Debates of May 30th, 2016

Finance — Main Estimates 2016-17

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, again, one cannot accrue something in a budget. I think the question was whether that was in the fiscal period 2015-16, and the answer to that question would, indeed, be yes.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, was the $900 million for reversing our government's planned public sector sick leave changes then set out in budget 2015-16?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, those numbers were only budgeted but never accrued.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, they were in the budget. As the minister said, they could not be accrued. I will take that as that they were there.

Was the $300 million for Alberta stabilization in budget 2015-16?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, again, as our responsibility was not to prepare 2015-16, I cannot say exactly what was in that budget.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, if we add those numbers up, that is $2 billion in Liberal-initiated spending primarily on their platform commitments as I mentioned. I wanted to finish those comments off.

I would like to make some more comments about another part of the discussion tonight and it has to do with forecasting. After those comments I would like to move on to my questions and I will indicate to you, Mr. Chair, when I get to those questions.

Under successive Liberal and Conservative governments, private sector economists have been consulted on their forecasts for the economy and the average of those forecasts is used as budget baselines. Here is the advice the minister received from his own officials in the briefing binder he received in November:

“The department regularly surveys about 15 private sector forecasters for their views on main economic variables. The average of these private sector forecasts then forms the basis for the economic assumptions used for fiscal planning in the budget and the fall update. This practice has been used since 1994 and introduces an element of independence into the fiscal forecast. It has been strongly supported by external organizations such as the International Monetary Fund and we recommend you maintain this practice.”

Apparently the finance minister did not agree and instead he decided to politicize this important process for his own political benefit.

In his budget the minister used a base oil price of just $25 per barrel for 2016 and real GDP growth of just 1%. This has the effect of lowering expected tax revenues by $6 billion. Previous governments generally have used a figure between $1 billion and $3 billion. He calls it prudence, but at the finance committee one PBO official likened it to assuming oil prices would only go negative. Its report said that such a large arbitrary deviation from private sector forecasts would remove independence from the process. By the way, those average sector forecasts were $40 a barrel in 2016 and they expected our growth rate to be just around 1.4%.

Instead, it appears the finance minister has given himself a $6 billion slush fund to play with. This is very concerning. In every one of the next five years the government can spend $6 billion more than was outlined in the budget and still meet its deficit targets. This is not a conspiracy theory. A recent BMO report shows that the Ontario Liberals have been using this strategy for years to hide spending. The process of forecasting is fundamental to our budget process and it is important for Canadians to understand how the Liberals are politicizing it and undermining the credibility of the finance department.

I will now move on to my questions.

Why did the department make such an unusually large downward adjustment to the private sector forecast? Was this a decision by the minister himself, or who recommended it?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I would like to come back to the previous line of questions. When we look at the government actions taken since we came into power and we look at the situation we were left in, we find the deficit without the government actions, and I want to be absolutely clear. When we consider the expenditures that we have made along with the savings we have made, the deficit without the government actions, therefore the deficit left us by the previous government, is $2.5 billion. It is there in black and white. I would like the member to review that.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, might I get an answer to my question that was posed instead of a previous question when the minister was not so certain of his numbers?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I would like to ask the hon. member whether I can have adequate time to answer his question.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, I believe the time is the time. The question was asked and I will re-read it and that is the amount of time the minister will have to respond.

Why did the department make such an unusually large downward adjustment to the private sector forecasts? Was this a decision by the minister himself, or who recommended it?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I am pleased to confirm that we did work together to come up with a prudence factor in the budget. We looked at the previous private sector economists' forecasts. We realized that they had repeatedly been marked down in the subsequent rounds and that markdown was on average $40 billion. Therefore, as a prudence factor, we took $40 billion which translates into a $6 billion prudence factor. This is the sort of thing that Canadians expect us to do in order to ensure we start off with an appropriate format for our budgeting and from there, as we have said repeatedly, we are making investments to improve our situation for the future.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, on page 48 of the budget, I note the $6-billion contingency is not separated from the core budget balance, as it has been in past budgets. Who advised the minister to draft the budget this way?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I am pleased to say that as has been done in the past, we worked together to put together a budget that makes sense for the times that we are in. We believe taking a prudence factor made sense. It continues to make sense. We are obviously seeing a continuation of volatility. We are obviously seeing challenges in the global environment and we continue to be aware that we want to be ready for challenges even in our own economy, which indeed we have seen.

