An Hon. Senator: No.

Senator Loffreda: Of course not. No bill is ever perfect, perhaps with the exception of the one I’m sponsoring, Bill S-259, the bill on the Hellenic heritage month. That might be perfect — just kidding.

But I do feel the government has put forward a series of amendments and new measures that will benefit Canadians as well as many different sectors of our economy, and they send a strong signal that we are on the right path towards more growth and greater economic outcomes and positive social changes.

I would humbly urge all senators to vote in favour of sending Bill C-47 to the National Finance Committee today, so we can undertake the clause-by-clause consideration of the bill. Thank you.

Hon. Clément Gignac: Senator Loffreda, thank you for agreeing to answer the question. Congratulations on the leadership that you’ve shown as the sponsor of this bill.

I learned that it is complicated to request an amendment to a bill, especially a budget implementation bill. That has happened only three times since 2009. I got the message that I wouldn’t be moving any amendments to the budget implementation act.

However, I’d like to ask you about clauses 114 to 116 of the bill. You referred to the threshold for the application of the GST and the payment card compensation services. For those senators who are listening, it is important to understand that the federal government lost its case before the Federal Court of Appeal in January 2021, because, basically, these payment cards aren’t taxable and are considered non-taxable since they are financial services. However, the government is claiming that they are actually administrative services.

Are you comfortable with including an observation at the end of our report stating that it is completely unacceptable for the federal government to have waited 26 months after losing its appeal to introduce a measure in the budget? What’s more, this measure is retroactive and could go back as far as 1991. How comfortable are you with that and would you at least agree to let the committee present an observation?

Senator Loffreda: Thank you for the question, Senator Gignac. As you know, we’re both members of the committee and have debated this issue there many times. The committee heard from Department of Finance officials, who told us that this measure shouldn’t come as a surprise to the banks. They told us retroactivity is perfectly reasonable, in their opinion, and something the banks should expect because it was never acceptable as such. I have a great deal of confidence in our Department of Finance and our National Finance Committee. I agree to adding an observation because it’s an observation, as such.

[English]

Legislating 26 months after a court decision is a delay that should not be acceptable. Going retroactively is a concern. The independence of our judicial system is also a concern. I trust the finance officials who appeared before our committee and explained that it should not be a surprise to the banks and that it was discussed with the banks that this was not permissible. We are discussing a windfall of $195 million to the banks. I think a strong observation will be well accepted. Going forward, I think this will be in discussion with the government. I am looking forward to your observation.

[Translation]

Thank you for your question, Senator Gignac.

[English]

An Hon. Senator: Oh, oh!

Senator Loffreda:  — it has been an honour to sponsor this bill in the Senate. Is the bill perfect?

The Hon. the Speaker: I see two senators standing with questions. I’ll start with Senator Gignac and then Senator Batters. Will Senator Loffreda take a question?

Senator Loffreda: Yes, with pleasure.

[Translation]

Hon. Elizabeth Marshall: Honourable senators, I also rise to speak to Bill C-47, the budget implementation act. I would like to thank Senator Loffreda for his comments and also for going through the bill because I won’t have to do that now. I can talk about the economy and government’s fiscal position and Canadians.

Canadians are facing many challenges in these difficult times. Inflation has increased, making the cost of living more expensive. While inflation had begun to decelerate after peaking at 8.1% in June of 2022 and falling to 4.3% in March of this year, it increased again in April to 4.4%. This does not mean that prices are coming down. It just means that prices aren’t going up as fast. However, food prices remain high, affecting all Canadians. In fact, inflation on food remains elevated at 8.3% as of April of this year.

To cope with the increasing cost of living, many Canadians have reduced their food consumption. They have changed their eating habits and those of their families. Some Canadians are using their credit cards to pay for food. The CEO of Canada’s largest food bank, located in Toronto, said at a recent meeting of the House of Commons Finance Committee that there were 60,000 client visits every month before the pandemic, which increased to 120,000 visits during the pandemic and to 270,000 visits during the month of March.

Second Harvest, the national service that rescues surplus edible food that businesses cannot use and distributes it through a network to people who need it, surveyed 1,300 non-profits in December of last year to understand how food charity is likely to change in 2023. Their survey indicated that 2 million people were served monthly across Canada pre-COVID. That increased to 5 million people in 2022, and it is expected that 8 million people will be using these charities in 2023, which represents 20% of the population of Canada. In other words, one in five Canadians are expected to access food banks or other food‑related programs this year. It is certainly a sobering statistic.

If the government thinks the economy is doing so well, it should speak to some of the millions of Canadians lined up at food banks if they truly want to know how the economy is doing.

Rents have also increased significantly in most cities and towns across the country. A Canadian Press article in April of this year reported that rents in Canada increased over 10% between March of last year and March of this year, bringing the average rent to over $2,000. Renting was most expensive in Vancouver, where a one-bedroom apartment was $2,743, an increase of 17% from last year. Toronto was less expensive than Vancouver, where a one-bedroom was $2,506, an increase of 19% from last year. According to the 2021 Census, almost 5 million households in Canada are renting, so increasing rental costs are affecting a significant portion of the Canadian population.

To help with the increasing cost of groceries and rent, the government has provided some financial assistance. For example, Bill C-46 provided financial assistance to some families to help with the cost of groceries based on the GST rebate program. However, as the CEO of the Daily Bread Food Bank said at a recent House of Commons Finance Committee meeting, “. . . the benefit is helpful . . .” but it “. . . will not shorten the lineups outside of food banks . . . .”

The CEO of The Mississauga Food Bank also said that any additional money is good, “but . . . will not make a significant difference beyond the week or month when it’s received.”

The Grocery Rebate was based on the GST rebate. This assistance was provided to 11 million beneficiaries referenced by government as low and modest income. That equates to 30% of our population receiving financial assistance to buy food. This is in addition to the support provided by the food banks.

Bill C-31, which was passed last year, provided $500 to individuals who rent and meet the program criteria. Government estimated that 1.8 million renters would qualify for the financial assistance at an estimated cost of $1.2 billion. Since there are almost 5 million households renting, 36% of renters received financial assistance under this program, another sobering statistic.

