Finance Committee on Dec. 7th, 2021

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

Very good, thank you.

My next questions are also for Mr. McGowan.

Mr. McGowan, can you confirm for committee members that if Bill C‑2 were to pass in its current form, would the minister have the authority, by regulation, to add other sectors to the tourism and hospitality recovery program?

For example, if any sector was facing significant challenges and needed a more generous assistance program, can you confirm that the minister would have the authority, by regulation, to include it in the tourism and hospitality recovery program?

[Trevor McGowan]

The rules contain a number of measures that could be modified by regulation. In general, the percentages and factors used for calculating wage subsides can be modified by regulation.

Getting to your specific question, the definition of a base percentage—which is the basic wage and rent subsidy definition—if you look at proposed paragraph 125.‍7(1)(n), provides the flexibility to provide an alternative subsidy rate that can be calculated in respect of different entities or different applicants for the subsidies. That would provide flexibility to provide different wage subsidy rates that can be calculated for, in your example, a different industry beyond tourism and hospitality.

There is flexibility provided in order to change the subsidy rates and have different rates applying in respect of different entities, potentially in different sectors.

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

All right, thank you.

As I understand it, the minister would therefore have significant regulatory authority. If Bill C‑2 were to pass, the economy shifted and it was determined that small and medium-size businesses as opposed to large businesses, say, or a particular sector, should receive more assistance and a percentage had to be changed to ensure that they have access to one of the various components mentioned here, the minister would have that authority. New legislation would not be needed.

I would just like a confirmation.

Since my time is up, I will wait for the next round of questions.

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Monsieur Ste-Marie.

That's time. I'm sure it could be answered in a later round.

We are now moving to the NDP with Mr. Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

One of the purported goals of Bill C-2 is to support the tourism and hospitality industry. If you take independent travel agents as a case study, about half of the folks who are represented by the Association of Independent Travel Advisors have been very clear that they were being paid under the Canada recovery benefit program as opposed to any of the wage subsidy programs.

There's a reason for that. It's because they work for themselves. It's an industry that's about 85% women. A lot of them work out of their basements. Many of them continued to work in the early days of the pandemic helping their clients secure their rebates or travel vouchers. Many of them are working now to help as folks start to contemplate vacations and, in the interim, create bookings. Of course, they won't be paid until people actually take the trip.

This bill really doesn't provide any ongoing support for them. We know they are getting close to a time when they can support themselves financially, but this bill is an admission that this is a sector that has not yet recovered, and yet there's no help for those folks.

I'm wondering. What was the decision? What was the discussion around choosing to proceed in a fashion that would exclude such a high percentage of people in an industry that the government itself has said it wants to continue to support?

[Trevor McGowan]

Thank you for the question.

I can provide some information on the general policy background and how the rules in part 1 of the bill relating to the COVID subsidies work. Then if my colleague Max would like to jump in on the more policy-analysis side, he could do so.

I think there are really two points to be kept in mind with respect to the question of independent tour operators.

The first, of course, is that the wage and rent subsidies provided under these COVID rules in section 125.7 of the act do not specifically exclude independent contractors. In fact, if you have a sole proprietor who has employees or pays rent, they could avail themselves of the various subsides in part 1 of the bill.

However, of course, that's not a complete answer, because, as was noted, a lot of independent tour agents operate as independent contractors, and the wage subsidy in part 1 of the bill subsidizes wages. Those are wages paid from an employer to an employee, so if no wages are paid, or if there are no employees, then there would be no qualifying expenses for the wage subsidy.

Similar considerations hold true for the rent subsidy. If you had an agent who was paying rent, perhaps because they were renting out a commercial space, then they could avail themselves of the rent subsidy, but we do understand that won't always be the case.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

In fact, I think it's not the case for about 50% of people in the industry, which to me is a pretty sizable chunk of the industry. We're not talking about some outliers. We're actually talking about a pretty core part of the industry.

I am curious to know what the discussion around excluding those folks from ongoing financial support looked like, and where and when the decision was made to cut them out.

[Trevor McGowan]

I can say that, from the beginning, the wage subsidy was designed to subsidize wages and help retain the connection between an employer and an employee. It has not applied to payments to independent contractors or, as has been mentioned earlier, dividends from business owners.

It was focused on subsidizing wages as were, as also noted, other programs put forward by the government like the CERB.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

What we're trying to understand here is why a policy decision was taken to uniquely deploy the wage subsidy policy tool as a way to provide ongoing support to the industry, when it leaves about half the industry behind.

Until very recently, the government had another policy tool that captured those folks. That was the Canada recovery benefit. The Canada worker lockdown benefit was seen as the way to try to replace that. I think it does a shoddy job. That's a debate I'm looking forward to having, but not right now.

