[Recorded by Electronic Apparatus]
Tuesday, May 2, 1995
.0938 
[Translation]
The Chair: We are continuing with our review of Bill C-76.
[English]
Before we start, I think the official record should show that Richard Domingue had twins two weeks ago. He has been out of commission since. He still looks harassed, tired, fatigued, and he probably won't recover for a long time, but we're thrilled for him. Congratulations, Richard.
[Translation]
David Walker would like to ask you a question.
Mr. Walker (Winnipeg-North-Centre): My question is for the Bloc québécois. Bill C-70, which is now before the House, will be submitted to us at the end of next week. Do you have any witnesses to suggest for the review of this bill?
Mr. Plamondon (Richelieu): May I answer you this afternoon?
Mr. Walker: Yes.
Mr. Plamondon: Mr. Loubier will be here this afternoon. Will you be in session this afternoon? He will be able to answer you.
Mr. Walker: Very well.
[English]
The Chair: There's no problem. Ray Speaker will be here as well.
Our first witness this morning is Mr. Thomas Payne from the Central Western Railway. Welcome, Mr. Payne.
Mr. Thomas Payne (President and Chief Operating Officer, Central Western Railway Corporation): Thank you, Mr. Chairman, ladies and gentlemen, members of the committee.
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I have brought with me an associate of mine, Danny Moe. He's the chairman of the producers' advisory committee to Central Western Railway, which is a group of farmers along both lines of our railway who have assisted and advised the railway in service questions and has been a great help over the years. He was a member of the Save the Stettler Subdivision Rail Retention Committee in the early 1980s. He has a few words to say after I have finished.
The policy framework we're going into in the railway industry was aptly laid out byMr. Goodale and Mr. Mulder in front of the agriculture subcommittee last week. Where we're really headed - and I can't help but applaud where the government is taking the railway industry - is toward faster transportation, cheaper transportation, more efficient transportation and a fair sharing of the costs and benefits.
I have to say I have worked very closely with Transport Canada over the amendments to the National Transportation Act and the Railway Act. I think they are a great step forward, and I think we might finally find ourselves, in the railway industry, somewhere approaching the 20th century.
The conditions the industry works under are very highly regulated. Any effort to reduce that burden and move forward to allow railways to get on with their lives is to be highly congratulated.
About Central Western, I think a little history is in order. The company was started in 1984 with a special act of the Alberta legislature. My background is as a locomotive engineer. I'm a locomotive engineer by trade, and that's my claim to fame. I rode engines for CP for a long time.
It became abundantly clear by the late 1970s that the national railways wanted to get down to main track, get off the branches and increase their densities on the mains. A couple of guys and I got the bright idea that we were going to go out and start a railway company.
It seemed very simple at the time. The old acts were very well written and they said we could apply, so we did. Two gentlemen I saw at that time were Mr. Bandeen from CN and Jack Spicer. They said it was really simple; all you have to do is get a special act of Parliament or a special act of the legislature to start business. Then you somehow have to get the grain rates changed.
Well, the grain rates changed with the introduction of the Crow, the WGTA revision. The Alberta government granted us a special act. We commenced operations on the Stettler subdivision in the fall of 1986.
Both of the lines we operate on are protected by a federal government order to the year 2000. It's a valid and subsisting order of the Privy Council of Canada. There's only one problem: it doesn't apply to us. Because we're a provincial railway we're in another jurisdiction.
CWR has a number of characteristics. It's the only Canadian owned and operated regional railway. We are well financed. We've invested some $6 million in these two lines of railway. Approximately $2.8 million of our balance sheet is retained earnings and equity. We're a good, strong little company.
We run a demand service. If any of you are from the prairies and on branch lines, sometimes you see a train and sometimes you don't. We run a demand service. We've run for as few as two cars; we've run for as many as 198.
We've cut the turnaround time on car service. From an industry average of 20 to 21 days, we have cut that car cycle time down to 11 days in one case and 7 days in another. That's for a car to go from an elevator in the middle of the prairies to Vancouver and back to the spot at that elevator. I don't think there's a combination of services you would find on the main tracks that could match that kind of performance.
All of the savings Central Western has generated over the past nine years of operation have gone to the benefit of the producers generally on the Canadian prairies.
Freight rates reduce when costs are reduced. So increased car turnaround times, bigger trains, more efficient trains, just-in-time delivery trains, lower operating costs on the branch lines, that all goes to the credit of the farmer through a lowering of rate.
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The system is designed to operate on averages. The main track costs, which are high density and low cost, are averaged with high-cost low-density lines. That's the regime we work under.
Now we get to Bill C-76. I cannot but applaud the introduction of Bill C-76 in a move toward pay the producer. I think it's absolutely the correct thing to do. There's going to be a lot of shouting and screaming over the amount to be paid out of the $1.6 billion. There's going to be probably $4 billion worth of claimants on the $300 million transition fund and I'm sure you'll hear from all of them.
The issue for Central Western is very simple. There's a deficiency in the bill. Railways are paid their costs. The freight rate derives from the costs, which is placed on an individual station-by-station location. When we pick up grain from a delivery point such as Coronation or perhaps even Stettler and deliver it to Canadian Pacific, we get the difference between the stations. This is not a difference in cost; it's a difference in rate. So for hauling a 100 tonne car of grain for 100 miles, out of the freight rate we get paid the princely sum of 50¢ a tonne. The cost to operate the subdivision above that 50¢ is approximately $8.75.
What has happened to our rate since we've started? When we started operations, the freight rate we were paid for our tonnage was approximately $13.50. As we've achieved economies over the years, our freight rate payments against our costs have been progressively reduced. I believe we are now at the lowest possible cost that can be achieved on a branch line of the density that we have in western Canada.
We maintain well. Last year we put in 15,000 ties, and in the previous years we had programs of the same magnitude. We're rebuilding our lines, and we're rebuilding those lines without the benefit of the Prairie Branchline Rehabilitation Program because there's no more money in that program.
The payment of the $1.6 billion that's going out in Bill C-76 to the producers in western Canada is in fact all of the money plus what is being paid out on an annual basis to CN, CP and ourselves. So the farmer has the money to pay for the costs of the operation of the railways of Canada. How do we collect it? We collect it through a freight rate.
The freight rate schedule proposed in the bill as schedule III is too low. The only costs that are included in the calculation of that freight rate are CN and CP. If they recover only their costs from that freight rate, or the potential to recover their costs - they can always lower the rate - then when we take a car to interchange and we say we need $8.75 from them to reflect our costs of carriage on the subdivision, they turn around and say they have no money to divide with us.
That fact has been confirmed by the Department of Transport. I believe the committee has in hand a letter from Mr. Easter, the chairman of the Subcommittee on Grain Transportation, about that.
The response we got from Canadian National and Canadian Pacific when we talked to them about the matter was that they have no money to divide with us, and they're absolutely correct.
What then happens is Canadian National and Canadian Pacific collect a small amount of pennies at each delivery point as they move across the prairies on each tonne of grain for the 32 million tonnes delivered. We then go to interchange, we give them a train, and they pay us a full division of $9.25 out of the freight rate.
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We've talked to CN and CP. They're perfectly prepared to discuss full divisions with us. But in order for them to collect the money the Government of Canada is paying out, we have to have the freight rate amended.
It's important to note that the payout will not be any larger than what is being paid out today. So we're not asking for any extra money.
Gentlemen, it's an issue of equity. We are the only regional Canadian-owned railway in the country. We're the only regional railway running on the Canadian prairies, with the exception of Southern Rails Cooperative Limited in Saskatchewan, which has the same problem. They run two 25-mile branch lines with no delivery point. They're spotting cars at farmers' fields. Quite frankly, I don't understand why we've been left out of the piece.
What we need from the committee is an amendment of the freight rate.
Mr. Chairman, with that I'll conclude and let Mr. Moe speak for himself. Thank you.
Mr. Daniel Moe (Chairman, Central Western Railway Corporation Producer Advisory Board): Thank you Mr. Chairman and members of the committee.
I farm at Morrin, Alberta, which is at the southern end of the Stettler subdivision. I farm approximately 2,500 acres and ship approximately 2,000 tonnes of grain per year with Central Western Railway Corporation.
I'm the chairman of the Central Western Railway Producer Advisory Board, as Mr. Payne mentioned. That committee consists of eight farmers: four from the Stettler subdivision and four from the Coronation-Lacombe subdivision. Our purpose is to advise CWR on operational and policy matters that will enhance their service to their customers.
At this point, I can assure you, we are not advising Tom to cease operations as of August 1, 1995, but this is a scenario that could quite easily come about if this amendment is not reached.
In 1984 when Mr. Payne wanted to purchase the Stettler subdivision, I was probably foremost in the line of people who were throwing stones at him trying to get him to go away. But since that time I've been in contact with Central Western Railway and I can see what their small business, private enterprise type of operation can do to boost service, productivity, and customer satisfaction.
Until the present, only lesser quality branch lines have been available for purchase. CWR have shown tremendous improvement in operating these lines. I feel that significant additional savings could be achieved if operations could be expanded to good branch lines and perhaps some secondary main lines.
As Tom stated in his presentation, some of the stated goals of the proposed new legislation are to reduce government operations and subsidies, reduce railway operating costs, deregulate the railroads, and provide a future structure that will facilitate short lines, speed up the abandonment process, and enhance running rates. Short lines or regional railways can be an integral part of this process, but we must have a legislative framework that will allow them to function and to generate income.
The problem CWR is finding itself in is, under the proposed new legislation, there is no way for them to be paid as of August 1, 1995. That is, their costs are left out of the cost base, which is used to determine the rates.
If the national railroads were put into a completely commercial situation there would be no problem. The short line and the national railway could negotiate revenue-sharing contracts between them based on a through-haul system.
For example, if the rate for CP to move grain from point A to Vancouver was $30, with a combination short line-national operation, the short line could move the grain off the line to interchange for, say, $10 a tonne, and the main line carrier could take it to Vancouver for $20 a tonne, arriving at the same $30 a tonne figure. But because the national railroad's rates are maximum rates, which are cost based, regulated, and only calculated on the lines they operate, as Mr. Payne said, they have no money to revenue share with a short line.
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Now, all we're asking for is to have CWR's operating costs put into the cost base and paid to CN and CP and be available for them to revenue share with Central Western Railway. We're not asking for any money; all we're asking for is a way for the CWR to be paid.
Under the proper new legislation, short lines' lower cost operations will be a very attractive and important tool in acquiring lower freight costs for farmers; that is, a short line with a lower cost plus the national railroads will equal a lower rate than an equal distance by only the national railways.
For example, using the same numbers, CP Rail could move a car of grain from point A to Vancouver for $30, while under that scenario the short line could move it to the interchange for approximately $8 and the main line carrier would receive $20, for a total of $28, a $2 saving. All it does is allow for some negotiation and a way to provide lower rail costs.
As a farmer, I can accept the fact that a short line railway can go out of business because they're uncompetitive. So be it. But please don't force them out of business because of a legislative oversight. Again, as we said, we're not asking for money. All we want is a framework put in place so that the short line can continue to operate.
