I call the meeting to order.
Welcome to meeting number 32 of the House of Commons Standing Committee on Finance. Pursuant to the committee's motion adopted on Friday, February 5, 2021, the committee is meeting to study all aspects of COVID-19 spending and programs.
Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, and therefore members are attending in person in the room and remotely using the Zoom application. Proceedings will be made available via the House of Commons website.
Just so that witnesses are aware—members certainly are already aware—the webcast will always show the person speaking rather than the entirety of the committee.
I would remind folks to try to keep their mike off when they're not speaking.
Witnesses, if you want to add a comment to somebody's question, even if it's directed elsewhere, just raise your hand and I'll try to catch you. If I miss you, you'll have to put your mike on and yell.
With that, we do have a couple of orders of business. I'll split them and do one with this panel and one with the other before we go to witnesses.
The order of business that we must deal with is the budget for the Bill hearings we already completed. The request for the project budget, just to name it, is Bill , and the amount requested is $5,025.
Does somebody want to move that motion?
Good morning, Mr. Chair.
Good morning, members of the House.
I am pleased to be before the committee today. I thank you for the invitation.
I am joined by Mr. Jean-Michel Ryan, chairman of the board of the Alliance de l'industrie touristique du Québec. He will be happy to answer your questions later if necessary.
I will be happy, of course, to answer any questions in English as well.
The Alliance de l'industrie touristique du Québec is the voice of 10,000 tourism businesses and federates 40 regional and sectoral associative partners. It also has a mandate to promote and raise the profile of Quebec as a destination on a national and international scale.
The alliance has also created the Conférence économique de l'industrie touristique québécoise, which is composed of six women and six men business leaders and entrepreneurs in tourism. The conference has in fact submitted numerous recommendations to the government to adequately support tourism, one of the sectors hardest hit by the pandemic.
Prior to the pandemic, the tourism industry was thriving in Quebec as these figures show: $16 billion in tourism revenues, 30,000 businesses, or 12% of Quebec businesses; 400,000 jobs, or one in ten jobs in the province; $3.5 billion in export revenues, making it Quebec's fifth largest export product; 2.5% of Quebec's GDP; $2 billion in tax revenues for the government. In Canada, 2019 was a record year, when tourism spending reached $105 billion.
Since the start of the pandemic, Quebec's tourism industry has suffered colossal losses of approximately $10.5 billion and a net loss of 81,000 jobs in the accommodation and restaurant sectors alone. While 98.5% of economic activity has now recovered in Canada, the tourism sector remains paralyzed and the prospects for recovery, still uncertain.
Over the past year, the Canada Emergency Wage Subsidy and the Canada Emergency Rent Subsidy have been very well received by the tourism industry. In fact, they have served as a lifeline to many entrepreneurs who would have closed their businesses without this assistance. These federal programs remain vital to the tourism industry, and they must be extended through 2022 to give the industry the predictability it needs to deal with the realities I am about to address.
First, there is the financial precariousness of the majority of tourism businesses. These companies find themselves nearly cashless and in debt as never before, having had to take out loans just to get out of the crisis, not to finance growth or the creation of a new product or strategic partnership.
Second, there is the continuing uncertainty about the evolution of the virus. This influences restrictions on travel, gatherings, and reopening of borders, and destabilizes the industry on an ongoing basis. It should be noted that over 53% of tourism spending in Quebec comes from visitors outside of Quebec.
Third, there is the labour shortage. Already representing a significant problem, this has been accentuated by the pandemic. Indeed, there is currently an exodus of expertise and experienced employees to other sectors less affected by the pandemic. In Quebec alone, 40,000 jobs are still to be filled for the summer.
The extension of these programs is therefore essential.
Also, specifically with respect to the Canada Emergency Rent Subsidy, it is time for the government to recognize the opportunity for tourism businesses to benefit from the lockdown support measure of the additional 25% fixed cost coverage.
Mr. Raymond Bachand, President of the Conférence économique and former Quebec minister of finance, said that there are two ways to close a business: either you force it to close its doors, or you prevent people from going there or using its services. Clearly, in the latter case, closing the borders, banning gatherings, limiting travel, preventing meetings and conventions, and prohibiting school trips and sports tournaments are all measures that strike directly at the heart of tourism. They prevent tourism businesses from operating normally or simply staying open.
As I said, the border closures alone are taking away the majority of the industry's revenue, and the other restrictions in place are reducing revenue in the accommodation, attractions, festivals and events sectors by at least 25%.
In order to stem the exodus of management and skilled personnel from the tourism industry, we recommend that the Emergency Wage Subsidy be enhanced to the rate of 85%.
In addition to these programs, we believe that the federal government must have a national reopening plan, which would include a timeline for reopening the borders as well as safe and traveller-friendly rules and conditions. We urge the government to work with associations representing business to explore possible solutions.
Finally, it is imperative that the government work with the provinces to put in place uniform and standardized health rules to facilitate travel across the country.
In closing, I invite you to review the letters submitted over the winter by the Conférence économique to Ms. Freeland, the , and the Alliance's pre-budget consultation brief. You will find all of our recommendations in it.
Thank you for your attention.
I provided a written statement in advance, so I won't use the five minutes here. I'll just quickly summarize a few points before passing it back to the committee.
I was an employee of WE Charity from November 2018 to June 2020. First I was a strategist, and later I moved to the executive office, where I supported Craig on the road in Canada, the U.S. and the U.K. I also increasingly took on his social media, including, perhaps most notably now, his LinkedIn, which is what I assume has led to me being here today.
I will openly say in advance that I don't have any insight or visibility—then or now—to WE Day talent contracts, the Canada student service grant, anything WE Villages-related, or really anything to do with finances or the structure of the organization.
That said, I'm happy to answer any questions that I can today. Thanks for having me.
We would like to thank Chair Easter and the committee for the opportunity to present. We're here today to talk about the Canada emergency wage subsidy.
