Finance Committee on Feb. 3rd, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order. Welcome to meeting number 16 of the House of Commons Standing Committee on Finance. Pursuant to the motion adopted in committee on December 16, 2021, the committee is meeting today to continue its pre-budget consultations in advance of the 2022 budget.

Today's meeting is taking place in a hybrid format pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

Today's meeting is also taking place in a webinar format. Webinars are for public committee meetings and are available only to members, their staff, and witnesses. Members enter immediately as active participants. All functionalities for active participants remain the same. Staff will be non-active participants and can therefore only view the meeting in gallery view.

I'd like to take this opportunity to remind all participants at this meeting that screen shots and taking photos of your screen are not permitted.

Given the ongoing pandemic situation and in light of the recommendations from the health authorities, as well as the directive of the Board of Internal Economy on October 19, 2021, to remain healthy and safe, all those attending the meeting in person are to maintain two-metre physical distancing, and must wear a non-medical mask when circulating in the room. It is highly recommended that the mask be worn at all times, including when seated. All members must maintain proper hand hygiene by using the provided hand sanitizer at the room entrance. As the chair, I will be enforcing these measures for the duration of the meeting and I thank members in advance for their co-operation.

To ensure an orderly meeting, I'd like to outline a few rules to follow. Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice at the bottom of your screen of either the floor, English or French. If interpretation is lost, please inform me immediately and we will ensure that interpretation is properly restored before resuming the proceedings. The “raise hand” feature at the bottom of the screen can be used at any time if you wish to speak or alert the chair.

For members participating in person, proceed as you usually would when the whole committee is meeting in person in a committee room. Keep in mind the Board of Internal Economy's guidelines for mask use and health protocols. Before speaking, please wait until I recognize you by name. If you're on the video conference, please click on the microphone icon to unmute yourself. To those in the room, your microphone will be controlled as normal by the proceedings and verification officer. When speaking, please speak slowly and clearly. When you're not speaking, your mike should be on mute. I remind you that all comments by members and witnesses should be addressed through the chair.

With regard to a speaking list, the committee clerk and I will do the best we can to maintain a consolidated order of speaking for all members whether they are participating virtually or in person. The committee agreed that during these hearings the chair will enforce the rule that the response by a witness to a question takes no longer than the time taken to ask the question. That said, I request that members and witnesses treat each other with mutual respect and decorum. If you think the witness has gone beyond their time, it's a member's prerogative to interrupt or ask the next question and to be mindful of other members' time allocation during the meeting. Therefore, I also request that members not go much over their allotted question time. Though we will not interrupt during a member's allotted time, I'd like to keep you informed that our clerk has two clocks to time our members and witnesses.

I would now like to welcome our witnesses.

From the Canadian Centre for Policy Alternatives, we have David Macdonald, senior economist; from the Canadian Taxpayers Federation, Franco Terrazzano, federal director; from the C.D. Howe Institute, Mark Zelmer, senior fellow, and Jeremy Kronick, associate director of research; from the Council of Canadian Innovators, Dana O'Born, vice-president, strategy and advocacy; from Équiterre, we have Marc-André Viau, director of government relations; and finally, from Sociétés d'aide au développement des collectivités et Centres d'aide aux entreprises, we have Pascal Harvey, general manager.

We're now going to hear opening statements from the witnesses. One witness per group will have up to five minutes to make their opening remarks before we move to questions by members.

We're going to start at the beginning of our list with the Canadian Centre for Policy Alternatives and Mr. David Macdonald.

[David Macdonald, Senior Economist, Canadian Centre for Policy Alternatives]

Thank you, Mr. Chair.

I'd like to thank the committee for the invitation to speak today.

I would refer members to our 2022 alternative federal budget, which lays out in much more detail the items I’ll speak on today and provides you with other costed proposals for your consideration.

If COVID-19 in general, and omicron in particular, have taught us anything it's that there will be future waves of this pandemic. The federal government has played a critical role in buffering both households and the provinces from the worst economic impacts of COVID-19, but we need to move to longer-term resiliency against future waves so that we can all resume some sense of normalcy in 2022 and beyond.

