EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 27, 1995

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[English]

The Vice-Chair (Mr. Campbell): Good morning. On behalf of the Standing Committee on Finance, I'd like to welcome you to our session this morning in Charlottetown. We're going to begin now. I think all of our witnesses are here, and I welcome you.

We have with us this morning: from the Canadian Labour Congress and the P.E.I Federation of Labour, Sandy MacKay, president; from the Cooper Institute, Vince Murnaghan; from the Federation of Prince Edward Island Municipalities, Don Doncaster, president; from the Greater Charlottetown Area Chamber of Commerce, Cleve Myers; from the Prince Edward Island Chamber of Commerce, Harvey MacKinnon; from the Prince Edward Island Federation of Agriculture, Barry Cudmore; from the Prince Edward Island Teachers' Federation, Joyce McCardle; from the Tourism Industry Association of Prince Edward Island, Alfred Groom; and from the P.E.I. Health Coalition, Mary Boyd.

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Have I left out any groups?

Accompanying Mr. Groom from the Tourism Industry Association of Prince Edward Island is Don Cudmore. I couldn't see your name behind Ms Boyd's name.

Very good. We are ready to begin. As has been explained, we've asked each of you to make a brief opening statement. Our procedure after that will be to allow you to comment on what you've heard from each other. The purpose of this round table discussion format is to provide an opportunity for witnesses and committee members to have an exchange of views. We hope this exchange will lead to a better report from the committee.

Once you've had a chance to comment briefly on each other's presentations, we'll then turn to committee members for questions. We have members from the Liberal Party, as well as from the official opposition and the Reform Party. They are each identified at this end of the room, starting with Mr. Pillitteri and going around this way.

With that, we will begin with the Canadian Labour Congress-PEI Federation of Labour, Sandy MacKay.

Mr. Sandy MacKay (President, Prince Edward Island Federation of Labour; Member, Executive Committee, Canadian Labour Congress): Thank you, Mr. Campbell, and I'd like to welcome the members to P.E.I. We have some concern in respect of what the Department of Finance put out for the framework for discussion on the three questions you'd like us to answer. While it's addressed in notes, certainly once we get into the debate it will become more evident we don't agree with that.

In fact, if you look at the current fiscal situation in Canada, there is actually an operating surplus. If you take out the debt servicing cost, the federal government now is operating on a $20 billion surplus.

One of the key economic assumptions made by the federal Department of Finance is that we will continue to live in a world of slow growth, high unemployment, and high interest rates. Now, we would suggest if growth were higher and interest rates were slightly lower, there really would be no fiscal problem.

Therefore, we believe there is an essential economic question facing us. How do we move from this current context of slow growth and high interest rates, making massive cuts inevitable, to a new context allowing us to preserve and indeed expand our social programs and public services?

We did that last year by presenting a choice here. It was an alternative federal budget, which we believed in and we still believe in. We are going to be presenting an alternative budget again this year. We are part of a group that's going to be presenting it, and this alternative budget gives technical, credible alternatives to the cut-and-slash policies of Paul Martin.

We believe essential to that are the monetary policies of the Bank of Canada. We believe an easier monetary policy would have a number of positive impacts on the economic and fiscal situation. It would directly lower the cost of servicing the accumulated debt. It would stimulate growth in the economy by lowering borrowing costs for consumers and business, thus creating jobs and boosting tax revenues. It would, by bringing about a falling exchange rate of the Canadian dollar, increase exports and reduce imports, again creating jobs and raising revenues.

We believe you members of Parliament should treat the criticism we get for this alternative approach, usually coming from the business economists and the banks, as what it is: an outraged voice of the self-interests.

The chartered banks currently hold no less than $80 billion worth of Government of Canada bonds, and their current record profits are due in no small part to the money earned on these very low-risk loans.

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The banks and other bond holders are the key beneficiaries of the high interest rates and zero inflation policies killing jobs. The bond markets always soar on the news that growth is slow, or unemployment rises.

On the issue of jobs, I guess the key question is do we continue with mass unemployment and underemployment, and what does this do to the human resources? If we cut interest rates and made this a priority and unemployment fell from 10% to 4%, the national income would increase by over 15%. One hundred billion dollars would be out in the country.

We have some suggestions to implement this job strategy. We believe government should limit long hours and encourage more educational and family leave. We should have selective expansion of social programs, which also create new jobs. An example of this is a national child care program. We could create jobs with an expansion of the national infrastructure program, such as making older houses and apartment buildings more energy efficient.

This year's alternative budget will put forward a detailed and technical credible plan to really address the jobs crisis. This plan will be designed to lead us back to full employment.

There is no greater lie than the tired statement we hear from politicians who have nothing to offer working people. The tired statement is there is no alternative. While there is no single answer to mass unemployment, what is vitally important is that there is a real commitment to full employment as a central and major goal of government.

The right-wing idea that the public sector is some kind of unproductive parasite upon the private sector makes no sense. A productive private sector simply could not exist if it were not for schools, roads, airports, sewer and water treatment systems.

Thank you.

The Vice-Chair (Mr. Campbell): Thank you very much. We move to the Cooper Institute.

Mr. Vince Murnaghan (Treasurer, Cooper Institute): I speak on behalf of the Cooper Institute, which is an institute of development education located in Charlottetown. We do research and popular education, mostly in Prince Edward Island but also in the Atlantic area. We have direct relationships with similar groups in the south.

We welcome this opportunity to make our views known to you. We do not really expect to tell you anything you have not heard before because we are part of that static of which Mr. Axworthy spoke so insultingly yesterday in a CTV interview. We are accustomed to being ignored. We are not accustomed to being insultingly condemned by a minister of the government. We hope you will bring back to Ottawa and to Mr. Axworthy, Mr. Chrétien, and Mr. Martin the message that there is a lot of static in the country and this static will be around long after they have retired to live on the pensions provided by this static.

We accept the commonly held view that government has as its purpose to arrange the affairs of state in such a way that the good of all citizens is promoted. We feel sorry to have to say to you we do not see the present federal government subscribing to this view.

Financial decisions, for the past several successive Canadian governments, have neither been for nor by the people. They have been against the people, and primarily against the most vulnerable people - the aged, the sick, the fishers, the farmers, and the unemployed. Health care cuts, job cuts, and cuts in social security benefits affect the most vulnerable people.

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It distresses us that the level of poverty has steadily increased. Child poverty is greater now than it was when the House of Commons passed a unanimous resolution to eliminate child poverty by the year 2000. In the past week, a news item indicated that child poverty was at a crisis level. Children do not end up poor in isolation; they are poor because they've come from poor families. Average families are losing ground. Federal government leadership is needed to halt this decline, not to add to it by further cuts to social programs.

Besides increasing family and child poverty, job losses affect the well-being of those who lose the jobs. In addition, the loss of hundreds of thousands of jobs in the past four years has had an effect on consumer spending and on the tax base. Since successive governments have cut many jobs and have all focused on taxing individuals rather than profit-making corporations, they have effectively cut off some revenue sources.

The debt and deficit are real. Contrary to political rhetoric it is not caused by funding social programs, but to a large extent by tax exemptions and tax deferrals for the corporate sector. Yes, we are in favour of cuts to reduce the debt and deficit to 3% of GDP, but the cuts that we favour are not the ones that are being made by government. We favour cuts in tax expenditures. It is well know to you, hon. members, that billions of dollars of revenue are lost each year through exemptions and deferrals given to large corporations. It is also well known to you that the tax expenditures on RRSPs each year amount to nearly $15 billion. This program was established for lower income workers who do not have a pension plan at their workplace. It has become a haven for the rich.

Yes, we agree that government is too big, but not in the way in which the elites speak about it. If the finance department is looking for ways to reduce the size of government, it could consider the prospect of abolishing the Senate. This is a very costly part of government that serves no useful purpose. Billions of dollars could be saved if this institution were abolished.

Briefly, hon. members, what we are saying is that we want no more cuts to social programs. We vigorously opposed the proposed changes to unemployment insurance, which will have grave consequences, especially for seasonal workers. But we do want cuts that will make for a more equitable sharing of the wealth of this country. We call on the federal government to return the country to a place in which people want to live, to a compassionate, caring country. We maintain this can be done while still having a reduction in the deficit.

As for further devolution of powers to the provinces, we feel this would be disastrous to provinces like ours that have a low tax base. And for privatization, we feel this has already gone too far. There doesn't seem much left to privatize.

Thank you very much.

The Vice-Chair (Mr. Campbell): Thank you very much.

From the Federation of Prince Edward Island Municipalities, we welcome Don Doncaster.

Mr. Don Doncaster (President, Federation of Prince Edward Island Municipalities): Thank you, sir. I do not have a prepared brief, but I would like to make a few comments very quickly.

Question 1 is: What should our deficit reduction target be and how can it best be achieved? Certainly, the deficit has to be reduced eventually to zero, and in an orderly manner. With the next budget coming up in February or March, however, one of the crucial things about it is that Lucien Bouchard is going to be watching you. That budget is going to be extremely crucial. If there are massive social cuts or that sort of thing in that budget, Bouchard is certainly going to use it as ammunition to call either an election or a referendum. As the bottom line in a provincial election, he will certainly use it against the country.

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However, spending cuts or deficit reduction have to be achieved through federal spending cuts rather than an increase in revenue. Any increase in revenue means taxation placed further down the line. That's something provinces and municipalities certainly can't take any longer.

Question 2 is: How many budget measures should be used to create an environment for jobs and growth? Since I'm representing the Federation of P.E.I. Municipalities, I have to put in a pitch for the municipal infrastructure program here. It was extremely successful from our standpoint. We believe it should be continued. How much further municipalities and the provinces can go in continuing it with their one-third, or how far the federal government can go, I don't know.

