EVIDENCE

Standing Committee on Finance NUMBER 005 1st SESSION 43rd PARLIAMENT Wednesday, February 5, 2020 Le mercredi 5 février 2020 Standing Committee on Finance CANADA [Recorded by Electronic Apparatus] EVIDENCE February 5, 2020 Committee Edited Evidence * Table of Contents * Number 005 (Official Version) Official Report * Table of Contents * Number 005 (Official Version) Témoignages * Table des matières * Numéro 005 (Version officielle) 05 05 02 2020 2020/02/05 15:40:00 House Of Commons Comité permanent des finances Standing Committee on Finance FINA Chair The Honourable Wayne Easter 1 43

(1540) [ English ]

The Chair (Hon. Wayne Easter (Malpeque, Lib.)) :

I call this meeting to order. As all the witnesses know, we are dealing with pre-budget consultations for budget 2020.

Mr. Sean Fraser (Central Nova, Lib.) :

I have a point of order, Mr. Chair, and I'll try to be quick because I know the witnesses came here to testify. We had a discussion at committee the other day about an invitation to have Minister Morneau appear, in addition to the planned appearance of Minister Fortier tonight. Obviously, I flagged the scheduling conflict, but Minister Morneau will be able to make himself available to the committee on February 19. I just wanted to let the committee know of his intended presence here, though it will be after the upcoming constituency week.

The Chair :

Thank you for that information, and thanks to Mr. Morneau for agreeing to appear. I want to begin by thanking the witnesses for coming on such short notice. We have a very tight time frame to do this. I also want to thank those who made submissions prior to the mid-August deadline. Those submissions will be considered as part of the pre-budget consultations. With that, we'll begin with Mr. Weissman, as an individual, from Toronto by video conference. Welcome.

Mr. Peter Weissman (Chartered Accountant, Trust and Estate Practitioner, As an Individual) :

Thank you. I want to thank you for having me here to share my thoughts with you about the upcoming budget. I've been a witness at this committee on other issues before, but just by way of background, I've been an income tax practitioner for over 30 years. While my comments today will be some of my income tax observations, they are informed by years as a student, as an employee, as an accounting student, and for the last 20 years, as a business owner running an accounting practice. I'll be honest with you.

We're all still licking our wounds from the battle that was waged over the government's private company tax changes. You'll be relieved to know I don't plan on rehashing all of that today. I know what this is about. We have what we have. The only thing I'd like to say about it is that, during the process, I don't think the objectives of that process were flawed. Some of the ways of going about achieving the objectives were much too complicated, but they are what they are. We have complicated rules to work with instead of simple ones.

In 10 years or so we might find we have some judicially determined answers to what are seemingly unanswerable questions right now, to be quite honest, with respect to the TOSI rules, the income-splitting rules. I'm hopeful that the upcoming budget won't include similarly complicated proposals, and as a Canadian, to be very honest, I hope that they also won't include a lot of the divisive rhetoric we've seen in recent years. I personally found it very disturbing and really not productive to achieving what we as Canadians want.

I also just want to state that contrary to what I think many Canadians believe, business owners are not any more nefarious in their tax matters than employees are or, to use the government's term, the middle class and those working hard to join it. There are a number of employees who are very aggressive in their tax planning. I don't deal with aggressive tax planners. I don't want anything to do with them. I pay my fair share of tax and I think everyone else should. I don't really want to subsidize people who are cheating our tax system.

I don't think anyone should have to pay more than their fair share but I don't think they should pay less. It's not really morally acceptable, in my opinion, to pay less than your fair share. We live in a great country. We have a high standard of living. We should maintain that. We have great social safety nets. Some of them could be improved, but we look after our citizens and we look after our people and vulnerable Canadians. That, to me, is what I think our tax system should be doing. I'm happy to give suggestions to help keep funding that and using the funds efficiently to meet those objectives.

With that in mind, I'll just give you a few of my suggestions that will, hopefully, be considered in the budget or post-budget in further dealings. Hopefully, the 2020 budget will stray away from partisan positions and rhetoric and just take a more conciliatory approach to be more productive and to work with people who can help be part of the solution, instead of part of the problem. In that spirit I'd like to suggest that the government commit to three actions. First, we've invested in hiring more auditors, but I think the money needs to be spent now on training those auditors.

What we're experiencing in the field, particularly at the audit level, is that a lot of people who are new to the audit world as auditors have not necessarily been trained in income tax provisions. They follow audit manuals. Honestly, they're not well trained. Decisions are being made at the audit level that trickle all the way through to appeals and to the tax courts. When something's not handled well at the audit level, the trickle-up effect happens. I could give you a lot of examples. I have a situation right now that should be a simple matter.

Something was purchased before a certain date, and the auditor thinks the act says it had to be purchased after a certain date. It's clearly not correct. It's really simple when you read the act. It's a mistake. The proposal right now is to assess my client as having $6 million of capital gains because they sold a smaller property they were working out of and moved into a newer one. The act allows you to defer the tax when you do that. Because of this misreading of the act and saying that the new place had to be purchased after a certain date, my client now has to deal with appeals to try to get that reversed.

What concerns me is not just that the auditor misunderstood something relatively simple in the act but the fact that the supervisor signed off on that audit as well. I think that's a function of workload. I'm not judging anyone, but the training of auditors, to me, is much more important now than hiring more auditors.

(1545) I gave you that example. I think that hiring people without training them defeats or undermines the objective of why we are hiring them. I'm all in favour of enforcing more compliance for people who aren't in compliance with our tax rules, so don't get me wrong on that front. I think that using the auditors better, training them, would get us a better result, recovery-wise and cost efficiency-wise, than just hiring more people.

Second, I'm hopeful that the government will continue on its path to making the system easier to navigate and manage for people with disabilities—physical disabilities and mental infirmities. I was appointed inaugural co-chair of the first disability advisory committee back in 2005. That was a committee that reported to the minister of revenue, just as the current disability advisory committee does. At that time John McCallum was the minister of revenue. That committee was created in a budget.

I remember reading the budget, as a tax practitioner, and it said it proposed to create this committee to advise the minister on ways to better administer the disability tax credit. I applied based on that and got the position. It was a very productive year, before the committee was cancelled when the government changed. We have had luck in having the committee reinstated recently. My concern, though, is why. We shouldn't need the committee to exist anymore.

I was appointed in 2005, so that's 15 years ago, and we still have the need for a committee to help advise the government on how to administer the disability tax credit. I think it's time to consider a new role for the disability tax credit or perhaps a new model. It's very complicated, the way it's worded. It's a very old system, and so are some of the medical expenses. I'll give you some examples. I think a look at the overall treatment of disability tax measures and medical expenses in general is really overdue.

We have, for example, in the medical expense section, limits on how much you can claim in certain circumstances for full-time attendants. The limit was set in 1997, $10,000. We're now in 2020 and that limit hasn't changed. In over two decades that $10,000 number that was set back in 1997 dollars hasn't changed, and people looking after or paying for full-time attendants to look after their loved ones have a very restrictive amount they can claim in certain circumstances. It's time to relook at that. That's just one example.

Another one is that a number of years ago people with celiac disease lobbied—I'll use the term—the government because the cost of gluten-free food was much more expensive than the cost of regular food. The act was amended to include a provision that said for people with celiac disease the incremental cost to purchase gluten-free food is a medical expense. I think that was great at the time. More people are affected now by gluten problems than just people with celiac disease, but that provision hasn't been amended. I don't deal specifically in disability-related matters, but I do tax planning with people.

I had a client whose father couldn't swallow food properly. He had been rendered quadriplegic in a car accident. All of his food had to be pureed, but not in a blender at home. It had to go out, actually, to a food processing facility. It was very expensive. There's nothing in the act that allows something like that. They're quite common now, swallowing disorders. For people with Alzheimer's disease, dementia, that's a common symptom. There's nothing in the act that addresses that. I'm just trying to give you a flavour.

There's a whole area in our act that really needs to be revamped and brought up to date, and maybe even relooked at in a different context. That's what my third comment is. I think—no, I know—it's time for the government to commit to convening a multidisciplinary, comprehensive, bipartisan panel to look at a comprehensive review of our tax system. I know there's not an appetite for it. It's something that has been falling on deaf ears. It's really important. I'll give you two analogies here. I think of our tax act over the years; it's like a pair of socks.

Holes have popped up here and there, and we've darned them, sewn them, closed them shut, but now we have this tattered pair of socks that we really can't walk around in.

(1550) To give you a better example, in 1972 Canada had the best hockey team in the world. We all remember the Canada-Russia series in 1972. That was also when our tax act was last overhauled.

The Chair :

I don't want to interrupt, but we are considerably over time. I'd ask you to close pretty quickly.

Mr. Peter Weissman :

Thank you. I'll end in 10 seconds. That team was the best in the world in 1972. That's when the tax act was amended. That team wouldn't stand a chance on the ice today. That's the version of the tax act we're working with. Thank you for your time. I'm sorry I went over.

The Chair :

Thank you very much for those suggestions. This committee in the past has also recommended a comprehensive review. Turning to the Assembly of First Nations, we welcome Mr. Wilson, special adviser.

Mr. Daniel Wilson (Special Advisor, Research and Policy Coordination, Assembly of First Nations) :

Thank you, Mr. Chair, for the invitation to speak with the committee today as we meet on the unceded territory of the Algonquin nation. The Assembly of First Nations has developed a submission reflecting a broad range of investments that would support the participation of first nations in the economy. I believe it has been distributed to members. My thanks to the clerk. As we have noted with this committee in the past, closure of just the education and employment outcome gaps between first nations and other Canadians would provide an additional 1.5% to Canada's gross domestic product.

Among the investments set out in the document we have provided, I'd like to highlight four priorities that I believe could provide the greatest return on investment, with each of these moves forward a shared priority of first nations and the Government of Canada, building on important work already done and being done. The first is the implementation of the Indigenous Languages Act , passed by the previous Parliament. The revitalization of first nations languages is a key step in reversing one effect of Canada's former residential school policy—the erasure of our languages.

Knowledge of one's language also leads to better educational attainment and supports better employment prospects, part of that GDP growth to which I alluded earlier. The investments detailed in our handout were calculated by former associate deputy minister of finance Don Drummond, and take into account the investment made in budget 2019. The second priority I'd highlight is similarly about implementing legislation passed in the previous Parliament,

An Act respecting First Nations, Inuit and Métis children, youth and families . Again, the roots of that legislation lay in our colonial history and the failure to provide adequate care to first nations children. The important step of recognizing the jurisdiction of first nation governments through legislation is most welcome, but that jurisdiction needs financial support. The investment called for in our submission will support implementing first nations' jurisdiction. It would result in fewer children in the system and reduce the social costs of the damage being done to them currently.

Those reduced social costs will be joined, once again, by better outcomes for first nation citizens and concomitant benefits to Canada's economy. The third area I would like to highlight is housing. Regional Chief Picard of the Assembly of First Nations Quebec-Labrador spoke to this in this committee yesterday, so I will use this time solely to augment his remarks.

