Finance Committee on May 19th, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting number 49 of the House of Commons Standing Committee on Finance. Pursuant to the order of reference of May 10, 2022, the committee is meeting on Bill C-19, an act to implement certain provisions of the budget tabled in Parliament on April 7, 2022, and other measures.

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. As per the directive of the Board of Internal Economy on March 10, 2022, all those attending the meeting in person must wear a mask except for members who are at their place during proceedings.

I'd like to make a few comments for the benefit of the witnesses and members. Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike and please mute yourself when you are not speaking. For interpretation for those on Zoom, you have the choice at the bottom of your screen of floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

This is a reminder that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as well as we can, and we appreciate your patience and understanding in this regard. I request that members and witnesses treat each other with mutual respect and decorum.

I would now like to welcome today's witnesses.

From the Aerospace Industries Association of Canada, we have with us Mike Mueller, president and chief executive officer. From International Association of Machinists and Aerospace Workers, we have David Chartrand, Canadian general vice-president. We have Steven Tobin, chief executive officer of LabourX, as an individual. From the Business Council of Alberta, Michael Holden is with us. He's the vice-president of policy and also the chief economist. From the C.D. Howe Institute, we have Benjamin Dachis, who's the associate vice-president of public affairs, and William B.P. Robson, chief executive officer, although I am told that William Robson will be with us only until 4:30, members, so be aware of that.

From the Canadian Labour Congress, we have Siobhán Vipond, who's the executive vice-president, and we also have Chris Roberts, director, social and economic policy. From the Federation of Canadian Municipalities, Daniel Rubinstein, who's the senior director of policy and government relations, is with us today.

We'll now begin with Mr. Mueller from the Aerospace Industries Association of Canada, with his opening remarks of up to five minutes.

Go ahead, please.

[Mike Mueller, President and Chief Executive Offier, Aerospace Industries Association of Canada]

Thank you, Mr. Chair.

Good afternoon, everyone. It's a real pleasure to be here on behalf of the Aerospace Industries Association of Canada. Our members represent over 95% of aerospace activity in Canada, covering the civil, defence and space sectors.

I'm especially happy to see that David Chartrand is also appearing today. David and I have worked closely on the significant concerns we both have regarding the select luxury items tax act, specifically the negative impact it will have on the industry and the workers.

Despite perhaps being well intentioned, the tax as currently drafted will penalize manufacturers and Canadian workers. To be clear, this is a tax on manufacturing, and forcing manufacturers to pay this substantial tax will render Canadian manufacturers less competitive and directly translate into lost business and lost jobs. In fact, the industry estimates losses of over 1,000 Canadian jobs and potentially up to $1 billion in lost revenue to companies across the country.

This tax will affect not only large companies. It will have an impact on companies of all sizes in all regions throughout the Canadian supply chain. We are told that some manufacturers are already experiencing order cancellations due to this potential tax. This tax would put our industry at a significant disadvantage compared to international competitors, and it comes at a time when they're still recovering from the COVID-19 pandemic, during which 30,000 workers lost their jobs.

Lessons can be learned from other countries that introduced such a tax only to ultimately repeal it because of the significant damage it caused to their domestic manufacturing sectors. This was seen in the U.S. in the early nineties, where a similar tax was introduced only to be repealed two years later.

While political marketing of a luxury tax may sound good from a political perspective, the reality for those of us in the industry is the complete opposite. Rather, I would encourage members of this committee to focus on the economics and on how we can protect and grow the jobs here in Canada and support an industry trying to recover. This tax does the opposite.

We have been asking the government to conduct all the necessary economic analysis to ensure that this legislation will not have a detrimental impact on the industry in Canada and our employees from coast to coast. It is our understanding that no review was completed with respect to this tax. Therefore, we're asking that aircraft be removed from this legislation.

If the government is determined to forge ahead despite the negative impacts, it should be open to amendments to soften the impacts on the industry. The Deputy Prime Minister and Minister of Finance has stated that this legislation may need improvement and says she wants to work with industry to resolve the issues. We have recommendations to help mitigate the impacts, which we've shared with the government.

