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Second Reading of Budget Implementation Bill, 2017 (Bill C-44)


Honourable senators, I rise to speak to Bill C-44, the budget implementation bill which was received in this chamber earlier today.

Bill C-44 was sent to the Standing Senate Committee on National Finance on May 8 for pre-study. Certain parts of the bill were sent to other Senate committees for pre-study, and all committees have now reported back to the Senate.

Honourable senators, Budget 2017 indicates that the government will continue with its deficits for the next five years: $28 billion for this fiscal year, followed by $27 billion, $23 billion, $21 billion and $18 billion for the following four years.

In its 2015 election platform, the government made a commitment to run "modest" deficits for three years and balance the budget in 2019. This commitment has long been forgotten. Budget 2016 presented a projected deficit of $29 billion and this Budget 2017 is projecting a deficit of $28 billion.

The government further committed in 2015 to ensuring that Canada remains in a sustainable fiscal position. To do this, they established two fiscal anchors. They committed to reducing the federal debt-to-GDP ratio to 27 per cent in 2019-20 from the 31 per cent in 2015, and they committed to balance the budget in 2019-20. They have now abandoned both of their two fiscal anchors.

The federal debt-to-GDP ratio is now projected to be 31.5 per cent in 2019-20 and not the 27 per cent they promised. And they will not balance the budget in 2019-20. In fact, they have made no commitment whatsoever to ever balance the budget since being elected.

Last December, the government released financial information that projects deficits until at least 2055. While government promised three years of modest deficits in 2015, we now know that the deficits aren't modest, nor will they end in 2020. Deficits will continue for at least another 40 years.

Budget 2017 describes the government's borrowing program for the year. This year government expects to borrow $286 billion, of which $247 billion is to refinance existing debt, plus an additional $39 billion to fund the deficit and other transactions, such as loans and investments. Government pays interest on its borrowings, and for the past number of years, government has borrowed at record low interest rates.

However, higher interest rates are anticipated in the very near future; so with interest rates that are higher and additional debt as a result of the deficits, government's public debt charges will increase.

Public debt charges are projected to increase from $24 billion in the current fiscal year to $33 billion in 2021-22. That's a 37 per cent increase over three years.

Bill C-44, if approved, will enact a borrowing authority act. This will provide the Minister of Finance with borrowing authority and provide for a maximum amount of borrowing. Under this legislation, a government debt limit of $1.168 trillion is prescribed within Bill C-44. In other words, government is informing us that by 2020, our debt will exceed $1 trillion.

This includes the government's own borrowings of $691 billion, which we have now; the current stock of Crown corporations' borrowings of $276 billion; the three-year projection for government borrowings in the amount of $103 billion; and the three-year projection for Crown agencies in the amount of $43 billion. Added to this is a 5 per cent contingency fund of $56 billion, and this amounts to the $1 trillion I have just mentioned.

The deficits of the Liberal government will be paid by incurring debt, and this debt will have to be repaid in the future with tax increases. Hence the saying: Today's deficits are tomorrow's taxes.

Senator Mockler has already spoken on the borrowing authority act, so I will keep my remarks brief. In its 2015 election platform, the Liberal government committed to an open and transparent government, yet under the proposed borrowing authority act, the minister is required to table a triennial report — that's a report once every three years — in both Houses of Parliament to disclose the total amount of money borrowed. Given that the standard within government is a requirement for annual reports, there is no reason why the minister needs to resort to triennial reports. Total public debt is important information, and it should be reported annually.

Honourable senators, Bill C-44 also had a section on the Parliamentary Budget Officer. I want to talk about history. Back in 2015, the election platform included two references to the Parliamentary Budget Officer. It committed to ensuring that the Parliamentary Budget Officer was truly independent of government, was properly funded and accountable only and directly to Parliament. The 2016 fall fiscal update last year also made a commitment to establishing the Parliamentary Budget Officer as an independent officer of Parliament, promising independence, reporting to Parliament and parliamentarians. The government also committed to providing the Parliamentary Budget Officer with greater access to information.

