EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 28, 1995

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[English]

The Chair: Come to order, please.

The finance committee is pleased to be on the second leg of its cross-Canada hearings on the next budget. We're very pleased to be with you this morning.

Our witnesses are: from the Brandon Real Estate Board, Bill Madder; from the Council of Canadians with Disabilities, Laurie Beachell and Allan Simpson; from the Insurance Bureau of Canada, George Anderson and Paul Kovacs; from the Manitoba Chamber of Commerce, Robert Brazzell; from the Manitoba Fashion Institute, Allan Finkel; from the Manitoba Federation of Union Retirees, Albert Cerilli; from the Manitoba Real Estate Association, Derek Thorvaldson; from the Manitoba Taxpayers Association, Peter Holle; from the Rice Financial Group, Tom Rice; and from the Thomas Sill Foundation, Norman Fiske.

I'd like to thank you for joining us. Perhaps we could start off with a three-minute opening statement by each of you as to where you feel we should be going in our next budget.

Mr. Thorvaldson, would you like to start?

Mr. Derek Thorvaldson (Treasurer, Manitoba Real Estate Association): You want me to make a statement on where we should be going. I think the direction has pretty well been set as far as the real estate industry is concerned. We think the government is going to be forced to take a look at not increasing taxes. We don't see that as a viable alternative; you're going to have to get creative.

I think the government has to look to private industry to take over the role that the government has played in the past, to come up with some innovative ideas. That's what we see. What we can offer is to come up with some innovative ideas to take over certain roles the government has had in the past in ways that we believe are more cost-effective. That's sort of what we want to present here today.

Also, we believe the government has to take a look at some legislation that hasn't been changed in the past that we think needs to be changed to protect the consumer. That's our message this morning.

The Chair: Thank you, Mr. Thorvaldson.

Mr. Madder.

Mr. Bill Madder (Executive Officer, Brandon Real Estate Board): I'd like to add to that very briefly. Derek and I have sort of done a co-presentation, so we're both reading from the same notes. Certainly we would be in agreement on that.

In our presentation we actually have three suggestions. The first one, as Derek mentioned, would be a change to the Interest Act that would allow homeowners or mortgagees to have a prearranged and fair pay-out penalty if they choose to sell their house or pay out their mortgage. As it stands right now, there are no hard and fast rules for that. We feel it's restricting move-ups and in some cases people buying their first home.

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The second suggestion we have is with regard to the GST and how it affects housing. If there is, or even if there isn't, a national sales tax - if we can ever get that one together - the zero-rating of any real estate is our proposal. As it stands right now, our rental real estate in new homes is subject to GST, which creates some severe problems in construction starts.

The various levels of organized real estate have a vested interest in the economic policies of the country. Consumer confidence, investor confidence and interest rates are all important to us. The suggestions we have are in order to spur the industry on, with the important impact that would have on the economy.

CMHC estimates 112,000 starts for 1995 and 127,000 in 1996. We hope to see these numbers go higher. Each housing start creates approximately 2.5 person-years of employment. It's important to realize that it's not just for us that we want these things to happen; it's for the economy and the impact it would have.

There is one final proposal called the home investment plan. Most of you on the committee heard a presentation from the Canadian Real Estate Association last week. We hope that will be seriously considered, and we'll be open for any questions on that as well.

The Chair: Thanks, Mr. Madder.

Mr. Cerilli.

Mr. Albert Cerilli (Manitoba Federation of Union Retirees, Congress of Union Retirees of Canada): Thank you, Mr. Chair, and good morning. Welcome to Winnipeg.

The Chair: Thank you.

Mr. Cerilli: As a retiree coming from the labour side, I believe the confidence of Canadians can only be restored with full employment. That's one of the questions that has not been dealt with. Some questions the committee has posed for us to deal with are like asking us to commit suicide. So we have to take a look at the structure of the debate as a whole, rather than just parts and pieces of it.

In order to accommodate the 1.4 million children who are in poverty.... Looking at the scale of hardships and how the equation of taxation, at least in our view, is very unbalanced, while confidence in the business community is a reality of life, the fact of the matter is that $6 an hour or $8 an hour will not spur the economy or purchase the houses and goods that are going to be produced, be they from offshore or from within Canada.

In early June of this year Canada hosted the G-7 countries' conference in Halifax at a cost of about $40 million. One of the unresolved matters on the agenda was again the job crisis, not only in Canada but across the world. That was not even touched. In my view, that's too bad.

I come from the labour movement. In 1950, for example, just after the war, when labour peace was required, the government came to labour and said, we need to win the war. There was no question about that; we did that jointly. However, in 1950 we had to go on strike for such things as a shorter work week and the same take-home pay, which stimulated the economy to about the 1960s.

From the late 1960s on, all we have done is confront each other across the table, hammering the hell out of each other with regard to what is really good, be it with business or with governments.

One of the issues that has to be addressed is the job crisis, not only in Canada but around the world. The G-7 countries are a good stepping stone to deal with such matters.

If we look at the shorter work week, you will stimulate the economy and put some people back to work. In fact you'll put a great deal of people back to work. As a result of that, we can start looking at up-trends in the construction industry, the manufacturing industry and the purchasing power of Canadians.

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A couple of other things full employment will stimulate the debate on...is the fact that it'll force the provincial and territorial and federal governments to deal with the debate...along with its partners, the business community and labour. Without that debate we're not going to go anywhere. We're simply going to be heading down the road of downgrading our standards to those of the developing countries, where child slavery is on the up-scale. As a result of that, I think the ethical thing to do is to debate the issue as a whole rather than just some parts of it.

Just to compare some statistics, in the one I mentioned already, we're dealing with child poverty. It's a shame that Canada has 1.5 million children in poverty. Can you imagine that! And we pride ourselves on being a civilized society. My goodness!

At the same time we're throwing hundreds of thousands of workers out of their jobs, putting them on the welfare lines, collecting unemployment insurance, and forcing their stresses and their treatments on the medicare system. Then we want to deal with the economy in parts and pieces. I say we have to deal with it as a whole.

I was looking at some of the Financial Post 500 reports. From 1988 to 1995, 215,000 jobs were eliminated. There's been a creation of some jobs, but at what price of the other...?

We say society must be answerable to all. There has to be an economic equity for everybody.

The Chair: I don't think you'll find any disagreement on that around here, Mr. Cerilli.

Mr. Cerilli: I'm glad to hear that.

We can't just benefit from one another. We have to benefit together.

The Chair: Thanks for your opening statement. I welcome your introducing the question of full employment and how we get there. We'll look forward to the ideas of everyone around this table.

Mr. Brazzell.

Mr. Robert Brazzell (Chair, Taxation, Labour and Government Regulations Committee, Manitoba Chamber of Commerce): I'd like to thank you first of all for taking the time to come to Winnipeg, and for the opportunity to attend on behalf of the Manitoba Chamber of Commerce to make a presentation to the Standing Committee on Finance.

The Manitoba Chamber of Commerce is the largest business organization in Manitoba, with over 62 chamber members, representing over 8,000 businesses, from Churchill on the northern coast to Emerson at the southern border. I hope the collective knowledge and advice of its members will prove useful to the federal government as it strives to eliminate the deficit.

It would appear the Canadian public has accepted that the government debt is at least a problem, and perhaps a crisis. It is important, however, that Canadians understand the magnitude and implications of our national debt. Every deficit adds to this debt. The larger the debt, the larger the interest payments required to service it. We are currently paying 37¢ of every dollar we earn in revenue in interest alone, with no end in sight.

Aside from the sheer magnitude of the debt, the most frightening aspect of the federal debt is how much is owed to non-residents. Foreign debt can be devastating, for a variety of reasons.

Capital is not exempt from the principles of supply and demand. Our government borrows huge amounts of capital and the supply is limited. The result is a higher cost of borrowing, which means higher costs for government, but also for businesses and individuals.

Our huge debt and our ability to repay this debt make our creditors nervous. Any event that calls into question our ability to pay can set off wild swings in the value of our dollar, to the detriment of the economy. No economy prospers with this sort of instability.

Higher interest rates and the devaluation of our currency mean a higher cost of living and reduced discretionary spending and consumer demand. In addition, foreign investors are very concerned about our spending choices. They have a real ability to show their displeasure with our domestic policy through an increase in interest rates, which is a risk to the sovereignty of this country.

There is no question that aggressive long-term action must be taken. Therefore the Manitoba Chamber of Commerce recommends the following.

Continue to use conservative estimates of economic growth and interest rates. This approach has served the government very well in the last budget.

No new taxes of any kind whatsoever. Focus on expenditure cuts. We cannot price ourselves out of the tax market. The OECD has noted that the taxes we're paying governments are already much larger than those of our major competitor, the U.S. Indeed, the capital tax on banks and large corporations from the last budget may have been politically popular, but it is deeply unfair to their shareholders and has set an extremely dangerous precedent.

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Set a deadline for balancing the budget and a proposal for limiting the debt thereafter. We will build much more financial confidence by setting long-term goals in addition to short-term objectives.

The International Monetary Fund has noted that such action would strengthen market confidence and raise the credibility of the authority's commitment to price stability and national saving.

The government must continue to reduce transfers to provinces and individuals. The harsh reality is that the bulk of reduction will have to come from these transfers. To mitigate the inevitable pain, the government must look to eliminate duplication of services between itself and the provinces.

