EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 28, 1995

.1210

[English]

The Chair: I apologize to our witnesses. We're a few minutes late in starting. Thank you for your patience.

We are continuing our pre-budget consultations. With us in this round we have, from Citizens Against Government Excess, David Lindsay; from the Keystone Agricultural Producers, Marg Rempel and Mac McCorquodale. We have a person who is no stranger to this round table, Albert Cerilli; from the Jacks Institute, Evelyn Jacks; from the Union of Manitoba Municipalities, Jack Nichol; from the Winnipeg Chamber of Commerce, Andrew Alleyne; from the Rural Municipality of Lac du Bonnet, David Marion; from Crossroads Resource Group, Kenneth Emberley.

Have I missed anybody?

Mr. Albert Cerilli (Member, Joint Advocacy Committee, Manitoba Society of Seniors): Mary Pankiw - she's representing the Manitoba Society of Seniors.

The Chair: Mary, glad you are here.

We start with our opening statements. Mr. Roth.

Mr. Bill Roth (Director, Union of Manitoba Municipalities): I'm afraid Jack Nichol is not able to be present today. We'll be making the presentation on his behalf.

The Chair: Thank you very much. I'm glad you're with us.

Could we start with no more than three-minute opening presentations? Perhaps you'd be good enough to start, Andrew.

Mr. Andrew Alleyne (Chair, Federal Finance Committee, Winnipeg Chamber of Commerce): Thank you very much, Mr. Chairman. I represent the Winnipeg Chamber of Commerce. I appreciate the opportunity of being invited to make a presentation. I've submitted a copy of our brief. I'll address the three questions in order; first of all is deficit reduction.

The Winnipeg Chamber of Commerce believes the federal government is on the right track in recognizing the seriousness of Canada's debt and deficit problem. Canada's debt in absolute terms and as a percentage of GDP is dangerously high. Our $550 billion debt represents about 73% of our gross domestic product.

The fundamental issue we must face in establishing our fiscal policy objectives is the level of debt. Canada's debt level is the highest in the OECD and represents $18,500 for every Canadian. Unless the debt level is stabilized, annual debt servicing costs will remain at about $50 billion per year and government spending on programs to Canadians will be $50 billion less than we really should be expecting out of the federal government.

In this regard, we believe the only way the federal government can stabilize its level of debt is its objective of a balanced budget. The Winnipeg Chamber of Commerce encourages the federal government to adopt as its objective the achievement of a balanced budget by fiscal year 1998-99.

On the second question about job creation and growth, we believe the role of government should be to provide an environment that encourages the private sector to invest, to expand, and to create jobs. A number of government programs have met with limited success. The government should devote its efforts to reducing the impediments to business expansion and job creation. This should be done by reducing regulation and administrative burdens.

.1215

In terms of areas for future cuts to achieve the balanced budget objective, the focus of the government should be on continued expenditure restraint with no tax increases. We support the government's efforts at improving efficiencies and productivity within the public service. It should continue to focus on expenditure management and cost controls. It should try to reduce duplication between various levels of government. This would go a long way toward achieving what we believe the government's objective should be: a balanced budget by fiscal year 1998.

We also believe there should be no new tax increases. Canadians are already burdened with unacceptably high levels of taxation.

I would like to conclude that the federal government should adopt as its objective a balanced budget by the fiscal year 1998-99. This should be achieved through expenditure reductions and improvements in the operation of government departments and the delivery of government services. Finally, there should be no new tax increases.

Once a balanced budget has been achieved, flexibility will be restored to fiscal policy, and the government will once again be in a position to provide Canadians with the services they have come to expect. Thank you, Mr. Chairman.

The Chair: Thanks, Mr. Alleyne.

Mary Pankiw.

Ms Mary Pankiw (Vice-President, Manitoba Society of Seniors): Thank you,Mr. Chairperson. I would like to thank you and the committee, on behalf of the Manitoba Society of Seniors and the MSOS network of retired organizations.

The Chair: Thank you. We're happy to be here.

Ms Pankiw: Mr. Gilbert Paul, president of the Manitoba Society of Seniors, is unable to be present. Albert Cerilli, member of the joint advocacy committee, is present.

As vice-president of the Manitoba Society of Seniors, I would like to read the brief into the record.

The Chair: You have three minutes.

Ms Pankiw: The Manitoba Society of Seniors Incorporated is a provincial non-profit advocacy organization founded in 1979 by seniors who felt older Manitobans needed a united voice on the issues affecting them. MSOS presents the views of approximately 250,000 pre-retired and retired citizens of Manitoba, 55 years of age and over, to all levels of government, social service agencies, private business and the media.

The purpose of MSOS is to obtain the highest possible quality of life for Manitoba seniors by speaking out whenever and wherever a senior voice needs to be heard, to stimulate and assist community action to review government policies and legislation, to promote an alliance between ourselves and other organized seniors in Manitoba, and to engage in fact-finding and analysis of issues, publishing our results.

The MSOS network of retiree organizations - a developing network of Manitoba retiree organizations - currently numbers 37 organizations representing a membership of over 27,000 senior Manitobans. The purpose of the network is to provide an organizational framework for provincial senior organizations to share views on issues affecting their members, and to offer a means within MSOS for joint advocacy on seniors' issues to government, social service agencies, private business and the media. The network provides seniors with a stronger, more representative voice in issues affecting them by means of the partnership with MSOS.

The Manitoba Society of Seniors and the MSOS network of retiree organizations are pleased to present their views on the deficit reduction question. We commend the federal government and the members of the Standing Committee on Finance for providing the opportunity for Canadians to be included in government decision-making on the budget, and for facilitating communication between the elected and their electors.

.1220

The Coalition of Seniors for Social Equity tabled a position paper in 1994 that remains highly relative today. This document is attached as an appendix to this brief.

The agenda for these hearings is set out as: ``to hear from local witnesses as to what action the government must take to achieve its deficit reduction targets''. The framework for these consultations is too restrictive and the direction becomes too preordained. The terms of reference for a discussion on the budget must be more open and allow for a discussion of the substance of the issues.

The Chair: We are quite prepared to hear anything you want to present to us. The terms of reference were simply presented as a way of looking at some of the aspects, and this is why we look forward to your further presentation.

If I could move on to our next witness now, we'll come back to you, if you don't mind.

Mr. Emberley.

Mr. Kenneth Emberley (Member, Crossroads Resource Group): Ladies and gentlemen, I'm quite pleased to be here. I have prepared two papers for you: ``Environment and Democracy'' and ``The State of the Environment, Democracy and the Economy in 1995'', with a picture on the front of a person praying to have no pesticides in the food they eat.

You can't guess how difficult it is to come to this meeting knowing what has been achieved in the last 20 years by government and business working together. I've included in the brief that has the picture a full-page report on the state of the debt and the deficit. You'd be interested to know that the United States deficit increased steadily over a 35-year period. It increased the most, at $212 billion a year, while Ronald Reagan was in power, the man who made a hero of himself by fighting the deficit and the debt.

Our debt here in Canada has increased steadily over the years. The foreign debt was created by a deliberate policy of government and business to try to take advantage of cheap interest on foreign loans. Of the problems, 90% were created by a deliberate pursuit of government and business policies against the wishes of large fractions of the public who had no power and no wealth and whose votes didn't count.

We have watched the 1990 depression, the second depression I've lived through and the third recession I've lived through. During the last 15 years, wealthy people doubled their income on average. Everybody earning over $100,000 a year, when it's averaged out, doubled their income. Every single person making less than $12,000 a year had their income cut exactly in half by deliberate policies pursued viciously and furiously by Tom d'Aquino of the Business Council on National Issues, with the Chamber of Commerce supporting them.

I will give you a copy of the Alex Carey manuscript, which details the 86-year war of the Chamber of Commerce, the National Association of Manufacturers, the Business Roundtable in the States and the Business Council on National Issues in Canada to keep the lower classes from gaining any wishes they had in economic and political policies in the nation.

