Second Reading - Bill C-14, An Act to implement certain provisions of the economic statement tabled in Parliament on November 30, 2020 and other measures
Thank you, Senator Lankin, for your remarks on Bill C-14. I will be repetitive in some areas, but I won’t be 45 minutes. I will also try to give you an idea as to what I will be looking for when the bill goes to the Finance Committee.
As Senator Lankin indicated, Bill C-14 proposes to implement some of the initiatives announced in the federal government’s Fall Economic Statement, which was tabled in the House of Commons in December 2020.
The bill consists of seven parts, and I will provide some remarks on most parts, but not all of them.
The first one relates to the Canada child benefit, and that was the subject of a conversation between Senator Lankin and Senator Plett. That part of the bill is to provide additional financial support to families who qualify for the Canada child benefit.
For each child under the age of 6 years, the government is proposing an additional benefit of four quarterly payments in the current year. The first two quarterly payments will be based on the family net income in 2019, and the final two quarterly payments will be based on the family net income in 2020. Specifically, families who qualify for the Canada child benefit and have a family net income of $120,000 or less will be entitled to quarterly payments of $300 per child under the age of 6 years, and then for families with a family net income greater than $120,000, quarterly payments will be $150 per child under the age of 6 years.
Based on the wording in the bill, families must have already qualified for the Canada child benefit based on their 2019 family income in order to qualify for this additional support. Given that the deadline for tax returns for the 2020 calendar year is just a few days away, clarity has to be sought regarding eligibility for the Canada child benefit and the additional support proposed in this bill.
I don’t know why the government is focused on eligibility based on 2019 tax information. It seems it would be better to use 2020, especially since 2020 was the year of the pandemic and families who wouldn’t qualify in 2019 would probably qualify in 2020.
And as indicated in the Fall Economic Statement, it estimates that this initiative will cost about $2.4 billion dollars in 2021.
Part 1 of Bill C-14 also amends the Income Tax Act so that rental expense can qualify as an expense under the Canada Emergency Rent Subsidy program when it becomes due, rather than when it is paid, provided certain conditions are met.
Bill C-9, which we passed last December, addressed some of the problems associated with the rental program, because that program has had a lot of problems since it started last April. It soon became apparent after Bill C-9 was passed that businesses would have to pay their rent before they could claim it and receive the money from the government. This was a major problem for businesses who had no cash to pay their rent in advance. Hence, this amendment will allow the government to reimburse business owners for their rent before it is actually paid.
Clarity has to be sought as to whether the government will ensure these payments are used for the purpose intended and, if so, how the government intends to do this. I would expect that officials testifying at the Finance Committee will be able to provide that information.
Parts 2, 3 and 4 of Bill C-14 proposes to reduce student debt by eliminating interest on the federal portion of Canada Student Loans and Canada Apprentice Loans for the 2021-22 fiscal years. Specifically, these loans are not subject to interest from April 1, 2021, to March 31, 2022. In addition, during this same period, a borrower is not required to make any interest-related payments with respect to the federal portion of the Canada Student Loan, and the Fall Economic Statement estimates that this measure will cost approximately $329 million.
Clarity has to be sought as to how the government will implement these changes and how they will affect student loans written off and loans forgiven.
One thing we do in the Finance Committee almost every year is to review loans written off because the supplementary supply bill has a provision to write off some student loans. In addition to loans written off in accordance with the supply act, there is a substantial number of loans written off under the authority of the Financial Administration Act and loans forgiven under the authority of the Canada Student Financial Act and the Canada Student Loans Act. Loans forgiven and loans written off amount to hundreds of millions of dollars, so we need to look at how this provision in this bill affects the loans written off and loans forgiven.
Part 6 of the bill authorizes payments to be made out of the Consolidated Revenue Fund for three purposes, totalling $1.6 billion. The first purpose is for the Regional Relief and Recovery Fund for the six regional development agencies in the amount of $206.7 million. Clarity will be sought in the Finance Committee as to criteria to be met to qualify under this program, how funds are to be dispersed and any follow-up required after funds have been dispersed.
The second purpose of the bill is to provide $901.3 million for a number of health-related areas affected by COVID-19, including mental health and substance abuse, long-term care, innovative approaches to COVID-19 testing and virtual care and mental health tools. Clarity has to be sought as to who will qualify for funding, criteria that have to be met, what the funds have to be used for, as well as any follow-up required after the funds have been disbursed. This funding will have to be linked to budget initiatives announced yesterday.
