FINA Committee Report

Pre-budget Consultation Minority Report – Building a better Budget for all Canadians in 2013

Introduction

The New Democratic Party is once again pleased that the Standing Committee on Finance conducted broad and extensive pre-budget consultations that engaged Canadians on fiscal and policy priorities for the 2013 Budget. However, we would suggest that the format for submissions be less limiting in the future, both in terms of questions and of allowed length. Limiting interventions to this extent does not allow for Canadians to participate in the Budget process in the fullest and most comprehensive fashion.

We are producing this minority report because, while we think that the majority report contains many important summaries of witness testimonies, the report’s recommendations do not present comprehensive solutions to the important issues raised in the hearings.

Canada has done better than many countries during and after the last recession, but Canadians and their economy are not out of the woods by any means:

• Unemployment remains stubbornly high at over 7% across the country. Some provinces still have double digit unemployment and the total unemployed still number near 1.4 million – higher absolute numbers than before the recession.
• Many segments of the population have much higher than average rates of unemployment—including youth at a jobless rate of 14%, Aboriginal peoples and new Canadians.
• At a time when families are struggling to make ends meet, hundreds of thousands of Canadians are in part-time and precarious work when they would rather have full-time permanent jobs.
• The government’s job creation strategy is unbalanced and limited as it puts all of its emphasis on resource extraction and export and not enough on promoting the development of value added jobs in diverse sectors.
• At the same time, there are more than a quarter of a million vacant jobs in Canada that are going unfilled.
• Rather than developing the skills of Canadian workers and matching our unemployed to these vacancies, the government has put the emphasis on Temporary Foreign Workers (TFW) as a solution. There were 190,842 new TFW entrants in 2011 – a 56-per-cent increase over the 122,368 who entered in 2005. At the end of 2011 there were 446,847 TFWs in Canada, roughly double the 2005 total. By comparison, the family class, economic and refugee categories of immigrants totaled 248,748 in 2011. 
• Household debt remains stubbornly high and is worsening. In the December 2012 Financial System Review, the Bank of Canada noted that “Data for the second quarter show that the household debt-to-disposable income ratio increased by another 1 1/2 percentage points to 163 per cent, while the aggregate credit-to-GDP gap remained high.”
• Poverty also remains unacceptably high in Canada, with just under a million children living in poverty and over 882,000 Canadians using food banks on a monthly basis.
• The government is downloading massive costs to the provinces through cuts in health care and by raising the age of eligibility for OAS. The government is cutting some $36 billion from health transfers and has disengaged from any real leadership role with the provinces in improving healthcare – including assuring access to health care professionals, providing better prescription drug coverage at a lower cost, and ensuring quality homecare and long term care.

In order to effectively deal with these issues we need a new commitment to open, transparent and accountable government. We have heard from Canadians and stakeholders from coast to coast to coast who are outraged at the changes being made in successive omnibus budget bills. They want real consultation and real partnership from their government, and they deserve better.

The Government must work with the Parliamentary Budget Officer and Parliamentarians to improve transparency in the long-term so that Canadians and their representatives are able to make informed decisions about the future of our country

Dealing with an unstable world economic climate needs a clear strategy.

This is why Budget 2013 needs to be about job creation and ensuring that Canadian employment and economic growth are protected against global economic volatility. Canada needs a budget that will get Canadians to work now and that will address the persistent high unemployment that has not fundamentally subsided since the 2008 recession.

To make this happen, the federal government needs a plan to fix the skills mismatch that is sapping our economy. The government also needs to address two decades of very weak productivity growth, which has likely resulted in billions of dollars of lost gross domestic production.  

As a result of a well-regulated financial sector, Canada has weathered the financial crisis and subsequent global recession better than many nations. However, ongoing volatility in the global economy, combined with contradictory domestic fiscal policy, poses a risk to Canada’s future economic growth. New Democrats believe strongly that the federal government should take immediate action to safeguard the Canadian economy against outside risks from the Euro-zone and the United States.