We believe this is the right way to start. It is putting us in the position where now we can move forward on investments for Canadians.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, my next question is very important and the minister will have more time because it is lengthier. It cuts to the core understanding of the minister's spending projections. He has already shown a propensity to hide the true extent of his spending plans from Canadians. That is why he included so much Liberal platform spending in last year's fiscal year. We know that he has downgraded economic forecasts that have left him with the $6 billion in wiggle room in this next budget.

If GDP growth is stronger than his budget projections, which it probably will be, and if the oil price is higher than $25 per barrel, which it also will probably be, will the finance minister spend that money or will it be put to lowering the deficit?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I would like to start by saying that the fact that we are talking about our prudence factor is indeed evidence that we are open and transparent about that exact prudence factor. We took an average of 15 private sector economists' forecasts. We did not take a $25 oil figure. That was embedded in those private sector economists' forecasts. Of course, many factors can lead to those forecasts being correct or incorrect. We believe that taking a prudence factor was a good way to start.

Should the economy do better than we expect, we will be pleased. Canadians will be pleased and that will put us in a better economic situation and that will enable us to ensure that we have a better situation for the next generations by making investments to continue growth. That is in fact our plan. Our plan is investing. Our plan is being prudent, making sure that Canadians can see what we are doing and then going ahead and doing it. That is going to improve the situation for Canadians in the future.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Mr. Chair, we have a job to do, to hold the government to account for its promises to Canadians and for the facts and figures that are presented to Parliament. The minister has told every member of the House and all Canadians that this $6-billion slush fund is his prudent contingency plan. That is how he has presented it to Parliament. A contingency plan means he has left himself room to not go over budget if the economy suddenly deteriorates. It does not mean that he can then spend that money on new things that were not included in his budget plan if the economy does not deteriorate.

Will the finance minister commit to returning any savings in his projections from an oil price higher than $25 per barrel, or GDP growth stronger than 1%, to the taxpayers of this country? Will he commit to sticking to his budget plan and not spending his contingency?

[The Chair, Conservative, Bruce Stanton]

This will be the last response.

The hon. finance minister.

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, I am pleased to answer the question. We absolutely are going to be prudent with the money that is entrusted to us from Canadians. We know that it is critically important that we take the government revenues and we spend them wisely, and that we invest with prudence in the future of this country.

We know that making promises before we have an actual situation is not the way to go about this. What we want to do is set out a budget plan that makes sense. We want to invest so that we can hopefully exceed that, so that we can then turn around and actually make more investments in the next budget and subsequent budgets so that we can ensure that our economy continues to grow.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Chair, I would usually say good afternoon, but I think I am going to say good morning now.

I am pleased to speak to the committee of the whole tonight as we discuss the main estimates for finance. I would like to focus my comments today on one particular area that is of great interest to me and that our government is dedicated to enhancing: the field of innovation.

Before I begin my formal remarks, when I think of innovation I ask myself what it means for Canadians. I look at my riding, and in the city of Vaughan is a company that has been in existence for many years whose owners are good family friends. The Mircom Group of Companies is a leader in independent design and a manufacturer and distributor of intelligent building solutions. This company competes against the likes of General Electric, Tyco, and Johnson Controls, employing literally hundreds of Canadians. Over half its products are exported outside of Canada to more than 95 countries. This employer has employees who are scientists, R and D, and capital investment. This company is a Canadian success story. It is an innovator. That is what our government is attempting to put into this framework. It is attempting to encourage companies like this to come into existence, to grow, to remain in Canada, and to succeed. That is what makes me happy about what our government is doing in terms of its platform on innovation. We are going in the right direction.

