The committee will come to order.
Pursuant to Standing Order 108(2), the committee is studying the subject matter of Bill .
Yesterday we heard from representatives of Finance Canada. This afternoon we'll start on part 4, division 3, entitled “Financial Sector Stability”, and hear from Lisa Pezzack, director, financial systems division, financial sector policy branch; Liane Orsi, senior adviser, financial institutions division, financial sector policy branch; and Justin Brown, chief, financial systems division, financial sector policy branch.
Welcome. After your opening statement, we'll go to questions.
The floor is yours.
This proposal seeks to strengthen Canada's bank resolution regime by formally designating the Canada Deposit Insurance Corporation as the resolution authority for its members and by requiring Canada's biggest banks to develop and submit resolution plans. The proposal would also clarify that the Superintendent of Financial Institutions may set criteria for how domestic systemically important banks must meet the requirement to maintain a minimum capacity to absorb losses.
The Canada Deposit Insurance Corporation has been responsible for providing deposit insurance for Canadian banks since it was established by the Canada Deposit Insurance Corporation Act in 1967. Following the financial crisis, and in line with the development of international standards, CDIC's powers and tools have been expanded to facilitate the orderly resolution of its member institutions in the event of a failure. The proposed changes would formally designate CDIC as the resolution authority for its member institutions.
In this capacity, CDIC has undertaken a number of initiatives to ensure its readiness to deal with any banking failures. One of them pertains to the development of resolution plans, which describe how a systemically important bank could be resolved in an orderly manner while ensuring the continuity of critical financial services and protecting financial stability.
In 2015 Canada's systemically important banks were asked to work with CDIC to prepare plans demonstrating how they could be resolved in a manner that ensures financial stability in the unlikely event of their failure. The proposed changes would put the requirement for Canada's largest banks to develop resolution plans in legislation and provide CDIC with the authority to set out the framework for these plans in a bylaw. Together, the proposed changes would provide additional transparency regarding CDIC's activities as the resolution authority for its members, which should facilitate CDIC's role in supporting the stability of the financial system.
This proposal would also clarify that the Superintendent of Financial Institutions may set criteria for how domestic systemically important banks must meet the requirement to maintain a minimum capacity to absorb losses. The requirement for systemically important banks to maintain a minimum capital to absorb losses is set by the superintendent and met through additional regulatory capital and debt, subject to conversion into common shares in a failure through the exercise of CDIC's bail-in power.
Thank you, Mr. Chairman.
Good afternoon, everyone. Welcome to the committee today.
It's nice to see you, Liane. We interacted before, in a prior career.
First, on the change in role with regard to CDIC, can you guys comment in terms of how this fits in with the changes that have occurred over the last several years and since the financial crisis?
My second question is with regard to bail-in. I left a financial institution about two years ago now. We were having initial discussions and going along the way in terms of having bail-in securities put in place by the bank so that in the event there were some disruption to the financial sector they could be converted and bondholders would share some of the risk. Can we get an update on that?
Thank you very much for your question.
The purpose of this amendment is not to determine how the amount is calibrated but more how it's satisfied, the criteria for what instruments may be eligible. However, I'm happy to respond to both.
On the question of how it would be calibrated, we would be looking at what losses a domestic systemically important bank could plausibly experience, based on historical experience and stress testing, and also what level of capital is necessary to restore the bank to adequate levels of capitalization, with a buffer beyond that to establish confidence in the bank. This is a bank that has failed, so the intent is to recapitalize it such that it can continue to remain operating.
In addition to the calibration of the amount, this amendment that we are seeking views on will allow us to establish criteria as to what instruments, regulatory capital, or long-term debt are available to meet this requirement. We are seeking flexibility here not only in calibrating the amount but also in how to satisfy this amount, given that this is a new standard and market practices are evolving as well as international standards.
Ladies and gentlemen, welcome to your House of Commons.
In a way, you are the guardians of the economic stability of Canadian banks, which of course requires adjustment based on the new reality.
The bill covers the whole work. Are the proposed changes an updating function, or will they lead to more profound changes in the management of the security of the Canadian banking system?
I would also like to thank the witnesses for being here today.
I'm going to focus a little more on clauses 109 and 110 of the bill, which amend section 11 of the Canada Deposit Insurance Corporation Act.
Someone said that the board will need to develop and maintain resolution plans for systematically important banks. Clause 109(2.01) states that resolution plans must be approved by the minister. In fact, that part states:
“specifying that a by-law made under paragraph (2)(e) is not effective unless it has been approved in writing by the Minister.”
Could you explain why you decided to add that provisions, which requires ministerial approval for resolution plans?
Thank you very much. I thank members for their questions.
I'm wondering, Ms. Pezzack, if it's okay with the committee, if we jump to division 19. Ms. Pezzack is on division 19 as well, the proceeds of crime. If we can jump there, she doesn't have to stay and wander all afternoon.
Maxime Beaupré is here as well. Maxime is the chief, financial systems division, financial sector policy branch, and we are dealing with part 4, division 19, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
The floor is yours, whoever is starting.
First of all, thank you very much, Mr. Chair, and members of the committee for adjusting your schedule.
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act would be amended by division 19 to do the following:
|| ...expand the list of disclosure recipients to include the Department of National Defence and the Canadian Armed Forces, and to include beneficial ownership information as “designated information” that can be disclosed by the Financial Transactions and Reports Analysis Centre of Canada.