Bill C-44 did not initially deliver on these commitments. Under the initial legislation, the direction and control of the PBO and his office was vested in the Speaker of the Senate and the Speaker of the House of Commons. The Parliamentary Budget Officer's work plan was to be approved by both Speakers, and the Parliamentary Budget Officer's mandate was restricted to focusing on government reports and requests from parliamentary committees. The initial Bill C-44 did not include, in the mandate, the PBO's self-initiated work or work requested by individual parliamentarians.

All of these restrictions undermined the independence of the Parliamentary Budget Officer.

Government had also committed to providing the PBO with greater access to information.

However, clause 159 of the initial Bill C-44 amended the Federal Courts Act so that the PBO could no longer refer a question of law or jurisdiction to the Federal Court. As senators may recall, the PBO referred questions to the Federal Court in 2013, seeking to clarify the scope of the PBO's access to information and his mandate.

If the initial Bill C-44 were enacted, this remedy would no longer be available.

After much criticism of the proposed amendments to the Parliamentary Budget Office, government amended Bill C-44 in the other place.

While most of the concerns relating to the Parliamentary Budget Officer have been addressed in the amendments to Bill C-44, there are two remaining issues that concern me.

First, the amended legislation still requires the Parliamentary Budget Officer to consult with both Speakers when preparing his work plan and before deciding the matters of significance that should be brought to the attention of the Senate and the House of Commons. If the PBO determines that a matter is of significance and should be brought to the attention of Parliament, while the Speaker or Speakers disagree, what will be the outcome? In my opinion, the Speakers should not be involved.

My second point relates to the remedies available to the Parliamentary Budget Officer.

For example, if the PBO initiates a reference under section 18.3 of the Federal Courts Act because a department is unwilling to grant access to information, it is unclear from the amendments whether the Speakers have to be consulted or advised. During the most recent briefing with Senator Woo, Government officials have provided assurance that under the amended legislation he does not, but as mentioned the legislation now is unclear.

I'd also like to talk about the proposed tax measures under Bill C-44. Budget 2017 proposes several tax measures which are outlined in detail in the budget documents.

While the summary provided by the government is entitled "Cost of Proposed Tax Measures," the details clearly indicate these tax measures are not costing government.

Rather, these tax measures will generate additional tax revenues for government over the next five years in the amount of $2.5 billion.

I am going to summarize some of these tax changes, and I will begin with the cancellation of the Public Transit Tax Credit.

Through Bill C-44, the Liberal government will be increasing personal income taxes through the elimination of the Public Transit Tax Credit. This will add $200 million each year to the government's coffers, or $1 billion over the next five years.

In his report, the Parliamentary Budget Officer estimates that approximately 1.2 million Canadians will pay, on average, $137 in additional federal tax as a result of the Liberal government's elimination of the Public Transit Tax Credit.

The PBO identified 4,200 individuals who claimed the federal disability tax credit, but will lose this benefit under Bill C-44.

In addition, the Parliamentary Budget Officer estimated that there are approximately 185,000 individuals earning annual after-tax income below $22,600 that would have received a benefit from this tax credit.

Honourable senators, last year's budget reduced income taxes for taxpayers with incomes above $45,000. However, people with income below $45,000 did not receive any reduction in their taxes.

Last year, Senator Smith proposed an amendment to the 2016 budget that would have reduced income taxes for people earning less than $45,000. Unfortunately, this amendment failed.

Not only did the government not reduce taxes for these low-income Canadians in 2016, they are increasing the taxes for this vulnerable group in 2017 by eliminating the Public Transit Tax Credit.

Through Bill C-44, the Liberal government is also increasing business income tax, primarily through a variety of measures that will generate almost $1 billion in additional revenues for the government over the next five years.

Through Bill C-44, the government is also increasing sales and excise tax primarily through the following: tobacco taxation, which will increase government revenues $225 million over the next five years; and alcohol taxation, which will increase government revenues $470 million over the next five years. The point I'm making is that the tax measures in Bill C-44 will provide little tax relief but will impose significant tax increases.

In total, the tax measure in C-44 will increase government's tax revenues by almost $3 billion over the next five years, while providing only $350 million in tax relief.

I'd now like to provide some comments on the infrastructure bank, which several of my colleagues have already spoken about.

