Debates of May 28th, 2008

Finance—Main Estimates 2008-09

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Chair, I have another question about equalization.

I spoke earlier about the Séguin report, which says that to fix the fiscal imbalance, equalization must take into account the total revenue of all of the provinces. But, for the past two years, the government has chosen only to look at 50% of provincial natural resource revenues.

Once again, how can the Minister of Finance tell Quebeckers that—

[An hon. member]

Oh, oh!

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Chair, I would ask that you call the member to order or remove him because he has been bothering me.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

I would ask that all members have some respect for the member who is trying to ask a question.

Does the hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup have something to add?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Chair it is not all of the Conservative members who are lacking in judgment, but just the member for Louis-Hébert. He is the one to reprimand.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

I am still asking all members to show the same respect.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Chair, I would like to ask the minister to explain how he can tell Quebeckers that the fiscal imbalance has been fixed when, once again, the Séguin report received broad support in Quebec. According to this report, equalization must take into account the total revenue of all of the provinces and not just 50%.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, there was great discussion and debate among the members of the O'Brien panel and of the Séguin panel, I am sure, when it was working on this issue about what one includes and what one does not include. Does one include hydroelectric resources? Does one include certain types of minerals and so on in terms of provincial revenues and the computation to arrive at fiscal balance?

At the end of the day it is fair to say that the O'Brien recommendation looked at a compromised position with respect to that issue and I think that compromise has, overall, been well accepted by other Canadian jurisdictions, as it was by the federal government.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Chair, as all members of the House will know, one key priority of the Minister of Finance and his department has been to create a competitive advantage for Canada in global capital markets.

Part of this challenge has been to improve the regulation of Canada's capital markets, a need recognized and accepted by observers domestic and international. In the words of former IMF managing director, Rodrigo de Rato:

The Canadian economy is a very sophisticated economy, but in financial markets, you're not at the top....

Many of your big corporations go elsewhere to finance themselves. ...you [Canadians] should ask yourself why, and to what extent you're losing opportunities

Mr. de Rato's plea is simple and it is short, “Canada's investors deserve better”. The government agrees. While we recognize the constitutional jurisdiction of each order of government should be respected, we firmly believe we must modernize our securities regulatory framework. It is an important component of strengthening our economic union.

The government is taking action on this file and demonstrated leadership when it recently announced the membership of an expert panel, chaired by the hon. Tom Hockin, tasked to provide independent advice and recommendations to ministers, federal, provincial and territorial, on the best way forward to improve securities regulation in Canada.

There is good reason for taking action on this front. Canada has a strong and growing financial services sector which provides good, high paying jobs for Canadians and key services for consumers and businesses and yet we have a capital markets regulatory system that falls well short of our needs.

As aptly stated by the bastion of Conservative thinking, the Toronto Star:

At a time when the world's seven richest countries are looking for ways to collaborate in strengthening regulatory oversight of integrated, international capital markets, Canada is the only country that does not have a national securities regulator; instead, it has separate provincial regulators.

Canada is one of the only major industrialized countries without a common securities regulator, and this is a problem. Even my Liberal colleague from Wascana, who ever so briefly served as finance minister once, understood that when he remarked in 2004:

that Bosnia-Herzegovina is the only other industrialized country...[without a common regulator..."That should say to all of us that we need to substantially improve our system in Canada".

Our system of 13 regulators is cumbersome and fragmented and lacks the proper tools of enforcement. In a rare moment of clarity, the former NDP finance critic and member for Winnipeg Northdeclared that she was, “convinced of the need for a national securities regulator rather than the piecemeal provincial approach”.

Some have suggested the passport system, currently advocated by some provinces and territories, with the significant exception of Ontario, are sufficient reform.

However, we, along with most observers, believe that does not go far enough or fast enough. With the passport system, Canada still has 13 securities regulators with 13 sets of laws, however harmonized, and 13 sets of fees. Moreover, the passport system lacks national coordination of enforcement activities, making it difficult to maximize results on this critical part of the system.