Furthermore, it makes several technical amendments to ensure that the legislation functions as intended and to clarify certain provisions, including the definition of “client” and the application of the trust of the act to all trust companies.
The Government of Canada is committed to combatting money laundering and terrorist financing, and while we maintain a robust and comprehensive anti-money laundering, anti-terrorist financing framework, it must evolve to ensure the integrity of the financial system and the security of Canada and Canadians.
Including the Department of National Defence and the Canadian Armed Forces on the list of disclosure recipients would allow FINTRAC to relay information as it relates to the threats to the security of Canada. We would define threats to the security of Canada as defined in the CSIS Act, so it's quite a clear definition there.
It would allow for FINTRAC to disclose information that it has on beneficial ownership. Sometimes reporting entities provide this information to FINTRAC. They are not currently allowed to provide that information to competent authorities, and this would allow them to do it.
There are a variety of technical changes that would strengthen the framework, support compliance, and improve the ability of reporting entities to operationalize the act and ensure that it functions as intended. Some would relate to clarifying and streamlining regulatory authority, clarifying that all trusts are covered.
It would ensure that MSBs that are subject to the United Nations and Special Economic Measures Act sanctions cannot re-register as an MSB with FINTRAC.
There are some technical changes to correct English and French and to clarify some of the concordance.
Thank you once again for your presentation.
I'm mainly interested in the issue of ultimate recipients or, as you put it, “beneficial owners”. It mainly concerns the Canada Revenue Agency, which has an agreement with the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC, to provide information. I noticed the following problem. The agency collects a great deal of information from FINTRAC, particularly on transactions of $10,000 or more. The agency recently informed us that it did not follow up after receiving FINTRAC documents to determine whether the information received had been effective.
In the case that concerns us today, we realize that if, for example, you have information about the ultimate beneficiary or beneficial owner of an entity, of a corporation, you can't disclose it to the Canada Revenue Agency. That's the current problem, is it not?
Thank you very much, Mr. Chair.
I want to delve a little bit more into the Department of National Defence and Canadian Forces. Under subclause 430(1), subsection 55.1 of the act, it states:
|| (e) the Department of National Defence and the Canadian Forces, if the Centre also has reasonable grounds to suspect that the information is relevant to such a threat as it relates to that Department or the Canadian Forces.
Who's actually going to determine if that's relevant? There's always this idea of mission creep. I'd be interested to know, at some point from the Department of National Defence or the Canadian Forces, who in that department is qualified in financial matters? How would they determine that it's a relevant threat to them, and what would they do with that information in the long term?
I'm a bit concerned that there's perhaps a bit of mission creep in that, because even in the RCMP, for instance, it sometimes has difficulties understanding all these things and working with all the other agencies.
There are many provisions in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act that protect information that's in the custody of FINTRAC. One of those provisions that reinforces the separation between FINTRAC as an arm's-length agency and law enforcement as disclosure recipients, for example, is the fact that FINTRAC controls the information. We have legislated thresholds in the act that allow FINTRAC to disclose. As Lisa was indicating, FINTRAC is the one that applies those legislative tests to determine whether information under its custody can be disclosed to a recipient. It is not up to the recipients to make that test.
Furthermore, under the act, it is not possible to request information from FINTRAC, but it is possible for disclosure recipients to submit voluntary information records. This is how FINTRAC can help investigations when law enforcement agencies are, for example, interested in a case, and they have grounds to suspect that the target is involved in money laundering or terrorist financing. They can submit records to FINTRAC, but then FINTRAC makes its own analysis, and if it meets threshold that are legislated, there will be a disclosure.
I'm just going to another thing in the act here. I'm sorry to waste everyone's time. I hope I'm not boring anyone.
I've noticed there are quite a number of mentions of the “issue”, or the sale of “money orders”, or “redeem them from the public”. This is to ensure, for instance, that monies aren't transferred illegally or to finance terrorist operations.
Let's say we have the Canadian Forces in operations in some country, perhaps Africa, and someone has an unregulated corporation under a provincial jurisdiction and they're doing money transfers. How does FINTRAC ensure that National Defence is aware that monies might be flowing into the zone of operations where they're operating, so they're aware that maybe arms are being purchased that could be used against Canadians?
Now if you have a series of transactions, any sort of money remittance, business doesn't have to wait until the $10,000 threshold is met. They could say, wow, there are a lot of transactions going to that little town and I know that's a bit of a war zone, so that doesn't look right. They can then say, to me, that is a suspicious transaction and I need to report that. Just because we have the $10,000 threshold doesn't mean that they're not reporting you.
They would put that information together, send it to FINTRAC, and say, “There are some of these little things going to this little town and you might want to look into that.” FINTRAC has that ability, and it also has the ability to disclose information to its national security partners as well.
If it felt that there were an issue—it knew the Canadian Armed Forces were there and that the money was going into this region and that it would look suspicious—in the eyes of the money transmittal business, or whoever would be sending the money, they would be then in a position to share that information, if it met the two tests.
Thank you for being here.
As you surely know, the provision is copied and pasted from Bill . My question isn't necessarily to determine why you decided to include it in Bill , but rather why you have chosen the legislative approach rather than a budgetary one, which is the regular and fastest way.
If the government believed that it was a priority to adopt this $125 million allocation, and if it had been included in the main estimates, the allocation would have already been adopted.
You're asking this committee to adopt this part of the bill, even though it could have been done in some other way. What motivated your decision to use the legislative process?
