Finance Committee on Jan. 31st, 2022

[Greg McLean, Conservative, Calgary Centre, AB]

I see Mr. Chambers is temporarily out of the room. If we could trade spots, I think that's the best way forward.

[The Chair, Liberal, Peter Fonseca]

Mr. McLean, go ahead.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

Thank you for the comments today.

I echo my colleague, Mr. Ste-Marie's, concerns that we're only having the Parliamentary Budget Officer here as part of a mix of witnesses when we should have him here for one full meeting. Perhaps we'll have a motion on that to make sure we get to ask him some thorough questions.

I'm going to ask the people on the Green Budget Coalition about their comments on things like “inefficient fossil fuel subsidies”. I would like to know an example from them of an inefficient fossil fuel subsidy in place right now and that we should address, please.

[Vanessa Corkal]

I'll go ahead.

Our institute regularly compiles inventories of fossil fuel subsidies. Those are available on our website. We did one for 2018-19. We also did one after COVID.

We identify a number of measures in those documents. Some of them are direct spending programs and many of them are tax measures. I'll focus on the tax measures because we don't have a lot of information for those, and a report from the PBO earlier this year estimated that several billions of dollars are potentially being forgone by government per year.

These are types of subsidies that we would classify as inefficient. We argue that they're a poor use of public money primarily because they enable increased production of fossil fuels. We know we need to be reducing the production of fossil fuels if we're going to meet our 1.5°C target. That's what the evidence from the IPCC and the IEA reports shows us.

[Greg McLean, Conservative, Calgary Centre, AB]

Sorry, I didn't hear a direct response from you about an actual program where we're funding fossil fuel subsidies. Can you give me one in 15 seconds or less, please?

[Vanessa Corkal]

Sure. A good example would be some of the tax measures that we see from the federal government. The Canadian development expenses would be one example. There's also—

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

Canadian development expenses don't exist in the Canadian fossil fuels industry. They haven't for quite some time. As a matter of fact, Catherine McKenna stated very clearly that fossil fuel subsidies do not exist at the federal level in Canada any more. I think you need to update your facts on that.

We are looking for where we can actually do this. I will point out that fossil fuel production does not lead to actual greenhouse gas increases. Consumption is the actual problem. The more we penalize Canadian producers, the more we're getting an offshoring of jobs and pollution.

We're trying to lead to an industry here in Canada. Can you tell me how you think we're going to do that if we continue to throw money at subsidizing foreign producers of oil and gas?

[Vanessa Corkal]

For the first part of the question, we're also advocating for reduced subsidies for foreign producers by asking the federal government to eliminate international public finance for fossil fuels.

The second thing is that regardless of the term “subsidy”, the reality is that the market is moving towards a clean energy industry here and internationally. In order to best support Canadian workers and businesses, we should be investing in industries that help support our net-zero goal and that also allow us to develop and compete internationally. There's a large risk of stranded assets if we continue to provide support for fossil fuel production. I'm happy to go into more detail—

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

Yes, I'd love some detail because stranded assets are a manufactured narrative. We're actually not stranding any assets. We're actually penalizing our assets here in Canada for the sake of foreign producers, because we don't see the reductions happening anywhere else around the world.

I'll remind you that greenhouse gas emissions are a worldwide problem. There are 280-plus plants being built to burn coal in Asia because we have penalized our natural gas producers by not allowing them to get LNG offshore to abate the consumption of coal. These are not subsidies. These are efforts that we need to be making to abate carbon production around the world, yet we seem to be standing in the way with all kinds of narratives around how we're subsidizing an industry that we're actually moving forward.

I'll point out that Canadian oil sands producers have reduced their carbon footprint by over 36% in the last 20 years. This is significant on a worldwide scale. If the rest of the world moved in this direction, we'd be much further ahead.

Let's talk about COP26, if we can, and the commitments we made there.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. McLean. That's your time.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

[The Chair, Liberal, Peter Fonseca]

We'll move to the Liberals and Mr. Baker for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you very much, Mr. Chair.

My thanks to all the witnesses for joining us today. I would first like to speak with Mr. Milliard.

Mr. Milliard, recently, you wrote this about the transformation in the labour market: “It is also estimated that we do not know about 85% of the jobs that will exist in 2030.”

Can you tell us how the government can ensure that Canadians and the country's employers will be ready for that transformation?

[Mathieu Lavigne]

Good afternoon, Mr. Baker.