We commend Parliament for its quick action back in the spring of 2020, enacting the first wage subsidy legislation within just two weeks of the pandemic being declared and then following up with the more comprehensive Canada emergency wage subsidy shortly thereafter, with several other amendments along the way. The CEWS has been a lifeline, particularly for small and medium enterprises, which play a pivotal role in sustaining Canada’s economy. It continues to do great work in keeping the economy afloat and helping it grow.
Our main concern is the lack of flexibility that remains in the program and the inability of Canadian businesses to access it if they miss the application deadline or make a mistake in their filing. Such inflexibility seems contrary to both the purpose of the program and the spirit of the Income Tax Act in which these rules are found. Our perspective is that the lack of flexibility is impacting deserving companies in need across Canada in every sector, whether it be hospitality, tourism, fishers, restaurant owners, manufacturers, designers or construction workers.
We are respectfully requesting that Parliament introduce new legislation to allow for CEWS and CERS claims to be filed or amended past the deadline. We’ve provided suggested wording for that legislation as an appendix to our original letter to Chair Easter. We also ask that such an extension apply similarly to the Canada emergency rent subsidy, given that it also has a hard deadline.
I'll now pass the presentation over to Tara.
Let's look a little more closely at the issue. Currently, if the deadline is missed, the applicant loses 100% of the subsidy. There is no ability to amend the claim upward, so if the business finds they have made a mistake that would result in a larger claim, that opportunity is also gone once the deadline has passed. To underscore this point, we want to provide you with two examples of some of the likely unintended consequences of not allowing these claims to be filed late.
In Ontario, we have a client in the financial services industry who only realized at the last minute that they would qualify for CEWS. They reached out to us on very short notice to file their claim. Due to some recent turnover in their staff, they didn't realize they didn't have online access set up. Although we attempted to get it set up, it was too last-minute. We were unable to file the claim on time. As a result, this business lost out on the support for 129 employees.
Another business, in the software development industry in Quebec, prepared their own claim. The owner thought he had to deduct $25,000 from his CEWS claim for every period between March and June to which he also got the temporary wage subsidy, so he reduced his claim by a total of $75,000. However, the maximum temporary wage subsidy is only $25,000. He was actually entitled to an additional $50,000 of CEWS. He realized this mistake in late February, which was of course past the due date. Because the deadline had passed, it was too late to amend his claim. He lost out on that 50,000 dollars' worth of support.
The legislation and the accounting for CEWS is complex, and it's new. In the 12 months since the pandemic began, small and medium-sized enterprises across Canada have been focusing intently on keeping their businesses running and on keeping their employees employed, not on their accounting. We have provided examples only of missed CEWS filings at this point, because the first filing for CERS has not passed. However, it too has similar complex legislation and hard deadlines. Therefore, it's a given that there will be misses in this program as well.
We do recognize that given the rapidly changing nature of this legislation, the introduction of this deadline rigidity may have simply been an oversight. However, both existing legislation and jurisprudence support the ability to file tax returns, elections, forms, etc., past the applicable deadlines. We ask for the same treatment for CEWS and CERS. We all know that these programs are finite. They won't be around forever. Therefore, if we don't fix them now, many Canadian businesses may never recover.
In summary, we respectfully recommend that the CEWS and CERS legislation be amended to allow for some type of late filing. This will reflect the intent of the legislation and it will help more Canadian businesses keep their employees working.
I'd like to thank you for inviting Northwest Territories Tourism to be part of this important conversation. I also want to express our gratitude for the critical support given by the federal government to help the tourism industry in the Northwest Territories survive what is an unprecedented health and economic storm.
In 2019, before the pandemic, the NWT welcomed 120,000 visitors. These visitors spent over $210 million directly in the tourism industry. Since March 2020, the Northwest Territories border has been closed to leisure travel. The most recent research, conducted in October 2020, showed that 70% of tourism respondents lost annual revenue of between 76% and 100%. This past year has been devastating to all tourism activities in the Northwest Territories. It has meant that the tourism operators who chose to remain open have had to repurpose their activities in creative ways as they attempt to generate some staycation revenue to keep their lights on. Tourism operators have been resilient. They have changed their business models, offering summer day camps for children and other ventures well outside of their normal business.
While we are proud of the ingenuity of our tourism operators, we must state that the just over 15,000 households in the NWT will never make up for the revenue generated by our 120,000-plus visitors we normally see in a year. As you can imagine, tourism is extremely important to the Northwest Territories. Many tourism businesses have remained closed because it is not viable for them to open their businesses for the staycation market, while some have closed permanently. In the survey conducted in October 2020, only 21% of tourism businesses [Technical difficulty—Editor] 42% of businesses were temporarily or permanently closed.
The first thing I would ask of this committee is for the federal government to continue the current economic supports that are in place for the tourism industry for as long as it takes for travel to fully resume. Eventually, the NWT borders will reopen to leisure travel. When this happens, tax incentives for the 2021-22 fiscal year to support local travel within Canada would be extremely helpful, as we would then be able to try to attract travellers from Canada, where normally the Northwest Territories relies heavily on international travel visitation, particularly in the winter months.
Support for national airlines and local airlines as critical infrastructure to support travel will be important when travel resumes. Air Canada did cancel flights to Yellowknife earlier this year. Without the support for airlines, visitors won’t be able to visit us—not if they can’t get to the Northwest Territories.
I would like to share that the goalposts for the easing of pandemic restrictions are continually changing. Messages are confusing. This confusion causes a great deal of frustration in our industry. While we realize that the virus is changing and that this is the first-ever pandemic in living memory, we would like to ask the federal government to take the lead on devising a scenario-based plan for the reopening of travel. The plan needs to be science-based and data-driven.
There are some variables that we think could be included in a scenario-based plan. Set a benchmark for the percentage of the population that needs to be vaccinated for travel to safely resume. Hearing different numbers in the media daily, and hearing uncertainty about the usefulness of vaccines in allowing travel resumption, is frustrating and disheartening. Outline the role that rapid testing and contact tracing can play in safe reopening. Set consistent processes and standards. Set the safety measures that need to be in place to support travel, from border crossings to the tourism business level.