It's actually a complicated question. We have given CIFAR the requirement to develop an intellectual property policy in consultation with the nodes and institutions that will be recipients of this federal funding.
As you may be aware, institutions across the country have their own individual IP policies. There's actually evidence to support many different types of strategies. It's also notable that, in terms of what the research tells us about intellectual property policies, often they would differ by sector or industry, and that, depending on the stage of the research, whether it's very early stage or late stage, different types of intellectual property protection makes sense.
It's actually a fairly complicated task that we've given to CIFAR to work out an intellectual property policy that will be optimal for managing this large sum of money.
Thank you, Ms. McDermott, for your in-depth answers.
We will now turn to part 4, division 6, dealing with financial assistance for students. For that, we have representatives from Employment and Social Development Canada.
Mr. Rahman is the acting director general, Canada student loans program. Mr. Côté is director of policy and research, Canada student loans program. Mr. Moore is director, program design, Canada education savings program, and Ms. Nagy is senior strategic planning adviser, Canada education savings program.
Welcome. I'm not sure who is making the presentation.
Mr. Rahman? Go ahead.
Thank you, Chair. Yes, I will.
I'm from the Canada student loans program. I will cover clause 116 that is related to the Canada Student Financial Assistance Act, and then my colleagues from the Canada education savings program will cover clauses 117 and 121. Those are related to the Canada Education Savings Act.
With respect to clause 116, as I said, this is a proposed amendment to the Canada Student Financial Assistance Act that currently limits who can be a qualifying student to Canadian citizens, permanent residents as defined in subsection 2(1) of the Immigration and Refugee Protection Act, and protected persons within the meaning of subsection 95(2) of that same act.
As a result, persons who are registered as Indians under the Indian Act but who are not Canadian citizens are not eligible for student financial assistance under the Canada Student Financial Assistance Act. Amendments to this act will be introduced to provide that persons registered as Indians under the Indian Act will be eligible for student financial assistance, regardless of their citizenship.
That's clause 116. I will now pass to my colleagues from the education savings program.
I'll start and discuss clauses 117 to 121 of part 4, division 6.
By way of context, I'd like to note the following. Canadians use registered education savings plans, RESPs, to save for a child's post-secondary education. RESPs grow tax-free until they're withdrawn to pay for full-time or part-time education at a community college, university, CEGEP, trade school, or apprenticeship program. The Government of Canada offers two different education savings incentives. The Canada education savings grant is available to all Canadians and is based on contributions. In addition, low- and middle-income Canadians get an additional 10% or 20% based on contributions. For the Canada learning bond, which is available for low-income Canadians, no personal contributions are required.
Under the current legislation, requests for the Canada learning bond and the additional amount of the Canada education savings grant, submitted by anyone other than the primary caregiver—the person principally responsible for the care of the child—are declined. So the Canada Education Savings Act, which governs the administration of these education savings incentives, is being amended to permit the primary caregiver's co-habiting spouse or common law partner to apply for the Canada learning bond and the additional amount of the grant on the child's behalf.
It is anticipated that by allowing the spouse or the common law partner of the primary caregiver to also apply for these education savings incentives on behalf of the beneficiary, fewer education savings incentives requests will be declined, and there will be a resulting increase in the take-up of the Canada learning bond. It should be noted that the eligibility requirements for the Canada learning bond and the additional amount of the Canada education savings grants are not being changed.
Are you satisfied? Okay.
Thank you, folks, for your presentations and for answering questions.
We'll now turn to part 4, division 8, which deals with the Investment Canada Act.
From Innovation, Science and Economic Development Canada we have with us Patricia Brady, director general, investment review branch; and Jonathan DeWolfe, director, policy and outreach, investment review branch.
Welcome, Patricia and Jonathan. Who will start?
Good afternoon. We're here to speak to part 4, division 8. It proposes two changes to the Investment Canada Act.
The first change, in clause 192, is to raise the dollar value threshold that triggers the requirement for a net benefit review of a foreign acquisition of control of a Canadian business to $1 billion. Currently an acquisition by a non-Canadian of a Canadian business that's valued at or above $800 million must be reviewed under the Investment Canada Act for its net benefit to Canada and approved by the Minister of Innovation, Science and Economic Development before it's allowed to go ahead.
There is a schedule in the act currently for this threshold to rise to $1 billion on April 24, 2019, roughly two years from now. The amendment in clause 192 would accelerate that increase so that the threshold would move to $1 billion upon the coming into force of the budget implementation act. That would be two years ahead of the already planned schedule.
The higher $1-billion threshold will apply to investments by private sector investors. There is a lower threshold in the act for investments by state-owned enterprises. That threshold right now is $379 million, and this amendment will not change that threshold. In addition, the amendment won't change the government's ability to review investments for national security concerns. Any investment by a non-Canadian now can be reviewed under the act for national security concerns. There's no dollar value threshold for that review, and this amendment will not change that.
The second proposed change to the Investment Canada Act is in clause 193. That's to require annual reporting on the administration of the national security review provisions in the ICA. Currently the Minister of Innovation, Science and Economic Development is required to report annually on the administration of the net benefit review provisions, but the national security review provisions are explicitly exempt from that reporting requirement. This amendment would remove that exemption to require annual reporting on how national security review provisions have been used.
That's an overview of the changes in clauses 192 and 193. We're happy to answer any questions.
Yes, there are transitional measures in the act. Right now the threshold is $800 million.
I heard that it was $600 million, but it's actually $800 million.