When the Associate Deputy Minister of Finance appeared at our National Finance Committee, I asked him how the government knows that the GST rebate for groceries actually reaches those most in need. The same could be asked for the rental rebate program and all of the programs providing financial assistance to certain segments of the Canadian population. Given the myriad of financial assistance programs to help Canadians with living and other expenses, government needs to evaluate these programs to ensure that the money actually goes to help those who need it most.

The Bank of Canada, in its attempt to control inflation, began to raise interest rates in March 2022, which created further problems. Over the past year, the Bank of Canada has increased its benchmark interest rate from 0.25% to 4.75%, the highest it has been since 2001. That was a generation ago. Since Canadians are highly indebted, this has had a significant impact on their mortgages and other household debts. Unlike Canadians who rent, those with mortgages receive no financial help from the government. The cost of carrying a mortgage increased significantly; Statistics Canada reported that mortgage interest costs rose by 26%.

Many Canadians with mortgages are finding it increasingly difficult to pay the increasing costs of their mortgages. Many are extending the length of their mortgages, while others are adding increasing interest costs to their mortgage balances.

In its fourth-quarter financial results released on May 4 of this year, the Canada Mortgage and Housing Corporation, or CMHC, reported that a growing share of its mortgage insurance program is covering homes that are close to or “under water,” as the recent drop in home prices has eroded the borrowers’ equity. The term “under water” is used when the value of the home is less than the outstanding mortgage, so the value of their mortgage is higher than the value of their home. In the fourth quarter of last year, $2.3 billion of CMHC’s insured mortgages, or 1.2% of its portfolio, were at a loan-to-value ratio above 95%, but this year, that $2.3 billion has increased to $10 billion, or 5.8% of its portfolio.

That is significant because it demonstrates the financial stress of Canadians, but it is also concerning because this government is backing the insurance on those mortgages. The two private-sector institutions that also provide mortgage insurance show similar results. Canada Guaranty Mortgage Insurance Company reported that 5% of its outstanding insured mortgages, or almost $4 billion worth, are mortgages that exceed the value of the home. Compare that $4 billion this year to $532 million last year, which was less than 1% of its portfolio.

Sagen MI Canada Inc. reported that $14 billion, or 10%, of its outstanding insured mortgages exceed the value of the home insured. This has increased since last year, when $7 billion, or 5%, of its insured mortgages exceeded the value of the home. So it has actually doubled in a year.

Increasing interest rates are not over yet. Last week, the Bank of Canada increased its interest rate from 4.5% to 4.75% and indicated there will be further increases. Last month’s inflation report suggests that inflation may be reaccelerating, which will add further pressures on the economy and on Canadians.

The Bank of Canada’s Governor Macklem and former governor Mark Carney told the Senate Banking Committee last fall that inflation in Canada is domestically generated and reflects what is happening in Canada.

Carleton University business professor Ian Lee, in a recent interview with The Hill Times, said that the Bank of Canada is cooling the economy with rate increases, but the government is turning around, putting money into the economy. He said that even if it denies that it’s stimulus, any deficit is stimulative. Economist Don Drummond, a former Associate Deputy Minister of Finance and Chief Economist at the TD Bank, agreed that the deficit spending of the government is “absolutely” behind this increase in inflation.

Several months ago, Canadians were told that interest rates would start decreasing in the summer. Then it was said they would decrease in December, and then it was said they would decrease in the spring. Those interest rates, even higher rates, might be with us for a long time yet.

Last month, the Bank of Canada released its annual Financial System Review, indicating that higher interest rates are exposing vulnerabilities in the global financial system. While the bank reminds us that Canadian banks remain robust, it also said that they are not immune to international developments. The bank concluded that it is “. . . more concerned than it was last year about the ability of households to service their debt.” They said:

More households are expected to face financial pressure in the coming years as their mortgages are renewed. The decline in house prices has also reduced homeowner equity, and some signs of financial stress—particularly among recent homebuyers—are beginning to appear.

The bank, in its review, also said that:

The share of households affected by higher interest rates will continue to rise over the next few years as homeowners renew their mortgages.

One third of mortgages have had their payments increase so far, and this year, that will rise to nearly all mortgages over the next three years.

In addition, homebuyers have increased their reliance on credit card debt. In its Financial System Review, the bank goes on to say:

A large negative shock, such as a severe global recession with significant unemployment that further depresses house prices, could increase loan defaults among households. If defaults on uninsured mortgages with negative equity were to occur on a large scale, they could result in sizable credit losses for Canadian lenders —

— including Canadian banks.

The Bank of Canada says that the share of indebted households that are behind on payments for at least 60 days in any credit category is below the pre-pandemic average, but it has been increasing since mid-2022. The Governor of the Bank of Canada recently said that nobody should expect that interest rates will return to the very low levels that we have seen over the last decade or so. We should not count on near-zero interest rates seen in the first two years of the COVID-19 pandemic or in the years following the financial crisis. Interest rates will be higher than what people have gotten used to, and the transition creates some risk.

At 4.75%, the central bank’s benchmark rate is now the highest it has been since 2001. In fact, Canada has the highest level of household debt in the G7. CMHC recently told us that household debt in Canada has been rising significantly, owing to rising home prices. Mortgages currently make up about three quarters of household debt in Canada. Household debt in Canada made up 80% of the overall Canadian economy during the 2008 recession. It rose to 95% in 2020, and in 2021, it exceeds the size of the overall Canadian economy. In contrast to other G7 countries, household debt in the U.S. fell from 100% of GDP in 2008 to 75% in 2021. Household debt also dropped in the U.K. and Germany and was nearly unchanged in Italy, but in Canada, it keeps increasing.

If there is a recession or other negative economic shock, debtors might find it difficult or impossible to repay their debts.

The Deputy Chief Economist at CMHC also said that the Crown agency already sees early warning signs that more and more consumers are getting into financial trouble. A recent report from RBC Economics states that a looming recession and an unemployment rate projected to increase to 6.6% by early 2024 are likely to “tip more Canadians into loan delinquencies and insolvencies.” The report goes on to say that with pandemic-related government support measures now over and living costs soaring, mortgage delinquencies could rise by more than a third of current levels in the coming year.