As the Toronto Board of Trade told the Committee, “Maintaining [this] economic dynamism is not easy, especially within an economic environment characterized by considerable political and economic uncertainty in key export markets like the U.S. and Europe. Key to the success of our region's and nation's economy is having both a credible fiscal plan and a clear strategy to drive private sector growth. As events in the U.S. and Europe demonstrate, not having a credible fiscal plan becomes a drag on economic growth, increases debt servicing cost, and threatens the ability of governments to pay for vital investments in human and physical capital.”

Focus for the next Budget

Four elements require urgent attention in Budget 2013:

1. Promoting jobs and skills in a balanced economy;
2. Promoting productivity growth by closing our infrastructure gap with strategic investments;
3. Building a sustainable vision for Canada’s energy economy;
4. Supporting Canada’s families.

THE NDP RESPONSE 1: Promoting jobs and skills in a balanced economy

While the government talks about a jobs and prosperity agenda – this talk has not turned into action. The Official Opposition New Democrats ask the federal government to tie financial incentives to real job creation and to bring down the stubbornly high unemployment rate.  We must ensure that business can find the workers they need, and that Canadian workers have the opportunities they deserve.

Economic growth and employment are currently widely divergent across Canada in terms of regions, population groups and industrial sectors. And despite the significant employment challenges outlined above, in certain regions of the country and in certain industries, there are also acute labour shortages. For example, the Prairie provinces have low levels of unemployment, while most Atlantic Canadian provinces have rates in the double digits. Measures need to be included to promote local job creation as well as to provide support for labour mobility.

As we have noted, youth, new Canadians and Aboriginal peoples all continue to have very high unemployment. Specific strategies need to be developed for these groups. For example, the Assembly of First Nations emphasized that “investments in First Nation education systems become even more crucial to ensuring that First Nation citizens can take advantage of existing and projected opportunities. Canada requires a well-trained workforce, especially in the booming resource extraction industry, and First Nation entrants into the labour market will be crucial in filling current and future labour market requirements in all sectors, skilled trades and professions”.

We also need to develop new strategies to create value added jobs in diverse sectors of the economy.

As the Canadian Labour Congress indicated, “Business investments are not where they should be. The across-the-board corporate tax cut didn't deliver the promised investments in real assets, such as new factories and workers' training. Thus, these cuts failed to boost economic growth and productivity and didn't help create more and better jobs in Canada. Instead, those corporate tax cuts delivered high compensation to CEOs, cost Canadians billions in lower than expected government revenues, led to higher federal debt and deficit, and led to cuts in public services.” [1]

The federal government must take immediate measures to promote job creation and to enhance and sustain economic growth for all Canadians in all regions, population groups and across all economic sectors.

The Official Opposition New Democrats are asking for the government to bring in a jobs and skills plan with the following components:

• A long-term skills training strategy – created in partnership with the provinces and territories, employers, labour and educational organizations – to fill the skilled job shortages;
• A sector-by-sector strategy – developed in partnership with industry, labour and the provinces and territories – to promote job creation across all economic sectors;
• The improvement of supports for voluntary labour mobility where there is a short or long-term need that a Canadian worker can fill;
• Developing a comprehensive strategy to deal with persistent structural youth un- and underemployment involving linking education and training with targeted job creation;
• Stable, predictable and sustainable funding – developed in consultation with First Nations – for the successful Aboriginal Skills and Employment Training Strategy and for other programs to help First Nations and other Aboriginal groups fill the skilled job shortages;
• Significant improvements to the Temporary Foreign Worker program, including working with the provinces to improve the monitoring of rights and compliance issues, and setting out a path for citizenship for Temporary Foreign Workers.

THE NDP RESPONSE 2: Turning productivity growth around by closing our infrastructure gap with strategic investments

Canada needs sustainable, predictable and transparent infrastructure funding to lower business costs and boost productivity. The Official Opposition New Democrats urge the government to take action in Budget 2013 to build our social and physical infrastructure in order to ensure Canada’s competitiveness and support our families into the future.