I would point out that the investment called for in our submission would also give effect to one of the simplest and most concrete recommendations from the inquiry into missing and murdered indigenous women and girls that this government conducted over the previous Parliament. As that inquiry reported, lacking suitable housing alternatives, young women move out of their communities and find themselves in environments that are not secure and that expose them to harm. This investment can prevent that vulnerability and save lives.

In addition, it is well established that the ability to function at both school and work is dependent on the quality of housing. Committee members can easily imagine how difficult it is to function at school or work the next morning when upwards of 20 people are sharing a three-bedroom house, as is too often the case in first nation communities. Addressing this need will reduce social costs and provide benefits to the greater Canadian economy through enhanced productivity. The final priority I'd like to bring to the committee's attention is governance funding.

The Assembly of First Nations welcomes the unprecedented investments made by the current government over the past four budgets. The investment in governance detailed in our submission will increase the return on investments made to date and any that may come in the future. Every government requires strong governance systems in order to make efficient and effective use of the resources at their disposal. First nation governments are no exception. Funding for first nations governance has not risen by more than 2% in any year since 1997, thus failing to keep up with inflation, let alone other cost drivers.

As a result, current funding for first nation governance amounts to just over 3% of spending,

whereas most governmental organizations operate in the 10% to 15% range of expenditures. This is simply unsustainable for our governments. The investment outlined in our submission would provide for institutional development; the creation and functioning of shared service organizations; recruitment and retention of qualified staff; and the strengthening of financial management, human resource, and IT systems, and all other essential governance structures required to run an effective and efficient government. By investing in good governance, first nations are able to make better use of the resources available to them.

(1555) Canada and first nations share a desire to increase self-determination for first nations, as we agree that this, above all else, will improve the quality of life of first nations' citizens. However, jurisdiction, without the fiscal capacity to exercise that jurisdiction, is hollow. This investment in governance funding could be the most important step that Canada can take to support the important work that first nations and Canada are engaged in together. First nations' priorities are Canada's priorities. The return on investment is clear and benefits us all. I look forward to your questions. [ Translation ] Thank you. Wela'lioq .

[ English ]

The Chair :

Thank you very much, Daniel. From the Co-operative Housing Federation of Canada, we have Mr. Ross, who is the executive director; and Ms. Lockhart, program manager. Welcome.

Mr. Timothy Ross (Executive Director, Co-operative Housing Federation of Canada) :

Thank you to the committee for the invitation to be here today. I represent the Co-operative Housing Federation of Canada. We represent over 250,000 Canadians living in housing co-operatives from coast to coast to coast, in every province and in every territory. I'm joined here today by my colleague Courtney Lockhart. Our mission is to inspire, represent and serve our members across the country. I'm not here to talk about, necessarily, the interests of our members here today. I'm talking about an issue that is affecting so many Canadians, and that's the housing crisis.

Everyone needs and deserves a place to call home that is affordable, attainable and sustainable. I'm sure that all of you around this table have heard from your constituents about the housing crisis and the lack of affordability and supply in your communities. We are far from providing safe and affordable housing for all Canadians. Today, among renters across the country, nearly one in five is spending over half of their income on rent, putting families and individuals at risk of homelessness and reducing their capacity to afford basic necessities.

The problem is getting worse and more robust federal action is needed. When it comes to housing options, people know that they can buy and they can rent, but there's another choice that has been underutilized, and that's co-operative housing. Housing co-operatives are owned by their members. They provide security of tenure and they're affordable forever. For example, here in Ottawa, a two-bedroom apartment now costs, on average, $1,400 per month,

whereas a two-bedroom apartment in a co-operative costs approximately $1,000 per month. Here we are at the pre-budget consultation for 2020 and we have three actions that we'd like to propose to the federal government that will augment and accelerate the good work that is already under way with the national housing strategy. First, CHF Canada is calling on the federal government to invest in non-profit and co-operative housing. This is not a new or radical idea.

During the 1970s and 1980s, Canada developed many programs that successfully started most of the co-ops that exist in Canada today, sprouting up in every province and territory. These federal programs were cut in the 1990s or devolved to provinces, creating a serious shortage of affordable housing in communities across the country. Had these programs continued, we would have half a million more affordable, community-owned homes across our country. To get back in the game, we are proposing that the federal government establish a $300-million quick-start co-operative housing development fund.

Second, CHF Canada recommends that the federal government enhance the federal lands initiative under the national housing strategy that is already in place today. The cost of land is one of the biggest obstacles to developing new co-operative homes. The federal government should transfer $15 million in surplus land to the co-operative housing sector to develop new co-op housing. This would spark the creation of permanent affordable housing for generations to come.

In B.C., for example, the co-op sector has leveraged government surplus lands to develop community land trusts and hundreds of new co-op homes that will be permanently affordable in one of Canada's most expensive markets. With an enhanced lands initiative, we can replicate this model and build more co-op and non-profit housing across the country. I'll turn things over to my colleague Courtney.

(1600) Ms. Courtney Lockhart (Program Manager, Policy and Government Relations, Co-operative Housing Federation of Canada) :

Our third point is that the government needs to commit to protect long-term rental assistance programs. Rental assistance is a tried and tested method to help low-income households offset the cost of rent. This ensures that low-income households pay no more than 30% of their income on rent. This also creates mixed-income communities, where people paying market rent and people using assistance live alongside one another. We have 50 years of evidence that this model works and creates a strong sense of community among neighbours.

The national housing strategy includes a new rental assistance program that is set to begin in April 2020, but the scope is quite limited. In the past the federal government assisted almost half of all households and co-ops across the country. Now it has dropped below 20% because the rental assistance programs have become unpredictable, or do not even exist in some provinces. You may say that this is because there is less need and people are finding the right housing in the market, but we know that this is not the case.

The need for affordable housing continues to grow, with 1.7 million Canadian households currently in core housing need, meaning their housing is not affordable or not adequate. Co-op homes are already built, paid for and situated in strong communities. By maintaining these rental assistance programs, we can continue to help more low-income families live in co-ops across the country. Solving these housing problems no longer requires discussion; it requires action. We know what will work, so we encourage the federal government to leverage our expertise and our communities.

A housing system that works for all Canadians must include more co-operative housing. Thank you for your invitation today. We look forward to your questions.

The Chair :

Thank you both for those presentations. Now we're turning to video conference from Calgary—we had a witness yesterday from Calgary as well—Moodys Gartner Tax Law LLP, with Mr. Moody, CEO. Welcome.

Mr. Kim Moody (Chief Executive Officer and Director, Canadian Tax Advisory, Moodys Gartner Tax Law LLP) :

Thank you, Mr. Chair, and good afternoon, committee members. Thank you for the opportunity to appear to discuss the 2020 budget. My name is Kim Moody. I'm a chartered professional accountant and the CEO of Canadian tax advisory services for Moodys Gartner Tax Law and Moodys Private Client in Calgary.

I have a long history of serving the Canadian tax profession in a variety of leadership positions, including as chair of the Canadian Tax Foundation, co-chair of the joint committee of the Canadian Bar Association and CPA Canada on taxation, and chair of the Society of Trusts and Estate Practitioners for Canada, to name a few.

Before commenting on the 2020 budget, I want to start by sharing the significant tax changes we've seen in the last few years, for two reasons: first, to outline the significant challenges that are still outstanding to emphasize that we need to get it right; and, second, to highlight the divisive rhetoric that we all experienced to emphasize that this needs to end so that we can move forward with sound economic tax policy. The last four years' budgets have been plagued with disturbing and divisive rhetoric, pithy branding messages and, ultimately, poor taxation policies.

Some examples are, one, qualifying most budget contents with the phrase “middle class and those working hard to join it” when no credible definition of “middle class” exists; two, attacking the so-called wealthy with a 4% increase in personal tax rates at a time when our neighbour to the south was decreasing personal tax rates, which has put our country's competitiveness at risk; and, three, introducing the private corporation tax proposals of July 18, 2017, with the government effectively calling private corporation business owners tax cheats.

Such proposals, while scaled back, resulted in the introduction of the tax on split income regime and the new passive investment rules—more on this later—and the introduction of the journalism tax incentives, which frankly are an assault on our country's free speech. Woodrow Wilson, the 28th President of the United States, who served from 1913 to 1921 and was widely regarded as one of the better presidents of the U.S., once said the following about a nation: “a nation is a living thing and not a machine”. I find that very wise and sage.

With that in mind, I'll put recent history aside and move on to try to make a positive contribution to our living thing, Canada, but frankly, I believe all of us have an obligation to positively contribute to building a great Canada. We should be working together to develop positive policy and not simply revert to partisan politics. Such working together should be in a co-operative manner, with a conciliatory tone. Given such, here are some tax priorities that I believe should or should not be part of budget 2020. Number one, take a permanent pause on the implementation of the stock option proposals.

Overly simplified, I believe the government and the Department of Finance have not provided a compelling case to change the status quo, as I have written about extensively in June 2019. Such proposals are very complex, with minimal tax revenues predicted to be raised, and the joint committee on taxation has pointed out some of the technical problems and the complexity of the current proposals. The proposals could have a detrimental impact on growing businesses' ability to attract skilled labour if they are not exempt from the new regime. Again, in my view, these proposals should be permanently abandoned.

Number two, do not increase personal tax rates. While I note that the Liberal election policy platform did not contain an explicit proposal to increase personal tax rates, it—and the Minister of Finance 's mandate letter—did contain a proposal that the minister “Undertake a review of tax expenditures to ensure that wealthy Canadians do not benefit from unfair tax breaks.” With respect, such a review was done during the previous government's mandate, so another review in three years is, simply stated, code for tax increases aimed at the wealthy.

Such indirect tax increases would cause even more capital to flee Canada and discourage the best and brightest from staying in Canada. This needs to be avoided. Number three, decrease corporate tax rates. U.S. tax reform has had a significant impact on the competitiveness of our Canadian businesses. In my home province of Alberta, now going into its sixth year of recession, the impacts of U.S. tax reform have been felt greatly.

While our provincial government has responded with corporate tax rate reductions, the federal government has not responded in a meaningful way to competitiveness issues caused by U.S. tax reform. One way that could occur is with modest corporate tax rate reductions. Number four, do not increase the capital gains inclusion rate. Again, the Liberal Party election platform did not contain explicit comments regarding the capital gains inclusion rate, but it did contain the aforementioned tax expenditure “review” to ensure that wealthy Canadians do not benefit from tax breaks.

With the 50% inclusion rate being one of the largest tax expenditures, many are concerned that the inclusion rate could increase in the 2020 budget. Such an increase would be devastating to the investment community and to the ability of our country to attract capital. Don't do it.

(1605) Number five, do not introduce the interest deduction limitation rule proposed in the Liberal election policy platform. Such election policy platform proposed a new rule to limit interest deductions to 30% of EBITDA. This appears to be a copycat proposal from the U.S. tax reform. However, the U.S. rule was introduced concurrently with a series of other anti-stripping rules and a 14% corporate tax rate reduction. In the domestic context I am unaware of the need for broad-based change, and would suggest careful and comprehensive review before such a rule is proposed.