The health care system in particular must be able to withstand future waves. We need a deeper bench in hospitals so that future waves can be absorbed without shutting down the rest of the health care system. This has to do with capital to some degree with respect to more intensive care beds, but it mostly has to do with staffing. I'm thinking of professions like nurses. Provinces need longer-term commitments to bolster their own systems. This should be through a federal workplace strategy for health care workers, but it should also be through a long-term reorientation of health care transfers in terms of federal commitments reaching 35% of total provincial health care costs, up from the pre-COVID level of about 23%.

Budget 2022 needs to keep in mind the atrocious long-term care death rates we saw in Canada. This certainly requires improved pay and more PSWs, but that’s only part of it. New national standards are necessary that ensure that seniors care is universal, public, comprehensive, and portable and that these be conditions for new federal funding with the provinces.

We also need to improve worker supports in budget 2022. In the January data I think what we’re going to see is the immense impact on workers due to sick leave as workers take time off due to omicron. Health and the opening of the economy are not in competition: the health of workers is a prerequisite for a properly functioning economy. Coverage of the self-employed, which did not exist prior to the pandemic through the EI system, has been roughly ongoing throughout the pandemic, first via CERB and the CRB, and more currently through the Canadian worker lockdown benefit. These programs have been haphazard, halting, and constantly changing. Looking forward to 2022 in the budget, I look forward to seeing a more comprehensive plan of how the self-employed can be more fully integrated into the EI system.

Longer term, the federal government needs to be more involved in the payment of the EI system, particularly once unemployment goes over a certain level. The Canadian system is somewhat unique in that only workers and employers contribute to it. Generally, in other developed countries governments themselves also contribute to the employment insurance system. That is de facto what has happened over the past two recessions, where the federal government has stepped in to bolster the EI system, but this should be more institutional, where the federal government is constantly contributing to the EI system, not just in times of crisis. This would allow for much-needed improvements in the system, like a higher replacement rate or a floor on what the unemployed receive, something like the $500 a week that we saw during the CERB and CRB periods, as well as a lower threshold for hours of entry into the system.

Direct transfers to households helped to keep poverty rates down in 2020 and 2021. In fact, it's likely that poverty rates were lower than they were in 2019, and we'll see that when the full data comes out. This was in large part due to CERB and the changes to EI, but also to one-time transfers. I think we need to build on that to better insulate adults in particular from poverty in Canada through two new programs. One is the Canada disability benefit, and the other is the creation of a new Canada livable income.

The Canada disability benefit was initially proposed in the 2020 Speech from the Throne. Substantial empirical work has been done since that point into how this could be implemented, the levels that would be needed. These are mocked-up in our alternative budget. We show that the various criteria for benefits, be they federal, provincial, or private insurance definitions for disability, can be unified in a common $11,000-a-year benefit, improving the lives of Canadians with disabilities while saving the provinces substantial money.

When it come to a Canada livable income, substantial basic incomes already exist in Canada for families with children and for seniors. However, adults in the middle of their age range and who don't have high incomes are left out from supports. The one support that they might be able to access, the Canada workers benefit, has received several significant changes in recent years, although it only covers workers with working income. One of the reasons people live in poverty is that they don't have working income for some reason.

The alternative budget—and I hope the federal budget—will consider a Canada livable income that will replace the Canada workers benefit, provide coverage for more Canadians, particularly those without working income, and provide a floor of $5,000 per person or $7,000 a couple per year.

Thank you very much for your attention. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Macdonald.

Now we'll move to the Canadian Taxpayers Federation and Mr. Terrazzano for up to five minutes.

[Franco Terrazzano, Federal Director, Canadian Taxpayers Federation]

My name is Franco Terrazzano. I'm the federal director of the Canadian Taxpayers Federation. We're a non-partisan advocacy group that has been fighting for lower taxes, less waste and more accountable government for more than 30 years. I thank you for inviting us to present today.

The year 2070 is when Canadians can expect to see their next balanced budget under the current trajectory laid out in budget 2021, and that's according to data published by the Parliamentary Budget Officer. That would add another $2.7 trillion to the debt tab, and taxpayers would lose out on about $3.8 trillion just to pay interest charges on the debt over those five decades of deficits.