Let's not crush domestic demand in the manufacture and final assembly of business aircraft, helicopters, turboprops and jets, not to mention the associated supply chain for parts, systems and services, as well as maintenance, repair and operation. The real question is, why put this at risk?

I should say it's a real frustration to our members that in budget 2021—the same budget that first introduced this tax—the government recognized that the industry was hit hard by the pandemic and provided significant funding to the industry to help it recover, and then on the other hand talked about implementing this tax.

This tax will damage the national strength of an industry that is still working toward recovery and making tremendous strides when it comes to green innovation. No other jurisdiction is doing this. Our loss will be a gain to U.S. aerospace and other competitor nations that want what we have. All policy levers should be pulled in the same direction to support the recovery of this strategic sector. That's also why our industry has been calling for a national aerospace strategy. Having a coordinated plan for this industry would avoid this kind of situation.

We need to leverage our strengths, not penalize them. If this tax is implemented as it's currently designed, Canadian businesses and workers will pay the price. There is an opportunity in front of us to get it right.

Thank you very much for your time and your support. I look forward to your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Mueller.

Now we'll hear from the International Association of Machinists and Aerospace Workers.

[David Chartrand, Canadian General Vice-President, International Association of Machinists and Aerospace Workers]

Thank you, Mr. Chair. Good afternoon, everyone.

I want to thank the committee for giving the IAM some time to voice our concerns on behalf of labour within this industry. We represent thousands of members, SMEs and OEMs in this important sector of the Canadian economy, across Canada in multiple provinces. Although, as labour, we do support any government's goal of addressing income inequality, we strongly believe that this tax is misdirected towards manufacturing. We do not believe this was the government's original intent nor that it reflects what was announced during campaigning. The fact is that jobs will inevitably be affected adversely by this tax.

Manufacturing has suffered greatly over the last decade, and the recovery of our sector will further be punished through this tax. The tax will put an added burden on our sector, which has already lost almost 30,000 jobs, just in 2020. We believe the negative impact on jobs and on our industry far outweighs any benefit that would come from this tax.

I, for one, do not understand why, in this sector, our country would do the opposite of all other countries. Protectionism is at an all-time high, and countries are protecting their industries while we're headed in the opposite direction. This tax will make us less competitive globally and will take some of the shine away from our country and our industry. It will tarnish our reputation as a world leader and as a great country to build and service business aircraft. We need to support this industry and limit barriers to our competitiveness.

This tax is contradictory to recent investments that government has made in this industry to strengthen, grow and make it more resilient. It is as if you are giving with one hand and taking away with the other. As Mike mentioned, we should learn a lesson from the concrete examples that exist where this type of tax has failed government, workers and their communities. We're talking about the boating and the business aircraft industries in the United States.

Finally, there's been no study or assessment done on the impact this tax would have on jobs versus the benefits it would bring. We feel this is a necessary step that has been skipped and must be done in order to determine the impact on jobs.

I appeal to this committee and to government to please consider the important impact that this will have on jobs and communities.

We believe there are four questions to ask ourselves. Are we putting Canadian companies at a disadvantage globally versus competitors? To us the answer is clear. It's yes. Will this tax generate a loss in sales? Absolutely. Would this translate into job loss? If you're selling fewer aircraft and manufacturing fewer aircraft, you have fewer jobs. Do other competitor countries have such a tax? They did. They learned from their mistakes, and they repealed these taxes and modified them, so the answer to that is no.

Again, I want to stress that this tax would apply to a limited number of manufacturers whose businesses rely heavily on the production of business jets. Not only would these businesses carry the liability of paying the tax, but if the tax rendered them less competitive, consumers of this type of good would turn to competitors. Business aircraft is a strength for Canada, providing a solid foundation for recovery and jobs, and should not be punished in a misdirected effort that will target manufacturers and workers.

If applied in its current form, the tax may be a disincentive for business to continue doing business in Canada or even to consider Canada as an option to establish operations. For decades, Canada's aerospace industry has not only had a competitive advantage due to a number of factors, but also provided incentives to business to continue operating here. Why would we go and do something different in this case?