Maintain regional equity: Manitoba has observed the elimination of the western grain transportation subsidy, the reduction of western economic diversification, and, in some people's mind, the unnatural restructuring of the Department of Defence.

The relative ability of each provincial economy to absorb austerity measures or restructuring must be kept in mind in considering their extent and timing.

A particular concern to Manitoba is the future of the Port of Churchill and the rumoured restructuring of AECL.

Government must eliminate business subsidies. All existing business subsidies that do not meet a stringent cost-benefit analysis must be eliminated. Government must become more efficient and also explore alternative revenue resources, including user fees where these are practical and fair.

Reduce UIC premiums: The $5 billion surplus is sufficient and should translate into reduced premiums for the employer as well as employees.

Commercialize, then privatize: Following on the example of the recent privatization of Canadian National, the government should identify all crown assets and agencies that can be commercialized and then sold.

Eliminate interprovincial trade barriers within the spirit of the 1994 Internal Trade Agreement: The Canadian Chamber of Commerce identified over 500 impediments to interprovincial trade, which cost approximately 1% of our gross domestic product. These savings could be put to much better use by government and business.

In essence, the position of the Manitoba Chamber is that we have to focus more on the costs of not taking drastic action now, rather than the consequences of these actions.

Thank you.

The Chair: Thank you very much, Mr. Brazzell.

Mr. Beachell and Mr. Simpson.

Mr. Laurie Beachell (National Coordinator, Council of Canadians with Disabilities): I have to start by saying our central issue is related to the harmonization of fiscal policy with social policy in this country, and our central concern relates to the role of the federal government in ensuring social policy equity across the country.

With the cancellation of the Canada assistance plan, the federal government basically has withdrawn itself from ensuring any standards of equity across this country in social programs, other than to ensure that a residency requirement will not be imposed by provinces in order to be eligible for welfare. Even that is being challenged as we speak, in that the Government of B.C. is now suggesting that a residency requirement should be established in order to be eligible for welfare.

So no longer do we have social assistance in Canada based on need, no longer do we have the assurance of an appeal mechanism if you're refused social assistance, no longer do we have a ban on workfare, no longer do we have any adequacy or support-level assurance for people on social assistance, and no longer are we assured of portability of services among provinces.

What we have with the continued federal devolution of power is the establishment of ten countries rather than one.

Our concern relates to a federal role in social policy. The federal government has a commitment in the charter to ensure equity of service provision across the country. The federal government has to recognize the need for equalization payments that look at the ``have-not'' provinces that are not going to be able to provide the same supports as some other provinces have.

We are not opposed to deficit reduction. We are not opposed to balanced budgets. We are opposed to building those upon the backs of Canada's most disadvantaged.

Disabled Canadians equal 15% of the population; yet 80% of those people are unemployed or underemployed. The very support mechanisms that assist people to become part of the economy are being eroded, these being home care, attendant care, transportation services - all of those pieces. All you have to do these days is look at what's happening in Ontario. You can see that disabled people are not being exempted from the cuts, as was suggested. The transportation system is cut. Income support programs are being cut. Social assistance services are being cut.

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We have a question for the finance committee, the Minister of Finance and the Government of Canada. How will you ensure some equitable provision of support services to disadvantaged Canadians across this country? The suggestions in our brief relate to that: national standards, a federal leadership role, a social audit, and a tax system that ensures some equity of wealth across the country. Those are the central issues for our organization.

We were dismayed yesterday to hear the Prime Minister suggesting even further devolution in the area of labour market training. As the consolidated revenue fund diminishes, our population - people with disabilities - is unable to get training. Anyone on social assistance is unable to get training because training in this country is now funded almost exclusively by UI dollars. If you are not receiving unemployment insurance or are not UI-eligible, you cannot get training in this country to get a job.

These are critical issues for our community and must be addressed. Many are beginning to call this ``the mean season''. Frankly, we expected it in 1984 under a Mulroney government. Frankly, we're now experiencing it under a Liberal government.

Thank you.

The Chair: Thank you very much, Mr. Beachell.

Mr. Rice.

Mr. Tom Rice (President and Chief Executive Officer, Rice Financial Group Limited): Thank you, Mr. Chairman. Welcome to Winnipeg.

There are three questions that should be discussed. What should our deficit reduction target be and how can it be achieved? How may budget measures be used to create an environment for jobs and growth? What areas of federal activity should be considered preferable to cuts: commercialization, privatization or devolution to other levels of government?

When we consider deficit reduction, job creation and better use of federal government activities, we should look at what the private sector can do instead of a department of the federal government. When considering new government activities, this question should be asked: can this service be better performed by private enterprise?

When we read articles about the deficit, the statement that too much of our debt is held outside of Canada often comes up. We should encourage the average Canadian to take proactive steps when offered to help in paying off the deficit quickly. This also poses the other question: what can be done to place more of our debt in the hands of the average Canadian?

By broadening the delivery system used for distributing government paper, we can achieve these ends. Ideas to change the future for the better should not always be dependent on what we have done in the past. Creativity and lateral thinking should be applied.

Sam Goldwin, a movie mogul, has been quoted as saying, ``Forecasts are dangerous, particularly those about the future.'' To try to understand the present we should consider government actions in the past and understand how they have affected our present when we are applying actions to affect our future.

There are three or four issues that my paper will cover. It takes a look at: sources of income tax that could be set against the deficit today; alternative distribution systems of government paper, i.e., bonds, Canada savings bonds, treasury bills, etc.; suggestions to review the tax credits for small business and create growth, jobs, education and retraining of people; and future costs for the aging population and for alternatives that could be considered to increase the costs for long-term care, alternatives provided by outside sources other than government.

The Chair: Thank you, Mr. Rice.

Mr. Finkel.

Mr. Allan Finkel (Representative, Manitoba Fashion Institute): Thank you, Mr. Chairman.

First, I'd like to welcome the Standing Committee on Finance to Winnipeg. I had the opportunity to attend these sessions held last year in southwest Manitoba. This is an extensive, very valuable process and we appreciate the efforts of the committee to go across the country to speak with people who have an interest in the state of our country.

The Manitoba Fashion Institute is the industry association representing Manitoba's apparel manufacturers. We are the second largest manufacturing sector in the province and the third largest apparel-manufacturing sector in the country. We currently have about 8,000 people employed in the industry, with various estimates of 1 to 1.5 persons employed indirectly as a by-product of the institute being in Manitoba.

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I will speak briefly to the issue of deficit reduction targets at this point. We believe it is in both the short-term and the long-term interests of this country to bring the deficit down in a decisive but not a precipitous manner. It is our sense that the current government is on an appropriate path, looking both to reductions of government spending and to programs that spur economic growth.

We believe this is very important because this creates a secondary level of programs that are necessary in this country. Basically it develops programs that increase real jobs for Canadians and that work to redeploy unemployed Canadians and Canadians on social assistance back into the workforce. These are true winning programs, with long-term wins for all Canadians against child poverty, for our economy, and ultimately for the Canadian treasury.

During the course of the morning we have had some direct exchange on a couple of the other areas. We do hope to speak a bit more directly on how budget measures may be used to create an environment for jobs and growth. We'll also have a look at the situation of further cuts, commercialization and privatization, in particular regarding the issue of devolution to other levels of government.

I'll leave those comments for the appropriate points in the conversation.

The Chair: Thank you, Mr. Finkel.

Mr. Anderson.

Mr. George D. Anderson (President and Chief Executive Officer, Insurance Bureau of Canada): Thank you, Mr. Chairman.

Last year we went to Lunenburg and appeared I think in the fishermen's museum.

The Chair: There were a lot of people who thought you should have been kept there.

Mr. Anderson: Yes, but we escaped that and now we're here in Winnipeg. We should probably be in the harvest room if we're going to keep the theme consistent, but in any event -

The Chair: I would just like to commend you for going to different parts of Canada. I think it's very useful for Canadians to see different Canadians go through the process you've adopted.

Mr. Anderson: Thank you very much, Mr. Chairman. We're happy to be in Winnipeg.

You've asked that we consider three questions, and I thought by way of summarizing our representation, we'd answer those three questions as specifically as we can. In that context, we've prepared two documents for the committee. One is a general statement of what we think the budget policy ought to be. The other one is a more specific set of statements about possible expenditure reductions, tax measures, and so on.

We tabled this last year in Lunenburg. We see that the government has done a number of the things we recommended then, and we're tabling it again because the list is still valid one year later.

You asked what the target should be and what is the best way of getting there. We've represented for a couple of years now that while the federal debt and deficit are huge and important things to be concerned about, the provincial debts and deficits are really what we should be focusing on. We have advocated for some time now that we look at the total federal and provincial debt, not just the federal debt, in considering what our federal strategy ought to be. In that context we have to have a coordinated debt reduction strategy with the provinces.

That would see us hitting a target of about 3% of GDP by the end of 1997-98. The implication of that for the federal portion of the deficit would be to set your sights on no more than $17 billion by the end of 1997-98. We think the best way of getting there, of course, is the way you've been doing it, and that is to set two-year rolling targets. We think that is creating confidence that the government can manage its affairs. It signals the foreign lenders that we're getting our problems under control, and of course this is a game of confidence as much as it is a game of numbers.

