:
Good morning, everyone. I'll call this meeting to order. This is the 16th meeting of the Standing Committee on Finance. We are continuing our pre-budget consultations for 2011.
We have two panels this morning. In our first panel we have seven organizations joining us here: the Canadian Construction Association, the Canadian Cooperative Association, the Canadian Healthcare Association, the Canadian Institute of Chartered Accountants, the Canadian Union of Public Employees, the Canadian Wireless Telecommunications Association, and the Hotel Association of Canada.
Thank you all for being with us. You'll each have a maximum of five minutes for an opening statement.
We'll begin with the Canadian Construction Association, please.
On behalf of the more than 17,000 members of the Canadian Construction Association, I want to thank you for providing us with this opportunity to appear before you today and share our views regarding the economy and our recommendations for this year's federal budget.
My name is Dee Miller and I'm chair of the Canadian Construction Association. In my outside world I am vice-president of JJM Construction, based in Delta, British Columbia. We're involved in road building, marine construction, and highway and bridge construction. I'm joined here today by our president from CCA, Michael Atkinson.
With ongoing global economic uncertainty, it's not surprising that construction remains the choice of governments around the world as the best investment for economic stimulus. In Canada, construction accounts for 7% of our nation's GDP and employs over 1.25 million Canadians. We are by far one of Canada's largest economic drivers, and our industry is projected to continue to grow throughout the decade.
A recent report commissioned by PricewaterhouseCoopers forecast that Canada's construction market will become the world's fifth largest over the course of this decade, in part due to strong global demand for Canadian energy and natural resource exports. In short, new infrastructure requirements to support the growing commercial needs of our economy as well as the long overdue renewal of our public infrastructure assets will become the primary driver of construction activity in Canada for the foreseeable future.
Given that infrastructure is critical to the functioning of our economy as it impacts not only productivity but ultimately business profitability, we believe new solutions will be required to help share the tremendous costs associated with the expansion and renewal demands of our nation's infrastructure. One solution to help lower the fiscal burden on governments will likely be public-private partnerships, which is something we have considerable experience at in British Columbia. However, this has drawn to Canada a large number of international firms that carry out much of their engineering and other back office functions in lower-cost countries. Furthermore, these firms often bring with them below market financing that makes it very difficult for Canadian firms to compete within our very own home market. While our industry does not support protectionism, we expect that the federal government, when tendering P3 projects, will ensure that a level playing field exists and that Canadian companies are not disadvantaged.
We're also very concerned about the capacity of cities to continue to fund their share of the infrastructure renewal burden. Since most cities do not have access to growth taxes, the annual transfers they receive from the federal government through the gas tax fund have become instrumental to their capacity to pay for infrastructure renewal. Making this transfer permanent, as outlined in the government's last budget, is an important first step, but unless this transfer is indexed, inflation will erode the effectiveness of this program over time. So our first recommendation is that the federal government index the current gas tax transfer fund to the cost of inflation.
Canada must also ensure that it has an adequate supply of labour. In construction, we expect a shortfall of 325,000 workers by 2019 due to retirements and increased demand for construction across Canada. In a best-case scenario, we expect colleges and other training facilities will help fill approximately half of our new labour requirements, still leaving a shortfall of 150,000 workers. Therefore, going forward, our industry will continue to rely on Canada's immigration system to help fill nearly half of our workforce requirements. However, with chronic processing backlogs within Citizenship and Immigration Canada, our pressing demand for foreign skilled workers will never be realized unless significant new resources are dedicated by Parliament to overcome this challenge. Therefore, CCA recommends that Parliament increase the annual budget to Citizenship and Immigration Canada, so as to permit the department to reduce, if not eliminate, the processing backlogs within the skilled foreign worker program.
Another area of concern for our members is red tape and the cost of regulatory compliance. We are pleased to see the government taking action on this issue, and we look forward to the outcome of the red tape commission's review. One example we used to illustrate our frustration with red tape to the commission is that of security clearances. When a contractor works on a military base for DND, it needs to obtain security clearances for firms and employees. If we decide to work at an airport, we have to go through this entire process again, which makes no sense, since CSIS and the RCMP are responsible for carrying out these reviews.
The Chair: You have one minute.
Ms. Nadine Miller: CCA members believe Canada needs to streamline its regulatory systems. To this end, we recommend that the federal government engage with the provinces to undertake a broader review of federal government regulations, with a view to eliminating duplication and streamlining the regulatory compliance process.
Finally, we believe the federal government can play a significant role in improving economic productivity through the use of tax incentives designed to encourage Canadian industry to invest in the modernization of our businesses.
CCA strongly recommends that the government extend the application of the current accelerated capital cost allowance for machinery and equipment to diesel-powered mobile equipment and machinery as well as to heavy-duty off-road vehicle purchases.
Mr. Chair, this concludes my presentation. I hope you found it of interest and I look forward to answering any questions you might have.
:
I want to thank you very much for giving the Canadian Co-operative Association the chance to present to you today.
The 9,000 cooperatives and credit unions in Canada have over 18 million members and $376 billion in assets, and they employ over 150,000 people.
We are particularly pleased to be here this year because 2012 has been declared by the United Nations to be the International Year of Cooperatives. We want to thank the Government of Canada for its consistent support for this UN year. We will be launching the international year on November 29 at our parliamentary reception and across Canada on January 12 in 12 locations.
We are also happy to be presenting here this week because it is Co-op Week, an annual event aimed at recognizing the contribution of cooperatives. The theme of this year's Co-op Week is the same as the theme of the international year: “Cooperative Enterprises Build a Better World”.
In his Co-op Week message to CCA, noted:
Co-operatives have helped many people and organizations find solutions to social and economic challenges in their communities, and this special week offers Canadians a chance to express their appreciation for the benefits that co-operatives provide.
Recently the cooperative model is back in the news. For example, in the U.S., in the recent health care debate, and in the U.K. around public policy, there is talk of how to use the co-op model on a wider and more effective basis.
During the recent years of economic downturn, co-ops generally did well around the world because they are community-owned, make profits that go back into communities, and have set reasonable levels of staff pay, including that for CEOs. Just two weeks ago, out of the top 100 employers featured in The Globe and Mail, three were cooperatives. In Saskatchewan, 11 of the top employers were cooperatives and mutuals.
Cooperatives generally last much longer than investor-owned businesses, as a 2008 Quebec government report and a new B.C. study have both shown. But they often need help in getting started.
This is why we are proposing three legacy budget projects for the international year. All of them are partnerships between the co-op sector and the federal government; thus, for moderate amounts of government funding or foregone taxes, substantial amounts of capital can be leveraged.
But it is not only capital that will be leveraged. One of the fundamental principles in the co-op sector is that of self-help; of communities and groups of people pulling themselves up with their own sweat equity. This is the working principle that built an oil refinery in Regina in the depths of the crisis of the 1930s, a federation of co-ops in Nunavut and the Northwest Territories in the 1960s, and more than 800 credit unions across Canada since 1900.
These three projects are backed by many prominent cooperative organizations, including the Credit Union Central of Canada, Desjardins, Co-operators General Insurance Company, and the Co-operative Housing Federation of Canada.
The first project is a federal cooperative investment plan based on Quebec's Régime d'investissement coopératif, which has existed since 1985. It would provide a federal tax credit for co-op members and employees who invest in producer—that is to say, agriculture, fishery, forestry—and employee-owned cooperatives. Such a plan at the federal level is estimated to cost between $17 million and $20 million per year and would produce $120 million per year of new investment across Canada. This is a plan that the Canadian Federation of Agriculture has consistently ranked as one of their top priorities.
The second project is a cooperative development fund, which would be co-funded by the federal government and the co-op sector, that would provide large and medium-sized capitalization loans to new and emerging cooperatives. This sector is requesting a one-time federal government contribution of $70 million, after which the fund would be self-sustaining. This federal contribution would leverage important contributions from the cooperative sector.
In 2008 the federal government commissioned PricewaterhouseCoopers to examine the model for this new fund, and they concluded that the potential impact of the fund is positive and will assist emerging and existing cooperatives to grow and expand.
These two projects were endorsed by the House of Commons finance committee in your December 2009 pre-budget report.
The third project, the last one, is a permanent and expanded federal cooperative development initiative. This is a program that provides grants and technical assistance to new and emerging cooperatives, and we hope can help also in providing solutions to business succession when new employee- and community-owned businesses can provide an alternative to the closure of family owned firms.
This program was started in 2003, renewed in 2009, and goes until March 2013. This program is managed by the two national cooperative organizations. Since 2009, 521 groups have applied for project funding, 140 projects have been funded in the last three years, and over 346 cooperatives have been created through another arm of the program. It has also helped to leverage additional resources from provincial governments and our own charitable fund.
In conclusion, I would say that cooperative enterprises can indeed help build a better Canada.
Thank you very much.
:
Thank you, Mr. Chairman, for the opportunity to speak to the committee.
[Translation]
I am going to speak to you in English, but I am always ready to try to answer your questions in French.
[English]
I thought I would take a moment to make sure that everyone on the committee understands on whose behalf I am speaking today: the provincial and the territorial health associations and organizations across the country. This runs from the Newfoundland and Labrador Health Boards Association, through the Health Association of Nova Scotia, all the way across to the Health Employers Association of British Columbia, and also into the territories.
You may have heard of us many years ago as the Canadian Hospital Association, but we now cover the continuum of health, and thus our name reflects the broader mandate. We're currently celebrating our 80th year of work on behalf of Canadians.
