similarly elsewhere, or does Canada appear to be on a path toward relatively higher capital intensity, implying relatively higher productivity and wages, or toward relatively lower capital intensity, implying relatively lower productivity and wages?

There's a subheading: “Canada versus the United States”.

Because Canada and the United States collect similar capital investment data, and because Statistics Canada takes particular care to compare Canadian to US prices, we can measure investment per available worker in the two countries with some confidence that we are getting meaningful numbers.

We convert the different types of capital investment into Canadian dollars, using Statistics Canada's measures of relative capital-equipment price levels to adjust for different purchasing power differences in the two countries. Investment goods tend to be less expensive in the United States than in Canada, so using the exchange rate alone in converting US to Canadian dollars would understate the relative bang US companies get per investment buck. Our adjustment provides a better idea of bang per buck spent on structures, M&E and IP products on either side of the border. The results of these calculations are seen in Figure 5, panels A through D.

Canada has an edge in investment in structures (panel A). Canadian businesses, with their relatively greater focus on natural resources tend to invest in more—

See, this is one of the things that's really hurting the productivity, and that's sort of one of the untold stories.

Canada has traditionally invested heavily in natural resources. In fact, it was one of the areas where we are most efficient and effective. Both this government's technical and attitudinal changes from the Harper government gravely impacted that. In many ways, Canadian energy is the golden goose that keeps the Canadian economy rolling. That's the truth. People will deny that up and down, but that is the reality. If you look at the numbers, the Canadian economy would have a significant challenge without Canadian energy and Canadian natural resources.

The report continues:

The gap narrowed sharply after 2014, with lower oil prices and a policy environment in Canada more hostile to natural resource industries—

That's true.

—However, it widened somewhat in 2021, with the rebound of Canadian's non-residential structures in 2021 coinciding with a slackening of pace in the United States.

The comparison in [manufacturing and equipment] investment (panel B), is much less favourable to Canada. While the measure is at an all-time high in the US, investment has been flat in Canada since 2009.

I will pause the text there. I'll get back to the text soon.

I had an individual come to our constituency office on a matter unrelated to his business. He'd been brought over from Europe to head up a manufacturing business in our riding. He was very surprised, I think it's clear to say, at the lack of investment, I guess you would say, in newer equipment.

His similar business in Europe—the business he came from to take over the plant here in Canada—was using equipment that was 20 years or 30 years newer. He was fortunate because, like me, he wasn't the youngest man in the world, so he had actually used some of this equipment very early in his career, but he was really surprised.

Unfortunately, I think it is the case too often that Canadian workers are being undermined by not being given the appropriate tools. Of course, there's the old adage of sharpening your saw. If you spend the time to invest in your tools, if you spend the time to maintain your tools, you'll be able to be more efficient and more effective.

We'll continue on:

The comparison in [manufacturing and equipment]...is much less favourable to Canada. While the measure is at an all-time high in the US, investment has been flat in Canada since 2009. US businesses typically spend more per worker on such investment, and the gap has widened over the past decade. The gap in 2021 was $6,300.

The IP gap (panel C) is worse yet. Since the mid-2000s, Canadian businesses’ spending on these products has been in a narrow range around $2,000 per available worker, while the US figure has risen from around $3,000 to more than $8,000. Some of this difference reflects slumping exploration expenditures by Canada’s struggling resource sector. To the extent this growing gap reflects greater use by Canadian businesses of information technology owned abroad, its implications for productivity are ambiguous. Reliance on foreign-owned technology might be simply a smart business decision, or it might reflect Canada’s lack of competitiveness in commercializing its own IP, leading to lower accumulation of IPP by Canadian firms.

Looking at the three types of investment together (panel D), we see that business investment per available US worker has exceeded that in Canada since the 1990s. The gap narrowed in the 2000s but widened markedly after the mid-2010s and has widened further during the pandemic. The US recovery from the pandemic has been better than the Canadian recovery: in 2021, business investment per available worker rose 9 percent in the United States versus only 3 percent in Canada.

The gap between gross investment per available worker in the United States and in Canada was almost $11,000 in 2021. Such a large amount represents a significant shortening of the replacement and upgrade cycle for a piece of capital equipment such as a truck or an excavator, a major upgrade of health and safety in a workplace, or a complete replacement of many [offices'] entire information and communications technology.

Asking how many cents of new investment per available Canadian worker occurs for every dollar of new investment per available US worker yields a summary comparative measure. In Figure 6, we show our measure of investment in Canada per dollar of its US equivalent in total and in each investment category.

Canada’s relatively robust rate of structures investment stands out in Figure 6. The surge to the 2013 peak—when each available Canadian worker was getting more than $1.60 for every dollar of new structures enjoyed by her or his US counterpart—is striking. So is the subsequent decline to less than $1.25 in 2019. In this category, at least, the 2020 and 2021 comparisons are positive for Canada, with the average member of the Canadian workforce receiving $1.35 of new capital for every dollar received by the average member of the US workforce in 2021.

Not so in M&E. After improving from fewer than 60 cents around the turn of the century to close to 70 cents around the time of the 2008–2009 financial crisis and slump, the amount of [manufacturing and equipment] investment per member of the Canadian workforce per dollar per member of the US workforce dropped to a dismal 37 cents in 2021.