For applications that have already been filed, so where there's an application for review filed and it's based on the current enterprise value of the Canadian business that is to be acquired, if the enterprise value is below $1 billion and a decision has not yet been made when these amendments come into force, then the application would be deemed not to have been filed. Essentially, it will require a recalculation of what the enterprise value is at the time these amendments come into force, which for public companies is based on market capitalization. They'll do that recalculation. If at that time the Canadian business is valued at more than $1 billion, then of course it would be subject to review; if it's less than $1 billion, it would not be subject to review.
To be clear on what would actually be reported in the annual report, it would be high-level information on the number of reviews that have been conducted. It would not give information on the particular investments involved, to protect both national security and confidentiality. Numbers of reviews would be provided without specific information on the investor or the national security concern. The outcomes of those reviews would be provided at a high level.
This was actually done. There's authority for this under the act to be done voluntarily, but it's not required. Last summer in the annual report, the government issued that information on past reviews. It became public in the summer that eight formal national security reviews have been conducted under the Investment Canada Act, and the outcomes of those reviews at a high level were also provided. In five instances, the investments were either blocked or divestiture was ordered, and in two instances the investments were allowed with conditions.
It would be that type of reporting that would be envisioned going forward, always mindful of the need to obviously not disclose information that would compromise national security or confidentiality.
I think 15 reviews were done in 2015. It's in our annual report.
If we're looking at the numbers in the last two years, there have been 28 acquisitions of control that were over $800 million, which is the current threshold. We looked at the number of those that were over $1 billion and there were 20 that were over $1 billion.
Based on historical numbers you would see that if the threshold had been $1 billion, then there would be about one-third fewer reviews, but of course we can't predict the number and values of future investments. By way of example, that would be the impact.
On the evolution of the threshold, the Investment Canada Act, in its current incarnation, has been around since 1985.
Jonathan is more of an historian on this than I am. I can go as far back as 2008, when the scheduled increase was first implemented. In 2008, the threshold was $295 million. The Competition Policy Review Panel is an expert panel charged with reviewing all of Canada's competition laws and frameworks with a view to making recommendations to make Canada more globally competitive. At that time, the Competition Policy Review Panel did work and recommended that the threshold in the Investment Canada Act be increased from around $295 million to $1 billion.
Its recommendation was that it happen immediately. That was based on its consultations across the country and on economic studies, etc., that assessed that Canada might have been putting itself at a disadvantage in competing for foreign direct investment because we had a net benefit review, and because the threshold was relatively low compared to the value of our businesses at the time.
The recommendation was made then, and legislation was passed in 2010 to introduce this scheduled increase to $1 billion. The policy then was to, again, remove a regulatory barrier for smaller transactions and focus net benefit reviews on those transactions that would be the most significant to Canada's modern economy. That was put in for those reasons. The initiative today is just to accelerate that final step in the increase to $1 billion as part of broader initiatives, some of which are in this budget implementation bill, to increase foreign investment and attract more foreign investment to Canada.
Thank you both for your presentation.
Thank you, again, Mr. DeWolfe and Ms. Brady.
Turning, then, to part 4, division 9, “Funding for Homecare Services and Mental Health Services”, from Health Canada, we have Ms. Voisin; and from Finance Canada we have Mr. Rajabali.
Whoever wants to begin, the floor is yours.
Part 4, division 9, relates to the government's commitment in budget 2017 to work with provinces and territories to strengthen the health care system to adapt and innovate and address new challenges. It confirms the offer that was tabled by the federal government on December 19, 2016 to provide $11.5 billion over 10 years to the provinces to support key priorities under a new health accord including $11 billion to be provided directly to the provinces and territories to support improvements for mental health and home care services.
Clause 195 outlines the authorities and the conditions to flow funds for the first year of this $11-billion commitment, in 2017-18 to provinces and territories, as an immediate down payment on investments in home care and mental health. That is $200 million for home care services and $100 million for mental health services. Those would be allocated on an equal per capita basis.
As set out in the proposed amendment, a province or territory will receive its share of this funding in 2017-18 if the federal Minister of Health notifies the Minister of Finance before December 15, 2017 that, in her opinion, that province or territory has accepted the federal proposal to strengthen health care that was tabled at the finance and health ministers' meeting on December 19, 2016.
This December proposal envisaged a pan-Canadian approach and that provinces and territories would work with the federal government to determine how to measure and report on results and performance to improve these services to Canadians. The Minister of Health is now engaging with her provincial and territorial colleagues on the details of how this future funding would flow. She is also working with them to develop a multilateral framework for the 10 years of funding, which would include commitments to develop metrics and report to citizens, as well as outline their key priorities for action.
This multilateral framework would then be used as the basis for individual bilateral agreements with each of the provinces and territories for funding for the next nine years.
I'd be happy to take your questions.
Have you done a constitutional analysis of this aspect of federal health spending when it is directly allocated to specific targets? We will be called upon to pass this legislation, and we want to ensure that it is constitutional.
If we say that the federal government is going to spend a certain amount—of course, I don't have the figure—on home health care, it has to be constitutional, meaning that the federal government has the right to do that. As parliamentarians, we have the right to say that it will spend that amount on that part of your health care system.
Can we be reassured in this regard? The provinces raise this issue, of course. As you know, there was some reluctance in the health negotiations. In fact, the federal government wanted to decide where the money would be spent, which could be seen as an encroachment on the powers of the provinces to decide where they were going to spend their money on health care. Can you reassure the committee in that regard?
