Finance Committee on Oct. 3rd, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting number 59 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 108(2) and the motion adopted on Wednesday, September 28, 2022, the committee is meeting to discuss Bill C-30, an act to amend the Income Tax Act.

Today's meeting is taking place in a hybrid format, pursuant to the House Order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

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 either “floor”, “English” or “French”. For those in the room, you can use the earpiece and select the desired channel.

I remind everyone 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'd now like to welcome before us the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance.

Welcome, Minister.

The minister is accompanied by officials from the Department of Finance. We have with us Nicholas Leswick, assistant deputy minister, and Lindsay Gwyer, director general, legislation, tax legislation division, tax policy branch. They are here by video conference, members, so if you are asking a question to one of the officials, you may want to look at the screens.

Also here is Pierre Leblanc, director general, personal income tax division, tax policy branch.

Minister, before your remarks, just on a personal note, I know how strong you have been in supporting Ukraine. We do have a number of Ukrainian—well, my wife is of Ukrainian descent, and I know Julie is also of Ukrainian heritage, and of course Yvan Baker is. I'm not sure about any other members. On behalf of all of our committee, I want to thank you for the great support that you have provided to Ukraine, and I think I speak for all of us here when I say that we are celebrating the gains that Ukraine has made in the last while. Thank you, Minister.

The floor is yours for your opening remarks.

[Chrystia Freeland, Liberal, Deputy Prime Minister and Minister of Finance]

Thank you very much, Mr. Chair.

I believe Nick is also of Ukrainian descent.

I think maybe one of the things we are all united on is our support for Ukraine, whether you are of Ukrainian descent or not. Thank you for starting there.

Mr. Chair, it's my pleasure to appear before you and members of the committee to discuss Bill C-30, the cost of living relief act, which would deliver targeted tax relief to the Canadians who need it most by doubling the goods and services tax credit for six months.

That would mean up to an extra $234 for single Canadians without children, nearly $500 for a family with two children, and an extra $225 on average for seniors.

This is additional support for roughly 11 million eligible people and families.

And Bill C‑30 is just one element of our new support package. As members of this committee know, Bill C‑31 includes a Canada Dental Benefit and a one-time top-up to the Canada Housing Benefit.

If we pass these two further pieces of legislation, up to half a million children under 12 will be able to go to the dentist. Low-income renters, some of the most vulnerable among us, will receive a little extra breathing room.

These measures are part of our affordability plan, which has already been putting more money back in the pockets of Canadians this year. We've enhanced the Canada workers benefit and we're cutting child care fees in half by the end of the year. In July we increased OAS by 10% for seniors 75 and older, and we doubled Canada's student grants until July 2023.

Mr. Chair, our plan is targeted, fiscally responsible, and supports the most vulnerable Canadians: our lowest-paid workers; low-income renters; families who can’t afford to have their kids see a dentist. And we are doing it in a way that will not pour unnecessary fuel on the fire and allow inflation to become entrenched— something that would make life more expensive for everyone for years to come.

But we cannot compensate every single Canadian for rising costs driven by a global pandemic and by Putin’s invasion of Ukraine. To do so would only make inflation worse. Canadians are smart, and I know they understand that.

And so as Canadians cut back on costs, so, too, will our government. We will do our part to not pour fuel on the fire.

We committed to a $9-billion cut in government spending in our spring budget. Canada does have the lowest deficit this year in the G7. We have the lowest net debt-to-GDP ratio in the G7. Our AAA credit rating was reaffirmed this year by Moody's, S&P and DBRS, and our new targeted inflation relief measures have an incremental cost of just 0.1% per cent of Canada's GDP, an incremental cost of $3.1 billion.

This legislation is about finding a balance between compassion and fiscal responsibility. This support is the right thing to provide to Canadians now, when they need it. Canada can afford to be compassionate to the most vulnerable among us, and we will be.

I'm happy to take your questions now.

As you said, Mr. Chair, we have finance department officials here who can answer questions too.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister, for those opening remarks.

We are going to start with our first round of questions. We're starting with the Conservatives. They have the floor for six minutes.

Go ahead, MP Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair. Thank you, Minister, for being here today.

