THE WEST BLOCK
Episode 17, Season 5
Sunday, January 10, 2016
Host: Tom Clark
Guests: Rachel Notley, John Ruffolo, Ujjal Dosanjh
Location: Ottawa
On this Sunday, between low oil prices and a sputtering recovery, is the Alberta dream dead? We’ll put that to Alberta Premier Rachel Notley.
Plus, the government had promised to hike taxes on stock options, but would that kill the tech start-ups? We’ll ask John Ruffolo from the Council of Canadian Innovators.
And then, are white male politicians being silenced by fear of upsetting the politically correct? Former Cabinet Minister and BC Premier Ujjal Dosanjh thinks so.
It is Sunday, January the 10th, and from the nation’s capital, I’m Tom Clark. And you are in The West Block.
Tom Clark: Well what a week that was, and not in a good way. By the end of last week, the TSX had stabilized, but not before recording a 20 per cent decline from where it was just two years ago. Adding more woes, the loonie is at its lowest level in more than 12 years, and the grinding of the energy sector continued as the price of oil flirted at one point with $30 dollars a barrel. It all had the governor of the Bank of Canada warning that things aren’t going to improve anytime soon.
Stephen Poloz: Now there is no simple policy response to the situation. The forces that have been set in motion simply must work themselves out. The economies adjustment process can be difficult and painful for individuals. And there are policies that can help buffer those affects, but the adjustments must still eventually happen.
Tom Clark: Well the governor pointed to three provinces in particular that are going to take the brunt of this economic downturn: Saskatchewan, Newfoundland and Labrador, and of course, the energy centre, Alberta. And joining me now is the premier of Alberta, Rachel Notley. And premier, thank you very much for being here. You know, the numbers are daunting when you take a look at it. Bankruptcies at five-year high, 66,000 people laid off in your province in the past year. Just how critical a moment is this for your province?
Rachel Notley: Oh we know it’s unprecedented that different parts of our economy are under tremendous stress and of course our provincial finances are under tremendous stress as well, and most importantly, what it really comes down to is those families where Albertans have lost their job. And so we’ve known, frankly, going back to the last election and going forward, that this is going to have to be what we focus on and that we were going to have to recalibrate to some extent, that we were going to have to take a measured approach in terms of going forward with our government initiatives and that we were going to have to focus as much as we can on stability and then whatever we can do to generate economic activity and support to regular Alberta families. So, that’s the framework within which my government’s been operating. And as has been stated by others, you know, we don’t control the price of oil. What we can do is work in partnership with Albertans, with Alberta job creators, with Alberta business people, with Alberta workers to try and come through this downtime together in a way that doesn’t cause the kind of damage that we’re still paying for a decade or two decades from now.
Tom Clark: Is part of that recalibration that you’re talking about, in terms of your policy, you came into office with a pretty ambitious climate change agenda, are you going to have to draw back on that as a result of these numbers?
Rachel Notley: On the contrary, I actually think that our climate change plan is one piece that’s actually going to help support Albertans going forward and it’s going to do that in a number of ways. It’s going to inject money into priority areas that have the capacity to build and to grow right now in the economy. It’s also going to bring Alberta into the national and international conversation with respect to greenhouse gas emissions and allow us to work, I think, more effectively with our partners to secure diversified market access for the resources that we have in Alberta, particularly in the non-renewable sector. And of course, what I’m really talking about is pipelines. And so, I think that our climate change – there’s a number of different mechanisms within our climate change policy that will actually contribute to economic development and allow for other areas to diversify and to develop in the absence of or in the slowdown in the energy sector. And meanwhile, it’s going to allow me to be out there as an advocate for our energy sector to talk about why we need more diversified markets.
Tom Clark: You know, for many years, throughout this country, Alberta was seen as the promised land. Young people going out to Alberta to seek their fortunes and to create a life, but now that you’ve got this rising unemployment problem in your province, no prospect really of a major turnaround, according to the governor, for about two or three years, is it time maybe for young Canadians not to go out to Alberta for a while and take what few jobs there are away from people who already live there?