The plan must include some lead time for tourism industry businesses to prepare for reopening, which will likely take some months, and include such things as hiring staff and re-establishing partnerships with airlines, hotels and other partners. If the federal government were to set a national standard, then individual provinces and territories could implement or revise these as appropriate. It would be very helpful, though, for the federal government to take the lead.
I think it is important to note to the committee that COVID-19 has created a false economy. When the pandemic subsides, many jobs related to the pandemic will be lost. The jobs currently held by contact tracers and border security officers, isolation centres hosted by hotels, and other related jobs will disappear as the pandemic abates. In the NWT alone we have a COVID secretariat that employs 187 people. The need to get the tourism sector up and running before or in tandem with the disappearance of these jobs is critical. This is another reason to have adequate lead time and a reopening plan.
The federal government supports have been critical to our industry. Without these supports, we would have no industry left when the pandemic eases and tourism resumes. All funding sources have been accessed by our industry. By far the most uptake has been in the northern business relief fund and the regional relief and recovery fund. The Canada emergency wage subsidy and the Canada emergency response benefit have also been very important. Tourism operators have also taken advantage of loan programs and the work-sharing program.
The most important thing I can say to you today is this: Please extend these programs for as long as the pandemic impacts travel, particularly leisure travel.
Thank you for your time today.
Mr. Chairman and members of the committee, thank you for inviting me to speak today. My name is James Cohen, and I am the executive director of Transparency International Canada. TI Canada is a registered charity and is the Canadian chapter of Transparency International, the world’s leading anti-corruption movement.
Canadians and the world have gone through a difficult, sad and exhausting year owing to the COVID-19 pandemic, and we are not done yet. In order to react to the pandemic, the federal government has had to spend unprecedented amounts of money in a short time. These funds were needed to procure essential medical supplies and equipment and to support Canadians experiencing economic distress.
In this time of need to fight the pandemic and support Canadians, it is also critical that transparency and accountability are preserved and even strengthened. In this rapid movement of large amounts of money, there is the risk of not only the misuse of public funds, but also the erosion of public trust. The public needs to be reassured, with evidence, that decisions are being taken with caution and integrity, and that they are executed with the same care.
To this end, I would like to address three topics today: procurement, beneficial ownership transparency and economic recovery.
First, transparency in public procurement is fundamental to ensuring that goods are procured at a reasonable price and in a fair manner. While the pandemic can allow some measures to be expedited in a procurement process, these principles must remain.
While it took considerable public pressure for the government to release some pandemic-related data, such as Canada emergency wage subsidy recipients and vaccine distribution timetables, there is procurement spending data available—namely, on the Public Services and Procurement Canada website. This data is in the aggregate, though. Spending in different procurement categories and the recipients of the contracts are available, but there is no breakdown of how many contracts each party received. While the aggregate data is a start, TI Canada implores the government to go further and make successful contracts available. This is particularly important for the roughly $1 billon spent on Canada’s vaccine contracts.
The second point I would like to raise is on beneficial ownership transparency—that is, the transparency of the actual physical person who benefits from a company. We remind the committee that Canada received negative reviews from the financial action task force's 2015 mutual evaluation and is viewed by many experts and other bodies as a destination for money laundering. This makes it all the more important for the public to know who is actually benefiting from COVID procurement contracts.
TI Canada was pleased to provide commentary to the government’s public consultation on establishing a public registry of beneficial ownership last spring. A public registry would help Canada fight money laundering—or “snow washing”, as it's referred to. We have been waiting for one year, though, for the results of those consultations. While we understand that the pandemic monopolized much of the government’s attention, surely the consultation results should be released by now.
Corporate beneficial ownership transparency is just as urgent for Canada during the pandemic as it was before, perhaps even more so. Beneficial ownership disclosure should be a requirement for all government contracts, licences and permits so the government knows whom they are doing business with. A public registry can also help Canadians protect themselves from fraud such as fake job offers and fake medical supplies.
This leads to my third point: economic recovery. Anti-corruption and anti-money laundering compliance and, indeed, transparency and accountability measures cannot be paused as a means to economic recovery. Here again, a public beneficial ownership registry will help, especially as designated non-financial businesses and professions like real estate agents and money service businesses will be required to conduct beneficial ownership due diligence as of June this year.
In the mining sector, TI Canada has observed provincial governments citing the pandemic as a reason to fast-track public consultation processes for environmental assessments in an effort to speed up economic recovery. TI Canada recently assessed EA processes relating to mining in Ontario, B.C. and Yukon, and our findings were that public consultations are already less than adequate. More transparency is needed, not less, especially with Canadian jurisdictions eyeing rare earths for green tech as an engine of economic recovery.
The Government of Canada has had to react quickly, with unprecedented resources and powers, to meet the challenge of the COVID-19 pandemic. While perfection in the response may not be reasonable to expect, transparency in decision-making and adherence to accountability during and after the pandemic are in our view non-negotiable.
Great. Let's try this again.
Hi. My name is Victoria Morton. I was an employee of WE Charity from November 2018 to June 2020. I began as a strategist on the business development team, and then joined the executive office in September 2019. As a strategist, I supported all revenue-generating teams—for example, corporate partnerships, donor engagement, retail and executive office. While in the executive office, I provided direct support for Craig Kielburger for major events and select meetings. Managing his social media became part of my role shortly before the pandemic hit, and became more of my responsibility afterwards, with a particular emphasis on building up his LinkedIn.
In a previous committee meeting, Craig referred to his EA sending LinkedIn connection requests from his account. My title at the time was manager of executive projects, but the tasks he referred to on March 15, 2021 were under my portfolio. While I don't specifically remember Ben Chin, I did draft and send about 100 LinkedIn connection requests from Craig's account with custom messages using information I gathered from several internal and external sources.
Please note that I was laid off in March 2020, at the same time most staff were, and then rehired about two weeks later on a two-month contract. During those two weeks, I applied to grad school, so I requested that the contract be made part-time. I was accepted into the grad program. From May until my departure, I was attending school full time and working part time at WE, still primarily supporting Craig. As the two-month contract came to an end, I was offered a renewal but decided to respectfully decline, to focus on my education. I returned my company laptop, which contained any contact lists and confidential documents, shortly after.
