Procedure and House Affairs Committee on Oct. 23rd, 2012

[Marc Mayrand]

It could be there's a point where it doesn't make much business sense, but again, banks are good at figuring out ways of managing complex systems. I don't know what will be the behaviour once the rules are in place.

Again, my comments today are based on the assumption that there will be some $1,200 loans. How many? I don't know. What I'm raising as an issue is that these types of loans, contributions, will be extremely complex to administer for political entities, contributors, and Elections Canada, which after three years may have to follow and monitor an inordinate number of very small loans, when you think of it.

[Craig Scott, NDP, Toronto—Danforth, ON]

Exactly.

The question now is on this whole issue of unpaid loans becoming deemed contributions. There was some reliance from the minister in his testimony last session on the fact that a provision in Bill C-21, which says that a loan becomes an unpaid loan when it's been written off by the lender as an uncollectable debt and then it kicks over to the EDA being responsible, would more or less be pro forma.

That's exactly what banks would do, and therefore a bank would never really end up in the position of potentially being found to have committed an offence under the act. They wouldn't actually have a deemed contribution because they would always use this mechanism.

I notice in your remarks you said:

…according to the information reported by candidates after the 18-month statutory period, none of the $2.6 million in unpaid loans was written off by a creditor.

I'm wondering if there's some serious tension between what the minister was telling us about the likelihood of banks simply using this writing-off provision and Elections Canada's experience with the fact that this doesn't seem to happen very often. Is there any tension, or are we talking about two different actors?

[Marc Mayrand]

I don't think so. I think we were probably talking from different perspectives. The fact is, from the data that's available to us, writeoffs don't occur under the current regime. Now with the new regime, the writeoff would trigger a liability of the association or the party, so that means the use of more writeoffs.

There is another point I think I need to be clear on. The fact that a contribution is deemed does not create any illegalities. I think we have to be absolutely clear on that.

[Craig Scott, NDP, Toronto—Danforth, ON]

It's very important that you clarify that.

[Marc Mayrand]

There's no offence associated with the fact that a loan or any unpaid claim suddenly becomes a deemed contribution. There's no offence, certainly, attached to this.

[Craig Scott, NDP, Toronto—Danforth, ON]

It's very important that you do clarify that because I believe the minister is under the impression that this is the effect. We asked that question. It's very important that this committee go on to look at that.

Do I have any time left?

[The Chair, Conservative, Joe Preston]

Yes, one second. There's no time left.

[Craig Scott, NDP, Toronto—Danforth, ON]

Next time around let's talk about rebates.

[The Chair, Conservative, Joe Preston]

Thank you, Mr. Scott.

Mr. Albrecht, for five minutes, please.

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

Thank you, Mr. Chair.

Thank you, Mr. Mayrand, for being here today.

I'm sure there's at least one thing all of us around this table today can agree on. On page 4 of your comments, where you talk about the complexity of the bill relating to stakeholders, those providing loans, and Elections Canada, you left one group out. You've left out this committee, in terms of the concerns we have about the complexity of it.

I want to turn to page 6 of the English section of your comments, when you started speaking about avoidance. You say:

By limiting loans of more than $1,200 to financial institutions, the regime seeks to curtail the influence of individuals who finance political entities through loans, and to eliminate the use of loans as a means to skirt contribution limits.

Then you go on to say:

That being said, since the bill in no way affects credit sales, an individual could sidestep the new rules on loans by becoming a supplier of goods or services.

Just as an example, as a candidate, I could go to a printer and have him or her print $10,000 or $15,000 worth of collateral to use in my campaign, which would then, in effect, become a loan because it's not paid yet.

Is there not a simple way to simply include as an amendment that we could not allow suppliers to give direct goods to a candidate, that they have to give it to the EDA, or provide it to the EDA on credit, as opposed to providing it to the individual candidate? To me, it seems a simple fix.

[Marc Mayrand]

Again, I would support that. One of the key objectives of the bill is to prevent self-lending, but unfortunately it forgot to deal with self-supply, which also exists in a campaign. It's not rare to see that.

I'm not sure that the provision of the statute is open in Bill C-21. I think you would need to get advice on that aspect, but, again, it would require an amendment to the legislation. It can be done, certainly, and it should be done.

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

I agree with your concern, and I think it's a loophole. There are people who would take advantage of it, but the suppliers also need to be aware that they are taking a huge risk by extending credit to an individual candidate as opposed to the EDA, which is ultimately responsible for the campaign.

