Finance Committee on May 25th, 2026

[Tim Ross]

Thank you for the question.

It's very important to recognize that Build Canada Homes has a lot of potential to help ease the housing crisis.

We are working very closely with Build Canada Homes currently to identify a pathway to invest in the pipeline of projects that were catalyzed under the co-operative housing development program. We have 15,000 units in feasibility and predevelopment, 5,000 of which are shovel-ready within the next 12 months.

On the predictability issue, we're days and weeks away from being in a situation where projects may stall or collapse. We are hoping that we can develop an investment framework successor to the co-op housing development program, so that we can continue to deliver the good-quality affordable homes that communities all across the country need.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

Ms. Lavoie, you were talking about something similar: increasing housing supply and fast-tracking housing starts. Are these initiatives meeting the needs in part or in full?

I really appreciated hearing the word “potential” because Build Canada Homes was established just a year ago. That means we can do more with it.

Do you feel that the economic update contains measures that help meet the needs?

[Alana Lavoie]

Absolutely. My response is practically identical to Mr. Ross's. We are waiting and working with Build Canada Homes to see how we can coordinate to invest in Habitat for Humanity Canada projects. However, as my colleague indicated, there are several projects on hold. If we still don't have any information, 300 housing projects will be abandoned within a few months. On the other hand, if the tools are put in place quickly, the change will be truly profound for us.

So, we're waiting and working hard on this.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

When you talk about the tools to be implemented, you're referring to the tools that have been announced, aren't you?

[Alana Lavoie]

Yes. I'm talking about the tools within the Build Canada Homes framework.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

Okay, thank you very much.

Mr. Lancastle, in your opening remarks, you mentioned the famous productivity super-deduction for manufacturing companies.

I'm curious, and this is the kind of question I ask regularly: do you have a very concrete example of how a measure like that would apply to the construction sector? When I say a concrete example, I really mean a specific benefit—A or B—that this deduction would provide.

[Ken Lancastle]

On Friday, I received a phone call from a member who was asking if this applied to him. There are questions. Construction, being highly capital-intensive, has a lot of similarity to the manufacturing industry, which was where the productivity superdeduction was really focused. He called me and asked if this was something that he could take advantage of. I didn't have any clarity for him. I said that I was happy to find out more information for him, but it wasn't explicitly referenced in the productivity superdeduction.

The industry, similar to manufacturing, requires a lot of capital equipment that is quite highly capital-intensive, but with very slow tax writedowns on it.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Lavoie.

I thank the witnesses.

To conclude this hour, I give the floor to Mr. Garon for two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Madam Chair.

Ms. Lavoie, Quebec is the only province that has long had permanent programs for the construction of social and community housing. It is well institutionalized. The rules are clear. At home in Mirabel, the community sector is familiar with the system.

In the federal government's previous strategies, there was a real desire to standardize all policies, particularly Canada's National Housing Strategy, which meant that negotiations with Quebec took a long time and that funding was frozen for three years. We always add this second layer of bureaucracy, whereas in Quebec, the system works relatively well. However, it needs funding.

Mr. Ross and Ms. Lavoie, I listened to your response to Mr. Lavoie's question. I found you both very diplomatic. What I gather from your response is that there is potential and the tools are there, but that you fear, to some extent, that what happened in the past might happen again—that there will be instances of duplication, that people will dither, and that projects will be abandoned.

Do you agree that the programs in Quebec are working and need funding, that this is a matter of jurisdiction for the Quebec government in many respects, and that avoiding the creation of duplicate programs and placing greater trust in existing programs in Quebec will allow for the creation of housing more quickly?

[Alana Lavoie]

That's a very good question. Habitat for Humanity Canada has only very recently joined the conversation on affordable housing in Quebec. So, it's only very recently that we've started working with the Quebec government on home ownership.

I'd like to see how Quebec's systems and the tools offered by Build Canada Homes will actually work together to accelerate the creation of affordable housing.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Very well.

Mr. Ross, here is the message we are sending to the government today: Don't repeat what you did with Canada's national housing strategy, and make sure we don't waste three years on this.