The other scenario that I can see happening is that if a short line were to buy a piece of line after the legislation went through, then the cost for that line would be in the cost base. The national carriers would be receiving a rate based on those costs. So they would have the money to revenue share with the short line. Because Central Western Railway Corporation came into being prior to this taking place, they're being left out of the system. Basically what we're asking for is equity in the system to allow Central Western Railway Corporation to continue operations.
Mr. Speaker (Lethbridge): Good morning, Tom.
The Chair: Do you use the CWR for hauling any of your grain?
Mr. Speaker: No. I'm a southerner and they're central Alberta, although we're not far apart.
I wanted to clarify one of the things you said, Tom. About adding to the rate that is currently in the legislation a small amount, would that amount be added to all rates right across western Canada? Say it's one penny or ten cents or something that would be added to all rates. Could you just clarify how you justify the adding of an amount to all of the rates, but then the dollars go to the Central Western Railway?
Mr. Payne: What happened when the costs of Canadian National and Canadian Pacific were removed from the system is the freight rate costs at every station, 7,000 of them or whatever there are in western Canada, every single station had a reduction in rate. The system is only designed to take costs out on an average basis through the system. So every place on the prairies dropped in cost.
I believe you have a map of freight rates in your package and you can see the pre-Central Western rates at 88¢. Then you see the 1992 rates, which is the lower line, showing the reduction in rates. Now that Central Western has to take its funds out of the freight rate system rather than as a direct payment from the WGTA section 60 contract, we need to have the average rates raised to reflect that.
With the Crow benefit of $658 million, at the present moment $653 million of that goes to CN Rail and CP Rail through the freight rate and $5 million goes to BC Rail Ltd, Southern Rails Coop, and ourselves. That $658 million is the amount that is still being paid out and now has been factored into the $1.6 billion.
Does that answer your question, Ray, that it goes down by average and up by average?
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Mr. Speaker: Yes, that clarifies it, because possibly one of the arguments against it could be that others will say why should they be paying for the service on the private line?
Mr. Moe: A point that also should be clarified is the fact that the present distance increments in the freight rate system are based on averages, as Tom said. Everyone across the prairies is helping to collect a bit of money for Central Western Railway. That's why the distance related increments on our lines aren't relevant to a revenue-sharing agreement. I think Tom said it amounts to 60¢ on the distance of one of the lines. That's what we could revenue share with CP Rail or CN Rail out of a $9 rate.
If I could use an example, the rates that are in place are not reflective of the actual work that is being done. For example, the 50¢ per tonne rate increments could be broken down this way: The short line would be paid approximately $10 per tonne for doing what I would call the grunt work: moving the cars out, spotting at the elevators and picking them up and bringing them to the interchange. The main line would receive approximately $20 per tonne for the through-haul shipment to Vancouver.
If you take that down to the next rate group, which is 50¢ per tonne lower, the scenario continues. The work being done by the short line railway would still be $10 per tonne, but the main haul would drop to $19.50, and so on.
If you go to the next rate group, you're still doing the same work, so the costs are the same, but you're closer to Vancouver, so you drop into the next rate group. It would continue to go $10 and $20; $10 and $19.50; $10 and $19; $10 and $18.50. As you move toward Vancouver the rates drop 50¢ per tonne.
If that will clarify, that's why the revenue-sharing provisions don't work. They're based on a distance increment on an average cost. They're not based on actual work being done at any given point across the prairies. I don't know if that made it any clearer or not.
Mr. Payne: The rate at Meadow Lake, Saskatchewan or somewhere like that way out at the end of a single line branch line was $34.10 the last time I looked. That station is some 350 miles from the nearest main track. I can't believe the actual cost of taking a car of grain from Meadow Lake to Vancouver is $34.50.
Every station through the whole system benefits from these average costs. The main track stations are slightly higher. They overpay because of their average costs.
Mr. Speaker: In terms of the increase in the average rate, what would you see happening? Are we talking 10¢, are we talking 50¢, or has that been projected?
Mr. Payne: I think it's in the order of 10¢. What I would have to do is contact the National Transportation Agency, which is the receiver of our financial statements and costing data. I would have to ask them to give us a detailed costing, which wouldn't take too long to do. It's probably a two- or three-day exercise over at the NTA. I think it's probably in the order of 10¢.
Mr. St. Denis (Algoma): Thank you, gentlemen, for being here.
Is this just an oversight? Is the solution a fairly simple one, technically?
Mr. Payne: Yes, it's very simple, technically. I think it's an oversight. I think Mr. Tobin summed it up in 1990 when a similar thing happened to us with the passage of the NTA. In your handout you have a quote from Mr. Tobin in Hansard. It's the same thing all over again; it's an oversight.
I think what happened was somebody checked what the costs are in the WGTA. The only costs that get used in the WGTA are the CN and CP costs. So a number got stuck on a dartboard, and that was the number. I don't think anybody turned around and asked about the two railways, Central Western and Southern Rails Cooperative.
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What about these two guys? They have costs too.
Mr. St. Denis: If a solution were arrived at here, it would affect the Southern Rails Cooperative as well?
Mr. Payne: It will fix them as well. I have a letter in hand from CN and Canadian Pacific which says that if this gets done they'll do a full division with us. I'm perfectly prepared to stand at the woodshed with CP and CN and get into a fist fight over how much money I extract from them on the rate base. I'm not afraid of that.
The Chair: [Inaudible]
Mr. Payne: Yes, but he's crafty. He's been around longer than I. I have only 25 years of seniority; he probably has 40.
Mr. St. Denis: [Inaudible] ...public hearings and the like for this kind of adjustment to the rate, would there? It would take major Herculean efforts to correct such an error.
Mr. Payne: This matter was heard fully by the National Transportation Agency in public hearings in Stettler when we purchased the Coronation-Lacombe subdivision in 1992. There were four days of public hearings in Stettler and the rate effects were fully explained.
It was one of the problems that the Alberta Wheat Pool had with the sale, quite frankly. What will happen, so they said, was Central Western may well get overlooked in the system and not be included in system changes. So they lose their security of having an elevator system on their lines. They have new elevators. They said they won't have the protection of being in the federal jurisdiction. The costs will be excluded. They won't be part of the system.
That was a risk for them. I told them I don't think that will happen. Yet here I am today on another crusade to Ottawa to fix an oversight.
Mrs. Brushett (Cumberland - Colchester): First, my question is for producer Dan.
You indicated, to use your own words, that you were throwing stones at Mr. Payne when he took over the short line, because you thought that it wasn't going to be affordable or efficient or whatever. If he had not taken over the short line, would your alternate choice be for you to haul your grain trucks to the next elevators or to the main line? What was your option?
Mr. Moe: That's correct.
Mrs. Brushett: Is that what you had been doing prior to 1986?
Mr. Moe: Prior to 1986 I was delivering to the elevators on the Stettler subdivision which at that time was run by CN Rail. In 1984 when CN applied to abandon the Stettler subdivision, I was involved with the group that was making a push to have CN continue to provide operations on that subdivision.
Mrs. Brushett: So why were you opposed -
Mr. Moe: It's because we were afraid of the same thing as Tom just mentioned, which was a small business that came in and took over operations. We didn't think he could provide as good a service as CN Rail. We also thought if he took over the line he wouldn't be able to make it work. He would go out of business and we would be left with no service.
Mrs. Brushett: When CN was running the line, were they doing spot runs as Mr. Payne is currently doing?
Mr. Moe: No. That's what I've really noticed since Central Western has taken over. There's no comparison between the services. CN Rail was providing service based on minimum car orders. We got very spotty service with CN. Since Central Western has taken over, to be frank, there is no comparison in the service. We've never had service like that.
Perhaps that line may be an extreme change. If it had provided better service, it might not have been so obvious. To us, there is no comparison.
Mrs. Brushett: Are the costs substantial if you truck your grain to the next nearest elevator or to the main line, if this weren't in place?
Mr. Moe: Personally, from my location, the extra costs would not be a great factor, because I'm close to the southern end of the Stettler subdivision. But for lots of producers on our committee it would mean the difference between a 10- to 15-mile haul and possibly a 40-mile one-way haul.
Mrs. Brushett: I ask these question because, as you may be aware, in the east we've lost freight assistance, freight rates and practically everything possible to get produce and products out of the region.
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As well, we have some short lines that have just been taken over by American lines but they're making substantial profits in just two years. So I'm able to compare some of the differences.
I do have one further question for Mr. Payne. Recognizing that things never stay the same for very long in this world, when you went into the purchase, as the major shareholder, as I understand, for the short line, did you not recognize that this might happen?
In fact, do you haul produce other than grain? Do you haul potash, coal, sulphur or any of these other bulk products?
Mr. Payne: No. The difference between ourselves and the RailTex lines, the Goderich-Exeter and Cape Breton Central Nova Scotia, is that they are non-grain dependent railways. They do not have regulated rates. We have regulated rates.
When we went into this business, we were assured by the government that every effort would be made to ensure that we were part of the system. As part of the system, I'm perfectly prepared to take my risks. What I see happening here is that CN and CP have the ability to collect some money out of farmer's pockets through the freight rate but we don't have that ability.
I'm perfectly prepared to live and die in the commercial world, but I have to be able to collect revenue. I can't collect sufficient revenue from the farmers on the Stettler and the Coronation subdivisions to pay all my costs, because a factored Crow benefit is being paid out to farmers over the whole prairies.
When we started, if the reduction in costs that we have achieved on our line had been given to our local farmers, then I could understand the argument now being made that we should be able to go and ding our local farmers. That's because the freight rate on the Stettler subdivision would have been about $11 to go to Vancouver, and the neighbouring subdivision would have been about $34, based on CN and CP costs. But it's not equitable.
So sure, when you go into a business, you go in with your eyes open, but you expect a level playing field.
Mr. Walker: I thank Mr. Payne for coming here and for meeting with many of us before this meeting to explain things.
I just want to say for the record that your case has been taken very seriously. I was hoping to have a fuller response than what I'm giving you this morning, but I can't. However, before we wrap up our hearings and look at different amendments, we'll make sure we do everything we can to analyze your situation and make sure all members of the committee know why a particular recommendation is or is not being made.
We're just a couple of weeks away from that. Our hearings go on in May. Then we'll put all the amendments together as need be.
I don't want to get ahead of myself. I just want to tell you I'm sorry I don't have an answer for you today, but we've been looking at it since you came to see me last week.
Mr. Payne: Thank you very much, Mr. Walker. If you take a quick look in your file, there should be a picture of one of our trains running east out of Coronation. It tells quite a tale. The ballast you see there was paid for and spread by Central Western. There are the ties that are being replaced. You can see little tie inserts, where we've inserted ties, by the edge of the track. Going back from the engine, we're replacing ties at the rate of 300 ties per mile on a branch line that hasn't seen ties since the 1960s.
We're doing what we're paid to do, which is to haul grain at the lowest possible cost. I'd like to get into the new environment, because then we can continue to do that.
As for that unit train, on 140 miles, we would turn this subdivision on demand and we would spot 15 or 16 individual little stations and have this train back to CP in less than 24 hours. I don't think there's a branch line that has a turn like that with the densities we have. I don't think there's a branch line that comes close.
Mr. Fewchuk (Selkirk - Red River): I see everybody is after the same pot of money. We have a problem. The government says today we have to restrain and watch what we're doing. To be fair to CWR, I feel neither CN nor CP nor any other railway should be subsidized if that is the case. They shouldn't be treated differently. If CWR is not to get part of the pot, CN and CP shouldn't either. That's basically where I'm coming from. They should all be on the same playing field.