I will now go to my formal remarks. What do we mean when we use that word, innovation? Certainly, it means different things to different people. Our government is daring to dream of doing something smarter, faster, and better to improve the status quo, to improve the quality of life in whatever ways possible. Fundamentally, we are trying to find solutions to the big problems. That means social innovation. It means embracing the premise that a clean environment and a strong economy can go hand in hand. It means understanding that some of our most important infrastructure is now digital infrastructure in the context of a knowledge economy. It means moving beyond individual interests to see the collective opportunities.

Technology has transformed the way Canadians access information, pay for goods and services, interact with each other, and build communities. At the same time, technology has now reached a new level. It is more than just communications. Technology has become a transformative tool in addressing global challenges like climate change. Where industrial progress once came at a cost to the environment, nowadays technology has emerged as our greatest tool in clean growth and healthy, prosperous societies. Our government has defined a new vision in 2016: to build Canada as a centre of global innovation, renowned for its science and technology, creative and entrepreneurial citizens, and globally competitive companies offering high-quality products and services. We are well positioned for this. We have world-leading research institutions, creative and innovative entrepreneurs such as the Mircom Group of Companies, businesses, and commercial organizations that can transform breakthroughs in the laboratory into products that enhance the lives of millions.

Canada's innovative society already creates jobs for the middle class, enhances homegrown talent, and helps companies expand beyond our borders. However, we can and we will do much more. What is now an emerging economic opportunity will become the foundation of a modern 21st century Canada. We will transform our economy from one that depends on a few resources to one whose resources are as infinite as our diversity, creativity, and talent.

Through 2016 and 2017, we will define a bold new plan, the innovation agenda. This will be a plan for change. It will define clear outcomes and pinpoint milestones toward achieving them. It will be a cross-government effort, drawing on Canadian and international experts in clean technology, health sciences, advanced manufacturing, digital technology, resource development, and much more.

It is important for us to be leaders in this field. We all hear that word, ecosystem. The ecosystem is important. In the old days there may have been an auto plant where everything would co-exist there and in the surrounding area. However, now, with an ecosystem, we may have many small companies operating in clusters, and we need to be at the forefront of that.

To help us realize this vision, budget 2016 proposes several interim measures to promote research and accelerate business growth. It would focus new federal support for science on world-class discovery research, maintain funding for the commercialization of promising scientific discoveries, begin to orient federal business support toward those firms with ambitions to grow, and build a better evidence base to identify gaps, evaluate performance, and inform future decisions.

The rules are changing around us. In the old bricks-and-mortar economy, a bigger factory meant not just more output in wealth but more jobs. That is not the case in the new digital economy. We need to enable and support this change. We also need to ensure that we do so mindfully and in a way that does not stifle innovation. The innovation leaders are the future and must be equipped with the skills they will need to succeed. Post-secondary and other research institutions are front-line agents in fostering science and research excellence. They help to train the Canadian workforce of tomorrow. They also help to create the knowledge base necessary for the private sector and policy-makers who are looking to build a thriving and clean economy. To ensure that these facilities continue to support our researchers and innovators, budget 2016 will invest up to $2 billion over three years in a new post-secondary institutions strategic investment fund.

If investing in the spaces that enhance our innovative potential is the first step, the second step is most certainly investing in Canadian researchers themselves, particularly those on the cusp of new discoveries. In Canada, this funding typically flows from federal granting councils, which include the Canadian Institutes of Health Research, the Natural Sciences and Engineering Research Council, and the Social Sciences and Humanities Research Council. These councils already receive $2.8 billion annually to support research and training of highly qualified people at universities and colleges across the country. This year and going forward, I am proud to state that our government will provide an additional $95 million to support discovery research, the highest amount of new annual funding in over a decade. To ensure that federal support for research, including through the granting councils, is strategic and effective, we will undertake a comprehensive review of federal support for fundamental science. We want to be sure that we are providing the right support to the right leaders, and that fields of research reflect shared Canadian priorities.