We think it's very important in looking at achieving these targets that the government commit itself to no new or increased taxes. I think that signal has been given pretty strongly by Canadians. New taxes are not the way of trying to deal with this problem.

We are also advocating that we get out of the game of what I call hot-potato politics, simply offloading expenditures from the federal government onto the provinces and watching them pass through the costs in terms of increased taxes. That is a short-term palliative that creates long-term pain, and we think the need to talk to the problems and coordinate our actions here remains very, very important.

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So our answer to the first question is to keep on with the two-year targeting. Look at a maximum deficit of no higher than $17 billion for 1997-98. It's our hope that we can achieve a balanced budget by the end of the millennium.

How do we use budget measures to create jobs and growth? We think, consistent with what a number of others have said, that deficit reduction will lower interest rates, and that in turn will create jobs. As you know, most of the sectors in the Canadian economy are interest sensitive: the lower the interest rates, the higher the demand and the more employment is created thereby.

It will also reduce political uncertainty in the country. The more people are employed, the better they feel about the nation.

We think these two questions of high debt and deficits and political uncertainty are fuelling each other. The reverse will work as well. If you want to bring the country together, get Canadians employed. If you want to get Canadians employed, get interest rates down.

We think the government should look again at a targeted infrastructure investment program - not one that builds community rinks and arenas, but one that looks at roads and sewers and the communications system and, at the margin, begins to fill the deficit created in infrastructure investment in the country over the last few years. We think the government has a role there, and we think the infrastructure investment program, targeted to very hard investments, would be a good thing to do.

The third way in which budget measures and related measures could be used to create jobs and growth is to get serious about regulatory harmonization. I've talked before about creating a country of eleven solitudes on the regulatory front. I think in many respects it's exactly what we have. Those eleven solitudes create a burden on the business community in terms of compliance, which has been built up over the years. The cumulative effect is very serious.

Industry and business have to be invited into the tent to talk to politicians and bureaucrats about how to get to a more manageable level the regulatory burden we all face.

The third question you've asked is what privatization and cost-reduction measures we should use. I simply refer you to the paper we have submitted that talks about a number of these over the next few years.

The Chair: Thanks, Mr. Anderson.

Mr. Fiske.

Mr. Norman Fiske (Chairman, Thomas Sill Foundation (Inc.)): Mr. Chairman, welcome to Winnipeg.

We have a presentation that's slightly longer than 3.5 minutes. Are we going to be allowed to make this presentation again later in the morning?

The Chair: Could you summarize it for us? We'll give you lots of chances to -

Mr. Fiske: Will I have an opportunity later?

The Chair: Well, sure.... We're really interested in the guts of your proposals to us.

Mr. Fiske: The guts of our proposal deal with private foundations in this province, and of course in other provinces across Canada. We have introduced a program in Manitoba that fosters the creation of community foundations. Through the fostering of community foundations, we're offering the people of Canada the opportunity of empowering Canadians to take care of themselves financially and reducing demands on the federal treasury. I'd like to deal with that matter more fully in our presentation later.

The Chair: Sure. We're very interested in this concept, and we have been apprised of it to a certain extent already. We're looking forward to your comments. Would you like to explain very briefly what a community foundation is and, secondly, how we could facilitate their development?

Mr. Fiske: We have a really good example of a community foundation right in Winnipeg, it being the Winnipeg Foundation, which was the first foundation in Canada. The largest community foundation is in Vancouver.

The Thomas Sill Foundation has a program whereby we go out and offer $100,000 to a community in Manitoba. We've established ten of these community foundations.

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Now, we will give them, over the course of four years, $100,000 each if they will in turn raise $200,000. This is a nut that will grow over the next several years to what we expect to be many millions of dollars, the income from which will take over a lot of the social service costs of their communities.

Again, as I said, it's a program that will empower Canadians to take care of themselves financially and also reduce demands on the federal government. We estimate the cost to the federal government as nil on this particular program.

The Chair: What would you like to see from us to assist you?

Mr. Fiske: What we need is a broadening of subsection 149.1(1) to enable private foundations to foster the growth of community foundations by allowing the donations made by private foundations to be included in their disbursement quota. Right now, a gift made by a private foundation to a community foundation has to flow through and be washed out in the year given. It cannot accumulate in the capital of the community foundation.

So what we're asking is that a gift by a private foundation to a community foundation be allowed to be treated as capital by the community foundation and be included in the disbursement quota of the private foundation.

Right now that's not possible under the present structure of the act. If that was allowed -

The Chair: Which act is that, Mr. Fiske?

Mr. Fiske: The Income Tax Act.

If that was allowed, it would encourage private foundations to pick up our program and foster further growth in community foundations throughout Canada.

The Chair: The idea being that we will accumulate a reserve of capital in perpetuity and the communities can use the income off it for purposes that they decide.

Mr. Fiske: Exactly.

The Chair: Thank you very much, Mr. Fiske.

Mr. Fiske: But I won't be allowed to -

The Chair: We think it's an interesting innovation in terms of what this committee has heard over the past two years and we're very glad you're with us to promote it.

Could I turn now to the members of Parliament. We have with us, from British Columbia,Mr. Grubel. Paul Crête, Pierre Brien and Nick Discepola are here from Quebec. From Manitoba we have three members of Parliament: Mr. Glen McKinnon, who is not a regular member of the finance committee; Mr. Ron Fewchuk, who is a regular member of the finance committee, and Mr. David Walker, a regular member plus parliamentary secretary to the Minister of Finance. We have BrentSt. Denis with us from Ontario.

[Translation]

Mr. Brien, please.

Mr. Brien (Témiscamingue): I have a very short question for Mr. Anderson.

You talked about an infrastructure program and I would like you to tell us what field you are considering. You alluded to technological development. How could we do this without causing distortions in the market, if this program were to apply to the private sector?

[English]

Mr. Anderson: Our proposal, Mr. Brien, is to look at the traditional forms of infrastructure investment, those related to roads, sewers and communications systems. We're not advocating investments at the margin in experimental new technology. We're looking at the hard-core basis of investment that creates jobs in the long run, which is transportation systems and communications systems.

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With the discretionary expenditure room that the federal government has, we think there isn't room to be investing in this kind of more forward-looking technology that your question implies. In that respect, these are not distorting investments. They're investments that promote growth in the long run.

While we recognize that they're expensive at the front end, they're certainly far preferable to short-term wage subsidies that simply maintain the status quo. I hope that answers the question.

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): I understand Mr. Grubel not wanting to link immediately B.C. to Alberta. Those may be ideas in the mind of Mr. Chrétien but they are not necessarily those of the people of British Columbia.

I have a question for Mr. Anderson. You stated that there should be some sort of common position between the federal government and the provinces on the deficit reduction objectives, and probably also on the matter of duplication and overlap.

You probably know that, in politics, this comes down to deciding how to do things. So, what could we do to lead governments into this kind of approach? This is not necessarily the model that has been developed during these past few years.

You mentioned the budget of 1995, and the table on duplication is the same as last year. There has not been a lot of improvement. As far as duplication is concerned, at the end of the table, I did not understand what was meant by seriousness levels one, two, three and four. This is very technical and I would like to understand.

[English]

Mr. Anderson: Mr. Kovacs, who designed the document, will answer the second question. In respect to the first question, there is in the country, I understand, some disincentive for premiers to meet on certain questions.

But I think on issues of deficit reduction and duplication of federal and provincial services there's a fairly strong consensus in the country that these are important issues that ought to be dealt with irrespective of everything else. The Prime Minister made an announcement yesterday on certain shifting of manpower training powers, federally and provincially. So I think there's an impetus there to look at making the system more efficient irrespective of other political questions. I also think that all premiers across the country recognize the need to deal with the debt and deficit questions.

For example, just last week I heard Premier Romanow talk about this kind of idea, which we had presented last year, to signal to the foreign markets, which are increasingly important to our welfare as Canadians, that we're serious about this problem and that we have a target that respects the kind of targets, for example, that the Europeans have developed under the Maastricht Treaty. I think that would create some further confidence.

I think the impetus is already there to do these things. A lot of provinces would respond positively to getting rid of duplication, harmonizing expenditures, and making a consistent signal about our debt plans federally and provincially.

Mr. Paul Kovacs (Vice-President, Policy Development, Insurance Bureau of Canada): I can answer the second question about the description of the report. This is an extract from a very large report prepared by the federal Treasury Board. Our objective today, as it was when we tabled this, is to identify specific programs to show that there are many and that there is a lot of money involved. I can make copies of the full report available.

The particular category identified, the overlap category, did indicate that there was some justification for the federal government and the provinces doing somewhat similar things. The category identified most frequently here, category 4, is, I believe, an indication that the people who receive benefits from these federal programs are people who also receive benefits from provincial programs that are somewhat similar. There is not a complete overlap. This is not to say the federal report says the federal government and the provincial governments are doing the same thing to the same people. But they are doing similar things to similar people and spending a lot of money doing it.

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The essence of the report - and that's why we're tabling it here and elsewhere - is there seems to be an opportunity to source this out and do it a little more efficiently, through either federal or provincial changes. But I'd be glad to make copies of the full report available. I don't have it with me today, but I could send a copy to you.

The Chair: Thank you. Merci, Mr. Crête.

Mr. Grubel.