Our board of directors is a bit different from many in the health world. It reflects the face of the public. Members have emerged from local hospital and health boards. They've risen to govern at the provincial level and they now come to speak at the national level with CHA. They are HR experts from the mining and forestry sectors, registrars of community colleges, superintendents of educational systems, and chartered accountants. They run insurance companies and real estate firms; they work in sales and retail. They are the public, they are the voters, and they have strong messages to deliver. Perhaps most importantly, they are responsible for the allocation and monitoring of billions of dollars of public funds.
You have asked us to help you deal with ongoing difficult financial times, and we get that. You've asked us to bring concrete, doable solutions. We get that as well. You've asked us to be as specific as possible and you've also asked us to limit our recommendations to three.
Well, we have more than three, but we're committed to respecting the committee's parameters and we're pleased to offer three concrete, doable recommendations, which I'll briefly review today, knowing that you have received the material in advance.
One additional comment that I would make before I do so is that CHA supports a very strong role for federal leadership in the health of the nation within our Canadian model, which confers the constitutional responsibility for health to the provinces and territories. We specifically require that this federal leadership help us move from a focus only on the illness system to one that truly addresses the need for a wellness system. We need to keep Canadians out of hospitals; we need to prevent their becoming ill and move them quickly from acute care to appropriate continuing care; and again, we need courageous federal leadership to do so.
That is a nice segue into the first recommendation.
The recommendation is to reduce health system costs over time and target funds from current resources—new ones, if we have them, but current resources—to population health initiatives. The Naylor report, with which you're probably familiar—and I can go into more detail, of course—recommends funding public health services in the amount of $1.1 billion per year and is a good starting point. The annual economic burden of direct and indirect costs of illness in Canada is estimated to be $188 billion. We need prevention. There is currently no earmarked funding for health promotion and disease or illness prevention activities under the Canada health transfer to date.
Recommendation number two is to leave needed dollars in the health system by modernizing and bringing equity to the current interpretation of rules concerning the GST-HST rebate eligibility criteria in the Excise Tax Act. This is a complicated issue, but we estimate that $300 million is being taken out of the health system. It's being given with one hand and taken away with the other, and we feel it needs to stay where it is initially given.
Our recommendation number three is to enhance the health sector. It's about EHR and EMR, folks. We need to get these moving. There are funds being made available to emerging health professionals only within the physicians', nursing, and pharmacists' professions. The rest of the workforce has never had this training. If we truly want to start taking advantage of the innovative processes and pieces that are coming forward, there are programs existing, we feel, that could be opened to these other health professionals to make them more amenable to the new technologies.
I will finish with a thank you for hearing me, and I look forward to questions.
:
Good morning. My name is Gabe Hayos, and I'm vice-president of taxation with the Canadian Institute of Chartered Accountants.
On behalf of Canada's 78,000 chartered accountants, thank you for the opportunity to appear before this committee. In my remarks today, I will cover the CICA's views and priorities for the 2012 federal budget, highlighting measures we believe will support the nation's economic recovery by helping Canadians and Canadian business prosper.
Recommendations include simplifying taxes and easing the personal income tax burden, reducing red tape, enhancing Canada's tax incentives for innovation, enhancing financial literacy, encouraging retirement savings, and continued support for international credential recognition.
With respect to red tape reduction, an element of key importance to the CICA's view is that the federal government's administrative agencies should focus first on providing compliance assistance, rather than focusing principally and perhaps almost exclusively on regulatory enforcement. We believe that a positive attitude change towards compliance assistance, motivated by a supportive tone from the top being expressed by ministers and their deputies, will contribute meaningfully to red tape reduction and enhanced efficiency in government.
Canada's domestic tax system must be simplified to lessen the regulatory burden placed on Canadian business, and we recommend that the federal government establish a national consultation process to obtain input on tax simplification initiatives.
Measures that merit consideration include pursuing greater federal-provincial tax harmonization across all tax systems, adopting a loss transfer system of taxation for corporate groups, and extending personal income tax filing dates for those with income from trusts or partnerships.
The government's commitment to reducing the general corporate income tax rate to 15% by 2012 is important to our ongoing economic recovery and should be applauded. We also encourage the continued adoption of policies recommended by the Advisory Panel on Canada's System of International Taxation.
We believe that action should be taken to improve our scientific research and experimental development tax incentives and that tax credits should be made partially refundable for all businesses.
In order to stay competitive and attract and retain human capital, Canada must stay attuned to the personal income tax burden placed on Canadians. Canada's chartered accountants favour the use of broad-based tax reductions over targeted measures.
Over time, we encourage the government to increase the top two tax thresholds and the rates that apply to them, in order to bring them in line with those of our global competitors. Key to balancing this broader approach is the need to examine the appropriate mix of personal tax and consumption taxes. Canada relies on personal income taxes to a greater degree and on consumption taxes to a lesser degree than the OECD average. Adjusting the revenue mix would improve Canada's tax competitiveness. We recommend that the government consider changing the revenue mix to bring it closer to the OECD averages.
Reducing income tax on personal savings is crucial to helping Canadians prosper over the longer term. With this comes the need to enhance financial literacy to ensure Canadians have the financial skills to make the best choices on planning for their retirement. Our research shows a clear link among financial literacy, higher rates of savings, retirement preparedness, and financial planning. We urge the government to continue its commitment to financial literacy.
The CICA is working to support a national collaborative financial literacy strategy and will soon be launching a program to provide Canadians with the knowledge and confidence required to take control of their finances.
With respect to the retirement income system itself, we support the government's commitment to increasing contribution limits to tax free savings accounts. We believe reducing the income tax on personal savings will provide an incentive for savings and make the tax system more efficient, effective, and competitive. As an example, we recommend raising the RRSP maximum contribution limits and also taxing RRSP withdrawals according to the nature of the underlying income—that's capital gains, dividends, or interest—rather than all of it being taxed as ordinary income.
Finally, skilled professionals are vital for Canada's future, and the CA profession encourages the government's ongoing commitment to easing the transition of internationally trained professionals into the Canadian workforce. We support the development of streamlined bridging programs that help these professionals resolve any educational or experiential gap, so they can contribute their full potential as quickly as possible.
To conclude, we believe the nation's economic recovery can best be supported by enacting measures that help Canadians and Canadian business prosper.
Mr. Chairman, thank you for the opportunity of appearing before this committee. I would be pleased to respond to any questions.
:
Thank you very much, Mr. Chairman.
Good morning. CUPE is very privileged to represent just over 600,000 Canadians, people delivering front-line public services from coast to coast to coast. Our members don't just deliver these services; they depend on them as accessible, affordable, and quality features of our lives, and they're hit twice by restraint measures if they occur: they lose their jobs and they lose the services.
The average salary for a CUPE member is just under $40,000 a year. The value of public services in totality that each Canadian receives is worth about $17,000 a year. Three years after the financial crisis struck, we continue to be in very difficult economic times. We ask this question: are we any further ahead? Further recessions are imminent or arguably under way in the United States and Europe, thanks in large part to austerity measures, little progress on financial sector reform globally, more bank failures, particularly in Europe in the last week, and bailouts.
We still have in Canada officially 1.3 million Canadians out of work and many more who have given up looking for a job. We've had slow job growth and negative real wage growth since the recession hit three years ago. Household debt—and I know Mr. Carney has spoken to this committee about this—is at record levels: 150% of income. Public services are being cut and workers are being laid off while government maintains planned corporate tax cuts, which are adding $0.5 trillion in excess cash that, for the most part, corporations are hoarding and not investing at this point in time.
The sale of luxury goods going up and dependence on food banks rising speaks to rising inequality in our country. Supply-side economic policies of corporate tax cuts, deregulation, and cuts to public spending haven't worked. We have a demand-side problem, worsened by structural inequality. The International Monetary Fund, and recently the Conference Board of Canada, raised alarm about rising inequality hurting economic growth in Canada.
Warren Buffett and many others are calling for government to raise taxes on those with the best ability to pay. Alex Himelfarb, a former Clerk of the Privy Council, wrote in The Globe and Mail on the weekend about that very subject matter. No wonder people are fed up and increasingly taking to the streets around the world. We need job growth, and workers also need decent real wages and services. We don't need government policies interfering with free collective bargaining rights. That will make labour relations worse in our country. If workers don't have a voice and are constantly threatened by strong-arm measures favouring employers, they can't be expected to work productively.
Austerity measures and federal spending cuts announced in the last budget were a mistake. We need to sustain and expand services, jobs, and spending, which are historically low in terms of the share of our economy. Public infrastructure investment was instrumental in stimulating economic recovery three years ago. Funding for future years has been depleted. We need additional infrastructure investment, better planned, with a long-term commitment.
I'll close with our three general recommendations. First, we need to sustain and expand services, jobs, and spending, in particular cancelling damaging federal program spending and job cuts from the last budget and protecting current rates of increase for social and health transfers to our provinces.
Second, we need to promote investment in sustainable growth and job creation, in particular making a long-term federal commitment to investment in public infrastructure, particularly public transit, to the tune of $18 billion needed over the next five years. We could start with an additional cent from the federal gas tax, which would be worth about $400 million, provided to municipalities to devote to public transit.
Finally, Mr. Chairman, we need to implement fair tax reform both to improve the functioning of the economy and to generate revenues to pay for public services. Here are two examples: set aside planned corporate tax cuts, and implement fair taxes on the financial sector—a financial transactions tax or a financial activities tax could generate about $5 billion a year in Canada.
