Category Archives: Ontario Politics

Reining in Canada’s Financial Giants – Are Consumers Getting a Fair Break?

While arm’s-length regulators at both the provincial and federal levels do the heavy lifting when it comes to regulating Canada’s financial services, it is ultimately politicians such as Ontario Finance Minister Charles Sousa and Federal Finance Minister Bill Morneau, who are accountable for protecting the interests of consumers in their dealings with Canada’s banks and other  financial institutions.

Introduction

In an important piece in the July 31 issue of the New Yorker Magazine on the decline in the prosecution of white collar crime in the U.S., author Patrick Radden Keefe cites a telling 2002 incident involving ex-FBI director James Comey. Keefe relies on the description of the incident contained in the journalist Jesse Eisinger’s recently published book, “The Chickenshit Club”.

Keefe writes:

When James Comey took over as the U.S. Attorney for the Southern District of New York, in 2002, Eisinger tells us, he summoned his young prosecutors for a pep talk. For graduates of top law schools, a job as a federal prosecutor is a brass ring, and the Southern District of New York, which has jurisdiction over Wall Street, is the most selective office of them all. Addressing this ferociously competitive cohort, Comey asked, “Who here has never had an acquittal or a hung jury?” Several go-getters, proud of their unblemished records, raised their hands.

But Comey, with his trademark altar-boy probity, had a surprise for them. “You are members of what we like to call the Chickenshit Club,” he said.

What Comey was saying, of course, was that avoiding risky prosecutions aimed at reining in Wall St. might have been seen as career enhancing under the previous U.S. Attorney responsible for keeping an eye on Wall St. but with Comey as boss, such an approach was going to be a career killer.

This post is the first of a series of Canada Fact Check investigations asking the question: does Canada have a Chickenshit Club problem when it comes to the development and enforcement of financial services regulation?

The answer for impatient readers? The next 12 – 18 months will tell and Canada Fact Check will be there to tell the inside story.

Here’s what we know now.

Finance Minister Morneau’s response to CBC investigations of hyper-aggressive bank sales practices

On March 6, the CBC’s Erica Johnston broke the first of a number of CBC stories on shady sales practices in Canada’s banking industry. The CBC reports revealed a constant pattern amongst big banks and credit unions of signing consumers up for products or services without providing all the required information, particularly about fees, costs and penalties related to the products. In many cases, bank employees were signing people up for products without even notifying them.

On March 15, in response to the CBC reports, Finance Minister Morneau turned to the Financial Consumer Agency of Canada (FCAC) and announced that the Agency would be conducting a separate industry review to examine Canada’s financial institutions’ sales practices. The FCAC has the primary mandate to represent the interests of consumers on “systemic” policy matters effecting federally regulated financial institutions such as banks, trust companies, life insurance companies and property and casualty (auto, property, etc.) insurance companies.

The FCAC has indicated that it expects to publish its initial findings by the end of 2017. Furthermore, FCAC officials expect to conclude the review of bank sales practices in June, 2018 and will publish a final report soon after. Finally, FCAC may conduct additional specific investigations flowing from the industry review. For example, if a FCAC  follow-up investigation determines that a specific violation has occurred, the Commissioner may make public the nature of the violation, which financial institution committed it, and the amount of any monetary penalty levied by the FCAC on the financial institution. Continue reading

The Liberal hydro rate reduction program: sound policy or just a shell game?

The March 2 hydro rate reduction announcement by the Ontario Liberal government was widely compared to converting a 20-year personal mortgage to a 30-year mortgage. Your short-term payments may go down but in the long run you end up paying a lot more.

On March 2, the Ontario Government announced its latest package of initiatives designed to reduce hydro rates. The key initiative in the package (the re-financing of the Global Adjustment) was widely compared to converting a 20-year home mortgage to a 30-year mortgage and amounted to little more than a cheap accounting trick designed to bribe Ontarians with their own money. The re-financing initiative was the latest in a series of Liberal hydro initiatives that set aside sensible electricity policy and instead, embraced private-sector style financial engineering in order to pursue political – as opposed to policy – objectives.