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The Chair: Who will object: all of the producers who use your facilities because their costs will go up by 10¢ a tonne?
Mr. Payne: I would think so, but that would be from a lack of understanding of how the system works. I don't know how they calculate this system, but it's a big spreadsheet.
The Chair: I understand.
Is the rumour true that you are going to make a bid for CNR when we privatize it?
Mr. Payne: I'd be delighted. I have a map with a lot of circles on it showing good regional railways that could be sold off by Canadian National. I think there are some real opportunities. I really look forward to it. I want to get out there and do some more railroading and have some fun at it.
The Chair: Gentlemen, thank you both for being with us. It has been quite an experience for those of us who have had the opportunity to meet somebody who is really bigger than life. AsMr. Walker said, we'll take your representations very seriously.
Mr. Payne: Thank you, Mr. Chairman.
The Chair: Our next witness is from the CFS, the Canadian Federation of Students. Let's just take a short break.
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PAUSE
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The Chair: Please come to order. Our next witnesses are from the Canadian Federation of Students, Guy Caron, national chairperson, and Jocelyn Charron, government relations coordinator. We look forward to your presentation.
Mr. Guy Caron (National Chairperson, Canadian Federation of Students): First, let me apologize for the lateness of our arrival. There was some misunderstanding about this session.
With me is Jocelyn Charron, who is the government relations coordinator for the Canadian Federation of Students. We'll make our presentation as brief as possible.
We would like to thank the members of the committee for granting us the opportunity to make a presentation on behalf of our members. The Canadian Federation of Students represents over 425,000 college and university students across the country. Student leaders meet twice a year to develop policy and map out the work of the federation. Our goal is a post-secondary education system that is fully accessible and of high quality.
The main premise of our brief is that a budget embodies choices, and the choices that are made reflect the political values and priorities of the government. While we recognize the constraints the government faced when it made the choices that are reflected in Bill C-76, we still believe the government could and should have made other choices. We will begin by discussing our main concern with Bill C-76, which is the Canada Health and Social Transfer.
Of all the measures announced by Finance Minister Paul Martin in his February 1995 budget, the amalgamation of the current transfers found in the Established Programs Financing arrangement and the Canada Assistance Plan under a new vehicle for federal transfers called the Canada Health and Social Transfer will probably have the most far reaching consequences. Under this new block funding arrangement, the provinces will have greater flexibility in designing social assistance programs, but they will have to do it with less money.
As Table 1 shows on page 7 of our brief, the federal government plans to cut $2.5 billion in 1996-97 and another $1.8 billion in 1997-98, for an accumulated loss of nearly $7 billion from 1995-96 levels. Block funding makes it more difficult to assess exactly how, where and when students will be affected. Different provincial governments may make different decisions based on their priorities. In some provinces students may bear the brunt of the cuts, while in others people who receive social assistance may be targeted. But there is little doubt that students will be affected in much the same way they would have been if the government had implemented the proposals for post-secondary education found in the social security review: massive tuition fee increases and heavier debt loads.
Unlike the current Established Programs Financing legislation that governs federal transfers, Bill C-76 doesn't even establish what nominal percentage of the transfer should be devoted to post-secondary education. Students are already familiar with provinces using money supposedly allocated for post-secondary education to pave roads, build dams, etc. But under EPF, at least, they could determine approximately the amounts that had been misused, since the legislation stated that 28.5% of EPF transfers should be set aside for post-secondary education.
We are convinced that the diminishing levels of funding, combined with the total absence of guidelines, not to mention national standards, will have dire consequences for accessibility to post-secondary education in Canada. In the last year we have repeatedly stated our concerns about the growing level of student debt in our country. We have warned all levels of government that within a few years many students would graduate with debts as high as $40,000. Many people scoffed when we mentioned those numbers. However, those numbers are all too realistic.
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Consider this. The average student loan in Ontario this year, 1994-95, was $6,169. For a four-year program this amounts to an average debt of $24,676, to which we must add the interest students will have to pay over 10 years. Our original estimate of the tuition fee increases associated with the plan outlined in the social security review was $2,000 over three years, an estimate shared by the Association of Universities and Colleges of Canada.
Under the new Canada Health and Social Transfer we believe our projections are still valid. They may, in fact, underestimate the tuition fee increases some provinces will impose as a result of the funding levels set by the Canada Health and Social Transfer.
Each tuition fee increase of $1,000 adds $4,000 to the debt of many students. So a tuition fee increase of $2,000 over the next three years would mean an additional debt of $8,000 for many students who have chosen a four-year program. In such a scenario, the average student debt would reach $32,676. Those who might be tempted to write Ontario off as an exception should know that the average student loan in British Columbia this year was $5,996, whereas the average student loan in Nova Scotia last year, 1993-94, was $5,997.
Clearly, something is wrong here. The Canadian Federation of Students is not interested in playing up the differences between generations, but the cumulative effect of the policies enacted during the last 10 years will be to create a generation of students with huge debts and waning employment perspectives.
There is little doubt that the federal government was instrumental in broadening accessibility to post-secondary institutions in the 1960s and 1970s, and without a strong financial and moral contribution, there is no doubt that the gains of the preceding period are going to be lost. Unfortunately, the creation of the Canada Health and Social Transfer clearly indicates that the government intends to do just that: bring us back to the past.
Canadian students who attend colleges and universities should probably not worry about the decline of national standards for post-secondary education. There have never been any. For years now, the Canadian Federation of Students has asked for the adoption of a higher education act that would establish national standards for post-secondary education with special arrangements for Quebec. The creation of the Canada Health and Social Transfer makes the adoption of such legislation even more unlikely.
Whereas the legislation governing the current Established Programs Financing arrangements states that federal contributions should increase provincial flexibility, Bill C-76 asserts that the Canada Health and Social Transfer aims to increase provincial flexibility. Here, flexibility clearly refers to the manner in which social programs are delivered.
Of course the government claims it will be able to maintain national standards, and there are specific references to national standards in Bill C-76. Two new criteria have even been added to the five conditions already defined by the Canada Health Act: no extra-billing and no user charges.
In his budget speech, Finance Minister Paul Martin said the government would invite all provincial governments to develop a set of shared principles and objectives that could underlie the new transfer. Part V, subclause 13.(3) of Bill C-76 reiterates this commitment. However, we believe other stakeholders should be involved and we hope the Minister of Human Resources Development will extend an invitation to all the groups that stand to be affected by the Canada Health and Social Transfer.
Bill C-76 doesn't specify what will happen if the federal government and the provinces are unable to agree. Presumably the federal government will have the power to act unilaterally and impose its own set of principles and objectives. However, the federal government's ability to enforce national standards has always been linked to its control over the cash portion of EPF transfers, which was already declining because of the five-year freeze that was put in place in 1990.
With the Canada Health and Social Transfer, cash transfers will decline even faster.
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In the near future the federal government may still be able to enforce the Canada Health Act, provided it can muster the political will to withhold all federal contributions that fall under the Canada Health and Social Transfer. Otherwise, if the federal government decides to withhold only a portion of the transfer, provinces may simply use the funding provided for social assistance or post-secondary education and direct it to medicare. They would be able to do so with impunity because Bill C-76 imposes no CHST-related criteria they would have to meet with respect to post-secondary education and only one criterion that should be met for social services.
We believe national standards will eventually simply fall by the wayside. Lacking the financial clout afforded by cash transfer, the federal government will be unable to enforce them. Without national standards, provincial governments facing their own fiscal problems may be tempted to download their problems to health care institutions, post-secondary education institutions, social services organizations and municipalities.
Why do we care so much about national standards? You'll find plenty of people who see nothing wrong in scrapping the principle of universality in favour of targeted social programs, or even in letting individuals and families fend for themselves. We are strongly opposed to such a vision. We don't want to live in a society in which the right not to bother with those we deem unworthy or undeserving is elevated to the rank of a sacred principle.
We believe Canadians who need medical care should get it whether they can afford it or not. We believe students who qualify should be given the opportunity to attend college or university without incurring a debt that will burden them for the rest of their lives. And we believe that Canadians have a right to basic food and shelter without having to beg for them. We believe that these objectives cannot be met without a strong public sector and we are convinced that Canadians can still afford it.
It is becoming clear to many Canadians that the budget tabled last February by Finance Minister Paul Martin will bring sweeping changes to our country. Most Canadians will be affected, from prairie farmers and grain handlers who depend on grain transportation subsidies to sell their produce to patients who have come to enjoy the benefits of a civilized health care system, to post-secondary students who will soon find themselves burdened with more debt than they can handle.
Before the government goes ahead with these changes, Canadians should be given a chance to voice their concerns. That's why we urge the government to hold community hearings across the country.
Thank you very much.
[Translation]
The Chair: We have only seven minutes for questions. We will therefore begin with you,Mr. Plamondon.
Mr. Plamondon: I would first like to say that I am surprised. Are you French-speaking?
Mr. Caron: Yes, I am.
Mr. Plamondon: From where?
Mr. Caron: From Rimouski.
Mr. Plamondon: And you?
Mr. Jocelyn Caron (Canadian Federation of Students): From Sherbrooke.
Mr. Plamondon: You arrive here with a document in English only. Aren't you ashamed? At the very least, it should be in both languages. You represent a federation composed of francophones and anglophones, you come here with a document in English only and you speak in English. That, my friends, is how we become assimilated. That is how French Canadians are swallowed up in Canada and lose their ground. It's because people like you don't stand up for yourselves, are ashamed of your language and don't use it to express yourselves.
I have no question.
The Chair: Excuse me. They have the right to appear before us however they please, and the federal government is responsible for providing the translation. When I speak French, I'm creating the same problem.
Mr. Plamondon: I'm not referring to you, Mr. Chairman. I was speaking directly to the witnesses about something. I said I had no questions. Give someone else the floor.
The Chair: Thank you, Mr. Plamondon. Mr. Speaker.
[English]
Mr. Speaker: I think we want to make sure that in our society we have the freedom of choice. That's what we hope we protect in this country of Canada.
In my preamble to that I want to say that it was a good brief. It was very mature and it was well presented. I appreciate that very much. You've made your case very well, and you're not trying to, in a sense, carry a cause that is outside of reality. I see some reality in the brief and I want to thank you for that.
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I have two questions that I have to answer as a representative of a broader society than just the university or the college community. On page 11 of your brief you say:
- We believe that students who qualify should be given the opportunity to attend college or
university without incurring a debt which will burden them for the rest of their lives.
About 6% of those students who start grade 1 get to university. How do I answer the question to, say, the young farmer who wants to get started, the young businessman who wants to get started, or someone else who invests in something, and they have no access at all to this public credit? How do I say that I'm fair if I pay the total way for the university student but I can't help a small businessman or a beginning farmer in the very same way? How do I justify it and reason with them that there is equality of opportunity?
Mr. Caron: I can understand that. We previously made a presentation on Bill C-28 and the Canada student loan program.
Mr. Speaker: Right.
Mr. Caron: The main philosophy of the federation and of the students who actually draft the policies we are presenting here is that education is a responsibility of society mainly because society is fully benefiting from a well-educated population.
