Finance Committee on Oct. 3rd, 2024

[Adam Chambers, Conservative, Simcoe North, ON]

I was also at the INDU meeting this morning. In my free time, I like to travel around and watch other committees. I heard the same quote. How does it make you feel when you hear a minister say what he did?

Then also, you look at SR and ED, as you just mentioned, or the amount of money that we subsidize to foreign multinationals in the electric vehicle battery sector, but they're putting higher taxes on Canadian companies that are based here and trying to grow.

[Benjamin Bergen]

I'll remove feelings on this one. I think we just need to look at the reality.

To quote William Blake, execution is the chariot of genius. What we've seen from this government over the last 10 years is an inability to execute.

Looking at various programs, whether it be things like superclusters, which were downgraded to clusters, the creation of the Canada Innovation Corporation or the economic tables, this is really a government that has truly struggled to understand where the 21st century economy is going.

I think the last remarks of a minister to blame innovators for their inability to deliver is an indication that the government has lost the plot and truly indicates real challenges going forward in terms of how we are going to get ourselves out of these challenges economically so that we can pay for housing, pay for transit, pay for health care and pay for arts and culture.

I would turn it back, really, on the minister to say, “Show us what you've accomplished, show us what you've done”, and then we can talk about who has ambition and who's able to actually deliver.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Now it's over to MP Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to say a huge thank you to Sheila and Sydney for being here to talk about basic income. My colleague asked excellent questions. I think you know I'm very supportive, so I'm going to just say thank you for coming. Your recommendations are very clear.

I also want to say a huge thanks to Patricia Tessier. You gave a great presentation. I'm a huge believer in what you have said. We have to give far more money to our non-profits and co-ops. My colleague Joanne is going to ask a few more questions of you, but I also want to say we have to do far more to protect existing affordable housing stock. We are seized with this right now, and it's something I'm very much working on.

With whatever time I have left, I want to direct my questions to the Council of Canadian Innovators, which provided very biting testimony today. I think you both know I'm a very big supporter of the vast majority of recommendations that you've put forward. I didn't hear my colleagues' testimony this morning, but I know that we very much believe in innovators in our country and we have great confidence in them. We think we have the smartest, brightest innovators, and I agree with you. There's even more we can do to help support them.

The first thing I want to ask about is your procurement. I almost want to blow our whole procurement system up, and part of the reason is that not only do we have excellent innovators but I also think we have a small business economy. Therefore, I would like both our innovators and our small business economy to be able to tap into our procurement.

The thing is that it seems like such a big beast. How do we get started? In terms of the first step or two, what would be your recommendation?

[Benjamin Bergen]

If our comments are viewed as spicy or fiery, it is just an indication of where we are as a country. If our economy had grown over the last decade similar to places like Denmark, the United States or Australia, there would be an additional $500 billion in our economy each year, which would probably be more than enough to pay for the housing requests that we've seen put forward at this committee, for arts and culture or, potentially, for a basic income.

Therefore, getting innovation right and getting the 21st-century economy right is critical. We have a revenue problem in this country, and the people we work with are revenue generators, so figuring out ways to support them is critical.

I know the minister does support innovators in terms of his language, but when he goes to committee, it is truly troubling that is his framing.

On the procurement piece, I will kick it over to Nicholas to tackle that, because there is a real opportunity here for the government to do something transformative. It's going to take time, but there's an opportunity.

[Nicholas Schiavo]

Thanks, Benjamin.

Thank you for that question, MP Dzerowicz.

If I could offer the committee one top-line, concrete recommendation to start to move the log jam, it would be to create a dedicated fund for technology procurement that departments could use when they need quick, innovative solutions. The idea behind this fund would be to reduce risk aversion, support ongoing product development with firms and with suppliers, and focus on key areas that are strategic both for Canadians and for the government. Think about things like energy, health care, clean tech and cybersecurity.

Ideally, this fund, which can be modelled after international examples like the SBIR, would have a simple, fast application process. It would be focused on collaboration. It would build capacity within the public service, and it would offer financial incentives for departments to take risks.

If I can take a step back, I think there is a fundamental misunderstanding of what procurement is or should be in the federal government, and this is shared across governments of all stripes going back decades.

Procurement is not a silo just to get things; it is 15% of our GDP. Every single year, the federal government and governments across the country are spending billions of taxpayer dollars on everything from pencils to software to fighter jets, but we are not doing it in a way that is strategic. Other advanced economies understand that they can use procurement not only to deliver services for their citizens but also to grow their economies and play to those domestic firms where there are strengths.

It is a bit of a cultural shift in terms of procurement in this country. Simply put, procurement done well is prosperity for Canadians, so I hope we can see some of that change.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

Very quickly, because I know I've run out of time, I just want to say that I read through your recommendations, and I do think that a lot of Canadians do not understand that the shift of value to intangibles is under way and has been under way for a while. You have made recommendations around making sure that we have clear performance indicators and explicit measurements around prosperity and growth for our foreign direct investment. As a follow-up to our committee, could you provide some suggestions of what those could be? That would be really helpful.

I know I've run out of time, Mr. Chair, but I want to thank very much all the witnesses today for their excellent presentations.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

If you can allow those to come to committee, that would be great.

MP Ste-Marie is next up.

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

Thank you, Mr. Chair.

Mr. Duceppe, the reform of the employment insurance scheme was promised long ago, and consultations were held; this was in the mandate letters. The date that had been announced was pushed back, but now we have radio silence.

Can you remind us of the importance of this reform and the reason why it is urgent that it be carried out?