That's fine. I think that's it for questions. Thank you both for your presentations.
We will turn to division 10, which is the Judges Act.
We calculated that at the rate we're going, to get through all of the part 4 divisions to 21, it will take us about another seven hours to get there. We have an hour and twenty minutes, plus another hour on Monday. We have two hours and twenty minutes. I'll remind members to keep questions on topic and as brief as possible so that we can hopefully get through all part 4 divisions. This is something we always run into. It is a good way for members to gain information beyond the act itself, but just keep time frames in mind.
Turning to part 4, division 10, the Judges Act, we have from the Department of Justice, Ms. Adair Crosby and Ms. Anna Dekker.
Ms. Crosby is senior counsel and deputy director, judicial affairs, courts and tribunal policy; and Ms. Dekker is counsel, judicial affairs, courts and tribunal policy.
The floor is yours.
I'm here today to talk about the proposed division 10 amendments. They touch on two aspects of the federal responsibility under section 100 of the Constitution Act, 1867, that Parliament must fix and provide the salaries and benefits of superior court judges.
The first aspect is that many of these amendments represent the final step in the constitutional process required for setting judicial compensation, which includes review and non-binding recommendations by an independent, objective, and effective commission. Those recommendations were delivered to the Minister of Justice in June 2016. The government publicly responded in October 2016. The proposed amendments would implement that public response through Judges Act amendments. This is required in order to safeguard the principle of judicial independence, which includes financial security.
The second part of the amendments, which my colleague Adair will speak to, are Judges Act amendments that propose to increase the complement of superior court judges.
Some of the highlights from the judicial salaries amendments are clauses 196 to 210, which would simply update the judicial salaries in the Judges Act as of April 1, 2016, which is in keeping with the time frame of the commission's recommendations. Clause 198 would increase the salary of the chief justice of the Court Martial Appeal Court of Canada to be equal to the salary of other chief justices of superior courts, and it would also propose to increase the salary payable to the prothonotaries of the Federal Court from 76% to 80% of the salary of a Federal Court judge.
Clause 213 proposes to amend the start date of the next quadrennial commission and subsequent quadrennial commissions from October 1 to June 1.
Clauses 215 and 216 propose an annual allowance of $3,000 for the prothonotaries, and also propose reimbursement of 95% of a prothonotary's representational expenses before the quadrennial commission.
Clauses 218 and 221 propose changes for certain chief justices and senior judges in recognition of their years of service for carrying out their managerial responsibilities.
Clause 220 would extend existing removal allowances to the judge of the Supreme Court of Newfoundland and Labrador, who is resident in Labrador in certain circumstances.
Clauses 224 to 226 are technical amendments: for example, to correct discrepancies between French and English language of the provisions that govern the division of annuities on conjugal breakdown. Also, they would ensure that financial support orders can be enforced on all applicable Judges Act payments.
I'll turn it over to my colleague.
I will give you my abbreviated version, since time is of the essence today.
As Anna mentioned, this is the second element of division 10, which essentially provides for the establishment of 27 new judicial positions in the superior, trial, and appellate courts across the country. These increases in the judicial complement are intended to address workload pressures facing many of the courts, including those arising as a result of the Supreme Court of Canada's decision in Jordan.
If you refer to clause 208, you'll see the breakdown: there will be an increase of 11 judges to the Court of Queen's Bench of Alberta, and one judge to the Yukon Supreme Court. These amendments are to respond to needs that have to date been demonstrated.
The balance of the amendments found in clause 211 authorize the creation of a pool of judges, which would comprise 12 new judges that can be appointed to the provincial superior courts, and three new judges to the provincial appellate superior courts. These 15 positions will basically be allocated across Canada to help ensure that needs in those jurisdictions are met.
We are working right now with our colleagues in the various jurisdictions to develop the sort of objective data that will be necessary to demonstrate that there is a need there. At that point, the appointments would be made.
That's my short version. I'm happy to take questions.
I'm sorry; I fully understood the question, but I will respond in English.
Basically, no positions have been formally allocated in the legislation. If you open up the Judges Act, you will see a certain number of positions for every court. The 15 pool positions are those that would be allocated to Quebec—some or all of them, depending on the need that Quebec is able to demonstrate.
One thing I would like to point out is that there has been a lot of press about the number of vacancies in Quebec. In fact, as of last week, there are only two vacancies. We hear upwards of 14 or 16 vacancies. Those positions don't exist until this legislation has been passed. So there are two vacancies.
Then there would be, of course, a maximum of six additional appointments that the minister could make, based on the additional positions that have been authorized in the provincial legislation.
The IAI was picked at the time because it actually reflected wages. It was an attempt to provide an indicator that roughly approximated increases in wage levels. As this index is based on salary, it was simple as that.
At the most recent commission, the government did attempt to assert that CPI would be a more appropriate guard against inflation than the IAI. The commission recommended against that, and recommended that IAI be preserved. There has been a rough relationship over a number of years between the IAI and the CPI. Some years it's higher, some years it's lower, but if you look at the graph over time, it's roughly approximate. This year it was a loss, for sure. The CPI exceeded the IAI.
Thank you very much for your presentation, Ms. Dekker and Ms. Crosby. You're released.
We'll turn to part 4, division 11, “Support for Families: Benefits and Leaves”.