[Marc Mayrand]

We have very limited information on that, but the impression we have is that there's a fair bit of confusion for lenders and suppliers on whether they're lending to an individual or a campaign, which is a different entity. I think there is a lot of confusion there.

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

You are underlining the complexity again.

If I have a little more time, Mr. Chair, on page 7 you say:

...the regime should bring closure to the management of political entities' finances, by precluding the possibility of loans remaining unpaid for extended periods.

Do you have a period in mind that would clearly define the parameters as to how long that should be extended?

[Marc Mayrand]

The bill proposes a three-year period to get rid of loans. In my recommendations report, and I was basing that on previous draft legislation, I was proposing 18 months. Three years is probably right, because even after three years we still see loans and unpaid claims outstanding. In terms of loans, it's about $600,000 after three years, and for unpaid claims it's about $400,000. The amount has gone down significantly, but there are still quite a few claims outstanding after three years.

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

Mr. Chair, do I have a little bit of time?

I just want to clarify this. In the last sentence of that paragraph you say “the bill does not allow for this disclosure to be achieved”. In my understanding, the bill did address the time parameters as to how long the loan could be left unpaid.

[Marc Mayrand]

Unfortunately not. This is another complex part of the regime. I'll try to put it simply. If you take a candidate, the candidate must file his return within four months of the election date, the polling date. At this point that return will show what's been coming in to the campaign, what were the expenditures, and what is outstanding in terms of claims or loans. Then, on the access, it says the candidate has 18 months to reimburse those debts. As long as the reimbursement takes place within that 18-month period, there is no requirement under the act to file an amended return or to file an updated return. It's the same thing for leadership candidates. Again, if debts are entirely paid within the statutory period, after the first return there's no statutory requirement to update the return, so we don't know the source of funds and how they were distributed among creditors.

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

Thank you, Mr. Chair.

[The Chair, Conservative, Joe Preston]

Mr. Williamson, for five minutes.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you, Chair.

Mr. Mayrand, it's good to see you again. You've raised a lot of interesting points today. It sounds almost as if we've gone from a real mess into a swamp, in terms of some of the proposals, what the bill is trying to accomplish, and then your counter-proposals.

What I find interesting today is that this bill had actually advanced to this stage with multi-party support. I thought we were actually getting somewhere, and now I'm wondering if that's the case.

I want to step back and get to first principles. What is it we're trying to accomplish here? I think if you look at the headlines, it's dealing with the outstanding debts from candidates and how to resolve those. Reading the bill, listening to your comments, it seems the solution we're looking at just involves a maze of regulations. I believe that for a lot of candidates, new and old, the current regime is cumbersome, and we're talking about potentially building on that.

As a side note, I'm beginning to be skeptical that banks are even in a position to fill some of the room we're asking them to. We'll have to put that question to them, I think, as opposed to any of you gentlemen today.

Can I ask you this? Your solution seems to be...I'm going to try to kind of nail it down here, and you're welcome to correct me if I'm wrong. You're looking for greater access of information from Elections Canada reporting requirements, no loans, and, ultimately, political parties would assume the obligations of local candidates when it comes to at least the local level.

Coming from that, I have two questions. First of all, what is your solution to deal with the large outstanding loans from leadership contestants?

I'll ask that one first, and I'll come back to my second one.

[Marc Mayrand]

Again, there's no easy one.

The main one that I think would be effective is to prevent candidates from running who still have outstanding loans after whatever period—three years—so not allow them to run in future elections until they've covered or reimbursed all their debts.

[John Williamson, Conservative, New Brunswick Southwest, NB]

With the leadership loans we're seeing today, how would that go?

[Marc Mayrand]

I would treat them the same. Anyone who enters the electoral competition and incurs debts and cannot repay them after, again, a reasonable period of three years, maybe should not be allowed to enter the race again.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Okay.

My next question is this. Has any consideration been given to the idea of moral hazard? If local candidates run up debts, instead of showing some restraint as the election nears and things don't look great, they just keep spending, knowing full well that the central party is going to eventually assume the debt.

The question of moral hazard...it seems that debts could actually become larger and just be turned over.

[Marc Mayrand]

I think that will be something the parties will need to factor into their internal set-up.

When we look at the overall picture of funding for candidates, we see that loans represent about 3% to 7% of their financing. Half of it comes from contributions and 40% comes from transfers from campaigning and parties.

The other thing is that, again, there is a limit on spending. The candidate has to be careful there, because he can easily get offside if he crosses the line over the spending limits.