The municipal infrastructure program had a great effect, especially in the small communities in the areas of water, sewers, sidewalks, and that type of thing. Besides the buying of pipes and the rest and getting them installed, it had a spin-off effect beyond that. When you get into a small community with the water and sewers, there are local contractors laying it, etc. When we put water and sewers in and dug up people's lawns and that sort of thing, these people then had to spend more money hooking it up to their houses. The town would put it down the street and each household would then put it into their house. This is an extra $700 or $1,000 per house.

It had a far deeper effect in that once they put it in and had to redo their lawns and so on, for some reason or other it caused people - especially when you put in water, sewers, and sidewalks - to fix up their property. Lo and behold, didn't they paint it or go further with it. This caused a reaction among their neighbours, so the whole town benefits from a slow spin-off just from putting in the water, sewer, or sidewalk. So the benefit from it was far deeper and far greater than for just the companies that produced the pipes and that type of thing and the companies that installed it.

On question 3 - What areas of federal activity should be considered for further cuts? - certainly devolution to other levels of governments just cannot be. If the federal government can't raise any more taxes and has to cut, it's certainly not accomplishing anything by passing those down to the provinces and the municipalities. It just doesn't make sense. If that money isn't out there for the federal government, it certainly isn't there for the provinces or the municipalities.

Thank you.

The Vice-Chair (Mr. Campbell): In introducing Mr. Doncaster, I neglected to mention that he is, of course, the mayor of Kensington.

Thank you very much for being with us.

Mr. Doncaster: Thank you.

The Vice-Chair (Mr. Campbell): We next move to the Greater Charlottetown Area Chamber of Commerce, with Cleve Myers.

Mr. Cleve Myers (Member, Greater Charlottetown Area Chamber of Commerce): Thank you, Mr. Chairman, members of the committee, and ladies and gentlemen.

The Greater Charlottetown Area Chamber of Commerce again welcomes the opportunity to present to the pre-budget sessions of the Standing Committee on Finance proposals and suggestions that the chamber urges the committee and, through it, the Government of Canada to consider in the preparation of the next federal budget.

Firstly, the chamber wishes to recognize the ongoing efforts and progress that have been made in reducing the amount of the annual deficit. These steps, although necessary toward preserving the economic health of our nation, are not always politically popular. It is the chamber's view that the government is proceeding along the right track and urges continuance, if not acceleration, on this course.

At the same time, we need to remind ourselves that for more than twenty years we've been adding to the accumulated debt of our country at a staggering rate, spending billions of dollars more than are collected in revenues each year. The result is that the country now owes almost $600 billion, a virtual straitjacket that limits our opportunities and places us at a competitive disadvantage in the world market. High tax rates are required to service this mountain of debt. High interest rates are the result of our thirst for the foreign borrowings required to keep us afloat. This approach to democratic fiscal responsibility in which we have all participated now puts our future at risk economically, socially, and culturally. What's perhaps most revealing and is cause for the greatest concern at this point is that there is no consensus that a problem even exists, let alone a united approach to confronting it.

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With this preamble, what follows are the the chamber's responses to the three set questions.

What should our deficit reduction target be and how can it best be achieved? As we have said, the deficit and the accumulated debt reduce Canada's competitiveness, its economic health, and its resources for helping needy Canadians. The deficit must be reduced more rapidly with tough but attainable targets clearly set out and achieved, to quote the finance minister, ``come hell or high water''.

This current period of economic growth presents a good opportunity to put a plan in place for a balanced budget by the year 2000. There's no better way for Canada to usher in the next millennium. It's important to point out from our viewpoint that although a balanced budget in 1995 represents to some an almost impossible goal, its achievement would mean the job is only half-finished. Thereafter, annual surpluses would be required for many years into the future to eliminate the accumulated debt of more than $600 billion by the year 2000. This could realistically take another 20 years, so in total the whole program would occur over 25 years. Given that we've had 20 years of overspending to arrive at our present position, such a timeframe for debt elimination is both appropriate and manageable.

How can this target best be achieved? Let's start by stating how it cannot be achieved. The taxpayers of Canada, both private and corporate, are taxed to the absolute limit. There's no public appetite for further tax increases, either direct or hidden. Any increases at this point will have a negative influence on the economy in any event.

The following are the areas that should be looked at as opportunities for deficit reduction: The first is reduction of waste and overspending by government. While progress has been made in this area over the past few years, there's still much work to be done. There's no one in this room who could not cite several examples of government spending that defy the laws of economics and point out clearly that the public sector remains unconvinced about - and therefore uncommitted to - spending reductions.

Our local example is the recent relocation of a government office, at considerable cost, by a federal minister to his own riding solely because they did not have their share of government jobs in that area. While this may be the case, the result was a net outflow of public money with no net gain to the region. In terms of direction and commitment to spending reduction, this type of leadership from the highest levels offers little to public sector workers and to the general public.

In spite of efforts to reduce spending by the government, there is still a great flurry of activity by government departments each March to spend what is left in their current budget lest they lose it. The present budget model, if not rewarding spending, does not discourage it or reward savings. The chamber encourages government to explore the use of incentives to reward spending reduction initiatives. Implementation of such a model may be difficult and subject to criticism, but difficult problems require ingenuity and courage, both of which Canadians have in abundance.

As for continuation of privatization and contracting out, the chamber recognizes recent privatization efforts and urges the continuation of this policy for any service that can be more efficiently delivered outside government. All services should be scrutinized from the viewpoint of what can't be privatized or contracted out rather than from the viewpoint of what can be.

Regarding the harmonization of GST and PST, any tax should be efficient, easy to understand and to calculate, cheap to collect, and difficult to avoid. The move to one sales tax follows these principles and offers encouragement to the economy. The present two-tax system is regressive and harmful, especially to the tourism industry, which shows strong potential. The chamber urges that harmonization be pursued aggressively.

As for jurisdictional overlaps, again recent progress has been made in this area but improvement is still possible. In light of the recent referendum, it appears that discussion will soon begin on the devolution of powers to the provinces. Care must be taken not to allow overlaps to drift back into the system.

The annual filing of information and annual issuing of licences, etc., should be changed to a filing every two or three years as appropriate. This would include those filings that fall under Statistics Canada, an agency that appears to be out of control. This agency creates inefficiency in the economy and appears to be a prime candidate for privatization.

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How may budget measures be used to create an environment for jobs and growth? The Auditor General indicated last week that the practice of using public grants and subsidies to promote employment and economic growth has met with little success. While there may be certain instances in which benefits can be demonstrated, as a general rule governments are ill-equipped and inefficient in taking money from the public, running it through the system, and delivering it back via programs that purport to improve the economy or conditions for employment.

One area where a case can be made for public participation is that of economic infrastructure development. In our own area, for example, subsidies previously used to underwrite ferry operations will be used to finance the cost of the fixed link for 35 years. If all goes according to plan, the result will be the discontinuance of the need for public funds to get ourselves and our goods to the mainland after those 35 years.

We should have a transportation link that increases our competitiveness, therefore creating an environment for jobs and growth and moving us a step further away from dependency on annual transfer payments.

The chamber views economic infrastructure development as having the following characteristics: demonstrable economic benefits, fixed duration in time and money, long-term benefits as opposed to immediate benefits, complementary to rather than competitive with the private sector, system or process oriented, and subject to public scrutiny and input prior to implementation.

On the whole, the chamber is of the opinion that the budget measure that would meet with the quickest response from the economy in terms of growth and jobs would be the implementation of a plan to reduce and eliminate the deficit. Further tinkering through poorly conceived programs that are more politically oriented than economically oriented will continue to meet with the same dismal results.

What areas of federal activity should be considered for further cuts, commercialization, privatization, or devolution to other levels of government? As stated previously, the short answer is that virtually all activity should be considered. Nothing should be deemed sacred, including crown corporations and agencies, all government services and universality of programs. We should be delivering programs and services only to those in need. And notice that we've said that they should be ``considered''. We haven't advocated cutting and privatizing everything.

In summary, it's the chamber's position, Mr. Chairman, that the country needs to move quickly to put its financial house in order while the window of opportunity is still open. Further delay will only reduce our options and put at risk everything we've created over the last 130 years.

Any approach needs to incorporate these basic principles. The public is ready for cutting of expenditures. They need to see an achievable, long-term plan that will produce real results. They need continuing education as to why the previous course was not sustainable, backed up by leadership that sticks to the plan.

In closing, we would like to thank the committee for the opportunity to present again this year and we wish you success in the difficult, challenging, and hopefully rewarding days ahead.

Thank you very much.

The Vice-Chair (Mr. Campbell): Thank you.

Next we will hear from Harvey MacKinnon, from the Prince Edward Island Chamber of Commerce.

Mr. Harvey MacKinnon (Greater Charlottetown Area Chamber of Commerce): Mr. Chairman, I am not representing the Prince Edward Island Chamber of Commerce. I'm here with the Greater Charlottetown Area Chamber of Commerce.

The Vice-Chair (Mr. Campbell): Then we'll hear from Barry Cudmore, of the Prince Edward Island Federation of Agriculture.

Mr. Barry Cudmore (President, Prince Edward Island Federation of Agriculture): Thank you, Mr. Chairman. Members of the committee, ladies and gentlemen, I will refer to the brief that we've had distributed.

The Prince Edward Island Federation of Agriculture is a general farm lobby organization, working on behalf of farmers in a broad range of commodities, farm sizes, and equity levels all across Prince Edward Island.

We are proud of our family farms, which provided $311 million in farm cash receipts in 1994. While the potato industry is the major single crop, the livestock industry provides a stable balance to our agricultural economy. It is our forecast that farmers will continue to be the backbone of this province.

