The Hill Update: Looking Back at the Summer and Looking Ahead to Big Issues in the Fall and Beyond September 15, 2017


With the House returning on September 18th, The Capital Hill Group is pleased to present you with a political and policy update regarding the state-of-play in Ottawa on where the parties stand as MPs prepare for the Fall sitting, the status of some key policy and legislative issues, a defence procurement update, the latest info on the split of the Indigenous and Northern Affairs Department, and on-going trade discussionsCONTENTS

Political Overview

Opinion Polling

New Cabinet and Shadow Cabinets 

By-Elections to Come

NDP Leadership Race

Hot Policy Issues

Marijuana Legalization

Business Tax Changes

New National Security Agency and Legislation

Indigenous and Northern Affairs Split

Trade Update

Defence Procurement Update

Political Overview

Opinion Polling

Near the halfway point of Justin Trudeau‘s mandate as Prime Minister, his Liberal Party remains broadly popular with the Canadian electorate, according to opinion polling. The most recent CBC polling analysis and aggregation from earlier this weekpegged the Liberals at 42% (up 3 points from the 2015 Election), the Conservatives at 31% (essentially unchanged from their election result), the NDP, soon to elect a new leader (more on that below) at 16% (down 4 points from 2015), the Green Party at 6%, (up 3 from 2015, although the Greens tend to poll better between elections), and the Bloc Quebecois at 4% (more or less unchanged from 2015)

New Cabinet and Shadow Cabinets 

Both Justin Trudeau and Conservative leader Andrew Scheer rolled out new front bench teams over the summer as they prepare the face-off in the Commons.

The biggest implication of the cabinet shuffle on August 28th was Trudeau splitting the Department of Indigenous and Northern Affairs into two separate Departments, Crown-Relations and Northern Affairs and Indigenous Services. Ontario Liberal stalwart Carolyn Bennett remains in the Department of Minister of Crown-Indigenous Relations and Northern Affairs, with her Ontario colleague Jane Philpott joining as the Minister of Indigenous Services. Replacing Philpott as Health Minister is Ginette Petitpas Taylor, of New Brunswick, previously Parliamentary Secretary to the Minister of Finance.

With the retirement of Judy Foote, Seamus O’Regan is now Newfoundland and Labrador’s representative in Cabinet, serving as Minister of Veterans Affairs. The other changes were Calgary’s Kent Hehr transfer from Veteran’s Affairs to Sport and Persons with Disabilities and a big promotion for British Columbia’s Carla Qualtrough moving to Public Services and Procurement from her previous appointment as Minister of Sport and Persons with Disabilities.

Two days later on August 30th, Scheer rolled out his full shadow cabinet. 

High profile roles for his former leadership rivals include Lisa Raitt as Deputy Leader, Maxime Bernier as Critic for Innovation, Science, and Economic Development, Michael Chong as Critic for Infrastructure, Communities, and Urban Affairs, Tony Clement as Critic for Public Services and Procurement, Erin O’Tooleat Foreign Affairs, and Steven Blaney as Veterans Affairs.

Other important Critics sure to see the spotlight at Pierre Poilevre at Finance, James Bezan at National Defence, and Gerard Deltell at Treasury Board.

By-Elections to Come

A number of MPs have left, or will be leaving the House. Former Conservative interim leader Rona Ambrose resigned her Edmonton-area Sturgeon River—Parkland seat on July 4th, with former Conservative Deputy Leader Denis Lebel resigning his Lac-Saint-Jean seat on August 9th.

Former Conservative Agriculture Minister Gerry Ritz announced he would be leaving politics on August 31st, and should be formally resigning his rural Saskatchewan Battlefords-Lloydminster seat shortly, and former Liberal Public Services and Procurement Minister Judy Foote announced she would be resigning her Bonavista—Burin—Trinity seat on August 24th, with her formal resignation expected shortly.

On a sad note, earlier this week Scarborough-Agincourt Liberal MP Arnold Chan passed away from cancer. Elected in a 2014 by-election and re-elected in 2015, Mr. Chan had previously undergone treatment for cancer. His last address to the House, in June 2015, urged civility and asked his fellow MPs “to elevate our debate, to elevate our practice.”

