Procedure and House Affairs Committee on March 17th, 2011

[The Chair, Conservative, Joe Preston]

Minister.

[Vic Toews, Conservative, Provencher, MB]

I can't add anything beyond what my colleague has already stated.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Chairman, I think you will agree we have had testimony that leading authorities on the subject do not consider the financial advice to be a cabinet confidence after the bill has been tabled in the House of Commons. So I'd like to know, by what justification do these ministers consider that information to be a cabinet confidence? Under whose advice and whose authority are they withholding that information?

[The Chair, Conservative, Joe Preston]

Mr. Martin, your time is up. I'll give them a very quick chance to answer because I did take some of your time in my conversation.

Very quickly, Minister.

[Rob Nicholson, Conservative, Niagara Falls, ON]

Again, I don't think anybody would want any cabinet documents tabled or made public. We all have an obligation on that. But I can tell you, Mr. Chair, that the information you have before you with respect to the costing has been presented to this committee in compliance with the Speaker's ruling. I know a great deal of work and effort has gone into this to make this as expansive and informative as possible.

All I would say to the committee is that we can talk about procedures on that, but in terms of the costs of the crime bills, you do have that information before you. I appreciate that it's a lot more than what you got a month ago, but again, this is an expansion and more and more details of this. I trust this will be of great help to the committee in examining the costs of the crime bills.

[The Chair, Conservative, Joe Preston]

Committee, we promised the ministers we would excuse them by 11, so let's do so.

I will suspend, and we will be back in two minutes.

[The Chair, Conservative, Joe Preston]

I would like to start, but I really would like a member of the opposition sitting at the table before we do.

I thought I was reasonably clear with “two minutes”.

Mr. Proulx, will you please represent all of the opposition?

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

I will get the opposition back in.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Are we in session?

[The Chair, Conservative, Joe Preston]

We are; I am just waiting for a few members to return.

We have Minister Menzies, the Minister of State for Finance, and we will be asking him questions.

Minister Menzies, do you have an opening statement today?

[Ted Menzies, Conservative, Minister of State (Finance)]

I certainly do, and--

[The Chair, Conservative, Joe Preston]

Do you think it would be appropriate if we waited for at least one member of the opposition before we started the opening statement?

[Ted Menzies, Conservative, Macleod, AB]

I guess it's always good to have some member of the opposition.

I see that Mr. Martin has joined us.

[The Chair, Conservative, Joe Preston]

All right.

Minister Menzies, Happy St. Patrick's Day to you and your team. If you have an opening statement, please go ahead.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

As my father, who was born in Belfast, would have said, “Top o' the mornin'.”

It's nice to see you, Chair, dressed in green; very appropriate today.

[The Chair, Conservative, Joe Preston]

I was attempting to be the world's largest leprechaun today.

[Voices]

Oh, oh!

[The Chair, Conservative, Joe Preston]

We'll see how that goes.

[Ted Menzies, Conservative, Macleod, AB]

Well, we all know that not many Irishmen have actually seen a leprechaun until after they've had too many beers.

Anyway, thank you for inviting me here.

I would like to introduce three members of our finance department who we have with us. We have Doug Nevison, who is director of the fiscal policy division. We have Geoff Trueman, director of the business income tax division, which will be very relevant here today. We have Yvonne Milosevic, who is the senior counsel in our law branch. They are here to answer any of the technical questions. I'm sure we will get many of those throughout our discussion today.

Thank you for this opportunity to appear before the committee today. I am representing the Minister of Finance as well as the Department of Finance of Canada.

As you know, I, along with the Minister of Finance and our brand-new Parliamentary Secretary to the Minister of Finance, Mrs. Shelly Glover, and officials in the department are hard at work—we are all hard at work—finalizing budget 2011. We're all waiting in anticipation for that to be delivered next Tuesday. It will be building on the success of Canada's economic action plan with its next phase.

While Canada has weathered the recession better than most other major industrialized countries, we all recognize that much work is left to do to secure Canada's economic recovery. Indeed, even though over 480,000 more Canadians are working today than in July 2009, more than offsetting the jobs lost in Canada during the global recession, we all remain concerned about the number of Canadians who are still looking for work.

Clearly, this is going to be an important budget, not merely for the political aspects that we are often fixated on here in Ottawa but for ensuring that we all do what we can to help secure Canada's economic recovery in the midst of a still fragile economic period.

Before continuing, let me assert that our government is committed to improving transparency in Parliament. Indeed, we believe, like all parliamentarians, that Canadians should know how their tax dollars are spent. That's why we recognized the need for something that no government had done before, or even contemplated for that matter, and that is creating the landmark and independent Parliamentary Budget Office.

We also passed a law requiring all federal departments and agencies to produce detailed quarterly financial statements. We proactively produce ground-breaking progress reports on the economic action plan, something even Kevin Page, our Parliamentary Budget Officer, has publicly stated, and I will quote him here, “really put Canada almost at the forefront in fiscal transparency and stimulus”.

We also made more crown corporations subject to access to information, including the CBC, the Royal Canadian Mint, Canada Post, and my favourite, the Canadian Wheat Board.

Hopefully, provided this Parliament and Canadians continue to support our government, we can build on that record in the years ahead. Nevertheless, I am here today to speak about recent issues around our government's low-tax plan, specifically the costing. I would suggest that the part that we missed in Mr. Brison's motion was the benefits of our low-tax plan, the benefits to business tax reductions that Parliament voted on and passed, thereby endorsing, in 2007.