We have increased the number of poor people in Canada from one in seven ten years ago to one in five. The policy you're adopting of smashing social programs is deliberately designed to increase the number of poor elders from the wealthy and the prosperous economic forces, especially with business.

The thing that's most sad and pitiful is that all these policies were described in detail, and this paper I give you quotes a woman who did a study. A very senior woman did a professional study on the state of our economy and she stated that it seems it's necessary that a large increase in total debt is usually a necessary though not a sufficient condition for prosperity. Each time there has been a surge of prosperity in Canada and the States, it was because at the urging of government and business, people went out and borrowed more money from household finance, government borrowed more money to create subsidies for business to promote growth, and corporations all went into debt.

.1225

The biggest increase in debt in the nations' history, in Canada and the States, has been during the last 15 years, with all the levered buyouts, when people became wealthier. The upper classes doubled their income and the lower classes lowered their income.

There's only one reason that doesn't happen in Europe. The people in Europe have a more stable economy. For many years they have had a higher standard of living than in the United States. They have less social disruption because they permit unions, and where there are unions there is a higher level of industrial efficiency, there is a more stable social environment, and the working class has enough money to buy the things in the country and maintain prosperity.

The Chair: Thanks Mr. Emberley. We'll come back to you.

Mr. Emberley: We must not persecute the lower classes.

The Chair: We'll come back to you. We have lots of time. Thank you, Mr. Emberley.

Ms Jacks.

Ms Evelyn Jacks (President, The Jacks Institute): Good morning. I'm president of The Jacks Institute, a career college that teaches income tax preparation as an occupation. I have spent much of the last 15 years talking to Canadians right across the country about their tax system and answering their questions.

By and large, I would like to say at the outset that in my experience, our income tax system has had a very high degree of integrity. During my own working life, which has been approximately 20 years, though, I have known no debt-free world.

As I look the 20 years or so into the future before I retire, certainly your statistics show that old age security and guaranteed income supplement are going to be a major problem for us. They're going to grow from about $20 billion to about $32 billion. While this figure is very large and certainly very scary, it's not as high as our annual deficit, which is running at about $35 billion a year. So it seems to me our futures can be quite secure in that we don't need to fear them if we can get our fiscal house in order.

I agree with the Winnipeg Chamber of Commerce forecast for how much spending we should target to cut every year. It's a very large number. It's about $50 billion if we take a look at not only deficit reduction but somehow getting a handle on the $555 billion deficit we currently have.

When you ask what our deficit reduction target should be, I believe we should look at eliminating overspending immediately, but we should be looking at a debt-free society at a minimum 25 years from now, by the year 2020. This means we need to have some kind of plan over the next 25 years to tackle that projection.

There are only two ways to reduce debt. One is to make more money; the other is to stop spending. I believe in Canada we can do both. To make more money we need a vibrant economy in which our citizens can prosper, and as a result perhaps pay more in tax revenues. Certainly there must be an incentive to seize opportunities before us and to turn them into prosperity; and I do believe we have those opportunities.

Margaret Thatcher once said governments do not create wealth; rather, properly governed people do. We must encourage an economic and social environment in which both the people and their governments can bring their fiscal house in order. In that way we are responsible to each other.

There are primarily two ways we can accomplish that. First, have tax policies that encourage self-efficiency and entrepreneurship. Second, cut public spending and program spending immediately.

The way to do the latter goal is of course very difficult. I would suggest one way to do that is to talk to the people who are managing government today, and that's the civil servants on the front line. These are the people who know government better than any of us. I'm sure they would have lots of suggestions for reducing waste and eliminating overlap.

How should budget measures be used to create an environment for growth and jobs? I believe there are five key ways.

First, I believe we should simplify the tax system. I believe a lack of understanding affects voluntary compliance, and we have a huge problem in this country with the underground economy. That's something I certainly wasn't aware of 15 years ago.

.1230

I believe that by and large, our citizens are honest, hard-working people who like to pay their taxes. But when we have an underground economy, it distorts the system and erodes the integrity of the tax system. I believe that's a huge threat.

The Chair: I apologize; I have to cut you off. We'll come back to the other four points you are suggesting for debt reduction.

Mr. Marion.

Mr. David Marion (Reeve, Rural Municipality of Lac du Bonnet): Good morning. I'm the reeve of the rural municipality of Lac du Bonnet, which is about 100 kilometres northeast of Winnipeg.

The present budget consultations are of particular interest to us in Lac du Bonnet because the largest employer in our region is Atomic Energy of Canada Limited, a federal crown corporation.

AECL operates Whiteshell Laboratories, which is western Canada's largest scientific research centre. There is also the underground research laboratory. It is a world-class facility that is investigating safe underground disposal of nuclear waste. AECL pumps $80 million to $90 million into Manitoba's economy annually, and I am told their facilities could easily be worth over $1 billion.

There have been recent reports in the Winnipeg Free Press that AECL plans to close Pinawa and consolidate its operations at Chalk River nuclear laboratories northwest of Ottawa. To do this, however, it will need to spend $100 million to upgrade the Chalk River site, which is not as modern as Whiteshell Laboratories.

This situation concerns us greatly and relates directly to these budget consultations. How can mothballing $1 billion worth of modern scientific facilities be in our national interest? This would appear to be a false economy.

We need regional equity in our budgeting process. I believe that if Whiteshell Laboratories is closed down in favour of eastern Canada, this equity will once again be seriously violated. Why not change the policies of AECL to allow the active participation of the Province of Manitoba and private industry in Whiteshell and perhaps develop it as a centre for environmental research rather than just nuclear research? The solution need not cost the federal government a cent, yet it will sustain solid, well-paying, high-technology jobs and valuable income tax revenue.

The Chair: Thank you, Mr. Reeve. Mr. Roth.

Mr. Roth: Good morning. Regrettably, the president of the Union of Manitoba Municipalities cannot be here.

We really appreciate the opportunity to meet with members of the federal Standing Committee on Finance and provide our input during your pre-budget consultations.

The Union of Manitoba Municipalities represents 165 of the 202 municipalities in Manitoba, including 106 rural municipalities, 15 local government districts, 23 villages, 18 towns and 3 cities. The mandate of our organization is to assist member municipalities in their endeavour to achieve strong and effective local government. To accomplish this goal, our organization acts on behalf of our members to bring about change, whether through legislation or otherwise, that will enhance the strength and effectiveness of municipalities.

While municipalities are most often affected by the policies of provincial governments, there are also a number of federal issues that have significant impact on local governments. In fact, the third item identified for discussion today deals with the devolution of federal activities to other levels of government.

The U of MM appreciates the fiscal constraints the federal government is facing. We've always advocated for the three levels of government to reach a better understanding regarding division of responsibilities. However, too often costs and responsibilities are simply shifted to municipalities without sufficient consultation or forethought.

An example of this has been the reduction in the grant in lieu of tax payments by the federal government to municipalities in recent years. A related problem is that of the federal government unilaterally reassessing its own property and subsequently capping a portion of its property tax bill. While the federal government benefits from municipal services provided to all property owners, it's not paying its fair share of the costs. Therefore, other rate payers are forced to pay more taxes to compensate for the reduction in federal funds. In addition, the uncertainty surrounding the federal government's payments of grant in lieu of taxes greatly disrupts the budget process in municipalities. This is of particularly serious concern to those municipal operations with a large number of federal properties.

During this past summer negotiations took place between the Federation of Canadian Municipalities and the federal government that began to address the problems of grants in lieu of taxes. However, the discussions came well after the federal government had unilaterally reduced its payments.

The reduction in grants in lieu of taxes is an example of the worst type of downloading. Rather than creating efficiencies, there is only a shifting of costs from one level of government to another. In addition, there's no rationale provided nor any consultation with affected parties.

.1235

Reform of the goods and services tax is not a federal area of great concern to the municipal governments. The Union of Manitoba Municipalities does not oppose the harmonization of federal and provincial taxes to produce a single-rate value-added tax. However, we do not believe that the change should result in additional costs being downloaded onto municipal governments.