That's trillions of dollars that can't go to hiring more nurses, reducing class sizes or fixing potholes. That's trillions of dollars that can't stay in families' pockets to help with the groceries or to make sure the kids get to hockey practice. That money would be going to the bond fund managers through interest payments.

Right now, each Canadian's individual share of the debt federally is about $30,000. By 2070, that could reach $67,000. It's a massive debt that we're piling onto the backs of Canadians' kids and grandkids. Right now, many families are already struggling with inflation and are rightly asking how they're going to pay for this unprecedented amount of government spending. Of course, there's technically nothing stopping the government from balancing its budget long before 2070, but this government is using the cloud of COVID-19 to go on a debt-fuelled spending binge.

In the last budget, the government planned to increase permanent spending by more than $100 billion by 2026, and that's already on top of spending that had reached all-time highs even before the pandemic. In 2018-19, before the pandemic or any Canada-wide recession, the government spent more money than it did during any single year during World War II, and that's even after accounting for changes in inflation and population growth.

In our budget submission, the CTF has outlined a plan to get to a balanced budget in 2023-24 by returning program spending to prepandemic levels, adjusted upward for inflation and population growth. We are calling on the government to balance the budget by returning to all-time high levels of spending before the pandemic.

How do we get there? Well, with the massive amount of money that the government has been borrowing for years, finding savings in each department should be like finding water in the ocean.

Of course, the government must do the little things right: no more blowing thousands of dollars on sex-toy shows in Germany and no more marijuana simulation kits for the military or spending thousands of dollars on red-carpet parties for communications staff.

The government must also do the big things right: no more giving 312,000 federal bureaucrats pay raises during a pandemic while their neighbours lose their jobs and perhaps their businesses and take pay cuts, and no more giving businesses like the Ford Motor Corporation $295 million. Also, we can't keep increasing the blank cheque the government gives to some premiers by $1 billion every year forever.

There must also be leadership at the top. That means ending the pandemic pay raises that MPs and senators continue to gobble up. That also means that a Governor General shouldn't be able to leave the role early after serving for only about three years and still be eligible collect her pension to age 90, totalling about $4.8 million. That also means ending the expense account for retired Governors General, who can expense taxpayers for more than $200,000 every single year for the rest of their lives, including for up to six months after their deaths.

This government can balance the budget, stop piling debt onto Canadians' kids and grandkids, reduce the amount of money we're giving to the bond fund managers on Bay Street and avoid tax hikes by returning spending to prepandemic levels, which were already at all-time highs.

I assume that you're going to hear from hundreds of individuals and groups asking for more money. I am here on behalf of 235,000 Canadian taxpayers across Canada who are asking for less. For a bit of added context, since I've been talking, about $1.3 million more has been added onto the debt.

Thank you. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Terrazzano.

Now we'll move to the C.D. Howe Institute and Mr. Zelmer or Mr. Kronick for up to five minutes.

[Mark Zelmer, Senior Fellow, C.D. Howe Institute]

Thank you very much. We promise that we will combine well within the five minutes.

Good afternoon, Mr. Chairman and members of the committee. Thank you very much for your very kind invitation to join you today.

As you will note from my bio, I have more than 35 years' experience in dealing with financial sector policy issues in Canada and abroad. This past year, I helped prepare three papers for the C.D. Howe Institute that might be of interest to you in your deliberations.

The first one explored modern monetary theory, or MMT. It concluded that MMT overstates the degree of monetary sovereignty that countries such as Canada enjoy in a world where capital is mobile.

The second paper offered some lessons on how public accountability could be injected into the OSFI's supervision of financial institutions.

The most recent paper discussed the emergence of cryptocurrencies and promoted the introduction of a digital Canadian dollar by the Bank of Canada to support the development of Canadian dollar-linked cryptocurrencies by the private sector. It also argued in favour of having the digital currency issued in token form so that most of the benefits that Canadians currently enjoy with paper money can be retained.

Finally, given my past experience, let me note that Canadians and Canadian businesses now stand out for being among the most highly levered in the industrialized world.