Thank you, Mr. Chairman. We look forward to any questions.
:
Thank you very much, Mr. Chair.
Good morning to all of you. I'm pleased to be here this morning.
I have a good news story to tell this morning. It's about the wireless sector in Canada. It's a fast-growing sector. It creates thousands of jobs. It enables our communities and our families to be better connected, and it makes our communities safer as well.
[Translation]
The industry is enjoying tremendous growth. We are not here to ask you for money, but to tell you that things are going well and that certain steps can be taken to ensure that things keep going even better.
[English]
The wireless sector in Canada is a major driver of economic activity across all sectors of the economy, and it’s one of the few true enablers of success and growth in all other sectors of the economy.
Just to give you an example, traffic on Canada’s networks is growing exponentially. Some of our networks are growing at 5% per week. Now, most other sectors of the economy would be thrilled to have 5% growth in a year. But 5% growth a week means that the traffic on our networks will more than double; it will be 26 times more by 2015. This means there's an ongoing requirement to make massive investments in networks to make sure Canadians continue to enjoy the service they want.
We provided a submission to the committee. We also shared with you a slide deck. On one of those slides, slide 3, you can see the contribution of the wireless sector in Canada. You can see it's $41 billion a year.
[Translation]
This is a contribution of $41 billion to the Canadian economy, $17 billion of which is a direct contribution to the gross domestic product, $15 billion is in indirect flow-through and $9 billion is in consumer supplies.
[English]
And you can see how this compares to other sectors of the economy. But what we see and what's happening in the wireless world is something truly remarkable, and that is the combination of wireless telephony with broadband Internet to create the mobile broadband Internet. That's truly what Canadians want from coast to coast to coast, and that's what the wireless sector wants to deliver.
If you look at slide 4, and this is a very interesting slide, you will see it gives an indication of what's happening in the wireless sector. A smartphone will consume 24 times the bandwidth of a traditional feature phone. A laptop will consume over 500 times the bandwidth of a traditional feature phone. This is exponential growth. If you compare it to highways, for instance, it's as if we had a four-lane highway this year, and next year we'd have to have an eight-lane highway and a sixteen-lane highway the year after just to satisfy the traffic. The increase will be 26 times between now and 2015.
One of the roadblocks we face in Canada is high government spectrum licence fees. I refer you to slide 5. This compares the spectrum licence fees that are paid by the wireless sector to governments in all G-7 countries. You can see that Canada has the highest spectrum licence fees in the G-7. In fact, Canadian wireless carriers hold licences for less than 2% of all the licensed spectrum in Canada, yet they pay for over 50% of all spectrum licence fees in Canada.
If we had a regime comparable to that of the U.S., the wireless sector would pay $4 million in fees. In 2009, the wireless sector paid $130 million in fees. This is simply an obstacle to investment and an obstacle to growth in one of the fastest growing sectors of our economy.
If you look at slide 6, you will see the investments that have been made by this sector in recent years. While other sectors were struggling from 2007 to 2010, this sector of the economy made record investments in our networks around the country.
All this is to say, Mr. Chair, that we have three recommendations to make. The first is to introduce in 2012 a temporary accelerated capital cost allowance for broadband network-related assets and move it from 50% to 100%. The second is that the government set a timetable for bringing the administrative licence fees paid by Canadian wireless carriers in line with comparable fees paid by wireless carriers in other G-7 countries. The third is that Industry Canada eliminate outdated regulation and red tape on conditions of licence that impose an unnecessary regulatory overhead on both licences and the government.
Thank you, Mr. Chair.
:
Thank you very much, Mr. Chairman.
[Translation]
Thank you for the invitation to appear here today.
[English]
Ladies and gentlemen, travel and tourism in Canada is a $74 billion industry. We employ about 594,000 people.
In the lodging sector, last year we generated in excess of about $16 billion. We employ 284,000 people across the country.
I like to say that every time I appear before the committee we're the good news sector, because we create jobs and generate a lot of money for the federal government. Last year $3.2 billion went to the feds, so we usually get a pretty good welcome when we come here.
But ladies and gentlemen, we have some issues before us that I want to briefly touch on. The first one is that I'd like to say we welcomed Minister Bernier's announcement of the federal tourism strategy a couple of weeks ago, particularly making various government departments accountable and also setting out a target of $100 billion of revenue for tourism by the year 2015. This is all good news.
But what is needed? What are the problems? Well, Canada right now is the fifteenth most popular destination in the world, and yet our brand is number one. About ten years ago we were the seventh most popular destination and we had a travel deficit of about $1 billion. Now it's up to about $14 billion. So obviously we have some issues. What we'd like to be able to do is get Canada back among the top ten destinations globally.
What would this do for us? It would bring in 5.7 million more people a year, it would create about 46,000 jobs annually—you're going to hear me keep on talking about jobs in a brief period—and it would generate another $1.5 billion in taxes.
But what is the problem that means we are not in the top ten? One of the biggest things is the aviation sector and why it is so expensive.
Let me tell you, one of the biggest problems we have right now is that 21% of Canadians leave this country to get onto a plane in places such as Bangor, Maine, or Buffalo or Bellingham, or whatever, right across the country. That represents about 2.5 million people, or 5 million people inbound return. That's far too high. We need to reduce the aviation cost structure.
The second thing is that we have a problem with visas. Let me give you Brazil as an example. Brazil's is the seventh largest economy in the world, soon to become the fifth largest. What happens if you're a Brazilian wanting to go to Canada, the States, or Australia?
Well, in Canada you go into the Canadian embassy, you surrender your passport, you surrender all the documentation, and hopefully within a week to three weeks you'll get your visa.
If you're going to the States and you go into an American embassy, you surrender your passport and you get a visa the same day.
If you're going to Australia, what do you do? You go online. You get your visa online immediately, the same way as when you purchase an airline ticket in Canada and the airlines ask where you are going in the States and what your passport number is, etc.
We need to speed it up. So visas are the second thing.
The third item is funding for the Canadian Tourism Commission. The Canadian Tourism Commission budget has gone from basically $100 million in 2001 to about $72 million today. That's a drop of about 27%, but in real dollars it's 40%.
We know that all budgets are being looked at right now across the board. In fact, we like the government doing that; we want the government to do it. Why? It's because they will then come to the realization that the value of support for promotion is something that's real and will create jobs and will benefit everybody right across the board.
I want to give you a quick example of what happens when you don't enhance your budget. The State of Michigan has a new Republican governor who was elected on the basis of cutting costs. He came in with a budget. He cut funding right across the board, in education, mental health, health promotion, correctional services. But what did he do in March of this year? Remember, this is a Republican governor in Michigan. He increased the budget, first by $10 million and then by $25 million, because he saw the value in it.
Ladies and gentlemen, we have an unemployment rate in Canada today of 1.7 million. We have 1.3 million Canadians looking for jobs. If you look at the StatsCan report, you will see that the sector that created the most jobs in the last quarter is the lodging industry and the service sector. We are a solution for the government in its economic recovery.
Ladies and gentlemen, thank you very much for the opportunity to be here today with you. I welcome any questions.
:
Thanks very much, Mr. Chair.
And thank you for all of those very interesting presentations.
I want to spend about an hour discussing your presentations with each of you, but I have five minutes.
Let me start on the issue of health care. I completely agree, and I think it's completely intuitive that to reduce our health care costs and be more effective for Canadians, we need to promote wellness and we need to be more preventive in our approach. I'd like to hear you give a couple more examples. I know something that has been raised with me, for example, is the issue of midwives—that if there were greater recognition of midwifery across the country, especially in first nations communities, we would reduce our health care costs tremendously and really promote well-being, especially amongst mothers and newborns.
Could you talk very briefly about the impact of some preventive measures and specifically address the midwives issue?
I'd also like to thank all the presenters.
I'm going to start by directing my questions to Mr. Hayos. I think we've noted a couple of times that people who perhaps have the biggest vested interest in a complicated tax system are telling us to simplify it. We've heard that again from a number of different folks. I appreciate those comments.
I'm going to give you what is perhaps a two-part question. Typically if government makes changes, you hear some significant criticism. We perhaps have programs that have run for 33 years and have never been reflected on. As you're aware, we're undergoing a review right now in terms of government expenditures and we're looking at where we can perhaps fine-tune things. I'd certainly like your comments in terms of the expenditure review process.
You've also heard that perhaps we shouldn't be doing any cutbacks, but right now what we have, of course, is a sovereign debt crisis, and really, we're trying to grapple with that. If you have any more general comments in that area, I'd really appreciate hearing your thoughts.
Thank you, witnesses, for appearing this morning.
Mr. Moist, I have to tell you that I think you hit it right out of the park in your executive summary when you talked about how to “achieve sustained economic recovery in Canada” and also to “create quality...”. I take some issue with that, though, and if I could, I'll just suggest making a little correction there to say “that the government create a climate where quality sustainable jobs can be created” and “ensure relatively low rates of taxation, and achieve a balanced budget”.
Congratulations, sir. I think you're absolutely right.
Mr. Lord, you have had a distinguished career. You're a former premier of New Brunswick. I want to ask you, however, because the opposition is quite critical of the government's position of lowering corporate taxes and the importance of that, if you could just give us your feelings. I've read that a recent study says you expect to fill 100,000 new positions in the IT sector. If you could just tell us how important the position is that the government is taking to keep corporate tax lower and tell us if you would agree with that...maybe you could just enlighten the group on it.
:
Thank you very much for the question.
