Mr. Speaker, I will be sharing my time with the hon. member for York West.
In the 10 minutes I have, I want to cover a number of topics. First is the one I raised during question period today, which is the surprise decision by the government to eliminate a competitive advantage that was given to the credit unions and the caisses populaires in the seventies to allow them to compete with the banks on a level playing field. I also wish to touch on the federal public service, the matter of R and D, and a very important local institution, the National Capital Commission.
I will begin by talking about co-operatives.
As I said, the co-ops, credit unions and caisse populaires have a reduced tax rate. That is being taken away. They are getting a tax increase of about 36%. They are going from 11% to 15%. The reason the tax rate had been given is so that they could capitalize. Even the banks recognized that they needed it. I will quote the analyst from the National Bank Financial. He said:
Credit unions serve a different market, run higher costs partially as a result, and do not have access to capital other than retained earnings and preferred share instruments issued to members.
His name is Peter Routledge. He is an analyst at National Bank Financial, and I totally agree with him.
The reason the government had agreed to give and maintain this credit is so that credit unions could compete with the banks and offer financial services in small town Canada, where many banks had withdrawn their services. We have a situation where all of a sudden without any consultation, in the budget on Thursday credit unions and caisse populaires learned about this and wondered where it came from.
One wonders how the government justified its comments in the few pages just before that decision. These comments contradict what it had just decided, and I will quote the budget book, on page 147.
The Government will review the regulatory framework, including the process for approval of new financial institutions, to ensure that it promotes the entry and growth of smaller institutions, while preserving the safety and soundness of the sector.
However, for the safety and soundness of the sector, credit unions and caisse populaires have demonstrated their soundness.
How can the government say on the one hand that it wants to encourage entry and growth of smaller institutions, and then tax them? The credit unions were essentially small and growing credit institutions, offering services where the banks, the big six, are not, and then it taxes them. I was reading this on the weekend with my contradictory detector, and then the alarm sounded.
Where is this coming from? That is what I asked the government, and I did not get a real answer. The government changed this two months after the government acknowledged, in its written response to the special committee on co-ops that was set up by this chamber unanimously last May, and which reported to the government in September. In its response on January 28, the government said essentially that it recognized and understood that capitalization was still a challenge for co-operative businesses. Yet two months later, boom, this happens.
One could suspect that the government might have been lobbied. That is a suspicion that I have. The same gentleman I quoted made another quote that is rather astounding. This was in the Globe and Mail on Thursday. He said:
Credit unions benefit mightily from CMHC mortgage insurance so one could look at that as a federal government “subsidy” that they now have to pay a little more via the tax code.
Yes, CMHC insures mortgages, but it does for the banks as well. I want to point out, in 2008, when it was a year of some financial difficulties around the world, including in Canada, the government put $125 billion on the table to ensure the credit of banks would not dry up, via CMHC. There was $69 billion of that which was taken up by banks; hardly any of that was taken up by credit unions. The banks saying the credit unions are getting a subsidy advantage from CMHC, forgetting that they are too, is something we should be very careful of.
When people profit from investment in bank shares, they get a 50% capital gains deduction. They do not have to pay tax on the first 50%. If the Conservatives had said in their budget on Thursday that maybe that ought to be reduced somewhat, say by a few percentage points, or by 36%, the equivalent of what they have taken away from the credit unions today, I am pretty sure the phones would not have stopped ringing in the government offices. I am not suggesting we do that, but that is a basis of comparison. The members of co-ops, credit unions and caisse populaires are essentially their shareholders, and now they are being dinged by a 36% tax increase. For the shareholders of banks, that is not the case.
I have asked numerous people over the last few months if they were aware of the amount of bonuses paid to bank executives and the higher echelons in the banks in Canada. No one I have talked to knew the amounts. That has to become a known fact. Last year, it was $10.3 billion that was paid to Canadian bank executives. The year before, it was $9.2 billion. In 2008, when we had fairly serious financial difficulties and the banks were offered a loan of $125 billion, about $7 billion was paid to bank executives. Before we start taxing credit unions more, maybe we ought to consider putting a cap on the bonuses that banks can pay to themselves, as is being considered now in some European countries, Germany being among them.
I want to ensure we realize the importance in the financial system of credit unions and caisse populaires. Before the Conservatives propose doing more things, they should have had the decency of talking to them first and not just announcing the decisions. I would hope they would even want to reconsider, given the importance of credit unions in small town Canada where there are no other financial institutions.
I would like to set this issue aside for a moment and focus on the public service.
I would have liked to see an improvement in the antagonistic relationship the government seems to have with our public servants, but that does not appear to be the case. In last year's budget, members will recall that the government said it would eliminate 19,000 public service jobs. Most of the unions representing public servants agree that many more have been lost, if we include the jobs that had already been eliminated and those currently being eliminated.
The way the government is doing this is just incredible. For every job it eliminates, it drives five other public servants into uncertainty. For the 19,000 or 20,000 jobs it wants to eliminate, it will advise 100,000 public servants that their jobs could be at risk. It is spreading terror throughout the public service.
When someone receives a notice, a letter—for that is how it is done—informing them that their job could be at stake, can you imagine what must happen after that? Fear must immediately strike the hearts of these people and their families. This has an impact on the economies of the communities in which these people live. It also has an impact on productivity, when an employee knows that they have a sword of Damocles hanging over their head and that someone could cut the cord. We need to fix this.
On R and D, I have no problems with the notion of investing in the applied part of that science, but I am worried that we have been neglecting basic and pure research. The 12 Canadian scientists who won Nobel prizes did not win them for applied research; they won them for basic and pure research. I hope the government would take notice of some concerns, which are now becoming more forceful, to not abandon basic research. The DNA was basic research, and that is having a major impact down the road. There is a number of these examples. If we neglect those, down the road we will suffer. We will pay for that, so let us ensure we keep an equilibrium.
As far as the NCC is concerned, quite simply if the Conservatives are serious about keeping the NCC, then they have one thing to do and do fast, which is appoint a CEO. That position has been vacant since last summer. If they are going to have an institution that has a mandate, then somebody has to exercise that and they need a CEO.
The minister responsible for that institution needs to appoint a CEO as soon as possible if he genuinely wants to preserve the National Capital Commission.