Why does this matter? Well, I believe the tailwind of falling interest rates and rising asset prices over the past 40 years has helped to contain credit risk in our financial system, but this tailwind has dissipated and may become a headwind going forward. If I am right, then life may become more uncomfortable in the future for our highly levered private sector than conventional credit-risk metrics might suggest. This underscores the need to have some flexibility in our public finances to respond to future shocks.

Thank you again for the opportunity to meet with you today. I'll be happy to respond to members’ questions on these or any other topics. I will hand over to Jeremy to finish off our five minutes.

Thank you.

[Jeremy Kronick, Associate Director, Research, C.D. Howe Institute]

Thanks, Mark.

I'll add my thanks to the chair and the committee as well for the invite here today. It's always an honour to be asked.

I'm going to touch on three topics very briefly and I'm happy to expand on any of them in the Q and A. I'll talk about inflation, the housing market, and the proposed bank and insurance tax.

On inflation, it was entirely appropriate for fiscal and monetary authorities to take an aggressive stance when the pandemic first hit. We saw much success in this regard. However, here and around the globe, these stimulative policies have continued long after the recession has ended, and the result, not surprisingly, is inflation well above comfortable levels for inflation-targeting central banks.

The seemingly coordinated hawkish response of late by developed world central banks might help in taming inflation here at home, but higher interest rates across the global board will slow aggregate global demand, which in turn will hurt domestic economic growth. This is one of the many problems with inflation. Once it takes hold, it is hard to break, and higher prices disproportionately hurt lower income folks.

The second topic is housing. One idea floated around has been lowering CMHC’s mortgage insurance premium to get people over the affordability threshold. I worry about the precedent that this kind of move has for the relationship between government and Crown corporations whose job, in the case of CMHC, is to set these insurance premiums to ensure stability in our financial system and compensate the public for the risk they bear. In the name of increased affordability, we're increasing financial stability risk and this is a difficult trade-off.

The crux of the affordability issue is, of course, supply, and here, unfortunately the federal government is limited in the tools in its tool box. What it can do is focus on what prods it can use to encourage lower levels of government to improve their approval processes, their rules around density, and the way they charge development fees.

Lastly, I'll just mention the discussion on the bank and insurance tax. Taxes should of course be progressive, which this one is meant to be, but in our environment in Canada, banks and insurance companies will pass down this cost to consumers, to employees and to investors in the form of higher fees and insurance premiums, lower deposit rates, and so on. Now, if the Canadian financial sector was more competitive, some other competitor would come along and offer a better deal to customers, upending the incumbents. However, in our highly regulated sector, despite good competition from credit unions, it's unlikely to come to pass, meaning that more needs to be done to continue to improve competitiveness in this sector, which is a better way to tax any excess profits.

Moving forward with open banking and implementing the recommendations that came out of the advisory committee on open banking should be at the top of the list, because this is a zero-cost way of improving productivity.

I will stop here and thank the members of the committee again for the invite. I look forward to the Q and A.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Kronick and Mr. Zelmer.

We are moving now to the Council of Canadian Innovators and Ms. Dana O'Born.

[Dana O'Born, Vice-President, Strategy and Advocacy, Council of Canadian Innovators]

Good afternoon, Mr. Chair.

Can everybody hear me okay? Excellent. I see lots of nodding heads. I'm getting used to that on Zoom.

Thank you so much for the opportunity to present today and talk about the importance of budget 2022. I know there's a lot of content to get through.

I'm appearing on behalf of the Council of Canadian Innovators. We are a national business council representing 150 of Canada's headquartered fastest growing tech companies. Our members are headquartered, as I mentioned, here in Canada and employ north of 52,000 workers across the country. We're market leaders in the sectors of health care, clean tech, financial technologies, cybersecurity and more.

Addressing Canada's postpandemic talent crisis and improving Canada's innovation outputs in research, development and commercialization are the two priorities from our pre-budget submission that I will speak to today.

First, I'd like to brief you on the pressures facing domestic technology companies—and this talent issue is pervasive, I think, probably across all sectors, but specifically for the tech sector today—in their pursuit of attracting and retaining highly skilled talent to fuel the growth of their companies.