[Tim Ross]

I would say it's really important to recognize that we're in a transition right now. With Build Canada Homes focusing on new builds and innovation and delivery, let's not forget that a significant number of federal programs are at their end and no longer have a budget.

One of those major things is our federal-provincial and federal-territorial agreements. Provinces and territories are very important delivery partners in addressing the affordable housing crisis. I certainly recognize the competencies of Quebec and that long track record of delivering community housing.

[The Chair, Liberal, Karina Gould]

Thank you very much.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you.

[The Chair, Liberal, Karina Gould]

Colleagues, that concludes this hour. Please join me in thanking our witnesses.

We will now briefly suspend as we prepare for the next panel.

[The Chair, Liberal, Karina Gould]

Colleagues, I'm delighted to welcome everyone back. We will resume the meeting.

I would like to take a moment to welcome our new witnesses.

From the C.D. Howe Institute, we have Alexandre Laurin, vice-president and director of research, who is joining us by video conference. From Generation Squeeze, we have Dr. Paul Kershaw, policy professor at the University of British Columbia's school of population health. From the Montreal Economic Institute, we have Renaud Brossard, vice-president, communications, and Gabriel Giguère, senior policy analyst. Also, from the Canadian Shield Institute for Public Policy, we have Kaylie Tiessen, chief economist, who is also joining us online.

I would like to remind participants of the following points.

Please wait until I recognize you by name before speaking. For those participating via video conference, click on the microphone icon to activate your mic, and please mute yourself when you are not speaking. For those on Zoom, at the bottom of your screen you can select the appropriate channel for interpretation: floor, English or French. Those in the room can use the earpiece and select the desired channel.

I will just remind the witnesses that committee members may ask questions in either English or French. If you will need interpretation, please take a moment now to prepare your earpiece and select the listening channel you need in order to take full advantage of the time allotted for questions and answers. I will also remind everyone that all comments should be addressed through the chair.

All virtual witnesses have conducted a mandatory witness onboarding test.

We will now begin with opening statements from our witnesses.

We will begin with Mr. Laurin from the C.D. Howe Institute, please.

[Alexandre Laurin, Vice-President and Director of Research, C.D. Howe Institute]

Thank you, Madam Chair.

Members of the committee, it is a pleasure to participate in your pre-budget consultations.

The C.D. Howe Institute is an independent, non-partisan public policy research institute based in Toronto. Each year, we publish approximately 50 studies, which undergo a rigorous peer-review process.

The institute also publishes its own annual pre-budget recommendations document, titled “Shadow Budget”. In our pre-budget document, we have often emphasized two things: the need for greater fiscal discipline to limit the growth of public debt, and the need for tax reforms to stimulate economic growth and investment.

Today, I will focus my remarks on the issue of tax reform.

Last March, Jack Mintz, my colleague Nicholas Dahir and I published a study proposing an ambitious reform of the Canadian tax system. The study is titled “‘Big Bang’ Tax Reform: Unleashing Growth in the Canadian Economy” and is available on our website. Since the study is in English, let me continue my remarks in English, as it is much easier for me.

As you know, Canada's economic performance over the past 10 years or so has been weak. Business investment is also low and productivity growth is weak. Gross national income per capita is not growing fast enough. I'm sure you've heard that many times already.

Our message in our tax reform study is simple: The country doesn't need another small tax change here and there. What we need is to send a strong message through a major structural tax reform. We rely more on income tax than any other G7 country. High income tax reduces incentives to invest, work more, take risks and grow businesses in Canada. I'm sure you've heard that before.

High taxes also encourage tax planning instead of productive economic activity. We are also running large government deficits. Any tax reform needs to be revenue-neutral, at least in the short term. We're not proposing large new deficits. We're proposing a better tax structure for growth.

Our proposal has four main parts to be implemented at the same time. I'll go through them very quickly.

First, lower personal income tax. We propose reducing income tax rates and reducing the number of tax brackets from five to three.

Second, we need to simplify the personal income tax system. We propose a new, simplified $10,000 credit allowance that would replace most credits and deductions. This optional allowance would allow a simplified tax return that would fit on a single page. I must also say that lower-income households would benefit disproportionately from that allowance.