A sloppily introduced rule could have a devastating impact on the business community, especially capital-intensive businesses that hire hundreds of thousands of Canadians and form the backbone of the Canadian economy. Number six, amend the TOSI regime. As many have likely already told you, the TOSI regime is extremely complex and broad-sweeping, resulting in massive tax increases for so-called middle-class business owners and their families. While there may be a compelling policy case for some sort of anti-income splitting regime, the current regime is untenable and, frankly, unfair.

These rules need a complete rethink. Number seven, repeal the journalism tax incentives. These rules are an attack on free speech in Canada. Some, including me, believe that the regime could lead to biased media reporting in an era where the average person believes that our media is already biased, which is not good. While these incentives may be well intentioned, the tax system is certainly not the right policy lever to deal with the foundational challenges that the print media around the world are facing. As Woodrow Wilson said during World War I in 1917:

I can imagine no greater disservice to the country than to establish a system of censorship that would deny to the people of a free Republic like our own their indisputable right to criticize their own public officials. While exercising the great powers of the office I hold, I would regret, in a crisis like the one through which we are now passing, to lose the benefit of patriotic and intelligent criticism.

In my view, the journalism tax incentives will indeed lead to a form of indirect censorship, and ultimately, this slippery slope needs to be avoided. Number eight, introduce meaningful changes to enable a fair succession of the family business and farm to the next generation. Finally, as many presenters have told you before, this country needs comprehensive tax review and reform. Yes, I know many of you are tired of hearing this. I've had a chance to listen briefly to yesterday's panel, and three of the speakers said the same thing, and so did Peter Weissman.

Perhaps there is something to all the smart people who have appeared before you. Perhaps certain academics, bureaucrats and parliamentarians, who think that comprehensive tax review and reform are not necessary or that Canadians are not ready for such a review, are simply wrong. In my view, Canadians are ready. They're ready for real and refreshing change for the better, ready for positive change to assist our living thing to get ready for the next generation. I realize that this committee has recommended it before, but the government does need to take action. Thank you. I'd be happy to take questions.

(1610) The Chair :

Thank you very much. Turning to the Multiple Sclerosis Society of Canada, we have Mr. Davis, senior VP.

Mr. Benjamin Davis :

Good afternoon. I'm pleased to present to your committee key priorities for Canadians affected by MS. Canada has one of the highest rates of MS in the world. An estimated one in every 385 Canadians live with the disease. It's a chronic, episodic, progressive and often disabling disease of the central nervous system. Since that includes the brain, spinal cord and optic nerve, MS can affect vision, memory, balance and mobility. On average, 11 Canadians are diagnosed with MS every day.

The MS Society has heard the personal and profound stories of life with MS from Canadians, the struggles in the workplace, the financial difficulties families are facing to make ends meet, the frustrating barriers in accessing Health Canada-approved therapies, appropriate care, housing and social supports, and of course, the hope that research gives to the tens of thousands of Canadians living with this disease. To address these realities, I'll present our recommendations on employment and income security, access and accelerating research. First is employment security.

People with MS want to work but struggle to continue to work. We need to update the definition of disability to include episodic. A staggering 60% are unemployed and that needs to change. Often the problem is one of flexibility and accommodation, and an understanding of episodic disability. Last year, the HUMA committee studied Motion No. 192, episodic disabilities. Its report, “Taking Action: Improving the Lives of Canadians with Episodic Disabilities”, made 11 important recommendations that now need to be implemented, including extending the duration of the EI sickness benefit from 15 to 26 weeks.

The second area of priority is income security. The costs of paying for medication, services, equipment and treatment are a significant burden for people with MS and their families. Intertwined with this burden are complicated application processes, requirements for numerous verified medical forms and strict eligibility criteria for programs. When MS stops people from working, they should be able to access adequate income and disability support. This situation is amplified for women. In Canada, MS affects women three times as often as men. We recommend the following.

First, make the disability tax credit refundable. Second, implement the 11 recommendations in the HUMA committee's Motion No. 192 report. Third, change the eligibility criteria for the Canada pension plan and disability tax credit to include those with episodic disabilities, using the new Accessible Canada Act 's definition of disability. The third area of priority is access. Access to comprehensive treatment, care and appropriate housing is a must. We recommend the following to make access a reality for Canadians.

First, implement the Accessible Canada Act to ensure a barrier-free Canada, with a specific focus on programs and service delivery, employment, built environment and transportation. Second, we recommend, through intergovernmental health agreements, investing in comprehensive home care, and for those unable to remain at home, funding the development of appropriate housing through the national housing strategy.

Third, we recommend increasing access to Health Canada-approved treatments, as early intervention is vital to avoid many of the long-term economic and personal costs that result from unnecessary, irreversible disability. The needs of people with MS and their families should be at the centre of health and drug policy decisions. The fourth and final priority area is accelerating research. Research is key to new treatments, better quality of life, and ultimately, a cure. Canada remains at the forefront of MS research around the world.

Through generous contributions from donors, corporate sponsors and fervent fundraisers, the MS Society has invested over $175 million in research since its inception in 1948. The MS Society continues to fund fundamental research, as we still don't know what causes MS or how we could prevent it in the future. First, we recommend the federal government continue to invest in basic scientific research. Second, we recommend that the federal government connect with health charities to ensure the patient voice is part of setting research priorities.

We believe that federal research funding programs should be informed by the perspectives of patients, their caregivers and health care providers. Finally, our third recommendation is to partner with health charities to turn innovative research into real-life treatments. There are a number of partnership opportunities within the impact goals of our own new strategic plan: advance treatment and care, enhance well-being, understand and halt disease progression and prevent MS.

For example, the Canadian prospective cohort study to understand progression in MS, otherwise known as CanProCo, is an innovative public, private and philanthropic partnership that will allow researchers and clinicians to observe a large group of people living with MS from across Canada over a period of time, and collect data from them. Analyzing this data will answer fundamental questions as to why and how progression occurs, which is key to improving diagnosis, treatment, health services and health outcomes.

(1615) Thank you for this opportunity to speak and share with you the priorities that Canadians affected by MS want you to take action on: employment, income, access and research.

The Chair :

Thank you, Mr. Davis. Our final witnesses are from the National Police Federation: Mr. Sauvé, president, and Mr. Merrifield, vice-president. Welcome.

Mr. Brian Sauvé (President, National Police Federation) :

Thank you, Mr. Chair. Good afternoon to the committee. I want to thank you for the invitation to present today. My name is Brian Sauvé. I was recently elected and confirmed as the president of the National Police Federation, representing almost 20,000 members of the RCMP across the country. With me today is vice-president Peter Merrifield, as well as two other vice-presidents sitting in the gallery, Michelle Boutin and Dennis Miller. I provided copies of the speaking notes to the clerk, as well as a short presentation that I'll refer to.

First, I want to give you a bit of history on the RCMP, and then we'll get into what the NPF is all about. This past weekend we celebrated our 100th anniversary as the Royal Canadian Mounted Police. For those who don't know, in 1920 the Royal North West Mounted Police merged and assimilated the Dominion Police, forming what you have today, which is the Royal Canadian Mounted Police. Effectively we've had this name for 100 years. We're approaching our 150th anniversary in 2023 because the North West Mounted Police was founded in 1873.

Many Canadians will know the RCMP from their presence here on Parliament Hill or the storied musical ride. Our responsibility is to enforce all federal statutes in Canada including national security and organized and commercial crime. However, in addition to those high-priority mandates the RCMP also provides contract police services in over 150 communities across Canada. We have over 929 work sites, both domestic and international. Many of those communities are remote and isolated. For example, from Grise Fiord, Nunavut, all the way to Surrey, British Columbia, to Gander, Newfoundland, to Red Deer, Alberta.

When all those residents dial 911, we show up. We are the police jurisdiction and they expect someone to treat them with courtesy and respect, as well as to investigate their crimes and solve their issues. Here's a little about the National Police Federation. For those of you who don't know, that coming up on its150-year history, the RCMP membership was unable to organize and certify a bargaining agent. We are the first one ever. We made history in 2017 by filing the first application for certification.

The Federal Public Sector Labour Relations and Employment Board certified the NPF in July last year as the first-ever bargaining agent for all 19,000 police officers across the country. Overnight the NPF became the largest voice of organized police labour in Canada, the second-largest voice of organized police labour in North America, and most probably, close to the fifth- or the sixth-largest one in the world. We're a fairly large body now and we're still learning as we go. We're keeping our voices respectful and professional. We're solutions-based.

For now the membership of the RCMP has a voice to speak out about all the trials and tribulations, successes and pitfalls, we have encountered through our 147-year history. The primary focus of the NPF is to ensure RCMP members are properly compensated, resourced, supported and trained to maximize public and police officer safety. We are entering into collective bargaining on contract issues with Treasury Board later this winter. However, that's not the reason I'm here today. It's an introduction to who we are, but I do want to cut to one case that is specific to the budget and this committee.

The RCMP is drastically underfunded and under-resourced. The deck I provided on page 3 shows a cross-section of British Columbia. I could do every province but it would be a very long presentation. That data is from 2016. It shows you that the RCMP, in every community we police in British Columbia, offers fewer police officers per population than comparative municipalities. Our Mounties are extremely efficient, and I would put a Mountie up against a munie any day. However, I would suggest to you that a reasonable person would assume that we are stretching them beyond their capabilities.

If we're going to talk about priorities of happy, healthy work-life balance, mental resilience, mental health in the workplace for our first responders, they cannot be as overworked as our membership. They are continually at risk of burnout. You will see provinces across this country making legislation for post-traumatic stress related to our first responders' jobs that is directly linked to that exposure. We can train them to be resilient, but we also need them to have time off to decompress.

(1620) In order to improve that resiliency and to provide a healthier work-life balance, which can only lead to improved service delivery and a safer Canadian public, the RCMP needs more police officers. I can't bargain that with the employer. This committee can recommend to the minister to improve the funding for the RCMP and increase that funding for the number of cadets who go through Depot in Regina. Although dated, a 2010 white paper was written by the Senate entitled “Toward a Red Serge Revival”.

It speaks specifically to the human resource crisis the RCMP was facing in 2010, and one of the recommendations was that we hire an additional 5,000 to 7,000 police officers to address that crisis with our increasing mandate and the demands placed on us in 2010. We are now 10 years further down the road, and I would suggest to you that if that report were written today, similar conclusions and recommendations would be made. Respectfully, we need to act.

The RCMP is in need of additional funding to increase its ability to recruit and train more police officers to provide those members working day in and day out the ability to enjoy a healthy work-life balance, remain healthy and maintain public safety in the communities they police. I know it's a little odd to have a labour group come and ask for funding for its employer, but that's where we're at. I thank you for your time. I appreciate the invitation, and we're open to questions.

The Chair :

Thank you very much, Brian. We thank you and all the police forces in the country for what they do. We'll turn to questions, and if we can go to five-minute rounds for the first four and then drop it to probably three and a half for the next four, we'll get everybody in. We'll start with Mr. Poilievre and then go to Mr. Fragiskatos.