From governments to businesses to community organizations, so many of us have embraced new digital tools in the past two years. Today, more than ever, Canadians shop, bank, study and connect online, and this increased demand for digital services has helped fuel an economic rebound in the ICT space after the dark early months of the pandemic. A recent report from the ICTC estimated that by 2025 Canada's digital economy will employ 2.26 million Canadians—that's 11% of all employment in the country—but this will require an additional 250,000 jobs to be created over the next three years.

The good news is that CCI's members and Canadian scale-up companies are committed to creating many of those new jobs, but they face a serious talent supply issue. Nearly every conversation I have with our members tends to deal with workforce issues in some way. Scale-up companies can't just maintain their workforce; they actually need to grow it, and grow it rapidly. Adding the best and the brightest talent remains a constant priority.

Further, a recent survey of our membership found that most companies plan to increase their workforce by 20% this year. That's an additional 10,000 workers added to our workforce in Canada by this year's end.

For years, the shortage of skilled talent has been a driving concern for the council, but the recent shift to remote work has only exacerbated this problem. Canada's skilled workers are now part of a global labour market, where geography is no longer important. Our domestic innovators are finding themselves in fierce competition with global companies that can offer significantly higher salaries for the same crop of high-skilled workers. This is driving up wage inflation across our companies, with some finding that wage expectations have increased by 25% in the last year.

To meet the talent needs of our country's fastest growing companies, we need to increase the generation, attraction and retention of skilled workers for Canadian firms. We have many recommendations on how to address these challenges, including improvements to our immigration system and investments into upskilling and retaining programs. I look forward to engaging with you on these ideas today.

I'd also like to bring to your attention Canada's SR and ED program and its need for reform to help spur innovation and generate a greater return on investment for Canada. This tax credit is the cornerstone of Canada's innovation funding, and it's used by an overwhelming majority of CCI members, and more.

We have been calling for SR and ED reform for years. During last year's federal election, we were encouraged to see that leading political parties heard our calls and included plans to reform SR and ED in their platforms. But we continue to be concerned that as the government promotes an innovation agenda, the SR and ED program does not allow costs related to the development and protection of IP to be eligible for the tax credit. Intellectual property is arguably the most valuable commodity in the innovation economy, and SR and ED badly lacks an IP focus.

In our budget submission, we also ask the government to stop giving SR and ED incentives to foreign companies that take their IP outside of Canada. The SR and ED tax incentive, particularly the refundable portion, delivers material and long-term value to Canada only if the IP flowing from the investment stays here. Without an IP strategy for SR and ED, Canada is doing philanthropy, not innovation. We also need to see the deployment of other tools to protect ideas as they commercialize, such as patent boxes.

I appreciate the opportunity to be here today to present on behalf of our innovators. I do hope you'll take the time to read CCI's full budget submission. I also urge you to get to know the innovative companies in your own ridings—I have checked many of yours, and they do exist there—and understand the challenges that are facing them in their pursuit of scale. Without a strong base of these homegrown, high-growth companies in Canada, we will not be able to generate the economic growth and public wealth necessary to pay for the public services that Canadians depend on.

Thank you. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. O'Born, and we look forward to asking you questions.

We are moving now to Équiterre and Mr. Marc-André Viau.

[Marc-André Viau, Director, Government Relations, Équiterre]

Yes. Thank you, Mr. Chair.

Members of the Standing Committee on Finance, thank you for having me here today. My name is Marc‑André Viau. I'm the director of government relations at Équiterre, an environmental NGO with over 150,000 members and supporters. The organization focuses on agriculture, light and heavy transportation, consumption, energy and climate change in general. Last August, it submitted a brief on agriculture, energy and mobility as part of the pre‑budget consultations. I'll outline the recommendations from that brief, some of which have been updated.

Climate change is affecting Canadian production resources and crops. Last summer's drought in Canada resulted in food supply shortages for retail, which are currently being exacerbated by the border barricades in Alberta, as well as yield losses for canola and wheat. As they say, when it rains, it pours. After the fires came the floods, especially on the agricultural plains of the Abbotsford area. Flood damage in British Columbia is estimated at $450 million.

We welcome the new guidance provided by the federal government and its provincial and territorial partners. In both the Guelph statement and the mandate letter of the Minister of Agriculture and Agri‑Food, climate risk management is a key issue. We want to see the government invest in solutions that will help farmers adapt to better manage climate risks, while using agriculture as a tool to fight climate change.