Rachel Notley: Well you know, I think that the fact of the matter is, is that Alberta will continue to be in the long-term, one of the key, if not the, economic drivers of Canada’s national economic health. And so going forward, I think people will see that that’s what Alberta is. And Alberta is the home to the youngest most well-educated, and in many cases, most diverse populations in the country. We have strong communities. We have strong universities. We have a strong public sector. We have a strong health-care sector and health innovation sector, and we have other sectors of our economy. And now, what we’re doing actually is we’re creating opportunities in the area of renewable energy and energy efficiency and those kinds of things. And, of course, part of our budget also loosened up a great deal of capital for small business and small and medium enterprise ventures. So, I actually think that there’s a lot of opportunity in Alberta right now and I would never in a million years say that people shouldn’t come to our province because we’re going through a slowdown now, especially compared to what we were dealing with before, but I think that, you know, we’re going to see that opportunity renew itself. And in the meantime, we have some incredibly strong fundamentals in our province.
Tom Clark: Let me ask you a specific question because in a bad economic situation what makes it worse most of the time is uncertainty, in other words, get the bad news out of the way. You’ve said for a number of months now that you’re going to release your Royalty Review. That’s a very big deal in the oil patch, when can people expect to see that Royalty Review and possibly a realignment of the Royalty program in Alberta?
Rachel Notley: Well I’ve said before, you know, we weren’t quite ready to get it out the door before Christmas. It will be released to Albertans in the next very few weeks and I believe that it is a plan that most people in the energy sector will see is highly responsive to the current circumstances and allows for them to make longer term investment decisions in a way that will of course support our growth back to greater prosperity in Alberta. So, I am fairly confident that we’re going to clean up some of the artifacts of the old system and make sure that it’s a rational system that in sense, the right kind of thing in an ever changing energy economy, but I also think that it’s one that most key leaders within the energy industry will find it helps them to make plans for the future.
Tom Clark: Premier Rachel Notley of Alberta talking to us today. Thank you very much for your time premier. Good seeing you again.
Rachel Notley: Thank you, good to see you.
Tom Clark: Coming up next, the tech sector’s fight to stop a new tax on stock options. And what is the cost of being politically correct?
Donald Trump: “We can be politically correct and we can be stupid, but it’s going to get worse and worse.”
Tom Clark: Welcome back. There are few business areas in Canada that show more promise than the technology sector. The giants, such as Shopify and Hootsuite, are among dozens more that are leading Canada into the new economy, but the sector has enormous problems finding investment, finding and keeping key talent. And one immediate threat, says the industry, is a proposed tax hike on stock options.
Voiceover: Here’s how most of us see stock options: wealthy executives getting options for company shares and when they’re cashed, they’re taxed to the mere half the rate of their salary. A pretty lucrative tax dodge. But there’s another option story: start-up tech companies with no money using worthless options to pay their young workers, sometimes for years. If the company takes off, those options turn into money, but it’s a huge gamble for the young worker. But the only way tech gets off the ground.
Tom Clark: And joining me now from Toronto is John Ruffolo. He is the Chief Executive Officer of OMERS Ventures, one of Canada’s leading pension funds and also, increasingly is spokesman and advocate for Canada’s start-up tech industry. John thanks very much for being here on the show. Initially, can you just walk me through or walk us through what the consequences would be of taxing stock options for people in the start-up tech business in Canada? What would be the consequence?
John Ruffolo: Sure Tom, really two fundamental consequences. This is about a Canadian competitiveness in the innovation sector. We believe, and this new federal Liberal government believes, that the innovation sector is a key for the future of this country. Changing the stock option rules disproportionately impacts the innovation sector. There are in fact some abuses with respect to these rules, but it’s not in the innovation sector, where the vast majority of employers, particularly at the earliest stages, use stock options to attract employees and to retain them. And by changing these rules, you might actually strike at the very heart of getting the talent that you need to compete. And in this game, it is a complete war for talent.