Minister, are you aware that the finance department is currently conducting an inflation study?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Finance conducts many studies, and of course it's important for them to be looking at inflation—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

The finance committee is conducting one.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Oh, the finance committee. Sure. Of course I am.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

You know that we have been eager to have you come before finance committee, as was laid out in the motion, to come and have a deep dive into inflation. Are you aware of that?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I am glad to be with you here today and dive into anything you'd like to talk about.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It's curious, Minister, that you only seem to want to show up here when you're asking for $2.6 billion in taxpayers' money. It's just odd that you would only come for that. I do hope you will be coming back for the full inflation study, because I think there are a lot of issues outside BillC-30 that we need to have a discussion on.

Minister, given the hard work that should have been done over the summer, there's been a lot of criticism about the spending of this government, particularly from a macroeconomic viewpoint. You alluded to this in your own opening comments about adding fuel to the fire.

In chapter 9 of your own budget 2022, you talked about a pause on certain spending of up to $3 billion, as well as a strategic policy review by Treasury Board.

Why, Minister, did you not use the summer to say that we're going to be giving more supports to Canadians through GST tax relief but at the same time shelving or postponing or stopping spending so that you would lessen the issue of inflation? Why did you not do that work?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Mr. Albas, I think that is exactly what our government is doing.

As I said in my remarks, our government believes that today we need to find a balance. The balance needs to be between providing targeted support to the most vulnerable Canadians who need it while maintaining real fiscal responsibility.

I think the support we're talking about today, the GST tax credit, is actually support that everyone around this table agrees is the right thing to do. It's exactly what the IMF is recommending. It's targeted, it's focused, it reaches the people who need it the most, and we have really been careful to keep an eye on spending. We recognize that now is the time for fiscal responsibility. The budget in the spring was fiscally responsible. As I said in my opening remarks, Canada today not only has the lowest debt-to-GDP ratio in the G7 but also the lowest deficit in the G7. We are finding that balance, and I look forward to getting support from all members of the House for that balanced approach.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Minister, a balanced approach would mean that as you offer something, in this case targeted tax relief, you would also then correspondingly make sure there are cuts. That isn't the case. Since you're so much about fiscal responsibility, Minister, maybe you could tell us when you believe the budget will be balanced.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Again, as I said in my opening remarks, we are taking clear steps to show fiscal responsibility. One of those steps is a really responsible budget that we tabled in April. Let me really underscore that it's the lowest deficit in the G7. It does include a $9-billion cut to government spending.

I know that Canadians right now are having to make careful choices in their household budgets, and I think it's quite reasonable of them to expect the same careful management by the government of the country's finances. That is exactly the approach we're taking.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Most families, when they balance their own budget, know when they will come back into balance, Minister. I really would hope that you would start doing the hard work, because both Conservative and Liberal ministers of finance have worked very hard in the past to come to the Commons with a balanced budget, and if you can't even give us a date, that's says to me that it's still just talk.

Let's talk about Bill C-30 as it is.

This one-time help, which Conservatives do support, is welcome relief for families. As you said, it's about $467 of support through this bill. Now, contrast that with the fact that the average family of four is now spending over $1,200 more each year to put food on the table, and that's not to mention the rising costs of heat, gasoline and rent. Do you acknowledge, Minister, that this bill is not enough to fill that shortfall for these Canadians who would be targeted by Bill C-30?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Mr. Albas, as I said in my opening remarks, the careful balance that the government must find right now as Canadians grapple with inflation and as the Bank of Canada fights inflation is quite different from what we needed to do when COVID hit and we had to shut down the economy.

When COVID hit, we said—we as a country decided—that we were going to close things down to save lives, and we did save lives. A study over the summer led by David Naylor showed that 70,000 additional Canadians would have died had we suffered U.S. levels of mortality. We did the right thing, but we actually all collectively said—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Minister—

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I'm getting there. I'm getting there, okay? It's an important contrast.

We collectively said that we needed to shut down the economy, and in order to ask people to do that and to prevent economic scarring, it was necessary for the government to put a floor under the economy to support businesses and to support households.

The inflation and affordability challenge is quite different. We cannot fully compensate every single Canadian family and every single Canadian business for the higher costs of inflation. If we did that, it would be the Sisyphean struggle, and we would be pumping huge oceans of money into the economy and making the Bank of Canada's job even harder.

That's why—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Well, Minister, I'm really glad you raised the Bank of Canada—

[Chrystia Freeland, Liberal, University—Rosedale, ON]

—we're being careful of how we characterize what we're doing.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Albas, and thank you, Minister. That is the time.