It's certainly my pleasure to answer this question. I think that for every sector of the economy it's important to make sure we eliminate barriers for growth. At the same time, I think it's important that we do not penalize those who succeed, simply to subsidize other sectors. We need to realize that our economy is changing. You will see sectors that will grow and you'll see sectors that will not grow. Some may actually reduce in size. That's actually okay. It's okay that some sectors grow and others may not, and for that, often we look at governments and we ask governments, “Can you tax somebody more so you can subsidize somebody else?”
I certainly feel personally—and it is the position of the CWTA—that we're better off with lower corporate taxes, and lower taxes in general, to sustain economic activity, to create more jobs, and to create a climate for investment and for growth, where we invest in strategic infrastructure but we don't simply subsidize sectors. That's what will enable more growth and more job creation, and that's in the end what enables us to pay for the social programs we want, whether they're health care, education, or senior care, whatever we need.
But in all this discussion, I think one thing that we have to keep in mind, whether we talk about corporate taxes or personal taxes, is that we can't ask our kids to pay for us. Passing on a debt and a deficit to our kids just because there's something we want today is just not the right approach.
:
Yes. The Canadian Construction Association absolutely supports dedicated funding to help pay for the cost of renewal of our infrastructure in Canada. We think that's one measure. There are other measures that we would like considered as well.
As I mentioned, our industry is the biggest creator of stimulus in the economy, as has been found throughout the world. So if governments, in their provincial transfers to the municipalities, could look at increasing additional amounts in those transfers in addition to the gas tax.... In the States, they're looking at ways that states can raise more money to help with that infrastructure renewal. A lot of our infrastructure is the responsibility of the municipal level, and they don't have ways to raise additional money, typically, outside of property tax. It has created some real hardships at the municipal level.
So the dedicated tax is absolutely a great measure, but we need it indexed, as we said, and any other way that we can look at increasing funding for infrastructure.... The government committed in the budget to work with all levels of government for developing a permanent, long-term, sustainable infrastructure plan, which is for water treatment plants for communities, for infrastructure for the fibre optic field...I mean, it's every area. We've been told that natural resources in Canada are going to grow--
The Chair: Okay. Thank you.
Ms. Nadine Miller: --and we need infrastructure--
The Chair: Merci.
Ms. Nadine Miller: --to stay competitive in our global marketplace, so anything that gets money there will help.
The Chair: Thank you very much.
Voices: Oh, oh!
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This sector is growing very quickly and will continue to grow very quickly. It's a clear indication that the world around us is changing as well.
I'm not one who always looks to the government to do more. Usually I prefer it when the government doesn't get in the way, and I think that's maybe the difference with me and most of the other presenters you'll see: instead of coming here asking for more, we really just want less. We want less red tape, less regulation, and fewer obstacles to growth.
There's a lot of demand for infrastructure, but I believe the most important infrastructure in this next decade, if we really want to truly embrace growth in Canada, will be infrastructure dealing not only with how we move people and goods, but with how we move ideas, and that infrastructure and those ideas will be moved by wireless mobile technology.
We're not asking for any money from the government to build those networks. We already have the fastest and best networks in the world. We just want to make sure that we continue, that we stay, and that we have those best networks of the next generation. For that, we're not asking the government for more money. We're asking the government to take less from us so we can invest more.
That, I think, is an approach.... Certainly governments have a role in making sure that we have good education and good training--absolutely--and that we have a fiscal environment that is competitive and attractive to business. But when we ask governments to try to do more and do too much social engineering or economic engineering, unfortunately sometimes it just doesn't work. Allow those who succeed to make the decisions and invest and you will see more growth.
:
Thank you, Mr. Chair. I'm going to try to be brief, but I'm going to make a comment to begin with.
We invite witnesses here because we are interested in sharing opinions and ideas about the budget. If ever a witness were attacked by a member of this committee, I'd be one of the first to stand up and defend them.
When a person is invited here as a witness and attacks a member of Parliament, it's shameful. I'm going to suggest that this committee send a copy of the blues to Mr. Moist and that he submit a formal apology, in writing, to the member who asked a very simple question about taxes.
Going back to the budget for a moment, I'd like to address my question to Ms. Miller. We talked a lot about the skilled trades and the need for more people who have the skills to do the jobs. I was in Alberta last week, and I found that many of the sectors were desperately in need of skilled trained workers.
We've provided things like tax credits for tools and cash grants for apprentices, and I know you would like to see us somehow increase the number of skilled workers. You did mention immigration, but how else can we get Canadians trained in those very important skills required in jobs your industry has and that the sectors in Alberta were mentioning to me last week?
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If you do come up with some ideas on better ways to offer incentives for that, we'd be very much interested.
I have a very quick question to the Canadian Institute of Chartered Accountants.
Mr. Hayos, you spoke very briefly about the reviews that are coming up, and I want to clarify something. There have been no determinations as yet with regard to the strategic and operational review, either cuts or extensions. We hired Deloitte to have an outside set of eyes to help us determine where we might find some inefficiencies. Those have not been reported, and yet you made a comment that you want to see more targeted expenditure.
I see a quote from your organization that says, “...it strikes the right balance by keeping Canada competitive” and also demonstrating prudent financial and fiscal management, and it sends a very important signal that Canada is indeed open for investment. “It is gratifying to see a determination to confront that deficit”, and “the earlier the government can balance its books, the better. A planned comprehensive review of departmental spending should prove useful in this regard.”
I was a little surprised to hear you say that you—
:
Thank you, Mr. Chair, through to the speaker.
Yes, we totally support the long-term infrastructure investment strategy, working with all three levels of government. As I mentioned earlier, different governments are responsible for different infrastructure. I think Canada would benefit from putting all the stakeholders at the table, including the engineering society and the construction industry.
The reason for my comment is that collectively I believe the stakeholders can help bring better solutions for that long-term plan. We mentioned three Ps. Three Ps are being widely used throughout the world. One of the strengths of three Ps is allowing all participants, from the finance right through sometimes to the operator, to work together to come up with more cost-effective solutions. A long-term sustainable plan, as committed in the 2011 budget, with all levels of government and stakeholders, including industry input, would be very beneficial.
One of the challenges in Canada—
I want to thank all the witnesses for being here this morning.
I want to apologize for my tardiness this morning.
Fortunately, today is a great day for Canadian farmers. Today we had legislation put in the House that will allow farmers in western Canada to have the same freedom as farmers in eastern Canada. I know that all the members here are excited about that, because we all believe in freedom. Without freedom, we wouldn't be sitting here talking about what we're talking about today.
Mr. Scott Brison: [Inaudible--Editor]
Mr. Randy Hoback: We'll let Mr. Brison talk about what he wants to talk about, but there are a few things he pointed out that I'd like to maybe highlight, just to get them on the record.
Ms. Glover talked about the increases in EI and what we've done there, and I think she has it on the record. But what's not on the record is the 45-day work year that the opposition was proposing and the $4 billion price tag that would have. I can open that up to any of the business members and they'd all probably give the same answer, so I don't think I need to do that--on what that would do to our economy, especially coming from Saskatchewan, where the unemployment rate is 4%. We're looking for plumbers and electricians.
In fact, I just did a riding tour where I talked to all the towns and municipalities, and it's a very interesting scenario. Four years ago in Saskatchewan, when you talked to the mayors they would say, “People are leaving. They're going to Alberta. How are we going to pay to maintain our infrastructure?” That was a quite common theme. Now when I talk to them they say, “We need infrastructure because people are moving back. We need commercial lots. We need more residential spaces.” It's a good problem to have, but it's also a good example of what happens when government gets out of the way and lets business get on with doing business. It's also a good example of having policies on balancing your books and maintaining a strong financial situation, which the Saskatchewan government has done. I give them credit for doing that.
I go back to Mr. Brison's comment about a $4 billion tax hike and exactly what that would be. I know he wouldn't want to see that, so I'm sure he would deny that right now, or would at least say that's not the thing.
Getting back to the agriculture sector.... Chair, I will apologize. I'm a little bubbly this morning because I'm so excited about this. We've been fighting for this for quite a while.
The Friday before the break week we saw a durum plant announced in Saskatchewan. This is what happens when you get out of people's way, let regulations go where they need to go, and get out of where you don't need to be. We had a durum plant announced in Regina--the first durum plant on the prairies. There is one more durum plant. It's in CIGI, in downtown Winnipeg. Otherwise, there are no durum plants in western Canada. We're the largest producers of durum and not one durum plant. Does that maybe tell you there's a regulatory problem there?
Anyway, we're addressing that. But what is so exciting is that this plant is being built with not one federal or provincial dollar. I look at that and say, “That's what we need to target to see our economy boom. What other things can we do to see that type of scenario?” It's not costing the taxpayer a penny. It's employing 50 people. It's buying local farmers' grain. It's marketing a value-added product. If you can't be excited about that, what can you get excited about?
Mr. Lord, I think I'll go to you first. In what other areas can we remove regulations to see this type of excitement in other sectors of the Canadian economy?
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I'll ask colleagues and our guests to take their seats. If there are any conversations, please take them outside. Perhaps someone could answer that wake-up call. I will also ask our media guests to please cease from recording. Thank you.
We are going to start our second panel. We are on a very tight timeline. We have another seven organizations during this panel. We have the Canadian Bankers Association, the Canadian Federation of Independent Business, the Canadian Home Builders' Association, the Canadian Labour Congress, the Canadian Medical Association, the Federation of Canadian Municipalities, and the Public Service Alliance of Canada. Thank you all for being with us today.