Economists at Desjardins Capital Markets published a report last month, warning that high interest rates could inflict much more damage yet on the mortgage and housing market. They labelled Canada’s mortgage debt as “a ticking time bomb.” The report says the pain for mortgage holders has barely started. The bulk of mortgages taken out during the COVID-19 pandemic — when rates were low and house prices high — will be renewed in 2025 and 2026. If interest rates remain high, many households will be impacted by significant increases in their mortgage payments.

It is not only Canadians who are paying increasing interest costs. Our government is carrying a significant amount of debt — over $1.6 trillion. Higher interest rates, along with more borrowings, are increasing the government’s debt servicing cost.

The government’s debt servicing cost between 2013 and 2022 were in the range of $20 billion to $25 billion annually. However, as the government borrowed more money and interest rates began to rise, public debt charges increased. For the year that just ended in March, public debt servicing charges were $34.5 billion. The government thought that debt servicing charges this year would increase from the $34.5 billion last year to $43.9 billion, and continue increasing each year after that. By 2027-28, the budget document estimated that the government would be paying about $50 billion in debt servicing costs.

However, with the increase by the Bank of Canada last week, debt servicing costs will now increase. When the Minister of Finance appeared at the Standing Senate Committee on National Finance last week, I asked her how much our debt servicing costs will increase as a result of the increase in the bank rate. She would not disclose the amount. She said that the government would regularly update Canadians as the economic situation changes — and the government, she said, will certainly do that in the fall economic update; that will be in December. I think the minister did not want to scare us with the new numbers.

The debt servicing cost is now one of the government’s most expensive programs — exceeding the costs of the Equalization program, the Department of National Defence and the new child care program, and it is closing in on the cost of the Canada Health Transfer. In fact, if the government did not have debt servicing costs, there would be a surplus of $3.8 billion this year.

How reliable are the government’s projections on debt servicing costs? In the fall fiscal update in December 2020, the government estimated debt servicing costs would be just over $25 billion for this fiscal year.

Now, 30 months later, it is at $43.9 billion and climbing, or at least 70% more than what the government estimated a mere 30 months ago.

We know now that with the increase in the Bank of Canada’s benchmark interest rate last week, debt servicing costs will exceed the $43.9 billion disclosed in the budget. Many analysts and economists expect the bank to increase its benchmark rate again in July or September, or maybe both.

In Budget 2023, the government defends its increasing debt servicing costs by explaining that debt servicing costs are projected to rise to 1.6% of the GDP until 2024-25, and then fall to 1.5% of the GDP for the remainder of the forecast horizon or, as the government says in its budget, to “a level that is low by historical standards.” But this is not true.

Public debt charges were actually 0.9% of the GDP in 2021, 1% of the GDP in 2021-22 and 1.2% of the GDP in 2022-23, and it jumped to 1.6% this year.

There are other ways to measure the government debt servicing costs. For example, David Dodge, former governor of the Bank of Canada, in a paper published in Public Policy Forum, proposed to move away from the debt servicing costs to GDP ratio, and adopt one relating to revenue — where sustainable service costs are not to exceed 10% of annual government revenues.

But debt servicing costs as a percentage of revenues are also escalating. Just two years ago, it was 5.9% of revenues. This year, it will be 9.6%. This is just below the 10% limit advocated by the former governor of the Bank of Canada. In fact, the Parliamentary Budget Officer, in his March 23 Economic and Fiscal Outlook, calculates debt servicing costs as a percentage of tax revenues and not all revenues, in which case this year’s percentage would be 11.5% — well above the 10% advocated by Mr. Dodge.

How much faith can we place in the government’s projections of debt servicing costs when past projections have been so wrong and so low?

In any event, debt servicing costs as a percentage of revenues are also on an upward trajectory. Debt servicing costs are escalating significantly regardless of how you measure it. Parliamentarians, Canadians and, yes, even the Government of Canada should be concerned.

Honourable senators, as I mentioned before, Canadians are the most indebted of the G20 nations, and have the highest household debt in the G7, but it is not only Canadians who are carrying a high debt load. Our own government has also significantly increased our debt since 2015.

In 2015, the government debt was $665 billion. This year’s budget indicates that the government will need to borrow $63 billion this year, bringing this year’s debt to $1,319 billion. Compare the $1,319 billion this year to the $665 billion in 2015. It has almost doubled — well, it’s 98.3%. Hence, the reason for our increasing debt servicing costs is a combination of more debt and higher interest rates.

The government’s current debt ceiling is $1.831 trillion, which was increased from the original debt ceiling in December 2021 by Bill C-14. Many parliamentarians and others were alarmed by the significant increase. However, the minister tried to assure us by saying that the $1.831 trillion is the upper limit — it does not mean that the government will undertake those borrowings. But the government is getting close to the ceiling.

The debt ceiling of the $1.831 trillion includes not only the government’s borrowings, but also the debt of Crown corporations. The Parliamentary Budget Officer estimates that total borrowings are expected to be $1.622 trillion by the end of this year. Since this government has never paid down any of its debt, this is our legacy to our children and our grandchildren. We are telling them that in their future, they will be paying for the government programs that we are enjoying today.

Honourable senators, I want to talk about the Budget 2023 document because it supports Bill C-47, and also the financial projections are outlined in the Budget 2023 document.

The document that supports Bill C-47 is referenced; it is 255 pages long. It identifies new initiatives which the government intends to undertake, and provides costing information on the two new initiatives, as well as details of economic and fiscal projections. It also includes the government’s debt management strategy and a summary of the legislative measures which showed up in Bill C-47.

In 2015, the government promised modest deficits for three years, followed by a balanced budget. Specifically, it promised a $10-billion deficit for 2016-17, followed by a deficit of less than $10 billion in 2018 and a plan to balance the budget in 2019. There was also a promise to reduce the federal debt-to-GDP ratio to 27%.

Since 2015, we have seen deficits every year. For the year that just ended in March, the government is estimating a deficit of $43 billion, followed by a deficit of $40 billion this year — 2023-24 — then a $35-billion deficit next year, a $27-billion deficit the following year, and then a $16-billion deficit and a $14-billion deficit. In other words, the deficit as presented in the budget document is supposed to decrease every year.

But there is no balanced budget in our future. There is no balanced budget showing up in that budget document.

When the government released its Fall Economic Statement last November, it projected a return to surplus of $4.5 billion in 2027-28. However, when Budget 2023 was released just four months later — in April — the surplus had evaporated and was replaced by a deficit of $14 billion because the government’s fiscal projections tend to deteriorate over time.