Hon. Pierre Poilievre (Carleton, CPC) :

My question is for Mr. Kim Moody, Canada's most colourful accountant. I hope you won't mind me saying that. He's also one of Canada's best accountants and has been a very intelligent and knowledgeable commentator on matters related to the Income Tax Act. Mr. Moody, when the government brought in the new tax on split income rules for spouses and adult children, a current and also a former chief justice of the Tax Court said that the complexity would lead to “battle” in the the court system between CRA and taxpayers, and that the judiciary was not sure how it would even interpret these rules.

At the time I commented that the government probably spent more money on enforcement and administration than it would collect in new revenues. Now that these changes have been implemented, what has been your experience with your clientele?

(1625) Mr. Kim Moody :

Thank you, Pierre, for the kind comments. My experience has been that the average accountants and their clients just cannot comprehend these rules nor apply them. At the end of the day, we're dealing with a situation where these rules apply to such a broad-based group of people. Pretty much every single private shareholder of a private corporation will have to deal with these rules and has dealt with these rules, whether correctly or not.

That's the problem with these rules: When you foist complexity on such a broad group of people who do not have means to access people like Peter Weissman, me and others, foundationally in my view, that is just unfair. I agree with your proposition, and I agree with the former justice proposition that the courts will be littered and the CRA will be littered with disputes on these matters, which is very unfortunate. Now having said that, is there a compelling policy need to do something to cleanup some mischief? Absolutely, but not with this set of rules.

Hon. Pierre Poilievre :

On the same subject, I'll go over to Mr. Weissman, whom I know to be a very wise man. I wonder if he has any wisdom to impart to us regarding the application of the new TOSI rules or the passive income grind-down that were part of the final tax changes coming out of July 2017.

Mr. Peter Weissman :

Thanks, Pierre. Yes, I'd be happy to give my observations. We've now had experience in the trenches with the TOSI rules. What we predicted is what's happening. We have a lot of difficulty interpreting the rules. They're not just tweaks. If you look at the record, if you look at how many

interpretations and positions the CRA has released in trying to help auditors, Canadians and taxpayers interpret the TOSI rules, you get a good idea of the number of resources that are being spent just on learning the rules, not even on enforcement. When I have a client who calls me about the rules, I have to pull out the act. I will not give an answer over the phone. I have to get back to client and I am a tax practitioner. The income-splitting objective, I think, was a notable one.

As I said in a Senate standing committee comment, I think we could probably collect about 75% of the anticipated revenues from the TOSI rules by changing them to a simple income-splitting curtailing method of extending our kiddie tax age to 24. That would have taken no additional work, with no additional costs of recovery for that. In the trenches, to answer your question, both the passive income rules and the TOSI rules are problematic, and we're still learning. I think it was Justice Rip who made the comments that you were talking about.

I was at the presentation when he talked about the Tax Court issues, and we're seeing them. I alluded in my opening remarks to the workflow that's moving up to appeals and to the Tax Court.

Hon. Pierre Poilievre :

It seems to me that a tax system that forces people to spend time guessing whether or not they can pay a contributing spouse dividends, rather than letting the two spouses just work on building the business, serving the customers and paying the employees, is a twisted outcome indeed. We have family members now who don't know whether or not they can qualify and are spending more time filling out logbooks to prove that they're actually contributing members of businesses than they are contributing to the business itself. Would you agree that this is an area of unnecessary and new complexity that could easily have been avoided with simple changes like the one you just suggested?

Mr. Peter Weissman :

Yes, and I am on record saying that.

Hon. Pierre Poilievre :

Good. Thank you.

The Chair :

Thank you both. Next is Mr. Fragiskatos, and then we'll go over to Mr. Ste-Marie.

Mr. Peter Fragiskatos (London North Centre, Lib.) :

Thank you, Mr. Chair. Thank you to the witnesses. Mr. Sauvé, I am looking at your brief. “Provide more funding for Depot to increase new members” is one thing you are asking for. Why do you want the funding to go to Depot?

(1630) Mr. Brian Sauvé :

Depot is the only place we train police officers.

Mr. Peter Fragiskatos :

That's in Saskatchewan, is that correct?

Mr. Brian Sauvé :

Yes. That's in Saskatchewan, in Regina.

Mr. Peter Fragiskatos :

Okay. When was the last time you saw funding for this purpose?

Mr. Brian Sauvé :

It's a little odd to have a labour group asking for an employer's increase in funding. However, I can tell you what—

Mr. Peter Fragiskatos :

I still think it's a legitimate question, just for context here.

Mr. Brian Sauvé :

It is a legitimate question. I can tell you that right now the plan is to put 40 troops through Depot per year. They've been doing that for about three years. However, Depot is only funded for 18. Our contracting partners in the divisions that have us as police of jurisdiction are actually “at risking” out, through their budgets, the funding for the other 22. This is kind of where, if you had some guaranteed funding for Depot, we would have a plan in place to increase the number of cadets being able to go through. That 1,200 number of members going through every year has been the case for the last three years.

The plan is to continue it for another three years. That will not fill the gap. Let's start this way. We have 1,200 who go to Depot, and about 1,000 graduate. That's about a 20% failure rate. Our attrition is almost at 850, so we're gaining 150 members per year, which is not even filling the gaps.

Mr. Peter Fragiskatos :

Okay. You are talking to MPs here, not to the government. Is that right?

Mr. Brian Sauvé :

Yes.

Mr. Peter Fragiskatos :

It's an open forum. I do note on your briefing paper that a white paper was submitted in 2010 to the Senate, called “Toward a Red Serge Revival”, talking about the human resource crisis that the RCMP faces. This white paper goes back, as I said, to 2010, so you've been asking for this for some time, not just under one government but under different governments. You alluded to this in your remarks, and this is my last question, because I want to go to Mr. Davis. Tell us about not just the physical challenges your members are facing but the mental health challenges that are at play.

Mr. Brian Sauvé :

Just to clarify, we didn't submit that white paper.

Mr. Peter Fragiskatos :

No.

Mr. Brian Sauvé :

It was written and researched by the Senate.

Mr. Peter Fragiskatos :

Excuse me.

Mr. Brian Sauvé :

Former senators Colin Kenny, Thomas Banks—

Mr. Peter Fragiskatos :

Yes, it was the white paper by the Senate. I apologize.

Mr. Brian Sauvé :

Just to be clear, it wasn't me. We didn't write it. It's way too deep for me.

Mr. Peter Fragiskatos :

Okay.

Mr. Peter Merrifield (Vice-President, National Police Federation) :

It was a sober-second-thought document.

Mr. Brian Sauvé :

Mental health is a lively topic today in the first responder community: fire, police, paramedics, even the Department of National Defence and the Canadian Armed Forces. It has been for a number of years. Suicide rates are through the roof. The RCMP has addressed this and tried to go down a mental health strategy approach by reducing stigma. Part of that has been resilience training. The road to mental readiness program is a Canadian Mental Health Association course we've implemented and developed for policing, and it's gone down the road. That's fantastic.

We can train our members to be resilient for what they see in the field. Where that resilience wanes and where it fades is when you're overworked and you cannot get well rested to be resilient. That's where we're seeing challenges in the field.

Mr. Peter Fragiskatos :

Thank you, Mr. Sauvé. I wish we had more time. Unfortunately, we are limited in that way. Mr. Davis, you have a number of recommendations, but one of the key ones is research and the need for accelerating that. First of all, it's my understanding that quite a lot has happened over the past 20 years or so on treatment. It's very different now than it was 20 years ago. Regarding the need for basic research, obviously this government has made historic investments in that. Do you have an idea how of how much of that basic research that's happening across Canada is being focused on MS?

Mr. Benjamin Davis :

To your opening comment, yes, there's been remarkable progress in the MS space over the last 25 years. If you were diagnosed 25 to 30 years ago, you were told to go home and good luck. Now there are a number of options available, and that's wonderful. Some have said to me that this progress is second only to the progress that's been made in the HIV community. That said, there is a tremendous amount of opportunity to continue to fund basic research. MS is such a complex disease, and because we do not yet understand what causes MS and we do not have a cure, we need to continue to invest in that community.

Investments in research are important. Research is expensive; it takes time. We need to continue to fuel what is some of the leading research in the world that happens here in Canada.

(1635) Mr. Peter Fragiskatos :

We're all done. Thank you.

The Chair :

All done, all in. Go ahead, Mr. Ste-Marie.

[ Translation ]

Mr. Gabriel Ste-Marie (Joliette, BQ) :

Thank you, Mr. Chair. First of all, I would like to thank all the witnesses for being here. They have raised some very interesting points. My first question is for you, Mr. Davis. Thank you for your well-structured presentation. Someone in my immediate family is living with a multiple sclerosis diagnosis. The day-to-day isn't easy. I can tell you that you are doing a good job, both on the Hill and in the field. In my riding, the Lanaudière

chapter of the Multiple Sclerosis Society of Canada is truly omnipresent and works hard. You've presented your requests well. I'd like to ask you a question. It's the provinces that provide health services. We see the federal government's share of funding declining year after year. All the provinces are asking for reinvestment in health care. Does your association support this request?

[ English ]

Mr. Benjamin Davis :

Can you repeat that last part, about our association?

[ Translation ]

Mr. Gabriel Ste-Marie :

Does your association agree with the request of all the provinces for additional federal funding in the health care sector?

[ English ]

Mr. Benjamin Davis :

Thank you for clarifying. Of course we need more investment in the health care system as it pertains to dealing with MS and other diseases. There's a piece around ensuring there's good coordination within the health care systems. It's very frustrating, in my opinion, in a federated model. We need greater coordination amongst agencies. All the funding bodies involved need to work together to ensure that there's an increase in investments. I'll give you an example. In many cases people with MS every year have to continue to check a box that says that they still have MS.

Motion No. 192, the report that was a tremendous amount of work done by the HUMA committee, spells out 11 very clear recommendations. One of them I lifted off the page for this committee is that there should be coordination on the definition of eligibility criteria. Provinces would benefit from that. Removing some of the waste and the burden and processes that evolve in the provincial systems.... That could be used for other things, obviously. I think there's a tremendous amount of opportunity. It does start with more funding, but it also starts with a lot of coordination and a lot of effort.

[ Translation ]

Mr. Gabriel Ste-Marie :

Thank you. My next question is for the Co-operative Housing Federation of Canada. Thank you for your presentation. Yesterday, our committee heard from the Association des groupes de ressources techniques du Québec, which deals with social housing. The organization is requesting the maintenance of the $1.7 billion a year that CMHC dedicates to the long-term funding of the current social housing stock. It is also calling for $2 billion a year to be invested in the National Housing Strategy to address the housing shortage, including co-operative housing. Do you share that organization's position?

I have a second question. Ottawa has still not signed a social housing agreement with Quebec. Do you think it's time for such an agreement?