Tom Clark: So, in the election campaign, the Liberals and the New Democrats both said that they want to tax stock options over $100,000, which for most Canadians, boy they think ‘$100,000, that’s a lot of money,’ but are you saying that if that went ahead as they promised it would – that this could in fact, not just hurt the tax sector, but close down parts of it because you can always go across the border and open up your business there, right?
John Ruffolo: Correct, and these sort of workers, there’s no manufacturing plants, there’s not equipment, it’s only brainpower and they can work anywhere that they would like. And we’re really fighting, particularly with a resource scarcity and a lot of people go down to Silicon Valley. And anything that we do to make a disadvantage for employees, and in particular, the millennial workers, those workers that will be the future of this country. You know? Let’s not make it even more difficult for them to want to come over here.
Tom Clark: I just want to play you a clip from somebody who’s advocating for the tax of the stock options, Dennis Howlett from Canadians for Tax Fairness. Take a listen to what he has to say:
Dennis Howlett: “You’ve got to look at it from an economic efficiency point of view and that’s why I’m saying there may be some basis for some limited continuing exemption for the tech sector, in proportion to the economic benefit it creates. But even there, I think, you know, fairness has to be a consideration and the need for revenue has to be a consideration.”
Tom Clark: On the basis of what you’ve just heard, how do you react to that? The people are saying you’ve got to pay your fair share into this new form of helping the middle class in a sense.
John Ruffolo: For the technology company, what they’re really doing is saying to the employees, ‘look, we do not have enough cash to pay you,’ and let’s just say they would otherwise make $100,000 a year in cash. What they’re saying is we will pay you $50,000 in cash and over the course of a number of years, and on average, it’s between seven to ten years, you will sacrifice that cash compensation and we’re going to give you a piece of paper. And that piece of paper is stock options. And in the unlikely event that we exit the business and it is more than 90 per cent of the time the stock options are actually worth zero, they’re making a massive bet in giving up seven to ten years of their life and if it strikes, they will make hopefully more than the $100,000 limit, but that was over a ten year period of time. Whereas, you compare it to a very large company that has tremendous resources, they could pay stock options, they can pay what’s called restricted stock units, they can pay bonuses, they have lots of flexibility, and this is just an additional ingredient to the compensation for some of the senior executives. And in that case, it’s not really a big employee or a CEO issue, it’s really a big company tax loophole. And just consistent to what the individual said from a tax fairness perspective, shutting that down, I get it. That makes tremendous sense, but the two examples are not comparable.
Tom Clark: John, you and some others, have been meeting with the federal government, the new federal government about, among other things, this very issue. Are you making any headway in perhaps creating an exemption for the tech industry on stock option tax?
John Ruffolo: Our job is not to be adversarial, but to actually educate the government to see the unintended consequences, but very helpful in a partnerial fashion to say we actually have the same objectives. Let’s try to figure out what exactly you’re trying to shut down. Let’s devise the rules in a manner to shut down what you think is abusive, but not hurt those things that we believe will create wealth, not only for a particular sector, but for the entire nation of Canada.
Tom Clark: John Ruffolo, the Chief Executive Officer of OMERS Ventures. I appreciate your time today, thanks very much.
John Ruffolo: Thank you, Tom.
Tom Clark: Coming up next, former BC Premier Ujjal Dosanjh on how political correctness is killing the political debate.
Donald Trump: “I don’t frankly have time for total political correctness.”
Ted Cruz: “I thought something was wrong, but I didn’t want to say it because it wasn’t politically correct.”
Jerry Seinfeld: “There’s a creepy PC thing out there that really bothers me.”
Jay Leno: “I’m getting lunch, what do you want?” I said, “I don’t know, where are you going?” He said, “we’re getting Mexican”. I said, “I don’t really like Mexican.” He goes, “whoa, that’s kind of racist.” That’s not racist.