Long before becoming a staff member, I was involved with WE as a youth from about grade 8 to mid-high school. I credit this organization with helping first ignite what has become a lifelong passion for civic engagement. I've volunteered with many organizations unrelated to WE, including some that are partisan. I'd like to proactively disclose that I have been a volunteer for both the Ontario Liberal Party and the Liberal Party of Canada. Some of this overlapped with my time at WE, but it was always undertaken as a private individual outside of work hours. Neither WE nor anybody within the organization has ever pressured me into any partisan activities.
I was happy to accept the committee's invitation to answer any questions that I can, but please note that I did not work on the Canada student service grant program, WE Day talent contracts or WE Villages, nor did I have any insight into the organization's finances. Additionally, I won't be providing the names of any other staff members. I'm grateful for Craig's previous refusal to give my name to the committee out of respect for my privacy. This allowed me to voluntarily identify myself using my personal Twitter account. I extend the same courtesy to all past and present staff members.
I'm grateful for the role WE has played in my life as both a student and staff member. I continue to deeply respect the work they've done to advance service learning in classrooms and social entrepreneurship, which are two fields I remain particularly passionate about. Regardless of what the future of WE is, I hope that support for service learning and social entrepreneurship continues to grow within Canada and around the world.
In my short three months with NWT Tourism, I've had an opportunity to speak with many of our members, from our largest operator here in Yellowknife to several of the medium and small operators. Most of them have very similar things to say about the programs they have been able to access over the last year. While they're extremely appreciative of the programs—because without them they would not still be in existence today—several of them have mentioned that if we're to continue down this path for the next six to 12 months, the ceilings on the programs could be lifted. More funding will be needed.
A lot of them have done what they could to patch everything together to stay in business and to keep hanging on for the last 12 months. A lot of that means dipping into their personal savings and selling things, but now they are a year into it and they don't have those personal savings left, and they don't have those things to sell anymore. Some of the limits on the funds they can access.... The biggest thing is that they hope the funding will continue, but they need the limits to be increased as well.
A lot of them also have expressed that if there's meaningful work for some of these operators to do while we're waiting for visitors to come back to us, they would be more than happy to do that. A perfect example of that is the military operations that we had in Yellowknife this past winter. They were able to use some of our operators and some of their facilities and infrastructure. If there's work like that, they would be more than willing to do it. None of them really want to be sitting around. All of them want to be working, so if there's something we can come up with to put them to work....
The biggest thing, though, when I'm speaking to the operators—and this is just in reference to how the government may be trying to come up with some guidelines—is the unknown, the uncertainty. As of right now, they know the programs are ending. They don't know if they are going to be renewed. As of right now, they know that they can't have visitors to any of our locations, and they don't know when that's going to change. The unknown is what the operators are really having a hard time with.
Thank you for that question.
Thank you so much, Mr. Chair.
I want to thank everyone for their presentations.
I want to go to three of our witnesses, but I'm going to start off with you very quickly, Ms. Morton, just for the record. Thanks so much for reading out your testimony. It was very helpful. It was also very consistent with what Mr. Craig Kielburger had indicated when he came before us and said, “Sure. I sent a hundred messages because I only had seven or eight people on LinkedIn before that, so that day a hundred messages went out. My [executive assistant] sent them to people to join on LinkedIn, and he was one of them.” You indicated that part of your responsibility in your office was particularly in building up LinkedIn, so I appreciate that.
I would just go very quickly to maybe one more small thing. In my office, I have my staff who do my social media. They are very helpful. They often will have a running list of all the social media they're working on. They will send it to me for any comments. Sometimes I comment on some stuff. Sometimes I change things and send it back to them. On some things I comment, and on some things I don't.
Is that more or less how you worked? You sort of gave a whole bunch of messages in and then some were commented on or not, but you weren't quite sure what, and that sort of came back to you.
It's nice to see you again, honourable Chair, and also committee members. Thank you so much for inviting us to present today.
We provided a PDF of our presentation, if you would like to follow along with that.
There are over 24,000 travel advisers in Canada, and half of us are independent travel advisers. What that means is that we are small business owners. We are self-employed and the majority of us are sole proprietors.
The two key pieces of information we want to give you at this point are that 100% of our revenue comes from the commissions we earn from our travel suppliers and that 85% of all travel advisers are female. We know that women have been the hardest hit in this pandemic, and our industry is no exception.
We have been told that we're all in the same boat, but we don't believe that's true. We believe we're all in the same storm, but in many different boats, and we believe that our boat is sinking much more rapidly than a lot of other boats out there.
Part of that is because of our delayed revenue stream. We're not like an industry that sells a product and gets paid a commission cheque the following month. In our line of work, it takes between five and 11 months from when a customer makes a booking of a trip until we actually get paid for the work we have done on that booking.
If we want to assume that travel restrictions would be lifted by the end of June, and if a client came and made a booking on July 1, we would not receive any revenue from that booking and the work we've done until as early as mid-November of this year, or, more realistically, as late as June 2022.
Our first reality is that we have been without revenue for one year. We know it's going to take five to 11 months from the resumption of travel before we start to see any revenue from future bookings.
We are asking the government for sector-specific aid, because we know that the CRB is not meant to be a long-term band-aid solution. There are other countries that are already in their second round of sector-specific aid for their travel advisers, and we believe that Canada needs to follow suit.
Here's another reality. Even though we have been hindered from earning any revenue, we are business owners. We have been continuing to operate our businesses and are as busy as ever, because we are supporting our clients. When they needed to be repatriated to Canada, we were there to do that for them. When they needed assistance with their cancellations, we were there to help them. As they have been issued their future travel vouchers, we have been processing those for them and we are continually reworking those files. As they have needed assistance with insurance claims, we have been busy providing that assistance.
Although we have been quite active in our businesses, the reality is that we are slipping through the cracks because, other than the CRB, only a very small percentage of independent travel advisers have been able to receive any funding from the federal government. The CRB was designed to put food on our table and help us pay the rent, not pay our business expenses.