Municipalities currently pay 7% of the GST on all purchases, but receive a rebate of 57.14% based on the principle that they should assume no greater costs under the GST than they did under the former manufacturers' sales tax. Municipalities receive approximately $800 million per year in GST rebates, which would be paid by property tax owners if the rebate were eliminated.

The Chair: We're not proposing elimination of that or any changes to that.

Mr. Roth: Another issue the committee wishes to address is how to use budget measures to create more jobs and growth.

The Chair: Excuse me, Mr. Roth. Could we come back to that later? I just have to get everybody on the record here first and give three minutes to every group, just so we're all on the same footing.

Mr. Lindsay.

Mr. David Lindsay (Secretary-Treasurer, Citizens Against Government Excess): Citizens Against Government Excess is a relatively new non-profit group that was formed within the city in the last year. Our group is dedicated to advising Canadians from across the country about the illegal government income tax, which is highly unconstitutional - the illegal government currency issuance. Our federal government has sold out the entire nation's wealth to a bunch of foreign and independent bankers.

The Constitution of this country currently exclusively requires the federal government to have certain responsibilities which it is prevented, by a Supreme Court of Canada decision, from delegating to anybody. Those responsibilities include the issuance of currency for the entire country, as well as the interest. These are currently set by the Bank of Canada. If you look in your phone book, it is a private organization.

The money of the country is currently set out by the federal government. It gives its bonds and treasury bills to the Bank of Canada. It then sells them to private bankers, who create the money in their computers that might never have existed before it was issued, and neither would the interest to pay that money off. The debt situation we have today is at the point where it is mathematically impossible to it pay off. It will never get paid.

With everybody here today it reminds me of last year's hearing, where everybody sits and talks about how these issues are going to affect them directly. For example, the Manitoba Society of Seniors is here this evening, the Winnipeg Chamber of Commerce and various other people. I will be talking later about the solution to the country's problems, the illegal activities of our provincial and federal governments in the issuance of currency, and get to the heart of the situation.

I have tried for two years to meet with the parliamentary secretary, David Walker, who is my own MP. I've been rebuffed over the course of two years. I have not been allowed to see him. Obviously he does not want the information to be made public; therefore, I am forced to come here today again and present the information on the record. I will get into more detail about it subsequently during the meeting. Thank you.

The Chair: Thanks, Mr. Lindsay. So far I haven't heard anything that would suggest you understand what our constitutional system is all about, but that's fine.

Ms Rempel.

Ms Marg Rempel (Executive Member, District 4, Keystone Agricultural Producers): Thank you, Mr. Chair. Keystone Agricultural Producers, as Manitoba's general farm policy organization, is pleased to have this opportunity to participate in this pre-budget consultation process.

Approximately one year ago, KAP representatives had the opportunity to speak to members of the Standing Committee on Finance in response to a new framework for economic policy that had been advanced by the Minister of Finance. Our message at that time was relatively simple. We basically indicated that KAP believed farming people in Canada are as aware as any other Canadians of the need to reduce Canada's debt load and revitalize the Canadian economy. Also, farming people are prepared to do their part as long as they are convinced they are being treated equitably in any adjustments made to this end.

We also suggested that agriculture can be a very effective partner in Canada's new economic strategy. However, if it is to be in a position to contribute to desired growth and expansion, it will require sufficient commitment from the government with respect to that portion of the budget supporting the industry to do its part.

As more attention is directed to value-added activity, substantial investment will need to be directed into the production sector to ensure sufficiency of supply. Some government funding may need to be redirected to achieve the desired goals.

Many KAP members believe our message should be put more bluntly. The agricultural industry over the past several years has had imposed upon it a disproportionate share of budget cuts, and we believe it is time for some greater equity to be applied to agriculture's relationship with other sectors.

.1240

We remind you that 1.8 million jobs in Canada are jointly linked to agricultural industry. This represents 15% of total Canadian jobs. One job in Canadian agriculture generates four to five additional Canadian jobs. The small business sector, which does include farming, has accounted for 80% of accumulated job gains from 1978 to 1992. In 1993 the agrifood trade balance accounted for $2.6 billion, or 36% of overall balance of trade. Agriculture was 8% of that total. However, it should be noted that the overall agriculture budget for 1994-95 was 53% lower than 1991-92, having fallen from $4.47 billion in 1991-92 to $2.07 billion in 1994-95.

An objective that has received wide attention and acceptance in recent times is that one of the main goals of Canadian agrifood trade policy should be the export of $20 billion worth of agrifood goods by the year 2000. KAP is supportive of this goal. However, we do not believe this type of goal can be achieved if support to agriculture continues to be withdrawn as in past years. Again, government must ensure that sufficient funding is directed to those sectors that are now having to adjust to new realities.

Announcements by the federal government this past spring indicating elimination of benefits under the Western Grain Transportation Act impacted agriculture in the prairie region very significantly. This, coupled with discontinuation of the Canadian Wheat Board's pulling arrangement for seaway costs, has meant that producers in Manitoba will be impacted more severely than in any other region. These changes to grain transportation policy will require major adjustments by producers in Manitoba. Until the full implementation of the 1995 budget measures have taken place, we cannot accurately judge the full impact of those measures. Producers will need time to decide upon and achieve the adjustments.

KAP has taken the lead in attempting to arrange for the development of a business plan for rural adaption in Manitoba, involving the participation of all stakeholders and directed at ensuring healthy rural communities in the future. The federal government's commitment to this rural adaptation initiative is crucial. We strongly urge that the upcoming budget provide the resources necessary to provide the type of effective coordination of rural adaptation initiatives required to avoid duplication of effort and narrowness of perspective.

The Chair: Thanks very much, Ms Rempel. I'm sorry to cut you off there, but we will give you a chance to make the points for the record and indicate your precise areas of concern.

[Translation]

I would like us now to go over to the members' questions.

[English]

If you would like to put on your translation sets, we will have simultaneous translation.

[Translation]

We'll listen first to Mr. Paul Crête.

Mr. Crête (Kamouraska - Rivière-du-Loup): Mr. Marion, you state in your brief that we need a regional equity in our budgeting process. Last year, in my riding, I experienced the closing down of an experimental farm and we only learned about it through a newsletter. I very much appreciate your making the committee aware of this issue. However, I would like you to elaborate a bit on how we could ensure regional equity in the budgeting process. How could that goal be attained?

The representative of the Union of Manitoba municipalities had started listing a number of approaches that have been taken; he might complete his presentation and develop its main points.

[English]

Mr. Marion: I guess the way to make sure that it does take place.... I appreciate your comment and that question from Mr. Crête. I think it's important that we continue to have these processes that travel across the country involving the input of as many people as possible.

I'm bringing up Atomic Energy as an equity issue. It has only two main research sites in Canada: one in Ontario and one in Manitoba. My understanding is that its creation in 1963 was to accommodate diversification of higher technology to western Canada.

.1245

You said in your comments that you learned about the closing of a research facility after the budget was released. We've been getting information in our province to indicate that this is happening, and I'd like us to be proactive.

There are issues we can deal with aside from getting government funding. We can build with the private sector to create something that is quite sustainable and developable. If we're going to continue to have a country and if we are to be a truly strong country, it's important that we do have things decentralized to other areas of the country - not just Manitoba, but areas of Quebec, the Maritimes, and the rest of western Canada. I think it's a very important principle that we incorporate into the budgetary process.

[Translation]

Mr. Crête: What you are saying is very interesting. Since we are looking at the budgetary policies and the people in power who are making decisions always choose to concentrate research and development expenditures in Ontario, would you go as far as saying that a criterion should be established to ensure that the regional development needs of the main parts of the country be taken into account when designing research and development activities in Canada?

[English]

Mr. Marion: Again, I think that for a successful country it is a policy worth investigating. If you tend to have too much concentration, you're going to tend to have the majority of the growth in that area, often at the expense of the other areas or regions of the country.

[Translation]

Mr. Crête: I would like that the representative of the Union of Manitoba municipalities be granted two or three minutes to complete his presentation.