The third purpose is to make $500 million available in income support payments under the Canada Emergency Response Benefit Act, and this relates to the CERB benefits paid out over the past year. This will be a wind-up of that program.
Part 7 of Bill C-14, which is the part of the bill that I was mostly interested in, proposes to increase the limit on Government of Canada borrowings. The limit is established by the Borrowing Authority Act. I can remember when that act was implemented. It was enacted in 2017 by the Budget Implementation Act, and it permits the Minister of Finance to borrow money with the authorization of the Governor-in-Council.
I was on the Finance Committee at the time, and that part of the Budget Implementation Act received a fair bit of discussion. So this bill provides a maximum limit on the amount to be borrowed. In 2017, the Borrowing Authority Act established a limit of $1.168 trillion. This included the current stock of government borrowings in 2017, plus the estimated borrowings of the government for the subsequent three years, plus the borrowings of the Crown corporations and, finally, a 5% contingency fee on the total projected borrowings at the end of three years. Senator Lankin made reference to that 5% contingency fee.
Each year, included in its budget document, the government outlines its debt-management strategy. Since there had not been a budget for over two years, government outlined its debt-management strategy for 2020-21 in its economic and fiscal snapshot issued last July, and then it further updated its debt-management strategy for 2020-21 in December’s Fall Economic Statement and outlined the proposed amendments to the Borrowing Authority Act that now appear in Bill C-14.
Included in the Fall Economic Statement is the new proposed limit of the $1.831 trillion as well as an analysis of how the new proposed limit was established. The analysis in the Fall Economic Statement, which outlines the calculation of the new debt ceiling, is somewhat confusing because it uses the combined debt at the end of October 2020 as its starting point rather than at the end of the previous fiscal year. The analysis includes several components, and it effectively builds the new proposed debt ceiling to the $1.831 trillion from the existing ceiling of $1.168 trillion. It is a proposed increase of $663 billion, or 57%, over the next three years to March 31, 2024.
The magnitude of the $663 billion increase has been the subject of much discussion, as have been the individual components that make up the increase. For example, the increase in the debt ceiling includes $100 billion in new stimulus spending that was identified in December’s Fall Economic Statement but which was not included in the government’s fiscal framework at that time.
The $100 billion received significant attention from the Parliamentary Budget Officer, the C.D. Howe Institute, the International Monetary Fund and others who questioned the necessity of a $100 billion stimulus program. However, given the new initiatives announced in yesterday’s budget, the $100 billion will have to be reviewed in that context.
In addition, the $663 billion includes an $87 billion contingency amount based on 5% of the proposed debt ceiling. Why government would need a 5% contingency on debt already incurred has not been explained. In addition, the 5% contingency was already provided on the initial debt ceiling of $1.168 trillion back in 2017, so why is the same 5% contingency amount being provided a second time on this same debt ceiling?
Other issues concerning the significant increase in the debt ceiling need to be addressed by government. For example, parliamentarians will be interested in knowing whether any of this increased debt will be purchased by the Bank of Canada.
In a recently released report, the Parliamentary Budget Officer is projecting borrowing requirements to increase the debt to $1.7 trillion by March 31, 2024, which is just $125 billion below the proposed debt ceiling. Since the Parliamentary Budget Officer’s projections do not include the $100 billion in stimulus spending, any of the new budget initiatives or other items, such as the $5.9 billion Air Canada assistance plan, it raises the question as to how this additional spending will be funded. Will it be by a further increase in the debt ceiling or the imposition of new taxes?
The last point I will raise relates to transparency.
As honourable senators are aware, I have often spoken in this chamber about the difficulty of tracking government’s COVID-19 spending. The funding proposed in this bill is primarily for COVID-19 spending programs. The government needs to clarify how these expenditures will be disclosed and how they will be reported in its financial documents, such as the estimates, supplementary estimates, the fiscal monitor and the Public Accounts. How these expenditures relate to the budget initiatives announced yesterday will also have to be determined.
In addition, the government must clarify to which fiscal year these expenditures will be charged. Which of these expenditures will be charged to the 2020-21 fiscal year just ended, and which expenditures will be charged to fiscal year 2021-22, which began three weeks ago?
Honourable senators, this concludes my comments on Bill C-14 during second reading. I will have further comments at third reading. Thank you.