Procedure and House Affairs Committee on Oct. 18th, 2012

[The Chair, Conservative, Joe Preston]

We are here on the order of reference of Tuesday, October 2, Bill C-21, An Act to amend the Canada Elections Act.

We have Minister Uppal with us today. Thank you for coming today, Minister. I understand you have an hour for us today.

Our meeting is only scheduled until noon. The chair has to leave very quickly after that, so if something were to come up, the vice-chair could always fill in.

Mr. Lukiwski, you want to mention something.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Yes, and hopefully Marc can hear this as well. Rather than go in camera for other business, on Tuesday Monsieur Mayrand is going to be here. Whenever he comes it seems a heck of a lot of media show up as well, so I'm thinking that since this is a fairly small room, perhaps it would be wise to try to get a larger room in the same building, if possible, maybe one of the televised rooms, for Mr. Mayrand's two-hour appearance, if everyone agrees.

[The Chair, Conservative, Joe Preston]

I'm seeing everyone nodding.

I agree because it can be a bit of a circus in a small room if we try to put more than two media in here.

Yes, Mr. Reid.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

Mr. Chair, this is more a message for our clerk than for you, but if it's at all possible, it would be desirable to have that room in this building as opposed to the televised room down the road, which plays havoc with—

[The Chair, Conservative, Joe Preston]

—people having to get out of here in time to go to different events right after one o'clock.

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

That's right.

[The Chair, Conservative, Joe Preston]

I do understand. We will do our best. I've been told I'll have to flex my muscles, but we'll work it out. Favours are owed. We will see if we can get a room in this building and we'll see who we're bumping.

Minister, it's great to have you here this morning. I know you have an opening statement. If you'd like to go ahead, we're happy to have you for the hour you've given us this morning.

[Tim Uppal, Conservative, Minister of State (Democratic Reform)]

I'm happy to be here and I thank you, Mr. Chairman and colleagues, for inviting me to speak today to Bill C-21, the Political Loans Accountability Act.

I am joined by Matthew Lynch, an official from the Privy Council who will help with technical questions if needed.

As you know, this bill proposes to amend the Canada Elections Act to establish stronger rules and better transparency requirements for political loans. The establishment of high and consistent standards of transparency and accountability in our electoral system is an underlying objective of our government's larger democratic reform agenda.

This bill, as with our other efforts, seeks to increase the confidence Canadians have in the integrity of our political process. For Canadians to have that confidence, our government believes that voters must be the primary actors in the electoral process. That is why the Federal Accountability Act completely banned political contributions by corporations, unions, and associations.

Furthermore, we believe that voters must be able to participate in the electoral process on an equal playing field. Neither voters nor candidates should have privileged access to the political system solely because of their financial resources or wealthy contacts. That is why the Federal Accountability Act reduced the yearly contribution limits for individuals. That limit now stands at $1,200 per year for each category.

These principles of transparency and accountability, the primary role of citizens, and equality are the motivations behind this bill.

Bill C-21 is necessary because the regulation of political loans has not been updated to reflect the other recent changes to the rules for political contributions. Currently there are no limits on loans that corporations, unions, or wealthy individuals can grant to political entities. Right now the deck is already stacked against potential candidates who might not have connections to wealthy donors or significant wealth themselves or within their circle of family and friends. That unfairness is made worse by other loopholes that exist.

In the worst cases, loans can potentially be abused as a form of disguised contributions over and above the limits on donations that we have set. At the very least, the regulations and reporting of loans is inconsistent. The lack of limits on amounts loaned is entirely out of sync with the rest of our donation rules, and the rules on who can and cannot donate money to politicians don't apply to loans at all.

What's worse, the current rules don't provide for genuine deadlines for repayment or for genuine consequences to politicians who break the rules.

This situation needs to be fixed.

Ordinary Canadians are expected to pay back their loans under strict rules and timelines. The same should be expected of politicians.

The political loans accountability act is designed to fix these problems by making the regulation of loans consistent with the rest of our political financing and contribution system.

I'll provide a brief overview of the bill's provisions, which would apply to all political entities—parties, associations, candidates, and nomination and leadership contestants.

With respect to transparency, the bill would establish a uniform and transparent reporting regime for the terms and conditions of all loans to political entities and require the Chief Electoral Officer to publish reports on loans.

These changes would achieve greater transparency by ensuring that all political entities are subject to consistent reporting standards and that the lending practices of financial institutions to different parties and candidates are visible for all to see.

With respect to accountability, the rules for the treatment of unpaid loans would be tightened to ensure candidates could not walk away from them.

Bill C-21 would accomplish this by making electoral district associations responsible for unpaid loans taken out by their candidates. If there is no association, then the party would be responsible for unpaid loans.

Ultimately, electoral district associations and their members endorse these candidates, as do the parties and party leaders themselves. Loans that remain unpaid by those candidates need to be dealt with. We believe this mechanism would provide for the most logical, transparent, and accountable solution to that problem.