We commend the Government of Canada for its goal of deficit reduction. Your willingness to consult with industry is a worthy exercise. We recognize that change is everywhere around us, and we are told by your government that we must be prepared to compete with the world for world markets.

Through an aggressive pursuit of foreign opportunities, and with the support of Foreign Affairs, our producers are finding new markets, not only for agricultural products, but for agricultural technology and expertise as well.

Farmers in this province have in the past and will in the future continue to search out markets. We can compete if given the right tools to work with. Government policies must provide for diversification and sustainability in agriculture. If our industry is strong, so too is the economy of our province and of our country.

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The Department of Agriculture and Agri-Food experienced a 20% reduction in Mr. Martin's last budget. While we would not argue that further cuts may be needed over the coming years, we hope you will recognize the deep and dramatic impact these recent program eliminations or reductions have made to farmers and rural communities across the country.

You should realize that further cuts will not only mean fewer farmers, but also the demise of rural communities. We have lost transportation equalization programs such as feed freight assistance, the Maritime Freight Rates Act, and the Atlantic Region Freight Assistance Act.

We have lost 30% of the dairy subsidy. We have to absorb major increases in vital food inspection fees with a declining level of service. We must absorb increased feed cost as a result of the Western Grain Transportation Act elimination.

The capacity to absorb any further cuts comes at time when fertilizer costs have risen by 25% and barley prices, for instance, have gone from $95 per tonne in late 1994 to $205 at the present time.

To ensure farmers can be successful in adaptation to the new reality, the Government of Canada must be willing to commit to the following.

First, the $500,000 lifetime capital gains exemption must remain for agriculture. At our most recent annual meeting, the following resolution was passed:

WHEREAS the Federal Government is currently evaluating the future of the Lifetime Capital Gains Exemption, and

WHEREAS this program has enabled many family farms in P.E.I. and across Canada to continue to operate by next generation family members as a result of this program;

THEREFORE BE IT RESOLVED that the PEI Federation of Agriculture continue to urge the Federal Government to allow Lifetime Capital Gains Exemptions.

This exemption must continue if family farms are to be the rule rather than the exception for Canadian agriculture. It has allowed for an orderly transfer of family farms, whether they are incorporated or not incorporated, to successive generations and provided a stability to our rural communities.

Second, the government of Canada must make haste in achieving a memorandum of understanding with the provinces for safety nets. The government must remain committed to the $600 million for these important programs.

NISA, as the cornerstone of the safety nets program, is insufficient to address disaster situations and is of no benefit if there are no funds in the farmers' NISA account. One advantage of NISA, though, is that it is perceived to be GATT green.

Crop insurance, which many farmers need to satisfy their lending institutions, must remain.

The interest-free cash advance program should be made permanent, interest-free, and should not be taken from the safety net budget. It promotes the orderly sale of farm products and should remain to create cashflow for farmers.

Third, food inspection services should be a right to this country and are essential for expanded export sales. We must know the government's long-term plan for inspection service and cost-recovery. The vision of the government must acknowledge the future costs and loss of international markets if inspection services are not provided by an unbiased government agency. We cannot pay increased costs of inspection services and get reduced services. We cannot expect our international markets to understand the lack of national inspection or standards if we lose the world-class system that is so respected by other countries. Canada No. 1 means high quality. To reach the $2 million goal in exports of agri-food products, it must continue to mean world-class.

Fourth, investment tax credits have been an important tool to P.E.I. farmers remaining competitive and encouraging our farmers to purchase the most efficient and the most practical technology available for our buildings and equipment. Government policy should promote diversification and sustainability in agriculture.

Fifth, a 4% depreciation rate on farm buildings is not sensible, especially in some commodities such as hogs, where conditions dictate that facilities must be replaced either for deterioration or obsolescence before they are fully depreciated.

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Number six, we commend the government for the joint venture program for research and development. Canada spends less than most industrialized countries on research and development, and we feel the joint ventures between industry and government will further research and development in areas other than those that might have been done by either alone.

In conclusion, we contend that there will be less government in the future. Provincial and federal governments still have a distance to go to eliminate duplication. We expect the process to continue. The federal government will continue to downsize, but its significance as a strategic game player and referee will increase.

Island farmers are excited and positive about the future of our industry. We look forward to a continued partnership with your government in ongoing positive growth in our agricultural industry. With this partnership, Prince Edward Island farmers will continue to make an important contribution to the economy and to our country. Thank you very much.

The Vice-Chair (Mr. Campbell): Thank you.

We move next to the Prince Edward Island Teachers' Federation.

Ms Joyce McCardle (President, Prince Edward Island Teachers' Federation): Thank you. I'm afraid I understood that this was a round table discussion, so instead of a brief, my comments will be sort of in point form. I thank you for the opportunity to address you.

There are serious implications for the ability of the Province of Prince Edward Island to fund the cost for elementary and secondary education if the federal government reduces the amount of the various transfer payments to the province. We therefore would urge the committee to follow the red book pledge to follow a balanced approach between spending and revenue decisions to meet the need to control the deficit.

We support the goal to reduce the deficit to no more than 3% of the GDP through a balanced approach, and not only through cuts to programs. We further encourage the continued effort to create jobs and stimulate economic growth. This is the only long-term solution to the problem. Job creation reduces the dependence on social programs.

Canadians, when compared to others internationally, are not overtaxed. Corporate tax has been cut from 3% of the GDP in 1965 to 2% in 1993.

All levels of education and training must be recognized by the federal government as a priority, and decisions made to reduce the deficit must not negatively impact on the ability of provinces to meet the educational needs of children and youth.

The Constitution of Canada entrenches the general obligation of the federal government to make, and I quote from section 36(2):

equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.

It is critical to Prince Edward Island children and youth that the present equalization programs be maintained and improved if they are to be provided with educational opportunities that are comparable in any way to those available to children and youth in more affluent provinces.

The loss of funding to our province, through the proposals of the Canada health and social transfer, will have a devastating effect on the funding available for elementary and secondary education services. This program will also place many children at risk because of the reduction in standards in both welfare and health programs. These reductions, in addition to those likely to be imposed on seasonal workers under the unemployment insurance program, will make it increasingly difficult for children and youth in this province to grow and develop in a healthy environment.

The family problems created by inadequate health and social welfare programs will make it increasingly difficult for schools to meet the educational needs of these children and youth. The difficulty will be enhanced if the financial resources available to our education system are further depleted by a reduction in federal support to our province.

The CHST will combine current federal transfers for social welfare, post-secondary education, and health care. It will continue to pay provinces in both tax points and cash payments, but these cash payments will be completely phased out by 2008.

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There is grave concern that the CHST will result in an offloading of costs for post-secondary education to the students, and this will result in the imposition of tuition fees and loan programs that will make post-secondary education available only to the middle class and the wealthy.

There is a fear that the elimination of the cash transfers under CHST will ultimately eliminate the ability of the federal government to enforce national standards under the Canada Health Act.

The children and youth in Prince Edward Island are Canadian citizens and they have a right under the Constitution of Canada to educational opportunities that are comparable to those available to other youth and children in Canada.

Prince Edward Island spends the lowest amount of money per student in Canada to educate its children and youth - close to 60% less than that spent by Ontario. This amount cannot be further reduced without placing the future of our children and youth in great jeopardy. If they are to have a future, they must have comparable levels of education to those of their peers across Canada.

Privatization and contracting out will prove harmful to the education system, and we urge that this be halted.

Thank you.

The Vice-Chair (Mr. Campbell): We'll move next to the Tourism Industry Association of Prince Edward Island.

Mr. Alfred V. Groom (President, Tourism Industry Association of Prince Edward Island): Chairman Campbell, ladies and gentlemen, good morning.

Tourism is one of the fastest growing industries in the world. This industry has played and will continue to play an important role in the contribution to our national economy and tourism potential for revenue generation and job creation. Thus, the following brief will give you an appreciation of how the tourism industry can assist the economic policy framework of fostering durable economic growth and job creation.

The national deficit can only be reduced if all partners - government and industry - work cooperatively to seize the opportunity the marketplace presents. In 1994 the value of tourism to Prince Edward Island amounted to $154 million in expenditures from pleasure visitors. This year the industry is forecasting revenues of $170 million, an increase of 13%. In 1994 the tourism industry on Prince Edward Island employed 17,000 people on a full-time or part-time basis, and this represents approximately 30% of the labour force.

In 1994 the value of tourism to the Canadian economy represented $27.4 billion in total receipts and $10.2 billion in foreign exchange earnings. That represented 4% of the national gross domestic product and accounted for 586,400 jobs and $12.4 billion in government revenues.

Tourism worldwide presently provides employment for 212 million people. By 2000 it will be the world's largest employer, generating $3.5 trillion in gross output. It produced 10% of the gross domestic product and accounted for 10.7% of the global workforce. Between 1995 and 2005, travel and tourism will create 125 million new jobs. This means one in every nine jobs will be in tourism.

Recently, industry, the provincial government and the Atlantic Canada Opportunities Agency have partnered in creating a strategic design to help the province achieve significant growth and development in the tourism sector over the next five years. Aggressive targets and goals have been set for the next five years.

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With respect to the three questions posed by your committee, our association believes the government should strive for the highest possible deficit reduction.

It is perceived that this can be achieved by continuing to make operational changes within government. Higher revenues through increased taxation is not the way to reduce the deficit. The tourism industry and its consumers cannot absorb any further taxes.

On the federal level, just one example of operational change may include the privatization of some components of the federal park system. This would result in lower costs incurred by government and would provide more opportunities for the private sector. It would remove duplication in many aspects of the federal-provincial activities - environmental management, training, fisheries and taxation, for example.

In Atlantic Canada, and more specifically in Prince Edward Island, two of the greatest concerns for the tourism industry continue to be UIC reform and air access.