The Liberals' 2015 Election Platform committed to establishing the Canadian infrastructure bank, broadly defining the mandate of the bank, and committing to providing loan guarantees and small capital contributions to provinces and municipalities.

The 2016 Fiscal Update last fall provided further information on the infrastructure bank.

There has been much public discussion about the mandate of the infrastructure bank, its governance structure, the role of the private sector, the types of infrastructure projects to be approved, as well as the financial risks to government and ultimately to the taxpayers of Canada.

The section of Bill C-44 on the infrastructure bank was referred to the Banking Committee, which studied this section in detail.

The Banking Committee held several meetings on the proposed infrastructure bank and heard from the Minister of Finance, government officials and representatives from think tanks, pension plans and economic development, business, academia and financial services sectors.

Witnesses were divergent in their views on the mandate of the bank. While Infrastructure Canada explained that most projects would be submitted by other levels of government, other witnesses supported projects not otherwise pursued by governments. Others questioned the need for the bank, as it wasn't clear that it could achieve something that could not be achieved by a public-private partnership, or PPP. Others expressed concerns regarding privatization of public services.

Witnesses were also divergent on their views on the governance structure, with some emphasizing the need for government to maintain adequate oversight, while others emphasized the need for the bank's decisions to be free from political interference.

Under C-44, the Governor-in-Council will appoint the chairperson and the directors of the bank. The Governor-in-Council can also terminate, remove or suspend any director. This section has been discussed in great detail by the Banking Committee, and concern regarding the governance structure has been expressed by a number of witnesses. The board can also terminate, remove or suspend any director, but only with the approval of the Governor-in-Council. In addition, the CEO can only be appointed, terminated, removed, or suspended subject to the approval of the Governor-in-Council.

With regard to the funding, the government has committed to providing $35 billion on a cash basis to the infrastructure bank. Budget 2017 indicates that $15 billion of the $35 billion will be provided over the next 11 years, with $5 billion allocated to each of the following three areas: public transit, green infrastructure, and trade and transportation.

I just want to emphasize that the money isn't going out in one lump sum. It's to be spread out over 11 years, and the budget documents indicate how much is going to go out in each year under each of those three areas.

I'll have to go back and look at the transcripts, but I had the impression, when Senator Woo spoke, that maybe the $15 billion was for losses, which wasn't my understanding. My understanding is that the $15 billion is going to go out directly as cash, grants or some sort of financial assistance.

However, the remaining $20 billion of the $35 billion is going to be paid out as loans or equity investments. No information has been provided yet as to when the $20 billion will be disbursed, nor has there been any discussion on the terms and conditions to be attached to these cash outlays.

The $20 billion — and this is what people are saying — will not affect the government's bottom line, but that's only true to a certain extent. It won't affect the government's bottom line right now, initially, but it will affect the government's bottom line if it is written off or if it is written down.

In addition, C-44 permits the Minister of Finance to make loans and loan guarantees. Again, loans will not affect the government's bottom line initially, but they will if those loans are written off or written down. Those numbers, if those loans are written off or written down, will roll down right into the government's bottom line and increase their deficit.

And guarantees are something else that's provided for under the legislation: It will not affect the government's bottom line, but again, if the government is called upon to honour a guarantee, it will affect the bottom line and it will roll into the deficit.

So it should be noted that there is a risk to the issuing of the loans, to the equity investments and also to the guarantees.

The proposed legislation clearly indicates that the infrastructure bank is "not a Crown agent," and that's a heading in the legislation, although the briefing notes that we received said that it was. There are four exceptions to this spelled out in the legislation, and I won't mention them here. I can only conclude that the infrastructure bank is a partial Crown agent. It seems like it's not a full one.

In addition, the bank is required to provide an annual report to the minister and to Parliament. While the Financial Administration Act requires that Crowns and, therefore, the infrastructure bank, have to file annual reports, I think that because of the nature of the infrastructure bank. Because so much money is involved and this is something new, I felt that the legislation could have been strengthened by providing further direction as to what is included in that annual report.

Honourable senators, this concludes my comments on Bill C-44, the budget implementation bill. In closing, I would like to acknowledge the contribution of my colleagues on the National Finance Committee, many of whom are participating in this debate this evening. Thank you very much.