You will each have a maximum of five minutes for an opening statement, and then we'll have questions from members.
We'll begin with the Canadian Bankers Association.
Good morning, everyone.
Just when the CBA had submitted its pre-budget consultation brief to the committee, the global economy entered a troubled phase. There is no longer any doubt about the increase of economic uncertainty around the world.
[English]
As we all recently learned during the global financial crisis, Canada is not immune to the fallout from the problems that originate elsewhere. That's why banks are closely monitoring economic conditions at home and abroad and are taking steps to ensure that they can absorb any challenges that may come their way.
I think we're fortunate in Canada that we do have strong banks, and it's important that our banks remain strong so they can continue to contribute to Canada's economic recovery, job growth, and job creation.
I want to touch on three things in our submission that, in our view, the government can do to help shield Canadians from the impact of difficulties abroad, and also to encourage economic growth here at home.
Let me first talk about tax competitiveness. In our view, tax competitiveness, stated very simply, helps companies to withstand challenging economic conditions. It helps them to maintain employment and to create new jobs. This is why the CBA continues to support the government's efforts to enhance the competitiveness of Canada's tax system and to give Canadian businesses of all sizes—and therefore to give their employees as well—a competitive advantage. We encourage the government to stay the course, as they have been doing.
We also believe there are additional measures the government could take that would have only a minimal impact on government revenue but would significantly enhance the competitiveness of the Canadian tax system. In the past, this committee has recommended—quite wisely, in our view—that the government consider adopting a consolidated tax system. We know that consultations by the federal government are under way, and we do hope that decisions will be made so that the government can implement such a framework.
Second, I'd like to talk very briefly about Canada's pension system. We fully support the government's proposal for pooled registered pension plans. It's an unfortunate acronym—PRPPs—but there it is. We believe these plans will provide Canadians with a simple, efficient, and cost-effective opportunity to save for retirement. As we understand it, the public policy objective of PRPPs is to expand the retirement coverage of individuals who currently do not participate in a pension plan, particularly the self-employed and employees of small businesses.
A key benefit of this approach is that it builds on the existing expertise and the existing infrastructure in the private sector. We believe that banks have the necessary expertise and infrastructure to offer PRPPs. We very much look forward to working with the government to develop a framework that meets the government's objectives and meets the objectives of the Canadian public.
Finally, in terms of just touching on the points in our submission, the CBA very much believes in the importance of a strong, national regulatory framework for the financial system in Canada. That's one of the many reasons why we are on record as supporting the government's leadership in moving towards a national securities regulator, and we're very much looking forward to the Supreme Court's decision on this matter. That's the security side.
When it comes to banking, however, over the last few years we have observed a number of attempts by provincial governments to regulate the activities of Canadian banks in areas that fall within the exclusive jurisdiction of the federal government. Why is that a concern? Well, in our view, there are a number of benefits to having a single national policy and regulatory system for the banking industry. Such a system allows you to have a national banking system across the country, which allows you to mitigate risk through regional diversification, and it also provides benefits to consumers across this country in small towns and large.
All Canadian have access to the full array of financial products offered by their bank at the same competitive prices across Canada. To be able to achieve those benefits, however, we need a national banking system that is underpinned by federal policies and supervised by a strong federal regulator. Duplication and fragmentation in regulatory requirements is costly. It's confusing to consumers, and it undermines the national nature of our banking system.
So we encourage this committee, and we certainly encourage the federal government, to continue its efforts to protect and enhance federal jurisdiction over banking in Canada.
Mr. Chairman, I'll stop my remarks there, but I look forward to engaging the committee in discussion subsequently.
Thank you.
:
Thank you for the opportunity to be here today.
CFIB is a not-for-profit, non-partisan organization representing more than 108,000 small and medium-sized businesses across Canada who collectively employ more than one and a quarter million Canadians and account for $75 billion in GDP. Our members represent all sectors of the economy and are found in every region of the country.
Almost all businesses in Canada are small or medium-sized, and they employ 64% of Canadians and produce half of Canada's GDP. As a result, in this year, the entrepreneurs addressing issues of importance to them can have a widespread impact on our job creation and the economy.
I'm hoping we have a slide deck that I asked to be passed around that I would like to walk you through as we go through this presentation. No? Okay. I'll try to speak to the issues as they come up.
Our most recent business barometer showed that small business confidence took a bit of a tumble in August as the global economic outlook started to weaken, but it's still nowhere near where it was in 2008 and 2009. September saw a slight upward trend, indicating that small business owners are getting by but are remaining cautious about their future.
Recently, CFIB released a report. It was entitled “Survival of the Smallest”, and I'm hoping you'll be able to get a copy. We found that small businesses manage recession in a variety of ways. You'll see that on slide 3, once you do have a copy of the presentation, that laying people off was certainly an issue in many small businesses. However, small business owners were much more likely to work longer hours, sell to new customers in the local market, introduce new products and services, and even cut their own salary before resorting to layoffs. Interestingly, this report also identified a group of small business owners, about 20%, who grew their businesses during the recession. We called them growth-oriented enterprises, or GOEs. About one-third of this group increased the number of employees during the recession. In addition, more than one-third sold to new customers in other countries, and almost two-thirds sold to new customers in other provinces or in their local markets. They also introduced new products and services, expanded their online presence, and increased their advertising and promotional efforts.
A key finding from this report was learning about those measures that can help small business owners maintain or strengthen their business during more difficult economic times. As you can see--it would be on slide 5--freezing EI premiums was the most important, for both--
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We did specifically call and ask. Sorry about that.
As we found from this report, freezing EI premiums was most important for both the general SME population as well as for these growth-oriented entrepreneurs. Also important, especially to the growth-oriented entrepreneurs, was the payroll tax credit for hiring new employees. It's not surprising these are the measures of greatest importance to SMEs as payroll taxes are regarded as having the biggest impact on the growth of a business. This is primarily because they are profit-insensitive and only add cost to hiring, making them particularly difficult to absorb in less stable economic periods.
So our key recommendation for 2012 was to freeze EI premiums, which are scheduled to increase by 10¢ for employees and 14¢ for employers in 2012. Given the growing economic uncertainty currently gripping the global economy, now is not the time to be increasing payroll taxes. At the very least, the government should be extending and even expanding the EI hiring credit introduced for 2011 into 2012 and beyond so that it offsets at least some of the costs of hiring among small firms.
Next, small business owners are very worried about the growing government deficit and debt because they know that if this is not brought under control, it will result in higher taxes or drastic spending cuts down the road. Our members would like to see the government eliminate the deficit in the medium term, which means 2014-15. To do that, SMEs would like the government to cut back spending, just as many of them have had to do over the last few years.
As you can see, and it would be on slide 9, 82% believe there should be spending cuts in government administration, including employee wages and benefits. Furthermore, we're becoming more and more concerned with the growing unfunded liability in the federal public sector pension plan, which we understand to be more than $200 billion now. Currently it is unclear how this unfunded liability will be addressed, so our members fear it will eventually result in higher costs on those like our members and their employees who do not have access to such generous pension plans down the road.
We recommend that governments stay focused on eliminating the deficit in the medium term, and one important way of doing that is to start bringing federal public sector wages and benefits more in line with the private sector. There's also a need to review public sector pensions, and we suggest that governments start by implementing a common methodology for all public sector pension liability so that we can better understand what we're dealing with. In addition, we believe that federal public sector employees should increase their pension contributions from the current approximate 36% of their pension to 50% over time, which is the norm for most provincial public sector employees. Finally, we believe it is time to end early retirement provisions for new employees. We are pleased to hear that some federal government bodies are already moving in this direction, like the Bank of Canada, which we understand has plans to eliminate early retirement for new employees starting in 2012.
Finally, we want to touch on government regulations of paper burden, which costs Canadian businesses more than $30 billion a year to comply. The cost of employing is more than five times higher for firms with fewer than five employees than it is for those with more than 100 employees. We understand that the red tape reduction commission has been working toward addressing this issue, and we believe it can be done by making regulatory reform permanent through binding legislation that would require ongoing measurement and public reporting of regulatory activity in quality of government customer service, committing to paper burden reduction targets by placing constraints on regulators so that for every new requirement one or two will be eliminated, and having political oversight to ensure that these activities are being properly implemented. During this small business week, in this year of the entrepreneur, more and more people know that small businesses truly are the backbone of Canada's economy and the heartbeat of our communities. They employ millions of Canadians to take risks every day. Government's role is to foster that spirit and create conditions to help them grow into larger businesses.
Thank you.
:
Thank you, Mr. Chairman, for inviting us here today.
I am Ron Olson, acting CHBA president. I'm a new home builder and developer in Saskatoon, Saskatchewan.
With me today is Victor Fiume, CHBA's past president. Victor is a new home builder and renovator from Oshawa, Ontario. Also accompanying me is Dr. John Kenward, the chief operating officer of the Canadian Home Builders' Association.
Let me just note at the outset that we have tabled two documents with you this morning.
I will begin my remarks with a brief summary of current housing conditions and housing activity.
At the national level, new housing starts remain robust at over 200,000 starts, seasonally adjusted. Demand for home renovation services is also strong.
I would note that the current level of new home starts is influenced by high levels of condominium construction in Toronto and Vancouver. In other markets, activity is softer, and in some cases it is below normal levels. Current levels of new housing activity are not uniform across Canada.