For example, in November’s Fall Economic Statement, the government estimated the deficit for the year that just ended would be $36 billion. However, just four months later — in March — the $36-billion deficit had increased to $43 billion. And then the government estimated, in November’s Fall Economic Statement, that the deficit for this year would be $30 billion. Now, just four months later, the $30-billion deficit has increased to $40 billion, and the year is not over yet. The numbers in this budget are going in one direction only: up. This trend continues into future years. Projected deficits for each year will increase as time passes.

The total deficit estimated in the budget for the six years between 2022 and 2028 is $69 billion higher than the total deficits estimated in the Fall Economic Statement just four months earlier.

The Budget 2023 document also identifies another issue, which is that three large transactions in this fiscal year are being recorded in last year’s accounts, increasing the deficit last year by $7.5 billion, so the deficit goes from $35.5 billion to $43 billion. Two of the transactions were included in Bill C-46 — Senator Loffreda already spoke about that — and the third transaction is the $2.8 billion for the Gottfriedson Band class settlement agreement, which is included in this year’s Main Estimates but has yet to receive parliamentary approval.

Why has the government decided that these transactions should be recorded in last year’s accounts? Why are their other transactions not included? For example, maybe some of the cost of the F-35 fighter jets should be recorded last year — or some of the wage settlement with the union. It appears to me — and this is me speaking as a former auditor — that the government is trying to keep each annual deficit within a certain range and not have deficits fluctuate materially from year to year. If you look at the Budget 2023 document, the deficits projected over the next several years — according to Budget 2023 — neatly decline each year.

I also want to bring up the issue of the omnibus bills. Senator Loffreda mentioned this. In fact, prior to becoming Prime Minister, Justin Trudeau said that “. . . omnibus bills . . . prevent Parliament from properly reviewing and debating . . . proposals.” He went on to say that, “We will . . . bring an end to this undemocratic practice.” So here we are with an omnibus bill, Bill C-47, which is 430 pages long and amends or introduces 51 acts of Parliament, including a number of amendments to the already-complicated Income Tax Act and two new acts — one creating the Canada innovation corporation and the other creating the Canada dental care plan.

A number of committees — and Senator Loffreda mentioned this in his remarks, but I didn’t think he did the committee reports justice — in their reports on Bill C-47 expressed concern over the omnibus bill and the lack of time provided to review the bill. I would encourage my Senate colleagues to go and read those reports from the committees because I was really struck by the tone of many of the committees’ comments. They were quite negative and almost uncomplimentary to the government. Committees expressed concern that many of the amendments were unrelated to the budget and many of the amendments should have been stand-alone bills so they could be properly studied.

The Standing Senate Committee on Legal and Constitutional Affairs expressed concern that there was not enough time or opportunity to analyze the sections of the bill assigned to them and to determine the impact. They continued on to say that this does a disservice to the legislative process. They said it is particularly concerning regarding the proposed amendments to the Criminal Code and the Canada Elections Act, which should have been introduced in separate bills.

The Standing Senate Committee on Energy, the Environment and Natural Resources expressed its discontent with responses given by officials representing Environment and Climate Change Canada regarding the proposed amendments to the Canadian Environmental Protection Act.

The Standing Senate Committee on Banking, Commerce and the Economy stated in their report that it continues to be concerned that the government continues to include substantive changes to Canadian law in a budget implementation bill, which means there is insufficient time to properly examine the bill and hear stakeholders’ concerns.

And the Standing Senate Committee on Transport and Communications said that the subject matter in Divisions 22 and 23 of Part 4 of the bill is very complex in nature. They went on to say that, having no connection to the government’s budgetary policy, the committee hopes that, in the future, such amendments would be introduced as separate legislation.

I think it would be really beneficial if everybody went back and read those reports.

I’m looking at the time, and I’m thinking I might run out of time.

If you look at the budget details, the $5.3 billion that is assigned to the cost of the new budget initiative is really the net cost. The gross cost is actually $10.9 billion. There are a lot of numbers that show up in the budget that don’t have any reference. You can’t really tell what they’re for. They reduced the cost of the budget measure by applying a number of adjustments. There was one for $3.4 billion that was called “Realigning Previously Announced Spending.” Then there was one for $665 million, referenced as “Previously Provisioned in the Fiscal Framework.” Then there was $500 million for savings on consultants and travel.

For the $665 million, $561 million of it related to the Department of National Defence. I asked them where that money was in the fiscal framework. I couldn’t find it, and they couldn’t tell me. I had the impression they did not know. They committed to providing the Finance Committee with the information, but we never received it, and it has been quite a while since we asked for that information.

When I asked the Parliamentary Budget Officer about all these adjustments in the budget, he said that anybody with even the best intentions and best knowledge could not find them in the budget documents. He said these provisions were made in the fiscal framework, they’re not easy to follow and they’re not always transparent. That’s something from a government that keeps telling us how transparent they are.

There’s also $500 million in savings this fiscal year for consultants and travel. The Parliamentary Budget Officer did say that it should be relatively easy to achieve those savings, but he went on to say that there’s capacity for some of the work of the consultants to be done within the public service. So while the $500 million in savings is estimated for this fiscal year, $15 billion has been identified in savings over the next four years. The $15 billion in savings includes further reductions in consulting, another $7 billion in reductions throughout government departments and agencies and $1.2 billion in savings from Crown corporations. But there’s nothing there to indicate how government will save all that money. It adds up to $15 billion in savings to be realized beginning next year.

This information is relevant because these savings are incorporated into the government’s fiscal plan and deficit projections for the next four years, and $15 billion in savings over the next four years is a big commitment.

I want to move on to the Canada Growth Fund because I spoke about this last year, and I know Senator Loffreda mentioned it. I want to go back to last year and tell you what transpired. I still have concerns. Actually, I have more concerns this year than I did last year about the Canada Growth Fund.

Last year’s budget announced the government’s intention to create the Canada Growth Fund. It was to be an arm’s-length public investment vehicle intended to attract private capital — like the Canada Infrastructure Bank — to help meet the government’s economic policy objectives and help close the underinvestment gap in Canada’s economy.