Third, we need a more neutral corporate tax system. We propose reducing the general corporate income tax rate to 10% while eliminating most special preferences and carve-outs. Another option would be to tax profits only when they are distributed, not when they are reinvested in the business. There are two options there.

Fourth, we would need to raise less economically harmful taxes to cover the revenue shortfall. We would raise the GST or introduce a new payroll contribution, with an exemption at the lower-income level.

Our goal is straightforward: It is to encourage growth in the Canadian economy. Our estimates suggest that our reform would raise Canada's GDP by roughly 2.5%, which would support wage growth and higher government revenues in the long term. Our estimates suggest that the reform would be distributionally neutral at the household level and would not increase inequality. That was an important result for us.

In short, if Canada wants stronger growth and higher living standards, small tax tweaks will not be enough. What we need is a real tax reset.

Thank you. I would be happy to take questions.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Laurin.

We will continue now with Dr. Kershaw for five minutes, please.

[Dr. Paul Kershaw, Policy Professor, University of British Columbia School of Population Health, Generation Squeeze]

Good afternoon.

Thank you, Chair and members, for the invitation. On behalf of Generation Squeeze, an organization working to improve well-being for all generations, I have one straightforward message. Canada is within reach of the most significant improvements to affordability and income security in decades, and we can do it without raising tax rates or increasing the deficit, but only if Ottawa redirects billions in subsidies currently flowing to retirees with six-figure incomes towards Canadians who have greater financial needs.

Here's what we could do. Imagine allocating $5,000 to every one of the 400,000 retirees below the official poverty measure and virtually eliminating seniors' poverty. We can do that. We could, for a million young people struggling to afford housing, give an annual $3,000 subsidy. We could say to a million post-secondary students facing a $1,200 hit to the Canada student grant that we won't make that cut. We could add another 100,000 child care spaces subsidized at $10 a day and meet Ottawa's target of 250,000. We could go and invest substantially to reduce youth unemployment, say, turning the youth climate corps from a pilot of $1,000 into something that's supporting tens of thousands to give young people leadership and job training and make our communities more resilient.

We could do all of that by modernizing Canada's largest income security program: old age security. According to the spring economic update, in 2024, we spent $80 billion on old age security. By the end of the decade, it will reach $109 billion. It absorbs more new public spending than any other program in the federal budget by a whopping order of magnitude, and a surprising 16% of it goes toward retirees who already have six figures, a subsidy that, for those couples, often exceeds $18,000. By 2030, the share of that funding alone will reach $17.5 billion, even after taking account of the current clawback rules.

That $17 billion is big. It's more than twice what we are doing for $10-a-day child care. It's 10 times the amount of money put into making homes more affordable in the recent spring economic update. It dwarfs all spending on grocery supports, trades training and clean growth combined. Remember, this is just the portion of OAS going to financially secure retirees with six-figure household incomes. At a time when Ottawa projects deficits of about $50 billion annually for years to come, this $17 billion can no longer be justified as the best use of public dollars, so it's time to trim. It's time to trim OAS benefits, but only for retirees with household incomes above $100,000, reducing their subsidies by, on average, about $3,000 after taxes.

This change would protect OAS or improve it for 80% of retirees while reducing subsidies for simply the top 20% who now receive OAS. Very importantly, it would not cut OAS spending. We're proposing to only slow its growth. Rather than have it reach $109 billion by the end of the decade, we're talking about it reaching more like $100 billion. That $9-billion savings is enough to pay to eliminate seniors' poverty, improve rental affordability, help students and all of the other things that I summarized a moment ago, and do so all at once.

Canadians are ready for this change. Polling consistently shows that three-quarters of Canadians, including three-quarters of retirees, support it. Canada cannot build a resilient economy while we allocate $17 billion in subsidies to flow to those who have more financial security, even as poor seniors and younger Canadians struggle to afford the basics. For that reason, we are calling on Ottawa to modernize old age security in budget 2026 this fall to unlock the largest improvements to affordability and income security in decades, and to do so to benefit young and old alike.

Thank you. I look forward to your questions.

[The Chair, Liberal, Karina Gould]

Thank you, Dr. Kershaw.