There's another piece to our puzzle, and that is that we know the airlines need financial assistance. They are the backbone of our travel economy, and we need them to be financially viable. We also support the option of consumer refunds. However, in November, when the former transport minister announced that airlines would not receive any bailouts unless consumers were given refunds, there was a huge trickle-down effect. WestJet and WestJet Vacations, and then Air Transat and Transat Holidays issued notices to us saying that our clients would not receive a refund until we paid back the commissions that we, the travel advisers, earned on those bookings.
In some cases, those commissions were earned by us in 2019. They have already been taxed, and there's no way that we can pay them back, nor do we believe that we should be paying back those commissions, because they were revenue earned for services we provided to those large corporations.
We need assurances from the government that bailouts will only be given on the condition that travel advisers' commissions are protected. We're asking for the government to set up a fund in the amount of $200 million to facilitate this. Until travel restrictions are lifted, consumer confidence will remain low, and we believe that if the government is going to continue to impose these restrictions, aid must be given immediately to our sector.
We're asking for your support for commission protection, first of all, to ensure that bailouts will only be given on the condition that our commissions are protected. Commission clawbacks are forcing many travel advisers into bankruptcy.
The second thing we're asking for is sector-specific aid for independent travel advisers to help keep our businesses afloat. Please ensure that our businesses, and we, won't continue to fall through the cracks.
Thank you very much.
I'm pleased to be here on behalf of the Canada Mortgage and Housing Corporation to update the committee on our response to the COVID-19 pandemic.
I am especially pleased that my presence today is my last official act as a federal public servant. The health of our democracy depends on the primacy of elected officials and our responsibility to you is at the heart of our duty of loyalty to Canada.
I am reminded of the eloquent words of admonishment delivered to Oliver North, after Mr. North had professed his patriotism and claimed a more intricate and nuanced ability to determine that country's national security as an excuse for lying to U.S. Congress. Senator Warren Rudman, a conservative Republican from New Hampshire, invoked the opening phrase of the U.S. constitution, “We the People”, to remind him of his error, and said, “Congress represents the people” and “the American people have the constitutional right to be wrong.”
In fact, steadfast respect for our democratic processes, including our parliamentary committees, is the foundation of our dominion of Canada.
Turning to today's business, I last appeared before the committee months ago—still relatively early in the pandemic—to explain how CMHC responded quickly to help stabilize the Canadian financial system and to support the economic well-being of households and small businesses.
As you know, CMHC distinguished itself in its rapid response, launching multiple initiatives to support Canadians. In addition to hundreds of interventions on behalf of our individual housing provider clients, the principal policy measures we took were as follows.
We relaunched the insured mortgage purchase program with $150 billion of strength in co-ordination with the Bank of Canada's several liquidity measures, together to help ensure that banks would have access to reliable funding and keep housing markets functioning.
However, we also removed a prior implicit pricing discount in the prior IMPP dating from the global financial crisis, eliminating any suggestion that CMHC, or the Government of Canada, was subsidizing lending. It is a tenet of emergency support measures that they require more expensive emergency pricing.
We also coordinated with lenders and private mortgage insurers to allow Canadian homeowners impacted by the pandemic to defer mortgage payments for up to six months, which nearly one-fifth of mortgage holders made use of. The same relief was made available to our multi-unit clients to facilitate rent relief for their lower-income tenants.
Additionally, speaking of rent relief, we were asked to administer the Canada emergency commercial rent assistance for small businesses, lowering rent by at least 75% for more than 140,000 small businesses experiencing financial hardship due to the pandemic. That program has been superseded, as you know, by the Canada emergency rent subsidy, now administered by the Canada Revenue Agency.
At my last appearance, I repeated our economists' warning about a potential fall in house prices. Needless to say, we got that wrong. You may recall, however, that those were more uncertain times and people may not appreciate the ugly scenarios we were considering in our responsibilities as managers of systemic risk. The 18% decline level—the outside number that we used—was clearly identified as a worst-case scenario that we then described as very unlikely. However, our 9% decline warning did not take into account four significant factors.
First, there were the compositional or “mix” changes that inflate apparent price appreciation when a larger quantity of higher-priced homes are traded in one period versus another. Second was the full impact of low interest rates and other monetary policy changes. Third was the scope and scale of government support programs, and the extent to which these have delayed inevitable economic adjustments, including resulting potential unemployment. Finally, fourth was the behavioural and psychological effects of the foregoing on both where people would choose to live and just how much froth this would all create in housing markets.
I will say that I am very concerned about the state of current housing markets in Canada and the resulting potential impacts on our future economic growth, on the environment, from more people driving cars to get home, and on increasing levels of inequality. Homeowners have had windfall gains on housing while renters have fallen further behind during a pandemic that has already hit them harder. So-called extrapolative expectations—what my son would call “FOMO” or fear of missing out—are evident and signal a market that's become detached from economic fundamentals.
Since my appearance last spring, we have continued to focus our energies on helping Canadians navigate this crisis and position the economy for a rapid and strong recovery.
In July, we revised our underwriting policies for insured mortgages to protect future homebuyers, reduce risk and support stable housing markets. In doing so, we have chosen the health of our financial system over our commercial interests.
However, whereas our banks are safe, homeowners are not. We therefore continue to defend the stress test and 25-year amortization limits, measures that have protected homebuyers and our economy and restrained house price gains. Prices would have been even higher without these measures—our version of taking away the punch bowl so the party doesn't get too loud, as I once described it to this committee.
Demand measures aside, we've also continued to deliver a range of housing programs under the national housing strategy to increase housing supply, making housing more affordable and ensuring that Canadians continue to have the sanctuary of a home when it is needed most.
In October, we launched the rapid housing initiative, a $1-billion program to address the urgent housing needs of Canadians made vulnerable, especially those experiencing homelessness in the context of COVID-19. Our initial estimate was that about $1 billion of our RHI funding would support the construction of up to 3,000 new affordable homes. As recently announced, we surpassed this goal. The program will support the construction of 4,777 homes, of which over 1,800 are for indigenous people.