We understand there are choices to be made in that case. We understand the importance of the private sector as well as the public sector. Our philosophy is that those people who want to start a business, usually a small business, or want to go on their own, can do so and should be supported as well. But without going to university, maybe they would not have to make this choice.
What is preventing these people from getting to university to be able to get the knowledge and the skills that would be helpful to them? Actually, it is almost necessary for them to get a post-secondary education in economics or administration to be able to compete in our market. Those people might not be able to afford to do it. That's why they feel that university or college is not an option for them. This is why, if universities and colleges were made more accessible, they would actually benefit from an edge over people who won't be benefiting from those services.
Mr. Speaker: My other question is with regard to federal responsibility for the quality of education or health care or social programs versus provincial responsibility for those very same functions. I'm a believer that the closer government is to the people, the better quality you're going to get out of that service. You're going to have a greater demand on that level of government to perform in a certain way. What I see as a trend - and you've stated it very well here - is that things seem to be moving down to provincial responsibility, or even down to local or municipal responsibility. I have faith in the system that the quality will still be there.
Maybe you could comment on that. You see it differently from your perspective. Maybe you would like to comment further on that.
Mr. Caron: I would beg to disagree with the idea that the closer to the community or the population social services are, the better they are, necessarily. If we look at municipalities across the country we'll see a wide range of services which are not equally good in all cities. Public services in Montreal, for instance, garbage collection varies very much from what it is in Ottawa, but it's the same level of government.
It all depends on what citizens do with their responsibility to let their representatives know how services are being provided. I think the level at which it happens plays a role, but not as great a role as you seem to imply.
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I think if you look at all different levels of government, you will find some services which are well provided and others which are not. Really it's what the citizens are asking for and how vigilant they are in seeing how those services are provided.
Mr. Charron: What we mean by national standards is not that the federal government would control everything. We still recognize obviously, the provincial jurisdiction in post-secondary education.
By standards we want to establish that as with the Canada Health Act for example, there are some minimal standards that actually have to be applied in Canada. The systems are very different from province to province. In Quebec it is a very different system from what you will find in British Columbia and the emphasis is very different as well. You can take any other two provinces and it will be the same.
What we want to establish is that there are some elements in the post-secondary education system that have to be respected and in which we should apply minimal standards. We're talking about transferability of credits between provinces. We're talking about not standardization but helping to make the provincial loan systems for example, more accessible for students who want to study in other provinces. We're talking about minimal funding to post-secondary education which doesn't even exist right now for the provinces. We're not talking about standardization of the structures because that wouldn't respect the culture of the region. We mean actually to implement an act that would make the post-secondary education system not so divided and not so different from province to province.
Mr. Speaker: A good answer.
Mrs. Stewart (Brant): I would like to follow on some of Mr. Speaker's questions. As we talked about the quality, I wrote down that something is wrong here; the system isn't working right now as it is.
One of the things I'm wondering about is actually giving the accountability to the level of government that has the responsibility for education, i.e., the provinces. The provinces would have full accountability for it and couldn't come back to the feds and say that they can't do this in education because the feds haven't given them enough money.
If the provinces had the accountability and the electorate was there to force them from the electorate's point of view to give the quality of education that they're looking for, do you think that would go toward helping the issues you're concerned with now? Right now, given the system we have with the feds having no responsibility but giving some money for education that, as you point out, is not necessarily used for education, and the provinces not having full accountability for it, we have difficulty in making sure money gets used for education. Is it possible that this structure being proposed might in fact be a solution to that concern?
Mr. Charron: It's an interesting idea, but I think the problem goes even deeper than that because universities and colleges most of the time are not even accountable to provincial governments. There are some serious problems.
I can refer to Ontario, for example, where two years ago, in a report presented last year by a commission studying the accountability of universities and colleges there was one serious problem. The government didn't have access to the full financial statements of universities and colleges. They could not even assess if the situation was going right or wrong.
There can be some standards applied by the provincial governments but most universities seem to have a special status that keeps them outside of government legislation. They actually have their own legislation.
I think there is a fine line that is difficult to place on where universities should be accountable and where they should not be accountable. Obviously universities have to stay autonomous in some way and have to be accountable for the money that has been given to them.
I agree that the provinces have a strong role to play. What we are looking at is not to forget that the federal government has to play a very strong role in post-secondary education. It has to make sure the philosophies existing in different provinces won't make it so different that we'll actually have in post-secondary education 10 small countries running their systems without any possibility or with a greatly reduced possibility of students transferring from province to province, by greatly expanding the risk of a province just leaving it to the wealthiest of students to attend post-secondary institutions. This could very well happen in the future.
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In Canada we used to have a philosophy of compromise in post-secondary education between the European system, where accessibility is the key factor and the American system, which is considered as being more regulated by supply and demand. To Canadian students it's a dangerous trend that we are taking now to lean toward the American system while forgetting all the benefits of parts of the European system that are about to be deleted.
[Translation]
The Chair: Thank you, Mr. Caron and Mr. Charron. Your presentation was clear and well prepared. I am sorry I am not as bilingual as you are. You have been of considerable assistance to us. Thank you again on behalf of all the members around this table.
Mr. Charron: I would like to apologize to members of the Committee for being late. Mr. Caron had nothing to do with it. I was the one who received the fax and didn't read it properly. I have poor vision, but that doesn't change anything. So, it is my fault and I apologize again.
The Chair: No, it is our responsibility to have all briefs translated.
Mr. Plamondon: He is referring to being late.
The Chair: I have never been late myself, but thank you very much.
Mr. Plamondon: I would like to raise a point of order. Did you just say that the translation of texts is your responsibility?
The Chair: Yes, the committees' responsibility.
Mr. Plamondon: Not the witnesses' texts.
The Chair: No, that is the government's responsibility.
Mr. Plamondon: And distributing them to us afterwards? If that is your responsibility, why don't I have a French text?
The Chair: I don't know. I'll have to ask our clerk. Perhaps it's because of the time when we received this presentation.
Mr. Plamondon: Mr. Chairman, it has always been my understanding that witnesses could express themselves in the language of their choice, present their texts in the language of their choice and distribute them themselves in the language of their choice.
The Chair: Yes.
Mr. Plamondon: I agree with that. You misunderstood my approach with regard to these two witnesses. I did not criticize them for having a text in English. I did not critize them for speaking only in English. I told them that, as a Francophone, I was ashamed when I saw two Francophones stand here and present a text solely in English, giving the impression that English is the only language that is understood in Canada and that if their text had not been in English, it would not have been understood. I was ashamed to see them express themselves only in English, since they are bilingual. Why not show that Canada is bilingual, if it is true? Why didn't they show that they knew both languages by presenting their text in French and English as bilingual witnesses usually do? That's what I said.
I never demanded to have the text in French right away since, according to the committee's custom, witnesses have the right to present their text in French or English and the texts are then translated into the other language.
Thank you.
The Chair: We will now hear from the representatives of the Public Service Commission.
[English]
Ruth Hubbard, would you be good enough to introduce those who have accompanied you here today?
Ms Ruth Hubbard (President, Public Service Commission): Certainly, Mr. Chairman. With me are Mr. Michel Cardinal, Executive Director, Staffing Programs Branch of the Public Service Commission; and Ms Ginette Stewart, Commissioner, Public Service Commission. Also in attendance but not at the table is Mr. Fernand Lalonde, Director General, Appeals and Investigations Branch, and Mr. Gaston Arseneault, Senior Counsel to the Public Service Commission.
The Chair: Would you care to introduce the other people who have come with you?
Ms Hubbard: These are the people who are with me and who will be supporting me in answering your questions, Mr. Chairman.
The Chair: There are a lot of other people here as well, I understand.
Ms Hubbard: There are a number of other people here from the Public Service Commission.
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If you would like, I'll ask them to stand and introduce themselves to you.
The Chair: Thank you.
Ms Beverly Whitelaw (Legal Services, Public Service Commission of Canada): Beverly Whitelaw.
Ms Pamela Ward (Staffing Programs Branch, Public Service Commission of Canada): Pamela Ward.
Mr. Ross McMahon (Staffing Policy and Program Development Directorate, Public Service Commission of Canada): Ross McMahon.
Mr. Keith Hobbs (Communication Branch, Public Service Commission of Canada): Keith Hobbs.
Ms Cheryl Geeson (Parliamentary and Legislative Affairs, Public Service Commission of Canada): Cheryl Geeson.
Ms Nora Benbaruk (Treasury Board Legal Services, Treasury Board of Canada): Nora Benbaruk.
Mr. Michel Papineau (Public Service Employment Adjustment Group, Treasury Board of Canada): Michel Papineau.
Mr. George Brackenbury (Staff Relations Division, Treasury Board of Canada): George Brackenbury.
Ms Joan LaRose (Human Resources Development Division, Treasury Board of Canada): Joan LaRose.
The Chair: I know you have a presentation to make to us. I simply ask how many public servants it takes to make a publication. I assume everybody here is on the payroll. Anyway, I look forward to your presentation.
Ms Hubbard: As you are aware, Mr. Chairman, the Public Service Commission of Canada is the parliamentary agency established under the Public Service Employment Act with responsibilities related to staffing, recourse and training.
The mission of the Public Service Commission is to ensure that the people of Canada are served by a highly competent public service that is non-partisan and representative of Canadian society.
Another important player in the human resources field in the public service is Treasury Board which, as the employer, is responsible for areas such as job classification, collective bargaining, the workforce adjustment directive, and general human resources management.
[Translation]
The Public Service Commission and Treasury Board have a power exercised by deputy heads which falls directly under the Public Service Employment Act. We are therefore very pleased that the Public Service Commission has the opportunity to address the Finance Committee in order to answer questions on the relationship that exists between Bill C-76 and the Public Service Employment Act.
[English]
The decisions announced by the government in its February budget will impact on the lives and careers of thousands of public servants.
We see the role of the PSC in implementing decisions flowing from the recent budget, as continuing to assist the departments in managing the people side of their restructuring. This includes the placement of surplus employees. Our intention in this regard is to provide well-targeted tools to departments and deputy heads to help us all ensure the people of Canada will always be served by a highly competent public service that is non-partisan and representative of Canadian society.
[Translation]
We are fully aware of the challenges facing the Public Service Commission on the eve of the 21st century and the possibilities which foreshadow changes.
Under the Public Service Employment Act, Bill C-76 proposes two new provisions on priorities to which surplus employees are entitled.
[English]
As it now stands, the Public Service Employment Act and the public service employment regulations determine respectively two groupings of priorities for qualified candidates: statutory priorities and regulatory priorities.
Statutory priorities have precedence over regulatory ones. Under the statutory grouping, the first priority goes to public servants returning from a leave of absence, followed by members of ministerial staff, then by employees who have been laid off. Under the regulatory grouping, but not in any order of priority, come surplus employees, laid-off employees, or those declared surplus who have accepted lower level positions, employees on leave for the relocation of a spouse, and employees who become disabled.
[Translation]
When deemed to be in the public interest, the Commission would give surplus employees in a department higher priority than any other employees from the same department or other departments for appointments within their own department. This amendment would help departments manage their reorganization and their cuts more rationally and humanely.
Surplus employees would be placed as efficiently as possible, at the lowest possible cost and with a minimum of disruption.
Moreover, this measure would reinforce the responsibility of departments toward their own employees.
