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Budget Implementation Bill, 2016, No. 2

Honourable senators, I rise today as Government Representative and sponsor of Bill C-29. This bill implements provisions of the government's budget tabled in Parliament on March 22, 2016. As you know, measures contained in that budget included the middle class tax cut, the new Canada child benefit, the enhanced Canada Pension Plan, an increase to the Guaranteed Income Supplement for seniors, measures to extend EI benefits in regions affected by changes to commodity prices, and service improvements for veterans.

The government received a democratic mandate to enact these policies, and passing budget legislation in the Senate is necessary to effect the government's commitments to Canadians.

To put my observations and this budget implementation bill into context, I want to point out that the overall objective of the government's policy is to promote economic growth in a way that strengthens the middle class and benefits Canadian families, workers and the most vulnerable members of our society. The budget implementation bill that we are examining today contains measures that are key to meeting that objective.

For example, starting in 2020, Bill C-29 indexes the Canada Child Benefit for inflation to ensure that this tax-free benefit will continue to help Canadian families in the years and decades to come so that the benefit keeps pace with the rising costs.

This benefit means that nine out of 10 Canadian families are already receiving higher monthly benefits, almost $2,300 each on average for 2016-17 compared to the previous system. Parents with children under 18 will receive annually as much as $6,400 per child under the age of six and up to $5,400 per child for those aged six through 17. This is money that will help relieve the high cost of raising children, whether these funds are used for buying school supplies, covering grocery bills or buying warm coats for the winter.

Honourable senators, I am happy to say that the new Canada Child Benefit will lift hundreds of thousands of children out of poverty in 2017, compared with 2014. I am sure that particularly at this time of the year many of us will be reflecting on the importance of helping all Canadian kids have a happier childhood and a fair shot in life. From a personal standpoint, working on legislation that addresses issues like child poverty reaffirms the purpose and focus of our work here in Parliament.

With this second budget implementation act, the government is also following through on a Budget 2016 promise to support senior couples who face higher costs of living and increased risks of poverty as a result of living apart.

In Budget 2016, the government restored the age of eligibility for Old Age Security and Guaranteed Income Supplement benefits to age 65 and allowance benefits to age 60 over the 2023 to 2029 period.

This budget also increased the Guaranteed Income Supplement top-up benefit by up to $947 annually for the most vulnerable single seniors starting in July 2016. This change is helping those seniors who rely almost exclusively on OAS and GIS benefits to get by. It increased the maximum GIS by 10 per cent for the lowest-income single seniors.

Bill C-29 amends the Old Age Security Act to increase its flexibility. When a couple receives GIS and spousal allowance benefits and happen to be living apart for reasons they cannot control, each member of the couple would receive benefits that are based on their respective incomes.

By extending this treatment to couples receiving GIS and allowance benefits, the government is improving fairness for seniors and helping them enjoy a dignified retirement. The enhanced CPP enacted through Bill C-26 is of course an important part of meeting this goal in the future.

Bill C-29 strengthens the integrity of the tax system by eliminating the loopholes currently being used to avoid paying taxes in order to ensure that everyone pays their fair share of taxes to fund public investments and services. The bill reiterates the government's willingness to crack down on tax evasion and avoidance with provisions that implement country-by-country reporting standards and the common reporting standard. These policies were developed by the G20, the OECD, and here in this chamber by Senator Downe.

In the interest of transparency, I am going to briefly present the specific technical measures set out in Bill C-29. For a more in- depth analysis of these measures, I direct you to the legislative summary that was distributed to all senators and their staff yesterday.

Part 1 of Bill C-29 makes various amendments to the Income Tax Act. Some of the many amendments include the indexing of the Canada Child Benefit, technical amendments to the tax treatment of switching between mutual funds and the interest accumulated on sales of debt obligations, and the clarification of the tax treatment of emissions allowances. Bill C-29 also seeks to prevent a multiplication of access to the small business deduction through specific tax planning structures. Part 1 also provides for the implementation of country-by-country reporting standards by large multinationals as part of the OECD's base erosion and profit shifting project, and as I already mentioned, the implementation of the common reporting standard for G20 countries, effective July 1, 2017.

Part 2 of Bill C-29 makes additional technical amendments related to CRA assessments. Part 3 of the bill makes related changes clarifying that the CRA and the courts may increase or adjust an amount included in an assessment under the Excise Tax Act that is under objection or appeal at any time provided the total amount of the assessment doesn't increase.

Part 4 of Bill C-29 makes technical amendments to Employment Insurance provisions. Specifically, Bill C-29 would establish the specific concept of not suitable employment in legislation rather than in regulation. This would align more directly with previously existing jurisprudence. Part 4 also contains changes to the Old Age Security Act, which I have discussed. In addition, Part 4 modernizes the governance of the Royal Canadian Mint Act.