Mr. Grubel (Capilano - Howe Sound): I'd like to express my appreciation to Mr. Beachell for being here to take the side and try to protect the interests of the most needy in our society. I believe this is a very worthwhile thing to do. I have never encountered anyone concerned with trying to get a system of finances under control who would say ``we should target those people''.

There was a model that said - when things were going really well - in order to make sure the disadvantaged in our society get enough, we should also give a lot of money to the middle and upper classes. That's why we have all these universal programs that say we don't care how much money you make, you are entitled to OAS, you are entitled to UIC, and all those programs. The idea was that as a result of this the masses of people would vote generous goodies for everyone and in the process we could help the poor. The best way to do this was from Ottawa.

Now two things have happened. One of them is that we're running out of money. Deficits are accumulating at the rate of $100 million a day. This is all falling on future generations in a most inequitable way.

The second thing is that a lot of people have found out their neighbours are getting money they surely don't need, and somehow we must save.

The response of many people who have thought about this was to take administration and responsibility for those programs away from the centre, because we can't afford them any more. In order to save the essence and have enough money for the really needy, we're going to give it to the provinces and from there down to municipalities, or even further, to community organizations.

The people who recommend this believe that the people in the provinces are as compassionate as those intellectual and moral leaders who set themselves up in Ottawa 25 or 30 years ago, and said this is the way we must go. But they have the advantage of being able to sort out whether or not people actually need it, to what extent they are pretending they need it, and all those kinds of things.

When I hear you hammering at the idea that the money will now be administered, at a slightly smaller level, provincially or locally, I get very upset. I ask myself what is wrong with the idea of the local communities being asked to sort out and make sure the money only goes to those who really need it. Why do we need Ottawa? What's your answer, Mr. Beachell?

Mr. Beachell: I think we can tell you what's wrong.

I'll give this one to Mr. Simpson, and then add a few comments, if I might.

Mr. Allan Simpson (Executive Director, Independent Living Resources Centre): In our analysis of social policy, there is no such thing as an assured compassionate community. There is only assurance through checks and balances. We need a federal linkage. We need a federal policy that is universal and ensures the rights of Canadians to have the fundamentals of survivorship, including clothing, shelter, etc.

There are many values in which we share resources, responsibilities, and responsibility with community groups. But underlying that must be the protection of the fundamental rights of liberty and the pursuit of happiness and freedom that we as disabled Canadians must find.

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I've worked in the insurance industry for 22 years. I've worked in private sectors. I've worked in an awful lot of community work. I've worked in little groups and I've worked in national groups. There is no assurance a local community group isn't as hard-hearted, as insensitive, as the other side of the coin. Another neighbourhood, another municipality, can be very compassionate.

We know when they took the Manitoba welfare system away from the municipalities there was terrible insensitivity to neighbours when people took other forms of prejudice against each other.

So our movement, the Council of Canadians, and its various organizations really believes we need federal leadership to ensure the fundamentals. Yes, work with the provinces. Yes, avoid duplication. As an actuary with an insurance background, I know the efficiencies of individual insurance companies, but I also know the duplication and waste of multiple claims departments, multiple sales forces, marketing departments - multiple everything. So we must ensure the private sector does an efficient job, but universal programs must be in place to ensure the efficiency...and I know from analysis the most inefficient government program is more efficient than duplication of multiple organizations, multiple regional departments.

What we're doing in this province, for example, Manitoba, is wasteful. We're now taking all the health programs and regionalizing them into ten regions - again, with your principle, down to community boards, local advisory committees - all with duplicating research departments, filing departments.

So I cannot agree with you everything should be turned over to local community groups. It doesn't work.

Mr. Grubel: But Mr. Simpson, you have a wonderful opportunity to throw out the past at the next election and fix it. There will be so much opportunity to discuss the local issues, rather than the national issues at the national level; issues about the outports of Newfoundland and downtown Toronto. I cannot understand the efficiency of the political process that says ``Why don't we go to the United Nations and have it all done from New York''?

Mr. Beachell: No.

Mr. Grubel: How come you talk to Ottawa, then?

Mr. Beachell: Checks and balances. What we have at the local level is what we call ``the rush to the bottom'', because no one community wants to offer service better than that of their community next door, because you have a migration. If Alberta were offering - and this is a big ``if'' - the best social services programs in Canada, do you think other people would not be moving there when they're the cuts in Ontario?

What we have without national standards is a rush to the bottom: minimum, basics, nothing above that. The local community is so fearful of their system becoming bankrupt from everybody moving in.

Mr. Grubel: The evidence is exactly the opposite.

Mr. Beachell: I don't believe it.

Mr. Grubel: British Columbia made its programs the most generous. The reason they introduced residency requirements is that they want to keep them so high. That's exactly what you want. It's not going down, down, down. It's going up.

Mr. Beachell: So you as an elected member of the Canadian government would not be concerned that somebody moving to B.C. would not be eligible for any support programs, even though we're Canadian citizens?

Mr. Grubel: As long as they move there in order to get that, then they shouldn't get the generous systems they want for their own citizens.

Mr. Beachell: We have no standards, then.

Mr. Simpson: We have to decide if we're a Canadian or we're not a Canadian.

Mr. Grubel: I don't think that follows. The British Columbians consider themselves to be Canadians. If you want to go to British Columbia and look for a job -

Mr. Beachell: I would hope British Columbians consider themselves to be Canadians. I would hope Quebeckers consider themselves to be Canadians. I thought we were building a nation, not ten separate solitudes.

Mr. Grubel: If a group of people in Manitoba decide their friends and neighbours, a collective to which they belong, where they might fall into the pit of misery and need help...they get together and they set a certain standard, and you, with your intellectual arrogance, moral arrogance, are saying the collectively made decision to provide such a program is inadequate; ``you should be told from Ottawa''. I'm asking a question.

Mr. Cerilli: Are you calling these people...moral arrogance? Are you accusing them of -

Mr. Grubel: I'm making -

Mr. Cerilli: I take exception to that, if that's the case.

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The Chair: Excuse me. Having listened to these witnesses I'm sure that they're more than capable of defending themselves and the forceful position they've put forward. Thanks for your help anyway, Mr. Cerilli, but I think we'll find they don't need it.

Mr. Grubel: I want to understand the moral foundation that makes individuals say that when a group of Canadians who are all members of that community - their neighbours, their friends, their kids, they themselves could become ill - set up a system of social assistance and say this is what they want. What is the moral justification for people who say they can't have that, that they must have one dictated for them from Ottawa?

Mr. Beachell: We have no objection to communities coming together and seeking positive solutions for their citizens. We'd encourage that. Our concern is those communities that do not have the resources, that may not have the leadership, that are economically depressed and that are unable to come together to support the collective.

I've worked in community development and I've gone into some communities that can organize wonderful, supportive systems overnight. I've gone into other communities that couldn't organize something in twenty years. They're depressed. They're deprived. The leadership base is not there. The economic base is not there.

The provincial government and the national government have to ensure that those communities that do have those economic disparities or leadership disparities, etc., are able to provide a base level of service and that's why we call for national standards. We do not oppose communities coming forward with innovative solutions. Many will. We applaud those solutions and we want them replicated across the country. What we want to ensure is the base level.

Mr. Simpson: May I just add a little bit to the comment?

In my work as the manager of the independent resource centre that's exactly what we do. It's self-help, people just released coming together to form transportation systems, housing systems, peer support groups for people with abuse, etc.

But my background in insurance tells me the country as a whole needs an attitude, a level of confidence. Confidence is the energy that gives everyone in the business world as well as everyone in the social field and the church world the energy to do things. When we call for a national issue, we mean that fibre and that soul, that principle that gives us the energy to be creative, to be constructive, contributing, building members of society.

Yes, you're absolutely right. We do it in many community groups. We do it in provincial groups and we do it in national groups. Those networks must work together, but confidence comes from my belief in the country, my belief in the security, my belief in the social network that says I won't starve tomorrow. Those principles must be assured at a federal level.

I'm sure the business community.... That's where we need those same levels of assurance and why the president of this committee and the federal leadership in finance set the tone for the entire country. Unfortunately it's no longer policies in the country, but the financial policy of the country that runs the thing.

It surprised me when Mr. Chrétien announced yesterday that the feds will withdraw from national training. It very much depressed me, more psychologically than economically. The federal government withdrawing from job training is crucial beyond job training. It's into the soul of what Canadians are entitled to in terms of economic growth, development and skills training.

That does say it. All the work we've done in this last two years.... It really shocks me, but I'm willing to analyse the other aspects and talk to our member from Alberta here privately to show him what the independent living centres do on a community basis too.

Thank you.

Mr. Grubel: Mr. Chairman, I just wanted to say thank you to these gentlemen who have had such front-line experience with this kind of work. I'm learning. That's why I'm travelling with this committee. Thank you very much, gentlemen.

The Chair: Thanks, Mr. Grubel.

I'll turn now to the member of Parliament from Selkirk, Mr. Ron Fewchuk.

Mr. Fewchuk (Selkirk - Red River): Good morning, ladies and gentlemen. For those of you from Ontario and other parts of Canada, welcome to Manitoba.

Mr. Fiske, you mentioned that you'd like subsection 149.1(1) of the act changed. Could you elaborate on that? Would that cost the federal government any exchange of funds or tax credit points or anything?