[English]

Mr. Jerome Maus (Executive Director, Union of Manitoba Municipalities): We do have one additional point we would like to make. There's one additional paragraph, if I could read that.

The UMM believes that the Canada-Manitoba infrastructure program is a very successful example of government expenditures providing both short-term and long-term benefits to the Canadian economy. In Manitoba the 376 infrastructure projects started in the past year and a half have resulted in over 3,000 jobs. In addition to providing quality services and facilities for their ratepayers, improvements made to the infrastructure of Manitoba will assist communities in becoming more efficient and competitive and more attractive to industry.

The UMM had representation on the infrastructure project selection committee, and we were very pleased that the senior levels of government followed the recommendations of the committee. This level of cooperation resulted in Manitoba having one of the most effective infrastructure programs in the country.

After reviewing applications for funding from municipalities, we are certain there is no shortage of additional quality infrastructure programs. Therefore, we strongly urge the federal government to introduce a second infrastructure program. Thank you.

The Chair: Thank you, Mr. Maus.

Merci beaucoup, Monsieur Crête.

Mr. Grubel, please.

Mr. Grubel (Capilano - Howe Sound): Ladies and gentlemen, I am very pleased to hear all these great ideas on how to spend more money and why certain programs should not be cut or should be given more money. I wish we could be here to help in sorting out how all these things can be done, but I want you to remember, ladies and gentlemen, that the fact of the matter is that as of today, we're leaving for our children and grandchildren a federal debt of $565 billion. It is growing at the rate of $100 million every 24 hours.

I want to remind you that the money we have already promised to our seniors, a group which many of us sitting around this table will soon join, requires that our children and grandchildren will be paying another 50% higher income tax just to serve our needs in retirement and medicare. We have to come up with a report to the Minister of Finance on what to do about this problem. How can we best cut it? I find it very disappointing to come here and be told that maybe we should not cut some atomic power situations, somebody who believes all the solutions lie in getting rid of the banks....

.1250

What can we do? Are you people aware that if we don't cut within two or three years, all of the people who look forward say that we will have another recession, and the deficit that is now $100 million a day will go to $200 or $300 million a day? Can we responsibly look into the eyes of our children with this?

Is this the kind of advice you want us to take back? More work to be done for farmers? More money to be spent on infrastucture?

The Chair: Does anybody wish to respond to Mr. Grubel?

Mr. Cerilli: I guess we want to see the country fall apart. I'm not prepared to do that, and our generation is not prepared to do that. The seniors behind me believe in economic equity on all fronts.

It goes without saying that the people here are simply saying that rail abandonment will only offload to the municipalities, the cities and the provinces the major part of $16 billion to repair the present system.

Somebody mentioned the Crow rate. Let's look at that. The federal government has put over $200 million in the pockets of the farmers in Manitoba, amounting to about $16,000. However, they didn't take into account that it's going to cost the farmers $500 million to meet their transportation needs.

If we look at some of the notes we've already put on the record, Mr. Chairperson and the committee, we said that we could look at a number of ways - the shorter work week, you name it. But let's put on the record some of the statistics regarding Canada's deficits.

The Chair: We're certainly aware of -

Mr. Cerilli: I know that, but to tell the people who put this country together that they are expecting too much is not fair. We're here to present some of our views and concerns, and we think 44% of the deficit is due to tax breaks to upper-income earners and corporations, 50% is due to high interest rates, 4% is due to general program spending and 2% can be attributed to social programs.

We're saying you should maintain something that can achieve the goal as you get older so that you can retire in dignity and not be scraping from your family or anybody else. Those days have passed. We went through that generation. We went through a couple of world wars to be at this stage today.

I welcome you to put the real issues on the table and deal with them as a whole, including our labour force and the unemployed. If we go around leaving behind unemployed youth and everything else, what good would that be? France just went into a general strike, Alberta just had to back down because of general strikes. That's what we're creating if we don't handle the thing properly, and we're here to tell you that there are mechanisms.

The Chair: With all due respect, Mr. Cerilli, so far we've heard one mechanism as to how we approach these problems. We agree on the problems. You have only given us a shorter work week. Do you have other issues?

Mr. Cerilli: Yes.

The Chair: Please enumerate them for us - one, two, three, four and five.

Mr. Cerilli: First, look at the tax structure in a meaningful way - fair economic equity to everybody with regard to tax structure.

The corporations are going offshore, and we've repeated that this morning. They're hiding behind tax shelters that shouldn't be there. The federal government must take the bull by the horns and tell those corporations that they can't do that. They cannot then accuse seniors of wanting too much.

The Chair: That's number two.

Mr. Cerilli: The Bank of Canada must be restructured to create a meaningful role in our society, rather than just set policy from the International Monetary Fund and the World Bank. I think we must have a bank system policy in Canada made up of Canadians with regard to the Canadian bank.

.1255

The Chair: Number four.

Mr. Cerilli: As well, seniors and the unemployed, health care and medicare can be accommodated with all of the components we've talked about with regard to maintaining high standards and a strong central government on these issues.

Somebody this morning mentioned that if we want twelve countries, then we're going down the right road. We don't want that in this country. We want a united Canada with strong central standards for the provinces to follow, be it on training, education or anything else.

The Chair: Thanks, Mr. Cerilli.

Mr. Grubel: Mr. Chairman, you have sat with me through hundreds of hours and hundreds of witnesses, a certain proportion of whom give exactly the same ideas that Mr. Cerilli has. You and I have made a sincere, hard-working effort to listen to experts who are responsible for running these programs. We have looked at all of them and we have found that this is not the solution. If that were the solution - and it sounds so easy - then any respectable politician who wished to be popular, get re-elected and continue to do his footwork for society - that's why we're here - would already have accepted these simple solutions.

Mr. Chairman, after what I have heard from hundreds of witnesses, and after a sincere effort to understand the issues, there's only one solution. We have lived beyond our means in this country for a very long time. We are committing an inequity to future generations that is unprecedented in the history of Canada. We have to bite the bullet. There are no magic solutions. When a government consistently spends hundreds of billions of dollars more than it is taking in, it cannot continue. The average guy on the street knows that.

That is where we want to hear from the people of Canada. That's why we are undergoing this tortuous exercise of listening for twelve hours to opinions on what we should realistically do.

The Chair: Thanks, Mr. Grubel.

Mr. Lindsay: I want to address one of the issues Mr. Grubel talked about. Canada is not living beyond its means. We are the richest country in the world in terms of resources and people. For the size of its population, Canada has done more to contribute to technology, science and various other aspects, both within Canada and around the world, than any other country.

You've stated that Canada is going roughly $100 million further in debt every 24 hours, and that legacy will have to be passed on to our children. Do you know where that money is coming from? That money is interest. The money that our government borrowed from the banks never existed before it was borrowed. The interest on the money did not exist. The principle was borrowed, but the interest wasn't.

If I lend you $10 and you agree to pay me back $11 at the end of the year, you've agreed to the impossible. It cannot be done because the money is not there to pay it back unless you want to work to pay it off. Or if you borrow it again next year, if you roll it over.... That's what the current federal government is doing with their bonds every year. They roll it over every year so that they can afford to pay the interest on it.

Mr. Grubel: Explain something to me. The Department of Agriculture has subsidized the Crow rate. Let's say it was $1 billion a year and there wasn't an equivalent amount of revenue to pay for it. In order to pay the workers and pay for the diesel fuel and all that, it had to obtain $1 billion. So it went to the capital markets in New York and said, we have a piece of paper that says we promise to pay you 10% a year on that $1 billion for 20 years. Are there any takers who will give us the $1 billion in return for this note? These investment funds and pension funds in New York and Toronto said, okay, here's the $1 billion. Explain to me where we don't have a problem.

.1300

Mr. Lindsay: The thing is if you don't -

Mr. Grubel: - billions of dollars in the past, and now add $565 billion by the feds alone, and every year $50 billion is due in interest. Where is there no problem? Why is there no problem?

Mr. Lindsay: There is a problem, because the federal government was given the power to issue the currency of this country, not to go borrow it from people or from the bank, which will create the money out of nothing.