In the words of the Canadian Bankers Association:

...[the passport system] is only a second-best solution. All of the same infrastructure, costs, and fees of the current fragmented regulatory system remain in place...entrench[ing] a potentially confusing and inefficient enforcement mechanism.

Furthermore, the passport system does not address our need to improve policy making. It is still necessary to obtain agreement from 13 regulators to change the rules.

Such a system is not progress away from the cumbersome realities of today. In short, the passport system is not where Canada needs to be in today's global economy. On that point the Liberal opposition again agrees with the government. I will quote the member for Wascana again who said:

I don't believe that the passport system is an adequate response. It still leaves us with a system that is largely fragmented and certainly less sophisticated than that in virtually every other country in the world.

That is the kind of good sense that the member displays along with his colleagues in the Liberal Party when they continually support our government on matters of confidence in the House.

For years, Canada took a leading role in advocating for free trade in securities with the United States. Under mutual recognition of each other's regulatory regime, Canadian investors would have better access to global opportunities and businesses listed on our exchange would have better access to global investors.

However, our country suffered a disappointing setback when the U.S. Securities and Exchange Commission decided to proceed with discussions with Australia as a priority rather than Canada. This decision was directly related to the fact that the U.S. would have to deal with 13 separate securities regulators rather than a single Canadian regulator.

Where do we go from here? Clearly we can no longer afford to sit back and watch our competitors pass us by. Now is the time for a more efficient market system.

The benefits of a common securities regulator are well known. It would give all regions in Canada a seat at the table. It would make the regulation of our markets more responsive and accountable by creating a decision making body that would coordinate the views of all jurisdictions promptly and fairly. It would improve market efficiency and ensure the best use of money and resources by making the system more efficient to operate. This, in turn, would lower costs and make it more affordable for all who benefit from it, both those with capital to invest and those with businesses to build.

Another advantage is that a common securities regulator would improve enforcement and better protect investors with a common set of sanctions and remedies, as well as better enforcement across the country.

By serving as a single point of contact for law enforcement agencies, both at home and abroad, Canada would be better placed to share information and detect market fraud.

It is worth nothing that many observers suggested that the current market turbulence surrounding asset backed commercial paper, or ABCP, could have been lessened with a common securities regulator.

For instance, in a recent appearance before the finance committee, Diane Urquhart, independent financial analyst, and Larry Elford both noted that the ABCP situation was yet another reason that Canada desperately needed a common securities regulator.

Having such a structure would ensure meaningful participation by all provinces and territories, with a strong presence in all regions with local expertise who would respond to regional needs, for example, the oil and gas industry in the west or the futures market in Montreal.

The bottom line is simplicity and effectiveness. A common securities regulator represents an opportunity to move toward simpler, more principles based regulation.

It is little wonder that the all party Standing Committee on Finance's 2008 prebudget consultation report, something I worked on crafting, had as its first recommendation the establishment of a common securities regulator. The minister has made the case to all ministers, federal, provincial and territorial, that we must look beyond the passport system.

As such, I would like to ask the minister in the time remaining for his comments on improving Canada's securities regulation. Why is it, along with other measures to break down interprovincial trade, so important, and not allow for investment in Canada but investors small and large?

Also, I also would like his comments on the NDP's recent decision to abandon the position of its former finance critic, the member for Winnipeg North--

[An hon. member]

What?

[Dean Del Mastro, Conservative, Peterborough, ON]

Yes, it is unbelievable. --and fight against our government's plan to better protect investors in Canada through a common securities regulator.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I certainly thank the member for Peterborough for his excellent work on the finance committee in this House and for the people of Peterborough. He has been a tremendous advocate for those people in the great city and county of Peterborough as well.

I was surprised. The last part of the member's question was interesting. It was about the change in the NDP position. I am not quite sure what has happened, but the former finance critic, the member for Winnipeg North, who only a few months ago said:

[I am] convinced of the need for a national securities regulator—rather than the piecemeal provincial approach...Canada does not seem to have the tool box necessary to deal with corporate fraud.