Mr. Milliard had to step away for a few minutes. So I will take over and answer that very good question. It brings us back to something we discussed previously: continuing education. The real problem, as you say, and as has already been mentioned, is that we do not know about the jobs of tomorrow. If we did know about them, we would be preparing for them already. The challenge for workers is to hone their skills and their tools all through their careers so they can become comfortable with new technologies and new techniques. In that way, when new jobs appear in emerging sectors of their industry, they have the flexibility they need to adapt to them. That is why we are proposing a voluntary savings scheme for continuing education. In French, the acronym is RVEFC.

At the moment, as you know, there is a tax credit for continuing education. Of course, tax credits are better than nothing. However, we prefer a program that is a little more structured to send a powerful message. Employers and employees could make voluntary contributions, which would give them access to funds for continuing education all through their careers.

Mandatory or voluntary programs already exist for all kinds of things, like retirement or studies. In the same way, we could set up a more structured system for continuing education. The federal government would then be sending a strong message to employers and employees, that continuing education is the key to the jobs of the future.

I do not want to get into the technical details of the program we are proposing, because we discuss them in our brief. But that is basically the vision that we would like to see us all embrace.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you, Mr. Lavigne.

I will read what you wrote so that I understand the details better. But, beyond what you have just said, do we need to do something else, rather than continuing education only? There is also training at the start of a career, when people are still very young and still studying. It would better prepare them for the changes in the economy, as you were saying, and for the new requirements that workers will have to deal with in the coming years, requirements that we still do not know about.

[Mathieu Lavigne]

Yes, indeed. We at the FCCQ are working with the Department of Education in Quebec, so that the school curriculum aligns as much as possible with the skills that workers will need in the future.

As for the federal government's role in that, there are jurisdictional challenges in Canada. The government's role could be more financial, but it could also take more concrete measures, as it did when it established the Student Work Placement Program. The program is currently being made more flexible, but that will end on March 31 this year. We are therefore proposing that the flexibility be extended for two years.

As you say, apart from continuing education, we need to act right from the time that the students are given placements. This is because we are heading more and more towards training in the form of placements, that is, with actual work. That has two advantages. The first is for students, who gain specific skills in the workforce, but the second is for employers. Given the labour shortage, they can bring interns into their businesses right away. They often offer those students jobs shortly after their placement, because they already know that they have the skills and the motivation. So it is a win-win situation, for employers and for workers.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you very much, Mr. Lavigne.

Thank you, Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baker. That is your time.

We are moving into our third round of questions. I have the Conservatives up first.

Will it be Mr. Chambers or Mr. McLean?

[Adam Chambers, Conservative, Simcoe North, ON]

I'm back in the room, Mr. Chair. Thank you very much for your indulgence earlier.

[The Chair, Liberal, Peter Fonseca]

Welcome back, Mr. Chambers. You have five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

Mr. Giroux, thank you for being here. I would love to see you come back for an extended period.

I want to spend a couple of minutes talking about fiscal responsibility and perhaps the benchmarks we look at. In 2015 we were told by the government that the budget would be balanced in four years. Then we were told that we should be looking at a declining debt-to-GDP ratio. Then it was suggested by the government that we should really be concerned about debt service costs. Now it's unclear, I think, to the market what measures this government is using to determine when it would remove its foot from the gas pedal or from increasing stimulus spending.

With the labour market where it is currently, this government claims that we've recovered most of the jobs from the pandemic. The government also likes to point to strong growth in the last half of this year and a strong growth outlook for next year. We heard testimony from other economists at this committee just last week warning against increasing stimulus spending from here forward. Would you agree that there are risks of continuing to spend?

[Yves Giroux]

There are indeed risks from continuing to spend at an elevated level. There are two risks. One is that it risks creating a higher debt-to-GDP ratio. It makes it much more difficult to return to a declining debt-to-GDP ratio. But that also depends on the state of the economy. If the economy grows even faster, the debt-to-GDP ratio can continue to decline, even with what would normally be higher levels of deficit. The other risk is that when demand is strong and labour markets are already working at full capacity, when we have full employment, as a few of the other witnesses, notably Monsieur Milliard, talked about, then there's labour scarcity. That can lead to inflationary pressures, notably on wages and salaries. That can be transferred into prices in general.

These are the main two risks. I don't want to spend too much time responding to that, but inflation and the risk of slower debt-to-GDP ratio declines are the two main risks.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

So just to confirm, on a simple basis, on a go-forward basis, additional government spending would have inflationary pressures on the economy at large—potentially.

[Yves Giroux]

There are indeed risks. It depends on the type of spending. If it's spending that does not create additional productive capacity and it stimulates demand, it can lead to inflationary pressures, yes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

Have you or your office done any analysis on when the federal government would balance the budget, holding all things equal?