Ujjal Dosanjh: There were several things. Here, in B.C., there was a strata council issue with respect to the executive meetings being conducted in Mandarin. The Chinese-only signs in commercial establishments. Then there was some report on multi-million dollar homes done by a Chinese Canadian planner, who was essentially ridiculed for following the money. And, you know, ultimately what really triggered me to write was Prime Minister Trudeau’s remarks that Canada had no core identity and it only had shared values, and I felt that Canada did have a core identity. When I came to this country, his father was the prime minister and he fought for that core identity and I believe that we have that core identity and I think one of the problems is that on issues of language, race, culture, ethnicity, religion, white politicians in power particularly silence themselves for fear of rebuke from guys like me. And the issue of political correctness comes up, you know, with all of my friends, no matter what colour or ethnicity they’re from. Be they Chinese, be they Indians, be they brown, be they white, be they black, and all of us talk about it in our private lives, but nobody really wants to speak about it because of what happens. You are ridiculed and you get a lot of abuse.
Tom Clark: But that brings up an interesting question then. So where is this backlash coming from? Who are the perpetrators of this iron fist of political correctness that’s killing the national debate?
Ujjal Dosanjh: You know, I don’t know. But you see my Twitter and you see a lot of abuse. But I believe that these are people who misunderstand the thrust of what I was trying to say and misunderstand the need for what really has to happen. What I’m arguing about isn’t that somehow, you know, white guys should have more power. They’re already very powerful. They don’t need more power. They just need to freely express themselves on issues they don’t express themselves on like language, race, ethnicity, culture or religion. You know, the other day, I was being interviewed by another media outlet and somehow the host asked me why am I not asking brown and other men to speak up rather than just white men? And I said to her, I said, “you know, I thought multi-culturalism was about everyone, not just guys who look like me or look different from white”. And that’s the problem with this concept of multi-culturalism that we misunderstand and if it is to work, it is about everyone having a conversation and everyone being included. All of us have ethnicities and cultures. We all bring it to the Canadian identity.
Tom Clark: But let me sort of pose the other side of this question because some people might say, you know, we were just watching some clips before we started this interview, and here you have Donald Trump and Ted Cruz, two white male politicians saying things that a lot of people find offensive, a lot of people agree with, but nevertheless, they seem to be breaking the bonds. Is that the type of breakthrough in the political conversation that you applaud when you see somebody like Trump or Cruz going out there and saying things that most politicians wouldn’t say?
Tom Clark: Let me just take one example, Canadian example and ask whether this is the sort of conversation that you’re talking about. Recently, Prime Minister Trudeau created a cabinet, 50 per cent men, 50 per cent women, the first time we’ve had gender parity in a federal cabinet. There was very little criticism of that. In fact, I didn’t read any criticism of that. Should there have been? Is this the sort of thing you’re talking about that we breach a wall like that as long as it’s done in a respectful tone? I’m trying to figure out where the new ground is.
Ujjal Dosanjh: Well you know, I’m not a sociologist and I can’t give you all the answers. I raised the issue because I felt that as a question, hanging over our heads that very few people want to talk about in public. In private, almost everyone you talk to agrees that there is a certain silence. On gender equality, sometimes you have to force things. I have no problem with that. For instance, on the issue around the niqab, I think Prime Minister Harper went too far making it a legal issue, but I think that’s up for debate. Niqab is up for debate in terms of values and the kind of values we want to promote in Canada. It may be somebody’s private right, but you can’t legally enforce these rights. These are about social, cultural and other equalities.
Tom Clark: Ujjal Dosanjh, I’m going to have to leave it at that, but I thank you very much for continuing this national conversation. I appreciate it.
Ujjal Dosanjh: Thank you.
Tom Clark: And that is our show for today. Thanks very much for being here. We’ll see you back here next Sunday for another edition of The West Block. In the meantime, I’m Tom Clark. Have a great week ahead.
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