Mr. Fiske: Not at all. All we're asking is that the funds, which are presently disbursed by a private foundation, be allowed to be disbursed to a community foundation to be held by that community foundation as capital. Presently, they can't.

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Presently they can't. Therefore, if we have a private foundation that wishes to establish a community foundation, they presently can't because those funds are not included in the disbursement quota of the private foundation. Private foundations have an annual disbursement quota, which they must meet under the provisions of the Income Tax Act. They can't conduct a program of growth of community foundations as the act is presently structured.

The Thomas Sill Foundation had a disbursement quota excess of $1 million. That's what enabled us to go ahead with our program of establishing ten community foundations. That $1 million is now used up and we won't have another disbursement excess. With interest rates the way they are today, and everything else, there just isn't room in our budget to create an excess disbursement quota.

If section 149 was restructured to allow private foundations to include donations and transfers to community foundations within their disbursement quota, then the program could carry on and could flourish across Canada.

What we're talking about is establishing a community foundation. You can look at a community foundation as being a bond or debenture or debt in reverse. We're all used to the government's issuing bonds and paying interest annually, year after year after year. Today it represents, I believe, between 30% and 33% of the government expenditures in all. If we can reverse that process through the compounding, the accumulation of savings of Canadians, then we'll have a bond in reverse, whereby the interest on that pot of money created in every community will be there to spend for years to come.

A trillion dollars is going to pass from the baby boomer generation to the next generation. If we structure community foundations throughout this country, then a goodly part of that wealth that's being transferred will go into community foundations that will help a community to look after its needs by itself.

Jack Pickersgill wrote in his memoirs that Canadians today would be amazed at how little the federal government provided by way of services in the 1930s. Pickersgill, who grew up in rural Manitoba, noted that Canadians then took care of their personal and community needs from their own local resources. Communities have been looking too much at our governments to take care of their needs. What we want is to reverse the process so that Canadians and people in ordinary communities will take pride in their community and be able to help themselves.

The Chair: Mr. McKinnon.

Mr. McKinnon (Brandon - Souris): I have appreciated the comments as we're going around the table.

I picked up on a reference to several items. One would be the fact that we seem to be having in the world, as well as here in Canada, job shedding; secondly, competing interests for scarce dollars, an attempt to have full employment through a growing economy.

I'm interested in Mr. Rice's document and whether or not he feels that, through certain initiatives of the federal government, we can take the thrust of the real estate folks and the chambers of commerce and harvest that energy in such a fashion that we can in fact meet national objectives, through my quick reading of this proposal.

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I'd like you to expand briefly on how we could attempt to take these competing interests to make a program whereby we can in fact have a growth factor in our economy, based on some of the things I see in your document, Mr. Rice.

Mr. Rice: Thank you, Mr. McKinnon.

I'd like to back up for a minute because I'm unfamiliar with this type of forum. Like Mr. Fiske, I was not aware of what you may have been looking for in your opening comments.

My paper covers several areas. I think I'm here first of all as a Canadian, as a person who's worked in the financial industry for some thirty years, not on the institutional side but in working with average Canadians with small businesses, in helping them plan for business and growth development, and in helping them to save money to be self-sufficient in retirement, as well as in helping those Canadians through their retirement years and planning for that today.

I witnessed and lived through the change that was brought about by Mr. Benson in complete tax reform some 25 years ago next year. The principles on which that was founded, I believe, are still the underlying roots of our present tax system. There has been a lot of tinkering with some of those issues over the last 25 years. Situations come up where loopholes were brought to forces that avoided taxation and that helped people keep from paying tax.

I'm not a proponent of people avoiding taxes. I believe there were intentions and purposes put into that original taxation document that have been changed and altered, perhaps compounding some of our problems and affecting growth within this country. Compounded on the fact of high inflation was the fact that the country set out on a path of deficit financing to create jobs back in the 1970s. That was worldwide thinking at that time, and we were not aware of what the cost of deficits and inflation were going to be in the end result. The interest rates and the compounding of those high interest rates that were unpredictable at the time have created a lot of the deficit costs today.

So I would like to reverse and take a look at three or four areas that have either been changed, tinkered with, or left alone. I believe there are revenues that the federal government has left in the hands of Canadians, and it has assisted Canadians in providing for their future. This should be perhaps brought to the floor and examined.

The Chair: I'd like you to bring those forward. Could you just tell us very quickly what they are?

Mr. Rice: One is our pension system today. The federal government, in RRSPs and pensions, has taken the correct course in helping us out. It has acknowledged that we're going to need income in our pensions and is going to provide future income down the road. When our demographics change from three people working for each retired person to one person in the year 2020, there will be income coming from those sources on an ongoing basis, along with the longevity of people.

Perhaps we could move things forward by allowing a prepayment to exist on the pension proceeds that have accumulated to date. We have $603 million in pensions in Canada. I've not heard that used in talks on our balance sheet or in talking about our deficit. That's income for the future; it's going to solve a lot of income problems in the future. That's where it was in 1993, and it's higher than that today.

If it could be framed or presented in a way in which Canadians could be given the opportunity to prepay federal and provincial taxes - provinces have deficits, too, and they would have to lend money to Canadians to be withdrawn down the road, along with the compounding interest - at a level roughly somewhere between 20% and 25% of RRSPs and private sector pension plans, that could possibly be created.

In my paper I make reference to demographics, to reasons, and to the amount of money that could be accumulated. In that example alone, if 25% of Canadians elected to do this, and were allowed to do it on a one-time basis - and I've talked to a lot of Canadians about the idea of taking the opportunity to prepay their taxes - that would create $50 million. If that money was applied directly to the deficit with no government spending, allowing it to sit in a prepaid account with the continuation of accumulated interest and with other contributions to be encouraged down the road, we'd be able to take that $50 million and apply it to our deficit today. What would that mean in interest cost reductions? What would that mean in future costs? I've given some samples of that in my paper.

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The Chair: Thank you.

Just so I understand this, any person who has accumulated an equity in a pension could prepay the income taxes that would otherwise be payable when those funds are withdrawn after retirement.

Mr. Rice: Yes, and it would sit in a prepaid account and interest would continue to be deferred, etc. It would be a one-time windfall by which we could extract government money on deferred income that is in our system today. Those that would be affected include institutions and people like myself who have this to worry about -

The Chair: I'm just trying to understand your concept. The concept is that if I have built up a $100,000 equity in a pension, I could prepay the taxes that might otherwise be payable when I withdraw those funds during retirement?

Mr. Rice: At a reduced rate today, yes.

The Chair: Okay. That's very interesting.

Mr. Rice: As I say, it would be roughly 25%, which is roughly what foreign tax is on that money if you leave the country. There are many people trying to find devious ways -

The Chair: I know, I'm not arguing with you. It's a very interesting concept and I'm sure the insurance industry might have some views on it as well.

I'm sorry, Mr. McKinnon.

Mr. Rice: My paper covers off a lot of ramifications, which is why I'm concerned about the time to cover the issues that are there.

The other one is that -

The Chair: I'm sorry, Mr. McKinnon, did you want to...?

Mr. Rice: But there are three other issues that I think are relevant.

Mr. McKinnon: I would allow the speaker to continue, Mr. Chairman.

Mr. Rice: With regard to prepayment, there are an awful lot of deferred capital gains within our system that were artificially created over and above the original intent through inflation. Today, we're finding devious ways being used. Tax planners are using offshore trusts and are getting assets out of Canada, so we don't capitalize on them in Canada. We'd be giving a one-time frame again to prepay those taxes, to bring them back into our system, and to set up a new adjusted tax base to move forward on.

There are revenues that can be taxed in our system if we address them and make it attractive enough for Canadians to flush them out.

The other one is government paper. One of the things we tinkered with back in the early 1980s was to remove two elements of Canada savings bonds and investment instruments that were outside of registered jurisdictions - RRSP plans or pensions plans - and that allowed Canadians to invest and to save and allowed the interest to continue to be deferred and to be taxed on the way out. All interest that's earned today must be reported in the year it's earned, unless there are devious ways found again. If those were reintroduced or thought about and looked at, particularly encouraging the federal government to move on their government paper, being one year as shorter paper in Canada savings bonds and getting into an investment that was five or ten years out for long-term savings in yields that are going to be consistent over the next decade, with low inflation and lower interest rates.... The long-term rates are going to be higher than short-term rates. We can move back to getting Canadians and institutions encouraged to buy the longer-term paper on an interest-sheltered basis that is not back-taxable as it's earned.

Put some encouragement back into the system by allowing Canadians to buy government papers instead of finding other instruments to buy that are supported by government paper.

As well, look at the delivery system of government investments through means other than investment houses and banks, which are all one and the same today. In the last twenty years we've had a large increase in qualified individuals. More people are registered to sell investments on the security side. The government should allow those people to sell the papers directly instead of having them as sub-agents of investment dealers, etc., who are stripping those papers down and are making profits to their own end.

The government has taken the correct initiative by looking at smaller denominations in order to make them more attractive to the average Canadian, but they need to go one step further. They need to look at the delivery system and how it is distributed, instead of setting up their delivery system. They could do it on a cost-plus basis. My paper covers that and the reasoning behind it.