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[English]
Clause 9 of Bill C-76 would provide the PSC with the discretionary authority to decide not to appoint a priority person where such an appointment would result in another person becoming entitled to a priority. This authority would allow departments in which old jobs are disappearing and new ones are being created to place employees affected by an internal reorganization or downsizing before considering any person with a priority entitlement. Deputy heads would no longer be in the unfortunate position of having to declare an employee surplus because another employee with a priority has been appointed.
Historically, departments themselves have had the greatest success in placing their surplus employees in part because they are in a better position to match qualified employees to positions within the organizational profile of the department.
[Translation]
We believe that the implementation of the new measures proposed will help departments promptly place employees who have experience and abilities, while helping maintain the level of competence within the Public Service.
Mr. Chairman, the measures recommended in Bill C-76 expand the powers the Public Service Commission already has. These new measures will be beneficial to public servants and help reduce the adverse effect of the workforce adjustment.
My colleagues and I now welcome any comments or questions you might have. Thank you.
The Chair: Thank you. Mr. Plamondon.
Mr. Plamondon: The government is talking about cutting the number of public servants through the bill. They say 45,000 jobs will be... I have difficulty understanding how client service will remain at its current leel with 45,000 fewer public servants.
With regard to service, in what proportions would quality suffer? Could it drop by 50%? I am referring to response time, front line service and availability of public servants. What does this mean to you, especially in relation to response time?
Ms Hubbard: The ministers and deputy ministers in each department could answer this question better than I could, because the decision to change the way things are done or to stop providing a service is a political decision related to the decisions announced in the budget.
I presume that some activities will be transferred from one level of government to another, or from the Public Service to a Crown corporation. These cases simply involve a change; the activity will not be cut back. I also assume that we will see better service or lower costs as a result of the strategic decision to change the way things are done.
Mr. Plamondon: The objective in the bill is not to transfer a power from the federal government to a provincial jurisdiction, a private firm or a Crown corporations. The government says 45,000 positions are to be cut.
Let me give you an example. The number of jobs at the employment centre in my region will drop from 42 to 10. What, then, will be the quality of the service provided to unemployment insurance recipients? It is the same thing in many areas. When you cut 45,000 positions, don't you cut the quality of service to the public in half? In other words, will a person dealing with the government have to wait longer to receive an answer? Will we see a reduction in the quality of services?
Ms Hubbard: As president of the Public Service Commission, I find it difficult to answer that question.
All I can say is that of these 45,000 positions, approximately 6,000, I believe, are related to air traffic control services.
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The government made the decision to provide this service differently. This does not represent job cuts. That is the case for the others. It is true that the Public Service is expected to be smaller than it used to be, but the question of current services and new services is another matter. In a department, a minister could announce that the role of the federal government is going to change and that there will therefore be less work for public servants.
I cannot comment on the effect of this reduction on the quality of services because it involves redefining the government's role and it is necessary to know how it is going to be implemented. That could change the way things are done. Some services might be eliminated, but I cannot give you further details in this regard.
[English]
Mr. Speaker: About the 45,000 positions - and I think we raised this in another forum - are they identified at this time?
Ms Hubbard: Some of them will be identified, to the best of my knowledge; some of them may not be. It depends for each individual department and agency on whether in fact they have done sufficiently detailed planning to know exactly which positions will be affected. This will also take place over a three-year period.
To give you an example, in my own organization the day after the budget we were able to let virtually all the people who would be affected in the current fiscal year know they were going to be affected. We were able to know the number of positions, by group and level, that would be affected in the second year, but we weren't able to say to a particular person, we expect it will be him or her. In some parts of our organization we were able to do that; in other parts we weren't. That is further detailed work we're doing now. I would expect the departmental experience would be something like that.
Mr. Speaker: About positions that are currently vacant or that will become vacant, you don't know which ones will become vacant. Out of the 45,000 is there a number for those currently vacant through the system that will not be filled and will be abolished as positions in the establishment?
Ms Hubbard: There may well be a percentage of those 45,000 anticipated reductions that in effect people have already left and the managers will simply not be hiring people to replace them. I'm afraid I can't give you a number across the whole system. I'm not sure if that information is available. In our own case it seems to me, if my memory serves me well, out of about 150 or 160 positions we estimated might be affected this first year, 20 or 25 are already vacant.
Mr. Speaker: The minister made a statement in the House about employment equity throughout the system: there would be an attempt to balance this as the reductions occurred throughout the system. How are you administering that policy and also recognizing that merit should also be a priority item in filling a position?
Ms Hubbard: Our legislative requirement in reductions is to focus first on choosing between people. If 20 people were doing the same kind of job and it was decided that only 15 were needed, the process that is used is a reverse order of merit. That means the person who is least qualified is the first person to go.
From a legal or technical sense, merit is the basis for determining things. We do however have special programs we administer in part for the employer to make sure we attract and retain people from employment equity groups.
We will be continuing to do our best to make sure those few programs which are relatively small in number keep operating.
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It is true in some departments for example that the employment equity representation among term employees, employees who are hired for a specified period of time, is higher than it is in the regular population? If a department were to look at its downsizing by simply eliminating all its term employees it might in effect have a reduction in employment equity percentages. It will be a challenge to maintain the representation we have in the public service today in downsizing. Managers will be using their normal judgment to keep an eye on representation, but the fundamental basis for downsizing is merit.
Mr. Speaker: My last question is a general one. You talked about clause 8 and clause 9 and I gathered from what you said you were accepting of them. You feel the policy that comes through in those two clauses is administratively possible and you can work within those parameters.
Ms Hubbard: Yes, we believe those two clauses will be helpful in administering priorities. Clause 8, which is the one that deals with priority employees, basically says that when we, the commission, believe it is in the public interest, we can say a surplus person in a department has a higher priority for placement than any other of the priorities that would normally exist from within that department or from another one. Because our experience is that most departments are successful in placing their own people inside their own organizations, we think this clause and the other clause will let us help the system work more efficiently and help the placement of affected and surplus people better at the end of the day.
Mr. Speaker: Were you involved in designing part of the legislation in the early stages or some of the regulations?
Ms Hubbard: We were asked if there were provisions like these two, clause 8 and clause 9, which we thought would be particularly useful in helping us do our job, which is to manage the priority administration system. Yes, we were involved in deciding, as a commission, what provisions we thought would be useful.
The Chair: Thank you, Mr. Speaker.
The parliamentary secretary, Mr. Duhamel. Welcome.
[Translation]
Mr. Duhamel (Saint-Boniface): Thank you for your presentation, Ms Hubbard. I would like to welcome you and your colleagues.
I have two major questions and the first one has a number of parts. I will ask them in succession and then you may answer me.
[English]
The first question has a number of parts. I would like you to describe as briefly as you can the Public Service Commission's role during the downsizing period, perhaps in juxtaposition to Treasury Board. Even though I'm parliamentary secretary to Treasury Board, I must confess I sometimes have some difficulty keeping them separate.
Perhaps you could describe as well how the Public Service Commission plans to monitor hiring during this period to ensure that surplus employees are placed before looking at external hiring. It would be useful for me and I think my colleagues to know how many employees are on its surplus list now and how many there were last year in comparison.
I would like to know again briefly, the types of training and counselling the Public Service Commission will be offering to surplus employees. Finally, within that question, how will the Public Service Commission monitor casual employment?
The other question if we have time and I don't know what the time limitations are, after the downsizing -
The Chair: The time is quite tight. We have other people who want to ask questions.
Mr. Duhamel: I will skip the second question.
Ms Hubbard: Let me start with your question on downsizing and the relative responsibilities. I'll try to do this relatively quickly.
The two pieces of legislation that are primarily involved are the Financial Administration Act and the Public Service Employment Act.
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When is a decision made that downsizing must occur? Obviously, the government of the day decides and takes a policy decision. Implementing that decision is something that is done by the deputy head. The responsibility for deciding that work is no longer required is something that's done basically by the deputy head.
Again, if a department were told to reduce its expenses by so much, there might be other ways of reducing the expenses than actually reducing the number of people. That again is a managerial decision.
Under the current downsizing the two voluntary departures, early retirement incentive and the proposed early departure incentive, would again be exercised by the deputy head with respect to early retirement from the Superannuation Act and from the early departure should this proposed bill go through. About accepting a cash-out and administering the workforce adjustment directive, these are all managerial responsibilities that flow from the Treasury Board.
In determining that a particular employee will be laid off, that's something the deputy head has the authority to do under the Public Service Employment Act. The Public Service Commission is not involved in that decision, but there are regulations in the Public Service Employment Act that say how that is to be done, and that is the reverse order of merit.
In my example I gave earlier, if there are 20 people doing a certain kind of work and you decide that you need only 15, that is the deputy head's decision. The fact that you must then decide through a reverse order of merit process is something that flows from regulations related to our responsibilities.
On redress, if someone feels they have been laid off improperly they can file a grievance through the collective agreement process to the National Joint Council. If somebody said they were one of the 20 and they were selected as the first to go and they believed the reverse order of merit process wasn't fair, then they would come to the Public Service Commission. We have a recourse function we administer pursuant to the Public Service Employment Act and we would investigate to see whether in fact the reverse order of merit process was carried out properly.
Career transition services. Counselling employees is something that we help with.
Reintegration of surplus or laid-off people. The deputy head has a primary responsibility to do that.
Our responsibilities are priority appointments and the reintegration. Some of that authority we delegate to deputy heads, but it comes from our responsibilities. We maintain an inventory of priority people, so if a surplus person cannot find a job in their own department we refer them for jobs in other departments. That's something we do. Departments must go to the inventory to see if there are people they should consider before they can have a competitive process, for example.
The business of making an offer to an employee is something the deputy head does, but it is authority we've delegated to them. If an employee were to refuse a reasonable job offer which would trigger the end of the surplus notice period under the proposed legislation that is something the deputy head does pursuant to the workforce adjustment directive.
I'm not sure that helps. It is primarily the deputy head and the manager of the department.
[Translation]
Mr. Duhamel: There are two questions which could not be answered. Perhaps some figures could be provided.
[English]
Mrs. Stewart: Given the quality of our public service and the familiarity that you have with that quality in making sure that employees have the training and skills they need to do the job, how significant an impact do you think would have been felt in servicing had we, instead of adopting a strategy of targeting jobs and saying that if the job is deemed to be surplus the person is surplus, as opposed to making the programs more generally available to all and then managing behind the leave?
Ms Hubbard: The question really is a question that needs to be put to the employer.
Mrs. Stewart: I guess I'm asking you about your transferability of skills, your understanding of the services.
Ms Hubbard: Public servants are highly qualified. We have an internationally acknowledged highly competent public service. There are certainly going to be some very highly skilled, very capable public servants, because of the amount of downsizing, who are going to be declared surplus. Probably those people can quite easily transfer their skills to other places.
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Without commenting on a voluntary scheme officially as the commission, I guess my view as a manager is that it sounds good but it's really tough to do in practice.
Mrs. Stewart: What is?
Ms Hubbard: Running a voluntary scheme. As a manager at the end of the day you have a certain amount of work you have to get done. You are being asked to continue to run a certain number of programs or to change their design. What you really want is to have the greatest capacity to keep doing that.