It was established last year by Bill C-32. I spoke to the bill at that time. There’s no information on the fund except to say that it would be a wholly owned subsidiary of the Canada Development Investment Corporation, which would be responsible for administering the funds. There’s nothing to say how they are going to administer the funds.

Unlike the Canada Infrastructure Bank and the newly created Canada innovation corporation, the Canada Growth Fund wasn’t enacted under its own legislation. Bill C-32 was very short: It created the fund, and there was no requirement that the fund would report to Parliament. There’s very little information on it.

The Fall Economic Statement said at the time that the fund would operate at arm’s length from the federal government and would invest using a broad suite of financial instruments using all forms of debt equity guarantees and specialized contracts. It would invest on a concessionary basis with the goal that every dollar invested with government funding would aim to attract at least $3 of private capital. The objective of attracting private capital is identical to that of the Canada Infrastructure Bank, which, as we all know, has experienced underwhelming success. The objective is to attract $45 billion of private investment along with $15 billion provided by the federal government for a total investment of $60 billion.

In addition to my concerns over the absence of legislation defining the mandate and governance structure of the fund, Bill C-32, if you will remember, provided $2 billion to the minister to buy shares in the subsidiary corporation. The problem was that the subsidiary corporation didn’t exist. The minister, in response, explained that by saying that the Canada Growth Fund needs to act swiftly and partner with fast-paced private sector entities. Delays, she said, are likely to lead to many lost opportunities. The fund was eventually incorporated as a subsidiary of the Canada Development Investment Corporation later in December.

The Financial Administration Act comes in here. It establishes a very important piece of legislation. It establishes the financial management framework of the government, and it provides direction to government departments, agencies and Crown corporations on financial matters. It’s one of the foundation pieces of legislation within the Government of Canada. That section of the Financial Administration Act requires that certain transactions by a parent Crown corporation or a wholly-owned subsidiary of a Crown corporation must receive Governor-in-Council approval if they have certain types of transactions. That means they have to go to cabinet to get approval. These types of transactions would include acquiring shares of a corporation, acquiring assets or substantially all of the assets of another corporation or selling or disposing of shares.

On December 21 of last year, regulations amending the Crown Corporation General Regulations were published in the Canada Gazette exempting the Canada Growth Fund and its wholly‑owned subsidiaries on that section of the Financial Administration Act. Given that the Canada Growth Fund does not have to comply with section 91 of the Financial Administration Act, that there is no requirement for the fund to report to Parliament and that there is no enacting legislation, the Canada Growth Fund is going to operate beyond an opaque wall. Access to information about the Canada Growth Fund will not be available.

The Regulatory Impact Analysis Statement indicated that this exemption to section 91 of the Financial Administration Act is necessary because approval requirements by cabinet would slow down the fund’s ability to enter into transactions. The intent was to enable the fund to make investments in the first quarter of 2023.

Division 32 of Part 4 of Bill C-47 proposes to amend the Public Sector Pension Investment Board Act to enable the Public Sector Pension Investment Board to manage the assets of the fund. It will allow the board to incorporate a subsidiary for the purpose of providing investment management services to the fund. But it’s also going to amend Bill C-32 to increase the $2 billion that was approved in December by the Fall Economic Statement Implementation Act, so the payout in December is going to increase the amount to $15 billion. That $15 billion will go out right away. We think that’s going to be the end of it, but the funding is not capped at $15 billion because Bill C-47 also provides for additional funding through an appropriation bill.

The Canada Growth Fund has no enacting legislation and no governance structure. Although Bill C-47 provides the fund with $15 billion, there’s no requirement to provide annual reports to Parliament and the fund has been exempted from the accountability requirements of section 91 of the Financial Administration Act.

There’s also confusion over the eventual structure of the fund. The regulatory impact analysis said that the fund was intended to be a subsidiary of the Canada Development Investment Corporation only on an interim basis, yet officials testifying at our Finance Committee last week indicated that the fund will remain as a subsidiary of the Canada Development Investment Corporation.

While it was the objective of the government to enable the fund to make investments in the first quarter of this year — as the minister said, the fund had to act quickly — the fund is yet to begin operating. So much for the fund acting swiftly with the fast-paced private sector. The government hasn’t even been able to get the fund set up properly. In any event, I’ve seen enough of the Canada Growth Fund that I do not think it’s going to end well.

I want to talk about the Canada innovation corporation act. Division 7 of Part 4 of the bill proposes to enact the Canada innovation corporation act. That one does have its own legislation. The act says:

. . . to maximize business investment in research and development across all sectors of the economy and in all regions of Canada to promote innovation-driven economic growth.

What does maximize business investment mean, what does innovation-driven economic growth mean and how will the government measure it if they’re going to put money into this organization?

The legislation does not indicate any specifics as to what the government expects the corporation to deliver, achieve or how the government will measure the corporation’s success or lack thereof. This is especially concerning because numerous funds already exist within the government with the objective of driving economic growth.

For example, there’s the Strategic Innovation Fund, the Greening Government Fund, the Innovative Communities Fund and the funding to support clusters and superclusters, all of which are funds disbursing billions of dollars. Yet the Deputy Minister of Innovation, Science and Economic Development Canada and the Deputy Minister of Finance told the Senate Banking Committee that none of these funds have ever been evaluated to determine what their impact has been on the economy. This means that the government does not know whether these existing funds disbursing billions of dollars have actually achieved any economic benefit.

Since this corporation has been created to maximize business investment and promote innovation-driven economic growth, the government needs to define the structure and criteria against which the corporation will be evaluated.

Section 20 of the proposed Canada innovation corporation provides the money for the government to operate. Because the money is coming from the Consolidated Revenue Fund to the corporation and is provided for in the act, the payments are statutory. That means that the money will be paid out each year automatically and the money doesn’t need to be requested in an appropriation bill, so there will be no more parliamentary debate about this money.

According to Bill C-47, the corporation will receive $198 million this year. Next year, they’re going to receive $775 million, $800 million the following year and another $800 million the next year. That adds up to more than $3 billion to be paid to the corporation in its first four years.

The money for the corporation doesn’t end there. The act requires that the minister will pay the corporation $525 million each and every year after March 2027, and there’s no end date. The legislation specifically says for each subsequent financial year, $525 million, and that’s it. As I said, this amount is also statutory.