Mr. Grubel: It's not a bank; it's a pension fund.

Mr. Lindsay: Where does the money in the pension funds come from? It comes from the people who had to work for it.

Mr. Grubel: That's right. Where's the bank?

Mr. Lindsay: I refer you to a 1939 report I handed out to all the members from the standing committee report on banking and commerce. The governor of the Bank of Canada was asked at that time, if the federal government issues a $1,000 bond and/or a treasury bill, whatever you want to call it, and goes to the private banks or whatever, where does that money come from? The governor admitted in that report that they had to issue some brand new currency. To pay that currency off, the government taxes the hell out of every Canadian.

It's the same as if you buy a house. If you want to buy a house for $100,000, the bank issues $100,000 to you. Where did that money come from? It didn't come from depositors' money, because that is illegal. That is brand new money that was created. They won't give you that $100,000 in cash. That money stays in the bank. They will not give you that money in cash. Why? Because that money doesn't exist. The federal government is in the same boat.

I'll give you a quote from a former director of the -

Mr. Grubel: I don't wish to engage in a debate over monetary policy.

Mr. Lindsay: This is the issue here. We're all talking about individual problems and how they affect us, but nobody's getting at the heart of the problem. The heart of the problem in this country is where that money is coming from. Very few Canadians know how currency is issued in this country, very few. If everybody knew how currency is issued in this country, you'd have a revolt on your hands tomorrow.

The Chair: On that basis I think we should keep everybody in the dark.

Some hon. members: Oh, oh!

The Chair: Could we move on to Mr. Fewchuk, please?

Mr. Fewchuk (Selkirk - Red River): Good afternoon, ladies and gentlemen. Welcome to Manitoba and to Winnipeg.

Paul, you made a reference earlier to AECL and to the Manitoba colleagues here not being aware. We're aware of what's going on. I just want to assure the rural municipality of Lac du Bonnet that we are not sleeping. David Iftody, the member of Parliament for your riding, has been fighting very hard along with the Manitoba caucus in trying to figure out if there is another alternative. I just wanted to bring that to light to make sure there's no misunderstanding here today.

The Chair: Do want to respond to that, Mr. Marion?

Mr. Marion: I appreciate the work that's being done. I've been in contact with Mr. Iftody myself. I wanted to make sure that was brought up for the record of the committee today. I appreciate the work that's done.

I want to make a comment. We've been here for about an hour and we seem to be failing to make any progress. We're indulging in certain philosophies from your panel. I thought this was the time when we, as individual Canadians who are representing different constituencies, could bring forward our concerns, whatever they might be. I don't think it's fair to judge them. I think we should be listened to and some meaningful discussion should be made of that.

Obviously the problems we face are giant. Even at our municipal level it's difficult to do budgeting these days. I appreciate that the member, Mr. Grubel, has sat through a lot of committee meetings, but for us this is our only opportunity to be on the record. There should be a little more respect demonstrated for that.

The Chair: I apologize if you feel I have not respected your views or given you the opportunity. I assure you that you will have the opportunity to put your views on the record. If you have specific suggestions for us, Mr. Marion, perhaps you would be good enough to present them to us right now.

Mr. Marion: I'm talking collectively about what I've seen around the room so far. I'm not specifically saying -

The Chair: I'm sorry, but there are no collective views here. You've all come as individual witnesses. We're here to hear your views individually. Perhaps we will find consensus and perhaps we won't. Do you wish to put anything on the record?

Mr. Marion: No.

The Chair: Is there anybody else? I know there are other people I cut off who have not had a chance to reply: Ms Jacks, Mr. Lindsay, Marg Rempel and Mr. Emberley.

But I would like to turn to Mr. McKinnon right now, because in responding to his questions, some of these things might be elicited. If they're not, you'll have an opportunity to make your views known to us.

.1305

Mr. McKinnon (Brandon - Souris): In general terms, I'd like to ask both the KAP representatives and the UMM for their views on taxation reform. I know there's more information here in your presentation. Perhaps Mr. Maus or Mr. Roth would like to comment first, then the KAP representatives.

Mr. Roth: As you're fully aware, municipal corporations get their moneys from property taxes. As a consequence, we're extremely concerned because of the level of property taxes at the present time. Therefore, when we make reference to the GST and harmonization of it, we don't have a problem with that. But we feel that if we were to pick up the $800 million that would be incurred if we had to pay this additional money towards the federal government, this would certainly be a major concern. Property taxes are already at a very high level at the present time.

Mr. McKinnon: Are you suggesting that you should be totally excused from the payment of that? Is that what I hear from you? Or is it the rebate component?

Mr. Roth: It's just the rebate. We do not expect to be excused from the percentage we're already paying; we accept that.

In terms of taxes, we also made reference that we feel that through consultation and also through working together, we can work together to eliminate some overlapping. We have a major concern that offloading onto municipal corporations would not be prudent at this time. We're saying to the federal government that you have to look at your own expenditures.

Mr. McKinnon: What suggestion do you have in the area of grants in lieu? I realized when I read your presentation that lack of consultation was one reason you're raising the issue. Is there a process you feel the federal people could enter into with the municipalities in this regard?

Mr. Roth: We have our own assessment. Properties are assessed. As a consequence our major concern is that you have another assessor coming in with a lower assessment, and as a consequence reducing some of those taxes being paid by the federal government. We're providing services to the best of our abilities, and we feel we're not being paid the portion of taxes we rightly deserve to provide the infrastructure needed to provide services to federal properties.

Mr. McKinnon: To the KAP representatives, I noticed a reference to GST in your presentation. Would you care to expand your views in that regard?

Ms Rempel: Certainly. Our most recent annual meeting adopted a resolution calling for provisions whereby any altered goods and services tax is not applied to any agricultural items that are currently zero-rated, and farmers retain the opportunity to collect back GST paid on production costs. This resolution stems from the concern that in an industry such as agricultural production, which is so dependent on export trade, any such taxation makes Canadian producers more uncompetitive in the world market circumstances.

I think basically we want taxation policy to reflect that our input costs are increasing steadily. They're increasing faster than the current slight rise in the return on grains and oilseeds. We certainly appreciate that, but it does not compensate at this point for the increase in our input costs.

As far as taxation level by the federal government is concerned, we have put forward the position for a long time that we would like the excise taxes on farm fuels eliminated. We feel that's unfair compared to our competitors around the world.

We would urge the federal government to maintain the $500,000 lifetime capital gains exemption provision for agricultural producers, because that constitutes a major part of our retirement strategy.

If on my farm I have problems servicing my debt, I'm going to look at those things that are giving me a good return. Every dollar invested in agriculture returns $7 to the Canadian economy. I think that's a good return and I think it's a good way to get out of debt.

Mr. Grubel, we're not saying we haven't taken our share. We have. We've taken a 52% cut in the last four years. We feel that's our share. We feel that investment and research in agriculture, tax breaks or tax considerations to agriculture, would do more for the economy than the pensions currently going to members of Parliament in perpetuity at high levels.

.1310

The Chair: I'm sure you get a lot of agreement for that, and not just from farmers.

Mr. Walker.

Mr. Walker (Winnipeg North Centre): Most of my questions were already answered in the last KAP summary.

Going back to the municipalities, I want to make sure I understand. My understanding was that we stabilize the transfers to the municipalities in an arrangement made in the negotiations with the federation. Is it your understanding that there are further cuts?

Mr. Maus: No, I understand there are still negotiations ongoing. I haven't been advised that the issue of the GST has been -

Mr. Walker: No, not GST, on the grant in lieu of taxes.

Mr. Maus: My understanding is there is a proposal only to change the name to payments in lieu of taxes and that it's still under discussion.

Mr. Walker: For the smaller municipalities in Manitoba, what sort of scope are we talking about for the grants in lieu of taxes? Is this a large sum for the smaller municipalities? I know in Winnipeg it's a large sum, but what is it like elsewhere?