[ English ]

Mr. Timothy Ross :

I will begin with the first question, which is much easier than the second question. We generally support a reinvestment in community housing. At one point federal funding for community housing exceeded $2 billion per year. That's going down as a result of the end of operating agreements with community housing providers that are non-profits and co-ops all over the country. One good thing about the national housing strategy is that it has some programs that do reinvest in community housing, specifically the federal community housing initiative and the Canada community housing initiatives.

It will secure, and this is of the utmost importance to our members, the rental assistance that low-income households need in order to continue to live in their housing co-operatives. We absolutely support that recommendation from our colleagues at the AGRTQ, L’Association des groupes de ressources techniques du Québec.

However, one thing, and we did identify this in our brief, although the national housing strategy has reinvested in the rental assistance that low-income households rely on in community housing, in non-profits and co-operatives, the new supply programs that are intended to develop new affordable housing lack earmarks. There's no easy point of entry and no easy access into these co-investment programs.

We think the development of community housing that is inoculated against the upward pressures of the speculative market results in double digit rent increases for renters across the country, and vacancy rates dropping below 1%. We think the federal government should invest in a new supply program for co-ops and not-for-profits.

(1640) The Chair :

We'll go to Mr. Julian, and then back to Mr. Morantz.

Mr. Peter Julian (New Westminster—Burnaby, NDP) :

Thanks to our witnesses for the very important presentations that you're making. I appreciated your words, Mr. Davis. I thought, when you gave your presentation of my cousin, Julie Serle, who died of multiple sclerosis. I know of so many families across the country. Mr. Ste-Marie just mentioned his family is impacted. We should all come together to support the initiatives you're talking about. Mr. Sauvé and Mr. Merrifield, I am aware first-hand of the difference in funding. I represent two communities. New Westminster has an independent police force. In Burnaby, it's the RCMP.

The police forces are very professional and competent in both cities, but in Burnaby, they are being strangled by what has been chronic underfunding by the federal government of RCMP training and Depot, and in providing officers. The graphic you presented shows so vividly the difference in the number of police officers per population. This is something that shows the strength of the arguments you're bringing forward. I hope those arguments are part of the recommendations that we bring forward from the finance committee. I want to begin my questions with you, Mr. Wilson.

We lose over $25 billion a year in overseas tax havens, according to the PBO. We waste massive amounts of money on very wealthy people, yet first nations communities have been chronically underfunded, starved of funding. The Assembly of First Nations is calling for about $7 billion a year to address what has been the legacy of colonialism. What is the cost we pay if we don't make those investments, so that indigenous communities, whether we're talking about infrastructure, education, or housing, are finally treated with the same respect as other Canadians?

Mr. Daniel Wilson :

I thank the member for the question. I'll begin with a short history because there's a well-established document that answers your question. The Royal Commission on Aboriginal Peoples published a report in 1996 that had a really interesting paper within it called “The Cost of Doing Nothing”, which is precisely the point that you raise. At the time that was roughly $11 billion. I did a recalculation of that about five years ago and it was well above $20 billion at the time.

I haven't recalculated it since, but I can assure you that it vastly exceeds the $7 billion per year that we're talking about in the entire submission here. As I tried to emphasize in my remarks about the priority areas that we wanted to highlight, all of these have enormous returns on investment both through the reduction in social cost and the concomitant productivity increase, which leads to gains in Canada's GDP. Those will be vastly outstripped.

The reference I made to the 1.5% was the result of a study from the Canadian Centre for the Study of Living Standards in 2017 that estimated it at approximately $37 billion, just in reducing the gap in outcomes on education and employment alone. As you can see, all of those numbers exceed the investment required in order to benefit Canada and first nations simultaneously by multiple-fold.

(1645) Mr. Peter Julian :

Thank you very much for that. To the Co-operative Housing Federation, given the increased number of homeless and the struggle that so many people are having to find affordable housing, could you give us the sum total of what you're asking for in this budget? What would actually be required to expand the co-operative housing movement so that every Canadian could have a roof over their head?

Mr. Timothy Ross :

In this particular budget there are two asks that have financial requests and it's $350 million, focused on the creation of new co-op housing supply and the acquisition of federal surplus land. The other programs that are focused on rental assistance are already budgeted in the national housing strategy. That's the sum total for this year's request.

Mr. Peter Julian :

When tens of thousands of people are sleeping out in the streets and parks of our country, what would it take, with those kinds of investments with co-op housing, to ensure a roof over everybody's head?

Mr. Timothy Ross :

The short answer would be that we have a really good national housing strategy, but why only set out to solve part of the problem? The targets that have been set do not address all of the core housing needs in Canada. The national housing strategy could be enhanced by augmenting the targets to address all core housing needs and end chronic homelessness, not only address it by a half.

The Chair :

We'll have to move on to Mr. Morantz. We'll keep it to a tight four minutes and then move over to Ms. Dzerowicz.

Mr. Marty Morantz (Charleswood—St. James—Assiniboia—Headingley, CPC) :

Thank you, Mr. Chair. Mr. Weissman, I just wanted to talk to you about the disability tax credit and RDSP programs. I'm somewhat familiar with these programs because my wife and I had to apply for them for my son with autism. I remember it being, even for us, quite complicated, particularly with the banking requirements around setting up the RDSP at the time. I've gone through your presentation and I wondered if you could talk about the concerns you have with respect to these two programs in general. Also, could you touch on the issue of uncoupling? I think it is an interesting idea.

Mr. Peter Weissman :

I'm sorry. Could you just mention again the last part of your question?

Mr. Marty Morantz :

In the presentation you talk about the concerns around the coupling of the RDSP with the disability tax credit in terms of eligibility and the idea of uncoupling those. It's in the Disability Tax Fairness Alliance's letter to which you are a signatory.

Mr. Peter Weissman

Yes. Thank you. By the way, to all the people who've made comments about MS and its effect on people, personally I'd like to thank you for acknowledging that. I've been living with MS since 1993—I have my scooter here behind me—hence one of my reasons that I've been quite active on the disability tax credit measures. The disability tax credit is a very difficult program for people to access, especially people with mental infirmities. You mentioned autism. It's not tangible or visible. You can't really measure or objectively quantify a disability that comes with a mental infirmity.

From my experience with the disability tax credit, the largest percentage of claims that are denied have to do with mental infirmity or developmental disabilities. I think there's a fundamental problem, and there has been since I was on the committee back in 2005 and dealing with mental infirmities and developmental disabilities. To have a tax system where the medical and disability-related measures start with a fundamentally difficult program—difficult to administer, difficult to access and difficult to understand—undermines the whole effectiveness of all the programs.

The RDSPs I think were a great addition to the financial options available to people with disabilities. Linking that with the disability tax credit was a problem, because not everyone who gets the disability tax credit continues to have a disability. What we found in 2017 was that a lot of people with diabetes were being disallowed the credit—and they had been allowed it before—because of some “advances in technology”. When the credit was disallowed, they lost their entitlement to the RDSP, and they were going to have to pay back all of the incentives they received. That was what I meant by the uncoupling.

Once you've received the credit, the benefits from the RDSP that you're entitled to I don't think should be taken away. Finance did listen to that, and the uncoupling was made to a certain extent. I'm not sure if that answers all of your questions.

(1650) Mr. Marty Morantz :

That certainly helps. In terms of other issues around the program, though, I think that in the letter you talk about the issues around awareness. You say that, really, a very small percentage of people are actually entitled to the disability tax credit, and also, for the RDSP, which as I recall was former finance minister Jim Flaherty's initiative—a very small percentage of them are able to access it or are even aware of it. I'm wondering what your experience is on that with regard to your clientele and your experience on the committee.

Mr. Peter Weissman :

A lot of people are not aware of the disability tax credit, and a lot of people who are have been talked out of applying for it. They're scared of it. They read about how difficult it is. They read about second letters going to doctors about medical histories, and they just don't think that they're going to be eligible and that it's going to cost them a lot of money to access it. That's one of the problems with the disability tax credit the way it is now. When they first came out, RDSPs were not available at most financial institutions, and you could only get them at the retail banking level.

The banks weren't that interested. The limit on the amount that you can put into an RDSP is relatively low for most financial institutions. You have a $200,000 maximum over the lifetime. Most of the investment houses are not really interested in that space. In the last number of years, I've noticed more private client investment houses are willing to help wealthy families who have people in the family with RDSP eligibility learn about them and actually invest in them, but other than that, the financial institutions really aren't marketing the product.

It's really left to the disability community to find out about it themselves. The grants and the bonds are [ Technical difficulty—Editor ].

The Chair :

Thanks to both of you. We're way over. I didn't want to cut the discussion. We'll go to Ms. Dzerowicz and then over to Mr. Cumming.

Ms. Julie Dzerowicz (Davenport, Lib.) :

Thank you so much, Mr. Chair. I want to thank everyone for their great presentations. I wish I had more time to ask all of you questions, but I don't. I will start off with the co-ops in Canada. Both housing affordability and affordable housing were the top two issues during the recent election. I'll tell you that there's a lot of interest in my riding, and I'm in downtown west Toronto. There's a lot of interest from a number of groups to actually create more co-op housing. I want to get started with what we've done so far.

My understanding is that we have, through the national housing strategy, provided funding down to CMHC for those who are interested in creating new co-op housing. The other thing that I thought we had also done was to renew operating agreements that had come due for co-ops and then provide a bit of a six-month bridging support that might be needed for those. Am I right on what we've done so far? Can you answer very quickly?

Mr. Timothy Ross :

Generally, yes. The renewal of what were called operating agreements is under way. It's being replaced with rental assistance to low-income households.

Ms. Julie Dzerowicz :

That's what you call long-term rental assistance programs.

Mr. Timothy Ross :

Yes. That's under way. We're really looking forward to the launch of the federal community housing initiative on April 1. That will secure affordability for 55,000 households in community housing across the country. In terms of new funds to start new co-ops, it's a bit of a yes and no. There are new supply programs, for example the co-investment fund, and any group can apply, whether you're the largest private developer in a city or the smallest, even an unincorporated group that was just incorporated yesterday.

With the exception of Quebec and now in Vancouver, an issue is that the development capacity has really been lost within the community housing and co-operative housing sector over the last 30 years due to the cancellation of supply programs in 1993. That's why we want to really focus on that issue and start with a $300-million quick-start fund for new co-op development.

Ms. Julie Dzerowicz :

I was going to raise that because the biggest issue we are facing is that people don't have the capacity. They have no clue, other than they want to do it, they want to use their space to do it or they have some capital to contribute. That whole other portion of how to develop it and then how to actually run it is completely different. You're saying that your $300-million quick-start fund would include some dollars for the capacity to be able to create the plan and then actually run a co-op moving forward. That's helpful.

You've also mentioned the enhanced federal lands initiative, the $50-million federal lands transfer. Do you have a mapping of these federal lands that you'd be targeting across the country? Do you already have a sense about that?

(1655) Mr. Timothy Ross :

The information on that is scattered. Lands, as they become available, are posted on CMHC's website on its own program page, so there is no comprehensive view, at least that I know of, that has been made public.