What are the other areas that were talked about around here that would create jobs? The small business tax level, which was given to small businesses - the power that has driven this country's economy for the last ten years - principally to allow and encourage for them a preferred tax rate on profits, would allow them to reinvest that capital back into the system in job creations, etc.

The Chair: Mr. Rice, I have to interrupt. As I understand it, your recommendation here increases the limit from $200,000 to $500,000 for small business deductions.

Mr. Rice: It's not that simple.

The Chair: Okay.

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Mr. Rice: If we look at the history, that $200,000 has shrunk by virtue of a lot of other means. I covered that in my paper.

I propose that rather than increasing that across the board and leaving it open to companies that are just going to take the profits out and not reinvest them back into job creation, we open up a tax credit between $200,000 and $500,000 to be given back to companies that have spent money in five different sectors at the end of the year, supported by their auditors. This is the same way that tax credit for scientific research is done and supported. So it's given back after the money is spent, instead of in speculation of the money being spent.

My paper comes up with a reasonable logic for that as well. I think that through that it would be an encouragement. The points that are covered in there are job creation, training and career development, expanding growth of business income, replacement of capital equipment, and expansion of physical space and location. Those five checkpoints would deserve some sort of credit back, but it would be done after the money was spent at the end of the corporate year.

The other area we're all going to be faced with down the road is government cutbacks on health care and medical costs. This gives me great concern, as it does all Canadians.

In the United States and Japan, the private sector contracts it. People can buy, and are encouraged to buy, indemnity policies that will provide for private sector funding. They will provide a payment in the event of the person having cancer care, disability care, etc., as well as long-term care in a nursing home or home care at the rate of anywhere from $50 indemnity to $200 a day, depending on the type of coverage the individual purchased.

My paper is suggesting that those payments to such a plan are no different from what the government established as the baby boomers were moving through retirement, with RRSPs, pensions and education savings plans. They open another section up to encourage the deductibility or tax credits for premiums going to private plans that will reimburse Canadians so they can look after their own means in long-term care, etc. My paper covers that as well.

Those are four proactive situations.

The Chair: Thank you, Mr. Rice. You've tweaked our imagination in many areas and I commend you for your resourcefulness. I think we have to take a very serious look at each one of those proposals.

Thank you very much, Glen McKinnon.

I turn now to Mr. Walker, member of Parliament for Winnipeg North Centre and parliamentary secretary to the Minister of Finance.

Mr. Walker (Winnipeg North Centre): Mr. Chairman, I just want to go back to Mr. Rice's comments.

We've tried to take some initiatives on the retail debt strategy by setting up a new operation in Toronto, because we see the same problem as you do in terms of getting directly to the investment community, not through banks or through other institutions. We're looking for ideas on different instruments.

We have just started. I don't think an executive director has been appointed yet. We didn't do it for this fall campaign of Canada savings bonds, but we hope that by next year we'll be operational. We hope to deal directly with people like yourselves and other independents around the country on the distribution of these instruments.

Mr. Rice: Well, hopefully you'll do it through a new distribution share on a cost-plus basis by paying a commissioner fee as the products are being sold, instead of trying to set up another government arm that's going to compete with free enterprise out there.

If you can do this on a cost-plus basis, I agree with everything that's been proposed and the suggestions that have been put forward, except for the delivery. I think there are other cost-effective ways that the delivery can be done rather than freezing government jobs.

Mr. Walker: We don't see it as being a national delivery system.

Mr. Rice: The report I saw had some reference that the government was going to set up their own delivery system and compete, and people could buy directly from the government. It was even purported for the CSBs this year. I disagree, and I think the government is making a mistake in doing that.

The Chair: Thank you, Mr. Walker.

Mr. Discepola.

Mr. Discepola (Vaudreuil): Thanks, Mr. Chair. I have a question for Mr. Cerilli.

You mentioned that reducing the work week or some form of work sharing would help stimulate the economy. I've had several discussions with a professor in my riding, who seems to arrive at the same conclusions as you do. Unfortunately, he doesn't have any studies either.

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Maybe it's only our home province of Quebec, but I look at the labour movement in Quebec and how its silence was, in my opinion, bought to the tune of $800 million to $900 million to the provincial treasury in the upcoming budget, and at the police force in Quebec, for example, demanding 11% increases. Is there really an opening on the part of the labour movement to show flexibility in allowing employers more flexibility in manpower scheduling?

Is there an opening in the labour movement to open up labour contracts that exist, or is it just that the labour movement wants a reduced work week for the same pay?

Mr. Cerilli: That's a long question, and you're not going to get a short answer and all of the details that you want.

The Chair: That serves him right.

Mr. Cerilli: One of the things you have to look at is not job sharing. That's something different. The shorter work week is not a new phenomenon. People around the table have mentioned the experience in Germany, or Europe, because of the economic situation over there and the harmonization of governments in certain areas.

Taking the debate in Germany right now, a lot of papers are around. There are certainly papers at the University of Manitoba regarding labour studies over there that look at the shorter work week and the impact of employment opportunities for people. We went through that in the 1950s, just after the war. We had a deficit, probably as high as it is right now. Looking at full employment and reducing the work week from 48 hours per week to 40 hours a week with the same take-home pay created a number of jobs in a lot of industries.

You have to look at what's happening in automation, the trends of automation and how they have impacted on the labour force.

I have been working since I was 14. After the war I came over from Italy. Mine was the last boat out, by the way. We left those countries because of their politics. So we came to have a democracy.

As a result of that, the railways, for example, went through an extreme amount of rationalization and reduced from 130,000 employees in the 1950s to the present 26,000. We did that in a manner that retrained people to handle the jobs for automation.

In order to be successful in any shortening of the work week, you have to introduce a retraining program that is meaningful. You simply can't take all of the jobs out of the economy and not create new ones. We're just running fast to keep up, but the unemployed seem to be leading the pack in terms of loss of jobs.

Canada has its own problems.

The job crisis is not just Canada's problem. It's a world problem. The G-7 countries that I put in my paper.... It will be for the record for whoever wants to read it. I've written other papers on the subject. There are 800 million people in the world today who are underemployed or out of work or homeless. So we're establishing an army across this world that is not going to sit still. So we have to take a look at what we can do about a shorter work week.

The business community has plans in regard to providing all kinds of things. There might be subscriptions for returning to medicare coverage for premiums for the private sector. We went through that. We went through another system, which right now covers everybody on a universal basis. We have national standards.

I'm trying to jump in with all of these things in answering your question in the time we have.

The debate should be around whether there is a possibility, not only in Canada but in the rest of the world, of dealing with the job crisis.

One of the areas is a shorter work week. Whether it be 24 hours or 32 hours to start with, the fact of the matter is that it has been done before. The European Community has studies going on right now on the shorter work week.

As a result of that, I think the G-7 countries have missed the boat in dealing with the job crisis.

As we compound the problem, various things are going to happen.

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In my paper -

Mr. Discepola: I don't see how we'll stimulate the economy without putting an extra burden on small businesses in particular.

Mr. Cerilli: I think some of the small businesses have done that.

If you read my papers, there are a number of questions. There are just five that I put out there. One of them is how the federal government is going to deal with the concerns of the million and a half Canadian children living in poverty. We can't stand for that.

How will the federal government tax the corporations? I'm not talking about small business. I think the suggestion for the small business person with regard to tax credits to stimulate the economy for job creation might be something that fits into the pattern.

How will the federal government define, for example, poverty for Canadian seniors? We've heard about the taxation part of pensions that have already been paid. If you take the money now, what are you going to have later with regard to taxation when the retirees go into retirement?

Consider the other area we asked about. How will the federal government define and explain to Canadians the jobless recovery?

This is the last of my three questions. How will the federal government tax Canadian corporations with the offshore back accounts, and so on?

All I'm trying to say is that the shorter work week will stimulate the economy by bringing people back to work. It'll do a number of things. It'll put the unemployed back to work. Retraining will have a meaning with regard to jobs to which they will be able to go back. The reduced work week will alleviate some concerns about day care, and so on. There are a number of other areas, as well, with which the debate on the job crisis will deal. A lot of experts will come out with regard to dealing with that.

Mr. Discepola: Is the labour movement prepared to -

Mr. Cerilli: Have you asked them? The only time that I could recall the labour movement.... I was young enough, in fact, to be around when the labour movement was asked during the war....

Order in Council PC1003 was put out to deal with the elimination of strike action during the collective agreements. It was replaced with arbitration. The labour movement came along and said yes at that time.

However, everything has to be put on the table for labour. I'm retired. The labour leaders of the young generation are looking at everything concerning the whole country, not just themselves. They've always done that.

I think if you ask the labour movement, providing that everybody's up front, with their full cards on the table, you might be pleasantly surprised. But you'll have to ask them.

Mr. Discepola: No comment, Mr. Chairman.

The Chair: Thanks, Mr. Discepola.

Mr. St. Denis, please.

Mr. St. Denis (Algoma): Thank you, Mr. Chairman. Thank you for the welcome to Winnipeg. My riding is in northern Ontario. I've been here a number of times. I always appreciate coming back.

I'd just like to change the direction of the discussion for a few moments as we get close to winding up.

We've heard from different witnesses at numerous stops about the subject of national standards versus provincial or local responsibilities. I believe that question came up in some of the responses that Mr. Beachell and Mr. Simpson brought up. They were quite eloquent, I might add.