Canada is falling behind in rebuilding existing infrastructure and creating new projects. This infrastructure deficit has major economic costs. There is a demonstrated link between aging and underdeveloped infrastructure and flagging productivity. According to the Federation of Canadian Municipalities (FCM), “During the period when productivity in the United States outpaced Canada’s, infrastructure investment in Canada declined by 3.5 percent while in the United States it grew by 24 percent. The discrepancy between Canada’s infrastructure investments and that of other global competitors, especially China and the European Union, are even greater.” In fact, Canada’s infrastructure deficit was estimated by the FCM at over $123 billion in 2007.

The Canadian Construction Association told the Committee that: “With respect to Canada's continued economic recovery and growth, it will probably come as no surprise to you that we continue to emphasize the importance of ensuring that Canada's key critical public infrastructures—its highways, roads, bridges, seaports, border crossings, inland trade routes, water treatment facilities, water distribution systems, schools, and hospitals—are not only repaired and restored, but improved and maintained. Why? Because there can be no economic growth without state-of-the-art and well-maintained critical public infrastructure”.

The cost of new infrastructure more than pays for itself over time. The Association of Consulting Engineering Companies – Canada cited a study by the Residential and Civil Construction Alliance of Ontario that “predicts that public infrastructure underinvestment will cost the Canadian economy 1.1% of real GDP growth annually over the next fifty years and reduce the long-term profitability of Canadian businesses by an average of 20%”.

Investment in public infrastructure provides enormous economic benefits. The Federation of Canadian Municipalities noted in their presentation to the Committee that “There is no surer way to create jobs today and strengthen our economic foundations of tomorrow than investing in municipal infrastructure”. The Association of Consulting Engineering Companies – Canada agreed: “A national, long-term infrastructure investment strategy can eliminate the economic costs of infrastructure underinvestment and promote a sustained economic recovery in Canada”.

There is also a crucial link between innovation and good jobs. The Canada Foundation for Innovation told the Committee that: “The Government of Canada’s most important role in increasing productivity is to support both the generation of new knowledge that leads to innovation and the training of highly productive workers.”

Innovative technology is a key driver of increased productivity. For this reason, if Canada is to invest to promote innovation, it must help businesses every step of the way. As Ecotech noted, “The funding chain tends to give businesses access to capital over the entire phase of development, from basic research all the way to marketing and public trading of shares”.  The Canadian Manufacturers and Exporters Association has also warned against the effects of cuts to research funding[2].

Canada needs a long-term strategy that provides cities with long-term, predictable funding to improve business productivity and keep our communities moving. Funding should support innovative projects such as public transit, as well as projects that will help refurbish our communities and spur creative job development.

The Official Opposition New Democrats are calling on the federal government to address Canada’s lagging productivity gap by:

• Bringing in long-term, predictable and transparent infrastructure funding, starting with the allocation of 1 cent of the gas tax to transit projects across the country;
• Maintaining the Gateways and Border Crossings Fund, and continuing current federal infrastructure commitments, like those under the Building Canada Fund;
• Reversing cuts to research funding.

THE NDP RESPONSE 3:  Building a sustainable vision for Canada’s energy economy

We need a Canadian energy strategy that realizes our potential and reflects the interests of all Canadians. The Official Opposition New Democrats urge the federal government to partner with the provinces and territories in moving Canada to a sustainable energy future.

The way we produce and consume our energy has major implications both for the competitiveness of our economy, and for the sustainability of our environment. A sound and sustainable energy policy for the 21^st century must integrate both renewable and nonrenewable energy sectors. It must be framed in the practical understanding that economic success and the protection of the environment are deeply intertwined.

New Democrats recognize that depending solely on renewable sources is impossible and must be balanced with the use of existing non-renewable energy resources. The responsible approach would be to work with the provinces, territories and First Nations stakeholders to set a policy framework that would reduce our environmental footprint, and that would also safeguard future generations’ access to Canada’s valuable yet finite resources. Such a framework would include improved environmental performance as well as an increase in value-added processing of energy resources in Canada to capture more of the benefits of our non-renewable resources.

Countries like Germany are showing us that the right mix of public investment and market solutions in the green economy can create whole new sectors in green technology, conservation and renewable energy. The Canadian Chamber of Commerce told the Committee that “no one opposes environmental improvements. It is in area in Canada that we think is very promising”.