Mr. Maus: There are a lot of different types of situations such as penitentiaries, border crossings, federal pastures. The post office is another one. There are a number of federal properties, RCMP detachments and so on.

Mr. Walker: Do you have any idea what percentage of your tax base this would represent - 5%, 10%, 15%?

Mr. Maus: In most cases it would be around 5%.

The Chair: Mr. Discepola.

Mr. Discepola (Vaudreuil): On the same issue I have two controversial questions. I'll save my second one for later.

I come from a municipal background. It's my understanding that prior to 1992 and 1993 municipalities didn't get compensated because there was a theory that you should never tax the Crown and the Queen. If you have a provincial institution in your municipality, what does the province pay you in municipal taxes?

Mr. Maus: With respect to provincial grants in lieu, they pay the amount equivalent to what they would normally pay in taxes for properties that are subject to grant. There are certain properties that are not subject to grant -

Mr. Discepola: That's exactly what I was getting at. In Quebec right now the province only pays 25% of the taxation.

I don't know of any mayor or any reeve who would voluntarily want to get rid of the federal institution in their municipality. I know you're defending your terrain and your municipalities, which is fine, but it's always the same taxpayer at the end of the line whether you pay it in property taxes or in federal-provincial taxes. We must not lose sight of that fact.

The same analogy could be provided for the GST, for example. You don't get any credit back. In the province of Quebec, municipalities don't get any credit back for their provincial service tax portion of it. So why should the federal government always be giving you back and giving you back when I think you're best able to adapt to that reality?

If it looks like downloading, you just have to look at the 1990 download procedure from the federal government and the famous Ryan reform in Quebec where $400 million was dumped on municipalities. Since 1990 there hasn't been one municipality I know of that has increased property taxes. It works because you guys are down on the ground. You know exactly the level of service that's required and you can adapt to it.

My other question is on the infrastructure program. Contrary to Mr. Grubel, I think it's one of the more successful programs. It's created over 100,000 jobs and I would like to see it continue, but not necessarily on sewage or other types of infrastructure. Do you have any community-oriented programs where this type of arrangement with three levels of government could apply, which the municipalities have looked at or would be interested in?

Mr. Maus: I will respond to your first part.

I think we agree with the need for the federal government to reduce the deficit. Being a municipal person yourself, you know that municipalities are mandated to not run deficits. They're not allowed to do that. If they do run a deficit, they have to pick it up. So we're very much in agreement that there is a need for the federal government to reduce the deficit so as to not have a deficit eventually.

.1315

The concern we have is the unilateral movement of costs to different levels of government, especially the municipalities. We are prepared to work with the federal and provincial governments to rationalize the delivery of services. I think the need is for rationalization so we're not delivering the same type of services.

There are certain things we are very good at. There are certain things the federal and provincial governments are very good at. I think we should each do what we do best. An example is the building of roads. I think municipalities in Manitoba, in any case, are good at that. That's what they do.

If there is going to be any change in the services we provide, we should look at providing the services we're best able to provide. That's why we're advocating this. It's not that you shouldn't transfer any of the costs, but that you should consult with the appropriate level - in our case it would be the municipal - of government before any changes occur.

That's the point we would prefer to make. It's not that there should not be any changes. We can't live in the past; we have to look forward to the changes. As I said earlier, we have to leave a stronger country for our children. Therefore, we're looking at the best way of making those changes and rationalizing the delivery of services.

Mr. Roth: In terms of the infrastructure, we're very appreciative of the fact that our representatives made recommendations and that they're accepted under the Canada and Manitoba infrastructure program. I think that displays a tremendous amount of cooperation. This also has a consequence. We have to recognize the fact that this infrastructure program did result in jobs. As a consequence, the people who secured these jobs pay taxes.

Look at what's happened with the elimination of the Western Grain Transportation Act. We're extremely concerned that the municipal cooperation will ensure...that roads will become really negatively impacted in the next few years. As a consequence, we feel that we do an excellent job in building roads, getting involved in bridges, providing services to property and so on. We are taking the position that we'd like to see some of the money from the WGTA allocated to municipalities for this very purpose.

Many projects were folded when the infrastructure program came out. These projects are still to be reviewed. Large projects were never completed. But we think that providing an infrastructure will make it possible to prevent rural population decline, which has been prevalent in the last 10 to 15 years.

Mr. Discepola: I encourage your municipality to put forth ways of enhancing the project and maybe enlarging it. I think it's a program that has worked well. It can continue.

I'd like a question for Mrs. Pankiw or Mr. Cerilli. I think, Mr. Cerilli, especially since you proudly stated that you've been working since you were 14 and contributed to Canada, I accept that. I've also been fortunate to have been working since I was 12.

But consider when we start saying that it's not my problem; it's their problem or the government's problem. We have to look at the cause of the deficit. Whether it's justifiable or not, it was there and was used to provide a level of service and a quality of life for those generations that benefited from it. Unfortunately, I don't think I'll be able to provide my children with the same opportunities my parents provided me. That's what I'm concerned about.

When we look at the deficit problem, it's not just the government's problem or just one sector. It has to be a collective effort; otherwise we're not going to get out of the mess we're in.

I'd like to ask Mrs. Pankiw what her association's position is on the question of a clawback at $53,000. I have yet to get an answer from somebody as to what is so magical about getting a deduction just because one turns 65, for example. What is the rationalization behind that? I may not even reach the age of 65, so I wonder how one can get a pension. Is your group totally against the clawback, especially when you see that it only occurs at an individual salary of $53,000? If you have a senior couple, they have to make $106,000 before the clawback even kicks in.

.1320

If we're going to leave a better future for our children, don't you think maybe the seniors could put forth some form of sacrifices in addition?

Ms Pankiw: As far as that issue was concerned, it was not included in the deficit...mentioning how to decrease the deficit reduction. I really wasn't prepared to address that issue.

What I wanted to address - and I hope you'll let me because I never did get a chance - is that we do not want to see the deficit reduced through cuts to social programs because that will reduce the standard of living of the most disadvantaged Canadians. Also, deficit reduction must not be made at the expense of seniors and others who are most vulnerable because all of society is in some way breached.

I wanted to say that a nation's most valuable resource is its people. What kind of society do we as Canadians want? I do know the seniors have contributed to the pension fund, and I feel that for many of them, if they contributed, it is their money and they worked for it. Could government not see other ways of getting money, probably looking at corporate tax revenue? Also, these people would probably be leaving money, if they had any extra, for their children and other generations.

One point I would like to make is that - and you may have noticed - our costs are escalating all the time, and very soon that $53,000 is going to be poverty level. Look at our taxes in Winnipeg. Look at the high cost of living and the high cost of utilities. Another issue is that they are also deteriorating health-wise and they probably have to hire help. So looking a few years down the line, $53,000 is going to be poverty.

I also wanted to say that in the deficit reduction address, the human costs are not clear. I would like Mr. Cerilli to speak on this issue.

Mr. Cerilli: I think the human cost, not only to seniors but to the young generation - our children, grandchildren, and great-grandchildren - is going to be tremendous.

Last year I was asked to conduct a study with regard to seniors at risk. In my research I found that seniors weren't the only ones at risk. There were four levels of our generations at risk: the young people who can't find work; the people under 40 who are being thrown and jilted out of work and have to be readjusted, retrained, and so on, and who may find a job; people at 55 who do not have full pensions or have reduced pensions; and of course the 65 age group, who retired at pension but whose pensions, as was mentioned by Mary, are being reduced and affected.

The human cost is tremendous. The stress and strain, as I mentioned this morning, in regard to medicare and the cost to medicare is going to double and triple. The longer hours we're working is a stress and strain on workers, not only to rural communities, the farmers, and everybody else, but I think the cost is going be tremendous if they're not handled.

I would also like to answer to my piasona from Montreal that I never said it's only government's fault or problem. I think it's a collective problem, but the partners have to be fair to each other and deal with the matter right up front.

I would like to make a summation and suggestion for full employment, taxes, and the GST. It was mentioned...the underground economy has to be looked at, how those taxes are evading the taxman. The collected taxes that are not being remitted have to be looked at by companies.