Ms. Julie Dzerowicz :

Unfortunately, I have to cut you off, but if you have any information that might be helpful to us on that, it would be great. I just want to turn my attention very quickly to Mr. Davis. Community Food Centres Canada, which is located in my riding, has been a very big advocate around making disability tax credits refundable. They're big believers that what happens unless we do that is.... They believe it's a gap in our poverty reduction strategy, and our actually making it refundable will reduce food insecurity. Do you have an understanding of what the cost would be to government if we were to make it refundable?

Mr. Benjamin Davis :

That's a great question. In our advocacy work, we are often asked that question by elected officials. Last year we partnered with the Conference Board of Canada to answer two questions: What's the cost of making the DTC refundable, and what's the cost of making EI sickness benefits more flexible? It's about a billion-dollar investment, but the modelling that the Conference Board did shows an obvious return. Of course, with MS and other diseases, when MS takes you out of the workforce, the disability tax credit.... I'm not the accountant in the room, but if you don't have enough income, it's about as valuable as Monopoly money. We absolutely need to make that refundable.

Ms. Julie Dzerowicz :

Would you mind—

The Chair :

I'm sorry, Julie. You're out of time. We'll split the remaining time between Mr. Cumming and Ms. Koutrakis. Mr. Cumming.

Mr. James Cumming (Edmonton Centre, CPC) :

Thank you to all of you for appearing today. My first question is for Mr. Moody. Given the tax changes and the direction that we're seeing with these tax changes, often I see unintended consequences. My concern is flight of capital and flight of talent. What's your experience, particularly in Alberta or in general? Are we at a point now where we're starting to see people looking at other options, particularly because the U.S. seems to be going in a different direction and making it more attractive for capital to be in the U.S. with their tax changes?

Mr. Kim Moody :

Without a doubt, I see it among my client base. We deal with private corporations, private individuals and major employers. I can tell you without exaggeration or embellishment that a good chunk of capital—and I mean significant capital—has gone south of the border for that very reason, which means loss of jobs. To make a long story short, it's been very challenging in Alberta, as I'm sure you know. You're absolutely right about unintended consequences in terms of some sloppily drafted tax legislation that has been put forward over the years. My recommendation is to be very careful about that kind of stuff in the future.

Mr. James Cumming :

Okay. Mr. Weissman, you talked about training for Revenue Canada officers. You have experience, particularly with returns. For persons with disabilities and seniors, a lot of the files are simple returns. Are we at a point with technology now, given that Revenue Canada has a lot of the information they require, to simplify that process and lessen the burden on Revenue Canada so that they can focus on more complex issues? Are we getting close to the point where we can look at potentially doing that?

Mr. Peter Weissman :

My practice doesn't involve a lot of personal tax returns, but I can answer your question because I do have observations in that area. The CRA has become more automated, especially with the easier tasks that you just mentioned. We do download client information from the CRA website when we are filling out tax returns. In the disability tax credit world, I used to have to reapply every five years because of my MS. I now don't have to apply. I don't have to reapply as often, and it's the same for some other applicants. At that level, the CRA has become much more efficient and user friendly.

It's at the more difficult levels, such as in the audit field when you're on private company matters or reorganizations, that you notice the lack of training. That's not something you can automate or simplify.

(1700) The Chair :

Thank you. Ms. Koutrakis.

Ms. Annie Koutrakis (Vimy, Lib.) :

I would like to thank everyone for being here today. Thank you for your reports. They were very interesting, and alarming in some cases. I will be directing my questions to Mr. Ross and Ms. Lockhart. If I have a little bit of time left, I will direct them to Mr. Davis. In my constituency of Vimy in the city of Laval, we have five housing co-operatives. The largest has over 100 apartments. With the CMHC, the government created Canada's first national housing strategy. This plan of over $55 billion over 10 years will reinforce the middle class, stimulate our economy and reduce chronic homelessness by half.

We have seen a very positive response with the implementation of the NHS. With that in mind, could you please inform us, just briefly, on your recommendations for new housing co-operatives, specifically on the eligibility criteria for loans?

Mr. Timothy Ross :

Do you mean the eligibility criteria for current programs within the national housing strategy?

Ms. Annie Koutrakis :

How would you like them to be changed, if they need to be changed at all?

Mr. Timothy Ross :

Certainly, if you want to create a greater depth of affordability, one thing that would be beneficial, if you were looking at making modifications to the co-investment fund, would be to look at the ratio of grants to loans. The larger the grant contribution in the development project, the more you can deepen the affordability. That would be one place to look. There's another area that would be worthwhile. Community housing all across the country is getting old. A lot of co-ops and non-profits are obtaining new financing and new lending to renovate and renew their properties.

We have a program that has facilitated access to about $100 million of credit union lending to co-operatives within our membership. One thing that gets in the way, for co-ops and non-profits that are still under their operating agreements with CMHC and that will be for some time, is that they're carrying a mortgage with CMHC. There's a significant interest penalty if you exit that mortgage. A program that was introduced has just expired. It's the prepayment penalty relief program with CMHC.

That would be another area to look at in terms of lending that would facilitate access to capital for co-ops and non-profits across the country.

The Chair :

We will have to leave it at that. I remind committee members that we have two more panels of six, followed by a minister for an hour. It would be nice to have five minutes between each panel. I want to very sincerely thank the witnesses for their responses to questions and for their presentations. The committee will consider them as we move forward in our pre-budget recommendations. With that, thank you very much. Thanks to the folks on video conference as well for taking the time. We'll suspend for five minutes.

(1700) (1710) The Chair :

We will reconvene our the pre-budget consultation hearings for the 2020 budget. To begin, I do want to thank all of the witnesses for coming here on very short notice. For those who made submissions in the spring and early summer prior to mid-August, the committee made a motion to bring those submissions forward. They will be considered in our recommendations, as they are considered part of the pre-budget consultations. With that bit of introduction, we will start with the first witness, the Business Council of Canada, with Brian Kingston in his usual seat. Go ahead, Brian.

(1715) Mr. Brian Kingston (Vice-President, Policy, International and Fiscal, Business Council of Canada) :

Mr. Chair and committee members, thank you for the invitation to be here and to take

part in these consultations. The Business Council of Canada represents the chief executives and entrepreneurs of 150 of Canada's leading companies in all sectors and regions of the country. Canada's economy faces serious headwinds including an aging population, weak productivity and rising global protectionism. Our economy is barely growing on a per capita basis. Over the past decade we have witnessed growth of around 0.5%. That's half the pace achieved by the U.S. and half the OECD average.

Slower growth over the long run will inevitably mean fewer opportunities for our children and grandchildren, higher rates of unemployment, and less money for vital public services such as health care, education and transit. To better understand these challenges and to identify solutions, last year the Business Council launched a task force on Canada's economic future, in which we engaged Canadians from across the country to advance policies that enhance growth and ensure a better future for all.

The task force report and recommendation outlines how government business and other stakeholders can work together to strengthen Canada's economic capacity and spur investment for the benefit of all Canadians. At the same time, it calls on employers to enhance Canada's human potential by embracing diversity and inclusion in the workplace, promoting mental health, and supporting a more skilled and innovative workforce.

The report recommends that the government modernize the regulatory environment, prioritize nationally significant infrastructure projects, modernize and simplify the tax system, rethink Canada's foreign policy in a changing world, increase immigration flows to build the future labour force that Canada needs and, finally, develop a national resource and climate strategy. Of these recommendations, we believe that regulatory modernization has the greatest potential to improve the lives of citizens, drive innovation and enhance business activity across the board.

This is something we heard consistently during our consultations, and we think now is the time for a new approach to regulation in Canada. I am happy to provide some details on that in the question period. As Canada's largest employers, our members are committed to doing their part to nurture Canada's workforce.

That includes increasing labour force participation among indigenous people, encouraging greater diversity and inclusion in the workplace, promoting the adoption of proven mental health strategies, investing in employee learning and development, expanding career opportunities for young Canadians and supporting the next generation of Canadian innovators and entrepreneurs. Now, I recognize that some of the priorities I have just talked about are what you would expect from the Business Council of Canada.

As I said at the beginning of my remarks, we represent 150 of Canada's leading companies, and we recognize that as parliamentarians your focus is on building a better future for all Canadians. That means not just the large companies that we represent but also entrepreneurs, small businesses, indigenous-owned firms and innovators of all kinds. In other words, we challenge ourselves to focus on the broader interests of Canadians today and in the future.

Tomorrow we plan to release a statement in partnership with the Canadian Council for Aboriginal Business, the Canadian Federation of Independent Business, the Canadian Chamber of Commerce and Canadian Manufacturers & Exporters. Collectively, the member companies of these five organizations employ millions of Canadians in every corner of this country and every part of the private sector.

I can tell you from experience that these five organizations don't always agree on the same priorities, but we are coming together because we all recognize that without a healthy and growing economy, our society and our governments will not be able to afford the vital programs and services that Canadians depend on. Without a healthy and growing economy, our children and grandchildren will not be able to look forward to a better future. I look forward to sharing with you that statement when we release it tomorrow. Thank you for the opportunity as always, and I look forward to questions.

The Chair :

Thank you very much, Brian. We turn now to the Canadian Electricity Association with Mr. Bradley. Welcome. The floor is yours.

[ Translation ]

Mr. Francis Bradley (President and Chief Executive Officer, Canadian Electricity Association) :

Thank you, Mr. Chair and committee members. My name is Francis Bradley, and I am the president and CEO of the Canadian Electricity Association. CEA is the national voice of electricity. Our members operate in every province and territory in Canada, and include generation, transmission and distribution companies, as well as technology and service providers from across the country. Canada's electricity sector employs 81,000 Canadians and contributes $30 billion to Canada's GDP. Indirectly, our sector supports essentially every job and industry in Canada. Electricity is the foundation of the modern economy.

Electricity is also at the heart of Canada's transition to a low-carbon economy. Over 80% of Canada's electricity generation is already non-emitting, making it one of the cleanest grids in the world. In fact, the Canadian electricity sector has already reduced GHG emissions by 30% since 2005. Electricity will play an essential role as Canada transitions to a low-carbon economy.

The sector is uniquely positioned to help advance Canada's clean energy future and provide, as the throne speech aspires, clean affordable power in every Canadian community. (1720) [ English ] Sustainable, affordable Canadian power offers the opportunity to decarbonize and electrify other sectors such as transportation and industrial processes. To do so will require substantial investments in the sector to accommodate new demand and evolving technologies. We must do so while maintaining the reliability and the affordability in the system that Canadians have come to expect.

We're pleased that the government has supported this transformation in past budgets, with pilot programs for new technologies such as smart grids, deployment of EV charging infrastructure, electric vehicle purchase incentives and energy efficiency. Looking to the future, we’ve identified a number of ways that the federal government can support this process. I’ll highlight some of those recommendations from our submission.

First, the government, in conjunction with provinces and territories, should complete a national electrification strategy to ensure that government policy, utility investments and customer expectations are built on a robust and actionable plan. The Conference Board of Canada estimates that there is a need to invest $1.7 trillion—that's trillion with a “t”—in the electricity sector by 2050 to reach climate goals. It’s important that we base this investment on a national plan. Second, the government should target investments to meet the electricity needs of tomorrow.