As indicated in the statistics, tourism is still creating jobs. Unfortunately, many of those continue to be on a seasonal basis.

The impending unemployment insurance changes do not address the reality surrounding the seasonality of our industry. This is of great concern to our industry. Job creation and other economic development initiatives in Atlantic Canada need to respond to these realities.

The industry would like to encourage the government to work cooperatively to extend the season and thus create an environment of commerce allowing for long-term employment.

Air access is one of the key ingredients needed for the present tourism industry to expand and for our economy on Prince Edward Island to prosper. At the present time, the industry and thus the economy is being held hostage by the major airlines of Canada. As a result of this, the industry is forced to direct its marketing plans to only the areas serviced by these airlines.

The present federal regulations do not allow for increased competition in the airline industry. Canadian regulations are twenty years behind the United States and ten years behind Europe. The fact is if potential visitors are unable to get to the destination of choice quickly, economically and hassle free, then the desire to vacation in Atlantic Canada - and Prince Edward Island in particular - will decrease.

Air access will assist in the extension of our tourism season. In turn this longer season creates wealth and more employment opportunities.

It is imperative that the government and the industry partner do seek deficit reduction, but, more importantly, create an atmosphere for training and human resource development resulting in a top quality tourism product.

Prince Edward Island's tourism industry growth is poised for success with easier automobile access via the fixed link and government support for expanded air access to this province.

In summary, the tourism industry cannot place enough emphasis on the necessity of government to realize the apparent need to control the deficit and the resulting benefits if industry and government partners will include job creation plus an extension of the tourism season. This in turn will assist in the improvement of revenues for both public and private sectors.

On behalf of the Tourism Industry Association of Prince Edward Island, thank you for providing the opportunity to present our comments today.

The Vice-Chair (Mr. Campbell): We'll turn next to the Prince Edward Island Health Coalition, Mary Boyd.

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Ms Mary Boyd (Prince Edward Island Health Coalition): Thank you, Mr. Chairperson.

Like the Teachers' Federation, I was under the impression this would be a round table. So I'm just going to take some selected comments and present them to you at the beginning.

The Vice-Chair (Mr. Campbell): Let me just use this opportunity to comment. That's the second time this has been mentioned.

This is indeed a round table, not just geographically, as we sit here, but in process. So when you are done, we will then move to some interaction among the witnesses and then to questions from the members.

So it will be very much a round table discussion. I've already seen the patterns develop for issues where various witnesses disagree and have different viewpoints. There may be some internal contradictions within your own presentations, which I'm sure members will want to ask about.

So we'll be very much a round table in the second part. Please proceed.

Ms Boyd: Thank you. I'm just saying because of my impression I haven't got a brief, but I have some input.

First of all, we looked at the three questions. To begin I'll just to give a thumbnail sketch of an answer regarding targets for deficit reduction. The groups that have concentrated on the alternative federal budget are looking closely again at the new, alternative budget. We have not adopted a deficit reduction target as such.

When you look at Europe and the Maastricht Treaty, the countries there are adopting a debt-to-GDP target. This means if you adopt a ratio, for example, of a debt-to-GDP of 60%, by the year 2000 there should be no deficit at all. This is the direction researchers are taking.

How would this happen? It would happen through job creation and expanding income through work. As a result, government revenues will be higher and the debt will begin to decline. So by the year 2000 we should start to work on bringing the debt down and the deficit would be zero.

Lower interest rates have been the driving force behind the alternative budget. We believe if we could lower interest rates and increase the growth rates to 5%, for example, and hold that for five years, then there would be no deficit. But if we concentrate on just lowering inflation, then we increase unemployment and we increase hardship.

Another way of achieving this kind of target is to have the Bank of Canada lend more to the government. The bank used to lend 20%. Now I think it's about 5%. This is a very important change we recommend.

Also, the purchase of more government bonds is important. Selling RRSPs overseas is something to be discouraged, as is borrowing overseas.

So we need to expand, as I said, through job growth, financing ourselves and getting control over interest rates. Regarding a deficit reduction target as such, when you anticipate a surplus by the year 2000, it's better not to concentrate on deficit and on the long-term program.

Martin took a goal of deficit reduction of 3% of the gross domestic product. I don't think he's going to meet that goal, nor is he going to meet his employment target. The alternative budget decided to take Martin's 3% deficit reduction this year and show it could be done without any cutbacks to social programs.

The second question is how may budget measures be used to create an environment for jobs and growth? Again, it's a very short answer. Cuts to programs and transfers are not the answers, and under the Canadian health and social transfers, people will be laid off. It is going to increase unemployment. It is going to increase hardship for people. The federal and provincial governments are taking a stand that is opposite to the one that should be taken in order to get at our debt and deficit problems.

.0930

As for the question about areas of federal activities that should be considered, we say again, don't adopt the cuts approach. If the government operates with normal efficiency, the economy will bounce back. There has been a prediction that the economy will be $250 billion better off at the turn of the century. Why would we be preoccupying ourselves with cuts?

In addition to that, Canada's fiscal crisis is not the result of an unaffordable system of social programs. Canada has under-collected relative to most of the capacity of the citizens and the corporations. We do have much more capacity to contribute to the well-being of Canadians even when compared to other industrialized countries.

Social programs as a percentage of GDP have remained relatively stable since the mid-1980s, with the exception of the recession years. The debt and deficit are up but revenue collection is down, and that is one of the main problems that preoccupies us at this point. All of this has been exacerbated by high interest rates.

There are three points that are important to keep in mind. Changes in taxation have put us in this situation. Between 1976 and 1985, the majority of upper-income Canadians and corporations had a tax holiday. This is what caused the serious decline in public revenue, with the full indexation of personal income tax and substantial growth and tax shelters. Canada is the only G-7 country with a decline in public revenues.

Another problem is that in 1987 the federal government broadened the tax base at the bottom and in the middle and reduced the rates at the top. This created profound inequalities in the tax system.

Third, corporate contributions declined most rapidly among all sources of federal tax revenue in the last twenty years, from 7% in 1992 and 17% in 1985 to 25% in 1955. Canada's corporate taxes are very low in relation to industrialized countries and are the lowest of all the G-7 countries, including the U.S.A.

In 1990 Finance Minister Wilson admitted that Canada was among the world's most lightly taxed countries. The deputy minister of finance is saying the opposite now, but in fact Wilson's comments still hold.

The Vice-Chair (Mr. Campbell): Excuse me. I wonder if you're ready to touch on your other points. Time is running.... Thank you.

Ms Boyd: Okay. Another point that's important is that at a time when our country has decided to cut back and make major cuts in social programs, research is showing that in fact the opposite may be true. Research shows that as you increase your expenditures and put more money into these programs, growth takes place. In fact, cuts may hinder this growth. Unemployment insurance, social housing, welfare and affordable university education may be very important contributions to prosperity rather than drags on economic performance.

This lack of investment in people goes against the kind of innovative society we need at this point.

.0935

The choice is not between greater equality and greater growth. The report of the United Nations development program shows that Japan, Spain, Belgium and other industrialized countries with a narrower gap between the rich and the poor grew faster from 1980 to 1992 than did countries with greater disparities, such as the United States, New Zealand, Australia and Switzerland. Sweden and Britain are two exceptions.

Research has shown that there is a link between equality and growth and that human resources are increasingly important to the new economy. So when the teachers' federation expresses alarm about cutbacks to education, I think they're right on. A society that handicaps large segments of its population during periods of major technological change may be handicapping the future of the economy. There are studies that show that the stress of these inequalities increases health costs.

Finally, where is the will to bring about social justice in our society and to close that gap? It would certainly be for the benefit of the people. When you hear -

The Vice-Chair (Mr. Campbell): Ms Boyd, I wonder if we could conclude there so we can allow time for discussion and questions.

Ms Boyd: Can I just say one sentence in conclusion?

The Vice-Chair (Mr. Campbell): Please.

Ms Boyd: When you hear Mr. Harris in Ontario, Mr. Klein and Mr. Manning talk about change and decentralization, these are code words for destruction of the social safety net that helps hold our community together. I will talk more about this later.

The Vice-Chair (Mr. Campbell): Thank you very much. I'm going to propose a very short break for coffee.

Before you leave, I want to tell you that after the break we'll move immediately into some conversation and dialogue with witnesses. You have presented different views. Everyone has acknowledged the need to deal with the deficit and some have gone further and said that we have to look at the debt. Some have proposed leaving expenditures alone. Others have proposed a further look at expenditures.

While you get your coffee or cold drink, would you prepare by thinking about the challenges this committee and this government face and come back with some specific recommendations for achieving the targets you've set for us and for meeting the challenges you've talked about? We want to hear more specifics when you come back. Thank you.

We'll resume in about three minutes.

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.0946

The Vice-Chair (Mr. Campbell): Ladies and gentlemen, what we'd like to do next is encourage some dialogue among witnesses at the table. You have each presented views to us, and to some extent the views are contradictory - not surprisingly. If this format is to be useful to the finance committee, it is only because of the dialogue we have as members with you and among yourselves. You are all taxpayers and stakeholders in this discussion. Ultimately it is for government and the minister to choose, but we desire and need your assistance in making those choices as taxpayers and representatives of different groups.

So I want to present you with the first opportunity to comment - and nobody's required to make any comment if you so choose - on what you've heard from each other. To the extent there's common ground, to the extent there's violent disagreement, it would help us to hear that. After that we'll move to questions from the members.

If you want to comment on anything anyone else has said or react to it, please don't use it as an opportunity to further elaborate on what you've already said. That opportunity will come through the questions from the committee. If you want to strictly comment, react or talk about the impact that might arise from some of the suggestions others have made, that would be very helpful to us.