The purpose of this post is to provide some context and analysis to the March 2 announcement as well as other recent Ontario government initiatives on the hydro file.

Policy Context

To achieve rate reduction, the Ontario government had three broad approaches to energy policy to choose from. It could have:

  • Dealt in a targeted way with the affordability challenges of those paying an unacceptably high proportion of their household income on home energy costs. This may very well have involved additional assistance for a good chunk of the ratepayer base but it certainly didn’t need to include an increased hydro subsidy for everyone;
  • Dealt with the “structural” inefficiencies that have contributed to spiralling system costs and therefore steadily rising hydro bills; or
  • Engaged in a range of complex financial engineering exercises that simply shift current energy costs to future generations of ratepayers and tax payers.

Clearly, a high profile measure such as the re-financing of the Global Adjustment (the key March 2 announcement) falls into the “financial engineering” category.

That said, the government has implemented several low-profile initiatives that deal directly with the real hydro affordability crises facing many Ontarians. Moreover, the government is beginning to explore some market design changes that deal with the “structural” inefficiencies that have driven up the overall costs of the system. Unfortunately, the perceived political need to dramatically reduce all Ontarians’ hydro bills in the short-term has won out. The result is that the more nuanced and targeted initiatives that address the real problems of affordability and unnecessary system costs are taking a back seat to the misguided (but splashier) financial engineering initiatives. Continue reading

Changing Workplaces: the coming mega-battle over Ontario’s workplace rules.

An interim report on Ontario’s workplace rules tabled many far reaching options for labour law reform including a new approach to collective bargaining aimed at smaller employers.

In the spring of 2015, the Government of Ontario initiated its Changing Workplaces Review to determine what changes, if any, should be made to the province’s labour laws in light of the fact that, in the government’s own words, “non-standard employment (which includes involuntary part-time, temporary, self-employment without help and multiple job holders) has grown almost twice as fast as standard employment since 1997”.

The specific focus of the Review is on possible changes to the Ontario Employment Standards Act (ESA) and Labour Relations Act (LRA). The ESA provides a minimum set of workplace standards that apply to all Ontario workers (albeit with many exemptions) while the LRA governs union-employer relations.

On July 27, 2016, Changing Workplaces released an interim report. The report canvassed a large number of issues affecting Ontario’s workplaces and provided a broad array of options to address each issue. For the majority of workplace issues canvassed, options presented included both maintaining the generally inadequate “status quo” as well as options that would significantly increase the protections provided to the province’s workers through fundamental and far reaching changes to the ESA and LRA.

In broad terms, the Interim Report:

  • concluded that there are “too many people in too many workplaces” not receiving their basic rights guaranteed under the ESA and LRA.
  • came to two general ESA conclusions: the administration and enforcement of the ESA should be strengthened; and there should be a comprehensive review and reform of exemptions from ESA protections. An example of the kinds of exemptions that the report is concerned about are the many occupations (liquor servers, etc.) that are exempted from ESA provisions related to minimum wage and hours of work.
  • reviewed what it deems a growing problem of employer misclassification of employees as independent contractors (and therefore not covered by the protections provided by the ESA or LRA), and the use of temporary workers (deployed through temporary help agencies, etc.) who are also not covered by many provisions in Ontario labour law. The potential options identified to address these problems include: expanding the definitions of what constitutes an “employee” and an “employer”; extending the ESA’s minimum standards to “dependent” contractors (a category of worker somewhere between an employee and an independent contractor); and reviewing existing ESA exceptions and special rules (including exemptions to overtime and hours of work).
  • examined a range of options that would support the enhancement of union rights, including the potential expansion of successor rights provisions to the contracting out of services, card certification (i.e. no vote required for union certification above a designated threshold of signed union cards), automatic access to first contract arbitration, and a possible prohibition on replacement workers (i.e. a ban on strike breakers); and
  • surveyed a number of issues related to termination of employment and severance pay. Significantly, one of the issues under consideration is whether the ESA should adopt “unjust dismissal” provisions, similar to those already in federal and Quebec legislation.