Part 4 also includes the financial consumer protection framework for the banking sector. I know this issue has caused concern to some in this chamber and generated some public discourse. Let me speak more extensively about this section of the bill to explain what it does and why it is good for Canadians. I will begin with the policy planks and then provide a few practical examples.

Honourable senators, Part 4, Division 5, enacts the financial consumer protection framework. This should not come as a surprise since in Budget 2016 the government announced its intent to modernize and enhance the financial consumer protection framework in the Bank Act.

Bill C-29 proposes to consolidate existing consumer provisions related to banking into a new part of that act, which helps to clarify the scope of the framework and facilitates its interpretation by eliminating discrepancies in how similar products and services are treated. In the specific, federally regulated sector of banking, new consumer-friendly principles are proposed that would guide the interpretation of specific provisions of the new part and help achieve better outcomes for consumers and the public with respect to banking.

To enhance the existing provisions and ensure that the consumer protections for banking are robust, the following targeted enhancements are proposed.

Regarding access to basic banking services, Bill C-29 makes amendments, including allowing the use of a broader range of personal identification documents to open an account or cash Government of Canada cheques.

Bill C-29 also makes amendments in relation to unfair business practices, including a new prohibition on applying undue pressure on a person and adding cancellation periods to a wider range of products and services.

Further, this framework makes amendments to disclosure in the banking sector, including expanding the use of summary information boxes for banking products and services.

It also makes amendments regarding the handling of complaints, including requirements for banks and external complaints bodies to report on the number and nature of complaints received.

The act also enhances accountability, with amendments including requirements for banks to report on measures to address the challenges faced by vulnerable Canadians. Now boards of directors of the banks will be directly responsible for ensuring that the banks comply with all these important consumer provisions.

Further, this consumer protection framework for banking asserts federal paramountcy over the banking sector, which is specified as an exclusive federal power in section 91(15) of the Constitution Act, 1867.

The paramountcy clause in Bill C-29 is intended to support the exercise of federal legislative jurisdiction over the incorporation of banks and banking in respect to new part 12.2 of the act.

The paramountcy clause states that the new part is intended to be, except where otherwise specified, paramount to any provision of a law or regulation of a province that relates to the protection of consumers or business practices with respect to consumers. The exclusivity provision is drafted very narrowly to apply only with respect to the new part of the act.

On the whole, the new part is intended to provide for an efficient national banking system and ensure that consumers have consistent and uniform protections across banking products and services, no matter where they bank.

The question follows: Why is this a good idea? The proposed amendments affirm that the Bank Act sets out a system of exclusive consumer protection rules for banks in order to ensure that Canadians benefit from the same rights and protections across the country, enhancing their financial mobility in our integrated national economy. This makes sense and speaks to the underlying rationale of having banking as a sector of exclusive federal jurisdiction.

Without a comprehensive and exclusive federal consumer protection framework, consumers would be subject to a patchwork and confusing array of protections. Bill C-29 provides the clarity and simplicity that Canadians deserve in their day-to-day use of bank products and services and provides for better outcomes.

Here are a few concrete examples: A resident in one province using a bank-owned automated teller machine in another province could potentially have to know and understand three sets of rules. How would this person know who to turn to for a complaint? The same could be said about any Canadian travelling in Canada or banking online. Which rules would apply? This bill would clarify that one set of rules would apply across the Canadian banking system.

Another example: The use of bank-issued prepaid cards is increasing. If a patchwork of different provincial regimes exists regarding the calculation and disclosure of costs, how could someone shop around and compare the relative costs of these products? The government is of the view, and the other place has agreed, that Canadians need a single set of information to make informed banking decisions. The alternative actually hurts Canadian consumers, which is no one's goal.

Multiple sets of rules, one provincial and one federal, applying to bank products and services would also mean longer and more complex legal contracts between consumers and banks. This bill cuts down the fine print, maybe at the expense of lawyers, but that helps Canadians understand what they are signing at the bank.

Honourable senators, overlapping rules and systems that apply simultaneously are not in the interest of consumers in the banking sector. Consumers are better protected when the rules and their rights are clear. Bill C-29 removes the burden of consumers having to understand a multitude of rules that apply to the same banking products and services.

As I said, the Canadian Constitution gives Parliament exclusive legislative jurisdiction over banking institutions and banking law. The proposed legislative measure affirms Parliament's constitutional authority over the banking industry.

An exclusive federal financial consumer framework provides an opportunity to hold banks to account and support a national system that supports consumers across the country.

