Finance Committee on Nov. 28th, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order. Welcome to meeting number 69 of the House of Commons Standing Committee on Finance.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Wednesday, November 16, 2022, the committee is meeting to discuss Bill C-32, an act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022, and certain provisions of the budget tabled in Parliament on April 7, 2022.

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 virtually using the Zoom application.

I'd like to make a few comments for the benefit of 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. Please mute it 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. I would remind you 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 best we can, and we appreciate your patience and understanding in this regard.

I would now like to welcome our Deputy Prime Minister and Minister of Finance, the Honourable Chrystia Freeland. Joining the minister from the Department of Finance, we have the associate deputy minister, Nicholas Leswick, and the assistant deputy minister of the tax policy branch, Miodrag Jovanovic.

Thank you for joining us.

Minister, we are all ears for your opening remarks.

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

Thank you very much, Mr. Chair and committee members.

I really want to thank Nick and Mio for being here with us today. Both of them, and all of our officials in the Department of Finance, have really been working remarkably hard, and I'm really grateful.

Mr. Chair, it's a pleasure to appear before you and the members of the committee to discuss Bill C‑32.

I would like to explain to you why it's so important that we work together to pass this bill.

First of all, we're permanently eliminating interest on Canada student loans and apprentice loans, which will save students an average of $410. We've also provided the necessary funding to extend this measure to Quebec students as well.

We're cutting taxes for Canada's growing small businesses from 15% to 9%. This is the delivery of a key commitment we made in the spring.

We're permanently increasing the corporate income tax rate of banks and life insurance groups by 1.5%, and we're implementing the Canada recovery dividend, which is a one-time 15% tax on their income above $1 billion to support Canada's COVID recovery.

Bill C‑32 will also enable us to implement our plan to make housing more affordable.

We're creating the first home savings account. This account will help Canadians make a down payment sooner by enabling first-time buyers to save up to $40,000 for that purpose.

We're offering a multigenerational home renovation tax credit of up to $7,500 to enable Canadian families to house a grandparent or a family member with a disability who decides to return home and live with them.

By ensuring that profits from the resale of properties held for at least 12 months are fully taxed, we will help ensure that houses serve as homes for Canadians, not frequently flipped investment assets.

We will also help reduce closing costs by doubling the first-time home buyers' tax credit to provide $1,500 to cover increased closing costs associated with the purchase of a first home.

One of the pillars of the fall economic statement was about growing our economy and creating good jobs, and this legislation helps deliver on that.

We're launching the Canada growth fund, which will help bring to Canada the billions of dollars in new private investment required to reduce our emissions, grow our economy and create good jobs at the same time, and we're delivering a new 30% critical mineral exploration tax credit that will help make Canada a global leader in an industry that is essential for everything from electric cars to cellphones.

Before I close, Mr. Chair, I also know that you will be hearing from witnesses about the Canada workers benefit. The Canada workers benefit tops up the incomes of our lowest-paid and often most essential workers. No one who works 40 hours a week should have to worry about paying the bills or putting food on the table. In budget 2021, we expanded and enhanced the Canada workers benefit to reach three million Canadians who do important jobs but don't get paid very much. The Canada workers benefit can mean up to $2,400 for a working couple every year.

The government currently delivers the Canada workers benefit through tax returns. That means that eligible Canadians need to wait until the tax year is over to receive the money they have already earned, but bills need to be paid throughout the year. That's why in the fall economic statement we further improved the Canada workers benefit. We've expanded the Canada workers benefit to reach up to 1.2 million additional hard-working low- and modest-income Canadians. This was an intentional policy choice, and it means the CWB will top up the income of up to 4.2 million of the lowest-paid Canadians.

Going forward, eligible workers will receive advance payments of the Canada workers benefit based on the income they made last year. Advance payments will be made in July, October and January based on a worker's income in the previous year.

Mr. Chair and members of the committee, Canada has the smallest deficit and the lowest debt-to-GDP ratio of all the G7 countries.

A few hours after the fall economic statement 2022 was tabled, Moody's reconfirmed our AAA credit rating with stable outlook. In October alone, 108,000 jobs were created in Canada, which means that 513,000 more Canadians are working today than before the COVID‑19 pandemic. Our economy is now at 103% of what it was before the pandemic, and our economic growth since the start of this year is the strongest of all the G7 countries.

Canadians are standing strong and our country's economy is resilient. Consequently, we can all rest assured that we'll pull through, just as we've made it through the last two and a half years.

Thank you, and I'll be pleased to answer your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, Minister, for your opening remarks.

The members have many questions, I know, and we're going to move into our first round of questions.

Minister, in this round, members will have up to six minutes for each party.

We're starting with the Conservatives and MP Hallan for six minutes, please.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Thank you, Mr. Chair.