Does anyone wish to comment on any of the presentations made by others this morning? Ms McCardle.

Ms McCardle: I would just like to make a brief comment. I heard from two different presenters that they had a very adverse reaction to tax increases. Nobody likes tax increases, but as I said, Canadians are not overtaxed. Polls have indicated - Vector Research and Development in December 1994 - that Canadians are willing to pay more taxes for the needs of poor children, job training of welfare recipients, public schools and day care.

I wouldn't like this committee to just go away and say that everybody is against tax increases. Nobody likes them, but as opposed to putting it all onto the public sector...maybe it would be equalized if it were a tax.

The Vice-Chair (Mr. Campbell): Mr. Doncaster.

Mr. Doncaster: I certainly disagree with the comment about Canadians not being overtaxed. I believe when you have to work until some day in July before you're working for yourself, because everything you earn before that goes to taxes, we're overtaxed.

There appeared to be some consensus about corporation taxes. I don't know whether free trade has done this or not, but corporations certainly appear to be in a very good driving position with corporation taxes. I forget what the actual statistics are, but they're certainly much lower as a percentage compared to individual taxes than they were 20 years ago. With free trade, the corporations and multi-corporations are saying, as a bargaining chip, that if you increase corporation taxes they'll go to Mexico. That circle has to be broken.

Certainly by cutting back on social programs such as UI and welfare, you're giving the corporations a much hungrier workforce to look to.

.0950

The Vice-Chair (Mr. Campbell): Are there other comments? Yes, Mr. MacKay.

Mr. MacKay: On Doug's last point, one of the things the media does is present and feed the concepts people believe. I want to agree with Doug's final comment about the taxes paid by corporations. If you watch what goes on in British Columbia and other provinces, they have what they call corporate day instead of that July day when workers' taxes stop. The corporate tax freedom day begins some time in January, so it's kind of interesting.

One of the common themes I heard that I was very disturbed about - and it's even in the third question - is the whole issue of privatizing the public sector. Right now, economic analysts are saying they're disappointed and surprised that all of a sudden there's a slump in growth. Yet if you look at what's going on in the country, $1 out of every $5 in Canada is spent by government on salaries, goods, services from the private sector, roads, buildings and schools.

If you cut that and realize that one in five jobs is in the public sector, and in the last year one in ten government jobs has been lost, it's easy to figure out why we have an economic slump. I find it interesting that some people are saying privatize, which to me means fewer jobs, lower-paid jobs, insecure jobs, and temporary jobs.

What it really says to me is that somebody is trying to drive an agenda of cutting unions out of this country, because the public sector is highly unionized, highly skilled, does a good job and puts the value back into the economy. I would suggest that if this province took a massive attack in the public sector, it couldn't survive. That's a different point of view.

The Vice-Chair (Mr. Campbell): Thank you.

Are there other comments? Ms Boyd.

Ms Boyd: In relation to the comment on taxes, there's a statistic that shows that in 1991, 62,480 corporations paid no tax on over $12 billion worth of profits. Lower-income Canadians are paying lots of taxes and there is unequal distribution of the tax load at that level. Middle-income Canadians are paying a lot too, but if you count the services, we are better off than the Americans because of what we get for our taxes without cutbacks.

I also want to comment on the point that was raised about privatizing and the inefficiency of the public sector. All one has to do is compare Canada's publicly funded health system to the U.S. privately operated health system to see that ours is much cheaper and we have a much better thing going. That's just one answer to this private versus public argument.

The Vice-Chair (Mr. Campbell): You've had a lot of statistics for us this morning. Does that statistic with respect to corporations indicate whether they have had prior losses they are using, they're taking advantage of other things, they're simply declining to pay tax, or these are deferred taxes?

Ms Boyd: That's not a statistic on deferred taxes. It just shows how many ways they can get out of paying taxes compared to the average citizen.

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The Vice-Chair (Mr. Campbell): Does it show how many ways, or is it just a statistic that says they didn't pay?

Ms Boyd: If you put it with other bits of information, it shows the taxation system is built in a very favourable way for the corporations, and they can legally avoid paying those taxes.

The Vice-Chair (Mr. Campbell): Thank you.

We'll just take two more statements quickly, from Messrs Cudmore and Myers, and then we'll turn to MPs for questioning.

Mr. B. Cudmore: Mr. Chairman, those of us in the agriculture sector feel we're paying our fair share of taxes now. Our returns on investment are generally low. We rely heavily on volume to survive, to make a profit. The problem I have with increased taxes is that when a new tax comes in, it never seems to go away. It may have a change of name or whatever, but it stays with us.

As a society, I suspect we might have some sympathy toward more dollars going into education and health if we knew the new taxes raised were going specifically toward those items, but I don't perceive that as happening.

That would summarize my comments.

The Vice-Chair (Mr. Campbell): Thank you.

Mr. Myers.

Mr. Myers: Thank you, Mr. Chairman. I have just a couple of comments.

It strikes me that in our discussion, although we have various approaches to the solution, we seem to be talking about the same problem: we have a debt problem in the country that restricts our ability to continue to deliver social programs as we want to and as we have done in the past. It also seems that we have difficulty agreeing on the approaches to a solution.

With respect to the corporate tax issue, I'm a chartered accountant. I have a small public practice and the majority of my clients who are corporations don't pay taxes, but that is because they haven't made any money in the past few years. Those who have made money recently do have losses coming forward that they offset against the money they've made this year, and there's still more money to carry over to offset against future income.

Corporations are merely vehicles in this country that allow people to get together to carry on business. The people who own the corporations, the shareholders, are ultimately the ones who pay the taxes. There are only 30 million people in this country, and that's the tax base.

I believe in taxing corporations because of the services that corporations may incur, but the notion that corporations earn money, pay no taxes and then stick that money somewhere and don't use it to do something strikes me as strange. If corporations make money, generally what happens is they go out and want to do something else. They want to make some more money, so they have to employ some more people. I'm not advocating that you don't tax corporations. I'm advocating that we look at the whole picture to see what's really going on.

I think Canadians as a whole are taxed to the absolute limit, not just by the personal tax rate and the income tax measures, but with the GST and PST and with all the other taxes that aren't necessarily right up front. Whether it's registration for your vehicles or whatever, these are all taxes that we pay.

I'm surprised the tourism industry didn't touch on this, actually. I think harmonization of the PST and GST, especially in a province where we depend so much on tourism dollars, is an absolute necessity. If you come here from the United States and you look at the menu price on something and think you're going to pay x number of dollars for it, by the time you get out of there, after you've paid the GST, the PST and have left the mandatory 15% tip, you've paid an extra 33% on top of what you thought you were going to pay. That, to me, is just regressive to industry and therefore to employment.

The Vice-Chair (Mr. Campbell): Thank you. As the committee that recommended harmonization, we welcome your comments.

I have one last comment from the Tourism Industry Association, and then we'll go to questions.

Mr. Don Cudmore (Executive Director, Tourism Industry Association of Prince Edward Island): With respect to harmonization, when the committee on harmonization came to Prince Edward Island, we clearly supported it. The Tourism Industry Association of Canada clearly supports harmonization.

On the issue of taxation, where we come from is the fact that all of our product is taxable. No matter what way we turn, we're taxed at point of sale. That's one of the inadequacies of our industry.

The Vice-Chair (Mr. Campbell): Thank you.

We're going to begin with questions, starting with Mr. Loubier.

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[Translation]

Mr. Loubier (Saint-Hyacinthe - Bagot): Thank you, ladies and gentlemen, for appearing before the Finance Committee this morning. This is my second visit to Charlottetown, and each time, I've been given a warm welcome. I am always happy to come here.

I was going to ask a question, but Mr. Myers made me change my mind, or my target. Since he is an accountant, as he so clearly mentions, I would like to ask him if he realizes that the official corporate tax rate is roughly 40% in Canada. And despite this 40% rate, the federal government expects businesses to pay a real tax rate of only 20 to 22%, given the various tax provisions they're entitled to: deferring taxes year after year, deducting losses, etc. This 22% rate is the average tax rate that businesses pay in the United States.

Last year, researchers from the Université du Québec and the Université de Montreal conducted a study that showed that out of a sample of 300 Canadian businesses - if I remember correctly - barely 40% paid the normal 22% tax rate we would expect them to pay.

One of the main reasons for this was the existence of loopholes in our tax system, namely the possibility of using tax havens - we have identified 26 at present - for diverting part of the profits and creating imaginary losses in bogus subsidiaries. In short, according to the study, it would be to our advantage to totally remodel the tax system so that Canadian businesses, especially the large ones, pay their share.

Allow me to refer you to the Auditor General's Report of 1992 - not that long ago - where the Auditor General estimated the flight of capital to tax havens like the Caribbean at 16 billion dollars, as Ms Boyd mentioned earlier. That is 16 billion dollars in revenue that businesses are not paying to Canadian tax authorities! Given the comments you made earlier as well as the results arrived at by the Auditor General and academics, how would you react to that question?

[English]

Mr. Myers: Your question centres more on certain practices of certain probably large Canadian companies, as opposed to the tax rates they are under.

In this country we tax corporations on an individual basis rather than on a consolidated basis. This may offer them some opportunities by which they can slide their profits around to give them different year-ends and that kind of thing. If they're hiding them in the Caribbean or somewhere else, I don't think you'd get a lot of opposition from most people in this country that they should be paying their fair share of taxes. With respect to the clients whom I represent here in P.E.I., I'm not aware that any are hiding any profits anywhere.

At the same time, you've given credence to the fact that the tax rates here in Canada are effectively equivalent to what we see from our main trading partner and our main competition, that being the United States. The rates are there.

