Flaherty Warns of 'Significant' Hit to Federal Revenue

TRANSCRIPT - TRANSCRIPTION - Minister Jim Flaherty - Ministre Jim Flaherty

Minister of Finance Jim Flaherty

TRANSCRIPTION/TRANSCRIPTION

DATE/DATE:  March 8, 2013 11:30 a.m.

SUBJECT/SUJET:      
 Media Availability with Minister of Finance Jim Flaherty Following a Meeting with Private Sector Economists.

Hon. Jim Flaherty:                 
Good morning.  Bonjour.  Once again – I’ll just wait for Les to be comfortable there.  Are you okay?  All right.  Got to respect veterans. 

 

Once again, I’m not announcing a budget date right now.  I did meet with private sector economists this morning which I do regularly. The purpose of the meeting is to make sure that the government’s economic and fiscal forecasts are based on the best third party independent analyses that are available in Canada. The goal is to achieve a consensus that the March 2013 survey of private sector economists is a reasonable basis for fiscal planning. And we agreed this morning that it is.

We will continue to see modest GDP growth in Canada. The growth projections are slightly lower in the near term, as I expected when I spoke with you last week, mainly in 2013-2014.  The factors involved there are the continuing issues, challenges in Europe and the United States.


There’s some good economic news this morning, more jobs. We’re at a situation now in Canada that we’ve recovered, that we have gained almost one million net new jobs since the end of the recession in July 2009.  The U.S. job numbers this morning are also good. They beat market expectations. The housing starts number this morning was positive. And just recently, this morning General Motors of Canada Limited announced an investment of $250 million to upgrade their plant, their CAMI Plant at Ingersoll, Ontario. I spoke with the President of General Motors yesterday about that and that is a welcome investment in Canada. As you know, the Canadian people remain shareholders in General Motors.

The key government contribution that we can make in terms of budgeting and any government can make is to ensure that we maintain a sound fiscal position which we will do in this year’s budget for Canada. That means no dangerous risky new spending programs, careful control of the spending which we do control, no new taxes.  In a positive way, it means emphasizing jobs and growth.

In our consultations by our caucus members and the ministers and so on across the country, we have heard repeatedly from Canadians about the importance of matching Canadians to the jobs available, then making sure that our skills training, our education processes lead Canadians to the jobs that are being created, the thousands and thousands of jobs that are being created in the Canadian economy. We’ve been focussing on that, among other priorities. And we have work to do.

I heard more comments about skills training today from the private sector economists who very graciously have once again shared their advice with me and with Minister Menzies which will help us shape the budget which is to come soon. 

I welcome your questions.

Moderator:                        
 Thank you very much. Everybody, please introduce yourself, your outlet. We have time for one question, one follow-up each and we’ll start over here to my right.  Go ahead.

ON BALANCING BUDGET
Question:                                
Good morning, Minister.  Jessica Murphy with Sun Media. I’m wondering in your budget how you’re going to balance the – or offset the impact of declining tax revenue from a province like Alberta, for example, and try to balance the budget in 2015. 

Hon. Jim Flaherty:              
Yeah, well, we’ve been – we’ve been looking at savings within government certainly. On the revenue side, we’ve been looking at various loopholes that some people engage in in order to avoid paying their fair share of taxes.  On the expense side, we have been focussing of course on that part of the budget that is spending by the government itself.  We are committed not to reducing transfers to the provinces and we are committed not to reducing transfers to individuals. That takes up a lot of budget room. So we have to focus like a laser on our own spending which I’ve been doing.

Question:                                
Are you still confident you’ll be able to balance the budget by 2015?

Hon. Jim Flaherty:              
Yes, we’re still on track. The projections by the private sector economists, as I said, are slightly lower, particularly in the near term.  But we are on track to balance the budget in 2015 in the current parliament.

Moderator:                          
 Great, thank you.  Moving over to the left mic, I think Bill Curry there is the first one.

ON SKILL TRAINING
Question:                                
Minister Flaherty, Bill Curry from The Globe and Mail. On your comment about skills training, in your 2007 budget, you fully devolved skills training under Part 2 of EI to the provinces. It’s been five years now. Are you dissatisfied with how that’s going, how the provinces are handling that? And are you looking at reclaiming that two billion to make it a federal responsibility instead of the provinces running it?

Hon. Jim Flaherty:                 Well, I think it’s important that we work with the provinces and territories on skills training broadly defined. There’s significant provincial responsibility there. Having said that, there’s no question that the delivery of those kinds of services generally are better placed with the provinces and territories.  What we are looking at though is outcomes. Are we seeing the kind of employment outcomes that we expected to see? What is the degree of accountability? It’s very important in Canada with an unemployment rate in excess of seven percent that we ensure that young people in particular are matched to the jobs that are available.

You know, I can tell you anecdotally on the Toronto subway when I get a young person coming up to me saying I’m on my way to my job, Minister, as a grocery clerk at Loblaws, nothing wrong with being a grocery clerk at Loblaws, it’s a good job, but he just graduated from Ryerson, right? So we’ve got to do a better job of connecting – connecting the skills that people have and the education that people have with the jobs that are available in Canada.