Our government will also continue to support Canada's strength in genomics, the study of the entire genetic code that is fuelling innovations across a number of sectors. We will provide $237.2 million over the next four years to support the pan-Canadian activities of genomics. Well before genomics, Canadians carved out a special expertise in stem cell research. It started over 50 years ago when two of Canada's own doctors proved their very existence. Since that time, stem cell research has evolved into one of the world's greatest promises, with significant implications for medical treatments, commercial products, and public policy. We will provide up to $12 million over two years in support of the stem cell network, so it can continue to provide bridges that connect researchers and professionals through training and outreach activities.

To conclude, in the 21st century global economy, Canada needs to be innovative. We need to be leaders. Our businesses need to be fostered and encouraged. We need to embrace the world of science, technology, engineering, and math. We need to diversify our economy to enable growth and prosperity throughout the country. We need to turn the page on the last 10 years. In addition to these goals, I believe that Canada has a strong foundation to build upon. We have one of the best-educated populations in the world. We have one of the highest university investments in R and D in the world. We have one of the world's best investment climates. We are a leading edge of global trade. Let us be proud of Canada.

I would like to thank the Minister of Finance for his continued leadership on the economy in this period of global volatility. However, I would like to ask this to the minister. How will the Government of Canada help Canadian businesses innovate and grow?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, we absolutely intend on helping Canadian businesses to innovate and grow. We intend on doing that by investing in basic science, in research, and by investing in networks and clusters to enable us to develop a flywheel of research and investment that can make a long-term difference in this country. That is what we are embarking upon. Together with my advisory council, we are working on ways that we can actually do that. We will have more to say to Canadians in the coming months.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Chair, I would like to follow up and ask the Minister of Finance what specific measures from the budget 2016 he can tell us about that relate to innovation.

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, there are many specific measures that we can talk about. Clearly, they would include the $87.2 million for Natural Resources Canada projects across the country, in support of research in forestry, mining and minerals, earth sciences and mapping, innovation, and energy technology.

There is $8.7 million for the Canadian Space Agency projects, including the rehabilitation of the chamber used at the Shirleys Bay, Ontario facility to simulate space conditions for the testing of large spacecraft and instruments.

There are things like the $18.5 million for the National Research Council Canada projects, including $3.7 million for a leading-edge wake-making system at the St. John's towing tank used to evaluate the performance of marine technologies and vehicles.

These are just some of the many initiatives that we put in budget 2016 to help to grow innovation in this country.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Chair, our focus on innovation is meant to ensure that our longer-term growth profile of the Canadian economy is boosted, and ensure that we have a strong standard of living for my children and our next generation. Therefore, I would ask the Minister of Finance, for those individuals who are going to post-secondary institutions, what opportunities are there at post-secondary institutions and in the north that will help the government build upon its innovation agenda?

[Bill Morneau, Liberal, Toronto Centre, ON]

Mr. Chair, businesses, post-secondary institutions, governments, and other innovation stakeholders need to work together more strategically to create greater value for Canada. These connections are critical to transforming today's ideas into the products and services of tomorrow.

We will invest up to $800 million over four years to support innovation networks and clusters as part of our upcoming innovation agenda. While further work on our innovation agenda is taking place, budget 2016 provides the industrial research assistance program with a further $50 million in 2016-17 to increase the number of companies served by the program's highly qualified industrial technology advisers nationwide.

Finally, northern communities are a rich resource in the areas of geoscience, renewable energy, fisheries, tourism, and cultural sectors. To help promote strong, diverse, and sustainable economies for northerners, budget 2016 provides $40 million over two years to renew the strategic investments in northern economic development programs to the Canadian Northern Economic Development Agency.

We are proud of these measures to improve academic institutions and in the north in their innovation efforts.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Chair, I have one follow-up question in terms of the innovation agenda.

Could the Minister of Finance comment on our investment in rural broadband and how it is so important in being able to move, not only as we speak about infrastructure, people, and goods and services, but also move information from rural areas in Canada?