We are moving to the Liberals for questions. I have MP Dzerowicz for six minutes, please.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I want to thank the minister for being here with us today to speak on Bill C-30.

I also want to note that I very much appreciate that you've mentioned that you're very happy to take questions on inflation. Inflation is indeed an extraordinarily important study that is before our committee right now. I'm also very happy that my colleagues on the other side are taking the opportunity to ask questions.

You've been talking a bit about the pandemic and you've mentioned some of the positive track record that we have as we're coming out of COVID. We indeed have had a remarkable return to growth coming out of the lockdown days of COVID. You've mentioned the top GDP growth of the G7 this year, the recovery of over 100% of our jobs, and our low debt-to-GDP ratio, but I will say to you, despite all of this, that if I talk to people in my riding of Davenport, they will say that they continue to be worried. They see the rising costs of food. They see that in general their cost of living is going up. They're a little worried because it's unpredictable for them and it seems like there is no end in sight.

I know that we have a number of new targeted measures that we're introducing to help with the increased cost of living, but can you spend a minute or two to tell us why it continues to be important for Canadians to be contributing to the Canada pension plan and to employment insurance?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you very much, Ms. Dzerowicz.

Let me just say that I think it's important for all of us sitting around this table in the House of Commons to recognize that for Canadians who are struggling with the cost of living, the challenges are real and that all of us are addressing those challenges from a really privileged position. Things are hard for a lot of people right now.

The bill that we are chiefly discussing today won't solve everything, and I think it's important for us not to claim otherwise, but it will provide real support, real inflation relief, for 11 million Canadian households, for people who really need that help. I think that is why all of us around the table now support it. I hope that we will all see our way to supporting the $500 payments—one-off, one-time payments—to help Canadians who are struggling to pay their rent. Again, that's a targeted measure for people who are renting who are among the most vulnerable people among us.

Finally, I want to offer a pitch for dental care. I know people in your riding and in mine talk about it a lot, and I have to say—and I will turn to Mr. Julian to recognize the work we are doing together with the NDP on this—that if we step back, I hope all of us would agree that Canada shouldn't be a place where kids don't get to go to the dentist just because their parents don't have enough money.

You referred to the CPP and EI, and I'm glad you raised those two essential programs. You're right: The reality today is that the global economy is volatile. There are a lot of challenges. Countries around the world are grappling with high inflation—higher, in fact, than here in Canada. The war in Ukraine continues. I strongly believe that in these times of uncertainty, it is our responsibility as legislators to give Canadians the security that comes from knowing that their pensions are going to be there when they retire and need them and that EI is going to be there if they lose their jobs. That's why our government strongly believes that it would be a real mistake and a dereliction of our duty towards Canadians to do anything to harm the integrity of these two essential programs.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you. I have one more question.

I think we've all been seized by the horrible devastation from hurricane Fiona on the east coast. It's been very emotional to see. We know that climate change is accelerating faster than anyone has predicted and we know that we're going to see far more hurricane Fionas and Lytton, B.C.s, and far more devastating impacts to many parts of Canada as a result of climate change moving forward. Davenport residents have told me very clearly that they want us to continue to accelerate and decarbonize and move to net zero as quickly as possible.

My question to you, Minister, is this: How do we balance the need to aggressively move to net zero by 2050 by investing in the things we need—adaptation, resiliency, reducing emissions—while also making life affordable for Canadians and ensuring a strong quality of life?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I think that is an excellent question, and in some ways it is the central question of our time. I don't think that any of us should understate the challenge that the green transition is posing to Canada and the whole world. Olaf Scholz, who came to Canada this summer, said to me once, when he was still finance minister, that the green transition is the biggest economic transition that the world has faced since the industrial revolution. That is huge, and I think we need to understand the magnitude of what we need to do.

As Canadians in a small export-oriented economy, we need to understand that the green transition is happening. The world's major economies are partners; the EU and the United States have decided that this is where they're going. You started your question by talking about Atlantic Canada and the planet, and of course that's a really important reason that we need to act on climate, but there's also a kind of cold, hard economic reason: It is where our partners are moving decisively. Canada needs to move there too.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister, and thank you, MP Dzerowicz. We've gone past the time, but thank you.