The federal government's fall economic statement 2020 has also given new impetus to Canada's housing system. The rental construction funding initiative will be increased by $12 billion to $25.75 billion, 10 times the initial size of the program, starting in 2021. This new loan through a demonstrably successful program will support the construction of 28,500 additional rental units over a seven-year period.
The COVID-19 pandemic has made more apparent than ever the importance of having a safe place to take shelter and reinforced CMHC's resolve to realize our aspiration that by 2030, everyone in Canada has a home that they can afford and that meets their needs.
In closing, I'd like to thank the 2,200 people of our company who have transformed it into a housing policy and program implementation machine and a place that does things right, even including a massive IT transformation. The CMHC of today is client-centric, purpose-driven, innovative, inclusive and a resilient place in which Canadians can have confidence. It has been a privilege and the single greatest chapter in my career to have served our country alongside them.
Thank you again for the opportunity to be here on my last day as CEO of CMHC. I look forward to answering all your questions.
Mr. Chair, ladies and gentlemen, good afternoon.
First, thank you very much for giving us the opportunity to speak about your work on emergency measures during the pandemic.
The Fédération nationale des communications et de la culture, or FNCC, represents approximately 6,000 members in 80 unions. The federation also works closely with cultural unions, including the Union des artistes, the Quebec Musicians' Guild and the Association des réalisateurs et réalisatrices du Québec, to name but a few.
Together, our organizations represent more than 25,000 workers in the media, arts and culture. The FNCC represents both salaried and self-employed workers. Two weeks ago, the FNCC and its partners published a new and very troubling report on the situation of self-employed workers in the cultural sector. In short, the precarious situation that artists, creators and tradespeople in the cultural sector have faced for many decades, combined with the shutdown or increased complexity of activities resulting from the pandemic, has left our members in psychological and financial distress.
Of course, the living arts have been particularly affected by the health measures and closures. However, the entire cultural sector has been severely shaken. Now, just as venues have reopened in Quebec, it seems that we are entering a third wave.
I must point out that the average annual income of self-employed cultural workers doesn't exceed the low-income cutoff for a single person in Quebec. In 2017, this cutoff was $24,220. In 2019, none of the cultural activity areas reached this cutoff, not even the film and video industry.
This precarious financial situation and the weak social safety net available to self-employed workers make them very vulnerable during crises and slumps, which is the case for most of them. When surveyed between December and January, 64% of our members showed signs of high or very high psychological distress. This cannot continue. In this survey, we asked our members what they thought their net income would be in 2020, just from their work in the arts. Sixty-three per cent of the 1,500 respondents indicated that their net income would be less than $10,000, while 15% indicated that it would be less than $19,000. Also, over 40% of the members we surveyed are considering leaving the cultural sector.
Based on these data, we can make a few observations. First, 67% of our self-employed members have received the Canada emergency response benefit (CERB). Without it, many would have ended up with nothing to pay for their rent and food. This measure was most appropriate in providing direct help to cultural workers. Second, only 34% of cultural workers registered for the Canada recovery benefit (CRB). There appear to be a number of reasons for this drastic decline, including the fact that certain criteria, such as a job search, which was required even when the entertainment industry was still shut down, are not realistic in the cultural sector. Also, because of the fear of having to pay money back, when few of them have any savings, many don't take the risk. That being the case, the CRB should be extended for as long as this crisis lasts, and ideally, the administrative burden should be minimized to facilitate access.
Finally, apart from the CERB and, to a lesser extent, the CRB, few programs have reached artists, creators and tradespeople directly. A social safety net is needed for self-employed workers for whom intermittent work is part of the trade or profession. It is absolutely necessary to introduce an income replacement mechanism, without which it will be very difficult to remedy the precarious position of our artists and tradespeople. Need we remind you that without them, there is no culture? Improving the socio-economic living conditions of self-employed cultural workers must be a priority in all the measures that governments are considering.
As for the specific support programs for culture, such as the National Film Board, Telefilm Canada or the Canada Council for the Arts, generally speaking, these funds have been neglected and very rarely indexed for decades, which means that the entire sector was already in a difficult financial situation, and even more so for francophone content. Of course, the money is helping the sector, but it will need a lot of support in the coming years.
In closing, I'd like to take a few seconds to talk about the media sector. We reiterate the importance of placing government-wide advertising first and foremost in our Canadian media, whether in our newspapers or magazines, on television, radio or digital media. This sector was already severely disrupted by the fiscal, legislative and regulatory inequities that exist between them and the web giants.
The government must do everything it can to protect professional journalistic information, especially during these times of pandemic and misinformation, as well as our original cultural production, given that Canadians are spending more time than ever in front of screens.
The wage subsidy has also helped many media companies maintain jobs. It should also be extended for as long as necessary.
Mr. Laflamme and I would be pleased to answer your questions.
Let me start by recognizing and thanking the federal government, all of you as MPs and Canada's federal civil servants for the critical work you've been doing through this pandemic. Your work has been extraordinary, important and needed, and we're not done, obviously.
United Way Centraide Canada is Canada's largest funder of vital community services. We're focused on eliminating poverty and ensuring vulnerable Canadians have the support they need to build sustainable livelihoods. We serve all regions of Canada. Every year, United Way Centraide invests over $500 million to support 3,500 different community organizations and over 5,000 programs and services.
We've stepped up over the course of the pandemic. We're working with municipalities, public health organizations, foundations and frontline agencies to coordinate local responses. Through our fundraising, we've also been able to mobilize an additional $40 million in support for our community responses.
I would note that with the support of the federal government, we've been able to rapidly expand our 211 navigation service to all regions of Canada to help ensure that every Canadian can get the help they need when they need it. Also through the support of the federal government, we were able to expand funding to over 870 seniors organizations serving hundreds of thousands of isolated seniors through the new horizons program for seniors. Through the emergency community support fund, we were able to fund over 5,260 community programs across the country.
With that as context, there are really about five key messages I'd like to share with you.