In the public service environment there is also an issue of fairness. Good human resource planning means it may be possible to do some sensible things before you actually decide who gets declared surplus. Once the decision has been taken, it seems to me the fundamental basis of how things are done in the public service is to decide that the work is no longer required.
What you are proposing would be a completely different way of coming at the issue.
Mrs. Stewart: Precisely. It is.
In response to that, what I'm finding as I talk to managers is that in fact they are doing the reverse. They are offering it to people and then dealing with the fact that the job isn't there and finding other places for that work to get done.
If, given the legislation at this point, we have taken that path but in fact we're finding that the response to the legislation is really another strategy, it concerns me.
Ms Hubbard: I would speculate that what is actually happening is this. Managers are starting with the fact that a certain amount of work no longer needs to be done so certain jobs have disappeared. Before making the determination that person A who is doing this job doesn't have a job, if it's practical in an informal way to say someone else in the organization could do this job, this person whose job is going to disappear could do another, there is nothing to prevent that. That's good human resource management. I wouldn't think that's contrary to the intent.
I think the intent is you start with the discontinuance of work. The fact that managers in departments are doing what I would call good human resource planning I don't think is a bad thing.
Mrs. Stewart: Thank goodness they are good managers and they are doing good human resource planning. I'm just wondering if we have made their job particularly difficult. If we had thought about it from another point of view, we would have made their job easier in managing this very difficult time.
Ms Hubbard: If I were to hypothesize, there might just be a different set of problems that one would be facing. If one of my jobs were disappearing and seven people came to me saying they would really like to be the one who goes, as a manager, how am I going to decide? How am I going to decide which of the seven or three employees should be the one who gets to have the advantage? If there are three, four or five and I select one on some basis, the others are going to be fairly annoyed and they're going to feel that it's not fair.
I think one would have a different set of problems. I'm not sure one would have no problems.
[Translation]
Mr. Plamondon: In the Public Service, there are about 30,000 federal term employees, that is, people hired for a period of three months or more. In downsizing the Public Service, how many term employees will lose their jobs?
I will complete my thought and then you can answer my whole question. Why cut full-time positions while retaining part-time employees?
Ms Hubbard: I am sorry, but I don't have information on the number of term employees. I have here an estimate, however, I will ask Michel Cardinal to answer.
Mr. Plamondon: About 30,000.
Mr. Michel Cardinal (Executive Director, Staffing Programs Branch, Public Service Commission): That's right. If term employees hired for three months or more and casual employees are taken into account, you're right.
Mr. Plamondon: So, this is my question. Will these people be laid off or will they keep their jobs? You understand what I mean? I want to know what happens when there are 30,000 part-time or contract jobs, and positions have to be eliminated. Why not first eliminate term or part-time employees and retain full-time employees? Do cuts have to be made to both groups, and in what proportion?
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Ms Hubbard: An attempt is being made to preserve the jobs of persons hired for an indeterminate period. In the departments, the proportion of work performed by contract or term employees is being very carefully examined, and an attemps is being made to reduce the proportion of work performed by these employees.
For some activities, it may be important not to eliminate this kind of work. However, in our opinion, there should be less of this type of work in the future.
I don't know if Ms Stewart would like to add anything.
Mr. Plamondon: Thank you.
[English]
Mr. Fewchuk (Selkirk - Red River): Is there a problem out in the field with some of the unions not telling their employees that the top end is ready for retirement? There are maybe 12 in the department who are willing to retire and management wants to keep the part-time or the term employees, but they don't agree to keep the term employees. Has that question been thrown at you?
Ms Hubbard: It certainly is a possibility. I know that departments are working very hard at headquarters and in the field to work with the unions and to work among departments. We're often included at the table in these processes to make sure the approach that's being taken in implementing these program review decisions is one that all of the parties agree are reasonable in the circumstances. Some committees are being put together in the field where the Treasury Board Secretariat will be represented, we will be represented, departments will be represented, unions will be represented. They will be looking at a detailed level at how things are being done.
Mr. Fewchuk: Has my question been brought to your attention by the employees themselves? Management is willing to keep them on but we have a problem with the union disagreeing. Management is saying they can keep them; there are 12 people who want to retire tomorrow and everything is okay. They get the severance package, or whatever, maybe. The union is holding back the guy from producing and keeping the job. Basically that's what it ends up as.
Ms Hubbard: That particular issue has not been drawn to our attention as being one that is of concern.
Mr. Fewchuk: It has been drawn to my attention.
Mr. Speaker: In this downsizing plan, is there any directive or strategy such that employees at the central office or senior management in downsizing are bumping people at the regional level? Say at Agriculture Canada Ottawa versus Lethbridge, the senior people here are bumping people out at the region because they have less seniority in the hierarchy. Are they the ones being relieved of their job and then is that job being filled by someone who currently may be in central office or higher in the hierarchy?
Ms Hubbard: Unlike the provisions in some private sector collective agreements where seniority is a factor that is considered in layoff, it was, for example, in the Royal Canadian Mint, where I was for some while, that is not a provision of the collective agreements in the public sector.
To go back to fundamentals, the principle of appointment in the federal public service is through merit. So the basis for all the things that are done is to run processes that are likely to produce the most meritorious, the best qualified outcome at the end of the day. When we're placing surplus employees we're placing qualified employees. So there is that caveat.
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Let me say another thing. I think the deputy heads and senior managers are very conscious of the fact that there is a need to provide the right implementation of program review decisions, so for example one doesn't end up with significantly reducing operational capacity and maintaining capacity in what one would call overhead functions or headquarters functions. There is a need to make sure that managerial ranks get reduced to the levels they ought to be at to fit with any reductions that have to take place at the front line.
There is no structural incentive to do the kind of thing you're talking about. There's a fair amount of sensitivity among managerial ranks to do the opposite, to do what one would want to see happen as a taxpayer.
Mrs. Brushett: I have two questions. First, once this downsizing is completed do you have a plan of action to attract qualified career professionals? After we go through this gutting of the public service, then how will we attract really qualified people again in the near future?
Second, how does this merit principle that we always quote come into play in the frontline UI office or the human resources development offices out in the small rural areas of this country? How does this principle come into play when we are giving more autonomy to the smaller offices, and through whatever changes a manager decides that office can function more efficiently, people are dismissed because of redundancy or surplus? Where does merit fit into that?
Ms Hubbard: To your first question, it is worth noting that there are in fact a few systemwide programs that we are maintaining, notwithstanding the downsizing that has been running for a number of years, to continue to attract and maintain some key people who will be important to the future of the public service. I'm thinking of the management trainee program, a program begun some years ago that brings in around 200 people a year, some of the brightest and the best, with post-secondary education in public administration. We are maintaining our specialized recruitment program for certain special occupations, for statisticians, economists and others like those.
Notwithstanding the downsizing that's going on, this revitalization, if you like, is still going on. Those are still important initiatives.
I expect we're going to be able to continue to talk about a high quality professional public service in the future. We're going to have to be clear that it may look different from before, that it may mean some different things from before.
I was speaking last week to the Forum for Young Canadians, who were here for their weeklong visit. Michèle Jean, the deputy minister of Health, and I were both there to speak to these young people. We both independently ended on the same note, which was that they should seriously consider a career in the public service of the country. It's an international competitive advantage to have a high quality public service and notwithstanding the downsizing and notwithstanding that the challenges are going to be really significant, there really is a good future.
Does that mean we're going to be recruiting many, many people just at the moment? No. We're going to continue to recruit a few. The challenge is going to be to encourage the people who remain in the public service that there is still interesting, challenging work to do and to attract sufficient people from outside the public service in order to keep our demographics in balance, because we're an ageing public service. We need to do something about that or in 10 years down the road we will be facing some difficulties.
It is a challenge that we all face. We feel it particularly in the Public Service Commission. It's something that we spend time thinking about and worrying about.
On your second question on the merit principle in frontline offices, one of the things we've been working very hard at doing in the last little while is to make sure that the responsibilities that we delegate to departments and that are delegated down through departments to line managers around exercising merit, that is, staffing and filling vacancies, is done in a framework where accountability for the results is very clear. We've been doing that with a series of delegation agreements.
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We're doing a better job in the commission of negotiating a framework with a department about how we expect the managers who have this power to behave. We have a capacity to monitor. At the end of the day if we're not satisfied that this authority has been well exercised, we always have the authority to pull it back.
It seems to me this increased responsibility flowing down to the frontline managers to make them more responsive in providing service is not at all inconsistent as long as the accountability for doing it well and doing it in a way that respects merit is strong at the same time. Individual employees who feel they've not been well treated have redress mechanisms to us and through the grievance process depending on what is their concern.
The Chair: How many staff are on the Public Service Commission?
Ms Hubbard: In total?
The Chair: Yes.
Ms Hubbard: Around 1,700.
The Chair: It's going to be very difficult for us as MPs to go through this process of seeing the downsizing by some 45,000 public servants. We are very concerned as you are about doing this in the most humane way possible and in maintaining the highest standards of excellence. You're going to have a difficult task. Good luck.
Our next group of witnesses are no strangers to us. They're from the Caledon Institute for Social Policy. Mr. Ken Battle, President and Sherri Torjman, Vice-President.
Mr. Ken Battle (President, Caledon Institute for Social Policy): I want to thank you,Mr. Chairman and others, for allowing us to appear before the committee again. It's certainly not the first time we've appeared before the finance committee over the years.
I have just a couple of words of introduction about what we want to focus on today. We have a brief which perhaps could be passed around to the members because I am going to refer to a graph from it.
The document we're passing around for you to take away with you and to have a look at is a revised version, Mr. Chairman, of the response we made to the 1995 budget. I mention it only because it gives a much broader view of trends in social policy than I'm going to focus with you this morning.
We look at a wider range of social programs but we also talk about the trends in social programming and make the argument essentially that the changes that we're seeing in part in pension policy or that are coming in pension policy, and the changes that are under way to unemployment insurance and to federal social transfers to the provinces, which are the things we want to talk about to you today, in fact have been coming for a long time. They're nothing new. We see the origins of the direction of federal programming and indeed of the federal role in social policy going back a good nine or ten years to the early budgets of the Progressive Conservative government under Michael Wilson.
So we draw some continuity there that may either pique your curiosity or irritate you, whatever the case may be.
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Those of you who know us and our work will know that in terms of the area of social policy, we take great pains to do rigorous research and analysis and to write clearly. That's really the reputation that both Sherri Torjman and I have built up over the years. I'm only mentioning this personal aside to put my next comments to you in context. We choose our words carefully; we're not given to bombastic rhetoric, cheap shots or the kinds of criticisms one often hears from government critics. We try to be very responsible in our analysis and in our proposals to government.
In fact we're pleased to see that the budget actually on the pension reform front reflects very closely the proposals the Caledon Institute made three years ago.
When it comes to the Canada Health and Social Transfer, the outlines of which were put in the budget and in the bill, I don't I think it's an exaggeration, and we want to be on the record as saying that we regard the potential implications of the CHST for social policy as being quite disastrous. Doubtless it will take time to know exactly how the implications play out and we're going to have to spend a number of years studying those. Based on what we know of what has happened in the past, we're very concerned about what is going to happen to social and health programs throughout Canada.