We believe that investment in soil health is needed to unlock the full potential of carbon sequestration by ensuring the resilience of our agri‑food sector. To this end, we support the creation of a dedicated climate risk management program. We also recommend funding for the development of a pan‑Canadian strategy to study best practices in soil health.

Now that we've talked about climate impacts on agriculture, I want to turn to energy. After years of promises with no real follow‑through, we expect fossil fuel subsidies to end by 2023. However, we're also concerned that the repealed subsidies will be replaced by other subsidies. As over 400 experts recently stated, we're concerned that an investment tax credit will be proposed for carbon capture, use and storage, or CCUS. This could undermine our efforts to achieve carbon neutrality by 2050. Despite decades of research, CCUS is neither economically viable nor proven on a large scale. It has a poor environmental record and limited potential for significant and cost‑effective emissions reductions. If the industry wants to tap into this area, so be it. That said, taxpayers are already saddled with the bill for orphan wells, for example.

We recommend that the government release its roadmap for phasing out fossil fuel subsidies in the next budget framework and avoid subsidizing carbon capture. All this, of course, goes hand in hand with the passage of legislation and a fair transition plan. There won't be any transition without workers and communities.

There's a great deal of movement in the mobility sector. In 2021, Canada moved up the ban on the sale of new gasoline‑powered vehicles to 2035. However, zero‑emission vehicles, or ZEVs, account for only 5% of new vehicle sales. Meanwhile, light trucks accounted for a record 81% of sales. We're talking about the type of trucks that you keep seeing on the streets of Ottawa right now. This is driving up the transportation sector's GHG emissions record, despite the fuel efficiency of the vehicles. When we look at the sales figures in Quebec and British Columbia, we understand that we need a ZEV standard at the federal level to speed up the transition, which is currently being studied.

However, our organization believes that purchase incentive programs have run their course, and aren't sustainable in terms of funding the replacement of millions of vehicles. Not every vehicle should be replaced. Moreover, electrification must be accompanied by a modal shift to active and collective transportation, and also to shared mobility.

Since we're feeling very generous, we're proposing that the government save both money and GHGs in one program. It's time to transition to a self‑funding program of feebates to turn a portion of the sale of polluting vehicles into a contribution to financial incentives for the purchase of electric vehicles. This means reforming the green levy program to make it proportional to energy performance and vehicle weight. This green levy will be used to replenish the coffers of the purchase incentive program.

In closing, I want to remind you that section 23 of the act respecting transparency and accountability in Canada's efforts to achieve net‑zero greenhouse gas emissions by the year 2050 carries obligations for the Minister of Finance.

Under the legislation, the Minister of Finance must, in co‑operation with the Minister of the Environment and Climate Change, prepare an annual report respecting key measures that the federal public administration has taken to manage its financial risks and opportunities related to climate change. We recommend that the Minister of Finance begin this accountability exercise with the 2022 budget.

Thank you for listening. I can answer your questions during the upcoming discussions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Viau.

Now we're moving to Sociétés d’aide au développement des collectivités et Centres d’aide aux entreprises with Monsieur Pascal Harvey for five minutes.

[Pascal Harvey, General Manager, Société d'aide au développement des collectivités et Centre d'aide aux entreprises]

Thank you, Mr. Chair.

Committee members and guests, I'm pleased to be speaking to you on behalf of the network of Sociétés d'aide au développement des collectivités, or SADCs, and the Centres d'aide aux entreprises, or CAEs, in Quebec.

This wonderful network has 67 members, including 57 SADCs and 10 CAEs. It also represents over 1,000 people, including 400 permanent employees and 600 volunteers. The operation of these organizations is funded by Canada Economic Development for Quebec Regions, so by the federal government.

I also want to point out that our network is part of a larger pan‑Canadian network, the Community Futures Network of Canada, or CFNC, which includes over 260 organizations like ours—the Community Business Development Corporations, or CBDCs, and Community Futures Development Corporations, or CFDCs—across Canada. Our network spans all of Canada's rural and semi‑urban areas.

Today, I mainly want to talk about the Quebec fact in relation to a green and united recovery, to which we obviously want to contribute.