From Economic and Social Development Canada, we have Ms. Astravas, who's the director, special benefits, employment insurance policy; Mr. Brown, who's the executive director, employment insurance policy; and Ms. Hill, who's senior director, strategic policy and legislative reform, labour program.
Mr. Brown, the floor is yours.
Thank you, Chair, for the introduction.
I'll get right into my opening remarks.
I will address the proposed amendments to the Employment Insurance Act to provide more flexibility for parents and more inclusive benefits for caregivers.
Employment insurance is Canada's largest labour market program. The program provides temporary income support when workers lose their job through no fault of their own, known as regular benefits, and in specific situations that may occur over the course of one's working career, known as EI special benefits.
EI special benefits play an important role when helping individuals balance work-life responsibilities. They include maternity, parental, and caregiving benefits as well as sickness benefits. First introduced in 1971, the special benefits have evolved and expanded over time. In 2015-16, over 379,000 Canadians received maternity, parental, and caregiving benefits representing a total of $3.8 billion.
Budget 2017 introduces a number of changes to provide additional flexibility and support for families, which I'll briefly outline.
First, the bill introduces a new 15-week EI caregiving benefit. Eligible caregivers would be family members who are away from work to provide care for a critically ill adult, such as someone recovering from a serious accident or illness. In the unfortunate event that a family member's condition gets worse and deteriorates to an end-of-life situation, caregivers would be able to combine this new benefit with the existing compassionate care benefit.
Second, the bill provides more flexibility for families by allowing any family member who is eligible for EI—as opposed to only parents—to access the existing 35 weeks of EI support to provide care for a critically ill child.
Third, in order to enhance access to all EI caregiving benefits, medical doctors and nurse practitioners would be allowed to issue the required medical certificates. This measure would enhance access for Canadians, especially those living in rural or remote regions. These measures related to caregiving are expected to benefit up to 24,000 families annually.
The bill also introduces changes to EI parental and maternity benefits in order to offer both biological and adoptive parents more choice and flexibility according to their family needs.
Fourth, the bill proposes new flexibility for parents welcoming a newborn or a newly adopted child. Parents will have a choice to receive standard-duration parental benefits as are currently provided, up to 35 weeks paid at 55% of average weekly insurable income over a 12-month period, or to choose the extended-duration parental benefits over 18 months. Those would be paid for up to 61 weeks at a lower benefit rate of 33%.
Fifth, women would also have more flexibility to access EI maternity benefits as early as 12 weeks before the expected week of birth, as opposed to the current eight weeks prior to the expected week of birth. Providing earlier access to maternity benefits would allow pregnant workers to better take into account their particular health and workplace circumstances.
Taken together, these changes will have a positive impact on women in particular and offer them more choices. Indeed, in 2015, among recent mothers with insurable employment, 87% received maternity or parental benefits across Canada.
The bill ensures that the same changes that apply to insured workers would also apply to self-employed workers who voluntarily participate in the EI program by paying premiums.
The bill also adapts existing EI rules to clarify when and how EI special benefits can be combined together and over what period of time.
The proposed changes will have no direct impact on Quebec residents because the province currently offers maternity and adoption benefits and parental benefits through the Quebec parental insurance plan.
The proposed amendments for more flexible EI parental and more inclusive EI caregiving benefits represent an incremental cost of $886 million over five years and $205 million per year thereafter.
As per the Employment Insurance Act, these costs will be charged to the EI operating account and recovered through EI premiums. All of these amendments would come into effect on the same day, later in the 2017-18 fiscal year. The exact timing is to be confirmed and the date would be fixed by an order of the Governor in Council.
I will now give the floor to my colleague, Margaret Hill, who will speak to you about the changes to the Canada Labour Code.
I'll speak briefly to the amendments proposed in the bill, to part III of the Canada Labour Code. Part III of the code, as you may know, establishes minimum working conditions in federally regulated sectors such as hours of work, annual vacations, and statutory leaves. Federally regulated sectors include about 6% of all Canadian employees in industries such as banking, transportation, federal crown corporations, and certain activities on first nations reserves. Part III does not apply to the federal public service.
In general, when amendments are made to the EI special benefits, corresponding amendments are made to leaves under the Canada Labour Code. This is done to ensure that federally regulated employees have the right to take unpaid leave while they access the EI special benefits, without fear of losing their jobs.
Amendments are therefore being proposed in the bill to ensure that existing leave provisions under part III, specifically those related to maternity leave, parental leave, compassionate care leave, and leave related to critical illness are fully aligned with the proposed changes to the EI special benefits.
The overall cost to the labour program to implement the proposed changes to the code is expected to be modest, about $400,000. This would cover things such as training, labour program inspectors, the production of educational materials for employers and employees, the development of supporting regulations, and the monitoring of the impacts of the changes.
Costs to employees are expected to be minimal and will depend on the duration of the leaves that are taken and whether employees need to pay overtime or hire replacement workers. Stakeholder reaction is expected to be very minimal to the changes to the code.
I'd be pleased to address any questions that you have.
In relation to the maternity leave component, two issues have recently come up—at least in my riding, and I suspect I'm not alone—regarding the change through this legislation of allowing up to 12 weeks for maternity leave prior to giving birth. However, some of the concerns we hear about are around the eligibility. I'm assuming that those other conditions have not changed, or have not loosened. I'll give my two specific examples.
A resident who is pregnant goes on maternity leave. When she is set to return to work, she's laid off, but because she's been off on maternity leave, she hasn't had her 52 weeks prior to being laid off. Therefore, she's ineligible for EI, yet her male colleagues who were also laid off are eligible.