Today we want to focus on what in our brief we call the poor cousins of the programs that are being affected. As you know, through the Canada Assistance Plan the federal government since 1966 has shared half the cost of social assistance and social services provided by the provinces and territories. Since 1990 it has shared a declining share of those expenditures for Ontario, British Columbia and Alberta because of the cap on CAP. Through Established Programs Financing the federal government has effectively shared the cost of health and post-secondary education systems throughout Canada.
We want to focus on welfare and social services which we consider to be the poor cousins of those programs. It's interesting to look at the reaction there has been in the media and from interest groups to the CHST. It has quite predictably very much focused on medicare and the debate over whether this spells the end of medicare or whether that's alarmist. What has been lost in the shuffle - as we again predicted and are very concerned about - are the implications of the proposed changes in the CHST for welfare and social services. That's what we're going to focus on today.
I will turn it over to Sherri in a minute, but we want to give some level of detail because there isn't a solid understanding of the nature of the current system of federal cost-sharing for social programs in the provinces. There are a lot of misunderstandings about the nature of the system now. The most predominant one is that somehow the federal government has marionette strings that make the provinces jump to its tune in order to get the money. Of course, in fact the conditions that are applied to federal social transfers are very few. But those very few conditions are absolutely essential and with one exception that we'll get to, we're concerned that those conditions will no longer apply.
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The final point I want to make is that I don't want you to think we are social policy Luddites, that we are people who simply want to defend the status quo or are stuck in the 1960s and think that's what social policy is about. Far from it. The Caledon Institute and the work both Sherri and I did in the years before we set up Caledon in 1993 have really been in the forefront of arguing for fundamental reforms to Canada's social security system. In fact, in the whole area of federal social transfers, far from defending the Canada Assistance Plan, in a paper we prepared for Lloyd Axworthy before the social security review got under way we proposed that it be abolished.
We have some specific ideas about fundamental reform of unemployment insurance, welfare and social services that would really transform those programs and achieve some of the objectives I think people who are supportive of the CHST believe the CHST will achieve. It's not as if we're trying to defend the status quo. We've been long-time critics of some of the problems with the Canada Assistance Plan. However, we are concerned that, as it's shaping up, the CHST will have very few teeth to it.
Of course, it doesn't matter how much we argue about national objectives, conditions, standards and all of that because frankly, they become quite academic and irrelevant as the share of cash that flows from Ottawa to the provinces declines. We might as well be blunt and up front about it: In the 1950s and 1960s Ottawa spent its way into areas of provincial responsibility, health and welfare, and it's in the process of spending its way out of those areas.
We think that will have some serious implications for the future of welfare and social services not the least being that that money will no longer be there. We're talking about substantial amounts of funding. We did some estimates of what percentage of provincial revenues the current cash transfers under CAP and EPF are, and they are quite considerable. They vary of course from one province to another, but they're in the 12% to 14% range now. Effectively, in the early part of the next century - and we give different scenarios as to when the money will run out - that money will be gone.
Basically that means that although we're focusing on welfare and social services when we talk about social programs, I think the implications of the CHST will be much broader. There will be broader implications for the respective roles of government. They are going to have implications for other government programs, both provincial and municipal. They are going to have implications for the role of the voluntary sector. I don't want to be too poetic about it, but they will have implications for the nature of our confederation, the nature of what it means to be a Canadian.
I'll go from the general to the very specific and turn to Sherri, who's going to take us through some of the points we want to make about the potential effect of the CHST on welfare and social services.
Ms Sherri Torjman (Vice-President, Caledon Institute of Social Policy): I'd like to discuss the implications of the CHST with respect to the loss of the legislative base for welfare and social services and what this means. I'm sure you've heard a lot about the loss of funds and we will be discussing the implications of the declining transfers in a minute. There's also a loss of a legislative base and we're very concerned about what that means.
I want to emphasize what Ken said about the fact that we have supported fundamental changes to CAP, but that was done within the context of a comprehensive reform as part of the social security review. Right now, if the CHST goes ahead as is, we will have dismantling without any of the associated rebuilding. We're in a position right now where we're defending, in effect, the status quo because we think it's so important. We would want the status quo in place rather than this.
The Chair: I think we would too.
Ms Torjman: Oh, I hope so. That's good to hear.
As Ken said, CAP is the primary funding arrangement for welfare and social services, and there are few conditions in the act, but they are very important.
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I'll talk briefly about welfare first and then social services.
For welfare there are three primary conditions: no residence requirements, an in need eligibility criterion and an appeals procedure.
With respect to the residence requirements, provinces cannot put in place a residence requirement when people apply for assistance. The proposed piece of legislation includes that condition within it. So we are pleased to see that, although we note that if in fact there are no systems in place or if there are other kinds of eligibility criteria, the no residence requirement can be strictly academic. So it's good that it's in there, but it really goes along with the other conditions that were in CAP.
The second issue is with respect to the in need criterion. That was a profound advance in social policy when it was introduced. When CAP was introduced in 1965 and said that assistance had to be provided to people on the basis of financial need regardless of the cause of that need, that was a very important advance in the sense that people didn't have to qualify because they were blind or because they had a certain disability or because they were a single parent with a child under a certain age. They qualified on the basis of financial need, which was defined very strictly by provinces. It was not an open book. There were asset requirements, fixed and liquid asset requirements. There were income requirements. It was a very tight set of criteria. What it meant was that you didn't have to come as a deserving poor person.
In effect we will lose that because the CHST has no requirement that any kind of financial assistance at all be provided on the basis of need. Provinces can choose whatever criteria they so choose. In fact, they could say that certain people in the province do not require it. They can put that kind of eligibility criterion in place.
We're very worried about removing the legislative base for a safety net in the country when we have such a turbulent labour market which doesn't provide enough employment and which provides inadequate and insecure wages. It's a really serious concern just to remove that legislative base.
The third criterion of the Canada Assistance Plan was the requirement of an appeals procedure. Provinces had to have in place an appeals procedure for applicants and recipients of social assistance. It did not have any other conditions or description of what those appeals systems should look like, so right now they vary widely throughout the country. Some are tribunals. Some are simply review procedures that are put in place by their bureaucrats. But there is something in place.
Again, we worry that if there is no requirement in the proposed CHST for an appeals procedure, then that protection will be lost entirely. Welfare is a very complex and highly discretionary program and varies widely throughout the country. We feel that with such a program which is determined on an individualized basis it's absolutely essential to have some kind of appeal procedure to have that protection built in, but that will be lost.
The other thing that I want to mention about welfare is that a lot of people don't understand the fact that welfare is not simply the provision of cash assistance to people who don't have an income. Welfare provides various forms of special assistance in the form of disability- and health-related goods and services such as wheelchairs, special eyeglasses, prosthetic equipment, and homemaker services for elderly people or people with disabilities who cannot afford to purchase those goods and services. They're provided on a discretionary basis. You don't qualify automatically. You have to have a low income in order to receive it. These are very important supplementary programs to our medicare program.
In effect, welfare serves a quasi-health role by providing these forms of special assistance to people. We fear that if there is a loss of the legislative base of welfare and social services, then people with disabilities and elderly people will suffer inordinately. We think that there will be serious losses to the special needs provisions.
Already we've seen that when provinces cut their welfare programs, those special needs provisions get snipped very easily. We've seen that happen recently in Metro Toronto, and it's happening elsewhere in the country. It's not just the payment of direct cash benefits that is at risk right now, but it's all the other associated disability- and health-related goods that we fear will be lost.
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We think it's serious in the sense that we have a rapidly aging population. We know from statistical information that seniors have disproportionately high rates of disability and require these forms of assistance. We feel that there is a problem here in the making that is not being adequately addressed at all and that this legislative arrangement will only contribute to it.
I would like to speak just briefly to social services. The Canada Assistance Plan does not have very many requirements in place for cost sharing of social services. Basically, it matches costs, but it doesn't really set any conditions other than the fact that under certain provisions it will share only in the cost of non-profit services.
What we're worried about is losing the legislative base that allows costs to be matched for social services. It's not actually the standards per se that will be lost because there are very few now with respect to social services; it's the fact that the federal government will match the cost of certain programs and that the money is designated to go to those services. We fear that with the integration into a big block this is the one area that is going to be lost.
We fear that there will be big cuts to child care, child welfare and supports for people with disabilities.
We're not calling for a return to 50-50 cost sharing because we recognize that it would be unreasonable and would not be likely. We think other kinds of arrangements could be in place that will protect at least some of the funding for these programs.
Examples are variable cost sharing for welfare and social services on a negotiated arrangement, or even a block fund for welfare and social services that is kept separate from the bigger transfer so that the money that goes at least has a profile for those areas and they don't disappear entirely.
As well, there could be conditional grants in certain areas such as personal supports for elderly people or people with disabilities where there really is a need for an injection of funds.
I will leave it at that. I would like to respond to your questions afterward. The concern about the legislative base is very important, but it's also matched by our concern with respect to the loss of funds and what that means. Ken will address that aspect.
Mr. Battle: In the hand-out we gave you there's a graph on page 8. I'm sure you've seen your share of people's projections of the declining cash transfer, but I just briefly wanted to bring your attention to it.
As you know, these things depend on the assumptions one makes about both economic performance and the actual nature of the design of the Canada Health and Social Transfer. We looked at three scenarios.
The first scenario, which would have the cash transfers to the provinces on average disappearing in the year 2011-12, was based pretty much on an assumption of a continuation of the status quo in the sense that transfers would be partially indexed effectively to the change in GDP minus 3% and that there would be a continuation of an adjustment for population change at the provincial level.
The middle line, scenario two, keeps the GDP minus three percentage point indexer but it removes population indexing saying that maybe the new system wouldn't adjust for population size. That has the transfers disappearing two years earlier.
Then the bleakest scenario we show, scenario three, is simply assuming that the new CHST would be frozen at its level in 1996-97 and then that's what would happen.
You can draw lines all over the place. It really becomes a kind of an economist's exercise. The point is that the money will disappear, unless of course the CHST comes up with some kind of provision of indexation, which would be nice to know, but I doubt that it will. If it doesn't, then this is the implication.
Another aspect of the Canada Assistance Plan I just want to mention briefly to you is it is important to remember that we always think of CAP as welfare and welfare is for those poor people.
In fact, CAP was an important instrument of federal economic policy over the last three decades as well, because in times of high unemployment during recessions, as welfare caseloads and welfare costs at the provincial level escalated, the Canada Assistance Plan provided a counter-cyclical function in that the federal government shared half the cost of those increasing costs being borne by the provinces.
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Now, of course, what will happen with the loss of that counter-cyclical aspect is all provinces will be in the position Ontario has been in over the last several years. The figures we got from Ontario - and you can debate them - show that since the imposition of the cap on CAP in 1990, it has lost $7.7 billion in cost sharing for the Canada Assistance Plan. The reason for that of course was that the cap on CAP was in place just as the recession was hitting, particularly in southern Ontario. Welfare caseloads in Ontario increased by over 100% I believe, depending on the municipality and the part of the province, and costs went through the roof. Federal cost sharing to Ontario is now down to about 28% from 50%. It took only four-odd years to get there.
Our concern is that if the CHST functions as we expect, then the next time there is a recession provinces are going to be hurt very badly and we're particularly concerned with the poorer provinces. Again, unless there's some offsetting to the equalization formula, or some other way of offsetting what they're losing that they had under CAP, it could leave provinces in really serious straits.