The seats of Sturgeon River—Parkland, Battlefords-Lloydminster, Bonavista—Burin—Trinity and Scarborough-Agincourt are all considered safe seats for their respective parties, but Lac-Saint-Jean saw a close contest last election, with Lebel only winning re-election with 33% of the vote. None of the by-elections have yet been called, but expect Lac-Saint-Jean to see the bulk of political attention.

NDP Leadership Race

 

The first round of NDP leadership voting will begin on September 18th, with subsequent rounds of voting if no candidate wins a majority of the vote on the first ballot continuing on October 1, October 8, and October 15. With each round of voting, the last place finisher will be removed from the ballot.

Ontario NDP Deputy Leader and Brampton MPP Jagmeet Singh has the lead in public opinion polls fundraisingendorsements and his campaign is claiming a lead in membership sign-ups over Northern Ontario MP Charlie Angus, Manitoba MP Niki Ashton, and Quebec MP Guy Caron.

Singh, who would be the first person of colour to lead to a major Canadian political party, recently received significant praise for his handling of a seemingly racially motivated heckler at a campaign event, with videos of the encounter receiving hundreds of thousands of views, seems to be the front-runner at this point.

 Hot Policy Issues

Marijuana Legalization

The government introduced Bill C-45 in April of last year to legalize recreational marijuana by July 1, 2018. The bill allows for Canadians over the age of 18 to purchase recreational marijuana through federally licensed producers and to grow a limited supply in your home. The bill gives the provinces the responsibilities of price setting and distribution. The government introduced the bill to fulfill a campaign promise and is making the argument that it is safer to legalize marijuana as it allows for regulations and safety standards to be set to a product many Canadians already consume, protecting young Canadians at the same time. The opposition has strong reservations about the bill due to concerns brought forward in the Standing Committee on Health where an overarching critique of the bill has been the tight timetable with many witnesses stressing that the deadline should be extended. There were also concerns about the age of purchase set by the federal government and that the autonomy of First Nations might not be respected. Read the full text of the bill here as well as an introduction to the bill made by the government here.

As the July 1st, 2018 deadline approaches the Standing Committee on Health reconvened on September 11th-15th to get information and views from different stakeholders and Canadians on Bill C-45 and is expected to release its report to the House of Commons in December. During the week the committee has received 114 briefs and listened to several witnesses. These witnesses range from different police services, indigenous groups, various medical associations, and marijuana advocates, to the different departments in the federal government. Access the Standing Committee on Health study on C-45 including witnesses testimony and briefs here.

The response from the provinces and territories has been varied with Ontario being the only province to come out with a framework for distribution. The Government of Ontario announced that there will be a state monopoly on sales through a chain of marijuana stores and should have 150 open by 2020 with 40 scheduled to open in time for federal legalization next year as well as an online retail outlet. The structure will be a subsidiary of the LCBO and the legislation will be tabled this fall to create the stores while at the same time banning cannabis possession for anyone under the age of 19. The Ontario government stressed they would therefore continue to close all illegal dispensaries and will announce enforcement plan soon. Some other provinces have come out with public consultations including Manitoba, Alberta, Quebec, New Brunswick, Prince Edward Island, Newfoundland, and Saskatchewan. To access an article detailing Ontario’s framework for distribution here.

Business Tax Changes

The war of words between the Government and various business stakeholders over proposed business tax changes will likely continue into the Fall. The government’s proposals, released in July, target three tax-planning methods that make use of private corporations to save on income taxes: sprinkling income among family members named as shareholders, growing an investment portfolio inside a corporation as “passive income,” and converting income into capital gains. The Government messaging, led by Finance Minister Bill Morneau claims that the changes are needed to “level the playing field” in the Canadian tax system, and is adamant that it’s only the very richest individuals who are taking advantage of the system by putting spouses and adult children on the corporate payroll even though they do little or no work for the company, or who use so-called passive investments inside their corporation to shelter profits from full taxes.

Morneau contends for example, that the proposed change to passive investment income will have negligible impact on anyone making less than $144,000 per year, because they can simply plow investment dollars into their RRSP and TFSA.

Organizations of business groups and professional associations have turned up the heat on these claims, arguing that current incentives allow them to take on the risks of opening their own companies and, unlike salaried and public-sector employees, they don’t have a guaranteed pension or employment insurance protection.

