Evidence of meeting #86 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was question.
A video is available from Parliament.
Director, Trade and Tariff Policy, International Trade Policy Division, Department of Finance
That is correct. It is to incite importers to diversify and source away from these countries.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Thank you very much for that.
Chair, how much time do I have?
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Okay.
Just quickly, division 1 of part 4 would see the government put in place a single non-profit external complaints body for banks. For the folks at home who aren't familiar with this, what's the problem that the government is trying to address with this measure or proposal?
Acting Director, Consumer Affairs, Department of Finance
Thank you for your question.
Consumer groups have made several recommendations and suggestions in terms of how to improve the external complaints handling system. Some of the changes being proposed here are to provide the commissioner of the FCAC, the Financial Consumer Agency of Canada, with more oversight over the external complaints body system; and to improve the policies and procedures at these external complaints bodies that will be subject to the commissioner's approval
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Baker.
MP Ste-Marie, you have two and a half minutes, please.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
My question is about the amendments to the Canadian Environmental Protection Act. In my opinion, they are a step backwards because they will encourage oil companies to take their time before addressing climate change. Let me explain. The carbon tax that large emitters pay is used to fund green projects in the province where it was collected. Right now, if the oil companies don't propose any green projects, they lose that money at the end of the year. Yet, Bill C‑47 invites them to take their time. If this bill passes, the money will be set aside for future use. Therefore, oil companies will not have to put a project in place in the same year. I would like confirmation of that.
I remind you that, if municipalities do not use the carbon tax money for infrastructure in the current year, they lose it. With Bill C‑47, this would not be the case for oil companies. I would like you to confirm that.
Director General, Federal-Provincial Relations and Social Policy Branch, Department of Finance
There is no one here today to answer that question, but we are taking note of it. I think another department could answer that question.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Okay. I would appreciate it if you would follow up and send us a written confirmation on that.
I'd like to follow up on the issue that Mr. Blaikie raised about deposit insurance in division 37. We know that this is a response to bank failures or problems, either in Switzerland or in the United States, as in the Silicon Valley Bank example. In the U.S., the deposit insurance limit is $250,000 U.S., whereas in Canada it is $100,000. It used to be $60,000, but was increased after a study.
At the beginning of COVID‑19, there was agreement to increase that cap, and now there is agreement to increase it again. If every time there is a financial crisis, we have to pass temporary legislation to increase this amount, doesn't that make it seem like a $100,000 cap is not enough?
Senior Director, Housing Finance, Department of Finance
Thank you for your question.
This legislation allows the minister to increase the deposit insurance limit, which remains at $100,000 per deposit across the nine different categories of deposits. It is temporary. It is to be used only in exceptional and emergency situations. The thinking is that given the current situation and the banking turmoil that we saw in the U.S. and in Switzerland, it was a prudent thing to do.
As you pointed out, there was a legislative provision in the early days of COVID through the emergency legislation that Parliament passed that gave the minister that authority as well, and that expired without having been used.
I'm sorry. Bear with me. I forgot to introduce myself. I'm Rachel Grasham. I'm acting today, so excuse me for not having all the facts right at my fingertips.
On the $100,000 limit, I understand that this limit has been reviewed and the decision was to maintain it at $100,000. As I noted, it really is under—
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Ms. Grasham, you could send us any additional information in writing. Thank you very much.
Liberal
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
My question is about division 6 of part 4. This would allow, despite sections 27 and 27.1 of the Bank of Canada Act, any of its ascertained surplus to its retained earnings until its retained earnings are equal to zero. I just want to confirm my understanding of this. This isn't an ongoing authority for the Bank of Canada to be able to apply its retained earnings against losses. It's a time-limited authority, again, in a manner of speaking, to be able to offset the losses that it has already incurred as a result of the change of the increase in interest rate and the bonds buying and selling that it did during the pandemic in order to be able to finance the Government of Canada's income support programs, among other things. When those liabilities are covered or that difference on its asset sheet is made up, there's no ongoing authority for it to be able to do this. It's like a one-off.