Many people equate the devolution of federal responsibility to the provinces as automatic progress. I think the best description of the situation should be that responsibilities should be devolved from the federal to the provincial level when it makes sense and when it works in the best interests of all Canadians.

I wonder if a few of you would respond to this question: when the federal government gives away powers, should it in some way or another maintain some degree of responsibility by holding back the power to maintain national standards?

For example, take education. Mr. Simpson referred to the Prime Minister's announcement that we would be giving responsibility for manpower training to the provinces. Should there be, with that devolution, the gaining of some kind of national responsibility for education?

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I used education as an example. Are there other areas in which it's important for the federal government to maintain standards while devolving the administrative responsibility to the provinces?

Mr. Beachell: In the move to the Canada health and social transfer, which is the block funding of provincial governments for health, education and social service, there is no attachment of national standards, other than a non-residency requirement.

That is of grave concern to us for three reasons.

First, the federal government will have no mechanism for tracking how those dollars are spent. The federal government will not know how those dollars are being spent in the provinces. The only guaranteed standards are the standards of the Canada Health Act for health. You have a mechanism to withhold funding if the standards of the Canada Health Act are breached.

But you have also set up competition among the funds, by reducing funding and with a block fund to fund three central services to Canadians. There will be competition now between education and health, and health and social assistance. Our fear is that with the reduced fund you have established, social assistance will be the one that's going to take the dive.

Social assistance and social services are going to be squeezed. Those Canadians who are wishing to get into the labour market are going to find that those supports are not in place. As health care and education costs rise, with the public support for those two programs, and with what I would call sort of a mean attitude out there these days, I think disadvantaged groups are going to suffer.

We suggest that the federal government should establish a social audit process to determine how federal funds are spent. There should be a report back so that we know.... Under the present system, a provincial government can take all the money and spend it on roads and sewers if it chose to. Yet, the federal government would not have protected the health and social security of any Canadian by doing that.

The Chair: Thank you.

Do you have a brief comment on that, Mr. Anderson?

I know Mr. Finkel has not had an opportunity to outline some of the details. I will give each of you an opportunity, and not only to sum up. Those of you who have not had a chance to expand on your presentation and who respected our opening three minutes, such as Mr. Finkel, will have an opportunity.

You have a brief question, Mr. Grubel?

Mr. Grubel: Just a brief reality check for Mr. Cerilli. Europe has created no jobs in the last five years. The unemployment rate in Germany is 8%. Canada has created 800,000 new jobs in the private sector. I don't call that a jobless recovery. The net creation has been 700,000, because government set 100,000.

Thank you very much.

The Chair: Thank you, Mr. Grubel.

Mr. Finkel, you've been very patient.

Mr. Finkel: Thank you, Mr. Chairman.

My comments actually are in part a response to Mr. St. Denis's questions related to devolution. I am going to speak a bit not only on the education side but on the jobs and growth side of the equation. I'm going to deal perhaps with the issue of job training, which is an issue right now, labour market adjustments, as well as immigration control, because those are areas that appear to be fairly hot topics, certainly within Manitoba.

In some respects, a story is as good as a statement. I'll give a bit of a story, because we've had direct experience and have formed our opinions on the basis of that experience.

In Manitoba our apparel industry has had some more reported problems recently about the skilled labour shortage. In fact, our industry requires about 1,700 skilled workers right now. These are mostly sewing machine operators. In the absence of those people, our manufacturers are currently left with no option but to contract out their production elsewhere because they obviously must meet their customers' needs.

Unfortunately, every order we complete outside of Manitoba and Canada is a lost opportunity for Manitoba and Canada. We believe that the best form of wealth creation is job creation.

Yet, against our backdrop of 1,700 available jobs, we are struggling with 41,000 in Manitoba who are on unemployment insurance and 27,000 on social assistance. Until recently, we were unable to fill 20 spots in our training centre.

There's been much said recently about the disincentives within our current social safety net. I know our industry is looking forward with considerable interest and support for the changes in the unemployment insurance program that Lloyd Axworthy is expected to announce this week. We know this program has the opportunity to have an impact.

In Manitoba recently our training centre has become involved in the creative program with the Province of Manitoba, which will offer work incentives to social assistance recipients who successfully complete their training and actually take jobs. We believe it is in our interests and in the interests of the Canadian government to support any and all efforts that maintain a productive mode.

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This also leads to this issue of where we sit in terms of devolution. In many respects the situation would have been rectified in a different way had we had an immigration agreement between the province of Manitoba and the Government of Canada similar to that currently in place in the province of Quebec.

To our minds, labour market issues ultimately must be dealt with where people live and where they work. What works or what is needed in one city or province will not work elsewhere. There's no such thing as a so-called national labour market average statistic that can be translated meaningfully into a particular community in this geographically and economically diverse country...as ours is.

We know job occupations in the apparel industry are not considered a national priority. If we look around, we see that Toronto and Montreal in fact have surpluses of sewing machine operators. We don't. We have advertised in both cities and they're not moving here.

We have ten provinces plus our territories, each seeking to develop economic development strategies unique to their regions. It makes sense to do so. Economic development strategy, though, is useless without the tools to develop a unique regional labour pool.

We have lived this uphill battle for the last two years. To our mind it brings us to only one conclusion. We strongly encourage massive devolution of immigration control via significant changes to divisional nominee classes or by federal-provincial agreements, as well as increased provincial input into employment training programs. Economic stimulus requires a deft touch, bringing it as close as you can to those who can help.

Those are my comments on the issue of devolution.

The Chair: This has evolved into a fascinating discussion.

Mr. Anderson.

Mr. Anderson: Thank you, Mr. Chairman.

For many years, when I was a federal public servant, I was in the trenches on this issue, so I know a little about this on a day-to-day basis. After many years I concluded that the only thing we can say about Canada is it's a rather improbable country. If you look at the correspondence of Laurier and Macdonald, you'll see they despair of the country surviving yet another year; yet here we are.

One of the reasons we are here in the post-war era is that we have national standards that bind the country together and give us an identify that goes beyond straight economic and efficiency questions. I for one would argue they are extremely important to have. They do represent the soul and texture of what we are as Canadians. Perhaps we don't need a federal government, nor can we afford a federal government, that is as intrusive and pervasive as it has been. That's a practical matter. More efficient delivery of programs can be made at a local level. That's a practical matter.

But we're also making a statement about a nation here. Before we rush to hand over powers and opportunities to other levels of government we have to ask ourselves, does this standard really constitute something that's fundamental to our identity as a nation? Does this standard represent social progress for people? Does this standard make us competitive as a nation in the world of nations? We have to ask those questions.

I'm not sure the debate I hear in Canada gets down to that question. It seems to be a trade-off, a vulgar haggling over power-sharing among jurisdictions. There are higher aims for a nation. Those higher aims are expressed in its national standards.

That's what I conclude from my experience over the years.

The Chair: Thanks, Mr. Anderson.

We come to the moment now when I would ask each of you if you wish the opportunity to summarize your position. You have thirty seconds each.

Would you like to start, Mr. Fiske? Or perhaps I short-changed you. If you would like to take a little longer to explain your program, we'd be happy to hear it before we go to summaries.

Mr. Fiske: Thank you, Mr. Chairman.

We're very pleased to have the opportunity to make this presentation. We believe it contains an idea that is simple and unique. It is unlikely your committee will hear another presentation that offers the opportunity to empower Canadians to take care of themselves financially while reducing demands on the federal treasury.

By way of background, the Thomas Sill Foundation is the largest private foundation in Manitoba. Outside of Winnipeg, it is the largest non-government funder in the province. The foundation holds assets of approximately $27 million and makes grants of close to $1 million annually.

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Since its establishment in 1987, the Thomas Sill Foundation has been privileged to work alongside hundreds of charities, corporations, and government agencies that share goals in the delivery of humanistic services. We have seen how enthusiastically foundation philanthropy has been embraced, particularly in rural and northern Manitoba.

Our success, however, has caused us to realize that we cannot continue to fulfil growing expectations from our constituency. The Thomas Sill Foundation is a private foundation and as such expects no further significant additions to its capital. In this regard, we share a similar dilemma with government treasuries. Our income cannot, over the long term, continue to serve our constituents to the degree that they have experienced.

Furthermore, we believe that philanthropic opportunities will be missed as a function of inadequate funding. To address these problems, the Thomas Sill Foundation embarked on a project in 1993 that had as its goal the establishment of ten community foundations in rural and northern Manitoba. We set aside a budget of $1 million to be shared equally by ten communities.

In order to earn its $100,000 share, a new community foundation has to raise $200,000 locally within four years. The first community to accept our challenge was Morden in 1993. Since then, the communities of Altona, Portage la Prairie, Neepawa, Flin Flon, Thompson, Winkler, the Interlake region, the southwest region and Selkirk have created strong community groups dedicated to the success of their local community foundation.

The Chair: I wonder how much longer you will be. If you like, you can read this into the record and we could make it part of the official record. It's up to you, Mr. Fiske.

Mr. Fiske: I'll be less than five minutes, Mr. Chairman.

The Chair: My feeling is that it would be very valuable for us if we can have a copy and put it in the record. All of us are familiar with the concept. You have now made us aware of the efforts that you have made on behalf of developing these community groups and what you expect out of us. Is there anything else that you want us to be aware of?