Executives from Canada’s large tech companies have also expressed concerns at the plans, something that could give the government pause given their budgetary support for the IT sector and innovation. Notably, the Government backed off an election pledge to increase taxation of stock options in the 2016 Budget after concerns were raised from this sector, indicating they may have the Government’s ear.

The Conservatives have pledged to put the business tax issue front and centre when the House resumes, with Pierre Poilievre, Finance Critic, saying that the changes are “an all-out assault on middle class small business owners.”

Morneau will also have to contend with the numerous Liberal MPs who have expressed concerns about the plans, or at the very least, concerns about how they are being communicated. 

New National Security Agency and Legislation

Prior to rising for the summer, the Trudeau Government introduced Bill C-59, which has been heralded as the biggest national security sector reform since 1984. It makes a number of changes to Government security policy, adding more accountability and review measures and clarifying the language of Harper’s Bill C-51, which dealt with similar topics. However, it also gives more powers to some players in the security context.

Expanding the Communications Security Establishment’s Mandate
One of the major changes in Bill C-59 is the expansion of Communication Security Establishment’s (CSE’s) mandate to include active or offensive cyber abilities. These capabilities can include activities to “degrade, disrupt, influence, respond to, or interfere with” actors posing a threat to Canadians. Simultaneously, Bill C-59 maintains CSE’s mandate in cybersecurity, the more passive, protective use of cyber capabilities.

New National Security and Intelligence Review Agency
The Bill will also create a new national security and intelligence review agency that is able to examine the national security functions of all government departments. It will have access to all information except Cabinet confidences, and it will be able to hear complaints against CSIS, CSE, and the RCMP.

Restricting and Enhancing CSIS Powers
The main source of criticism for Bill C-51 was the open-ended threat reduction powers given to CSIS. Bill C-59 puts limits on these, prohibiting torture, cruel, inhumane or degrading treatment, detention, and serious property damage endangering a person. It also provides a closed list of the allowed threat reduction powers:

  • Altering or disrupting communications and goods
  • Fabricating documents
  • Disrupting financial transactions
  • Impersonating persons
  • Interfering with persons’ movements

Status of Bill C-59
The Bill was introduced on June 20, 2017 and has completed its first reading in the House of Commons. This is the first step of a process that usually takes about one year to complete. The Liberals may try to push the Bill through more quickly, but it has yet to move forward to second reading and debate.

Once the legislative process is complete, the provisions in Bill C-59 will come into force in a sequence outlined in the Bill. The dates are not currently specified but will be decided by an order of the Governor in Council.

Indigenous and Northern Affairs Split

The federal government announced a split in the former department of Indigenous and Northern Affairs into two new departments: Indigenous Services, and Crown-Indigenous Relations and Northern Affairs. The government hopes with this new structure it can slowly negotiate new self-governance agreements with indigenous groups, giving First Nations more autonomy over their own services allowing the government to reduce its staff at Indigenous Services with the plan to eventually close the department.

To begin the transition process Minister Bennett will run a six month consultation with indigenous stakeholders on how to redefine the government’s role and approach with indigenous affairs as well as how to split the department in two. The transition period is expected to last for about a year during which Minister Jane Philpott will be taking responsibility for the new department of Indigenous Services encompassing issues such as housing and education. Minister Carolyn Bennett will be taking responsibility for the new department of Crown-Indigenous Relations and Northern Affairs which will manage legal and treaty rights.

The former Deputy Minister of INAC Hélène Laurendeau will serve as the Deputy Minister of Crown-Indigenous Relations and Northern Affairs during the transition and the newly appointed Jean-Francois Tremblay will serve as deputy minister of Indigenous Services as of September 25th. Minister Philpott has also hired a new chief of staff, John Brodhead, who formerly served in the same role in the Minister of Infrastructure’s office. Both departments will be working out of the former INAC offices in Gatineau while divisions and specific responsibilities are decided for each department. The Prime Minister when announcing the split in August assured that during the transition INAC staff will remain at their jobs.