Wow. That's a shocking number. I'll read that again, because I think it's critical:

the amount of [manufacturing and equipment] investment per member of the Canadian workforce per dollar per member of the US workforce dropped to a dismal 37 cents in 2021.

The situation with IP products is even worse. A steadily declining trend since the mid-2000s has taken us to the point where the average member of the Canadian workforce in 2021—

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

It's past 1:00. We're suspending. I'll see everybody next week.

[The meeting was suspended at 1:01 p.m., Thursday, May 23]

[The meeting resumed at 11:43 a.m., Tuesday, May 28]

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to the continuation of meeting 143 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 108(2), the committee is meeting to discuss Bill C-69, an act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.

Before we begin, I ask all members and other participants to consult the cards on the table for guidelines to prevent audio feedback incidents.

Please take note that the following preventive measures are in place to protect the health and safety of all participants, including the interpreters: Use only an approved black earpiece. The former grey earpieces must not be used. Keep your earpiece away from the microphones at all times. When you're not using your earpiece, please place it face down on a sticker placed on the table for this purpose. Thank you all for your co-operation.

Today's meeting is taking place in a hybrid format, pursuant to Standing Order 15.1.

I will make a few comments for the benefit of the members. Please wait until I recognize you by name before speaking. For those on Zoom, please use the “raise hand” function. For those in the room, just raise your hand. The clerk and I will manage the speaking order as best we can, and we appreciate your understanding in this regard. I remind you that all comments should be addressed through the chair.

As we get back to where we were the last time, members, we have a new permanent member at our committee. Francesco Sorbara, the fine member from Vaughan, has joined us—

[Some hon. members]

Hear, hear!

[The Chair, Liberal, Peter Fonseca]

Welcome back, I should say, Francesco, because you were a long-time member of this committee.

I see a hand up. Go ahead, MP Hallan.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Chair, I ask for unanimous consent to suspend for probably 20 or 30 minutes so that we can finalize discussions on the motion.

[The Chair, Liberal, Peter Fonseca]

I believe we have unanimous consent. That's great. We're suspended.

[The Chair, Liberal, Peter Fonseca]

Members, we're back.

PS Turnbull, I see your hand up.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you, Chair. Thanks for your indulgence and giving us a short suspension to work out an agreement together. It is very good to see that we've been able to reach, I think, consensus—what I hope is consensus.

I would first ask, Chair, for unanimous consent of the committee members to withdraw the motion on the floor and then move a motion afterwards.

[The Chair, Liberal, Peter Fonseca]

You do have unanimous consent for that.

(Motion withdrawn)

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you. I would like to move the following motion:

As it relates to the committee's future business, including the study of Bill C-69, it be agreed:

I. That meetings in the week of the May 28 and future meetings be dedicated to hearing from witnesses regarding the bill for no fewer than 12 hours and that the clerk invite Mr. Mark Carney as a witness to testify with respect to the 2024 budget, the economy and the environment for two hours;

II. That any amendments to the bill be submitted to the clerk no later than 11:59 p.m. on Friday, May 31;

III. That clause-by-clause consideration of the bill start no later than 9:00 a.m. on Tuesday, June 4, and that during clause-by-clause consideration, all clauses which are subject to no amendment be considered and voted on first, followed by all clauses with amendments for consideration; and that if the committee hasn’t completed clause-by-clause consideration by 5:00 p.m. on June 4, all remaining amendments submitted to the committee shall be deemed moved, the chair shall put the question forthwith and successively, without further debate, on all remaining clauses and proposed amendments, as well as each and every question necessary to dispose of clause-by-clause consideration of the bill, as well as all questions necessary to report the bill to the House;

IV. That following the completion of the study of the bill, the committee dedicate future meetings as follows:

Two meetings on money laundering;

Two meetings on its study on the Policy Decisions and Market Forces that have led to Increases in the Cost of Buying or Renting a Home in Canada; and

Two meetings on its study on Inflation in the Current Canadian Economy.

That has been sent around to the clerk in both official languages so that it can be circulated.

I understand that all parties were involved in the discussions that led to this, so I want to thank everybody for their efforts to reach an agreement and to move past a bit of an impasse that we had for a while. It's really great to see the committee working collaboratively.

There are a couple of other things I want to put on the record in terms of the impacts of this, Chair. One is that the committee members agreed that it would be great to hear four hours of witness testimony on Thursday, Friday and Monday, with preferred times being 10:00 to 2:00 on each one of those days. That was the preference.

I would also like to say that the witness list would be submitted today. We would try to complete that so that invitations could potentially go out today, and witness testimony would then start on Thursday. We realized as we discussed this that the timelines are pretty condensed and that we need to get those invitations out as soon as possible to hear from witnesses.

I think that's all I was going to say, and I just want to say thank you again for everyone's collaboration on this.

[The Chair, Liberal, Peter Fonseca]

Well, thank you, PS Turnbull.

On the witnesses, the clerk will do their best. Of course, it's a very short time to be able to bring in witnesses, but we'll do the best we can.

Are there any others?

Go ahead, MP Chambers.