Thank you to the minister and the officials for being here.

Minister, the state of the economy right now is very concerning to everybody. Your government caused the worst inflation we've seen in 40 years: $110 billion added to the national debt before COVID even started, and over half a trillion in the last two years, 40% of which wasn't even COVID-related.

When our leader, Pierre Poilievre, was warning your government that there was going to be inflation, you claimed that it would be deflation. As inflation was taking off, you claimed it would be transitory. Inflation has been above the target rate since February of 2020. When you were telling your cabinet colleagues to find a dollar of savings for every dollar spent, you went on and added $52.2 billion in new inflationary spending in the fall economic statement.

You also asked how you could not afford to borrow when interest rates were so low. Then you failed to lock in those rates, and now we've seen the biggest interest rate hikes in history due to your inflation. The Governor of the Bank of Canada said at this committee that Liberal spending has driven up inflation, and he will have to continue high interest rates.

Why should Canadians trust that anything your government will do is actually going to be fiscally responsible?

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

First of all, thank you, Mr. Hallan, for the question or, I should say, questions because there were a lot of different points raised in that opening volley.

Let me make some different points in return.

I'd like to start by pointing out that, at a time when elevated inflation is a global phenomenon, our government is taking an approach that is balanced, that balances—

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

I'm sorry. I'd like to push back on that. You're claiming that it's a global problem, but the Bank of Canada—

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

Excuse me. It was a long question—

[The Chair, Liberal, Peter Fonseca]

MP Hallan, the question did go on for well over about a minute and a half, so please allow the minister to answer the question.

Please, direct everything through the chair, both to the witnesses as well as the MPs. Thank you.

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

Thank you very much, Mr. Chair.

Let me begin by pointing out that, at a time when inflation is a global phenomenon, our government is taking a balanced approach, an approach that balances fiscal responsibility with compassion.

Let me talk about the fiscal responsibility in our plan. Canada today has the lowest deficit in all of the G7. Canada has the lowest debt-to-GDP ratio in all of the G7, and just hours after I tabled our fall economic statement, we reaffirmed Canada's AAA credit rating—

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Mr. Chair, I only have a limited amount of time, and we did—

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I have a point of order, Mr. Chair.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

—hear this in the opening statement.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I think we owe it in this committee...and Mr. Hallan has reminded me in the past how important it is that we give the witness at least equal time in a response to the question as the questioner takes in asking it.

Mr. Hallan took, as you pointed out, Mr. Chair, a minute and a half. We should give the minister a chance to respond. I think everyone is eager to hear the answers to the questions.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

I would just say that we heard that in the opening statement already, and I only have a limited amount of time.

[The Chair, Liberal, Peter Fonseca]

MP Hallan, the minister is answering your question. Allow the minister to answer the question, and then go on to your next question.

Minister, please finish off this question, and then MP Hallan can continue.

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

Just hours after I tabled the fall economic statement, Moody's reconfirmed Canada's AAA credit rating with a stable outlook. That makes Canada the third-largest AAA-rated economy in the world, and it speaks to our government's sound fiscal management.

We also know that now is the time when Canadians need compassion. That's why I'm very pleased that, just this fall, we've managed to double the GST credit, provide rental support to people struggling to pay their rent, provide dental care, provide permanent—

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Mr. Chair....

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

—elimination of interest on Canada's student loans, and augment the Canada workers benefit.

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

Mr. Chair, the minister talks about global problems, and it seems like everything is anything but the Liberals' problem. However, it's completely the opposite, and I will assure the minister that most Canadians don't care about a rating from Bay Street. Most Canadians don't know what that rating even is. What they know is that the inflationary spending her government has done is putting more of them into food banks and leaving them to pay more for their mortgages and to worry about insolvency. The Governor of the Bank of Canada told this committee that the nearly 7% inflation rate that her government caused is going to cost each Canadian $3,500 next year. Again, blaming all other factors is completely avoiding the situation they've created.

The governor also said at this committee last week that, had their government not spent as much as it did, inflation wouldn't be this bad. He noted that with inflation at nearly 7%, every Canadian will be paying $3,500 more. As 50% of variable-rate mortgages are now hitting the trigger rate, one in five Canadians are skipping meals or reducing how much they eat, and the majority of Canadians who answered a poll said that they couldn't survive a recession if it lasted longer than a few months. Your government put Canadians in this position, and your future Liberal leadership opponent, Mark Carney, even admitted to a Senate committee that inflation is a domestic problem not a global problem.

We know that the relief measures proposed in Bill C-30, Bill C-31 and the FES will be evaporated by inflation, so why is the government not trying to tackle the actual root cause of the mess that it created?

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

Mr. Chair, I'll start with the beginning of that very long set of comments.