While the Ministers work out how to split up Indigenous and Northern Affairs there are varying reactions connected with the new structure. There has been anger from the Union of Health and Environment Workers who represent the employees at Health Canada who were not consulted before the department split was announced as well as anger over the uncertainty of employees’ futures in the possible transfer of the First Nations and Inuit Health Branch to Indigenous Services. There was a more positive response from Perry Belgrade, National Chief of the Assembly of First Nations who supports the shift away from the Indian Act but believes it doesn’t go far enough, and would like to see an Independent Treaty Commissioner appointed.

There is still a lot of work to be done until the full structure and responsibilities of these new departments take shape, but Minister Bennett office recently stated that the “formalization of ministerial titles and responsibilities will be finalized following royal assent of proposed amendments to the Salaries Act, which is currently before Parliament”. This is under Bill C-24 and will be one to watch once parliament resumes.

Trade Update

NAFTA renegotiations began last month and are proceeding on an accelerated schedule to try and reach an agreement by the end of this year. Key representatives from Canada, the U.S., and Mexico have maintained that negotiations can reach a beneficial conclusion by the end of the year. Meanwhile, evidence of concrete progress has been limited.

The first round of negotiations was held in Washington, D.C. from August 16-20and concluded with an optimistic Trilateral Statement from the three governments. It stated that each government will continue consulting with stakeholders and will provide more information to the other parties over the following weeks.

The second round was held from September 1-5 in Mexico City. During the second round, 25 working groups met to discuss topics including access to the market of goods, investment, rules of origin, trade facilitation, environment, digital commerce, small and medium enterprises, transparency, anti-corruption, and other topics. The negotiators again released a trilateral statement at the close of negotiations. It stated that negotiators had consolidated proposals into a single text that will be used as the basis for subsequent negotiations. Lighthizer, Freeland, and Guajardo also made statements at the close of negotiations, which emphasized the accelerated nature of negotiations and the progress that has been made.
In the weeks leading up to the third round of negotiations, which are set to be held in Ottawa from September 23-27, all three negotiating parties are projecting an optimistic view of NAFTA negotiations. Key representatives from Canada, the U.S., and Mexico have maintained that negotiations can reach a mutually beneficial conclusion for all three parties by the end of the year. Meanwhile, evidence of concrete progress has been limited.

Concrete information about the content of negotiations is difficult to come by. The three governments signed a Confidentiality Agreement prohibiting them from distributing each other’s documents except with government officials and individuals that are being consulted.

Prior to the first round of negotiations, Canadian Foreign Affairs Minister Chrystia Freeland discussed Canadian objectives in speech at University of Ottawa and in front of the House Committee on International Trade. She outlined the five following key objectives:

  1. Make NAFTA more progressive, in line with CETA.
    1. This includes labour, environment, a gender chapter, an Indigenous chapter, and reforming the Investor-State Dispute Settlement process.
  2. Cut red tape and harmonize regulations.
  3. Make the market for government procurement more free, like in CETA.
  4. Improve the movement of professionals, with CETA as a model.
  5. Uphold and preserve elements of NAFTA that are in Canada’s national interest
    1. This includes preventing unfair antidumping and countervailing duties (this is currently accomplished through Chapter 19), preserving the Canadian culture exemption, and protecting supply management.

While some of these are similar to the objectives of the other governments, there are some points of contention, like opening the market for government procurement and preserving the Chapter 19 dispute resolution mechanism.

Defence Procurement Update

Canada’s $62 billion dollar naval procurement project for 15 new warships is expected to have bids submitted by early November, with a winner selected in early 2018. However, Lisa Campbell, an assistant deputy minister at Public Services and Procurement Canada revealed earlier this month that bidders will be allowed a one-time free pass if their proposals initially don’t meet Canada’s requirements, giving them the opportunity to rejig their bids for the $62-billion program.

12 firms have been pre-approved to bid on the Canadian Surface Combatant program, with the ships as a whole being built by Irving Shipbuilding. Construction of the ships is expected to get underway by the early 2020’s, with the ships arriving in the mid 2020’s.

The original budget for the CSC program was $26.2 billion, or $1.7 billion per ship for 15 ships. However, parliamentary budget officer Jean-Denis Fréchette estimatesthe program will cost $61.82 billion, or $4.1 billion per ship — roughly 2.4 times more than originally budgeted.