Although almost all the above interim report sections include options that would significantly change the rules governing Ontario’s labour market, perhaps the most surprising feature of the report was the prominence given to various options related to what the report calls “Broader-based Bargaining Structures”. This post will explore the debate on broader-based bargaining options  that the interim report has kicked off.

First, some background on Ontario’s current labour relations framework. Continue reading

What should be done to make Ontario electricity rates more affordable

There is far more that the Wynne government can do to help Ontarians struggling with sky-high hydro bills. But will they do what needs to be done?

It will come as no surprise to Ontarians that according to a recent Nanos Research poll, the cost of hydro was the most important issue for 20.5 per cent of voters, eclipsing the usual suspects such as health care (15.1 per cent), jobs and the economy (9.6 per cent) and high taxes (7.3 per cent). And it will also come as no surprise that recent polls suggest that the popularity of Ontario’s Liberal Government is taking a beating because of the issue.

Undoubtedly, the government is frustrated by the electorate’s focus on the cost side of the hydro file and its relative lack of interest in what the Liberals see as a series of environmentally friendly energy policies (the closure of the coal plants, the Green Energy program, increased “clean power” imports from Quebec, etc.) that have dramatically reduced smog days and made Ontario a leader in North America in fighting climate change.

But if the Liberals are puzzled by the public’s refusal to give them much credit for their green energy initiatives, they only have to look as far their crassly political cancellations of the Oakville and Mississauga gas plants to understand why the public isn’t cutting them much slack on the hydro file. Politics is nothing if not a blood sport and if you want political credit for making tough decisions on a file, then it is probably best not to engage in a billion dollar’s worth  of political opportunism (the cost of re-locating the two gas plants) on that very same file. After all, that’s a billion dollars added to the hydro bills of the very voters that were already paying for the elimination of cheap, coal-generated power!

That said, it appears that Kathleen Wynne has gotten the message  (high hydro bills are “my mistake”) and has promised to announce new rate reduction measures over and above the already announced 8% HST rebate. Continue reading

What’s really behind Ontario’s rising electricity prices

hydro-lines

Ontario’s high hydro prices reflect a breakdown in the Ontario Government’s electricity planning process resulting in contradictory policies that add to costs.

On September 12, the Ontario Government announced in its Throne Speech that it was rebating the provincial portion of the Harmonized Sales Tax (HST) to residential and small business electricity users. The initiative is expected to cost $1 billion/yr. and is funded out of the provincial tax base. On September 15, Bill 13, the Ontario Rebate for Electricity Consumers Act, was tabled to implement the initative.

What the initiative means is that as of January 1, 2017, the Province will reduce residential and small business electricity bills by an amount equivalent to the 8% provincial portion of the HST.

 

Why the HST rebate benefits the affluent more than average hydro users

What is often overlooked is that the HST rebate provides a benefit proportionate to electricity spending meaning that the more you spend on electricity, the bigger your rebate. And, of course, the bigger your residence, the more you are likely to spend on electricity.

On September 27, Ontario’s Financial Accountability Officer (FAO) issued a report showing that the burden of home energy costs, as measured by share of income spent on home energy, falls more heavily on lower income Ontario households in spite of their lower overall energy spending. In 2014, the lowest-income 20% spent on average 5.9% of their pre-tax income on home energy, while the highest-income 20% spent only 1.7%.

Continue reading

What the New CPP Agreement Means for You

pensions CPP

The agreement  reached in Vancouver to enhance the CPP last week was historic in nature. Still,  some people will benefit far more than others. Many Ontario workers, for example,  would have been better off with the provincial pension plan that was abandoned by the Ontario Government within days of the signing of the CPP accord.

There is no question that Canada’s finance ministers reached an historic agreement in Vancouver on June 20. There is also no question that the changes in CPP design that the ministers agreed upon represent an eventual increase in CPP benefits for all workers when compared to the current CPP design.