The federal government has looked to stimulate a recovery in aerospace. This tax could unintentionally affect manufacturing jobs in this subsector across Canada. In effect, the luxury tax is somewhat contradictory to the intent of recent investments in aerospace.

For these reasons, I thank you for this opportunity. I'd be glad to answer any questions.

I would like to also let you know that we'll be sending a detailed brief to the committee. Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Chartrand.

Now we'll hear from Steven Tobin, as an individual, who's with us here in the room.

[Steven Tobin, Chief Executive Officer of LabourX, As an Individual]

Thank you, Chair.

I thank the other members of the committee.

Today I want to focus my remarks a little bit on the job market, so cutting across a number of themes. I want to pay particular attention to the issues of persistent labour and skill shortages. In thinking about the bill, initiatives like the labour mobility deduction program and others like it are important steps in a welcome recognition for employers who are having difficulties finding talent, especially in the trades sector. Despite some of the headline stories with respect to labour and skill shortages and low unemployment that we're seeing in Canada, I nevertheless still want to emphasize the point that many Canadians still struggle to find quality jobs today.

To harness and leverage the ongoing and planned initiatives and to create quality jobs for Canadians and to spur investment among businesses, I would offer up to the committee the following two considerations.

The first is that we need a comprehensive labour market strategy that supports and aligns with other economic, environmental and social outcomes. A well-functioning labour market is a cross-cutting issue. We may hear it throughout the other interventions today. It is needed in other areas to support these objectives. Simply put, our goals to improve competitiveness, address housing affordability and transition to a lower-carbon economy will not succeed if businesses and government cannot find the people and the talent to make those investments and transitions a reality.

A comprehensive strategy can bring together in a coherent and mutually reinforcing way the various pieces that augment each of the individual actions that are planned. A strategy of this nature is also a great and tremendous opportunity to bring together governments, employers, labour, educators, training providers and others to think collaboratively and cohesively about how to discuss these opportunities and challenges. A strategy is thus not about new measures or new spending, but it's about making the most of the investments that are planned.

The second point I want to make is that I believe we need to get serious about addressing labour and skill shortages. This should be a key pillar of any broad labour market strategy, and it requires our collective attention. I have a few points for consideration on where to start with respect to persistent labour and skill shortages. The first is that we need to recognize the difference between a labour shortage on one hand and a skill shortage on the other. These are not the same issue, and they require very different policy interventions. We need to diagnose the problem first before we design a solution. The extent of labour versus skill shortages is different across the country. It's not the same in my rural Cape Breton hometown as it is in Toronto. We need an action plan that properly diagnoses the problem across the country before we think properly about the solution.

To do that, a few suggestions, again very cost-effective, would be to streamline and promote more open access to existing sources of information, such as job vacancies and EI recipients. All of this must be done, of course, while we are mindful of privacy considerations, quality of information and data quality, but I assure you it can be done.

The third point under this strategy would be a cohesive and integrated approach to skills development. Here, too, I want to emphasize that skills are not the same as qualifications or credentials, and for far too long we have equated the two. Much of our programming and even the way in which we collect information and data is rooted in the old way of thinking that is based on qualifications and credentials and not skills. The good news here is that there have been significant investments in the past few years in the skills space. However, a comprehensive labour market strategy that includes testing and evaluating innovative approaches in partnerships in skills development would help make the most of those investments.

Finally, I would offer the following comment for the committee, which is that I believe we need to strengthen our culture of evaluation. No matter what new measure or policy we implement or attempt, we should make every effort, to the extent possible, as part of that framework to include an evaluation, one that goes beyond just monitoring and that is more about whether the program worked or didn't work.

Finally, from my international experience, I would say that, in Canada, I think we need to be more open in terms of accepting when something doesn't work. We can learn a lot from what doesn't work, but we need to think more strategically about how we integrate evaluation into all of the various initiatives.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Tobin.

From Cape Breton, we're going over to Alberta.

Many of us were watching the game last night. It was very exciting, and maybe we stayed up a little too late.

However, we have the Business Council of Alberta and Michael Holden with us for five minutes, please.

[Michael Holden, Vice-President, Policy and Chief Economist, Business Council of Alberta]

Thank you, Mr. Chair. The game was exciting, although I contend that we didn't get my desired result.

