Second Reading: Economic and Fiscal Update Implementation Bill, 2021

By: The Hon. Clément Gignac

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East and West block of Parliament, Ottawa

Hon. Clément Gignac moved second reading of Bill C-8, An Act to implement certain provisions of the economic and fiscal update tabled in Parliament on December 14, 2021 and other measures.

He said: Honourable senators, I am pleased to rise today as sponsor of Bill C-8, An Act to implement certain provisions of the economic and fiscal update tabled in Parliament on December 14, 2021 and other measures.

This speech today is my first official speech in the Senate since I was sworn in last November. I would therefore like to take a few minutes before I get into the substance of this bill to talk about why I joined the Senate and to share some of my thoughts on the state of our country’s economy.

First of all, it seems that global crises trigger in me an irresistible desire to travel to Ottawa to work on behalf of Canadians. In fact, I first came to work in the national capital at the onset of the 2008-09 financial crisis. I came here in September 2008, during a time of global financial devastation caused by the bursting of the U.S. housing bubble, to meet with Kevin Lynch, who was then the clerk of the Privy Council. I let myself be talked into leaving my job as chief economist for National Bank to become a special adviser at the Department of Finance.

Guess what? I have never regretted it. On the contrary, I felt a lot of satisfaction even if the days could be as long as the crisis was serious.

What a privilege for me to rub shoulders on a regular basis with the Minister of Finance at that time, the late Honourable Jim Flaherty; the Governor of the Bank of Canada at the time, Mark Carney; and the current Governor of the Bank of Canada, Tiff Macklem, then associate deputy minister in the Department of Finance.

What an honour to have also been designated by the Privy Council Office as Canada’s official representative on one of the four G20 working groups created at the Washington G20 Summit. I therefore want to take advantage of this forum to publicly thank the former Prime Minister of Canada, the Right Honourable Stephen Harper, and the Honourable Jim Flaherty for their confidence in me and this unique opportunity to represent Canada during the early work for the G20 leaders’ summit.

Honourable senators, I was working as a portfolio manager and the chief economist at the Industrial Alliance Financial Group when the global health crisis struck in the spring of 2020. This crisis and its unprecedented impacts on public finances once again awakened in me an irresistible desire to come to Ottawa, but how could I do it this time?

My charming wife, Jocelyne Duval, my life partner for over 45 years, and our three children convinced me to apply to be a senator by completing the well-known application form on the Senate website, because there were three openings to fill in the Quebec region.

I was so happy and proud when I got the long-awaited phone call from the Prime Minister of Canada in June 2021 telling me that I had been selected by the Independent Advisory Board for Senate Appointments to serve as a senator for Quebec. I would like to thank the Right Honourable Justin Trudeau for his trust in me and for this unique opportunity to be back here with you and to serve Canadians. I would also like to thank my three references, Sophie D’Amours, Rector of Université Laval, Rémi Quirion, Chief Scientist of Quebec, and the Honourable Jean Charest, former premier of Quebec, for supporting my candidacy and submitting their letters of recommendation to the Independent Advisory Board.

Honourable senators, I also want to thank all of you for your warm welcome here in the Senate. The welcome speeches of the leaders of the four recognized groups in this chamber, as well as the speech given by Senator Marc Gold on my swearing-in day, will be forever etched in my memory and I thank them for that. I wish to give special thanks to my esteemed sponsor, Senator Dennis Dawson, for his wisdom and his valuable help since my appointment to the Senate.

Honourable colleagues, I very much believe in the value of the Senate as a component of our Parliament and a counterbalance to the House of Commons in protecting the rights of minorities or under-represented groups in our society. Although our primary responsibility is to provide sober second thought on government bills, I am excited at the idea of introducing my own legislative initiative some day.

In the meantime — and to be perfectly honest — I’m not yet very familiar with all the procedures prevailing here in the upper chamber. Despite my experience as a politician for nearly four years at the National Assembly of Québec, I realize that there is still a lot to learn. This is, no doubt, partly why I agreed to sponsor Bill C-8. After all, as the old saying goes, “You learn to swim by jumping into the water.”

Personally, I very much believe in the idea of this second chamber being organized in a non-partisan way, independent from the governing party. As I mentioned to Canada’s Prime Minister, the Right Honourable Justin Trudeau, during our phone conversation last summer, I would definitely not be here with you if not for the reform in 2015.

Since I already had parliamentary experience at the National Assembly, I did not feel like getting back into partisan debates. Honourable colleagues, after just a few months with you, I prefer by far the generally serene and respectful tone of the debates that are held in this chamber to those we see in the other place, as they say. This can be perfectly illustrated by a simple comparison of the two chambers of Canada’s Parliament with regard to the nature of the questions asked of the various government ministers.