The first is that our community services infrastructure in Canada has really stepped up to meet the needs of Canadians, but I also want to let you know that these organizations are under great stress and need your support. We know, and we've heard consistently over the course of the year, that demand for services has increased. Not only has it increased, but it has stayed elevated throughout the pandemic.
We know revenues are declining amongst community services organizations by an average of over 40%. Some of it is due to lost donations and some of it is due to losses in earned revenue, but we also know costs are going up due to social distancing, PPE, safety requirements and the loss of volunteers. We don't have the same capacity to participate, due to health and safety issues.
The third point I'd like to raise is—certainly I've heard this—that programs like the Canada emergency wage subsidy program have been tremendously helpful to charities and community services organizations. It has helped them protect staff positions in the face of declining revenues. We know and support the fact that this program was extended until June, but we certainly also support Imagine Canada's call for a further extension of that program.
The fourth point that I think is really important—it's perhaps my most important point—is that our essential community services need a lifeline to the other side of this pandemic to ensure that they can continue to serve, adapt and respond to the needs of Canadians. This is why United Way Centraide Canada, alongside the YMCA and the YWCA, the Boys and Girls Clubs of Canada, Big Brothers Big Sisters, the National Association of Friendship Centres and many others have been calling for a community services COVID relief fund.
This fund would do a couple of things. First, it would provide a temporary, 18-month operating funding program to help bridge the gap in the operating capacity of charities and community services organizations, so they can continue to serve Canadians. The second component would be a transformation fund—a fund that can help community services invest in their capacity, whether it be technology, operating model changes or innovation in the program delivery, so that they can come out the other side of this pandemic stronger and more resilient.
Perhaps I'll close here. When I think about where we are in the pandemic today, if we want a strong and equitable recovery for all Canadians, we're going to need to support the very community-based and community-led organizations that support youth, that deliver child care and after-school programs, that protect women and families experiencing domestic violence and that support our Black and indigenous communities and people of colour who are living in vulnerable circumstances. We know they have faced the most significant impacts of these pandemics.
I really appreciate the opportunity to speak with you today. I'm happy to answer your questions.
Again, thank you for all the leadership and support you are also providing to Canadians every day.
Thank you very much, Mr. Siddall, for your service to the country. I know you have worked extremely hard and, politics aside, you have made great sacrifices doing your job. I hope you have health and happiness in the next phase of your life.
On the issue of Canada's housing market, you said you were wrong to predict that housing prices would drop between 8% and 16%. I'm not sure you were wrong; I think you might have been early. I think there is another chapter to unfold in this story.
As your data has shown, for a house to be affordable, the monthly payments on it should not consume more than 30% of pre-tax income. Right now, the average house costs the average family 50% of pre-tax income. That means that, for the average family, the average house is two-thirds more expensive than the family can afford.
Vancouver is the second most expensive housing market in the world, behind Hong Kong. Toronto is number six, when you compare average income to average house price. Housing prices rose record levels last year, in a time when immigration was down and the GDP fell by $120 billion. None of this makes any sense whatsoever.
That said, there are causes driven by the federal government that explain some of the story. One, of course, is that the Bank of Canada is printing money and pumping it into the financial system, and it's being lent out and driving up demand, but CMHC has a role here as well. You, as a mortgage insurer, are taking the risk off the lender and putting it on the taxpayer, which creates a distortion that separates risk from return. Anybody who can earn a return without a risk is going to engage heavily in the activity that produces that return.
What is the total dollar value of all the mortgage debt in Canada that CMHC insures, not just through a portfolio and transaction insurance, but through other securitization in Canada mortgage bond products?
Well, we have significant imbalances in certain housing markets.
I would say that, given how prices have grown ahead of economic fundamentals, there's certainly more risk of downside than risk of upside in housing markets. What we've done, the principal measure right now, in addition to strict underwriting.... The underwriting done in Canada by banks and by mortgage insurers is very strong.
People should not be worried about the stability of the financial system. As I said, our banks are sound. It's homeowners we should be worried about, because when prices fall, a number of these people will be exposed to very significant losses after paying real estate fees and insurance fees, and with very minimal equity. That risk of foreclosure is quite significant to homeowners, and people who lose their jobs—younger people tend to lose their jobs more quickly—could actually be exposed to great tragedy.
The problem is that this can accelerate upon itself. Housing markets are given to boom and bust cycles. Just as they run up, they run down. I know we don't think that's the case, but of the 46 financial crises for which we have housing data, two-thirds of them—this is globally—were preceded by housing boom and bust cycles in real estate.
Therefore, we should be worried about those homeowners. The stress test, which is something that creates a buffer above current mortgage rates, helps protect homeowners from that. It's an extra buffer that helps protect them from that eventuality.
Good afternoon, everyone. Thank you for your presentations. You're a very interesting panel of witnesses. Ms. Slater, Ms. Coates, and Ms. Wilson, the situation in which you and your colleagues find yourselves makes no sense. Hopefully the government will find ways to help you. The documents you have provided us with are full of solutions. We want you to be heard.
Mr. Siddall, you are the president and CEO of Canada Mortgage and Housing Corporation. I want to applaud you and thank you for the work that you have done. I wish you all the best in the future. I also want you to thank all your teams, who have worked very hard during the pandemic. I can't resist coming back to a topic you raised on May 19, almost a year ago. At that appearance, we talked about forecasts. I told you that many economists were expecting real estate prices to rise. Of course, I hope your forecasters have learned from this crisis. It is always difficult to make forecasts. That said, thank you again for all the work you have done.
Ms. St-Onge and Mr. Laflamme, when you come to testify here, it is always troubling. You are saying that two-thirds of self-employed workers in the cultural sector are in a state of psychological distress. Only one-third of them apply for or have access to the Canadian recovery benefit (CRB). This is very troubling. It must be further noted that self-employed workers as a whole are facing difficulties. The president of Travailleurs autonomes Québec mentioned the same problem with respect to the CRB. She also reminded us that, whenever there is a small problem, an investigation is launched and it takes months to resolve the matter.
If your members are facing the same problem, can you elaborate?
Do you see a connection between the very high rate of psychological distress and the lack of resources in existing programs?