Mr. Fiske: I did make reference to a disbursement quota, and I'm wondering if you're aware of what I meant by that.

The Chair: We are. To have the status under the Income Tax Act you must not retain all of your income; you must disburse a certain percentage of it every year. You want an eligible disbursement to be a capital contribution to a community fund.

Mr. Fiske: Exactly.

The Chair: That means the communities will be able to build up capital funds and look after their own needs, and you and your very generous foundation are prepared to fund communities that do that and have been doing it successfully.

Mr. Fiske: We have been doing it. We want to continue to do it. However, we need assistance through a change in the act.

The Chair: Thanks, Mr. Fiske.

Would you like to start, Mr. Anderson, a brief summary.

Mr. Anderson: Mr. Chairman, I think we've said what we came here to say, and I thank you for the opportunity. I pass to somebody who feels they didn't get their chance.

The Chair: Thanks, Mr. Anderson. Mr. Finkel.

Mr. Finkel: I'm probably in a similar position. I'd like to think that the government of the day has good political capital that it can expend wisely in terms of moving its deficit reduction targets down decisively, yet not precipitously. There is a related issue of offloading, to make sure that any programs that are devolved are done so with some sense of strategic partnership rather than simply removal. Ultimately, the consumers, the businesses, at the end of the day are the ones who will pick up the tab either way. Thank you.

The Chair: Thanks, Mr. Finkel. Mr. Rice.

Mr. Rice: Thank you, Mr. Chairman. I'd like to say in closing that I encourage the government to take a look at the four proposals I've put forward. It will create income. It creates jobs. We won't have to look out the rearview mirror of the tax vehicle we're travelling down. Let's start looking out the windshield and seeing where we want to go and using what we have inside the vehicle today. Thank you.

The Chair: Thanks, Mr. Rice. Mr. Simpson.

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Mr. Simpson: In this country we have made great strides in demonstrating around the world the advantage of Canadian civil rights, human rights and contributions to the economy. People with disabilities are now into major efforts to develop self-help services, businesses, employment and training. With modern technology, modern medicine, modern education, people with disabilities no longer need to be disadvantaged or disabled. I work at least seven days a week. I don't know where the four-day week is going to come from.

The Chair: We would like you to just take three days off, if you wouldn't mind, Mr. Simpson.

Mr. Simpson: I appreciate that. My wife does, too.

The capacity of disabled people to give back to society is tremendous. We have many international relations, and the role of Canadians in demonstrating what every citizen can do is so crucial. We do not want to go back to the American model of civil litigation, such as in the case of the young man in Calgary who was denied the lung transplant because he had Down's syndrome. We don't want to go back to story after story of people being denied opportunities because.... We talked about the deficit and economic debt. We are prepared to share our responsibilities and the aspects of budget control, but it must be done in a fair, equitable and stimulating way.

When Mr. Chrétien came in as Prime Minister, there was a degree of hope, confidence, and that's what we must rebuild. Right now, we are so intent on navel-gazing around deficit issues and national unity issues that we've lost the concept of people sharing and working together as Canadians. I think we have a lot to work together with.

Thank you.

The Chair: Thank you, Mr. Simpson.

Mr. Brazzell.

Mr. Brazzell: The focus of the chamber is to encourage a rapid reduction of the deficit. The thinking is that this will free up capital, result in the reduction of interest rates, restore confidence for foreign and domestic investors, increase investment and result in more jobs for Canadians. There are other concerns, including the elimination of the duplication of services and harmonization of services. This doesn't necessarily mean decentralization, but certainly will result in considerable savings.

There also was a suggestion today that Canada was something less of a country before the vast expansion of government expenditure and government services. In fact, I believe that it's exactly this expansion that is now threatening the country. Canada prides itself on the principles of fairness and equity in the delivery of government services. The chamber is in full agreement with these principles. We are, however, operating in a global economy, and the government's ability to provide services will be severely compromised unless Canadian businesses can remain competitive.

Thank you.

The Chair: Thank you, Mr. Brazzell.

Mr. Cerilli.

Mr. Cerilli: Thank you for this opportunity to wind up.

This is certainly a first step towards a new generation of leaders and workers in this country, and I'm glad that our generation is now finally handling the situation, as we should, to look for ways and means of strengthening the strengths of this country as a whole, and not simply to dismantle our present standards for the accommodation of a few.

Students, young people, looking for work and a place of leadership in this country must feel comfortable in regard to what we're leaving behind, as our generation steps aside. In my 45 years as an active worker and leader in the community, either in a union or the leadership of a community as a whole, we've always looked at different ways of accommodation of the whole, not just simply a few. Our brief highlights a number of areas in regard to questions to the government on taxation, as well as areas of what we should be looking at and making sure our standards cover social security, the medicare question, the shorter work week, the Drug Patent Act, transportation, as I mentioned, and even the Canada Elections Act. I think we have to take a look at the whole gamut as a Canada-made product, not simply somebody else's.

The Chair: Thanks, Mr. Cerilli.

Mr. Madder.

Mr. Madder: I think, in just wrapping up, I'll say a few things, and then Derek will speak.

I want to stress the very important part that the real estate industry can play in the economic growth of the country. With that in mind, our association nationally has come up with programs in the past, most notably the homebuyers' plan, which allowed access to RRSPs for first-time homebuyers, It was a very successful plan, showing over $3 billion of investment in real estate. Also, it was at little or no cost to the government, which we found very important.

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We have come up with two others this year that we suggest would be at no cost to the government and would help increase the confidence of Canadians to invest in real estate. First is the small change to the Interest Act and the second one is the home investment program. Derek will wrap up on that, but I want to say it's important that we let the industry grow on its own, and we have to give it the opportunity to do so without extra cost to the government.

The Chair: Thanks, Mr. Madder.

Lastly, Mr. Thorvaldson.

Mr. Thorvaldson: Thank you.

The whole investment program is a tremendous opportunity. It relieves government subsidies that are currently being spent and replaces them with private sector funds. It targets the lower-income Canadians and allows them to decrease their dependency on social assistance.

It's a job creation for small business. We believe it has the opportunity to create about 5,000 jobs nationally, build about 2,000 homes annually and save the government about $150 million. So it's a proposal that we think has a lot of merit, and we'd be interested in discussing it.

To sort of piggyback a bit on Mr. Fiske's program, we had originally looked at this in Manitoba, using foundation funds to set up something like this. The immigrant investor program came along. We think that's an opportunity to get the funds and then use this money to save the government money in the long run.

We believe these opportunities are what you should be looking at, and we thank you for the opportunity to express them.

The Chair: Thanks, Mr. Thorvaldson.

We've had a lot of hearings, but this morning we've probably heard more innovative ideas to deal with our deficit and debt crisis and to get Canada working again than we have heard in a long time. Let me briefly go through them.

To the real estate industry, which is a great creator of jobs, I believe your two programs deserve a lot of consideration: the Interest Act changes and the home investment program.

Mr. Cerilli, you've given us some ideas, including a shorter work week, which certainly some of the members of Parliament would welcome, but we don't think we're going to get.

Some hon. members: Oh, oh!

Mr. Cerilli: Canadians think you're all overpaid. I don't think so.

The Chair: If we cut our work week to four days, we'd certainly expect to cut our salaries and incomes by four-sevenths.

Mr. Finkel has given us an example of an industry that needs workers. We must, as governments at all levels, respond to the challenge he's given us to find ways to train Canadians who are not working but could find these jobs very productive in a growing industry. We compliment him on that. So all is not lost, even though we have a high level of unemployment and underemployment in Canada today.

The insurance industry has provided us with a very comprehensive brief. They've responded in a responsible way by giving us specific areas where we can cut spending. They are prepared to stick their necks out and support those in great detail. This is of great use to us.

I also again wish to commend them for not just staying close to their home office but travelling across the country so that Canadians can meet them and they can also meet different Canadians.

Mr. Fiske, you've done a great deal through your foundation to support people and communities and to give them the opportunity to become self-supporting and creative, using a little bit of capital from you, or a lot of capital from you but even more from them, and using their leadership. This is a trend I think we should be supporting.

Mr. Rice, you've given us four very innovative ideas as to what we might do without costing a great deal to our tax coffers, in some cases with no cost at all, to encourage individuals to take greater responsibility for their own futures. You have challenged us to look in great detail at every one of these, and I think the Insurance Bureau can help us on one of them.

Mr. Brazzell, we also appreciate the chamber's detailed presentation on areas that will help us with the deficit.

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Mr. Beachell and Mr. Simpson, you are really speaking on behalf of millions of Canadians who need our recognition and our support. You have demonstrated that you have so much to offer and that when we make cuts, we must not abandon those who are the most deserving. You've made a very strong case that it would be immoral for us to abandon those who are in need. The question is whether we do it through national standards or through greater application of local power, and you've spoken eloquently on the need for national standards.

As you know, this committee last year said there must always be a cash component to the CHST in order to keep the possibility of those standards at a high level and on a national basis. So I don't think you'll get a great deal of disagreement from this committee on that particular point, but again, you've reminded us of how important it is that we consider what you've said.

On behalf of all members, may I thank you very much for giving us some very innovative ideas and again reinforcing to each member of this committee how important it is that we do get out and meet the people. Thank you.

We adjourn until 11:00 o'clock.