The other situation is where a person was pregnant, took her maternity leave, returned to work, quickly got pregnant again, and was shy by a few hours of being able to qualify once again. No accommodation could be made with her employer to make up those hours in order to be eligible.
Does anything in this act start to address these flexibility issues around benefits when someone is either on or off maternity leave and these types of situations need to kick in, for example someone being laid off or needing to access maternity leave benefits once again?
As you may know, the Employment Insurance Act is a very complex piece of legislation.
Now, in terms of the changes that are being proposed in budget 2017, there is specifically the new caregiving benefit, as well as flexibility with respect to the maternity and parental benefit. There are no changes specifically aimed at increasing eligibility for EI in these provisions, or to address the situation you have identified there, of a person who has completed one EI claim and who subsequently experiences another insurable event—whether it is job loss, maternity, or a compassionate care situation—and is unable to requalify. If they are short hours, this doesn't do anything for them.
Similarly, if it is a woman who has been off on maternity and parental, and she returns to work only to lose her job, this doesn't address that situation.
There are some adaptations we've made to the rules for combining EI benefits, which provide flexibility so that if somebody has recently lost their job and would still like to take maternity and parental, they are able to access the longer duration option. It does not increase the total number of benefits they would have access to.
I think an important issue has been raised here. We say that currently six out of 10 Canadian workers are not eligible for EI. This is currently one of the fundamental problems of the program. The subject of today's discussion, however, concerns changes to certain programs under the Employment Insurance Act. It's not necessarily about eligibility, as you said earlier.
My question is about some changes to parental leave. You said that people could now choose between two types of leave, regular leave or extended leave.
I would like to know, for the benefit of the Canadians listening to us, when parents must make their choices and if the choice is reversible.
For example, if while on leave, the parent finds out that he or she is in good health and wants to return to work, can he or she be unable to do so because the choice is irreversible?
If they made this choice at the start of the benefits, yes.
I need to mention two things about the return to work. Depending on the particular circumstances of the family, the parent may be able to defer the benefits until later, but during the benefit period. If a parent returns to work not on a full-time basis, but on a temporary one, the parent can work during a benefit period.
We have a pilot project. Unfortunately, I am going to switch to English.
While working while on claim, they are able to retain some portion of their EI benefits, depending on how much they make in that period. Then if they stop working, they may continue to receive their EI parental benefits.
Thank you for your answer.
The way I see things, it comes back to trading four quarters for a dollar. Parents have the choice of more weeks at 33% or regular weeks at 55%. Ultimately, they receive the same amount, but it was spread over a longer period.
Do you really see this as an important benefit for parents, or is it rather a modest adjustment or, as the saying goes, trading four quarters for a dollar?
I think I would leave it to others to judge the significance of the change. I know we have heard from parents who welcome the ability to take leave and benefits over a longer period of time, so they might be able to reach a period of having access to affordable child care.
If you think more broadly about stakeholder reaction to the budget announcement, they've been very positive with respect to caregiving but it has been more mixed with respect to the parental changes. Some stakeholders have said that living on a 33% replacement rate is expected to be difficult and they don't necessarily see that as a good choice for many families.
I should add, though, that one element of the EI program, which is the EI family supplement, will continue to apply over that extended period of 18 months. In the case of a low-income family, they would receive a top-up not only over the 12 months but over the full 18 months, if they choose that option.
Division 15 pertains to the amendments to four acts under the purview of the Minister of Transport: the Aeronautics Act, the Navigation Protection Act, the Railway Safety Act, and the Canada Shipping Act, 2001. Collectively these amendments will allow the Minister of Transport to enter into service level agreements, or contracts, with industry organizations for activities in the aviation, navigation infrastructure, and rail and marine transportation sectors.
The amendments proposed here do not create new fees. They do not raise existing fees either. These amendments give the Minister of Transport the ability to sign contracts for services with organizations and users of Transport Canada's services. These amendments will also allow the Minister of Transport to spend the funds received from such an agreement in one fiscal year or in the next one. This is in recognition of the fact that service level agreements will be signed in respect of work that is likely complex and time-consuming and done in the span of more than one fiscal year.
That, Mr. Chair, concludes my opening remarks.
Does anybody have any questions on part 4, division 15, on agreements under the Minister of Transport?
As I'm hearing none, you're really going to get off easy, Ms. Lévesque and Ms. O'Connor. It was a good job you waited for this moment.
Voices: Oh, oh!
The Chair: Thank you both.
We're turning to division 16, the Food and Drugs Act, with witnesses from Health Canada.
From health products and food branch of Health Canada, we have David Lee, executive adviser to the assistant deputy minister, assistant deputy minister's office; Ms. Minto-Saaed, director, strategic planning and accountability division, resource management and operations; Mr. Morgan, director general, policy planning and international affairs directorate; and Mr. Trehearne, director general, resource management and operations directorate.
Welcome to you all.
Part 4, division 16 is yours to behold.
Thank you very much. We're happy to be here today.
As with our counterparts from Transport Canada, our proposal touches on user fees primarily, and the minister's authorities under which to set them.
As you know, Health Canada regulates the safety, efficacy, and quality of drugs and medical devices in Canada in both pre-market and post-market regulatory space and has been doing so for quite a long time. Since about the mid-1990s we've been charging user fees for those functions to subsidize the cost to taxpayers of the regulatory costs.