Speaking of independence from the executive branch, let me also publicly express my support for my colleague, Senator Marshall, regarding the need to eventually review the short deadlines imposed on the Standing Senate Committee on National Finance when approving the government’s main and supplementary estimates. We really feel like we are being rushed. Having just a few days in a Senate committee to approve tens of billions of dollars in government spending, in my view, is simply unreasonable and disrespectful of our mandate to give sober second thought to public finances.

As a member of the steering committee of the Standing Senate Committee on National Finance, my colleague knows that she can count on my support to come up with constructive, non-partisan solutions to better fulfill our role as senators.

I strongly believe in teamwork and count on your collaboration to help me as I assume my new responsibilities. As the well-known expression goes, “What you see is what you get.” Therefore, I ask that you not be shy about making suggestions to me in order to improve myself in the discharge of my duties.

Honourable senators, I know the bar is set high for me as a new senator from Quebec and the eleventh representative of the district of Kennebec. Indeed, my predecessor was the Honourable Serge Joyal, with whom I had the opportunity to exchange a few words just after my appointment and whom I salute in passing.

Let me be clear. While I am honoured to succeed him as the representative of this senatorial division in Quebec, I would never presume to replace him in this chamber, since I have neither his legal skills nor his mastery of public speaking. Nevertheless, inspired by his 2005 book entitled Protecting Canadian Democracy and by his actions to protect the rights of minorities and defend the French language, I will strive to contribute, constructively and in my own way, to the work of the Senate.

Colleagues, I am not a public health expert, and I will not predict how long this pandemic is going to last or how many potential additional variants might emerge. Throughout my career as an economist, I was always more interested in the health of our public finances and how our central banks set their monetary policies. I am certain that, on that point, no one will be surprised to hear me say that I am publicly very critical and vocal these days about how our central banks have behaved in the wake of this pandemic to control this rising inflation.

The Bank of Canada and its counterpart, the U.S. Federal Reserve, kept their foot on the gas far too long with their quantitative easing in 2021. What is more, last summer they misread the situation with their so-called transitory inflation, and most importantly, they were late getting into gear early this year with interest rate hikes. As illustrated by the sharp drop in financial markets since the beginning of the year, we are witnessing a loss of investor confidence in our central banks’ ability to counter inflation without causing a recession. I do not wish to lend credence to all the decisions made by our various levels of government in Canada, but our central bank’s primary responsibility is to maintain price stability, not fight against social inequalities. Traditionally, fiscal and taxation policies are much better placed than monetary policy to target an inclusive recovery.

Before I dive into Bill C-8, I would like to speak to that as a public finance expert, because I have participated in almost every Finance Canada budget consultation of the country’s chief economists since 1995.

That was a tradition started by the Right Honourable Paul Martin in his day. I imagine some of you might be concerned about the new fiscal and budgetary initiatives in Bill C-8, the December 14 fall economic update legislation. That is completely natural and understandable. After all, Canada’s COVID-19 Economic Response Plan resulted in record-setting budget deficits and a spectacular increase in the federal government’s debt over the past two years.

Like the former governor of the Bank of Canada, Stephen Poloz, I don’t really think you can accuse a firefighter of using too much water to put out a fire. All Western governments had to engage in massive spending and run up huge deficits to prevent the rapid contraction of the economy in the spring of 2020 from deteriorating into an economic depression similar to the one in the 1930s. In addition, because the federal government has far more financial flexibility than the provinces, it’s not surprising that the federal government played that leadership role and supported Canadian businesses and workers. Make no mistake, this was only possible because previous governments had spent the past two decades getting the country’s fiscal house in order.

What is the current situation today? It is fair to say that the debt-to-GDP ratio deteriorated during this pandemic, increasing from approximately 30% to 46.5% as of March 31 of last year.

Based on the figures recently released by the Parliamentary Budget Officer, we can see that federal debt servicing today represents seven cents for every dollar of budgetary revenue, compared to 15 cents per dollar before the 2009 financial crisis, which is far from the 48 cents per dollar in the early 1990s.

I remember that in 1995, Canada ran the risk of being placed under the supervision of the International Monetary Fund when there was talk of a potential crisis. Following these events, former minister of finance Paul Martin took the situation in hand. Standard & Poor’s, the U.S. credit rating agency, has reaffirmed Canada’s AAA rating. Canada is one of the few G7 countries to have maintained this excellent rating.

Dear colleagues, I am of the opinion that Bill C-8 will be useful and will make a difference for many Canadians. Otherwise, I would not have agreed to sponsor it.