Mr. Brossard, you have the floor.

[Renaud Brossard, Vice-President, Communications, Montreal Economic Institute]

Good morning, everyone.

I would like to thank you for inviting me here today. My colleague Gabriel Giguère and I are very pleased to be here to participate in the pre-budget consultations.

Two observations, directly related to fiscal policy, have caught our attention: first, the unsustainable trajectory of our public finances, and second, the decline in Canadian entrepreneurship, particularly over the past decade.

The chronic deficits of recent years have undermined our public finances. Interest expenses on the debt have risen, from approximately $25 billion a decade ago to just under $60 billion in this year’s budget. This increase stems from two factors: rising interest rates and—naturally—the growth of the debt on which that interest is charged.

Unfortunately, all signs indicate that the deficits fuelling this situation will persist. Earlier this year, researchers at the Montreal Economic Institute, or MEI, modelled the trajectory the Canadian budget would take over the next decade. The findings are alarming: if nothing changes, the federal deficit will grow to reach $117 billion in 2035—nearly double the deficit projected for this year. Interest payments on the debt will exceed $90 billion, and the debt will reach $2.4 trillion—that is, $2,400 billion—which suggests $900 billion in new federal debt over the next decade. This is a clear sign that current deficits are neither temporary nor under control.

In order to bring spending growth below revenue growth and restore a balanced budget within a reasonable time frame, we recommend that the government adopt a spending reduction plan that is much more ambitious than the one currently in place. In practical terms, this could mean an extended hiring freeze, systematic use of natural attrition, a review of the mandates of departments, agencies and programs, as well as increased reliance on efficiency gains made possible by new technologies. Here, the aim is to contrast this with the period of unbridled expansion that the Canadian public service has experienced over the past decade.

While this expansion of the state has had an impact on its spending, it is also important to recognize that it has affected our entrepreneurial sector. Such expansion typically entails increased regulation and higher taxes, two factors with a documented negative impact on entrepreneurship. Another negative effect of this state expansion, one that is less frequently discussed, concerns human resources. This is an aspect that is not discussed enough, but one that deserves consideration.

When the government expands rapidly, it competes directly with the private sector for the recruitment of skilled workers: analysts, managers, specialized professionals, technology experts and so on. All these talents represent not only a pool of future employees, but also future entrepreneurs. When an economy directs a growing share of its workforce toward public administration rather than private investment and business creation, it has direct long-term consequences for its ability to innovate.

In 2015, Canada had 803,000 self-employed individuals with paid employees—that is, entrepreneurs. Last year, that number had fallen to 716,000. This represented a decrease of more than 10% in the absolute number of entrepreneurs, while the population grew by 15% over the same period.

While the massive hiring of civil servants over the past decade has had an impact, it is not the sole cause of this decline in entrepreneurship. Increased regulation has made starting a business more complex. Announcements of capital gains tax increases and tax changes affecting small businesses have contributed to creating a hostile environment for entrepreneurship and to delaying certain investment projects. Additionally, the introduction of a new higher personal income tax rate in 2016 has made it more difficult to raise the capital needed to start a business. This echoes the comments made by my colleague Alexandre Laurin on this subject.

This decline in entrepreneurship is affecting our economic growth, which has been sluggish in recent years, as well as government finances. Fewer entrepreneurs means less wealth created, and therefore fewer good jobs, and, ultimately, less tax revenue.

If we want Canada to return to a stronger growth trajectory, better spending management will not be enough. In fact, we must also restore the conditions that make entrepreneurship attractive by addressing the decisions of the past decade that have contributed to the decline we are seeing.

Thank you very much for your time and attention.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Brossard.

We will hear from our last witness for this panel. That is Ms. Tiessen from the Canadian Shield Institute.

You have five minutes.

[Kaylie Tiessen, Chief Economist, The Canadian SHIELD Institute for Public Policy]

Thank you very much, Chair Gould, Vice-Chairs Hallan and Garon, and members of the House of Commons Standing Committee on Finance. Thank you for the opportunity to present to you today.