On balance, the CHBA is pleased with our industry's performance. It means that our members continue to contribute significantly to Canada's economy, to create jobs, and to drive consumer demand for a wide range of consumer goods and services.
Assuming generally positive economic conditions in Canada in the near term, and a continuation of current interest rates, the CHBA expects housing demand to be in line with projected housing requirements, which is in the 188,000 range. However, this positive picture belies some significant issues.
In relation to both new home and renovation activity, the current abnormally low interest rate environment is a major factor. The outlook carries a strong note of uncertainty and caution, given significant uncertainties in the world economy. The weak U.S. economy and the European debt crisis threaten continued economic growth in this country.
The central message of our presentation today is that home ownership affordability has deteriorated significantly. By home ownership affordability, we mean the relationship between housing prices and income levels. Given the current record low interest rates, access to home ownership is extremely positive. However, overall affordability levels, as measured by the share of income required to purchase an average home, are markedly worse than they were in the decade prior to 2005. To the point, today's artificially low rates are masking the ongoing deterioration of housing affordability. As interest rates inevitably rise to more normal levels, the deterioration in affordability will become more evident and will be reflected in a market reduction in housing activity levels as would-be purchasers are priced out of the market. It is imperative to take action now to improve housing affordability so that this does not happen.
The major factors in the erosion of housing affordability are government-mandated costs, which have escalated rapidly, and regulation. Direct government-imposed costs come through the ever growing array of taxes, fees, levies, and other development-related charges on every new home. At the upper end, such costs now total well over $100,000 per new home. In many communities, the total exceeds $50,000 per home. These costs are financed through the mortgages held by new home buyers. In short, government-imposed costs effectively transfer public sector debt to household mortgages. This is the most significant factor behind the serious decline in housing affordability. It will lead inevitably to lower housing activity and reduced employment in our industry overall.
As well, this decline will exacerbate intergenerational inequity. First-time home buyers, in particular, will be faced with increased house prices due, in part, to government-imposed costs.
In this context, it is important to note that while overall employment has recovered to above pre-recession levels, the recovery has been uneven. The job losses during the recession were much more pronounced among young people aged 15 to 24 than among workers over the age of 25. And the jobs recovered since the end of the recession have been predominantly among older workers.
All three levels of government drive up the cost of housing.
In closing, I will very briefly address the federal responsibility in this area. The CHBA has called upon the federal government to introduce a single threshold, full rebate treatment of GST on new home purchases. In 1991, the full rebate threshold was set at $350,000, with an upward cutoff point of $450,000. The government made a commitment to review these limits and adjust them over time, and 20 years later this has not happened.
Today, in most urban markets, few new home buyers are eligible for a full or even partial GST rebate on a new home purchase. This undermines directly housing affordability.
Similarly, the federal government has not addressed the inequitable impact of GST on home renovation costs. The CHBA has called for the introduction of a permanent renovation tax rebate to restore fair treatment of home owners who carry out renovation projects. This would have the added benefit of addressing directly the problem of the underground cash economy in home renovations, a problem driven in large part by high taxation.
Thank you.
:
Thank you, Chair. I'll attempt to be brief.
The 2012 budget is being developed against the backdrop of a very tentative and uncertain recovery globally and here in Canada. In our view, there's a real danger of rising unemployment. The International Monetary Fund has just forecast an increase in the Canadian unemployment rate from 7.1% last month to an average of 7.7% in 2012.
One neglected sign of the softening of the job market in Canada is the disturbing and rather under-noticed fact that real hourly wages are now falling. For the last three months, average hourly wages have been increasing by only 1.4% over the previous year. That's well below an inflation rate of 3%.
The high dollar and the slowing Canadian economy have now given us the highest current account deficit of any of the advanced economies. That current account deficit as a country is now significantly greater than that of the U.S., because of the slow growth of exports caused by the high Canadian dollar. We also see weak rates of business investment outside the mining and oil and gas sectors.
Low interest rates have certainly given a boost to the Canadian economy over the last little while—supporting the housing sector and consumer spending. The household debt is now a record 150% of disposable income. House prices in relation to incomes are as high in Canada as they were before the collapse of the housing bubble in the United States. In our view, it's totally unsustainable for our economy to continue to grow by means of households going deeper and deeper into debt.
So what is going to sustain growth and investment in our economy? Public investment funded by the stimulus program, which, it should be acknowledged, gave a great boost to recovery in Canada, has now virtually come to an end. We're now seeing a turn to spending cuts by both federal and provincial governments. Based on IMF numbers, cuts to spending by federal and provincial governments in Canada will cut our growth rate by about 1% in the year ahead. So public investment has gone from being a source of growth to a drag on growth.
Against that backdrop, the priority of the 2012 budget must be to create jobs and to maintain the recovery, not to engage in counterproductive spending cuts. We call for the federal government to launch a partnership with the provinces and cities in a major multi-year public investment program that would create jobs now and promote our environmental goals. We believe this would also stimulate private sector investment and private sector productivity if we choose the right kinds of public investment projects. Such a program would include increased support for basic municipal infrastructure, mass transit and passenger rail, affordable housing, and energy conservation and renewable energy projects.
One opportunity we have now results from the fact that Government of Canada borrowing costs are incredibly low, 2.4% for 10-year bonds. That's a really historic opportunity to finance major public investment projects that make a lot of sense, owing to their decent rates of return. Many major public investment projects more than pay for themselves over time. Economic growth fueled by increased productivity in the private sector boosts future government revenues. In our view, investment in public transit is a key example. The Toronto Board of Trade argues, correctly, that major investments in mass transit will substantially reduce business costs.
In our view, some of the initial costs of such a program could be raised by raising the federal corporate tax rate from the planned 15% in 2012, which is well below the tax rate in the U.S. It would be our assertion that the cuts in corporate tax rates to date have not generated the expected increase in business investment. To the contrary, over the past decade the growth in after-tax corporate cashflow has far exceeded the growth in private investment—to the point that corporations in Canada are now sitting on $475 billion of uninvested cash reserves. We think the recent example of the discussion on the scientific research and development tax credit suggests that targeted tax measures would be much more effective in boosting private investment. Our point would be to raise corporate tax rates and to direct those proceeds into more effective ways of supporting private and public investment.
To conclude, Canada has a very low rate of public debt. Our interest rates are low, and there are major public investment opportunities ahead of us.
I'll shut up now.
Over the past year, the Canadian Medical Association has engaged in a wide-ranging public consultation on health care, and we have heard from thousands of Canadians about their concerns. This exercise provided a road map for modernizing our country's health care system so that it puts patients first and provides Canadians with better value for money.
We found there was a groundswell of support for change amongst other health care providers, stakeholders, and countless Canadians who share our view that the best catalyst for transformation is the next accord on federal transfers to the provinces for health care.
That said, we have identified immediate opportunities for federal leadership in making achievable, positive changes to our health care system, which would help Canadians be healthier and more secure and would help ensure the prudent use of their health care dollars.
During our consultation, we repeatedly heard concerns that Canada's medicare system is a shadow of its former self. Once a world leader, it now lags behind systems in comparable nations in providing high-quality health care. Improving the quality of health care services is key if Canada is ever going to have a high-performing health system.
Excellence in quality improvement will be a crucial step towards sustainability. To date, six provinces have instituted health quality councils. Their mandates and their effectiveness in actually achieving lasting system-wide improvements vary by province. What is missing and urgently needed is an integrated pan-Canadian approach to quality improvements in health care in Canada that can begin to chart a course to ensure that Canadians ultimately have the best health and health care in the world. Canadians deserve no less, and there's no reason why these should not be achievable.
The CMA recommends that the federal government fund the establishment and adequately resource the operations of an arm's-length Canadian health quality council, with a mandate to be a catalyst for change, a spark for innovation, and a facilitator to disseminate evidence-based quality improvement initiatives so they become embedded in the fabric of our health system.
Canadians are increasingly questioning whether they are getting value for the $190 billion a year that goes into our country's health care system, and with good reason, as international studies indicate they're not getting good value for the money. Defining, promoting, and measuring quality care are not only essential to obtaining better health outcomes, they are crucial to building the accountability that Canadians deserve as consumers and funders of the system.
We also heard during our consultation that Canadians worry about inequities in access to care beyond the hospital and doctor services covered within medicare, particularly when it comes to the high cost of prescription drugs. Last year, one in 10 Canadians either failed to fill a prescription or skipped a dose because they couldn't afford it. I have an 82-year-old lady in my practice who takes her diabetic medications every second or third day because she can't afford to take them every day.
Our second recommendation, therefore, is that governments establish a program of comprehensive prescription drug coverage to be administered through reimbursement of provincial, territorial, and private drug plans to ensure that all Canadians have access to medically necessary drug therapies. This should be done in consultation with the appropriate insurance industries and the public. In the 21st century, no Canadian should be denied access to medically necessary prescription drugs because they are unable to pay for them.
Our third and final recommendation relates to our aging population and the concerns Canadians share about their ability to save for their future needs. We recommend that the federal government study options that would not limit PRPPs to defined contribution pension plans. Target benefit plans should be permitted and encouraged as they allow risk to be pooled amongst plan members, providing a vehicle that is more secure than are defined contribution plans. As well, the administrators of PRPPs should not be limited to financial institutions. Well-governed organizations that represent a particular membership should be able to sponsor and administer PRPPs for their own members.
The CMA appreciates that governments are moving ahead with the introduction of PRPPs; however, we note that they represent only one piece of a more comprehensive savings structure. We also continue to be concerned about the ability of Canadians to save for their long-term care needs. Whilst we have not included them in this pre-budget brief, the CMA holds to recommendations we have made in previous years that the federal government study options to help Canadians pre-fund long-term care.