The exercise of federal jurisdiction also holds the Government of Canada accountable to improved consumer protection as the needs of Canadians evolve.

Leaving aside the issue of legitimate exercise of federal jurisdiction of banking, we need to keep in mind what would be the best outcome for all Canadians.

Many assertions have been made to the effect that this bill would lower consumer protection standards, compared to what could be available in Quebec in particular. To the contrary, Bill C-29 is all about enhancing nationally and allowing consumers to access the benefits of those high standards.

Some suggest that this bill would allow banks to hide their fees. The fact is that this bill prohibits the imposition of fees unless they are provided for in an agreement. Others suggest that the banks could make misleading advertisements. The fact is that this bill requires banks' advertisements to be clear, simple and not misleading.

It has been asserted that banks don't have to comply with the recommendations of external complaint bodies. Banks do follow their recommendations. The fact is that of the hundreds of complaints that have been examined since their creation, their recommendations were followed in every single occasion. This delivers results for Canadians quickly and free of charge, without lawyers. I would emphasize this point.

To put this in practical terms, the median complaint that proceeds to the last stage of complaints, meaning it could not be resolved at the bank, is for amounts less than $1,000. In practice, the external complaint bodies deal with these complaints in 60 days or less, and again, that is free of charge. Contrast that with the experience of litigation as a resolution with its associated costs, time frames and other barriers of access to justice.

It is important to bear in mind that litigation is still available as a remedy for breach of contract under common or civil law, including through class action. However, this framework is intended to provide a comprehensive, customer/consumer- oriented regime for solving issues quickly and to consumers' satisfaction. The government wants banks to address consumer issues early, up front and proactively.

Could this new framework, once enacted, be enhanced, improved and strengthened for all Canadians? This is something to consider, and Canadians would benefit from a deep think in a Senate committee on this issue. The government would certainly welcome such a study with an eye to the future.

The government believes deeply in cooperative federalism, as symbolized by the two first ministers' meetings held in the first year of its mandate and the Prime Minister's invitation to premiers and territorial leaders to attend the United Nations Climate Change Conference in Paris. A third first ministers' meeting is being held today and tomorrow to work on the national plan on climate change, and the premiers have also been invited to discuss health care at a working dinner hosted by the Prime Minister tomorrow night.

This government wants to do more with provinces and territories, not less. By contrast, the previous government convened two first ministers' meetings in almost 10 years. So yes, this government is committed to cooperating with all provinces and territories, but federalism also means that there will be instances where the Parliament of Canada will seek to fully occupy its exclusive field of competence in the national interest. This is such a case.

In the government's view, and in the view of the other place, it is in the national interest in an increasingly complex global financial landscape that the Parliament of Canada fully occupies its exclusive federal jurisdiction over the banking industry in Canada by providing for clear, comprehensive, exclusive national standards applicable to the banking industry. Sometimes in our confederation, governments must take difficult decisions that may not be welcomed in every region but that in its view are in the national interest. Canadians elect their federal governments and their elected representatives to make those difficult choices. Again this is such a case.

In our work in this chamber, honourable senators, as you know, while local interests should never be neglected, neither can we neglect our responsibility to consider local interests in the context of the national good.

To summarize, the policy objective is for this Parliament to affirm its exclusive federal jurisdiction over banks and banking and support a national banking system to the benefit of all Canadians. The alternative would be a multiplicity of rules that for consumers would be confusing, complex and opaque. The alternative would mean that rather than counting on a dedicated and efficient federal supervisor, consumers would have to rely on lawyers providing complex advice on which rules potentially apply and defend their interests in protracted court proceedings.

Now, quite aside from the merits of Bill C-29 and the policy rationale for the budget measures it seeks to implement, I want to take a few moments to speak on the role of the Senate with respect to legislation such as the bill that is before us.

Bill C-29 is a classic example of a question of confidence in the other place. In its pith and substance, it is a budget bill that seeks to implement the explicitly announced budgetary program of a freshly elected majority government.

Despite this, as you all know, there is has recently been talk of a Senate amendment.

But amending or obstructing Bill C-29, a budget implementation bill, would run counter to the historical practice in this chamber and, in this particular case, constitute an overreach of the Senate's role in Canada's parliamentary democracy.

Honourable senators, I freely acknowledge that, by and large, the formal powers of the Senate are equal to those of the other place, but with two exceptions. Section 53 of the Constitution Act, 1867, directs that money bills and tax measures are to originate in the other place; and section 47(1) of the Constitution Act, 1982, provides that amendments to the Constitution can be made without the consent of the Senate. Beyond those limitations, the formal powers of the Senate are virtually unrivalled for an unelected body among the world's democracies.