[Yvan Duceppe]

This reform is urgently needed for the following reasons.

The money that a person receives from employment insurance is not a very high income. Often, people who receive employment insurance are seasonal workers such as forestry workers: people who plant trees, which are sometimes burned down by forest fires. In Canada, trees can't be planted year-round. Depending on the season when a person is able to work, it may be that they have not accumulated enough hours of work to receive unemployment and support themselves. This is the infamous “black hole” in employment insurance. This problem, which affects a number of people, needs to be fixed.

That is not all. As I said, the threshold to qualify for employment insurance is set at 720 hours of work, but that threshold does not take into account the fact that some people only work part‑time. When you work 35 or 40 hours a week, it is not too hard to accumulate 720 hours of work, but for people who work only one or two days a week, it is harder. In my opinion, the number of hours required should be adjusted and the number of weeks worked should be considered. This would ensure that these people qualify for employment insurance. I think this is important.

The last point relates to the types of benefits. Often, people who receive other types of benefits, who are often women, unfortunately, are not able to receive employment insurance, and this creates a degree of economic insecurity. Obviously, we have to avoid excluding people insofar as possible. There are unfortunately too many exclusions. People who live in the Gaspé, on the north shore and in the lower St. Lawrence are asking the federal government, despite its promises, to understand the problem and support them. These people really need this income.

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

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

We'll now go to MP Davies, please.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

Ms. Tessier, I think the housing crisis affects every community and every demographic from coast to coast to coast, but I think we can all acknowledge that there's an acute need among our indigenous, Métis and Inuit communities.

I note in your pre-budget submission that you write, “Budget 2024 committed $4.3 billion over seven years to co-develop an Urban, Rural, and Northern Housing Strategy. Implementation of this funding is urgently needed, led by the Indigenous housing sector.”

Could you elaborate on what you see as the key components of that strategy?

How do you believe that funding might best be allocated?

[Patricia Tessier]

Thank you for the question.

Definitely a key component, as you iterated, was that it's led by indigenous housing providers. For indigenous, by indigenous is a key component to the success, as well as recognizing and ensuring that funding allows for appropriate housing. The needs are different and the cultures are different. Even in a recent conversation about multi-generational living.... It is very common in certain indigenous cultures to have multi-generational living nearby or within, as well as having community gathering spaces. These are just examples of things that are aligned and appropriate to the culture at hand.

I think those are two key things—taking the time to engage and recognizing that their voices need to be heard. For indigenous, by indigenous will very much be the biggest key to success in that.

[Don Davies, NDP, Vancouver Kingsway, BC]

Ms. Tessier, I'm interested in the dual needs of capital funding and partnerships to help build the co-ops that so many people need in Canada, and then the operational funding that is often required to do that.

Can you elaborate and give us your thoughts on how the federal government can play a role in either or both of those areas?

[Patricia Tessier]

Capital funding is the initial contribution if we're developing new.... That initial contribution, like for any of us who have a house, ultimately lowers the operating cost because it lowers your mortgage and, therefore, can be more affordable, so that's capital and why it is required for affordable housing.

The operational funding, then, is really more geared towards, “How affordable?” That's why the ask is for a rental subsidy for low income, just to ensure that it can be no more than 30% of their income. Some new programs and language are now talking about the average market income and it not being over a certain percentage of the average market income, but that's problematic if the average market income just keeps increasing. If it's not tied to income and there's no rental subsidy, again, that will lead to some homelessness and, as we talked about, a reduction in productivity and impacts on the availability of staff for businesses.

The operational is really, probably, less about operating costs of a building but more about how to ensure we keep the homes affordable so that those who have lower incomes or deep needs have the income to contribute to the cost of running or operating the housing.

I hope that answers your question.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Davies.

I go now to MP Kelly, please.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you, Mr. Chair.

To the council of innovators, do we need investment in Canada in machinery, equipment, IT, technology and physical infrastructure? What are some of the things that we need investment in to reverse this productivity gap?

[Benjamin Bergen]

In Canada's tech sector we really struggle to have the capital required to help companies scale and grow. There are a few areas where this plays out. One is in the venture capital space. There are very few VC firms that have capital allocation to help firms scale and grow, so, often, firms have to go outside of Canada in order to access funding. We have some capital challenges in the VC space that are an issue.

In terms, though, of where government really should be focusing its energy, it should look at what the outcomes are that are going to drive firms to be successful. Our mantra at the council is, really, that the government shouldn't be picking winners. It should be supporting winners.

When you look at different government programs and funding opportunities, how are those funds being marshalled and allocated towards those firms that are showing green spurts and showing real opportunity? Often in Canada we support research but we forget about the development side of things, and it's the development side of things that fundamentally will pay for many of the things that folks in this room are talking about. Therefore, looking at ways of alleviating that and creating opportunity is critical. We point to SR and ED as just being one of many programs through which the government could be allocating those dollars more effectively.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Will increasing the inclusion rate on capital gains help draw investment into your sector?

[Benjamin Bergen]

In terms of the analysis that was done, not just by our organization but by others, when you make it more expensive and costly and you drive down risk versus reward, then you see capital move elsewhere. In the innovation economy, capital and, actually, labour—

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you. I have a lot of questions. I'm sorry. I really didn't mean to cut you short, but is it your testimony that this will drive investment out of the innovation sector?

[Benjamin Bergen]

That's correct.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

What are the other barriers to investment and opportunity in the innovation community? Is it red tape or the inability to access procurement contracts?