In closing, let me simply say that carrying out these recommendations would make a huge positive impact soon and over the long term in the lives of literally millions of Canadians from every walk of life.
Thank you for your time.
:
Thank you, Mr. Chair and members of the committee, for inviting us to speak today.
FCM has been the voice of municipal governments since 1901. Our members represent 90% of the Canadian population, or almost 2,000 municipal governments across this country.
When the global economic crisis hit, the federal government teamed up with municipalities to take coordinated action to create jobs and protect Canadian families and businesses.
[Translation]
Now, as growing uncertainty again threatens world markets, the Government of Canada must continue working with cities and communities to strengthen our economic foundations and to protect our quality of life.
[English]
Although stimulus spending is over, Canada must build on the economic action plan's successes, overcoming barriers to common-sense cooperation that too often keep governments from working together.
By the end of this year, municipalities will have built and helped pay for $10 billion in EAP projects. In doing so, our communities are creating 100,000 jobs and meeting 50% of the plan's total jobs target. Ottawa's growing collaboration with municipalities has produced policies and programs that deliver better value for Canadians, cutting red tape and streamlining funding approvals. Together we have started to repair some of the damage done to our communities by many years of under-investment and downloading. We cannot afford to lose that ground. Better planning, partnerships, and programs--these are trademarks of smart government.
But despite recent investments, we can still see the danger signs all around us: traffic gridlock, crumbling roads and bridges, rising police costs, and a housing shortage that puts new jobs out of workers' reach.
[Translation]
From St. John's to Montreal, from Inuvik to Victoria, the symptoms vary but the cause is the same: a tax system that has taken too much out of our communities and put too little back in.
[English]
Without a share of the income and sales taxes generated by new growth, communities have been forced to raise property taxes, cut core services, and, more often, put infrastructure repairs off. The resulting infrastructure deficit is bad for families, businesses, and our economy.
Of current federal investments in municipalities, 40% are scheduled to expire by 2014. These are not one-time stimulus dollars. They are core investments to repair roads, house low-income seniors, and keep police on our streets. These investments must be protected and put on a long-term track.
In Budget 2011 the government committed to work with municipalities, provinces, territories, and the private sector to develop a new long-term federal infrastructure plan. The new plan will give Canada the opportunity to end a long decline in its municipal infrastructure, improve transit and transportation networks, and fight traffic gridlock. In Budget 2012 the federal government must build on the intergovernmental partnership that pulled us through these darkest days of the global recession to achieve other important national objectives as well, including supporting front-line policing, protecting public safety, and fixing holes in Canada's housing system.
I'd now like to take a quick moment to expand on each of these three priorities: infrastructure, policing, and housing. Municipal infrastructure is the foundation of our economy. Our small businesses need quality roads and bridges to deliver their goods and services. Workers need fast, efficient public transit to connect them to jobs. And growing companies count on high-quality community services, from libraries to hockey rinks, to attract skilled workers. The federal government's recent commitment to develop a new long-term federal infrastructure plan is an opportunity to stop the decline in our infrastructure and secure our future economic foundations. All governments, federal, provincial, territorial, and municipal, must work together and with the private sector to take stock of Canada's infrastructure and establish a fully funded long-term infrastructure plan.
Second, there is nothing more important to Canadians than the safety of their families and communities. Canada's policing system, however, is badly in need of repair. During the past 30 years an unsustainable share of Canada's policing duties have been shifted onto municipalities, either through direct downloading or the inability of an overburdened RCMP to fulfill its full responsibilities. Today, municipalities pay more than 60% of the total policing costs, including $600 million worth of downloaded federal policing duties in areas such as border security, international drug trafficking, and cyber crime. All orders of government must work together to address the issues of policing roles and responsibilities and the allocation of resources.
[Translation]
Growing holes in Canada's housing market are harming communities, taxpayers and the national economy.
Rising house prices and rental shortages are making it difficult for communities to attract the workers they need to support the national economy.
[English]
Tens of thousands of families, senior citizens, and new immigrants are struggling to find adequate, affordable shelter, yet $380 million per year in affordable housing and homelessness programs is currently set to expire in 2014. I'd be pleased to share more with you on the housing aspect of our presentation later on.
Thank you.
:
Thank you very much, Mr. Chair.
This committee has been travelling across the country asking four questions: how to achieve sustained economic recovery in Canada, create sustainable jobs, ensure relatively low rates of taxation, and achieve a balanced budget. Well, I've been travelling across Canada, too, and Canadians are telling me different things. They're concerned that their government is offering only one choice: eliminate the deficit by cutting billions of dollars of public services and the jobs of the people who provide them. The Canadians I talked to want another choice: they want a way forward that grows our economy and protects our long-term social safety net.
Take Meghan Thomson, who was a chemist at Environment Canada working to reduce fuel emissions. Her work is critical to our future and our children's futures. This was her dream job and she felt lucky to be doing work that was about making a difference. At just 30 years old, her dreams were dashed. In July, one month before earning a permanent position after three years of term work in government, her job was cut. What message is government sending to young Canadians like Meghan, who should be the future of the public service? Eliminating good-quality sustainable jobs for Canada's next generation is not a sound economic plan for growth and prosperity.
I imagine John Kelly would agree. Until this fall, he was an integrity account specialist at the federal government's pension centre in Shediac, New Brunswick. He had one of those good-quality jobs you're looking to create, but his dream was destroyed very suddenly. After a meeting with his director, his job and the jobs of 150 others were gone. What does the loss of 150 jobs mean in a small community like Shediac? It's a loss of $4 million or $5 million in salaries that helped keep the community's economy alive, according to the Shediac mayor, and it will be the small businesses, the local restaurants, and the corner stores that will be hit hardest.
The government says it's just cutting services that aren't relevant or useful to Canadians. The Canadians I've spoken to would disagree.
Bill Dicks, from St. John's, Newfoundland, has worked for the coast guard for 30 years. For the last six and a half years, he has dedicated his expertise to the St. John's search and rescue substation, helping rescue people in trouble at sea. But the government is shutting down the station, along with another one just like it in Quebec City.
The St. John's subcentre watches over 900,000 square kilometres of ocean and almost 30,000 kilometres of shoreline, some 90% of the fishing vessel activity, and the highest level of transatlantic shipping in Canada. The government says that all this work can be coordinated out of Halifax instead.
The real search and rescue experts like Bill Dicks disagree. He doesn't want to downplay the expertise of the workers in Halifax, but there's just no way they would know the Newfoundland and Labrador coast as well as the locals do. Canadians along the coast are asking, “Is saving money more important than saving lives?”
There is no way around it: cuts to services undermine our safety, our health, and our environment. Canadians are smart. They know that gutting public services just doesn't make sense. They know there must be another way forward and that we can improve our public services and grow our economy. We think we can do this, but it means choosing another path and asking the right questions. There are alternatives.
If this is really about cutting costs and waste, then we suggest that the government start by reining in outsourcing costs, which, under this government, have risen by 79%. Also, if departmental budgets have been capped, why are we still spending $1 billion a year on outside consultants? As well, if this is really about quality sustainable jobs, why don't we keep people like Meghan Thomson and John Kelly in their jobs? Finally, if this is really about sustainable economic recovery, then why are we cutting jobs in communities--your constituencies--jobs that keep small and medium-sized businesses open?
Ordinary people should not be asked to bear heavier burdens and lose vital public services in order to satisfy a misguided quest to balance the books at all costs. There are alternatives.
The government says it is consulting experts from outside government and plans to make public service cuts. Well, we represent experts on the public service--the people who provide them--and we won't charge anyone $90,000 a day to share this expertise, because we know that it's possible to offer Canadians another choice and a better way forward.
Thank you very much for allowing me to appear before you today.
I'm sure the questions will be interesting.
Again, it's very frustrating that we have five minutes each to ask you all questions, so apologies to those who don't get asked questions.
I do need to begin with the Federation of Canadian Municipalities. Coming from the city of Toronto, I know how strongly the board of trade in our city has been advocating for infrastructure investments, especially in transit.
I'd like your opinion about whether spending on transit, for example, is just an expenditure or whether it is an investment, whether this is something that pays for itself over time. I think there's a very important distinction between spending for something on which we won't get any return and an investment. Can you comment on that?
:
Thank you, and I also would like to thank the witnesses.
I think we speak for everyone at this table that job loss is always very difficult for the people who are impacted, whether it's in the private sector or the public sector. Certainly in the communities that I represent, when we saw the mills close down, the devastation to the communities was very difficult. No one feels in their heart how difficult that is....
We recognize that we need to create an environment. For example, the mill spent $25 million and re-opened because the corporate tax rate was low, and trade was re-opening into China, Taiwan, and Japan, according to yesterday's headlines. So I think it's critically important to create the opportunity for job creation and then have the public services that we all deem so critical.
That was just a general comment, because I hear the stories that were talked about in terms of the people who have lost their jobs, and I think it's important to mention that.
Mr. Campbell, you talked about the securities regulator, but you didn't have a lot of time to get into specifics. We're waiting for the Supreme Court decision, but how do you perceive it's going to better protect investors, enhance enforcement of regulations, and track new international investment? Perhaps you can talk to why your organization perceives it to be important.
:
Thank you, Mr. Chair, and thank you all for appearing.
I want to make a quick statement, first of all, to the Public Service Alliance.