If there is the opportunity through other measures to not do what I think they should be doing and what we all think they should be doing - that is, paying their fair share of taxes - those can be acted upon. This, however, shouldn't mean raising taxes for every other corporation just to make up for the ones falling through the cracks.

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[Translation]

Mr. Loubier: This summer, in June or July, the CA Magazine,the canadian chartered accountants' magazine that you are probably familiar with because you are an accountant, made a recommendation to canadian taxpayers and businesses and strongly encouraged them to invest their profits in countries considered to be tax havens and even to sell the tax deductions that they weren't able to use because of their earnings to other businesses.

As there seems to be a kind of tax deduction trade and a laxist attitude toward tax avoidance, would you agree, as an accountant, to oppose the proposals from a magazine published by your professional association? Do you believe that there should be true tax reform in Canada to eliminate the loopholes contained in our tax system, and in the process, would you condemn the CA Magazine for presenting trade in tax deductions and tax avoidance as an almost normal practice to chartered accountants?

[English]

Mr. Myers: I'm not completely aware of what you are specifically referring to, but based on what you've said, and based on me being a chartered accountant for the last eighteen years and reading CA Magazine regularly, it would strike me strange if the magazine is advocating tax evasion.

If there are measures available through legislation in this country that permit this kind of activity, then perhaps that legislation should be looked at to see if it is equitable, fair and competitive with other countries. But I don't think if you look into it you will find that CA Magazine or any of its editorial staff is advocating tax evasion. That's a criminal offence.

[Translation]

Mr. Loubier: Would you agree to a reform of the corporate tax system to eliminate the loopholes that allow for this type of cavalier practice?

[English]

Mr. Myers: I'd need more information before I take a position on that. I'm not exactly aware of the mechanism that permits that kind of thing, but if it's contrary to what our nature is as Canadians - that we should pay our fair share and not evade that through some mechanisms, which if not illegal are at least questionable - I fully support looking into them and making sure that everybody, both corporations and individuals, pays the taxes they are supposed to pay in a country.

The Vice-Chair (Mr. Campbell): Mr. Solberg.

Mr. Solberg (Medicine Hat): Thank you very much, Mr. Chairman. I have a couple of questions.

I'd like to start by asking Ms Boyd a question with respect to her comments about the need to create employment. There are many countries around the world where you have de facto full employment, but they are some of the poorest countries in the world, countries where people have to scratch and work every day just to survive. Given that full employment by itself really isn't necessarily the key to prosperity, how would you go about creating jobs that aren't just ``make work'' jobs, jobs that actually contribute to the economy and to the productivity of the economy?

Ms Boyd: First, we do have the richest country in the world and, second, since we're on the topic of corporations, many of the jobs in those countries.... I don't know of many countries that have full employment in the south, in the poorer countries. I think the unemployment rates are quite high all over.

Many of those poorly paid jobs with terrible working conditions in those countries are jobs in the transnational corporations, something like 70 million jobs where people are paid 38¢ an hour or maybe $2 a day to work 16 hours. That often includes young 16-year-old girls. Everything is detrimental to their health. The corporations are trying find havens where they can have the cheapest labour and make the highest profits.

As long as we follow a system where we support the corporations and the principle of profits before people, we cannot create the kinds of jobs that offer people a living wage.

I'm not in favour of creating minimum wage jobs. The statistics in the tourism industry on P.E.I. may be high as far as job creation, but unfortunately a number of those are minimum wage jobs and that is not a living wage. It disturbs me very much to think that we're building an economy on Prince Edward Island on the sweat and blood of workers. That's not the way to create any kind of prosperity in any society.

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This is undoubtedly the richest country in the world, no matter what standard you take, and yet we're taking a whole approach that is increasing the gap between rich and poor. The rich are getting richer and the poor are getting poorer. There are many reasons.

If we don't invest in human resources, education and know-how, we're not going to have the creativity to create the kinds of jobs that are going to be quality jobs that pay and can compete, even though I don't like the word ``competition''. I think we need to be able to look at our world according to needs and how we help each other. Training and support for higher education are certainly needed. If money is allowed to circulate among the people at the base, they will come up with unbelievably great ideas for job creation, but the fact is that money has been drained away and the opportunities don't exist.

In government, we've had our public sector cut to the bone. I agree with the president of the P.E.I. Federation of Labour that if we keep cutting government jobs in this province - the government is one of the bigger employers - we're just inviting more and more poverty to Prince Edward Island. It's the same if you look at what's happening in the hospitals, in the nursing field, and so on.

Mr. Solberg: I wonder if I could just cut you off here because I have a couple of questions I'd like to ask and I know other people have questions.

You mentioned before that you think we should have lower interest rates. You also mentioned that at the same time we shouldn't be borrowing money overseas. In other words, you're saying we should be borrowing more money at home. We've had to borrow money overseas because we couldn't borrow all of the money we wanted to borrow at home. I suspect the only way to do that would be to raise interest rates. If you raise interest rates at home so you can borrow money internally, you're going to completely defeat your idea of having lower interest rates. How do you reconcile those two things?

Ms Boyd: Number one, as long as we pursue zero inflation, we're going to create more unemployment. That's one thing, so we -

Mr. Solberg: No. I'm talking about the interest rates.

Ms Boyd: Okay, but if we lower interest rates, people in Canada will start borrowing money and start investing and that is going to create jobs. As far as borrowing money overseas, we're doing it -

Mr. Solberg: Before you get too far along there, if we lower the interest rates, why wouldn't people invest somewhere else, particularly people from outside of the country who can put their money wherever they want? Why wouldn't they put it into an environment of higher interest rates?

Ms Boyd: I think we have to give incentives for Canadians to have an interest in this country. Isn't this one of the problems? If we don't take some responsibility within our own country.... Again, when you look at the wealth in this country, it's a question of what kind of returns you're going to get.

I think short-term and medium-term interest rates are the ones we have control over. If they are lowered, they will start a process of job creation and investment. There are bonds and things in this country people can invest in that have a decent return and would maybe invite the ordinary Canadian to invest more. I don't think we should always be looking at the people who want to speculate internationally for huge returns on interest rates. Let's look at the average Canadian and at more investment from the average Canadian in this country.

Mr. Solberg: Okay. I have one final question.

As far as corporations and taxing corporations, it's true that a lot of the profits are passed on to the shareholders. The shareholders, of course, are comprised of all kinds of people, including average Canadians and many pension funds, probably including labour pension funds. Those people use those profits to retire on. So in fact if you raise corporate taxes, aren't you going to also be lowering the return for retired Canadians and for people who are depending on small incomes to retire on?

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Ms Boyd: No. If you look at the corporations paying 7% and Canadians paying 48% of the tax bill in the country, the discrepancy is so great. The only returns that are up right now in this system are the corporate profits and the bank profits. That's it. So this system is rewarding the rich. It's making the poor pay a lot more taxes and punishing the poor people of this country very much.

With the approach of Paul Martin's budget to cutbacks, they never counted the cost or impact of those cuts, and there are many. I can go through them.

The only growth has been in the profits to corporations and banks, and those are huge.

The Vice-Chair (Mr. Campbell): Thank you, Mr. Solberg.

Ms Boyd, I would just like to clarify something, and this comes up in every hearing. Just so we can start from a common base, the largest pension funds in this country each own a significant share of the major banks you've referred to. For instance, the Ontario teachers pension plan owns 4% of the Royal Bank, 5% of the TD Bank, 4% of the Caisse de dépôt et placement du Québec, 3% of the Bank of Nova Scotia, and it goes on and on.

When we talk about banks and rich Canadians, we should know that 40% to 50% of the banks' shareholdings are in the major pensions. I think that was the point Mr. Solberg was trying to make.

We are going to turn to this side of the table now, beginning with Diane Brushett.

Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chairman.

We are very pleased to have the presenters here this morning before the Standing Committee on Finance and the Government of Canada. It's a real pleasure to be here on the island to hear some very interesting views.

The first question I would like to pose is to Sandy MacKay from the Prince Edward Island Federation of Labour.

You talk about the international integration fear and believe we have a lot of room in this country to let the dollar fall and seek its own level, if you will, in the marketplace. I would like to suggest this isn't a new thought. It has occurred in the past, and a few years ago we allowed this to happen. Even today we have the dollar at probably one of its very lowest rates. It has fallen to 72¢, but that still hasn't solved the problem.

I am wondering what motivates you and your federation to believe that if we let the dollar fall endlessly, we'll solve the problems financially.

Mr. MacKay: I don't know if we really said we should let it fall, but we say keeping it propped up artificially is a disincentive to creating jobs in Canada. Our exports and our economy grew, but when the dollar fell interest rates were propped up, which hurt the economy.

We're saying with the monetary policy there are alternatives to what is being done in the country. We said that last year in our alternative budget and no doubt we'll be saying it this year.

Mrs. Brushett: With the policy we've exercised from last year's budget, still dealing with inflation, we have controlled inflation, created some jobs, and exports have grown to the highest levels ever. Would you agree it has worked over the past year?

Mr. MacKay: We're saying more needs to be done. Some action was taken on the dollar, but the interest rates didn't go down as substantially as they should have. I guess you're setting a goal for the deficit without setting a goal for people to work. That's the difference.

Mrs. Brushett: That's the challenge, I agree. Thank you.

Mr. MacKay: If the federal government said, with as much vigour, be damned, or by hell or high water, we're going to have unemployment at 4%, we believe the deficit would disappear by itself.

Mrs. Brushett: Thank you. I think the challenge is there. But I think the overriding theme is if you can bring the deficit down, the jobs will come through the private sector and through our ability to compete in the marketplace.

Mr. MacKay: The difference is, how do we reduce the deficit? Do we cut and slash, or do we do it a better way?