This includes encouraging the commercial deployment of energy storage. Batteries and other technologies will help revolutionize our grid, allowing power to be used well after it has been produced. Previous programs facilitated the early deployment of wind and other renewables, and they could serve as a good model for storage. Third, we must enable innovation by modernizing our regulatory models.

This includes updating the Electricity and Gas Inspection Act to permit new metering technologies to reduce barriers to the deployment of advanced technologies such as LED street lighting and electric vehicle charging infrastructures. Similarly, a regulatory innovation fund would allow provincial and territorial regulators to minimize price impacts on Canadians as new technologies are deployed. Finally, we must continue to invest in cybersecurity. Canada has taken meaningful steps forward in the past few years to address cybersecurity issues.

Unfortunately, we continue to face dedicated and innovative adversaries who seek to undermine our critical systems. Information is the best defence. Canada should expand the Project Lighthouse pilot nationally. The program shares timely, actionable intelligence between government and electricity customers on a daily basis. It has already had an impact in Ontario and it offers opportunity for the rest of Canada. To conclude, it's no secret that the electricity sector is undergoing unprecedented transformation. The pace and scale of the changes we have experienced are nothing like we've seen in generations.

CEA and our members have an important role to play in enabling innovation, but we can't do it alone. There's an important role for other partners, including the federal government, to help drive this transformation. Thank you, members and Mr. Chair. I look forward to your questions.

The Chair :

Thank you very much, Francis. Turning then to the Conseil national des chômeurs et chômeuses, we welcome Mr. Céré.

[ Translation ]

Mr. Pierre Céré (Spokesperson, Conseil national des chômeurs et chômeuses) :

Mr. Chair, I would like to thank you for this opportunity to speak with members of the Standing Committee on Finance as part of the pre-budget consultations. I have come to talk to you about the employment insurance program, of course, and I do so as the spokesperson for the Conseil national des chômeurs et chômeuses. We bring together 10 regional organizations in Quebec and New Brunswick.

During the last election, last fall, the Liberal Party of Canada, which forms this government, committed to a number of employment insurance measures: a career insurance benefit for long-tenured workers; an employment insurance disaster benefit to be introduced in 2021; an extension of sickness benefits from 15 to 26 weeks; and the transformation of the pilot project for seasonal employees into an enhanced permanent program. The key measures are the extension of sickness benefits and the permanent program for seasonal workers. It is these measures that I will speak about. I'll start with sickness benefits.

It does not seem to be a given that sickness benefits will be announced in the next budget. We think that would be a serious mistake. The government has made a commitment to the public. The needs are great, and people are waiting. Thousands of people suffer from serious illnesses and, in many cases, have only EI sickness benefits to support them financially. In 2017-18, sickness benefits supported more than 400,000 people in Canada, 36$ of whom have received the maximum 15 weeks of benefits. The rate of exhaustion of these benefits is highest among those aged 55 and over.

I would like to bring the following facts to your attention. Of all the G7 countries, excluding the United States but including Russia, Canada has the worst health benefits coverage of any country in the G7. I did say the worst. France grants 156 weeks; the United Kingdom, 52 weeks; Germany, 78 weeks; and Japan, 72 weeks. I'll let you do the math. In Canada, the sickness benefit component was created in 1971 and has never changed. It is 15 weeks, and it's time for that to change. The government is proposing to extend it to 26 weeks. We consider that to be a minimum.

We believe it should be extended to 50 weeks for those who are seriously ill. That is our proposal. In fact, according to a study by the Parliamentary Budget Officer released in April 2019, the additional cost of extending sickness benefits, if they were increased from 15 to 50 weeks, would be $1.1 billion by 2020. On this subject, the Parliamentary Budget Officer said the following in his study:

Therefore, the increase in the duration of benefits is expected to raise the employee premium rate by a total of 6-cents from the baseline rate ….

There is an urgent need for action, and it is important not to subject this commitment to political calculation. Let's talk about seasonal workers now. The realities of seasonal work are part of the working world and our economy everywhere. The government understands that seasonal workers, and I quote from a government press release, “are an important part of Canada's continued prosperity”. These workers often find themselves without any other employment opportunities when the work season is over.

Their employment, like the length of the working season, is often subject to the vagaries of the climate, available resources and the market. That is why, in August 2018, the government implemented a pilot project targeting seasonal workers in 13 administrative regions by granting them five additional weeks of benefits. This pilot project will end on May 30. The government's commitment is to improve this program and make it permanent.

We believe that it does indeed deserve to be improved by better targeting seasonal employees in these regions, perhaps by identifying seasonal employers to better target seasonal employees. We also believe that an exception eligibility criterion, set at 420 hours of work, should be added for these seasonal workers. Similarly, we believe that this program should also be offered to indigenous communities that experience high unemployment rates and that, in fact, face the same constraints as seasonal employees.

In other words, we believe that we must protect our regions, protect seasonal workers and protect indigenous communities. The government must move quickly to improve this measure and announce it in the next budget in March of this year. If we are talking about money, I would like to bring to your attention the fact that the cumulative surplus in the employment insurance fund currently exceeds $4 billion. I would also like to point out that, according to an OECD study entitled “Social Protection and Well-being”, in terms of social spending on unemployment, Canada spends 10% less per capita than the OECD average.

(1730) We think the role of the employment insurance program is to help people who lose their jobs by providing them with economic security. It is also the role of a responsible government to ensure that the program fulfills that function. Thank you for your attention.

[ English ]

The Chair :

Thank you very much, Mr. Céré. I doubt if you'll find an MP around the table who hasn't had somebody come into their office because they had run out of sickness benefits at 15 weeks. I know many of us have had them tell us that. Turning to Deloitte, we have Mr. Khan, managing partner and head of Deloitte data. Welcome.

Mr. Bilal Khan (Managing Partner and Head of Deloitte Data, Deloitte) :

Thank you. Hello. Thank you everyone for taking the time. I appreciate that the committee has been drinking from a firehose of information, so I hope to be concise, clear and hopefully give the committee something interesting to take away. As mentioned, my name is Bilal Khan, and I'm the managing partner at Deloitte. I'm head of Deloitte data, which really focuses on data analytics and artificial intelligence, primarily around governance, strategy and public policy as they relate to the new economy.

In addition to this, I sit on the Province of Ontario's digital and data task force, which is a private sector task force responsible for setting a series of recommendations for the future of the province. Prior to being with Deloitte, I built one of the largest scale-up innovation hubs in Canada called OneEleven, which is focused on late-stage technology companies. Deloitte is one of Canada's leading professional services firms. We employ well over 14,000 people across the country.

Deloitte's purpose is to inspire and help our people, communities and our country thrive by building a better future for us all, something I think we all can relate to. We take great pride and responsibility in contributing our perspective on the issues that matter to our country and that affect the Canadian business community, more broadly. As part of our commitment to the future prosperity of Canada, we've established the future of Canada centre. It's our research and public policy branch designed to spark vital discussions about the country's future to help all Canadians thrive in the new economy.

At Deloitte, we believe that Canada has an opportunity, in fact, a responsibility, to be a global leader in the new economy. My remarks today will focus on how Canada can compete on the world stage as a true global leader in the artificial intelligence and data-driven economy.

To set the context a bit, Canada is extremely well positioned to reap the benefits and opportunities of an AI and data-driven future, thanks in part, first, to early leadership from our academic institutions; second, a highly trained workforce; third, an effective skills-based immigration system; fourth, continued investments in artificial intelligence; and fifth, the Canadian government's leadership in creating an open data ecosystem. Canada lags behind other countries when it comes to the commercialization and adoption of artificial intelligence.

Canadian businesses don't believe Canada is well positioned to lead in the data economy. Our research shows that Canadian businesses are facing several challenges when it comes to the new economy. Canadian businesses significantly trail their peers on AI adoption. At least 71% of Canadian businesses have not even begun their AI journeys, partly because as a mid-sized economy we have smaller datasets than companies in larger countries. In the new economy, data scale matters. Most Canadians don't understand AI or its implications, which is holding back business investments.

Businesses and consumers distrust AI and are concerned over unintended consequences from AI-powered decisions and data privacy. There's a lack of clear regulations on artificial intelligence and data, creating uncertainly for businesses and lack of trust for consumers. We've identified three key areas where bold action is needed to successfully achieve prosperity in the new economy. First, fuel the AI economy. Good data makes good AI possible.

If AI is going to drive our economy, which it eventually will, Canada needs to increase the quality and quantity of public data available to researchers and businesses to commercialize. This is especially true for companies in less populated countries like Canada that often have fewer resources and smaller datasets than larger countries, like we see with the domination of the United States and China. The Canadian government can help spur innovation by making more public data available in machine-readable format for commercialization purposes and making it easier to use.

Other countries are already leading the way. France, Germany, Australia and of course China have made publicly held data such as utility data, transportation data and health care data a feature of their national AI strategies.

(1735) Public data is even more valuable when combined with privately owned data. To accelerate this, governments across Canada can increase collaboration with the private sector to ensure that data is being released in algorithm-friendly, machine-readable format. Second, prepare Canadians for AI and data-related change. In our research we found that only 4% of Canadians were confident in their understanding of AI. We need to better equip our workers for a changing labour market and shield Canadians from being negatively affected by the new economy.

To prepare Canadians to respond to social changes that the new economy will bring, governments need to ensure that all Canadians achieve a basic level of AI and data literacy. For example, in Finland they've created a program called elements of AI, a free online course geared to people with no technical background. Experts told us that the popularity of the course outside Finland has also increased Finnish prominence in the global AI ecosystem. Third, mitigate risk and build trust in AI and data. Trust is the currency of the new economy. In our research we heard from Canadians that they did not trust AI.

This mistrust is holding back the adoption of AI. Businesses and consumers alike told us they had concerns about using AI-enabled tools they didn't trust. This is in part due to outdated legislation that does not provide transparency and clarity by clearly laying out the rules concerning AI, data, privacy and security. We understand that governments must balance both protecting consumer rights, data, and privacy while ensuring and encouraging business innovation. I'm encouraged by this government's effort to update Canada's privacy and consumer protection laws and the digital charter.

Legislation must be updated to reflect the reality of today's AI and data-driven economy and legislation should give businesses a clear set of guardrails and consequences to operate within the collection, storage and sharing of data. This is an area where clearer legislation wouldn't necessarily be detrimental to business innovation. This is because, absent timely and specific legislation, the grey zone that businesses are forced to operate in is far worse for innovation.

With a cross-cutting approach to public policy and strong private-public collaboration, we as a country can seize the opportunity to be a true global leader in the new economy. We can achieve AI and data prosperity in a way that will benefit all Canadians. I look forward to having a discussion through your questions. Thank you very much.

The Chair :

Thank you, Mr. Khan. I'm turning to Mortgage Professionals Canada, Ms. Taylor, chair of the board, and Mr. Taylor, president and CEO. Welcome.