Thank you for coming. Thank you for your presentation. However, I take one issue with you, if you'll afford me that. Previous to your appearing here, the Canadian Union of Public Employees came. I appreciated their submission, because they talked about how we can sustain an economic recovery in Canada to create quality jobs—I took some issue with them on that—to ensure relatively low taxation, and to achieve a balanced budget.
I would suggest, sir, that you're absolutely right concerning your cases of hardship, and all of us are sensitive to those. But I would suggest that Ms. Pohlmann would also tell you of many cases within the private sector too, and I would encourage you, if you could still do this for this committee, to submit something in which, rather than just look at the hardships—and we all recognize them—you might suggest ways that we as a committee might be able to tackle those issues that the public service union talks about.
I'm on a roll here, Mr. Olson. I have to disagree with your analysis of the cost of houses too. In Chatham, where I'm from, you can build a brand-new house for $450,000, and in Toronto that same house will cost you over $1 million. I would suggest this difference is due to more than just regulatory factors; I think there are other factors that play in, in all fairness.
I'm not going to ask you to respond to that. I'll bet you would like to, but I want to get to Mr. Campbell first.
We're seeing a phenomenon. The Windsor Star had a little quote from Buffalo Springfield that “There's something happening here”--you may have read that.
Could you tell us why our Canadian banks have fared differently and why that is so important to sustain economic recovery? Could you expand on that? I think it's our job to not always jump on the bandwagon but maybe as leaders to say, “Folks, there's another story here; you need to hear something else.” Maybe you could explain to us why we are in the position we are in today.
:
The second line of that song was “What it is ain't exactly clear”. Obviously there is a worldwide movement going on here, and we're listening very carefully, very closely. There are people with concern. Obviously there's a lot of uncertainty about the economic future, and we have to be sensitive to that.
But having said that, I mentioned that this is worldwide, and if you look at the protests on Wall Street and in Europe and elsewhere, the things that are the targets did not happen here. There were no bank bailouts; there were no failures; there was no taxpayers' money on the dime being spent on Canadian banks. Banks continued to lend during the crisis. They did what they were supposed to do. Other lenders, non-bank lenders, pulled out of the economy, folded up shop, and went home.
Canadian banks took up the slack to the best extent they were able to. That is critically important. If there is one lesson we have learned from the crisis, it is the importance of having banks that remain strong and can contribute in communities across the country, and they have done that.
So in the sense that there is this maybe unfocused concern out there, I think within this country--and not only looking just at the banks and the role they play in supporting job growth--we have an economy that still is on the plus side of GDP. Jobs are bring created. There is uncertainty, but there is no country in this world that I would rather be in than Canada.
Mr. Gordon, every union leader who has come before this committee has been asked the same question by government members. That question is, do you support unions paying taxes? To a certain extent we are all partisan at the committee, but this question seems to be getting out there a little too far. It seems to me the Conservatives don't understand that if you were to tax the union dues that fund your organizations, that's double-taxing your members. I wouldn't mind a comment on that.
But it also seems strange to me to hear people talking about how the conditions that will protect private sector jobs can only be reached by removing public sector jobs, so that you have put someone else on the unemployment line.
Do you feel that the Conservative government has been transparent in the way they've gone about setting into motion these cuts?
:
No, I don't think there has been a great deal of transparency to date about cuts.
For example, I happened to meet with the President of the Treasury Board, and we talked about my asking which programs they are looking at right now. He said they really don't know.
Well, we can talk about the programs, but once he has them on the table and they look at the programs, if they cut them or eliminate them completely, that will tell me where the job losses or the hits are going to be in communities.
What they're looking at is areas in which services are provided in communities. We have no clue in that. And they're going to outside experts, paying $90,000 a day to those experts, to assist them.
We have plenty of experts who are workers in the public service who have thoughts on that. When I asked him about that, he said they were asking those folks. I just happened to have been all across Canada speaking at a lot of our conventions where our members are, and I asked them whether they had been asked yet by their bosses how they can help. I got limited responses. In one convention of 500, five hands went up.
So they're not talking at the workplace, they're not talking to the people who are doing the job, they're going to outside experts—and I don't know where they get their expertise.
Transparency is not a word I would use in dealing with them.
Mr. Jackson, the pooled registered pension plan, PRPP, struck me as interesting. We heard that for the first time today.
We realize that 60-some percent of Canadians have no pension plan. There was an effort on the part of the government to move forward with the PRPP, but to my mind it's not much more than a glorified RRSP. It's subject to the same risks in the marketplace as RRSPs. I understand that the Canadian Labour of Congress has been in support of a phased-in increase to the Canada Pension Plan. In fact, the NDP, and I myself as critic, have been proposing this since 2009.
Would you advise the committee on the benefits you would see to increasing CPP? Also, do you see liabilities with the PRPP beyond what we've already noted?
:
I am sorry, but I will have to speak in English.
[English]
Fraud is an issue, and it has many forms in the financial sector. The bad guys are out there and they're very motivated to do bad things, and we are always trying to stay one step ahead of that. The challenge with fraud, and I think it's what you are referring to, is it comes down to an effect of breach of trust—you know, you trust somebody and that trust is broken, and there's a lot of damage. I think the question comes down to, how best do you deal with that?
When you look at the kinds of fraud that have been reported and that have taken place across the country, you have to be very careful how you approach that. I think a lot of the people who have committed fraud were not regulated. They were not registered individuals. They were not within the regulatory scheme. They were doing private deals or side deals.
We have always been of the view that one of the best protectors for consumers is to deal with regulated financial institutions that fall under a proper supervisory regime, whether it's financial institutions or registered and regulated advisers. I would also say, and I hearken back to a question I responded to earlier, that one of the great advantages that we see of a national approach to securities regulation, a Canadian security regulator, is that it would significantly strengthen enforcement and significantly strengthen the capacity to go after the bad guys. So that's how I'd answer your question.
:
I have a couple of questions.
Mr. Campbell, I just want to give you a heads-up that I will come back to you, because you made a bit of a face when Mr. Jackson made a comment earlier about PRPPs versus RRSPs, and when he talked about the financial benefits for those who provide. Think about it, and I'm going to come back to you for your comment on that.
I'm going to skip to the Canadian Home Builders' Association.
Mr. Olson, as I look at the suggestions being made, I am looking particularly at the Canadian Labour Congress' suggestions in their executive summary for this budget coming up. The second one was about Canadian pension plans doubling, when we all know that right now CPP is fully functional and will be secured, frankly, for the next 75 years. I want to ask you about that recommendation, as well as their third recommendation and how it will affect the people who are members of your organization. It would be doubling of CPP, and in their third recommendation it's the raising of corporate income tax to 19.5%.
How would that affect your members? Is that a positive thing for Budget 2012 that would help them to create jobs? They do say it is supposed to create jobs. How do you feel about that?
:
It was maybe just a raised eyebrow.
As Mr. Jackson said, reasonable people can have reasonable discussions about this. On the PRPP, I may make about three or four points.
A comment was made that there are high costs. In fact, the PRPP is designed, by definition, to be low cost. The thing that will guarantee that is the nature of the design of the product. We have not seen that yet. The nature of the regulatory system that will surround that will help guarantee that. As Minister Menzies has said recently, one of the advantages of this is that you are, in effect, buying in bulk. We have every confidence this will be a low-cost alternative.
Mr. Jackson made a good point about mandatory versus purely voluntary. The way we see it, and the way we have advocated that the government proceed on PRPPs—and it's a fair point—is to think about ways of getting as many people into the tent as possible. That gives you the scale and the scope. We have suggested that there be auto-enrolment of employees, but with the option of opting out if people do not wish to do it and wish to go a different route. We think that would help.
The third point I would make is that on a CPP system, as has been said, it's a mandatory premium—or a mandatory tax, if you would like—on the individuals. That's a very blunt instrument. They could be at times in their lives where they would rather use that money for something else. Just like we would offer this opt-out, individuals might say, “I think I can do a better job.” We have worries about the mandatory employee participation.
Those would be some of the comments I would offer on that.
:
Thank you, Mr. Chair. I appreciate that.
You do great work at the CFIB. I've been a member for many years, and thank you for the surveys you send me.
I couldn't help but raise an eyebrow to what Mr. Brison said. Of course, I'm much older than he is and his snapshot of the crime rate going down is from the mid-seventies to a few years ago and doesn't include the 1950s and the 1960s. It doesn't deal with the issue of organized crime and how those rates, violent crimes, have doubled and tripled in some cases. Of course, we are in a different era today.
I wanted to talk to the FCM specifically in relation to the $123 billion infrastructure deficit. The economic action plan, the stimulus shot, the $45 billion--no more money in the history of Canada has ever been invested in real terms. In fact, some of the other changes, gas tax being permanent, $2 billion a year, the one-page application form for ease of application for the fastest and largest rollout in Canadian history, the extension of the deadline to October of this year from March.... Then, of course, there's the equal distribution across the country, which I've heard from people, and I haven't seen any empirical evidence to suggest any favouritism was played in any part of the country.
My interest is strictly this. Of course, the NDP voted against all those things in the budget and in the subsequent budget. What would have happened to your members in particular if the $45 billion in stimulus...based upon some of the information I have, it is going to continue for some 30 or 40 years, including some of the green infrastructure investments, the northwest transmission line in British Columbia and the Mayo B in Yukon, and those types of investments that are going to continue to bring investment. What would have happened if the $45 billion was not invested by this government and the NDP had been successful in their vote against it?