But the crux of the matter, in this instance, is not whether we have the constitutional power to amend Bill C-29. We all know that we do, just as we can collectively defeat any and every democratically mandated piece of legislation that comes our way. Doing so, however, would be the undoing of the fine balance between power and legitimacy that Canada's founders established at Confederation.

The essential question is more complex: Should we exercise these awesome powers in the case under study? Honourable senators, I submit to you that we should not.

In the exercise of its powers, the Senate must act in accordance with its intended role as an appointed body in Canada's constitutional architecture. The framers of our Constitution envisioned the Senate as a complementary body in Parliament to the elected house that would not have a popular mandate to rival the other place, the exclusive confidence chamber.

So while the formal powers of the Senate are vaster than any other unelected chamber in the world, such extensive powers require caution, restraint and wisdom in their exercise. As the Supreme Court put it in 2014:

. . . the choice of executive appointment for Senators was also intended to ensure that the Senate would be a complementary legislative body, rather than a perennial rival of the House of Commons in the legislative process. Appointed Senators would not have a popular mandate — they would not have the expectations and legitimacy that stem from popular election. This would ensure that they would confine themselves to their role as a body mainly conducting legislative review, rather than as a coequal of the House of Commons.

Indeed, in our parliamentary, bicameral system of responsible government, matters of confidence are resolved in the other place. As my friend, mentor, teacher and Professor Emeritus Ned Franks notes in the collection of essays compiled by the Honourable Senator Joyal, and here I quote Professor Franks:

The key functions of the Commons lie in the making and unmaking of governments, that is, in supporting a government that retains its confidence . . . . The notion of "confidence" . . . is the key to Westminster-style parliamentary democracy . . . .

Professor Janet Ajzenstat wrote about the origins of the Senate, also included in Senator Joyal's compilation of essays. She noted the following:

Why did Liberals like Brown, traditionally more inclined to identify with the popular element, support appointment? Christopher Moore suggests that Brown for one favoured an appointive upper chamber because he believed it would have less legitimacy and would therefore be less forward politically and less inclined to interfere with responsible government, the principle for which Liberals had successfully campaigned for so many years.

Speaking about the Senate in his book entitled The Canadian Senate in Bicameral Perspective, Professor David Smith stated the following:

. . . [S]enators see themselves as parliamentarians, as an integral part of the legislative process. They also realize that, notwithstanding the absolute veto given them by the constitution, it is the House of Commons that is the confidence chamber. Members of the lower house are elected by and accountable to the people.

I would add that George Brown summed it up quite neatly when he spoke in the Canadian Legislative Assembly on February 8, 1865:

. . . [What] was most feared was that the legislative councillors would be elected under party responsibilities; that a partisan spirit would show itself in the chamber; and that the right would soon be asserted to an equal control with this house over money bills.

Hence, the Senate was never intended by the architects of Confederation to be a perennial rival and co-equal to the lower chamber. This is particularly true when it comes to budget bills that seek to implement policies have been explicitly articulated and subsequently passed by the elected chamber. And in Bill C- 29, what is before us is a framework implementing budget policies that have been adopted by the elected chamber in a vote of confidence. These are matters in which the Senate must exercise a very high degree of restraint.

In the case of Bill C-29, as you know, some of our colleagues have spoken favourably about amending a policy option that has been explicitly announced in the first budget of the democratically elected government.

To be clear, all the measures contained in Bill C-29 were announced in the government's 2016 Budget. Most relevantly, at page 222 of the budget tabled in the other place by the Minister of Finance on March 22, 2016, the government clearly announced its intention relating to the assertion of federal power over banking, and here I quote the budget:

Canadians deserve financial consumer protection that keeps pace in meeting their needs. In addition, the financial consumer protection framework must provide clarity to guide the operations of federally regulated banks.

Amendments to the Bank Act will be proposed to modernize the financial consumer protection framework by clarifying and enhancing consumer protection through a new chapter in the Act. They will reaffirm the Government's intent to have a system of exclusive rules to ensure an efficient national banking system from coast to coast to coast.

That was the budget.

Following through on such a commitment in a budget implementation bill is entirely consistent with parliamentary practice. Indeed, it would be wrong to claim that clarifying and modernizing the framework to protect Canadians in the banking sector is not a budget measure. It is.

A manual which I'm sure that we all keep on our bedside table, Senate Procedure in Practice, describes the diversity of financial issues typically found in a budget implementation bill. I want to quote it:

After pre-budgetary consultations and preparation, the Minister of Finance delivers the budget speech in the House of Commons . . . . It outlines the financial situation of the government and the economic condition of the country. It also announces policy priorities and strategic initiatives for upcoming years.