I want to preface my remarks by noting that the government has already provided the information requested from the Department of Finance to the finance committee and the House of Commons. In fact, Mr. Chair, we provided more information than was requested. Indeed, we have shared the Department of Finance estimated cost of the 2007 legislative tax reduction along with the five-year projections of total corporate profits before taxes and effective corporate tax rates.

As the Department of Finance officials can attest—and I would encourage honourable members to get these points clarified with our officials here today—this represented the first time that this level of detail has been released publicly.

I will quote again the words of the Parliamentary Budget Officer in his February 25, 2011 report: “...this information adequately responds to the request by FINA”--that is, the finance committee.

I will note that the information, along with the later analysis provided by the Parliamentary Budget Office, showed that business tax revenue for government actually increased over time, despite the reductions in the business tax rate. I know there might be some disagreements about fiscal and economic forecasts, especially when it comes to the high-profile numbers the hardworking officials at the Department of Finance release on items like the forecast federal budget balances. I know that some, like those at the Parliamentary Budget Office, believe these forecasts to be too optimistic, while others, like TD Economics, as was widely reported in their recent analysis, actually believe them to be too pessimistic.

I am happy to report that the forecasts of our knowledgeable and hardworking economists at the Department of Finance have been roughly in the middle of those opposite ends. Nevertheless, it is important to note that these are ultimately only projections.

I think we can all appreciate that this has been a difficult past few years for economic forecasters. It reminds me of a statement by the Canadian economist John Kenneth Galbraith that “The only function of economic forecasting is to make astrology look respectable.”

I mean no disrespect to the economists at the Department of Finance. Nevertheless, our government strongly believes that we need to ensure objectivity when developing our fiscal and economic forecasts. That's why our economic projections are based on a private sector average.

Indeed, the process of surveying private sector forecasts has been followed for over a decade. These private sector forecasters represent Canada's leading financial and economic institutions. For instance, for the fall economic and fiscal update released last year, we consulted with over a dozen forecasters. Among them were Bank of Montreal Capital Markets, Caisse de dépôt et placement du Québec, CIBC World Markets, the Conference Board of Canada, Desjardins, IHS Global Insight, Laurentian Bank Securities, National Bank Financial Group, Royal Bank of Canada, Scotiabank, TD Bank Financial Group, UBS Securities Canada, and the University of Toronto.

While such projections are based on the best information available from leading forecasters, there's always a degree of uncertainty and risk in the global economy that cannot be forecast. Forecasters would all concede that there has been substantial uncertainty recently, so some flexibility was and is advisable on our part. Recognizing the fragile state of the global economy, we actually discounted the average of the private sector forecasters in last October's economic statement by including an adjustment for risk. However, let me stress and reiterate that our government strongly believes that we need to ensure objectivity when developing our fiscal and economic forecasts.

Before concluding and opening the floor to questions for me and departmental officials, let me briefly talk about the legislated 2007 business tax reductions. I am not going to get into the usual back and forth about the fact that the Liberals want to increase, not freeze, taxes on job-creating businesses by billions and billions of dollars. I'm not going to explain how that will hurt businesses both small and large, as Catherine Swift of the Canadian Federation of Independent Business has publicly stated, despite what some in Parliament might have you believe. I'm not going to explain how hiking business taxes in the middle of a fragile economic recovery will hurt sectors like manufacturing and forestry, and how that will endanger and kill Canadian jobs. I'm not going to do that, as almost every respected economist, think tank, business leader, industry association, and academic in Canada has already done that.

What I am going to do is to correct the public record with respect to a couple of items very quickly.

First, we have heard from many in Parliament that Canada already has the lowest business tax rate in the world, and that the 2007 reductions were of no real effect. That is factually incorrect. Canada is in the middle of the pack on business taxes.

As former Liberal Finance Minister John Manley recently pointed out, we're competing, particularly in the OECD, which is the developed countries. We're in the middle of the pack, barely, in the OECD.

Second, it's important to remember that business tax projections are not static. As many economists have noted, simply increasing business taxes will not automatically translate into billions in new revenue for the federal government. Indeed, only yesterday the C.D. Howe Institute released a detailed report, which I encourage everyone to read. It confirmed that increasing corporate income taxes is the most costly way to raise government revenues and that tax increases distort economic decisions and erode tax bases.

As well-known economist Jack Mintz noted—

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

I apologize to raise this point of order; however, we had been told, Mr. Chair, that guests had been advised that they would have approximately five minutes for an opening comment. We're now close to 15 minutes with Minister Menzies.

[The Chair, Conservative, Joe Preston]

Well, not quite close to 15 minutes—

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Okay, 14.

[The Chair, Conservative, Joe Preston]

Mr. Minister, if you could finish then we'll get to questions.

[Ted Menzies, Conservative, Macleod, AB]

I appreciate that Mr. Proulx wants to get on with the questions. I will leave some of these very important quotes. I can certainly use those in answers.

With that, Mr. Chair, I will close. I look forward to questions, not only to me, but to some of the learned individuals we have actually excused from budget preparations. As soon as we're done here, I expect them to be heading back immediately to the Department of Finance.

Thank you, Chair.

[The Chair, Conservative, Joe Preston]

Thank you, Mr. Minister.

I do want to thank you for quoting John Kenneth Galbraith, who was a great member of my riding of Elgin—Middlesex—London, or at least he was born there. But quoting a Scot on St. Patrick's Day, I'm not certain....