Mr. Siddall, I know the government is celebrating the 4,777 units for the rapid housing initiative. I'm sorry. I live in Port Alberni and we have lost so many people, every week, to suicide, overdose, substance abuse and health-related issues from being homeless. Right now, with the isolation and the marginalization of people due to COVID, people are struggling. They can't deal with their mental, physical, emotional, spiritual or economic health if they have nowhere to go. They were counting on a rapid housing application. We know B.C. is building half the non-market housing in this country, but when they got rejected, we know that the rejection means people are dying.
What percentage of people who are homeless in this country will that first round cover?
I'm sorry. This is very emotional for me.
Second, did you ask the to top up the amount that was asked for? It's my understanding that the requests that came in were fivefold over what was delivered.
That's correct. I'll address that.
With the CEBA loan, one of the hurdles or roadblocks for us is that we have to have a minimum of $40,000 in non-deferrable expenses. As sole proprietors, we don't meet that benchmark, so we are precluded from that fund.
Then they introduced the regional relief and recovery fund, which was designed for small businesses that are falling through the cracks. We discovered that if you are in a rural area, you can apply through your CDC office for that fund and you are able to get funding. However, if you are in an urban area, it gets redirected to FedDev and you have to be incorporated for that. Half of our members are not able to access that.
We actually met with some of the assistant deputy ministers of small business and innovation and development earlier this month. They kept saying to us that we should be taking advantage of the HASCAP loan and that it's great, whatever the amount is, at 4%, a wonderful loan. Our response was that we've been one year without revenue. How do you expect us to pay loan payments on a 4% loan? It does not make sense for us to be going into more debt. We're already in debt as it is, up to our eyeballs.
My first question will go to Mr. Siddall.
Mr. Siddall, I share the sentiment of all my colleagues. Thank you for serving the country in the way that you have over these years, and I wish you nothing but good things in the future.
I want to ask you a question related to interest rates. It seems as though they will remain at very low levels well into the future, with the historic lows we've seen since the onset of the pandemic and the Bank of Canada and its governors hinting that there won't be an increase until the economy is really rebounding, and we don't know exactly when that will be. I was interested yesterday when the Parliamentary Budget Officer offered a projection that is very positive. Again, we just don't know.
Given that, is it safe to assume that housing prices will continue to increase with such low interest rates? What does that mean for the average Canadian?
I can tell you, in my community of London, Ontario, the average home price since 2015 has increased nearly 150%. Week after week, I talk to real estate agents and I talk to constituents. My constituents are being priced out of the market. Real estate agents can't keep up. There's such demand for homes that home inspections are a thing of the past. That's not happening anymore.
I just wonder.... I'm putting a number of things to you, but I guess if you're going to focus on one thing, it's this: How sustainable is this situation, given that interest rates are likely to remain very low well into the foreseeable future?
Thank you so much, Mr. Chair.
I just want to say a huge thanks to everyone for their excellent presentations. They were extraordinarily informative and very important.
I, too, want to lend my congratulations to Mr. Siddall. Thank you so much for your extraordinary service to our nation, and also best of luck on your next move. I want to say a huge thank you for the answer to the question that Mr. Kelly posed. People in my riding will be super happy that you have clarified that very well.
My question is for the other three groups that are part of our panel today.
The reality is that the world of work has been changing quite rapidly. This happened before the pandemic and is continuing even after the pandemic. The world will not look the same after this pandemic as we come out of it. The question for me is, how can our federal government help with the transitions? The travel industry is going to change. The world for artists in the cultural sector will change, and also how our non-profits will be serving our communities will change as well.
Our federal government has attempted a couple of things. We have introduced $1.5 billion in workforce development, meaning training and retraining programs. There's also an idea on the table, not proposed formally by our government but by a number of people broadly in our society, that maybe a new model for our social welfare system should be some sort of a guaranteed basic income.
Are these the right ideas and, if not, what might you propose?
Who would like to respond to that?
With that, we will go to a bit of committee business.
The panellists are released. Again, thank you for your presentations, your concerns and your suggestions.
Thank you, and have a happy Easter.
The clerk has sent out the fourth report of the Subcommittee on Agenda and Procedure. It is there before you, but maybe I'd better read through it to see if we have agreement from the committee. It is open for discussion.
Your Subcommittee met on Wednesday, March 31, 2021, to consider the business of the Committee and agreed to make the following recommendations....
1. That the committee continue and expand its study on Covid-19 Spending and Programs to include additional topics such as quantitative easing, renaming the study as “COVID-19 Spending, Programs, and Related Monetary Policy,” and that the Analysts provide the committee with a list of witness proposals presented to the committee during its study in order to assess the need for an interim report;
That maybe means “during its study to date” if we're going to do an interim report.
2. That witnesses for the expanded Covid-19 expenses study be provided to the Clerk before 5h00 pm on Thursday April 8, 2021;
That's next week.
3. That the committee set aside time to debate the motions of Peter Julian (tax evasion) and Julie Dzerowicz (interprovincial trade barriers);
That just goes to show that we couldn't come to an agreement on the subcommittee.
4. That the committee not meet during the week of April 5-9, 2021;
That's next week. It's to give everyone a break, including translators, clerks and analysts.
5. That the committee hold a meeting to study the Main Estimates and invite the Minister of Finance and senior officials;
6. That, when the Budget Implementation Act arrives at committee, it take precedence over any other committee business;
7. That the committee adopt the 2 following motions of Mr. Ste-Marie....
They're fairly lengthy. I will not go through them, other than to explain them. The first is to have the various agencies—BDC, EDC, Canada Mortgage and Housing, OSFI and the Bank of Canada—provide reports to the finance committee on a monthly basis on liquidity issues, etc. The second one is basically the same motion to provide a report to the finance committee similar to what we were getting over last summer from the Department of Finance on a monthly basis, but to ensure that the report includes:
Program amount concerning Health and security expenses linked to COVID-19;
Direct support measures to business and people;
Sub-categorize section for sector support;
Government liquidity measures;
Government extraordinary borrowing operations.
That is the report. If somebody wants to move it, we can get into discussing it.