I also want to talk about our relationship with Canada Economic Development for Quebec Regions, which has been very successful and which gives us the opportunity to develop programs for our members on behalf of the federal government. It also enables our members to develop programs in rural and semi‑urban areas, either in communities or with businesses.

I'll give you some statistics. Over the past year, through the regional relief and recovery fund, or RRRF, our members have loaned over $128 million to 2,700 businesses, which is quite significant. They also invested over $25 million in 3,800 technical assistance and local economic development projects.

We believe that, in terms of the pandemic, SADCs and CAEs have done a good job. We would now like to be part of a green recovery.

In the time that I have left, I'll tell you about what our members are doing on the ground. Each year, our members are involved in over 10,000 investment projects and over 1,000 development projects, mainly in the area of sustainable development. They carry out diagnostics, support companies, implement eco‑conscious projects or fund sustainable projects.

Several of our members are involved in industrial symbioses in the circular economy, while others are working together on net‑zero emissions projects. Some members have implemented forest biomass projects in their area, while others have even contributed to food self‑sufficiency projects in their area.

It would be good if, through the Department of Finance, the government could consider decentralizing some of the work so that the agencies and organizations that I'm representing today could play a more significant and obvious role in our communities. Our strength is our outreach and the strength of our volunteers and professionals on the ground. However, our direct connection to the communities and direct connection to entrepreneurs make us a key partner.

This sums up our work on the ground, the work of our members and the strength of the network. I look forward to answering your questions for the next while.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Harvey.

Witnesses and members, we're moving to our rounds of questions. Our first round will give each party up to six minutes for questions. We are starting with the Conservatives.

Mr. McLean, you have the floor.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

Let me thank all the witnesses we have here today, because in the short time you were able to present to us, you gave us a whole bunch of information, and I think it's going to be useful.

I'm going to start my questions with Franco Terrazzano of the Canadian Taxpayers Federation.

Thank you very much for what you do and what you bring to the table here. I've been in Ottawa for two years, and often at all of these committee hearings we hear from those we call “rent-seekers”. They come in and tell us that we need to fund them more through government. They tell us that these are their programs and that we need to fund them, without giving us the other side of the equation and without any consideration for who's paying the bill at the end of the day. It's Canadian taxpayers who are paying the bill.

Thank you for your work and for being here at these pre-budget consultations.

Let's talk about the debt-to-GDP ratio. That ratio has gone from 30%, which we were trying to keep it level at, to 50%, and now the government proposes to keep it at that 50% level even though our GDP is increasing. Can you comment on that quickly, please?

[Franco Terrazzano]

It's an absolutely staggering amount, and I think what's so eye-watering is that it's not just where the debt is now, but where the debt is going under current projections laid out in the last budget.

I mentioned the PBO. I think many Canadians are rightly very concerned about the financial burden that they are leaving to future generations. Right now, debt per person is about $30,000. Under current projections, over the next five decades that could be all the way up to $67,000. Many people are worried about the financial tab they're leaving to their kids and grandkids, and I think that's something the government needs to take seriously.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

I want to go into that further because I had to ask a question in the House of Commons yesterday, and one of my colleagues across the aisle talked about the debt-to-GDP ratio. GDP is a national figure. It counts everything we do. Debt, the way the Government of Canada calculates it, is a federal number only, and yet all that GDP is also provincial. So we can't double-count the GDP.

Can you tell us what the debt-to-GDP ratio really is when you count in the provincial debt across the country?

[Franco Terrazzano]

It is true that gross debt is much higher than net debt.

One thing that I want to bring up, member, with respect, is that I talked about these projections of five decades of deficits. That is startling in and of itself, but the PBO also estimates from their data that it would take at least another two decades to finally pay off that debt. I think many taxpayers are wondering if they'll ever live to see a debt-free Canada. Even more startling is the fact that the PBO assumes relatively low interest rates. It assumes a steady upward march of economic growth. I think we should all be concerned about what happens if interest rates tick up and if we stumble into another downturn unrelated to the pandemic.