Then we ask: What would they do? We see cutbacks in welfare as the most obvious implication, and even wholesale decategorization of certain people who would not be eligible for social assistance, as well as trainfare, workfare, increases in provincial income taxes, and imposition of user fees. That's why I was saying earlier that I think the implications of the loss of federal funding are going to be much wider than just for social programs.
I think we've gone far enough, Mr. Chair. Perhaps we'll stop here and entertain questions. As Sherri said, we really have two layers of recommendations or suggestions for the committee, neither of which I think has much hope of affecting reality.
One layer is what kinds of conditions and principles the provinces and Ottawa might negotiate with regard to welfare and social services. We can perhaps mention a few of those.
Second, and I think more important, what might be done with the future of the CHST cash grant? Of course, our recommendation there would be some form of maintenance of federal cash transfers to the provinces to prevent the erosion we're concerned about.
The Chair: The minister has mandated Mr. Axworthy to enter those negotiations immediately with the provinces.
Mr. Battle: That's our understanding. Maybe Sherri can just quickly mention a couple of the recommendations we made.
The Chair: We're almost out of time. It's up to you. I'm in the hands of members here. Maybe we could come back to that.
[Translation]
Mr. Plamondon: In two or three places in your document, you referred to the Wilson years. You also mention the beginning of Liberal rule. If you didn't know the names of the political parties and you saw the current trends in social policy without knowing that they are those of the Liberal Party, would you think the government had changed or that the situation had worsened?
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[English]
Mr. Battle: I guess the short answer is no.
[Translation]
Mr. Plamondon: Precisely!
[English]
Mr. Battle: Not really.
Now let me back up immediately. We go into the trends in social policy in some detail in our paper. We support the trends in pension programs and have been advocating them, unlike a lot of social policy groups. We support the trend to income tested benefits away from universal old age security. In terms of the changes in social transfers and frankly, in terms of the changes in unemployment insurance, I think it's quite justified to say that there has been more continuity than discontinuity between the previous federal government and this federal government. In part, that's because the details of those policies are being designed and implemented by the same people at the Department of Finance. That's no secret.
The one difference I would see is that under the Conservative government these changes were very much imposed on Canadians with really no chance for public debate, whereas I would argue that under the current government there has been more openness and a chance to debate the changes more than under the previous government.
The final point I'll make is that the underlying motivation for the change is the same, which is to deal with the fiscal crisis facing the federal government. So in that sense it really isn't a partisan matter.
[Translation]
Mr. Plamondon: Thank you.
[English]
Mr. Battle: I don't agree. We have alternative methods to deal with the deficit, so we don't agree with the full thrust of the policy. If you asked me as an observer from Mars or the United States - that's a good place, they don't know anything about us - it would be difficult to say there has been a big difference in the policies. I see more continuity than difference.
Ms Torjman: I just wanted to add, in response to your question, that there had been an opportunity to make some positive changes to social programs. The government had been discussing changes to child benefits and some changes to unemployment insurance that we had in fact supported. When the social security review was going along, there were some opportunities, or at least there was a window of opportunity to make some constructive change.
What we're worried about right now is that the kind of proposal we have in place is not constructive at all. It's simply a withdrawal.
[Translation]
Mr. Plamondon: Thank you.
[English]
The Chair: Thank you, Mr. Plamondon, for your non-partisan question.
Mr. Speaker: I certainly agree with your observation in terms of the changing legislative base and the funding base. It's there and it's going to happen.
In terms of the Canada Assistance Plan, three criteria were developed in the 1960s. I recall the appeal procedure very well; it was part of implementing that. We went over the hurdle of the residence requirement. I remember very well the discussion about support because of financial need, and that may very well be the one that will be challenged more than the other two under the current circumstances. I would appreciate your comments on that.
My basic question leads into something you started earlier. Under the current trend we're going to see more provincial autonomy and self-determination. How would our principles shift to accommodate that? How would you see that accommodated? I could come at it from a historical perspective, but I'd appreciate your current attitude on that.
Ms Torjman: I think there's a lot of room to accommodate provincial principles and programs.
We have a lot of variation in the country and certainly at the community level that's something to be encouraged.
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We would like to see a provision made for a safety net, a general principle that in this country we have a safety net for people who need it. You could have variability within that as we do now, but at the very least that basic minimum would be in place in the country. We're talking about a framework within which there can be a lot of variation, but we believe there has to be a framework in place.
Mr. Speaker: Have you developed that in a paper?
Ms Torjman: Yes, we're actually working on a paper that talks about the differences between conditions and standards and what we've been calling best practices in welfare and social services. Because the Canada Assistance Plan is basically a legislative framework with a few key parameters, we say that one of the possibilities is that the federal government can play a leadership role in terms of developing best practices in welfare and social services and encouraging better delivery, improved quality in some of the areas where, in fact, it cannot impose standards. That's one area where it can take specific action, although clearly it couldn't impose those kinds of conditions.
The Chair: Doesn't Bill C-76 preclude the government from doing that?
Ms Torjman: No.
Mr. Speaker: In light of the time, I'd appreciate the paper at some point in time. That would help.
Ms Torjman: Bill C-76 does not preclude the government from developing standards, conditions, or best practices. But the declining transfers, in reality any conditions that take away funds for non-compliance with those conditions, means there is a problem right there. The legislation itself does not preclude it, it is the declining transfers that actually mean there would be no enforcement clout for any conditions. It lets you fall into the best practice area.
The Chair: Under the CAP what programs they want to fund is entirely up to the provinces. If they fund them, we have to match them 50-50. There are no national standards.
Ms Torjman: That's right. Aside from the ones that we mentioned.
The Chair: A province is not forced to put any program into existence.
Mr. Battle: That's right.
The Chair: If they do, then we will match it. So today absolutely no requirements are being imposed by the federal government that the provinces look after the needy, the handicapped, the poor, the disadvantaged.
Ms Torjman: In effect, the province could decide not to have a welfare system at all.
The Chair: Exactly.
Ms Torjman: But if it does have a welfare system, then it does it on the basis of the in need criterion.
The Chair: So we're at least saying that Mr. Axworthy should sit down with the provinces to try to develop standards, or best practices, or whatever, which would be an improvement on what we have.
Ms Torjman: Yes, exactly. We have a lot of suggestions for that, literally pages of suggestions for welfare and social services. But it would be, as I said, in the form of best practices rather than conditions, because we can't see the federal government imposing conditions with declining transfers. It just wouldn't work.
Mr. Walker: I thank both of you for coming out.
No one in government kids themselves about the risks that are being taken in terms of the historical development of social policy. Then there was the frustration in the fall that the consensus developed so slowly. We have people coming to us now in support of national standards, for example in post-secondary education, whose voices were entirely silent at a very critical moment in the fall.
Regarding the issues you raised, I think it's part of our personal frustration in making sure that the debate continues that people don't romanticize the conditions under which the federal government operated over the last 25 or 30 years. I think there's no doubt that we set the stage.
There was an NFB film a few years ago that treated CAP as one of the primary and pivotal points in national social policy. Leaving it is sort of like stepping in the water at the first of spring; you're not sure how cold that water is going to be. It's one of the few bills I've seen in government where a minister has specifically been mandated to continue discussions. I think that shows you the level of concern we have.
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I'm not convinced from my reading of social policy - though I'm not as well-read as you are - that I'm as afraid of the provinces as I am of the states and the states' rights argument. I think the American issue is a really serious one, because there have been states with a long history of doing nothing. Since the depression, very few provinces in Canada have a history of consistently being mean. There have been moments of meanness - I'm not a romantic - but I don't think we would say that there are provinces that we should be afraid of, that we cannot give them some room to manoeuvre.
What we need is to continue this debate. I think your specific point that the re-indexing of the transfers would look after some of that depletion issue is something to keep in mind. The questions are: Is this a fait accompli? Is this a consensus about how we get ourselves in order to fight another day?
I have tremendous respect for you. I know how difficult this is in the history of your work and the goodwill you're showing by coming to talk to us again. But in my mind it's the consensus needed to fight another day. We have to get this off our back and get it organized.
If we don't have specific ideas at the right moment to for example re-index it, then it will get lost in the shuffle and people are going to panic that we have abandoned it. As you answered the first person, there's a continuation of departments, a continuation of fights, and a continuation of personalities despite our titles.
I guess I don't really have a question for you, just more of a comment if you asked me how I figure we could do this and live with it for the next two years.
The vote of confidence in Lloyd Axworthy to do the negotiations and the reality given the fiscal constraints it is better to set up a framework right now with as few conditions as possible. I am afraid those conditions might be totally counterproductive. I'd rather have an open book for the next two years in order to set it up properly. One would have to be in self-denial to pretend the issues that you've raised here don't exist.
Ms Torjman: I just want to point out that, far from romanticizing CAP, we have been very critical of that legislation over the years in all the welfare studies and social service studies we have done. But, in the light of this proposal, we feel that it's better than a CHST.
I'm not sure why there can't be a block fund for welfare and social services. Why does it all have to be put into one pot? Certainly that was not discussed as part of the social security review. The option all of a sudden came forward from the Department of Finance. There hadn't been public debate on that issue.
The Chair: One possible way of looking at it is the bigger the pot, the more clout. With three distinct smaller pots, there will be less clout.
Mr. Battle: Not more clout for welfare. Less clout. That's our concern.
Ms Torjman: It will get lost. I understand what you're saying from the perspective of the federal level, consolidating all the transfers and having that cash portion stay in longer, but certainly at the provincial level we're worried about the attention or the relative status of welfare and social services.
Mr. Battle: We still think in old terms even though we know we're in a new world. Part of those old terms was a federal government that always at the end of the day had a stick. Even if there was some re-indexation at a lower level, I still think we have to get beyond that and look at the provinces and the federal government working together - this sounds kind of Pollyanna-ish - in a new cooperative federalism because I think all levels of government do recognize the fiscal crisis and the problems with social policy.
I don't think we're going to be be able to get anywhere by just saying Ottawa is saying a province has to do this or that. They're really going to have to come together. Indeed, the provinces will have to play more of a leadership role.
Sherri mentioned Ottawa. Maybe some of the provinces should be the leaders. We're not crazy federalists; we just think this notion of developing new standards and best practices and modernizing our social welfare systems is an important one that we don't want to lose in the criticism here.
Mr. Campbell (St. Paul's): The concern about welfare losing out in that debate at the provincial level is certainly compelling and I understand your concern. It's the same argument we hear from people who are worried about medicare and about education. They come and they say the same things. Everybody thinks they're going to lose out in the relative competition for scarce resources.
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Ms Torjman: And they will. But when you look at services that are available to an entire population, politically they're more attractive than services that are actually available to a small percentage of the population.
Mr. Campbell: Yes, I understand that.
The Chair: The Caledon Institute and the two of you have developed a reputation over the years for being highly credible. We are going through a very difficult time, as you recognize, a time of transition necessitated by financial restraint. Your ongoing studies and cooperation in assisting us and people in the public life at all levels of government to find new and better ways and to help us maybe set some new priorities in all this area of social policy are going to be very important. This is why I'm grateful that you've both come before us today to alert us again to the great challenges we face. We welcome your ongoing cooperation. Thank you very much.
We stand adjourned until 3:30 p.m. today in room 705, La Promenade.