The question is this: If it was a principal policy objective of the government to continue to support people in the tourism and hospitality industry, why was there not a stream in the Canada worker lockdown benefit, for instance, that would provide for the very people I'm talking about right now—people who work independently, for themselves—who comprise a large percentage of the industry?

Why was a decision made not to create a stream under the Canada worker lockdown benefit that would continue to provide ongoing financial support to them, regardless of whether there was a public health lockdown in effect in their jurisdiction, as described in the act?

[Trevor McGowan]

I would need to turn to some of my colleagues who have been working on the CRB and Canada worker lockdown benefit in part 2 of the bill. I can really only speak to part 1.

[Catherine Demers]

Thank you for the question, Mr. Blaikie.

The lockdown benefit, as you mentioned, is really uniquely designed to address situations where workers—including self-employed workers and independent travel agents—who were affected by the lockdown could benefit from income support for the duration of the lockdown in their region. That's really in the context of addressing restrictions and the impact on workers due to public health restrictions—

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Demers and Mr. Blaikie.

We are moving to our second round. There will be five minutes for questions from each of the members.

We'll start with the Conservative Party.

Mr. McLean, you are up.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

I'm going to continue with the question asked by my colleague about the $7 billion that is part of this relief fund. I hope the telephone reconnection has allowed the proper officials to answer. I'll ask the question a little differently, if I may.

What recommendation are you giving to the finance minister about where this $7 billion will potentially come from?

This is something that I'm reasonably certain the Deputy Prime Minister isn't coming up with on her own, so I hope she's getting a recommendation from somebody in this department.

[Trevor McGowan]

I can provide a quick technical answer. The amounts being paid—certainly under part 1 of the act for the various COVID subsidies—are coming out of the consolidated revenue fund. That's the technical answer for where the refundable tax credit payments are coming from.

Of course, amounts going into the consolidated revenue fund are fungible, so there's no tracing of dollar for dollar, but the answer to the question is that they come out of the consolidated revenue fund.

[Greg McLean, Conservative, Calgary Centre, AB]

The outcome is a $7-billion higher deficit for this fiscal year going forward. Is that correct?

[Trevor McGowan]

Payments are coming out of the consolidated revenue fund. I would turn to some of my economist colleagues to talk about the deficit, rather than the legal mechanism.

The other thing to note on the second part of the question is that any recommendations or advice made by officials to the Minister of Finance would be a cabinet confidence and not something that we'd be able to discuss publicly.

[Greg McLean, Conservative, Calgary Centre, AB]

I don't know why this is cabinet confidence. We are asking a question.

Seven billion dollars more is going out the door, yet the Bank of Canada governor has said that he will not be buying any more securities under quantitative easing. If this is actually a market mechanism for issuing an extra $7 billion onto the market, what do you expect the interest rate payable on those bonds will be in the market?

[Trevor McGowan]

I'm afraid that the government financing questions are well beyond my area of expertise. I'm not certain if we have anybody on the call who could answer the question, although we could look into whether or not a follow-up is possible. It's just beyond my area.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Let me move on, sadly.

The pushmi-pullyu that you have with the programs here, where you're paying entities to hire people and at the same time paying people potentially to stay home, has actually increased the cost of labour significantly in most hospitality industries. Have you thought about this at all in your continued race to push money out the door at our hospitality industries in order to continue this spending mechanism that is accomplishing nothing but inflation?

[Trevor McGowan]

I can see if I understand the question, but then I would ask my economist colleagues to jump in. Is it the relationship between the COVID subsidies in part 1 of the bill, at least, and rising wages and inflation?

[Greg McLean, Conservative, Calgary Centre, AB]

The question is this. We were paying people at one point in time to stay home, and at the same point we were giving subsidies to the businesses to hire people back. It is causing a significant increase in the wage rates in those industries. Have you thought about that, as to how it's affecting inflation across the economy?

[Trevor McGowan]

Certainly I'd have to defer to my economist colleagues on the inflationary point, but of course, one of the central goals from the inception of the wage subsidy, for example, was to try to retain the employee-employer relationship so that people kept their jobs and were retained as employees.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Yes. Thank you. I understand the goal.

My last question will go to you, Ms. Demers. You talked about the $5,000 in earnings in 2020 in order to be eligible for these programs. How are you going to monitor that in respect of the amount of money that's gone out the door in what could be quasi-fraudulent distribution of government funds to many entities across Canada?

[Catherine Demers]

The proposed Canada worker lockdown benefit requires information contained in tax filings in order to determine eligibility. This is one of the eligibility criteria put in place for the Canada recovery benefit, and it is also proposed to be included as part of the worker lockdown benefit. To be able to receive this benefit, you would need to have filed taxes in 2020.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Demers.

We're moving over to the Liberals for five minutes

Mr. Baker.