Mrs. Brushett: I have a second question for Joyce McCardle of the Prince Edward Island Teachers' Federation. You expressed a lot of fear in your comments about the CHST, education, and the ability of children to compete nationally and internationally.

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You did say that cash transfer payments from the federal government would be eliminated by the year 2008. We're wondering where you find evidence of this in your statistics. I believe you have many statistics on different issues. It's our belief at the federal level that we should have cash transfers so that we have some leverage. We have not set a date, and I wish you'd give me a little background on where you got this year.

Ms McCardle: No, I can't give you the background on that, but I would like to -

Mrs. Brushett: There is no evidence to indicate that.

Ms McCardle: No, not at this time. I'm sure I read it somewhere, but I can't tell you where. I read so much.

Given talk of equalization, I would like to re-emphasize that on P.E.I. we cannot stand any cuts to equalization payments. Whether it's education or whether it's health, they're all interconnected. Our country has achieved the things it has because of our well-educated citizens. Our citizens, whether they're rich or poor, have achieved this through the public education system. I think the release of Canada's education report card on Friday tells us what a good job the education system is doing. So I would re-emphasize, please think of this and keep the equalization payments the way they are.

If you have another question for me, that's fine, but I have to leave at 10:25 a.m.

Mrs. Brushett: No. My further question, Mr. Chair, if I may, is to Mary Boyd of the Prince Edward Island Health Coalition. It's just one quick question before I pass it on.

You've expressed a great deal of concern about how Canada has undercollected taxes, and you've reiterated this many times. It's a theme we do hear fairly commonly, but you've expressed it very strongly this morning. I'm wondering if you know that, particularly in the Atlantic region but in all of Canada, the backbone of our job creation is really the small business sector.

Here in Atlantic Canada we have some 90,000 small businesses. That's a significant number of people throughout this region, and they support our job creation. Through that, it is for small business that we have kept the rate of corporate tax low, so that these small businesses may continue to grow and thrive and do their job in creating more employment. Are you in favour of eliminating that lower tax rate we've created for small business by some $2 billion?

Ms Boyd: No, you're right on there. My comments are not levelled against small business; small business does create most of the jobs in this country. This is very important, and I don't think small business gets enough support.

It's the big corporations and the wealthy that are getting off the hook, not small business. Sometimes when you address this, small business people think you're talking to them too, but we do have to make a distinction between small and large business in the same way as we do between low-income people and wealthy people. If we would tax the wealthy and the big corporations to get our revenue, that would satisfy me very much.

But I just want to say that small business doesn't always do us a favour either, sitting around the table calling for the harmonization of the GST and the provincial tax. You know harmonization means that you then have to extend that tax to essential items like food and things that are not taxed now. Who has to bear the brunt of that? Again, it's the poor people, who are getting poorer.

Just last week our provincial government said that now all welfare recipients have to buy their winter fuel from the Irving corporation. This is despicable. This is a scary, worrisome thing, that the freedom of choice of from whom and how you buy your fuel is taken away and put under a corporation. This is the kind of direction we're saying -

The Vice-Chair (Mr. Campbell): Thank you. Ms Boyd, I think you've answered the question. There are other questions. Thank you.

Mr. Easter.

Mr. Easter (Malpeque): Thank you, Mr. Chairman.

At this opportunity, on behalf of my federal colleagues, I'd like to certainly welcome the finance committee here and also thank the groups from P.E.I. for coming in and making their views known. I know it takes a lot of homework to get a brief together.

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I might also say, Mr. Chairman, that as you may have noticed, the weather here is much better than it is everywhere else in the country. You should see the difference in the summertime. Come on back on your own and spend a few dollars. We'd like that as well.

The Vice-Chair (Mr. Campbell): Excuse me, Mr. Easter, but I think Ms McCardle is about to say goodbye to us. I'll give her that opportunity.

Ms McCardle: I was about to say goodbye.

Dianne, I want to say I will get you that information and I will send it to you.

Mrs. Brushett: Thank you very much.

Ms McCardle: Thank you very much for the opportunity to appear here. I'm sorry I have to leave.

The Vice-Chair (Mr. Campbell): Thank you very much.

Mr. Easter.

Mr. Easter: Vince, you mentioned RRSPs and what they cost the federal treasury. It seems the issue of what level RRSPs should be at is constantly under debate. You are correct in that as it reaches higher levels, as a tax expenditure it does mean a reduction in terms of revenue for the federal government. I'm wondering what level you are suggesting RRSPs should be. Are there others who might want to make a comment on the level at which RRSPs should be set?

Mr. Murnaghan: No, Wayne, I can't suggest a level. I do know, however, that the program was established for working people who do not have pension plans. It is now being used and abused very severely by those who have a lot of money. It could be cut back; from the figures I've seen, this could mean a savings of $10 billion a year. I can't give you an income figure that it should be cut back to, though.

Mr. Easter: So you are suggesting that there should at least be consideration given to reducing the level from what it is currently.

Mr. Murnaghan: Yes.

Mr. Easter: In the presentation from TIAPEI, Alfred, you talked about extending the length of the season. I agree with the idea that anything governments might do to help out in this area should be done. If you go out to Cavendish in early September, you can almost shoot a cannon up the street. It is extremely busy in the summertime but it peters right off. I'm wondering if you have any specific suggestions that we might be able to look at in terms of helping to lengthen the season, not only on Prince Edward Island, but elsewhere as well.

I also have one other question, Mr. Chairman.

Mr. Groom: Wayne, that is a very good question. We've looked at how we can lengthen the season on Prince Edward Island, and we have been discussing this with our operators and those involved in the tourism industry. Things seem to shut down very quickly in early September.

We have a climate here that is very good for recreation and other forms of activity. From mid-May - when visitation here is very limited - or June through to the month of October, and right up until now, our climate presents tremendous potential. There are countries in Europe and elsewhere that have a great focus on hiking and ecotourism. We're getting some good weather for this kind of visitor. As I said, the potential for this area for the kind of visitor with this kind of interest is enormous.

Our problem is that we can't get those people here. The airlines coming into Canada are coming into the major cities, so we can't package and market correctly. It especially makes it most difficult to market because it takes a lot of dollars to do so. The marketing has to be tied into the air access. We're unable to do that and we realize that, but the regulations set by the federal government prevent many landings in this area.

For example, three days ago we had a -

The Vice-Chair (Mr. Campbell): I just wonder if you could conclude the answer. Mr. Easter has another question, and we still have to hear from Mr. Pillitteri.

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Mr. Groom: I'll finish off by saying that three days ago we had a meeting with Icelandair. They have potential customers for this area; that is, Prince Edward Island and the Atlantic region. They wanted to come in here next year to bring those customers in. They found they were restricted to two landings per week under federal regulations.

It's like building a hotel. If you only have ten rooms, it's not profitable. You need a certain amount of activity to make it profitable, and that's the point. Until we move ahead with some of our regulations, we are not going to bring this kind of client in and thus create jobs and, subsequently, wealth.

The Vice-Chair (Mr. Campbell): Thank you.

Mr. Easter, you had another question.

Mr. Easter: Yes, it's my last question. Thank you, Mr. Chair.

In your presentation for the Chamber of Commerce, Cleve, you talked about fast deficit reduction and debt elimination within 25 years, yet I think your colleague - I don't know if it was you or not - talked about the infrastructure program. It's kind of a contradiction to say ``reduce'' on the one hand and ``spend'' on the other.

I'm told by the research staff that a policy of going that quickly in terms of deficit reduction would basically leave us with an operating surplus in the neighbourhood of $80 billion per year. That would really then only leave 50¢ of total spending going to programs. That's a considerable reduction from what we have now.

Given what Doug said earlier in terms of the unity question and everything else, we can't massively reduce social spending. Do you not think that would be a little bit too heavy in terms of deficit reduction? If we phase it out over time through the short-step approach that Paul Martin has taken, would that not give us a better socio-economic balance and still meet the needs?

Mr. Myers: Wayne, I look at the deficit in the same way that I look at the mortgage on my home. I can't pay it all next year and I can't pay it all in five years, but over a long period of time and with a program in place, I could put some money towards it. If I have a plan in mind, I can eventually eliminate it. That gives me and my family sustainability and allows me to do the things I want to do, within reason.

I look at the federal government's situation along the same lines. I don't think we need a surplus of $80 billion a year, and if the program we have recommended produces those kinds of results to the detriment of the social programs, then I do think it's too quick. That's my personal opinion, because I obviously haven't had time to confer with the other chamber representatives.

It needs to be pointed out that our stance is not to reduce social spending and therefore make profits so that we can keep all the money in our pockets or put it in some tax haven somewhere. It's to allow sustainability of the programs that we've come to look at, appreciate and want as Canadians. Our concern is that we don't have that sustainability, which puts the programs at risk. We want to get back on an equal footing so that we have the opportunity to do what it is we want to do, but we don't have that opportunity right now.

Mr. Easter: Thank you.

The Vice-Chair (Mr. Campbell): Thank you, Mr. Easter.

Mr. Pillitteri has a question.

Mr. Pillitteri (Niagara Falls): Thank you, Mr. Chairman.

I have a question, but I think I want to make.... Everybody is bringing out some statistics this morning, so I think I might as well get inside some statistics, too.

Some presentations - those by Mr. MacKay and others around the table - have said this government has failed in the area of job creation and has not taken a look at the human element. You know, Mr. Chairman, when we won the election in 1993, we put many things in our red book, but had we predicted that we would lower unemployment from 12% or 11.5% down to 9.2%, some people would have thought this was not possible. We did do one thing, Mr. Chairman. We failed to put that in as a red book commitment. This government has created 460,000 jobs since that time, and it has lowered unemployment from 11.5% to 9.2%. So we've accomplished that. Of course we'll continue to do much better in the future.