ON TAX LOOPHOLES
Question:                               
Okay. And then to follow up on your comment about tax loopholes, that can mean a lot of different things to different people.  Some people if you spend more money on CRA – at CRA to go after people abroad hiding money, you’ll more than get that back.  Tax loopholes sometimes also mean tax expenditures, all the various tax credits domestically so are you looking at both of those things or more enforcement? What do you mean by tax loopholes?

Hon. Jim Flaherty:              
What I mean is everybody should pay their fair share of taxes and people shouldn’t be hiding money from the Government of Canada. Some people do that offshore and, sometimes, you’re right, it makes sense to invest more resources, for example, in the Canadian Revenue Agency so that we are better at policing the minority of Canadians who do not pay their fair share. So we’re looking at that side of it. We’re looking at the revenue side of it at some tax policies that create inequality and at some actions, regrettably, by some who would evade their tax responsibilities.

Moderator:                          
Thank you very much.  Terry Milewski.

ON UNEMPLOYMENT 
Question:                                
Good morning, Minister. Terry Milewski with CBC.  I have a question on behalf of the financially unsophisticated among us. You said that the job numbers this morning are good news but some of those unsophisticated Canadians might wonder well, how is it that we are apparently creating jobs at a pretty good clip and the unemployment rate doesn’t budget?  Can you explain that? What’s going on behind those numbers?

Hon. Jim Flaherty:              
Well, it depends on of course the number of people seeking jobs in Canada so the number will – the unemployment number percent will bounce around depending on that. And the U.S. measures their unemployment rate differently than we do with a different age at the beginning and so on so comparing the U.S. number and the Canadian number, the Canadian number is actually even better than it looks vis-à-vis the U.S. number.  But the key is that we’re seeing continuing job creation in Canada.  The number of people seeking employment varies.

Question:                               
 My follow-up is can you give us a date when you will give us a date?

Hon. Jim Flaherty:              
If you can tell me when the papal conclave is going to be, then I can perhaps do that.  No, Terry, we just haven’t decided yet.  There’s no great mystery. As soon as we make a decision, I’ll let you know.

Moderator:                          
 Go ahead.

SKILL TRAINING
Question:                                
Minister Flaherty, Alessia from iPolitics. Nice to see you. My question is in relation to the skills – skill training money that we’ve been hearing about in the budget.  I was wondering if you can give us a little more insight into what exactly we can expect in terms of changes. You just said that the delivery of this money is best kept in the provinces but you also said that there is very little accountability of how that money’s being spent and whether it’s actually leading to real jobs. We know that there’s a big shortage of construction workers in the energy sector.  What can we – in terms of details, what can we expect to see in changes in terms of this accountability?

Hon. Jim Flaherty:                 The delivery of the service itself, that is occupational counselling and so on, I think logically belongs with the provinces. There are other areas in which we can – we can deal with how – how one – how the system is funded. There’s no suggestion, by the way, that there be any reduction in spending by the Government of Canada on skills training. It’s too important.  It’s a priority of the budget.  For the rest of it, you’ll have to wait for the budget.

Question:                                Okay. No follow-up.  Thanks.

Moderator:                             Thank you. Gordon from Financial Post.

ON MORTGAGES
Question:                                
Yeah, hi.  Last week you gave a statement on mortgage rates, the so-called race to the bottom.  Are you still concerned about that? Has there been any change?

Hon. Jim Flaherty:                 Yes, I am concerned about that. I spoke with the relevant bank this week – well, with BMO.  BMO reduced their rate.  And I spoke with them about that this week and expressed my concern — my concern in two ways.  One, it’s an objective reduction of course but it’s also symbolic and we remain concerned, I remain concerned with the housing market in Canada. We’ve seen some moderation in the housing market which I think is a good thing. As you know, we’ve tightened up the mortgage insurance rules four times over the – over the recent years. So I thank those Canadian financial institutions that have not chosen to reduce their rates further.

Question:                                
Are you planning any more jawboning with these banks?

Hon. Jim Flaherty:                 Any more jawboning?

Question:                              
 Yeah, these banks. Encouraging them to —

Hon. Jim Flaherty:              
 I encourage responsible lending. I think that financial institutions of course are major players in the residential mortgage market and it forms a major part of their asset portfolios and the Government of Canada has a lot to say about it, not only because we’re concerned about the economic fiscal health of the country but also we have CMHC and many of those mortgages held by the private sector financial institutions are ensured with Canada Mortgage and Housing Corporation.

Moderator:                             Great.  So we have time for one more question. We’ll finish off over here on the left.

Question:                                Hello, Minister. On last year’s budget you had budgeted for a 4.4 GDP – nominal GDP growth this year. How much of a hit are you going to take on revenues because of the slower growth?

Hon. Jim Flaherty:                 How much of a kick are we going to take on the revenue side because of lower nominal GDP?

Question:                                Yes.

Hon. Jim Flaherty:                 Significant.

Question:                                Significant.

Hon. Jim Flaherty:                 It’s significant, yeah.

Question:                               
 Is it greater than the margin for risk that you had put in there?

Hon. Jim Flaherty:              
 We will manage it. The key is looking forward to the next two years and making sure that we stay on track to balance the budget in 2015-2016. There are a number of measures we can take to do that and you’ll see them in the budget.

Thank you.

Moderator:                             Thank you very much, everyone.  We do have time for a few economists to answer some questions so thank you very much, Minister Flaherty.