Once a motion to approve the budgetary policy of the government has been adopted in principle by the House of Commons, it is usually followed by one or more budget implementation bills. These bills establish or modify structures, programs, services and other measures announced in the budget.

It is also important to distinguish between a budget implementation bill and a supply bill. As is explained in Senate Procedure in Practice:

A budget implementation bill must be distinguished from an appropriation bill. The former implements the measures contained in the budget, while the latter is related to the statutory and non-statutory spending required for the proper functioning of the government, providing funds to existing structures, programs and services.

Also, an article published in 2011 in the Canadian Parliamentary Review informs us that it is perfectly normal for a budget implementation bill to contain various socio-economic measures, and not just fiscal measures. Penned by Michael Lukyniuk, a former clerk in the other place, that article on budget bills states the following, and I quote:

The Budget Implementation Bill contains the principal measures announced in the Budget. This includes amendments to taxation statutes as well as amendments to other statutes involving socio-economic measures. Occasionally new statutes may also be included.

Honourable senators, there is no controversy and there can be no doubt that a budget implementation bill may provide for various policies related to the functioning of the financial sector and how it interacts with Canadians, particularly where those policies were articulated in the budget itself.

Moreover, this is not a case where a policy that did not form part of the government's budget, or is entirely unrelated to financial matters, has been quietly inserted into the budget implementation bill in an ominous or omnibus fashion.

And in my view, absent an apparent abuse of process through the manipulation by the government of questions of confidence in the House of Commons, it is not appropriate for the Senate to defeat or insist upon its amendments to a bill that has passed as a matter of confidence in the House of Commons

This is likely why I have yet to find a precedent of a budget implementation bill having been amended by the Senate and sent back to the House of Commons.

The only precedent of which I am aware of a budget implementation bill having been defeated by the Senate is over 20 years old, in 1993, when a budget implementation bill was famously defeated though a tied vote. This is hardly strong precedent upon which to rely to posit that the Senate should obstruct Bill C-29.

The bottom line is this: It is not the role of the Senate to defeat or fundamentally amend a budget implementation bill.

The provisions of Bill C-29 which have been the subject of recent controversy are measures that implement the government's budget as tabled on March 22, 2016. Canadians have spoken and have given the government the right and privilege to present its budget to the other place, Canada's confidence chamber. Once that confidence has been given by the other place, the Senate must respect that choice and the choice of Canadians.

Having said this, there are alternative ways for the Senate and senators to make their voices heard and shape policy on this issue. For example, strong observations could be integrated in the report of the committee that will study Bill C-29.

In the spirit of finding a solution with respect to Division 5 of the Budget Implementation Act, the Standing Senate Committee on Banking, Trade and Commerce issued on Monday the following pre-study of Bill C-29 and proposed:

Because witnesses had contrasting views about the financial consumer protection framework proposed in Division 5, the committee believes that . . . the proposed framework should be comprehensively examined as part of the 2019 review of the Act.

Another option would be for the Senate to study the issue in greater detail and eventually make recommendations through a focused report. In this regard, yesterday Senator Ringuette gave notice of a motion that would authorize the Standing Senate Committee on Banking, Trade and Commerce be authorized to:

(a) Review the operations of Financial Consumer Agency of Canada (FCAC), the Ombudsmen for Banking Services and Investments (OBSI) . . .,

(b) Review the agencies' interactions with and respect for provincial jurisdictions;

(c) Review and determine best practices from similar agencies in other jurisdictions;

(d) Provide recommendations to ensure that the FCAC, OBSI . . . can better protect consumers and respect provincial jurisdiction . . . .

This would seem like an elegant and reasonable approach and one that the government would welcome. In this same spirit, the government is willing to consider committing to delaying the entry into force of Division 5 until such time as the Senate Committee on Banking issues its recommendations no later than May 31, 2017, as would be consistent with Senator Ringuette's motion.

Following the study of the policy issue at hand and based on its report, the government will consider recommendations from the Senate to make further legislative changes to the Bank Act as part of the 2019 legislative review of the act. Moreover, some recommendations could also be considered earlier as part of the government's supporting regulations to the regime that the government will be consulting on in the course of 2017.

To conclude, honourable senators, these are all options to consider as we proceed on Bill C-29, and I would urge all honourable senators to keep an open mind about solutions while remaining mindful of the role of the Senate with respect to a Budget Implementation Act such as this.

Honourable senators, I trust you will support Bill C-29, both on its merits and bearing in mind our complementary role as a chamber of reflection. If that weren't enough, it is Christmas.