I'll start by saying that I actually do think Canadians care about Canada's AAA rating. I think Canadians are smart, and I think Canadians understand that Canada's AAA credit rating represents a non-partisan verdict on the management of our government's finances. What it says is that a professional rating agency, whose job is to determine whether our government's approach is fiscally sustainable, has said, yes, it is. I think Canadians understand that, setting aside the sound and fury of partisan debate, it does really matter.

I will offer for the Canadians listening another objective, non-partisan verdict on our fall economic statement. I will quote from the Globe and Mail, which doesn't always agree with our government's policies: “It is, broadly speaking, the right approach. ...Canada [has] the slimmest government shortfall in the G7. In inflation-fighting terms, that has Liberal fiscal policy looking pretty good, especially graded on a curve.”

That's an objective, non-partisan judgment, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister and MP Hallan.

We'll now move to the Liberals for six minutes.

MP Baker, go ahead, please.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

Thanks very much, Minister, for being here with us today.

Before I get into my questions, I want to address something MP Hallan raised. We know that inflation is global in nature. We know that because we know that countries around the world are experiencing it. We know what those causes are. Countless credible, objective economists and experts—people who have studied this—have said that there are a number of causes. Two of the key ones are the supply chain bottlenecks that resulted post COVID-19 lockdowns and the war in Ukraine, which has particularly caused the price of food and energy to go up around the world. These are global markets for food and energy, and therefore cost increases in one part of the world result in cost increases in other parts of the world.

We know what's causing inflation. We know it's global. We know that inflation in Canada is lower than in most of our peer countries. Therefore, we know that Mr. Hallan's assertion, and the Conservative assertion, that somehow inflation is homegrown is completely untenable, illogical and counter to the facts.

I just wanted to share that perspective with you, Minister.

As I listened to you deliver the fall economic statement in the House, it was clear that you presented a plan that was meant to grow the economy, create opportunities for Canadian workers, attract investment and work on increasing productivity in Canada while also providing relief to Canadians—which you spoke to in your opening remarks—who are struggling with the increasing cost of living to pay their bills.

There are a number of policies in the fall economic statement. I won't cite them all, but there are a few highlights that I think are important for my constituents in Etobicoke Centre. I think about the elimination of the interest on Canada student loans. I think about the first-time homebuyer savings account, which gives first-time homebuyers the ability to save up to $40,000 tax free. I think about the introduction of the anti-flipping tax, which is of particular relief to many in my community. I really think it's important that all of us, on all sides of the House, particularly on this committee, work hard to get these measures passed as soon as possible so that we can get this assistance and support to Canadians who are struggling with inflation as soon as possible.

Minister, many of my constituents have told me that they want us to be there to help Canadians through this difficult time, but they also want us to spend within our means and be fiscally responsible. Could you share with us the metrics that you think are the most useful in evaluating our fiscal health? How are we performing on those metrics in comparison with our past performance but also in comparison with countries around the world?

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

Thank you very much, Mr. Baker, for your comments, for your hard work on this committee and also for your hard work in support of Ukraine.

When it comes to the metrics, the important ones to look at are Canada's debt-to-GDP ratio, particularly compared to our G7 peers. We have the lowest debt-to-GDP ratio. We need to look at Canada's deficit. In comparison with our G7 peers, we have the lowest deficit. I do think our AAA credit rating is really relevant. That's an objective marker.

All of us around this table understand that inflation is a real challenge for Canadians. This is a difficult time, particularly coming as it does after more than two years of a really difficult fight against a pandemic, but we do Canadians a disservice when we fail to place the Canadian experience in a global context. Canadians deserve to know, from us, what's also happening in the rest of the world.

Let me just read you the October inflation numbers from a few other countries with which we often compare ourselves. The Canadian inflation rate in October was 6.9%, which is definitely too high. It was the fourth consecutive month in which inflation had been stable or falling. Here are the inflation rates in a few peer countries: 14.3% in the Netherlands, 11.1% in the U.K., 10.7% in the euro area overall, 10.4% in Germany and 7.7% in the United States.

That global context is definitely important to bear in mind.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I want to ask you about one of the specific measures that is in the fall economic statement, which is the anti-flipping tax. I'm wondering if you could share with us, with Canadians who are watching this hearing, what impact that will have.

Why did you introduce this? How will it benefit Canadians?

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

As we heard just now in question period, and as we're going to hear around this table this afternoon, all of us disagree about many things, but there are some things we agree on. One of those things is that every Canadian has the right to a place to call home.

A concern that many of us share, certainly a concern of our government, is that housing shouldn't become a speculative asset. Homes should be for Canadian families, so this anti-flipping tax is a measure that is designed to ensure precisely that.

I do have the chance to personally thank Mio and his team for the unprecedented, and I think very powerful, tax measures they have put in place to help Canadians afford a place to call home.