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I heard some remarks this morning about small and medium-sized businesses. By the way, all of those jobs were created 100% by the small businesses.

Ms Boyd, just not to worry you on your part, if you put in that mid-sized businesses are up to $500 million, I don't think anybody in P.E.I. is generating that kind of revenue. So nobody is really missing the loophole. I think everyone is above it. In other words, by these statistics you're saying that everyone in P.E.I. is paying their fair share, or more than their fair share.

Another remark I heard this morning was about the contribution to RRSPs, that over $10 billion is not being collected or given a venue. Let me tell you, sir, that over 60% of the total contributions to RRSPs in this country are made by people who earn less than $60,000. So it's not for the filthy rich. For the ones that benefit up to $150,000, only 5% of those individuals are putting in that money. I'm just giving you some statistics, as others have.

I want to put a question to Mr. MacKay. That is talking about paying their fair share of taxes. In the G-7 group, as far as tax is concerned, Canada is about at the middle; I would say it is the fourth highest in paying taxes. If we take a look at the G-7, it encompasses everyone, but over 85% of our total trade is with the United States. So we have to look at the United States and what corporate taxes they're paying, because that is the competition.

Do you know that Japan is only the second-largest trading partner we have? We do more trade with South Korea than with France. We do more trade with China than we do.... So our comparison in trade is with the United States.

Let's now look at statistics.

That is our main competition. So when we lose an industry, when we lose jobs, we don't lose them to Japan; we lose them mostly to the United States. That's where we have to be competitive.

Mr. MacKay, you said that we have not invested in people. I just brought you some statistics on where we had invested in people.

People say that taxes paid by the corporations are only 7%. Relatively, it is what we collect, not what they pay. The 7% we collect is from the corporate sector and 40% is from the private individual. It is not that they pay only 7% in corporate taxes.

What do you suggest we should do in order to achieve, to be more competitive with the United States?

Mr. MacKay: You've certainly got lots of statistics in your comparisons with the United States. They're probably one of the reasons why the labour movement was adamantly opposed to NAFTA and the FTA.

I'd like to go back to your first comment, in which you talked about the big success your government has had in lowering unemployment. If Mr. Martin promised 400,000 jobs, we'd like to know where they are. Yes, the unemployment rate has dipped below 10%, but that's mainly because people have given up looking for jobs. Those are our statistics. If it wasn't for that, then the unemployment rate would be 12%. If you take into account the people who would like full-time jobs, who are mostly thousands and hundreds of thousands of women, then you would find out that the unemployment rate is really 20%.

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On your last part about the taxation and the U.S.A., if that's our attitude, then we're headed down the bad road some of the states have gone down. If you look at the Americans' health care or unemployment insurance, you see the arguments we used for why we opposed free trade.

I would say if you're going to be a corporation in Canada and you're going to use our resources - namely our people and our raw resources - then you should have to pay that price. You shouldn't be able to just get up and leave. We invest as a people in these corporations by buying their products, by allowing them to use our country and by allowing them to use our human resources. They should give back to the country and pay their fair share.

That's all we're asking. We're not saying they should pay an exorbitant amount. If you look at where we've gone from 1960 to now, the corporations have paid less in comparison to what the private citizen has paid.

I agree with everybody that if tomorrow they have a big concert to raise money for hospital beds, then thousands and thousands of Canadians and islanders will give, because they don't mind paying for that kind of thing.

I guess what happens is we get abusive with politicians. Everybody has talked about this government waste, and I don't know where the waste is, but we get abusive with politicians, so people don't believe you spend our money properly.

Then we get into this whole scenario. We don't want to pay taxes. We want our health care. We want good education. We want good roads and we're willing to pay for that. The scary part is we're getting into user fees.

The Vice-Chair (Mr. Campbell): Very quickly, Mr. Pillitteri.

Mr. Pillitteri: Thank you, Mr. Chair. I just want to make one more comment.

By the way, in 1988, to some extent, I was opposed to free trade and my party at the time was running against the type of package we were going to give the United States. I'm a farmer and within my area it practically destroyed the tender fruit and the wine industry. Today I'm glad to say to you I thought it was destroyed but as a Canadian, for me personally, it really made me put my spine up. I got into business and made some innovative changes.

However, let me say to you, we are an exporting nation. If we were to take that attitude and segregate ourselves, we would be in a lot worse shape today. The only growth we've had has been in our exports and those are mostly to the United States. If we had not done that, we would be in a lot worse shape today.

Mr. MacKay: Certainly the person beside you can argue better than I can against the free trade agreement. Also, you want to listen to George Baker if you want to talk about taxation.

The Vice-Chair (Mr. Campbell): Okay. Mr. Cudmore just had a brief intervention he wanted to make earlier.

Mr. D. Cudmore: Just for clarification, in our brief today we mentioned we employ 17,000 people in Prince Edward Island and we are forecasting by the year 2000 a 30% increase in employment. We think this is a very achievable goal, even though some of those jobs are seasonal and some of those jobs are at minimum wage.

First, I would question anybody who would have any concern about us creating that many jobs.

I would also question the UIC regulations in regard to...and, Wayne, I would try to get back to your question about seasonality. We're in a catch-22 situation here in Prince Edward Island. When the brunt of our vacation people leave by the first of September, we're still trying to keep some of our operations open to accommodate those who come in October and November.

We would like to see the unemployment insurance regulations, first of all, be gradual in the input of an increase from 12 to 20 weeks. We would like to see changes to the Unemployment Insurance Act. But we would also like to see some of that unemployment insurance fund go toward funding wages for some of those operations to stay open so we can accept our visitors, take their dollars and turn those dollars back into taxation dollars to put against the economy. That's simply our goal here.

The tourism industry is one of those industries where, if we can bring people here, they will spend money. We're heavily taxed. Contrary to some other thoughts around the table, we are heavily taxed. There are the GST and PST. They're there. So if we can provide customers for our businesses and tax dollars for the coffers, then the deficit will be taken care of.

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The Vice-Chair (Mr. Campbell): Thank you.

Mr. Loubier, a very short question or comment. We've gone over our time. We pride ourselves in the finance committee on delivering our product on time and under budget, so I'm a little embarrassed we're over time here.

[Translation]

Mr. Loubier: I'd like to ask another short question, but first of all I'd like to comment on something you said earlier about the large Canadian banks.

The large banks must obviously obtain funds from somewhere. The large banks must obtain funds for example from unionized employees' pension funds. That's why we must be more demanding with respect to the banks' behaviour.

We put money into big Canadian banks, and at the same time, these banks open some 50 subsidiaries in the Caribbean, or twice as many as they have outside this tax haven. Perhaps we should impose certain requirements on large Canadian banks with respect to the use of the funds we entrust to them. At present, they have to develop a social conscience, especially in light of the plight of our public finances. I think that we are entitled to demand, when we make deposits in these banks or when we entrust our pension funds to them, that they manage this money in the national interest.

I have a question for Mr. Barry Cudmore. Earlier, you talked about the $500,000 lifetime capital gains exemption. If this $500,000 lifetime exemption were to disappear, how would that impact farmers in Prince Edward Island?

[English]

Mr. B. Cudmore: At the present time, children growing up on the family farm have an opportunity to assume that family farm under fairly favourable circumstances, given this legislation that's in place.

It's impossible for almost anybody else outside of the family to consider getting into agriculture. There is a high risk and it's highly capitalized.

Having this $500,000 exemption in place, I believe, has helped sustain rural Canada. Keep in mind all levels of government have put a lot of infrastructure into rural Canada at the present time. Look at what's there: our schools and in many cases our hospitals. As well, many individuals have worked hard to maintain a smaller infrastructure in the community - churches and community halls, for example.

If we want to see agriculture stay as family units, I think it's very important that this exemption be allowed to continue. If it's the government's goal to have agriculture go outside of family farm operations, then without this sort of legislation this is what will happen.

This exemption has made it very possible for individuals to retire out of agriculture with something and allows for individuals in the next generation to assume a family farm operation. They can buy it at a reasonable price and be allowed to make payments to acquire the land and buildings over time in a reasonable manner.

The Vice-Chair (Mr. Campbell): Thank you very much. We're going to have to wrap up. We're well over our time. I want to take this opportunity to thank all of you for meeting this morning. It's extremely helpful to this committee, as we contemplate reporting with respect to the upcoming budget, to have the views of stakeholders, taxpayers, all of you representing different segments of our society. You all bring important viewpoints and raise important issues for us to consider.

I wonder if, as chairman, I can take this opportunity, in addition to thanking you, to leave you with some thoughts on the magnitude of what we face as Canadians. I am not speaking just of this committee, although ultimately we'll have to make some choices as a government.

People have suggested here we close down Parliament, which sometimes sounds very tempting to all of us. They've suggested we eliminate all the tax expenditures benefiting the corporate sector and indeed that we raise corporate taxes. If we did all those things - even raise corporate taxes by a third, close Parliament, end all tax expenditures benefiting corporations and raise the corporate tax by a third - we would still need between $15 billion and $20 billion to eliminate the deficit. Those are big bucks, as they say.

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This is not to ask for your sympathy, but just your understanding in the challenge facing us. As stakeholders, all of us, we have a long way to go if we're going to get to the point all of you agreed on, which is we must deal with and address the deficit. At least you all agreed on this. How to get there, we all disagreed on. However, I wanted to leave you with some sense of the magnitude of the problem. Even confiscating all incomes over $60,000 and all corporate profits doesn't get us there.

So thank you very much for your help. If you have further suggestions and ideas, we welcome hearing from you. We look forward to seeing the updated alternate budget.

You can communicate with the committee through the clerk if you have further specifics. Thank you very much.

Members, before we leave, let me just remind you we will resume here at 1 p.m. Thank you.