I'm here representing the Canadian Shield Institute for Public Policy. We're a new organization devoted to policy ideas that strengthen Canada's economic prosperity and sovereignty. We pay very close attention to what we call “sovereignty beats”. Here's a fun one: Between 2016 and 2024, Canada's budgets used the word “sovereignty” an average of three times per year. Last fall, when Minister of Finance Champagne tabled his budget in the House of Commons, the document mentioned sovereignty 57 times. That's a nineteenfold increase. We're going to have to wait a few months to find out what the number is in 2026, but it's a safe bet that the federal government will still be working to bolster Canada's sovereignty in a very volatile world.

Another thing we think about a lot is what sovereignty actually means. At the Canadian Shield Institute, we argue that governance is the root of sovereignty. We need to have the capability and ability to govern our territory, our economy and our society to be truly sovereign.

By this measure, digital sovereignty must be the most urgent priority for the federal government today, because we don't have it. Too often, we have seen governments respond to digital sovereignty concerns with data residency requirements: If the data centres are on Canadian soil, then that's a job well done.

Unfortunately, it's not so simple. Digital platforms require digital policies and governance institutions that engage with the data, IP, technical standards and platform economics that define the digital realm. Canada right now doesn't govern the activity that happens inside a data centre or in the cloud, so it doesn't matter where the servers are physically located. Canada has spent decades ceding control of our digital infrastructure to foreign private actors. Our daily communications, cloud storage, software systems, productivity tools, AI platforms and public sector technology stacks are overwhelmingly owned and operated by foreign firms. This dependency has direct economic, privacy, national security and democratic consequences. Canada has world-class researchers, strong universities and deep reserves of AI talent, yet the most commercially successful AI systems are owned and scaled elsewhere.

Canada funds research, but the intellectual property ends up owned by foreign firms. Canada generates valuable data, but foreign platforms monetize it. Canada procures technology, but that procurement frequently entrenches foreign hyperscalers rather than builds domestic capacity. In fact, we often count wholly owned foreign subsidiaries as being Canadian firms. This is a profound fiscal and economic strategy failure. Existing and future public expenditures must build Canadian-owned capacity, or we will compound the problem we're seeing today.

In the Canadian Shield Institute's written submission, you'll find detailed policy recommendations for how Canada can better govern the digital economy. Through clear governance, we believe we can capture the value of our own innovations. We also explore these ideas in even more detail through our ongoing policy series, “Foundations of Digital Sovereignty”.

In brief, we recommend that the Government of Canada act on six priorities: establish a whole-of-government digital sovereignty strategy, create a national data trust, modernize federal privacy and data legislation, establish an innovation asset bank, create a strategic sovereign compute entity, and build a strategic standards agenda.

The common denominator among these recommendations is governance. In order to meaningfully engage with the digital economy to drive prosperity and productivity growth, we need to govern how Canadians engage with the digital realm and how the digital realm engages Canadians. This ethos must be suffused in our national institutions, in our trade agreements and in our approach to governance systems like technical standards.

Digital sovereignty cannot be an afterthought. We're long past the point where technology is just one sector of the economy. Tomorrow, from coast to coast to coast, when Canadians get up and go to work, their jobs are going to involve a screen. Whether you're a plumber, a farmer, a banker, a child care worker, a musician or even a member of Parliament, your job today involves using software systems, databases and other digital technology tools.

If Canada is content to let the digital realm be governed by foreign hyperscaler companies or by other governments around the world, we will all be the poorer for it.

We believe Canada is ready to meaningfully assert our sovereignty in the digital realm, and we're really proud to present these policy ideas today on how to move forward in the 2026 federal budget.

I look forward to your questions. Thank you very much.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. Tiessen.

We will begin this round with six minutes from Mr. Kelly.

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Thank you.

Wow, those were some great opening statements. I'm going to try to get to as many of you as I can, but I want to start with Mr. Brossard.

You say that you have modelled and projected the deficit out to 2035, something that the budget does not do. I've questioned the minister many times about the trajectory that we're on.

With some of the time now, could you elaborate a little bit? You say $117 billion by 2035, over $90 billion in debt service cost. That's without new programs or new commitments. Could you confirm and expand on that?