I'm pleased to be here this afternoon on behalf of the Business Council of Alberta. We are a non-partisan, for-purpose organization, comprised of the province's largest-enterprise chief executives and leading entrepreneurs. Our members represent the majority of Alberta's private sector investment, job creation, exports and research and development. We are dedicated to building a better and more prosperous Alberta within a strong Canada.

My comments this afternoon will focus on selected components of the 2022 budget, organized across three key themes.

The first theme is decarbonization and a clean energy future. With the right policies in place, Alberta businesses can and want to play an essential leadership role in reducing emissions domestically and globally. What is needed is clear, long-term, market-based policy certainty to accelerate the pace and scale of major investments, as well as policy that reflects important regional differences across Canada.

To these ends, we were happy to see a number of supporting initiatives in the budget. The introduction of the refundable carbon capture investment tax credit, the proposed $15-billion Canada growth fund and the broadening of the Canada Infrastructure Bank’s mandate to include support of private sector investment into hydrogen and carbon capture infrastructure are all important steps forward. However, a few pieces were missing.

First, decarbonizing Alberta’s economy in time to meet Paris targets will require a massive acceleration of project approval and regulatory timelines, yet the current regulatory process is slow and inefficient and reforming it was not a priority item in this budget.

One option that could help would be to create a regulatory NEXUS card to fast-track approvals for trusted project proponents and for major decarbonization projects. Second, the budget missed an important opportunity to support emissions-displacing exports of liquefied natural gas. The global need for LNG has been highlighted by Russia’s invasion of Ukraine and how the resulting high costs and limited energy access have forced countries to revert to higher-emitting alternatives like coal.

Beyond this, the budget overlooked some other opportunities to support the low-carbon energies and solutions of tomorrow. One is immediately expanding capital cost deduction allowances for a wider range of opportunities, like geothermal power and bitumen beyond combustion. Another is establishing Alberta as the world’s “living lab” for industrial clean-tech solutions. With concerted, long-term federal investments, Alberta has the existing asset base and skills to create and export valuable global solutions.

Theme two is a long-term growth strategy built on innovation and productivity. Productivity is a key determinant of long-term economic growth, and the business council has long been concerned about Canada’s lagging productivity levels relative to its OECD peers. With that in mind, we were looking for the budget to include a long-term growth strategy built on innovation and an improved policy environment that encourages business investment and scaling.

We were happy to see several such initiatives in the budget, in particular, the progress on establishing a council of economic advisers, the Canadian innovation and investment agency modelled after DARPA, the announcement of reviews on modernizing and simplifying tax support for R and D, intellectual property and the SR and ED program and, finally, the proposal to more gradually phase out access to the small business tax rate.

That said, details on many of these initiatives are lacking, making it difficult to comment on them, beyond stating that the ideas, at least, are welcome. We look forward to working with the government as it fleshes out these proposals.

My final theme is developing the workforce needed for the economy of tomorrow. Automation, technology development, the energy transition and the pandemic have converged to create stubbornly high long-term unemployment levels in Alberta. We were looking for the budget to provide a direct federal contribution to employment insurance to incentivize skills upgrades and an annual top-up to the Canada-Alberta Workforce Development Agreement.

We were happy to see the budget include plans to consult on modernizing EI to support workforce retraining programs, even if details were light. The emphasis on under-represented workers in the labour force and the focus on supporting innovative partnerships are critical to shaping a productive and relevant workforce.

We were also pleased to see labour supply and mobility measures proposed for trusted employers to access temporary foreign workers, a new tax deduction for relocation and travel expenses for tradespeople, and increased recognition of foreign health care worker credentials. However, the budget did not clarify the government’s just transition policy priorities. Likewise, the proposed futures fund for regional economic diversification and the emissions reduction plan’s promise of a clean jobs training centre were notably missing.

In summary, we believe this budget represents a step forward in several areas important to Alberta’s long-term economic prosperity. There is still much work to be done, however, and we look forward to continuing that process.

Thank you for your time. I would be happy to answer any questions when the time comes.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Holden.

Now we'll go to the C.D. Howe Institute for five minutes.