Unfortunately, Canada is missing out on this important opportunity. We are at the top globally of per capita contributors to climate change, and at the bottom of international energy efficiency ratings of major economies.

The Conservatives are squandering Canada’s ability to cash in on a clean technology market that reached $1 trillion last year and is expected to grow to $3 trillion by 2020. Their roll back of environmental protections and failure to make polluters pay is not only causing significant damage to our environment – it’s having a negative impact on our economy as well.

And yet we are still spending large sums on tax expenditures for fossil fuels. The Green Budget Coalition has recommended to the Committee that the government “further reduce the over $1.3 billion in federal subsidies to fossil fuels”.

The Conservative government’s focus on exports of raw resources undermines our capacity to help secure Canada’s own energy needs, and neglects important opportunities for building value-added industry and good-paying jobs across the country.

The Canadian Labour Congress confirmed that our reliance on exporting unprocessed natural resources has a negative impact on productivity. They advocate for a new policy framework for international trade and investment that will lay out essential principles such as strict labour standards, create good jobs and promote sustainable economic development.

The Official Opposition New Democrats are calling for Budget 2013 to include a sustainable vision for Canada’s energy economy. The federal government must work with the provinces on the development of a Canadian energy strategy that will kick-start our green energy potential by:

• Restoring investment in home energy efficiency retrofits;
• Supporting renewable energy sectors to help Canada grow and succeed in a new global economy;
• Taking action on eliminating $1.3 billion in fossil fuel subsidies;
• Helping industry capture the benefits of clean technology markets by supporting green R&D;
• Supporting skills training to prepare Canadian workers for the jobs of tomorrow.

THE NDP RESPONSE 4: Supporting Canada’s families

Canada’s stagnant economic growth has had serious consequences for families. The Official Opposition New Democrats urge the federal government to use Budget 2013 to protect families and the economy from the looming household debt crunch.

Both Bank of Canada Governor Mark Carney and Minister Flaherty have issued warnings about unprecedented levels of household debt, but the Conservative government is failing to take the necessary actions to deal with this situation. Between 1982 and 2010, mortgage debt has exploded, increasing tenfold. Consumer debt has increased from $48 billion to $460 billion over the same period.

At the same time, wages have remained stagnant and income inequality has been on the rise in Canada over the last two decades. Things remain particularly difficult for women, new Canadians and Aboriginal Canadians. YWCA Canada emphasized to the Committee that “Women are central to the nation’s prosperity and productivity. Economic policy that fails to recognize this will fail for lack of foundation in the realities of Canada today”.

Budget 2013 must provide a plan for economic growth that benefits everyone. As Campaign 2000 noted, “This period of slow economic growth and high personal debt requires the federal government to prevent and reduce poverty for the health and well-being of all Canadians”.

Unfortunately, the Conservative government has remained focused on an austerity agenda that has made major cuts to the services on which families rely. Of the nearly 1.4 million Canadians who are unemployed, only about 39% of them receive Employment Insurance benefits. The Conservatives’ recent changes will make the situation worse and force unemployed Canadians to accept lower skilled jobs and leave home to seek work.

Communities and industries that depend on seasonal workers are bearing the brunt of the Conservative changes introduced without any consultation with premium-paying workers and businesses. Wait times at Service Canada are unacceptably long and have not improved.

When interest rates go back up, or if we experience another economic shock as a result of global economic volatility, things could get much worse for millions of Canadians.

The Official Opposition New Democrats are calling on the federal government to take immediate action to set out a plan that will protect Canadian families and the economy from the looming household debt crunch, including:

• Reverse their damaging reforms to Employment Insurance and fix EI so that it works for unemployed Canadians;
• Hiring sufficient staff to properly administer Service Canada programs and dramatically reducing wait times;
• Implementing strong regulations to stop abusive practices by banks, lenders and credit card companies;
• Implementing the housing strategy as outlined in Bill C-400 (MC Morin);
• Implementing the anti-poverty strategy as outlined in Bill C-233 (Crowder);
• Providing equitable funding for all First Nations schools based on the Shannen’s Dream motion passed in the House in February 2012, including core and program funding that is stable, sustainable and predictable and that is determined in consultation with First Nations.