With respect to the principle that voters should be the primary influence in an election, Bill C-21 aligns the loans regime with that of the rest of our political financing regime by prohibiting corporations, unions, and associations from making political loans.

Bill C-21 would only allow financial institutions and other political entities to make loans beyond the current annual contribution limit of $1,200.

I'll also add that loans made by financial institutions, and there are literally hundreds of eligible institutions covered by this bill, must be made at fair market rates of interest.

Turning to the principle of equality, under Bill C-21 total loans, loan guarantees, and contributions by individuals cannot exceed the annual contribution limit for individuals. With Bill C-21, wealthy individuals would not be able to bankroll their campaigns by making large loans to themselves, or by taking large loans from friends or family. This places all candidates, including women and minorities, on an equal playing field.

I would also like to note that this bill incorporates recommendations made by chief electoral officers and previous input by this committee.

The bill is substantively the same as Bill C-29, which was passed by the House of Commons in the 39th Parliament but died on the order paper in the Senate. Several amendments were made by this committee and are included in this bill. Those changes include: a three-year period after which unpaid loans become deemed contributions, which this committee increased from the originally proposed 18 months; requiring the Chief Electoral Officer to hear representations from an association, party, or lender before making a determination about a deemed contribution; and providing that the amount of any loan given or guaranteed and that is subsequently paid back within the same calendar year is returned to the lender's annual contribution limit for that year.

Bill C-21 also makes a change to the contribution limits for leadership contestants. Currently, contribution limits for leadership contestants are set on a per-contest basis. Under the bill, the contribution limits for leadership contestants would be set on an annual basis, similar to the contribution limits for other political entities. I would also note that the bill would not apply to loans that were entered into prior to the coming into force of the bill. For clarity, the change from per-contest to annual donation limits to leadership contestants would apply to leadership contestants who continue to be contestants because of their outstanding unpaid loans or claims, subject to any conditions imposed on them by the rules, courts, or the Chief Electoral Officer.

The coming-into-force provision states that the bill will come into force six months after royal assent. This is consistent with the corning-into-force provisions of other electoral laws and is designed to give Elections Canada sufficient time to implement the changes.

Our government believes that Bill C-21 is essential to preserving and enhancing the trust of Canadians in the integrity of their political institutions. We believe that politicians have a responsibility to manage their funds prudently and to make sure that they are borrowing and spending within the means of their campaigns. Regular Canadians must manage their own household budgets, and it is incumbent on politicians to do the same.

I hope you will support this bill. I would be pleased to answer your questions.

[The Chair, Conservative, Joe Preston]

Thank you very much, Minister.

I wanted to also point out that Mr. Lynch is with you today.

We will go to a seven-minute round to start, with Mr. Lukiwski, and then four-minute rounds after that.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Thank you, Minister, for being here today.

I would like you to expand on a few things. The presentation was excellent, but perhaps we could get a little more detail about some of the elements you covered in your opening statements, particularly on loans. Currently, as you pointed out, there are really no rules in place governing loans that can be made to a leadership contestant. For example, a friend, relative or a business associate can lend money in almost any amount to a leadership contestant, but there are no real rules in place on what that loan is, how much, if there are any limits on the loan, what the repayment schedule is, what the interest rate is, if there is one.

I'd like you to expand on that in terms of transparency. You said this bill would level the playing field and be a more transparent effort to try to get that type of situation where loans are made, so the public would be able to understand more completely the type of financial transactions that are being conducted between individuals and a leadership contestant.

Could you explain why this bill addresses the concerns that you've heard?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

Yes, absolutely. The current situation is that if you have wealthy friends or family or are well connected with corporations or unions, as a leadership contestant or candidate you can borrow money from these people and essentially have a major advantage over anyone else. This bill addresses that situation.

As for transparency, reporting on the loans of Canadians and knowing exactly what the term limits are, what the rate is, who is guaranteeing the loan, is obviously very important. It helps Canadians have trust in the whole system.

Under the requirements in this bill, reporting on the loans would include a statement of the terms and conditions of each loan, the amount of the loan, the interest rate, the lender's name and address, the dates and amounts of repayment of principal and payment of interest. If there's a guarantor, the guarantor's name and address and the amount guaranteed would be included. In the case of candidates and nomination contestants, the unpaid principal remaining at the end of each calendar year would be included. All these things would be reported to the public and Canadians would know who gave the loan and the amount of the loan that was given. It really adds to the transparency of it all.

As for loans themselves, individuals can still make a loan up to the donation limit. Currently that's $1,200. For anything over and above that, only financial institutions can give loans, and there are literally hundreds of registered financial institutions that can provide those loans.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Are you saying that if someone wanted to take out a loan, they would be obligated or forced under this bill to go to a financial institution, that they would not be able to go to a friend or a relative to lend them, say, $20,000, $30,000, $40,000 at friendly terms?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

Not for those high amounts. Again, you could get a loan for the maximum contribution amount. You could go to a friend and get a loan for $1,200. You could go to a few friends and get a few different loans to the maximum of $1,200. The idea is that if that loan was not repaid, it would be defaulted and turned into a contribution, so it would still be within that limit.

