Finance

The House of Commons Finance Committee met to study the federal spending power. Appearing as witnesses were Jennifer Robson, an associate professor at Carleton University; Tammy Schirle, a professor of economics at Wilfrid Laurier University; and Daniel Dufort and Gabriel Giguère, respectively the president and chief executive officer and a senior policy analyst at the Montreal Economic Institute.

Jennifer Robson argued that the federal spending power is legitimate so long as conditions on transfers do not amount to regulating in provincial jurisdiction and are voluntarily accepted. She noted that the share of federal funding flowing through conditional grants and contributions has increased, and that overly directive conditions—especially those seeking to leverage unrelated provincial policy changes—are rightly open to challenge. She urged the committee to focus on strengthening intergovernmental co-operation rather than fanning regional grievances, and cautioned that using transfers to buy subnational policy change is unlikely to be effective unless a province is already prepared to make that change.

Tammy Schirle presented an economic framework for assessing federal spending, using early learning and child care as an example. She identified three key questions: whether there is a shared market failure across provinces, whether the policy reduces frictions across regional labour markets, and what the full long-term benefits are. She cited research showing significant fiscal returns from child care investments, including higher lifetime earnings for women and reduced reliance on seniors’ programs. She recommended paying close attention to the quality of the caregiver workforce to ensure high-quality care is available.

Daniel Dufort argued that Canada’s budgetary challenge is primarily a spending problem, with deficits and debt servicing costs growing unsustainably. He criticized federal programs that encroach on provincial jurisdictions, such as dental care and pharmacare, as duplicative and costly, and called for a review of federal spending in those areas to free up resources for core federal responsibilities like defence. He described the newly announced sovereign wealth fund as a form of failed industrial policy, noting that it would be capitalized with borrowed money rather than surpluses, and compared it unfavourably to the Canada Infrastructure Bank, which he said has not delivered on its objectives.

Gabriel Giguère highlighted a decline in entrepreneurship in Canada, attributing it to regulatory and tax burdens, including the creation of a new federal tax bracket that he said discouraged over 9,000 people from becoming entrepreneurs. He argued that economically free environments erode the persistence of income status across generations. On housing, he pointed to regulatory burdens at the municipal level, such as long wait times for building permits, as a key barrier to affordability. He also linked the new sovereign wealth fund to Bill C-15, suggesting it centralizes project approval authority rather than fixing deficient regulations.

During the question period, several members challenged the witnesses. A Liberal member defended the Canada Infrastructure Bank and the Canada Growth Fund, citing specific projects and job creation, and argued that the new sovereign wealth fund is a different model from the Infrastructure Bank. A Bloc Québécois member pressed witnesses on whether federal programs like dental care and pharmacare address any market failure in Quebec, which already has its own systems, and questioned the democratic accountability of conditional transfers. A Conservative member criticized the sovereign wealth fund as a debt-funded industrial policy that would crowd out private investment, and argued that over-regulation, including Bill C-69, has stifled resource development. Another Liberal member asked about the housing accelerator fund, to which Schirle responded that she would pause to consider whether the province should be more involved in administering it with municipalities. The meeting included no procedural debate, motions or votes.