Obviously, you can count on my vigilance as an economist and a non-partisan senator who is independent of the political power in place to keep an eye on things in the years to come. After all, before embarking on new social programs or national guaranteed income programs, this country needs to accelerate wealth creation and to seriously address the causes of low levels of business investment if we are to realize our energy transition goals.

This should be a guiding principle for our leaders to follow. We must avoid transferring to future generations the burden of the present generation’s consumption of public goods and services.

Like all senators in this chamber, I too am in favour of a fairer and more inclusive society. There is no doubt that this chamber will have to consider bills along these lines in the coming months and years.

On the other hand, if we lose sight of wealth creation, we may one day not have enough wealth to distribute, and we may face harsh criticism from our children and grandchildren. I think the experience of Greece is a lesson for everyone here.

Honourable senators, I will now begin the second part of my speech, which focuses more specifically on Bill C-8, a bill to implement the measures in the economic and fiscal update tabled in December as well as other specific measures.

The majority of the fiscal or budgetary initiatives in Bill C-8 are a result of the COVID-19 Economic Response Plan. These are targeted measures to help the provinces, farmers, businesses and workers.

The bill also includes a previous commitment by the federal government to try to curb real estate speculation by foreign buyers. Over the next few minutes, I will do my best to simplify the often-opaque language used in this bill.

Honourable colleagues, I would like to talk about the four amendments that Bill C-8 proposes to make to the Income Tax Act.

First, as we all know, it has been established that adequate air ventilation and filtration is important to reducing the spread of COVID-19. Providing a refundable tax credit to small businesses would enable them to invest in better air quality. In order to encourage small businesses to invest in air ventilation and filtration, Bill C-8 proposes to introduce a 25% refundable tax credit on eligible expenses made for improving air quality, which would help increase outside air intake or improve air cleaning and filtration in commercial buildings.

Eligible businesses would receive the tax credit for eligible expenses up to $10,000 per location, with a spending ceiling of $50,000 for all eligible locations. In the spirit of encouraging businesses to act quickly, the tax credit could be claimed on eligible expenses made between September 1, 2021 and December 31, 2022.

Second, Canada’s vibrant rural and northern communities face unique challenges when it comes to their economic growth and resilience. The remoteness of many northern communities makes travelling costly for residents, including essential travel for the purposes of education and medical care. Right now, northern residents who are not receiving employer-provided travel benefits cannot deduct travel expenses under the deductions for northern residents. As a result, they are not receiving the same favourable tax treatment as those who receive employer-provided travel benefits. Bill C-8 proposes to amend the Income Tax Act and the Income Tax Regulations to expand access to the travel component of the northern residents deductions to individuals who do not receive employer-provided travel benefits.

Third, during the pandemic, Canada’s teachers showed a lot of resilience and supported initiatives to ensure that their students continued to receive a high-quality education. Often those efforts included purchasing school supplies out of their own pockets. In order to support teachers and early childhood educators, Bill C-8 proposes to amend the Income Tax Act and the Income Tax Regulations to increase the refundable eligible educator school supply tax credit from 15% to 25%. This will enable teachers to claim the cost of the supplies they use when they teach outside of school. Some electronic devices will also be added to the list of eligible expenses. The enhancement of the tax credit will provide significant support to teachers and early childhood educators so that they can help children learn in today’s difficult educational environment.

Fourth, recognizing that a large number of farmers use natural gas and propane as part of their operations, Bill C-8 proposes a refundable tax credit to return fuel charge proceeds to farming businesses in provinces in which the federal fuel levy applies, namely Ontario, Manitoba, Saskatchewan and Alberta, starting in fiscal year 2021-22. We estimate that for 2021-22, farmers will receive $100 million from the fuel charge. Refunds in future years would be higher, as the carbon tax increases.

Colleagues, Bill C-8 also proposes several other important measures to address pressing issues. For example, housing affordability has become an important concern in Canada, with house prices surging in most parts of the country. Bill C-8 proposes to introduce a new underused housing tax act that would impose a new 1% tax on owners of Canadian residential property in certain circumstances, effective in respect of the 2022 calendar year.

This new tax will ensure that non-resident, non-Canadian owners, particularly those who use Canada as a place to passively store their wealth in housing in Canada, pay their fair share of Canadian tax.

Beginning in 2023, certain owners of residential property in Canada would be required to file a return for the prior calendar year in respect of each residential property they own. In this return, owners may be eligible to claim an exemption in certain circumstances, such as where the property is rented out on a long-term basis or is occupied by its owner as their primary place of residence.

It should be noted that Canadian citizens, permanent residents of Canada and certain Canadian entities would not be subject to the tax, nor would they be required to file annual returns.