Once Bill C-47 is approved, the government has the authority to pay out this money and there will be no further parliamentary debate. But the money for the Canada innovation corporation doesn’t end there. While Bill C-47 specifically provides $3 billion for the first four years and $525 million for each year starting in 2027-28 and never ending, Bill C-47 also provides for additional funding above and beyond these amounts through an appropriation act. Billions of dollars for a corporation whose mandate has not been well-defined, nor do we know specifically what the corporation is supposed to achieve with all those billions of dollars.

The act also states the corporation is not an agency of the Crown, with the exception of more specific activities, but officials could not clearly explain what benefit this provides to the corporation or what benefits or disadvantages this has for the government. Even though Bill C-47 states that the corporation is not an agency of the Crown, the corporation is actually being created by an act of Parliament and is being funded by the public purse, and it carves out numerous roles and responsibilities for both the Minister of Finance and the Minister of Innovation, Science and Industry. In fact, the word “minister” appears 46 times in the Canada innovation corporation act.

While Bill C-47 includes some elements of a governance structure, noticeably absent is any reference to the appointment of auditors or the requirement of the corporation to table its annual reports in Parliament. The bill does reference the Financial Administration Act, which requires certain information to be included in the quarterly and annual reports of the corporation, but it stops short of requiring that the reports be tabled in Parliament.

As Senator Loffreda mentioned in his speech, the Standing Senate Committee on Banking, Commerce and the Economy in its report on Bill C-47 suggests that the government evaluate the corporation three years after its creation to determine whether it has been successful in meeting its mandate and publish the results of this in-depth evaluation in its annual report that should be tabled in Parliament.

I came across a survey that I found very interesting, and it relates to these two organizations that receive a lot of money from the government. The government is looking to the private sector to increase investment in Canada. I found the results of this survey very interesting and informative. It was a survey of 30 CEOs that was carried out by Nanos Research between March 15 and April 12 of this year for The Globe and Mail. The 30 CEOs oversee public and private companies from all sectors of the Canadian economy. The results of the survey won’t be surprising to members of the Banking Committee because they reflect the testimony that we heard at our Banking Committee, which is studying business investment in Canada.

More than 6 in 10 CEOs believe Canada is on the wrong track when it comes to being a place for business to invest. Only one third of the CEOs held a positive view that Canada is a good place to invest right now, which is a decline from five years ago. Issues raised include a lack of clarity on overall industrial and business policy, government’s hostility to business in general and the lack of consultation or collaboration with large businesses.

The results of the survey were consistent with the Business Council of Canada, whose members include the largest companies in Canada. The CEO of the Business Council of Canada also said that the federal government’s support for low-carbon energy, critical minerals strategy and clean-technology manufacturing needs projects that can move ahead, and if the government’s policy cannot provide assurance that projects can be approved and executed, then companies will be reluctant to invest. We’ve heard a lot about the government’s regulatory regime and how difficult it is for projects to be approved.

Taxation was another area of concern, where they said that Canada has the fourth-highest marginal income tax rate among its peers, and corporate tax rates that put Canadian companies at a disadvantage compared to the U.S. New taxes, including the bank tax, a tax on dividends from financial services companies and a share buyback tax aren’t helping businesses stay competitive. About 8 in 10 CEOs think that Canada will be in recession in the second half of the year — this was also included in the survey.

Unlike our federal government, which continues to spend, CEOs surveyed have been proactively preparing for a downturn in the economy by managing their costs and fortifying their balance sheets.

I think I still have a few more minutes.

Hon. Senators: Agreed.

[English]

Senator Loffreda: Thank you for the question, Senator Wallin. Our committees did look at that issue. I think everything pretty much goes into the general coffers, but I will get back to you with a clear answer on that issue and get back to our committee that reviewed that portion of the bill.

The Hon. the Speaker: Senator Loffreda, your time is up. Are you asking for five more minutes?

Senator Loffreda: Yes.

Hon. Denise Batters: Senator Loffreda, in your remarks you briefly mentioned the Canada Infrastructure Bank and said how that was a lesson to be learned from as you referred to the Infrastructure Bank as being “slow to get off the ground.”

The last I heard, this particular Infrastructure Bank had spent $35 billion and did not yet have one project completed. Do you have information that is different than that?

Senator Loffreda: I mentioned it as part of the budget implementation act, or BIA, to not repeat those errors that have happened with respect to the Infrastructure Bank. But the Infrastructure Bank is not part of this BIA, as you know. At times it is not easy to start a corporation. A start-up is never easy. It takes a lot of effort, resources and the right people in place. I am confident that, with the Canada innovation corporation, we’ll get the right people and resources in place. We saw with the Canada Growth Fund that the right measures have been taken and going forward it will help the economy.

With respect to the Infrastructure Bank, I don’t think it’s relevant in our discussion here, but you could ask the government that question in one of your questions during Question Period and they will have the up-to-date information. I’m certain that they do have that up-to-date information. But I want to keep it relevant to the BIA, and not everything in the budget makes it to the BIA. I’m willing to answer economic questions if there are any. But I will leave the Infrastructure Bank up to the government to respond to that issue.

The Hon. the Speaker: Is leave granted, honourable senators?

Hon. Senators: Agreed.

The Hon. the Speaker pro tempore: Senator Marshall, you don’t. If you want a few more minutes, you can ask. Senator Marshall, are you asking for five more minutes?

The Hon. the Speaker pro tempore: Do we have consent?

The Hon. the Speaker pro tempore: Senator Marshall, I hate to disturb you, but do you have a quick conclusion?

Hon. Colin Deacon: Honourable senators, I am rising to speak to Bill C-47, the budget implementation act, 2023, no. 1. You might expect me to focus on the billions intended to spur business investment, but I think Senators Loffreda and Marshall have done a great job there, and I will move on to something else that I am a little bit more focused on, and that is Division 39 of Part 4, at the very end of this 430-page bill.

It appears innocuous enough, introducing what seems to be a reasonable amendment to the Canada Elections Act, the stated purpose being:

. . . to provide for a national, uniform, exclusive and complete regime applicable to registered parties and eligible parties respecting their collection, use, disclosure, retention and disposal of personal information.