I was not that surprised that the member for Winnipeg North took that position given the support of the National Union of Public and General Employees for the same idea and by CUPE, the Canadian Union of Public Employees, which said:

Canada's securities...regulators have a dismal record....Canadians have been embarrassed...that regulation and enforcement of securities crime in Canada is so weak--

We know that the Liberal Party supports a common securities regulator for Canada. Of course, we do on the government side of the House and for good reason. This is an economic union issue for Canada. We have relatively free flow of capital in the world today. In Canada we still have 13 securities regulators. This is inefficient, ineffective and, in fact, is a competitive disadvantage for Canada.

As the hon. member for Peterborough pointed out, two events have occurred in the last year that offer further support and reinforce the need for action on this agenda for a common securities regulator.

First of all, the issues related to non-bank backed asset-backed commercial paper where the entities were largely, if not solely, supposed to be regulated by provincial authorities in Canada. We regulate at the federal level the banks. We regulate substantially in the insurance sector, but we do not regulate in the securities sector. I think sometimes that is a surprise to many Canadians when they learn that we do not have a unity in terms of that regulation in Canada.

This is an issue with respect to what went on concerning non-bank backed asset-backed commercial paper. Also, the issue that was raised by my hon. friend from Peterborough has to do with neutral recognition of securities regulators around the world or free trade in securities.

Canada was taking a leading role on this issue in the G-7, not only within the G-7 but with other countries in the world including Australia and discussions with New Zealand and so on. This is a tremendous opportunity for Canada to take leadership with respect to mutual recognition of securities regulators and get a competitive advantage for Canada by taking that leading role.

Lo and behold, the SEC in the United States, because we have this plethora of securities regulators in Canada, decided to go ahead and have its initial negotiations preferring Australia over Canada despite the fact that we were the nation advocating the cause at the G-7. It is a great disappointment, quite frankly. I take no joy in this.

This is something that needs to be fixed and I look forward to discussing it further with my provincial and territorial colleagues over the next two days as we meet together in Montreal. Quite frankly, I think there is growing recognition among some of the provinces that this needs to be dealt with particularly in the area of enforcement.

When one looks at enforcement of securities regulation, money-laundering, anti-terrorist financing and so on, who is equipped to do that in Canada except the federal Government of Canada with the RCMP, CSIS, FINTRAC and so on. I hope we make some substantial progress going forward. I also look forward to receiving the report of the panel headed by the hon. Tom Hockin toward the end of this year. Then I look forward to moving forward on what is truly an important economic union issue for Canada.

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Chair, the Liberal leader recently said Canada should lower taxes on things we want more of and raise them on things we want less of. In Peterborough I assume he means he wants fewer people working. He wants less manufacturing. He wants fewer people living in rural communities. He wants to disadvantage seniors. I guess that is what he wants less of. I do not understand it.

What he wants to bring in is a special Liberal carbon tax. It would be a disaster for Peterborough. A lot of people in my riding live a long way from work and the only way for them to get there is by car. They have to heat their homes because we have a winter in Peterborough and it gets cold. Sometimes they like to turn a light on.

In fact, some people in Peterborough might even be watching this on their television and the Liberal leader wants to increase their cost of electricity. I guess that is what he wants less of. He wants people enjoying their life a lot less and paying a lot more tax so he can spend it because we all know he has made $72 billion in promises and a $10 billion promise just tonight.