The Canada Emergency Business Account was essential to many small businesses that were struggling financially because of the pandemic. This account provided interest-free partially forgivable loans to nearly 900,000 businesses.

In January, the government extended the repayment deadline to qualify for partial forgiveness for CEBA loans from December 31, 2022, to December 31, 2023, for all eligible borrowers in good standing. Small businesses were eligible for an interest-free loan of up to $60,000, $20,000 of which can be forgiven if the loans are repaid by December 31, 2023, at the latest.

Bill C-8 would provide for a six-year limitation or prescription period for any amounts owing with respect to a loan provided under the program, which will help guarantee that CEBA loan recipients are treated consistently no matter where in Canada they live.

This limitation period is harmonized with other COVID-19 support programs, such as those set out in the Canada Recovery Benefits Act. Furthermore, the bill stipulates that any debt accrued through CEBA can be deducted from amounts owed or offset by them under the Income Tax Act.

Setting a six-year limitation period would ensure that CEBA loan holders are treated consistently, regardless of where they live in the country. The proposed limitation period would provide maximum leniency to small businesses that could be challenged for repayment of their CEBA loans.

Earlier, I spoke about the importance of proper indoor ventilation in reducing the spread of COVID-19. Bill C-8 proposes a $100-million top-up of the Safe Return to Class Fund to provinces and territories to support ventilation improvement projects in schools.

This $2-billion fund has helped provinces and territories work alongside school boards to meet the health and safety needs of their students to support in-person learning during the pandemic.

The top-up to the fund continues this support by specifically targeting ventilation-related improvement projects to reduce the spread of the virus in schools. Provinces and territories will have reasonable flexibility to spend their allocation on ventilation-related improvement projects that reflect their schools’ needs.

Examples of improvement projects include repair or replacement of heating, ventilation or air conditioning units; increasing maintenance of existing systems to ensure optimized operation; or other improvements that bring in more outdoor air or result in cleaner air, such as the installation of operable windows or portable air filtration units.

Funding will be provided to provinces and territories based on proposals outlining the overall costs of each jurisdiction’s proposed projects up to their maximum allocation.

Colleagues, I’m quite sure I don’t need to remind anyone that vaccination is one of the most effective ways of protecting ourselves, our families and our communities against COVID-19. Similarly, requiring proof of vaccination has helped increase the safety of indoor spaces, public gatherings and travel.

All provinces and territories have undertaken significant work to ensure that Canadians have access to standardized Canadian proof of vaccination and that it is consistent with proof of vaccination requirements in all regions of the country. In that regard, Bill C-8 proposes to provide the Minister of Health with legislative authority to make payments totalling up to $300 million to the provinces and territories to help with the costs associated with implementing COVID-19 proof of vaccination programs in their jurisdictions.

In addition, considering the significant expansion of provincial and territorial testing and control programs, including providing tests directly to Canadians, demand for rapid tests has increased in response to outbreaks and the arrival of the new Omicron variant last fall. These initiatives have led the way towards a further increase in large-scale testing in critical settings such as schools, shelters and long-term care facilities, as well as the introduction of screening to support vaccine mandates.

As case counts rose in August 2021, governments started implementing additional screening programs, including programs in schools, and stepping up serial testing for symptomatic and asymptomatic individuals in the workplace. The increased demand is due to specific factors, such as keeping schools and workplaces open, support for outbreak and resurgence management, including the risk of resurgence due to increases in indoor activities and gatherings over the holidays, and support for government and private sector vaccine mandates and personal risk management. To enable that, some provinces started distributing tests to the general public.

Bill C-8 would allocate an additional $1.72 billion to the Minister of Health to purchase and distribute rapid antigen tests to the provinces and territories and to workplaces.

Finally, colleagues, one other item in the bill that I would like to mention is Bill C-8 also seeks to amend the Employment Insurance Act to avoid penalizing seasonal workers who would have qualified as seasonal Employment Insurance claimants under the seasonal worker pilot project but, as an unintended consequence of the timing of the pandemic income supports, could not benefit from the program.

Honourable senators, the measures proposed in Bill C-8 that I talked about represent important changes that will help the provinces and many Canadians get through this pandemic and will also help the economy recover.

In closing, I would like to thank the Deputy Prime Minister and Minister of Finance, the Honourable Chrystia Freeland, and the Government Representative in the Senate, Senator Gold, for giving me this opportunity to sponsor Bill C-8.

Honourable senators, above all, I want to thank you for your indulgence, understanding and flexibility today in allowing me to share my motivation for becoming a senator before addressing Bill C-8 in greater detail.

Thank you. Meegwetch.

 

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