Go ahead, please.

[William Robson, Chief Executive Officer, C.D. Howe Institute]

Thank you very much.

I'll start off, and then I'll turn it over to my colleague Ben Dachis. We appreciate your inviting Ben and me to join you here today, and we hope our contributions will help you and your work on the 2022 federal budget and Bill C‑19.

By way of background, federal fiscal policy is a long-standing area of focus for the C.D. Howe Institute. Our work covers accountability and transparency, macro questions of debt and sustainability, detailed work on taxes and an annual shadow federal budget.

Our opening remarks will necessarily touch on only a few topics, mainly the elements of Bill C‑19 dealing with competition issues. We would be glad to answer questions on a wider range of topics if that would be helpful to members of the committee.

Although it's applicable to much more than Bill C‑19, I hope members will excuse my starting with a high-level comment about budgets and budget implementation bills, which is that there is too much in them.

A budget should be a fiscal document first and foremost. The key financial information—the pre-budget track for revenue, expense, the surplus or deficit, and the change in the accumulated surplus or deficit, plus what the budget projects are on those things—should be in the first 10 pages. Changes in taxes belong in budgets, as do changes in programs that affect expenses. Other program changes and commentary likely often belong in separate documents.

I have a comment about implementation bills. Even though Bill C‑19 deals with only some elements of the 2022 budget, it is a daunting document. Omnibus bills have a bad reputation for good reason, and I mean no disrespect to MPs but rather the opposite. I mean great respect to Parliament when I say that it ought not to be challenging for elected representatives to get on top of the text of a bill, let alone to anticipate the regulations and the contingencies and all the consequences.

Among the specific items that are covered in Bill C‑19 that Ben and I would answer questions on if there's interest would be the luxury tax. I did not know that Messieurs Mueller and Chartrand would be appearing on this issue. I think many economists would share the view that specific taxes of this kind are not good taxes. They distort purchases and production, as we've just heard from Mike and David. What they said about aircraft applies equally to motor vehicles and boats.

I'm not very enthusiastic about this but I'll say it anyway. If you think that it's really a good idea to single out specific products and services, use the GST. It's not as good as a low uniform rate on everything consumed, but it has some advantages compared to this.

Because Mr. Tobin...and we just heard also from Michael Holden on labour markets, I'll just quickly mention that a key test of any labour market policy—notably EI—is whether it impedes or promotes the matching of talent with opportunity. As everyone knows, the unemployment rate is at a record low. This is a good time to unwind provisions that encourage people in places or with employers that do not offer opportunities for stable jobs that pay well and offer advancement. We also would be happy, if people are interested, to answer questions with regard to vaping and the prohibition on foreign buyers of residential properties, among other things.

Let me just say that competition policy is a major focus of the provisions of Bill C‑19. It's also a major focus for the C.D. Howe Institute, particularly of my colleague Ben Dachis, who has been introduced already. He's our internal lead on the institute's competition policy council, and I turn my remaining time over to Ben.

[Benjamin Dachis, Associate Vice-President, Public Affairs, C.D. Howe Institute]

Thank you very much, Bill.

The C.D. Howe Institute's competition policy council, which is comprised of top-ranked competition law academics and practitioners, noted support for the government's intention articulated in budget 2022 to consult broadly on the role and functioning of the Competition Act and its enforcement regime. However, the scope of changes to the Competition Act in the BIA does not fulfill that commitment. The BIA contains major changes that, even if in the right direction, consultation might have improved the outcome. Many more changes, especially on increasing administrative monetary penalties, will be harmful to the Canadian economy and may even be unconstitutional.

The government missed key opportunities to consult with the various constituencies affected by the legislation. The government and this committee should reconsider the BIA's approach on Competition Act amendments. Now, if carving division 15 isn't feasible, which is my recommendation, the committee should call for, at a minimum, setting the proclamation date for all provisions, not just some, for a year from passage.

We also need to hear more from government on their plans for further consultation, as they had promised, so that these proposed changes could then be seen in concert with other proposed changes that would come as part of a prompt second stage of the Competition Act amendments.

Given my limited time for opening remarks, I'll stop there and leave further discussion of specific problems for the questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Dachis.