.1325

Of course the local infrastructure programs that are being.... I supported the infrastructure programs from my activity in the labour movement before I retired, and I'll continue to do that, because without infrastructure for transportation, the logistic movement of goods across this country into foreign markets is going to be devastating if we don't look after it.

I have one last point for local infrastructure initiatives and investment by the federal government. We have the Bay line, which is the CN Churchill line, and in Churchill we have the Akjuit aerospace program, which is trying to get off the ground. Without a rail line there's nothing else, because from Gillam on, there are no roads to service and refuel the north and the Akjuit project. We won't have that project.

So not only does the stimulation of jobs have to come from an investment by the federal government in conjunction with the three levels of government, but we also have to be realistic about it and how the taxes we pay are redistributed.

The Chair: Mr. St. Denis.

Mr. St. Denis (Algoma): I wanted to ask a short question of the Winnipeg Chamber of Commerce. In your summary you talked about a deficit. We can debate a lot of the similar issues, but clearly the public's deficit isn't under control or things can't be dealt with. I wonder whether you could just give us a brief outline of the experience here in Winnipeg. How is the housing market here? Is there some finger pointing to federal policies that are an issue there? With respect to the unemployment rate, could you give us a brief outline of what your experience has been in this community?

Mr. Alleyne: The Winnipeg housing market has been very weak for the last year, as has the national housing market. To me, the surprise is that with the reduction in interest rates, we have seen the housing market so weak here. However, in terms of unemployment, Manitoba's unemployment rate is 2% below the national average, and our rate of job creation has been the second fastest of any province. So we are seeing some job creation here. It's not as rapid as we'd like to see, but the unemployment rate is about 2% below the 9.3% national average.

The Chamber of Commerce believes - and I'm hearing some good comments here today from around this table - that if we can reduce the duplication of government services at the municipal, provincial, and federal levels, we can save some money in terms of expenditure cuts. We also believe the government should try to balance a budget during its current mandate. It's very key to our objective.

We realize we all have to participate in this whole exercise, and it's going to be painful. The business community is willing to do its share by recommending that the government eliminate subsidies to business. We're willing to do our share, and we're willing to operate in an environment without any government subsidies and then do our bit to get this balanced budget. That way, we're still paying $50 billion a year in interest payments over the next several years, and that $50 billion in interest payments should be going to other programs.

The Chair: Thanks, Mr. St. Denis.

I cut everybody off. I tried three minutes for the opening remarks, and I know some people were able to respect that. We'll go around the table and allow you to add anything you did not already have the opportunity to put on the table.

Mr. Emberley, you've had your hand up.

Mr. Emberley: Thank you, Mr. Chair. It's very interesting to share in this. I've been attending conferences for much more than twenty years. There's so much information that comes out.

I want to share some information with you to try to be helpful. That's the whole reason I came here. In the last two months I've prepared eight papers, and I'm going to include them as supplementary documents to you. I made a major effort to bring you some information that doesn't seem to be available. It's very important to me, and I think it's very important to you.

.1330

I love this country. I fought and was wounded fighting Hitler for this country to protect democracy. I paid my way. I've worked all my life. I drew unemployment insurance for only three weeks during my whole working career. I worked for the minimum wage for ten years. I know what it's like.

Since I retired eight years ago, I've worked and fought to try to save my country from going into debt and from going to pieces. We've had no success whatsoever, because government and the major corporations, backed by the Fraser Institute and the Business Council on National Issues, have been carrying on wrong-headed policies for twenty years with fierce determination.

I want to draw four key items to your attention, please.

I still have the letter I wrote to Trudeau in 1976 bitterly complaining that it was the fourth year in a row he was spending 25% more than his income. It's been going on all along. It's been going on for twenty or thirty years.

There's only one reason it's so important to shut it down now. I've included in one of my papers a nice little book called Trading with the Enemy. It is mentioned that the businessmen in the United States in 1934 went absolutely berserk with rage when F.D.R. Roosevelt turned communist and starting feeding the starving poor during the Depression. He started putting them in labour camps in the bush and feeding them. Irenee duPont, who owned General Motors, and J.P. Morgan's bank became so enraged that they were caught by the FBI organizing a fascist coup to overturn Roosevelt because he was feeding the starving poor during the Depression. The richest and the most powerful men in the nation wouldn't allow it. They were absolutely enraged. That was in the depths of the Depression.

We have the same kind of people in the depths of this depression carrying identically the same policy. This is a pretty frightening thing.

I have a graph at home that was presented in the House of Commons, and nobody could refute it. It shows that in 1950, individuals on income tax paid $960 million. Corporations paid $980 million. Corporations paid more than individuals. Then a trend started. By 1988 individuals were paying income tax of $60 billion a year. Corporations, after getting refunds of their subsidies, were paying a net tax of $4 billion a year.

If you're a genius and take $60 billion and subtract $4 billion from it, you'll find there's a shortage of $56 billion in taxes paid by corporations compared to the rate at which they paid taxes in 1950. That is where your deficit and debt comes from.

The Chair: [Inaudible - Editor]

Mr. Emberley: [Inaudible-Editor] the three points.

The Chair: That's what I was trying to ask you, because I just wanted to maintain the right of every witness to have equality of opportunity.

Mr. Emberley: Tom d'Aquino's Business Council on National Issues was worth $700 billion...150 corporations in 1988. Four years later they were worth $800 billion. In the first two years of the 1990 depression and in the two previous years, they increased in value by $100 billion and that was because they didn't pay their fair taxes. In Manitoba we created eight new billionaires and 30,000 millionaires in the last twelve years. In the United States -

The Chair: I wouldn't advertise it. You might have a lot of people who want to come here.

Mr. Emberley: - when Ronald Reagan came to power there were 800,000 millionaires. It took 200 years. Ronald Reagan created 700,000 more millionaires and 58 new billionaires in eight years. That is where the money went - all into personal private fortunes, not investment.

The Chair: You have half a minute left, Mr. Emberley.

Mr. Emberley: That's the reason we have this trouble. It's the privatization, deregulation, and looting of corporations and the looting of crown corporations. It's no secret that it's excluded from genteel discussion, from rational inclination. That is why we have the deficit and debt. I'm sick and tired of people lying about it every day, sitting here twiddling their thumbs and twirling their ears.

.1335

The Chair: Thank you, Mr. Emberley. I would like to give other people an opportunity -

Mr. Emberley: I'm not to blame for the deficit. I'm not taking on any of that national debt. It's not my fault.

The Chair: We'll come back to you. I just want to give other people an opportunity.

Mr. Emberley: I don't think I've stolen more than my fair share of time.

The Chair: We'll look at your fair share as whatever.... I want to try to give everybody around this table an opportunity to have the type of opportunity they seek.

Mr. Lindsay: I want to address some issues to David Walker that I've been trying to get to him in person.

As you're aware, Mr. Walker, there's a constitution in this country made up by the British North America Act and the Charter of Rights and Freedoms, neither of which is taught to any degree in our schooling system. The American constitution is important and is taught in detail, but in Canada, from the research I've done in talking to various principals in Winnipeg and around the province of Manitoba, it's hardly even talked about in our schools.

One of the things our constitution does say is that there are certain powers for the federal and provincial governments. The federal government does have the power of interest, legal tender, bankruptcy and insolvency, the issuance of currency and bills of exchange or promissory notes.

Almost all of the money in circulation today is because the federal government has borrowed that money. The federal government has the power to issue the currency of this country for defence, unemployment, social programs, government wages, infrastructure, etc. Why should the federal government, which can make that money interest- and debt-free, unconstitutionally give that power to a private monopoly and then borrow that money back, with compound interest, to the point of national bankruptcy, when we can never pay that damned money off? Answer that, please.

Mr. Walker: Mr. Chairman, the witness and I have met previously and we have discussed this in writing. We have a fundamental disagreement about this issue.

Mr. Lindsay: I still don't have an answer, Mr. Walker. Why should your government...? Paul Martin Sr. issued debt-free money to finance World War II. Why can it not be done today? It was done in the 1940s and 1950s.