Beyond that, if you require a larger loan, you can approach literally hundreds of financial institutions in this country that can provide that loan to you to help you to provide, I would say, seed money for a campaign. The idea of getting a loan is to have enough money to get your campaign started and then raise money to pay that loan off.

I think it's incumbent upon politicians to also have an understanding of what their campaign plan is, what their budget for that campaign will be, and to be not only able to get that loan but to be able to repay it as well. We expect Canadians to manage their budgets and I think we should expect it of politicians as well.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

You also talked in your opening statement about fairness. On the surface it's readily apparent where the fairness element comes in, but you referred to it, perhaps, as being a little easier for ordinary Canadians who wanted to get involved in the political process. This bill would help them accomplish that. Can you expand on that? Why would it be fairer for people who, perhaps, haven't been involved in the political process before? Why would this bill make it easier for them to break into politics?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

What this bill really does is it takes the advantage away from those who themselves may be wealthy, who may have wealthy family or friends, or who are very well connected with corporations or unions and they may be able to borrow money. The average person may not have those connections, or not have that wealth in order to get involved in the political process. It takes the advantage away from some people and it creates a level playing field.

When you have a level playing field, that really helps, especially for Canadians right across the country, women and minorities, who are thinking of getting into politics. What they're asking for is a level playing field. This bill would go a long way to ensuring they have a level playing field in that regard.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

There's one thing I want to be clear on. We've had a lot of discussions at least at the committee level about some of the unpaid existing debt by former Liberal leadership contestants from the 2006 leadership campaign. This bill wouldn't be retroactive in any sense would it? Would any loans that were taken out, say, in the 2006 campaign that are still outstanding be guided by the old rules? These provisions would come into effect when royal assent is given, is that correct?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

Yes. The bill itself is not retroactive. That is correct. Six months after the bill received royal assent, the bill would go into effect, but it would apply to existing debts. An existing debt means that leadership contest, even though it may have started in 2006, continues today, six years later, because the debts have not been paid off.

[The Chair, Conservative, Joe Preston]

Thank you.

Madam Latendresse.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

Thank you for your presentation, Minister.

As you know, we are in agreement with the substance of the bill. We do, however, have a few small questions regarding certain possible amendments.

I would like to begin with the following question: could you explain why it took so long for the bill to go through second reading and be referred to the committee, when you knew that you had the support of the official opposition and that you have the majority?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

Actually, once we had the support of the opposition parties, which I appreciate, I believe the bill came to committee quite quickly. The opposition parties cooperated in bringing the bill to a vote. It was voted on and I believe every party supported it. Here it is today and I'm pleased we're discussing it. In the previous Parliament, we had support from the NDP on the previous version of this bill.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

Very well.

We completely agree with the idea of restricting general financing options, as you explained, to enable everyone to start off on an equal footing.

However, we must realize that in some places in the country, people do not necessarily have access to many people who can guarantee a $1,200 loan. In this case, could we give some thought to the individual guaranteeing his or her own loan? Indeed, at times it is very difficult to find dozens or hundreds of people prepared to guarantee $1,200.

Would it be possible for someone to personally guarantee his or her own loan?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

The concern with that would be that if you were to guarantee or provide yourself a loan, and if that loan was not repaid, it would essentially turn into a donation. That donation would be over and above the donation limit currently set at $1200. If that loan is at the donation limit amount, it's deemed a donation at some point after default and essentially that takes care of it. If it's over that amount, then you deem it a donation and then they have over-contributed. Also, some people may not be able to provide themselves a line of credit, $20,000 or $30,000, or whatever amount you may say. This really levels the playing field to a point where everybody has equal access. In your scenario, you would have to assume that the person has the money to provide for themselves. Even if you're guaranteeing something, you have to guarantee it on something, and some people may not have that ability. This is really about taking that advantage away from wealthy individuals.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

That is true, but in some respects, this is about balance. Indeed, some individuals may be in Toronto where, for example, there are a lot more people who can make $1,200 donations than there are in a very remote, scarcely-populated region. So for this type of situation, people are not on an equal footing. If someone could guarantee his or her own loan, why not allow it?

[Tim Uppal, Conservative, Edmonton—Sherwood Park, AB]

Right across the country, there are literally hundreds of financial institutions. They're not just the banks. They're insurers, credit unions, and others that can provide these loans and are going to be equally accessible to everyone right across the country.

I would find it difficult to say that somebody in Toronto has wealthier friends than someone in another province or another city. That's generally not true.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

It is more about access. Thank you for your answer.

This brings me to my other question. By putting responsibility for political loans in the hands of the banks and financial institutions alone, are we not running a risk that the banks may decide to favour those candidates who have policies they like?