Mr. Robson, I understand you're only here until 4:30. Is that correct?

[William Robson]

That's correct.

[The Chair, Liberal, Peter Fonseca]

Now we'll hear from the Canadian Labour Congress, please.

[Siobhan Vipond, Executive Vice-President, Canadian Labour Congress]

Good afternoon, Chair and honourable members.

My name is Siobhán Vipond. I am the executive vice-president of the Canadian Labour Congress. I am honoured to be joining you today from the traditional unceded territories of the Anishinabe and Algonquin peoples.

We at the CLC speak on behalf of working people in Canada in every industry, occupation and region of the country. The congress welcomes many aspects of the budget implementation bill. The introduction of a labour mobility tax deduction, improvements to Canada's trade remedy legislation and restoring the prohibition on wage-fixing in the Competition Act are all steps that Canada's unions have been urging the government to take.

However, there is a great deal that is missing from this bill. Budget 2022 provides an additional $2 billion one-time top-up to provinces and territories for health services, yet health workers are facing dire staffing shortages and growing burnout. The bill fails to take urgent action to improve the retention and recruitment needed to address this crisis.

Also missing is action to help Canada's care workers, including in early learning and child care and in long-term care. To appreciate the scale of this problem, in March, Statistics Canada estimated the value of unpaid care at between $515 billion and $680 billion.

The budget takes steps on housing affordability and transit shortfalls, but it falls short of addressing the affordability crisis facing working people. The cost of food, fuel and shelter has shot up while wages lag far behind. Workers' spending power is falling. Living standards are declining for workers whose real wages are dropping at the fastest rate in memory. Pensioners who lost inflation-protected pensions are seeing their fixed incomes quickly eroded by soaring inflation.

The government should be urgently responding to this crisis by taxing corporate superprofits, housing speculators and the concentrated wealth of the richest Canadians; allowing wages to rise by strengthening labour standards and removing barriers to unionization; and strengthening social programs by implementing national pharmacare and dental care, quickly getting child care fees down and expanding free high-quality public transit.

Instead, the government is ramping up employers' access to vulnerable migrant workers, while the Bank of Canada is preparing to hike interest rates in the hopes that it will cool inflation. These measures are going to hurt working-class households and worsen inequality while doing nothing to tackle the entrenched power and corporate greed responsible for price-gouging and pandemic profiteering.

Let me end with some specific recommendations for amending Bill C-19, starting with the EI board of appeal.

For many years, labour and community organizations have struggled to restore important elements of the EI boards of referees that were scrapped by Stephen Harper's government in 2012. EI appeals should be heard by worker and employer representatives: people who understand their communities and the realities of workplace life.

Instead of the board of appeal reporting only to the government, we, Canada's unions, urge the committee to make the board of appeal answerable to the entire Canada EI Commission, including both worker and employer representatives.

We also urge the parties to restore the commission's lead role in selecting labour and employer members of the board. Historically, this was done in consultation with the commission's social partners, which included local labour councils. Workers have a right to regional representation and the option of an in-person hearing, another key recommendation of the 2018 tripartite review.

Establishing accessible, accountable social safety nets like our proposed changes to EI ensures workers have the support they need during turbulent economic periods. In our current climate of economic insecurity, workers must have confidence in the services they receive and the future of their employment. The proposed strategic policy review must not be a Harper-style attack on public service workers that opens the door to cuts and the privatization of services that workers and families rely on.

Thank you. I look forward to answering any questions you may have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Vipond.

Now we'll hear from the Federation of Canadian Municipalities before we move to members' questions.

We have Mr. Rubinstein with us here today.

You have five minutes, please.

[Daniel Rubinstein, Senior Director, Policy and Government Relations, Federation of Canadian Municipalities]

Thank you very much.

I’m Daniel Rubinstein. I'm the senior director of policy and government relations at the Federation of Canadian Municipalities. We're the national voice of Canada's local governments, representing 90% of Canada's population, coast to coast to coast.

We are grateful for every opportunity to discuss how our two levels of government can work together and improve the quality of life for people.

I'm pleased to be here today to speak to budget 2022 and relevant provisions in Bill C-19.