Today our proposal is requesting a revised authority for the Minister of Health to move the fees out from under the FAA, where they refer to the food and drugs regulations, and move them directly under the Food and Drugs Act, and to modify certain parts of the Food and Drugs Act to make that a better instrument to do so.
Essentially, this is not going to raise fees. It requires that we consult with all our stakeholders and continue to apply all the Statutory Instruments Act requirements as well, but it will set a comprehensive policy frame under the Food and Drugs Act under which we can charge user fees, and it will do it in a streamlined fashion.
Currently, under the GIC full regulatory process, it can take anywhere from two to four years to update a fee, so we're envisioning a more agile and globally comparable user fee regime wherein we can do those updates probably within 12 to 15 months.
That's part 4 of division 16 of the budget implementation act.
It also allows for an exemption from the renamed User Fees Act, which is the Service Fees Act, which our colleagues from the Treasury Board Secretariat are going to speak to and which we support wholeheartedly. Under the proposed framework, the Minister of Health will keep, as I said, all the accountability and transparency principles, including the requirement to consult stakeholders, performance penalties, and small- and medium-enterprise mitigation, and we believe there's no impact on the provinces and territories or on Canadians directly because the fees apply largely to industry, and the pass-through is minimal to non-existent.
I'll stop right there, and take your questions.
That's what we're basically proposing.
We're asking for an exemption from what was the User Fees Act and what is to be renamed as the Service Fees Act. We essentially meet all the requirements and the criteria that are in it.
In addition, pursuant to budget 2017 and some of the transformations that are going on in the pharmaceutical, medical access, and affordability world, we are already building new regulatory processes by which we can transform how we do our work.
It is a minimum 15-month process, and probably more like 18 months, to lift and shift our current set of fees under the Food and Drugs Act. Given the ambiguity of the timing of the implementation of the TBS changes and the coming into force therein, we thought that it would be better to get out ahead of that. In addition, we're talking about a comprehensive approach under the Food and Drugs Act that aligns to the policy, to the instrument the minister has. The minister will set fees through ministerial order.
However, ministerial order is not a blank cheque. It is essentially a regulatory process lite, with all of the elements of the regulatory process. It just minimizes a few of them, so that we will able to do this more than once every 22 years.
Health Canada has a strong record here. We are a globally competitive regulator. Our performance is comparable to any of the major regulators in the world, like the FDA, the EMA, the Australians, and the New Zealanders as well. We charge industry a fraction of the regulatory cost to do those same reviews at a competitive pace, while protecting the safety and efficacy of the drugs.
We feel that this is very comprehensive. It's robust. We have a great deal of experience here. We're a long way from the implementation of the User Fees Act in 2002 or 2003. We think we're in a different situation now.
Absolutely. That is a requirement of our approach, and it's a requirement of the Statutory Instruments Act, as well as a cabinet directive on the setting of regulations. The regulatory impact analysis studies are a mandatory piece of this. That will continue.
As I said, we have a list of about 12 things that our current regime has under the FAA, and all 12 of them will basically exist under the FDA as well. So the requirements to study the impact on industry is mandatory, and we will continue to do that.
The pharmaceutical industry in Canada is actually quite robust, and I think that Industry Canada or ISED could comment further on that kind of stuff if you had questions about that. It's not our expertise to understand the market as a whole and all of its dynamics, but we do assess the impact.
Globally, what we're talking about here is that all the major regulators in the world charge somewhere between 80% to 100% of the costs to the industry to regulate those products. Health Canada is in a world right now where we're subsidizing the cost, and fees amount to about 40% to 45% of our cost. So we charge much less than the global reality, and the fees are a fraction of what.... For instance, the FDA in the United States would charge $2 million for a major new active substance drug review, whereas we're charging about $250,000 to $300,000.
We have several. One is the consultation proper, together with discussions and negotiations about what the fee should be, in view of the impact on those sectors. I'm very glad that I'm not in the farming sector when I'm trying to set fees.
Second, we have a policy of fee mitigation for small or medium enterprises. Any small or medium enterprise can benefit from a reduction in fees, and we have excellent take-up of that process. We've done audits of it, and it's in very good shape. The people taking up the reductions in fees have a right to do so and there's good evidence to suggest that the right people are getting it. We've done audits on this.
Third, we're going to create a dispute resolution system so that stakeholders can come and discuss their situations with Health Canada. This of course will be something that we have to work on over the coming months as we develop this new regime with our stakeholders. We'll have to look at where and how that's going to work. Dispute resolution, though, is something that we're planning to do.
Fourth, we rarely have the kind of impact with stakeholders that we have with Health Canada.
One of the advantages of its going to cabinet—I know you're saying it's not, and I understand that—is that other ministers can argue the point, based on a memorandum to cabinet, that it would affect their industry.
When something is gazetted, and it's increasing costs to industries, how often is it rolled back? I don't know if it ever is. I think you're hearing from members that there is a bit of concern about user fees and whether the efficiencies are there, in the departments and on the government side, to make savings in other areas rather than just impose additional fees. What you are hearing is some concern.
In any event, I think that's it for questions. We appreciate your fairly direct responses to those questions.
I apologize to those who came for divisions 17, 20, and 21. We won't be able to get to you. We'll have to schedule you in at another time. We have divisions that have been farmed out as well.
In any event, the clerk will be back to those groups that didn't get up to appear. I appreciate your having sat through the hearings and being available.
The meeting is adjourned.