If someone could speak to how we got to where we are and how this is a solution to that—and only that, as opposed to an ongoing authority—it would be helpful for the committee.
Gloria Wong Director, Crown Corporations and Currency, Department of Finance
Mr. Chair, my name is Gloria Wong. I'm a director in the Department of Finance.
Thank you for the question.
Yes, the measure with respect to section 27 of the Bank of Canada Act is meant to be temporary. There is no long-term obligation for the government. The provision will expire once the Bank of Canada returns to positive equity or other losses associated with GPTP are covered.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
I think that's it for me for this round.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Blaikie and Ms. Wong.
We will now go to MP Morantz for five minutes.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Thank you, Chair.
Continuing about PSP Investments, I just want to clear up a few things.
You said that PSP management does have experience in venture capital. I didn't spend a lot of time looking for that, but I couldn't find any evidence of that. I'm wondering if you could table that information with the committee.
The reason I am asking is that on the PSPIB's website it does say, “PSP Investments' statutory mandate is to...Invest its assets with a view to achieving a maximum rate of return, without undue risk of loss”.
The technical backgrounder for the Canada growth fund says, “Risks the Canada growth fund will mitigate” are demand risk, policy risk, regulatory risk and execution risk. It states that “These risks, separately or in combination, are limiting the deployment and scaling of private investment because of the uncertainty they create about an investment's longer term financial prospects.” Moreover, “[The Canada growth fund] will invest in a manner that accepts some portion of these risks”.
That is more akin to a venture capital fund. So I am just unclear as to where the expertise lies? I don't question the expertise of the PSPIB as a pension fund manager. What I am wondering is why they've now seconded a team, or will be seconding a team, to provide advice on what is essentially a much more risky endeavour, which is to mitigate the risk for private enterprise, for new start-ups, or for other types of businesses or technologies.
I don't expect you to answer that here, but if you could think about that and come back with an explanation, I think that would be very helpful for the committee.
On the Bank of Canada, I just want to follow up on what Mr. Blaikie was talking about. Your briefing notes said that the losses the bank has incurred because of the quantitative easing program—in other words, the fact that they are now paying more interest on settlement proceeds than they were receiving on the bonds they purchased—would have virtually no impact on the government's budgetary balance. I thought that was an interesting choice of words. It wasn't “no impact”; it was “virtually no impact”.
When we had the bank governor and the deputy here, they said that in the good times they were paying about $1 billion a year. That doesn't fit, in my mind, with the words “virtually no impact”.
You said that it's virtually no impact because the government will have to pay the interest on the additional debt it incurs. However, the fact of the matter is that there is at least $1 billion in revenue the government is not receiving. Why would you say that has virtually no impact on the government's bottom line?
The second part of my question is this: How long will this go on, and what will the total cost of this action be to the government treasury?
Director, Crown Corporations and Currency, Department of Finance
Thank you for the question, Mr. Chair.
In response to the budgetary impact of section 27 of the Bank of Canada Act, you are correct that there is a cash flow issue. However, since the Bank of Canada is a government Crown corporation, its account is consolidated with that of the Public Accounts of Canada.
The measure itself has no impact on the government, but you are absolutely correct that the profits, the losses or the earnings of the Bank of Canada have a direct fiscal impact on the government. However, the information you have in front of you simply applies to the fact that the measure itself has no incremental fiscal impact on the government.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Now I am really confused because you're saying that it has an impact and it doesn't have an impact. Maybe I am missing something. Which is it? The government is out about $1 billion a year, is it not?
Director, Crown Corporations and Currency, Department of Finance
The bank's income or losses will affect the budgetary balance, but the fact that we're allowing the bank to withhold its remittances will not.
For example, if the bank earns an extra $1 billion this year, it will be an extra $1 billion dollars in the budgetary balance. If it has losses of $1 billion a year, it will be $1 billion less. However, whether the bank gets to hold the remittances—for example, if it earns $1 billion and it gets to hold the remittances—does not impact the balance because that extra $1 billion is already booked in the fiscal framework. That means it already affects the budgetary balance regardless of whether the cash flows back to the government.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Okay.
Do I have any time left?