That said, two additional questions need to be asked when assessing the agreement:

1)      To what extent are the workers most in need of a boost in their retirement savings getting the increase in benefits they need to truly retire in dignity and security. In other words, are the CPP changes agreed upon in Vancouver targeted towards those most in need ; and

2)      Are Ontario workers – who comprise almost 40% of the Canadian labour force – better off under the new CPP regime than they would have been under the Ontario Retirement Pension Plan (ORPP) that was scheduled to be fully implemented in 2019 – the first year of a 7-year phase-in of the agreed upon CPP changes that won’t be completed until 2025? This is relevant given that with the signing of the CPP accord, the Ontario Government moved within days to kill its ORPP initiative.

Background to the Vancouver agreement

Before answering these two questions, it is important to provide some context to the discussions that took place in Vancouver on June 20th.

The task for the finance ministers meeting in Vancouver was to see if there was a formula for reform that had a chance of getting 7 provinces containing two-thirds of Canada’s population (the amending formula for the CPP) to buy into. This was always going to be a challenge given that B.C., Saskatchewan and Quebec had been clear in the previous federal-provincial meeting in December, 2015 that they had little appetite for any sort of CPP/QPP enhancement and Manitoba’s brand new Conservative government was almost certain to join this “sceptic” group. Continue reading

The fight for a $15 per hour minimum wage in Ontario

photo $15 macondlad's

On April 4, 2016, New York Governor Andrew Cuomo signed a law which will significantly increase the minimum wage in New York  from the current rate of $9, to $15. The remarkable New York $15/hr. minimum wage victory contains many lessons for Canadian minimum wage activists.

 

On April 15, thousands of fast-food workers in more than 200 U.S. cities, and thousands more workers in other countries, including Canada, participated in a global show of force in support of a $15-per-hour minimum wage and mandatory paid sick days.

In the U. S., the $15 minimum wage campaign has made remarkable legislative gains in the past two years. In 2015, policymakers in 14 cities, counties and states approved $15 minimum wage laws including impressive legislative breakthroughs at the state level in New York and California.

In contrast with the recent U.S. experience, actual legislative victories in Canada on the minimum wage file have been extremely modest. Alberta’s general minimum wage increased to $11.20 from $10.20 per hour on October 1, 2015 and Premier Rachel Notley’s NDP government campaigned on a pledge to hike Alberta’s minimum wage to $15 per hour by 2018. The Notley campaign plank and the campaign promise by the federal NDP to re-instate a federal minimum wage and increase it to $15 per hour by 2019 are certainly encouraging as is Ontario NDP leader Andrea Horwath’s recent support for a $15/hr. minimum wage in Ontario. Continue reading

Climate change policies hit corporate push back

Prime Minister Justin Trudeau Addresses Paris Climate Change Conference

Prime Minister Justin Trudeau Addresses Paris Climate Change Conference. Despite Trudeau’s high profile Paris claim that “Canada is back”, almost all the heavy lifting on the climate change file is being done at the provincial level.

Prime Minister Trudeau received considerable media attention earlier this week in his appearances at the UN Climate Change Conference in Paris.

But beyond the photo-ops starring our telegenic PM, the question still remains as to what exactly Canada is bringing to the table in Paris?

The context

The purpose of the Paris UN conference is to somehow reach an agreement covering the post-2020 period that would require participating countries to set carbon-reduction targets that, while not legally binding on individual countries, will be considered “moral” obligations.

What then is Canada proposing to contribute to the fight against global warming?

On the international front, Trudeau has already announced that Canada will contribute $2.65 billion over five years to help developing countries reduce their reliance on fossil fuels, doubling Canada’s current contribution. And in Paris he also reaffirmed a campaign pledge to invest $300 million in research and development on clean technology.

But the far trickier issue is how to reach the domestic emissions targets already established here at home.