When I read this, however, a couple of thoughts came to mind. One, using a budget bill to change the Canada Elections Act challenges the long-standing practice of openly debating these changes in Parliament and arguably sets a troubling precedent. Two, given that there is actually no national, uniform and complete privacy regime governing how federal political parties currently collect, use, disclose, retain and dispose of personal information, what’s going on?

You may recall that we passed the Elections Modernization Act in December 2018. It allowed political parties to self‑regulate their collection and use of personal information linked to Canadian voters as long as they published their privacy policies. This is what the Privacy Commissioner was referring to when he spoke to our Legal Committee — that it was a good first step that they publish those privacy policies, but that those policies don’t live up to the 10 principles under PIPEDA. He also stated that he has no jurisdiction in which to investigate or comment on those privacy policies.

These voluntary policies are not uniform and they are not complete, especially when compared to any reasonable international norms. These voluntary policies don’t reflect the privacy protections that corporations or governments must follow, particularly as it relates to the areas of consent, transparency and accountability. Looking back, I was a bit naive to think any group should be entirely free to regulate their privacy policies, but that’s where we are; no uniform and complete privacy policies govern federal political parties at this time.

In their study of Bill C-47, our Legal and Constitutional Affairs Committee noted that privacy safeguards, or the lack thereof, can impact Canadians’ trust in political parties and, by extension, the electoral process. They recommended that amendments to the Canada Elections Act should follow consultations with the Chief Electoral Officer and the Privacy Commissioner and be introduced in a separate bill to allow for thorough study, noting that neither occurred in this case.

Well before the Facebook–Cambridge Analytica scandal, which was the non-consensual use of private information of tens of millions in a malicious way to influence voters in various elections, Canada’s Privacy Commissioner and Chief Electoral Officer were speaking about voter privacy. For example, in 2012, they raised serious concerns about the lack of privacy protections for Canadian voters.

Two years later, in 2014, then-Minister of State (Democratic Reform) Pierre Poilievre introduced Bill C-23, which was called the Fair Elections Act. It offered no privacy protection to Canadian voters.

Another four years passed. In 2018, Karina Gould, then Minister of Democratic Institutions, testified in defence of Bill C-76, the Elections Modernization Act, before our Legal Committee. When asked about self-regulated privacy protection, she pointed to the need for:

. . . a study to be conducted for parliamentarians, to examine how political parties could be a part of a system to protect personal information.

Interestingly, just as Bill C-76 received Royal Assent, the House of Commons Standing Committee on Access to Information, Privacy and Ethics published just such a study called Democracy under Threat: Risks and Solutions in the Era of Disinformation and Data Monopoly. The House Ethics Committee study was in direct response to the Facebook–Cambridge Analytica scandal. This group of elected MPs from across the political spectrum recommended urgent action, including subjecting political parties to the Personal Information Protection and Electronic Documents Act, along with their contractors, like social media platforms, data brokers, polling firms and consultants. Another recommendation read:

. . . grant the Office of the Privacy Commissioner and/or Elections Canada the mandate and authority to conduct proactive audits on political parties . . . regarding their privacy practices and to issue orders and levy fines.

The authors also suggested that the government enact legislation requiring social media companies to create publicly searchable databases of online political advertising; label political advertising; label content that is produced automatically or algorithmically; remove accounts that impersonate others for malicious reasons; and remove harassing, threatening or maliciously manipulated content like “deep-fake” videos, among other recommendations.

To date, Canada’s federal political party leadership has ignored these recommendations from their own caucus colleagues on the House Ethics Committee.

Soon thereafter, the Privacy Commissioner and the Chief Electoral Officer issued a joint statement requesting that our federal political parties voluntarily adopt privacy policies that align with international privacy law standards and that are based on the principles of consent, transparency and accountability. Little or nothing has changed.

I encourage you all to read the various privacy policies of our federal political parties to find evidence that any party has voluntarily implemented the recommendations I have just cited. I did not.

So why is Division 39 even in this budget bill? It seems to be that in 2022, British Columbia’s Information and Privacy Commissioner ruled that federal political parties must adhere to B.C.’s privacy regime governing political parties, and I suspect that is in response to persistent inaction.

The commissioner listed the array of personal data collected without voter consent. It’s eye-opening. Political party privacy policies give voters the right to correct inaccurate information, but those voters have no right to access that information. It includes information from the voter registry but also information scraped from the internet, gathered through apps and social media and by door-to-door canvassers. You currently have no right to ask political parties to stop sharing your information with a third party, like a consultant, polling firm or social media platform. If they suffer a cyber breach, like the government database breach that affected 100,000 Nova Scotians this past week, they have no obligation to let anyone know. Corporations and governments are obligated, and for good reason.

These federal political parties have ignored more than a decade of recommendations from the two officers of Parliament responsible for these issues. They’ve ignored the House Ethics Committee’s carefully researched recommendations. And when B.C. decided enough was enough, the Liberal, Conservative and NDP parties challenged that decision in B.C. Supreme Court. In these hyper-partisan times, I have to say it’s truly remarkable that this is the one issue that Conservatives, NDP and Liberals all agree on.

So why are they fighting so hard? One reason is that each party has an enormous database of granular data linked directly to identified voters. The Conservatives have their Constituency Information Management System, or CIMS; the Liberals have Liberalist; and the NDP has NDP Vote. Each party also has apps that gather extensive data and advanced information management systems to process all that data.

Canadian voter data has many uses, including enabling the micro-targeting of political messaging to like-minded voters within the broader population. When these political party databases are combined with the staggering amounts of highly personal data held by Facebook and other social media and big tech companies, their sophisticated methods can accurately predict who will respond to which type of political messaging with almost instant results.

I liken micro-targeting to digital gerrymandering, and it turbocharges highly divisive wedge politics.

Political organizers openly admit that voters no longer choose their political parties — political parties choose their voters. I, for one, find this troubling.

I first learned about micro-targeting 11 years ago while listening to “Under The Influence,” which is a CBC Radio One show hosted by Terry O’Reilly. I encourage you to listen to his 30-minute archived podcast from April 28, 2012. You will start to understand why the House of Commons Standing Committee on Access to Information, Privacy and Ethics titled their report Democracy Under Threat: Risk and Solutions in the Era of Disinformation and Data Monopoly. They saw the current political party privacy regime was posing a risk to our democratic and electoral reform process, and they recommended urgent action to protect Canadians and democracy.