Mr. Paul Taylor (President and Chief Executive Officer, Head Office, Mortgage Professionals Canada) :

Thanks very much indeed for the introduction, Mr. Chair, and thank you for the opportunity to address the committee today. Mortgage Professionals Canada is a national industry organization representing mortgage brokers, mortgage lenders, mortgage insurers and technology service providers in that channel in Canada.

As all of you will likely know, MPC has for some time now been asking for a number of changes to the mortgage macroprudential rules, primarily a reduction in the mortgage rules stress tests; the reintroduction of a mortgage insurance-eligible 30-year amortization for first-time buyers; a stress test exemption for borrowers who have paid, as agreed to, the first term of their mortgage and who wish to renew with a different lender; and an increase in the RRSP withdrawal limit under the homebuyers' plan, which was granted in budget 2019.

Ms. Elaine Taylor (Chair of the Board of Directors, Head Office, Mortgage Professionals Canada) :

First, we thank the government for implementing an increase in the homebuyers' plan from $25,000 to $35,000 and, as of January of this year, for expanding the program to include those who have experienced a breakdown of a marriage or common-law partnership. This is a good change. Our request to reduce the stress test has been continuous since that test's introduction. We have also been consistently clear that we do not advocate the elimination of the stress tests. However, the current Bank of Canada-posted rate mechanism is unduly onerous, and increasingly so over the last 15 months.

Five-year fixed rates are now generally 240 basis points below the current benchmark rate of 5.19%. While market rates have been reduced in response to bond yields, the posted rates have not moved in line. Accordingly, would-be borrowers today are tested proportionately harder than borrowers in January of last year. We are very encouraged to hear OSFI's assistant superintendent, Ben Gully, acknowledge the stress test gap. As we are advocates to uncouple the Bank of Canada rate from the stress test mechanism, we welcome this acknowledgement.

This public sentiment, coupled with the instruction in Prime Minister Trudeau's mandate letter to Finance Minister Morneau to make the borrower stress test more dynamic, we take as a clear expression of a problem understood. During the examination of alternatives, we asked that MPC and other senior stakeholders in the housing industry have their recommendations regarding the mortgage stress test included in the review process and their potential marketplace impact appropriately modelled.

(1740) Mr. Paul Taylor :

We also continue to recommend an exemption to the stress test where borrowers have paid as agreed through their initial term and wish to move their mortgage at renewal. Maintaining the current requirement is anti-competitive and, frankly, anti-consumer. Canadians with a proven payment history should not be tied to their incumbent lender's renewal offer. Also, while the program is in its infancy, the newly implemented first-time home buyers incentive plan seems not to be providing the level of support the government had projected.

Numbers published recently describe funding of roughly 50% of the projected take-up rate. We acknowledge that the winter months are traditionally a slow period for home purchases, but given the feedback received from our member mortgage brokers across Canada, we do not expect to see much of a change in the overall level of activity. We contend that the income multiples are the largest deterrent to the program's overall success, if success is defined as having the $1.25 billion allocation actually issued in equity mortgages.

Program participants are limited to four times their income, up to a household maximum of $120,000. If purchasers decide not to take a shared equity mortgage and instead simply use the existing mortgage insurance option, all things being equal and in today's low interest rate environment, they'll qualify to borrow significantly more than four times their income. Our members also note that the program as currently structured does not assist anyone to qualify to purchase a home who would not otherwise already have qualified.

The election campaign promise to increase the income limit and its multiplier to five times, and $150,000 in greater Toronto, greater Vancouver and Victoria, will go some way to increase participation and invites a discussion on regionalization of mortgage policy through the future design of this program. Our ongoing primary recommendation to assist first-time home buyers is for the government to reintroduce an insurable 30-year amortization exclusively for first-time buyers.

As a practical alternative, it would also reduce monthly carrying costs for the purchasers, who are traditionally the cohort with the highest propensity for income growth. Our own research has confirmed year after year that Canadians pay off their mortgages much faster than their original amortization

schedule requires. If a reintroduced insurable 30-year amortization is not deemed appropriate at this time, even though unlike the first-time homebuyer incentive it would receive 100% participation from mortgage lenders, we recommend increasing the qualifying maximum income multiple to 4.5 times. While we don't believe this will be as supportive a change as the reintroduction of the insured 30-year amortization, it will increase the number of would-be first-time buyers, would-be owner-occupiers and generally young and aspiring middle class Canadians benefiting from the program.

It would also place the limits more in line with commentary from the IMF that loans greater than a 450% loan-to-income ratio present the greatest risk. Increasing the income limit to 4.5 times nationally, therefore, should not raise the ire of the international financial community. Thank you very much indeed. We welcome any questions.

The Chair :

Thanks to both of you. The last witness on this panel is from the Vanier Institute of the Family. Ms. Spinks, president and CEO, welcome.

Ms. Nora Spinks (President and Chief Executive Officer, Vanier Institute of the Family) :

Thank you for the invitation to join you today. You've heard from business, energy and financial services. I'm here to talk to you about families in Canada. Families are the engine of our economy and the cornerstone of our society. Families are the primary caregivers, helping people recover from illness and injury. We live in an increasingly complex and interconnected world with unparalleled access to information—information about families and family life. However, despite the fact that we have enormous volumes of data, data is not the same as understanding.

At the Vanier Institute, we focus on enhancing the national understanding of how families interact with, have an impact on and are affected by cultural, environmental, social and economic forces. The Vanier Institute is an independent national charitable organization dedicated to understanding the diversity and complexity of families and the reality of family life in Canada. We envision a Canada where families fully engage and thrive in a caring and compassionate society, with a robust and prosperous economy, in an inclusive and vibrant culture, in a safe and sustainable environment.

The Vanier Institute is an evidence-based learning organization and a national resource for anyone interested in or involved with families in Canada. Governor General the Right Honourable Georges Vanier and his wife, Pauline, created the Vanier Institute in 1965 as a royal standing commission that should never be discharged. We continue to provide a wealth of information about families and family life, family experiences, expectations and aspirations. We've circulated some material for you just as a sample of what's available to you as you do your work.

I think we've sent you some material on student finances and some of the other material that's available, as well as materials dedicated to seniors and finance. You name it, we have it, and if we don't have it and you want it, we can likely get it for you. By analyzing data and synthesizing information, organizing resources and mobilizing knowledge, we expedite research to practice. We facilitate meaningful partnerships and collaborations across all sectors to maximize the impact of research on policies and practices.

We engage in conversations and collect stories from families and from people who study, serve and support families. We are a resource for those who fund or invest in research, services, policy analysis, program delivery and innovation. We identify leading and promising practices in communities, organizations and workplaces, and we share our findings across Canada and around the world.

We have a broad and inclusive functional definition of family, focusing on the important role that families play in the lives of the individual family members, the workplace and the communities in which they live, using a family lens to explore a wide spectrum of topics, since there are few things in life that don't affect or aren't affected by our circles of kinship. We make evidence-based forecasts while anticipating, planning and preparing for the future.

For example, in our recent work on intergenerational transfers of wealth, we've estimated that $750 billion will be exchanging generational hands in the next decade. We know that the fastest pathway to poverty is either divorce or loss of a life partner, and that disproportionately impacts women who are seniors. We continually seek and embrace new and innovative ways to reach out to researchers, educators, students, journalists, service providers, faith leaders, policy-makers, business entrepreneurs and others with an interest in families and family life.

With decades of experience and commitment, we've earned the respect of our peers in the voluntary, public and private sectors. Since our founding 55 years ago, we've earned a reputation as one of the country's thought leaders by sparking important conversations across boardrooms and around kitchen tables alike. Family finances and family policy have been a focus of ours for the last 25 years, as we've studied income, expenditures, savings and debt, wealth and net worth. The last year we've been focusing on three issues that may be of interest to you.

These are the Canadian family policy monitor, the family well-being index and the family research network. The monitor provides evidence-informed decision-making and evidence-based policy development and evidence-inspired program innovation. The index provides an opportunity to measure the way in which families are thriving and we're working with our colleagues in New Zealand, Scotland, Iceland and Australia and building on their work.

(1745) We engaged with Canadians on our listening tour across Canada: families affected by incarceration, military veteran families, first responder families, people working in early learning and child care, and families navigating the system designed to support adults and children with disabilities. This month we are meeting with LGBTQ2S youth who have been rejected by their birth families and have created chosen families, as well as Inuit elders who have been forced away from their families in order to receive medical care. The network will bring all of these together.

In the spirit of reconciliation and to further our relationships with indigenous peoples, we are aligning our efforts with the calls to action. In the spirit of a global community, we are aligning our work with the UN's sustainable development goals. In closing, I want to leave you with a quote from a report that was written by Mr. Khan's colleagues in New Zealand. They write that there are three evidence-informed foundations for the efforts that are going on in New Zealand:

First, people care about their wellbeing as much as their income. Second, wellbeing depends on a range of factors, only some of which can be purchased. Third, public policy that is exclusively or primarily focused on increasing income (or GDP in aggregate) may actually end up decreasing wellbeing now, or in the future.

In closing, I'm not asking for anything specific in the budget—although it would be nice if you found some funds for the Vanier Institute in your budget, as our counterparts in Australia are receiving $4 million a year from their government, and we aren't—but we are here to provide you with answers to whatever questions you need answered in order to make your decisions going forward for budget 2020. Thank you.

(1750) The Chair :

Thank you all very much for your presentations. We'll try to get eight questioners in, but we will hold people to four minutes, with little flexibility. We'll start with Mr. Cooper.

Mr. Michael Cooper (St. Albert—Edmonton, CPC) :

Thank you, Mr. Chair, and thank you to the witnesses. I'm going to direct my questions to Mr. Taylor from Mortgage Professionals Canada. I think everyone agrees that first-time homebuyers have been inordinately impacted by the mortgage stress test, yet is it fair to say that first-time homebuyers are among a group of borrowers who are quite reliable? These are low-risk borrowers.

Mr. Paul Taylor :

I don't think they are any more or less at risk than the larger community. The biggest trigger for mortgage default is loss of employment, which really can affect anybody in almost any geography. First-time homebuyers are certainly a community that has had the hardest time qualifying since the introduction of these new rules.

I think the societal concern we've had with the test since it was introduced is that while it seems to achieve the intended fiscal policy response in trying to curb overall levels of indebtedness, by creating a bit of a pause in housing market values because of a roughly 20% reduction in first-time buyers' borrowing power, those homes have effectively been on sale for the well-capitalized and the investment classes. The would-be owner-occupiers, the young, middle-class Canadian families trying to build homes for their growing families find them really unattainable.

Mr. Michael Cooper :

I saw some statistics, though they may be a little out of date, from Mortgage Professionals Canada indicating that about 100,000 Canadians who otherwise would have qualified for a mortgage did not qualify as a result of the mortgage stress test. Do you have any updated statistics in that regard?

Mr. Paul Taylor :

That was probably from our report written by our chief economist, Will Dunning. It was a cumulative total of his estimate of the number of folks who would have been pushed out of potentially being able to pu