[Greg McLean, Conservative, Calgary Centre, AB]

It was music to my ears when you talked about returning to balanced budgets in 2023-24. This country needs to get back to balance and stop spending the dollars that our children and our grandchildren, and their children, are going to have to pay for the programs that we're incurring here now, because we're all going to have problems. You talk about the systemic problems that are going to emerge in society. There are going to be payments to be made in the future.

I want to talk about the $560 billion that went out the door since the pandemic. As the Parliamentary Budget Officer indicated, $170 billion of that was discretionary spending, and had nothing to do with the pandemic. Is that something we can move backwards on very quickly to get back to a balance?

[Franco Terrazzano]

Absolutely. We have to remember—and this is what I also noted in the full budget submission—that you could balance the federal budget in 2023-24 simply by going back to prepandemic spending of a few years ago, which was already at an all-time high. In 2018-19, you had the federal government spending more than it ever has—with no Canada-wide recession— than it did during any single year during World War II.

One of the other concerns that we're hearing from so many Canadians, of course, is inflation, especially when you have the Bank of Canada's printing press on overdrive. There was $370 billion printed out of thin air and, of course, the more dollars the Bank of Canada buys, the less our dollars in our savings accounts and retirement accounts can purchase. A large chunk of what the Bank of Canada has been printing up is Government of Canada debt. It sure seems like Ottawa is financing a good chunk of its deficits by using the printing press.

[Greg McLean, Conservative, Calgary Centre, AB]

Yes, of course, and thank you for that comment on how we're financing it. There will be problems with that, as we know, going forward.

My final question for you, Mr. Terrazzano, is this. Can you explain the dichotomy between what we've gone through here as far as public sector payments are concerned versus private sector debt that's been incurred during this pandemic? The public sector has continued to grow its expenses significantly, and the private sector has borne the entire burden of everything that's happened in this pandemic, including lockdowns, cutbacks and unemployment. Can I get your comment on that, please?

[Franco Terrazzano]

It's unfortunate to say this but we're not all in this together. We've seen so many people in the private sector lose their jobs, take a pay cut, maybe even lose their small business, but we've seen no restraint from the federal government from spending more on everything forever. We've seen more than 312,000 federal government employees receive a pay raise while their neighbours in the private sector struggle. We've seen more government employees. We still have fewer jobs in the private sector than prepandemic.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. McLean.

We're going to move to the Liberals with Madame Chatel for six minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I'm very proud of the fiscal prudence and good management of this government through the pandemic. We have one of the best net debt-to-GDP ratios for the whole of the G20 countries. That's something to be very proud of during this crisis and pandemic.

My questions are mainly for Mr. Harvey.

Mr. Harvey, I appreciated your remarks and I agree that Canada is on the verge of a major change, an economic transition. In this economic transition, there will be winners and losers. The winners in this transition will be the ones who are well prepared.

In your remarks, you raised one of my concerns. Are our small communities, the rural and semi‑urban communities, ready for this transition? I represent a large constituency.

What are the best tools to ensure that we can support communities as they transition and that the communities are well established for the economy of the future?

[Pascal Harvey]

Ms. Chatel, I'd like to respond that the best tools are the SADCs and the CAEs. Taking care of rural areas and large, more isolated areas is part of our DNA.

The mandate given to us by the federal government through Canada Economic Development for Quebec Regions is to take good care of rural and semi‑urban communities. It's also to take good care of businesses, because the wealth creators are the entrepreneurs. They had a hard time during the pandemic.

If we're considering a recovery, we must use the proactive nature of the communities. We must also use the instincts developed during the pandemic. For example, this may involve promoting short consumption cycles, buying locally and ensuring that entrepreneurs can develop other types of practices and clients, while developing other daily practices.

Since 2008, the network of SADCs and CAEs has had a sustainable development discussion group. The network members have been very proactive. Out of 67 members, about 40 are currently working in this task force. This has enabled us to play a very active role in the areas of activity that I referred to earlier. These include industrial symbioses and synergies that allow companies to come together to develop other types of clients, so that they're ready to deal with different kinds of pandemics.

Unfortunately, there will obviously be other disasters in the future. We must learn from our mistakes and change our approaches and, above all, our consumption methods. In my opinion, the SADCs and CAEs are well‑equipped. In addition, our closeness to the community makes us key players in the recovery process.