What do Canadian voters think about political party privacy?

In their report on the 2021 election, Elections Canada found that 96% of Canadian voters want laws to regulate how political parties collect and use their personal information. Our current federal laws are completely at odds with Canadian voters on this issue of trust.

Regardless, the three political parties continue to defiantly ignore the repeated recommendations that they begin to adhere to international privacy standards and third party oversight; to obtain content prior to collecting personal information; and to inform citizens of a personal information breach that might cause them significant harm.

These risks are not hypothetical. In January of this year, the Green Party voluntarily announced the accidental release of names, addresses, phone numbers, birthdates and other data related to party members and supporters. Importantly, they were under no obligation to do so. Would other parties do the same? We may never know.

Does the highly personal data held by the other three national political parties benefit from some exceptional cybersecurity protections? I certainly hope so.

That’s because foreign adversaries could use these troves of detailed personal information to sow division right across Canada. There has been a lot of talk about foreign interference in our democracy this year, yet these parties continue to ignore the risks highlighted by their own MPs five years ago.

Just imagine how unprecedented volumes of granular data tied to identified Canadian voters could enhance the clandestine efforts of Canada’s adversaries, especially as we enter the era of generative artificial intelligence, or AI, built on large databases. This makes our political parties highly valuable cyberattack targets. If it happens, they are under no obligation to tell us.

Canadians are increasingly at the wrong end of a data vacuum. It is now estimated that each Canadian generates an average of about two megabytes of data every second. For perspective, the complete works of Shakespeare are five megabytes of data. That is about two and a half seconds’ worth of the data that each of us generates from our digital devices and activities. That is why citizens want control of their data. In most countries, they have it. We know that there is a lot of it, but we don’t know what is done with it.

Our Standing Senate Committee on Banking, Commerce and the Economy has been examining the issue of business investment in the digital era. We have heard from venture capital investors and founders of some of the most incredibly fast‑growing tech companies. Each one relies on data to create value that they export globally. They all emphasized that their company’s success demands that they establish and maintain a strong social contract with citizens — this being the right for individuals to control their data, and to have confidence and trust in how that data is used.

In the opinion of those globally successful investors and entrepreneurs, this social contract — this trust — is foundational to Canada’s future prosperity.

In a recent op-ed in The Hill Times, University of Victoria political science professor Colin Bennett, who has been researching this for a decade, wrote:

Political parties are regulated under privacy law in almost every other democratic country in the world, including those regulated under the European Union’s General Data Protection Regulation.

He also stated that the regulatory gap in Canada has become untenable and indefensible.

Where to from here?

Well, we know what has not worked. The leadership, executives and boards of the New Democratic Party, Liberal Party and Conservative Party have consistently ignored the will and advice of the two officers of Parliament responsible for privacy and elections. They have ignored the House of Commons Ethics Committee, and they have refused to voluntarily adopt privacy policies that align with global norms.

Instead of heeding this advice, the government is now including — in the budget implementation act of all places — a Band-Aid clause that allows the three parties to maintain the status quo. Perhaps we should invite the presidents of these federal political parties to explain the reasons and evidence behind their inaction. Maybe they have evidence that, somehow, democracy in Europe has been undermined by the General Data Protection Regulation’s voter privacy protections.

Some Hon. Senators: Hear, hear.

The Hon. the Speaker pro tempore: Senator Deacon, I’m sorry, but I have to interrupt you. We have to move forward for the vote on Bill S-5.

I believe that there is agreement on a bell.

Honourable senators, it being 5:15 p.m., I must interrupt the proceeding. Pursuant to rule 9-6, the bells will ring to call in the senators for the taking of a deferred vote at 5:30 p.m. on the motions responding to the message on Bill S-5.

Call in the senators.

On the Order:

Resuming debate on the motion of the Honourable Senator Gold, P.C., seconded by the Honourable Senator LaBoucane-Benson:

That, in relation to Bill S-5, An Act to amend the Canadian Environmental Protection Act, 1999, to make related amendments to the Food and Drugs Act and to repeal the Perfluorooctane Sulfonate Virtual Elimination Act, the Senate agree to the amendments made by the House of Commons; and

That a message be sent to the House of Commons to acquaint that house accordingly.

Hon. Paula Simons: Senator Deacon, you touched quite disturbingly on the power of political parties and bad actors to weaponize this kind of data. But I wanted to ask about something much simpler. Given the low voter turnout that we’ve seen over the last decades, is there a danger that if people don’t feel that parties can be trusted to keep their data, that they won’t volunteer, that they won’t donate, that they won’t answer questions in a poll? What is the impact of this kind of lack of privacy protection on our day-to-day relationship with our democracy?

Senator C. Deacon: Thanks, Senator Simons. I would say that businesses will tell you how it affects customer bases. If the customer base doesn’t trust how they are using data, what data they’re collecting, what they’re using it for and how that benefits individuals, they tend to lose engagement with those customers.

I think the same may be true for voters, as 96% of Canadians have said they want political parties to have privacy protections. That’s a pretty clear number. There aren’t a lot of things that 96% of Canadians agree on.

I agree with the findings of the House of Commons Ethics Committee, which is that it undermines our democracy. It undermines things over time.

I know the House of Commons is not chomping at the bit to deal with this, but it is an issue that I think the Senate needs to be very well aware of. It’s worrisome that we haven’t seen any action yet. Thank you.

The Hon. the Speaker: Honourable senators, the question is as follows: It was moved by the Honourable Senator Gold, P.C., seconded by the Honourable Senator LaBoucane-Benson:

That, in relation to Bill S-5, An Act to amend the Canadian Environmental Protection Act, 1999, to make related amendments to the Food and Drugs Act and to repeal the Perfluorooctane Sulfonate Virtual Elimination Act, the Senate agree to the amendments made by the House of Commons; and

That a message be sent to the House of Commons to acquaint that house accordingly.

Motion agreed to on the following division:

On the Order:

Resuming debate on the motion of the Honourable Senator Loffreda, seconded by the Honourable Senator Boehm, for the second reading of Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023.

The Hon. the Speaker: Your time has expired. I see that Senator Simons has a question. Are you asking for five more minutes?

Senator C. Deacon: With the will of the chamber, Your Honour.