Budget 2022 equips local leaders with tools that deliver concrete results in our communities—the places where people live, work and raise their families. First, it recognizes that municipalities are essential partners in solving our greatest national challenges, including housing affordability. We know that tackling our housing crisis means getting all orders of government working together better and faster. The federal budget makes major investments to tackle common goals, from growing housing supply to taking important steps to end chronic homelessness.

Municipalities, which best understand local supply needs, welcome the housing accelerator fund. It has transformative potential to help get housing built faster, through direct and flexible investments, if we work together to design it with speed and results in mind. The fund can help communities regardless of size. From cities to fast-growing rural towns, the potential is there for sure.

We were also glad to see the budget commit to improving the rental construction financing initiative and the national housing co-investment fund. The changes could mean more affordable rental supply for more Canadians. That's a direct call from local leaders and FCM and really is a critical component to expanding housing supply options for all. Municipalities have significant ambitions to tackle the housing crisis, and these investments—especially the accelerator fund—give municipalities the ability to take action and grow the right kind of affordable housing supply for Canadians.

The budget scales up the rapid housing initiative and extends the Reaching Home program. Both are critical to support the shared goal of ending chronic homelessness in Canada. The rapid housing initiative has been a genuine success story. It's working, and FCM will continue to advocate for growing the rapid housing initiative into a long-term tool to eradicate homelessness.

One critical outstanding need is for a robust urban, rural and northern indigenous housing strategy. We look forward to discussing this further.

Let me now turn to a second important issue for the public, namely climate action.

With the support of the federal government, municipalities are ready to take action on climate change.

Municipalities are on the front lines of new climate extremes. The new investments in this budget, from broadening electrical vehicle charging infrastructure to building retrofits and nature-based solutions, provide municipalities with the tools they need to take local action on climate change.

We welcome the federal government’s recognition, in the emissions reduction plan, that municipalities are critical to achieving Canada’s 2030 emission goals. We look forward to working with this Parliament on the implementation of that critical plan to ensure that municipalities have the direct funding tools they need.

That brings me to a third focus area for the budget, which is strong communities of all sizes. We know that Canada’s recovery needs to take root in our rural communities, which represent one-third of the economy. In particular, we welcome new investments in natural climate solutions and wildfire prevention and also the commitment to ensure that growing rural and smaller communities can access the housing accelerator fund.

When we look at the scale of need for rural climate adaptation and disaster mitigation, it's clear there's more to do through the disaster mitigation and adaptation fund. The need for this is urgent, as we saw last year in B.C. and Atlantic Canada, and as we’re seeing right now with the flooding in Manitoba and the Northwest Territories.

Finally, many communities across the country are grappling with retroactive contract policing costs resulting from the new federally negotiated RCMP labour agreement, and rural communities will be particularly hard hit. This situation requires urgent federal attention and collaboration with FCM and affected municipalities.

The relationship between the federal and municipal governments is essential for the recovery Canadians deserve. Like never before, the past two years have exposed our most pressing national challenges. They have taught us that, when we work together across orders of government, we can face these challenges in a way that supports the economy, builds strong communities and ensures Canadians’ quality of life.

Local governments are ready to continue this vital work with Parliament, and the budget will help keep us moving in the right direction. That certainly includes the $750 million in emergency operating funding for transit that is included in Bill C-19.

Thank you.

I will be happy to answer any questions you may have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Rubinstein and all our witnesses, for your opening remarks.

We are now moving to our rounds of questions. In our first round, each party will have up to six minutes to ask witnesses questions. We'll commence with the Conservative party and have MP Chambers up first for six minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

It's wonderful to see everybody. We have quite a rich panel. Thank you for taking time out of your day to spend it with us.

I know that we have Mr. Robson only until 4:30, so I will direct my initial questions to Mr. Robson and the C.D. Howe Institute.

Mr. Robson, when the budget came out, a number of articles suggested that it was potentially a prudent budget. In fact, the government referred to it as a prudent fiscal budget. I did some quick math, and in terms of projected spending this year coming up versus prepandemic levels, it looks like spending will be up about 25% versus the year just before COVID.