Trudeau has committed to reducing Canada’s carbon emissions by 30 per cent from 2005 levels by 2030. That’s the same target set by the Conservatives, the difference being that the Liberals regard it as “a floor, not a ceiling.” Most importantly, within 90 days of Paris he plans to host a meeting with the premiers to firm up the specific carbon-pricing policies and investments that will be required to make good on that pledge. Continue reading

Bay Street and the Hydro One Sale

Of the many options available to the Ontario government to finance its $130 billion infrastructure plan, selling 60% of Hydro One is pretty much the worst.

Of the many options available to the Ontario government to finance its $130 billion infrastructure plan, selling 60% of Hydro One is pretty much the worst.

It is becoming increasingly clear that the Ontario government is making a serious mistake in its plan to sell off a majority interest in Hydro One. According to a report from Ontario’s new Financial Accountability Officer, the province will be in even worse financial shape after the planned sale of 60 per cent of Hydro One than it is now.

Even former TD Bank CEO Ed Clark, the driving force behind the sale, readily admits that there will be significant forgone revenue from the sale of Hydro One down the road. But he, like Ontario Premier Kathleen Wynne, dismisses this on the grounds that the  partial sale of Hydro One is needed to help pay for Ontario’s plan to spend $130.5 billion over 10 years on transit, bridges, highways and other infrastructure.

Unfortunately, while it is undoubtedly true that the planned investments in Ontario infrastructure are badly needed, it is also true that of the various options available to the province to pay for its ten-year, $130.5 billion infrastructure investment, selling 60% of Hydro One is pretty much the worst option.

So why is the Ontario government selling off one if its most valuable assets in what seems like a clear cut case of “short-term gain for long-term pain”?

The sell-off of Hydro One is yet another chapter in the ongoing saga of an Ontario government mesmerized by private sector promises that a healthy dose of private sector, market “discipline” will somehow translate into the public good.

The names are familiar: eHealth, Ornge, the Mississauga and Oakville private gas plants, and public-private hospitals and transit – to name just a few.

The problem? Each and everyone turned out to be a train wreck of truly monumental proportions.

And now Hydro One. Continue reading

Trudeau, Wynne Pension Visions on Very Different Paths

15-10-28 trudeau wynne cpp hug

Despite the big hug and a short-term promise by Trudeau to help implement Ontario’s new pension plan, a look beneath the surface reveals serious obstacles to reconciling Wynne’s and Trudeau’s pension visions.

Prime Minister Elect  Justin Trudeau has promised to do what Stephen Harper pointedly refused to do – help Premier Kathleen Wynne implement Ontario’s new pension plan.

But reconciling Trudeau’s long-term vision of enhancing the Canada Pension Plan (CPP) with Wynne’s “ready-to-go” Ontario Retirement Pension Plan (ORPP), could prove tricky.

Trudeau to help on short-term implementation issues

The Conservative government refused to change federal regulations to help establish and collect contributions for the Ontario Retirement Pension Plan (ORPP), which is due to start collecting premiums in January, 2017.

In fact, the pension issue had become a significant point of conflict between the federal Conservative government and the Ontario Liberal government. During the recent campaign, Mr. Harper went so far as to say that he was “delighted” that his decision not to help Ms. Wynne “is making it more difficult for the Ontario government to proceed.”

But what a difference an election makes! The two Liberal leaders had a brief meeting at Queen’s Park on Tuesday and there appeared to be a complete meeting of the minds on the pension issue – at least in the short term.

According to a statement issued after the meeting, the new federal Liberal government will “direct the Canada Revenue Agency and the Departments of Finance and National Revenue to work with Ontario officials on the registration and administration of the [ORPP].”

Registration refers to the fact that unless a pension plan is registered under the terms of the federal Income Tax Act, employee and employer contributions are not tax deductible. Once registered, pension contributions and investment earnings are tax-exempt until benefits are paid to a retiree.

Administration primarily refers to piggy-backing ORPP premium deductions on the existing CPP payroll contribution infrastructure. Ontario had issued a request for proposal for a third party to help administer the plan because of the outgoing Conservative government’s refusal to co-operate. Now it won’t need that third-party partner, which means the ORPP should be less expensive to operate. Continue reading