Could the finance minister please share with me what a disaster the Liberal carbon tax would be and can he tell my constituents in Peterborough how much the Liberal carbon tax would take out of their pockets and how much it would hurt the people of Peterborough?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I see the members opposite are becoming animated which is a good thing. They are probably animated by the score at the end of the second period which is 2:1 Pittsburgh. I bet a lot of people in Peterborough in the riding of the hon. member for Peterborough are trying to watch that hockey game on television and want to have the ability to have electricity in their homes at a reasonable cost, and want to be able to put gasoline in their cars at a reasonable cost. All of that will be made terribly more difficult by the Liberal carbon tax.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Chair, I am pleased to participate tonight. I will be sharing my time with my great colleague from Ottawa South and my dynamic new colleague from Vancouver Quadra. I thank the minister for mentioning the score in the hockey game. I think that is apropos. I will just add that both of those Pittsburgh goals have been scored by Sydney Crosby from Coal Harbour.

I would like to ask the minister a simple question referring back to a black day in history, September 25, 2006, when he announced $2 billion in cuts. Does he recall how much he cut from literacy in that cut?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I do not recall making an announcement with respect to cuts in September 2006. I think there were some spending reallocations and reductions that were announced by the President of the Treasury Board at that time.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Chair, the people who work very hard in literacy in Canada do not feel like they were reallocated. They feel like they were cut. They were cut specifically $17.7 million.

In response to a question that I put on the order paper, we got back from the Department of Human Resources that in 2005-06 $33.3 million was spent on literacy by the federal government. The next year, the first full year of the government, $16 million.

I will ask the Minister of Finance, is that money going to be recouped for the people who support literacy in Canada?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I will make two points in response to the hon. member's question. First of all, the transfers to the provinces and territories have gone up very substantially as a result of achieving fiscal balance in Canada. He is talking about a particular program and some millions of dollars. This is of course billions of dollars in increases in transfers to the provinces and territories of Canada.

The other thing I might mention to him, and I recently gave a speech on this subject in Washington, is the investment by Canada in financial literacy which was in the last budget and is an important form of literacy, particularly as we go through more difficult economic times, as we see people looking at more options with respect to mortgage financing and so on.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Chair, the minister seems to be suggesting that this was too small a cut to worry about. To people involved in literacy it is a huge cut. We recently completed a report in the human resources committee on employability. Sue Folinsbee of the National Adult Literacy Database said:

Federations have been successful partners in workplace literacy partnerships. Their work and these successful examples of provincial partnerships should be strengthened and enhanced, not cut.

I think that the money taken from literacy was an abomination to people who are struggling to gain literacy achievements in Canada.

I see the minister of national defence is here. A couple of weeks ago there was a big announcement made on defence in Halifax. I would like to ask the minister: Who made the submission to Treasury Board that resulted in the Prime Minister's announcement of allegedly $30 billion? Was it the Prime Minister or the Minister of National Defence?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I cannot answer the direct question, of course, because I honour my oath about cabinet confidentiality. We do not talk about what goes on in cabinet. The increase in the spending in the military, as the member knows, is going to be 2% over the next 20 years, starting in 2010.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Chair, that announcement was announced as a big announcement. It was billed as a great new announcement. Ralph Surette, in the Chronicle Herald a couple of days later, said this about it:

Instead, it has turned into a comedy of errors. The announcement was of $30 billion over 20 years. That was revised to anywhere from $20 to $50 billion by various confused government spokesmen, and by the time it got to Parliament, the full accounting was closer to $100 billion.

Let me ask this, has this money in fact been submitted to Treasury Board?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Again, Mr. Chair, these are internal matters within cabinet and cabinet committees, and I am not going to breach my oath and get into that kind of thing. As we just said, this comes into effect in 2010, so there is certainly time to get that in order. The big story here though is what has happened. We have a government that is actually rebuilding the Canadian Armed Forces after many, many years of Liberal neglect

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Chair, it seems to be in his mind and in the Prime Minister's mind and nowhere else. It is very simple. Two of the main estimates or the supplementary estimates reflect the announcement made by the Prime Minister.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, the Canada first defence strategy is in budget 2008, in fact in every budget that we have presented, three budgets so far. We have dealt with properly equipping the Canadian military so that it can take on its role--

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

Order. The hon. member for Vancouver Quadra.