What was your immediate reaction to the budget?

[William Robson]

Thank you for the question.

Like you, I suppose, Mr. Chambers, I am struck by the degree to which baseline spending, if we can refer to it that way, has been escalating with every budget and fiscal update, such that when the COVID-related measures recede, we are looking at a federal government that is considerably larger than it used to be. I understand that there are a lot of unmet needs the federal government is particularly well placed to satisfy, but the increase in operating costs alone is quite startling. The federal government has a big wage bill. It has a big pension liability, which inflation is going to make worse.

What I was hoping to see and didn't see in budget 2022 was a fiscal track that really gave us the room to rebuild the federal government's fiscal capacity for the next thing that comes along. We have a bit of a practice, it seems, of treating everything we encounter—the financial crisis of 2008-09, COVID just now and maybe Russia attacking Ukraine is in this category—as though they're all once-in-a-century events. I think a prudent fiscal track would restore fiscal capacity quickly in order for us to be ready for whatever comes along next.

Already in the presentations today we've heard about, for example, adaptation to climate change. That's very expensive. The federal government talks a lot about it, but I don't see the provision for that, which will surely be very expensive.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

You mentioned the times and the events that have happened over the last decade. At the beginning of COVID, a number of articles talked about how most governments have found Keynesian economics and everybody is a Keynesian now. Would you say that the budget or this government's fiscal plan reflects that methodology?

[William Robson]

The initial response to the pandemic seems to have been reasonably well calibrated to the crisis. In retrospect, we might have overdone it a little in those early months, but everybody clearly remembers how frightening it was and what it was like to be confronting the virus for the first time, not knowing how contagious it was, how lethal it would be and so on.

What is susceptible to some criticism is the degree to which both the fiscal and the monetary stimulus continued at the scale that it did. The evidence for this is that we have very high inflation. We have it in Canada. It's also evident in the United States, the U.K., Europe and many other places. A lot of jurisdictions made the same mistake. It's done now.

My comment now will be very much along the lines of what I said earlier, that it's time to restore our fiscal capacity. The worst of COVID appears to be behind us. We have to bring the economy's productive capacity up and restrain spending to bring them into line. I think the initial response was perhaps a little too big, but I think we can give people a pass on that. The difficulty is that it's gone on too long.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much for that.

I remember that, before we had the budget and you were in front of the committee, one of your recommendations was to look at that top-line spending number versus the deficit or the debt number. Obviously, government spending does lead to inflation, as you warn and some other comments have warned, so it's important to look at that top line.

In my remaining minute, I would love to get your comments on the process. You mentioned the large omnibus budget bills and maybe making them smaller. Do you have a second preference?

We're in this era where it looks like these omnibus budget bills are here to stay, with two successive administrations using them. Do you think we need to set budget dates and a longer period of time to be working through some of these bills? Would that be a second order or a fallback position for you, or do you really think we need to try to get back to tens of pages of budgets versus hundreds?

[William Robson]

I think a shorter budget does make sense.

If you look at the provincial budgets, you'll see documents that are much closer to what I described. They're businesslike documents. The key numbers are up front. There is not a lot of commentary—an uncharitable person would say “political spin”—and an MP, somebody who is not a financial expert, can readily find key numbers and make sense of them.

Federal budgets are uniquely bad. This goes back a number of years. It's not a partisan comment. We now, though, have this situation where the actual summary statement of transactions, which is the key fiscal statement in the budget, is not even in the main document. It's in an annex.

I think that simply reorganizing budgets and committing to putting the fiscal information front and centre would be a good start.

Omnibus bills are frequently decried, and we have seen election platform commitments not to do them. I think those impulses are well founded. It's tempting to resort to them once in power, but there are too many examples of legislation passed in haste where elected representatives simply did not have the bandwidth to examine them properly. There is no reason why individual pieces of legislation that deal with different things could not be sliced up.

Bill C-19 is not uniquely bad in this regard, but if you look at the range of topics covered in it, there is no way that even as committed and as able a committee as this one can really be expert on everything that is in front of you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Robson.

Thank you, MP Chambers.

We are moving to the Liberals for questions. We have MP Baker up for six minutes.