The Chair: I'm not sure I understand this. Who should be given this interest-free money that the federal government can print? To whom should we issue this money free of charge?

Mr. Lindsay: Let's say Canada spent $10 billion on defence in a year. That money -

The Chair: Just answer my question. Who should we give it to?

Mr. Lindsay: That money is to be used only for the people, for government services. Get the structure -

The Chair: Okay, so we should be able to print paper money and pay for anything within the federal budget.

Mr. Lindsay: What do you think the banks do? They do the same thing. The only thing is that the banks charge usurious interest and the government has to tax the hell out of every Canadian to pay for it. That money never existed before.

The Chair: I just want to know where you're coming from. We should be able to print money to the tune of $160 billion a year, because those are our expenses, and we wouldn't have to charge taxes.

Mr. Lindsay: That's correct.

The Chair: So taxes are out the window.

Mr. Emberley: Could I also - ?

The Chair: I just want to explain, Mr. Lindsay.

Mr. Lindsay: I want to bring something to your attention.

The Chair: So we have no more taxes; we'll just print money for our expenditures. How do you buy your house? How do you rent your house? Where do you get the money for that?

Mr. Lindsay: I'm not advocating the dissolution of banks. Banks have a necessary -

The Chair: I didn't ask you that. I just want to know how we get money if government doesn't have to worry about it, if we just print money, spend it and get rid of taxes. How do you get money? Do you get it from working and getting a salary?

Mr. Lindsay: Yes.

The Chair: If you want to buy a house, do you have to pay interest on it or do you just have to put so much money down?

Mr. Lindsay: When I buy a house from a bank.... Let's say I buy it for $100,000. I'll put so much money down and the rest is borrowed from the bank -

The Chair: Should you have to pay interest?

Mr. Lindsay: That money never existed before.

The Chair: Should you have to pay interest on that? That's what I want to know.

Mr. Lindsay: At bargain levels, sure.

The Chair: Okay.

Mr. Lindsay: At the bank's operating expenses, you can bargain on that. But the banks should not be allowed to make the money for the country.

The Chair: Okay, I understand.

Mr. Lindsay: On a private level, there is no problem.

I want to point out one thing, if I can take two minutes. I have figures given to be by the finance minister of Manitoba, Eric Stefanson. He expects to collect approximately $1.475 billion in personal income tax, while the federal government is expected to collect $2.95 billion, for a total of $4.425 billion in income tax in Manitoba for the 1995-96 fiscal year.

.1340

I can go through the details on it, but that's not the issue. The fact is that the federal government does not have the power to issue a direct tax on incomes in this country. That is strictly a provincial power. If that money was to be collected only by Manitoba, in five years the entire provincial debt of Manitoba would be paid for, and the income tax rate could be lowered by 60%.

Mr. Discepola: That's the same argument the separatists use in Quebec.

Mr. Lindsay: Why do the separatists want to separate? That's a very good point. The separatists want to separate for one reason - economics. Unemployment is extremely high. I believe it's about 20% in Montreal right now. The basic reason for Quebec's separation is economics. They're not doing too well under Canada and they want the power to....

Certain powers were given to them and the federal government has usurped those powers from the provinces. The provinces have only given these to them and now they're talking about devolving those powers and giving them back to the provinces. Those provinces should have had them from the beginning. They should never have been taken away from them, and one of them is income tax. That's strictly a provincial power, and if anybody doubts that they should read Hansard from the English House of Lords at the passing of the British North America Act in 1867. It was stated on two occasions that the federal government is not to have an income tax, and the only three levels of overlapping jurisdiction between provincial and federal power are agriculture, irrigation and public works. Federal government taxation was never mentioned anywhere in this country, and the Supreme Court of Canada ruled that in 1950. Why are you still taxing us? I won't get an answer for that, will I?

The Chair: You will, Mr. Lindsay. Can you tell us how the taxing powers are divided up under the British North American Act, in sections 91 and 92?

Mr. Lindsay: Section 92 is the provincial powers. It states that the powers of direct taxation can be used within a province and only for provincial purposes.

The Chair: And federal?

Mr. Lindsay: And the federal government was given indirect taxation, the raising of money by a mode or system of taxation. As you will -

The Chair: [Inaudible - Editor]

Mr. Lindsay: No, it doesn't.

Mode or system as defined in Black's dictionary of law, sir, is a method or early system of doing something -

The Chair: I -

Mr. Lindsay: Can I finish here?

The Chair: I've heard you. The courts of England and the courts of Canada have held that there is absolutely no merit to what you're saying, that the federal government can tax by either direct or indirect mode. If you don't like it, that's a different issue. But when you come here and try to give us a legal opinion that is so spurious, you just indicate that you have no credibility whatsoever as far as I'm concerned. Maybe other members here would like....

To other people who have not had an opportunity to get their points across, I'll ask each of you to summarize in 30 seconds before we close off.

Ms Pankiw: Seniors and those approaching retirement are feeling anxiety and fearfulness about their financial situation. The message they're getting is to look out for yourself. They have been used to a value-run community.

To sum up, seniors contributed their fair share to pension funds. They fought for Canadian values and they contributed to the development of our Canadian social safety net. We suggest that the safety net is a must for each and every Canadian.

The Chair: Evelyn Jacks, you were going through your five-point program when I cut you off. We look forward to hearing the rest of it. Will you start with the five points again, so that we see them all in context?

Ms Jacks: This is my first experience at something like this, and it's really been an eye-opener.

.1345

I agree with a lot of what is being said today, and what I'm hearing is that everyone around this table is desperately asking for partnership within our future. We have to take it in that context, that we all have something to contribute as individuals and that we all have concerns about our future.

Before I list the five points, I want to say to seniors here today that there is no disrespect towards your contribution in the past. I guess middle-aged people like me are looking forward to providing the same social services to our children, and that's my main concern in being here today. I don't know how we can provide the same level of social backups to our children if we don't come to grips with certain things we need to do.

One of them is that we need to tackle this deficit. If I leave here today without saying anything else, I would like to urge the Minister of Finance to bring forward a concise, strategic plan to tackle this deficit within our lifetime. I don't know if that's 10 years or 15 years or 25 years. Here in Manitoba we have a plan to eliminate debt in 30 years, and I certainly would like to advocate that the federal government look at something similar.

There are five points, five keys, and none of them are simple. They all have to be looked with great detail.

First is the simplification of the tax system. I strongly believe that we have integrity here, that we must maintain it, and that it's critical for the future.

Second, redefine the mandate of all governments so that we eliminate overlap, starting with the federal government and working all the way down.

Third, because there will be omissions as a result of governments not being able to give the services we all want, I think we have to find ways to allow private enterprise to come in and take care of those omissions in services that are obviously going to happen.

Fourth, I think we need to create a global economy within Canada. I would like to be trading...in fact I currently do have a partnership with a company in Quebec, and I would like to do more of that as a business owner. I think one of the problems we face in Canada is our sheer distance, the fact that we're too far away from each other. If we could go to Montreal with reduced air rates to let people know during the referendum how much we love them, let's do that all the time. Let's make sure we tell them, get to know each other, trade with each other and make sure we actually prosper together before we look beyond our boundaries.

Lastly, I think all of us as individuals have a responsibility, but also those in government. I challenge you to establish accountability within your ranks so that there is some kind of a system of establishing a mission, goals and objectives within all of your departments. Then we can in fact be responsible for things that we do on a day-to-day basis, whether it is private enterprise or in business. I believe the result is that we will have a more prosperous Canada in general. So the whole aspect of accountability - not in the negative sense but rather in the positive sense - I think is very important as we go forward.

Thank you very much.

The Chair: Thank you, Ms Jacks.

Mr. Roth, before we go around....

Mr. Roth: If you wouldn't mind.... We brought three issues forward today. Two of them were the GST and payment in lieu of taxes. Basically, that is just who should pay who what amount of money in taxes. I realize that we're both in the same situation, we both want to have the other level pay as much as they can and not pay anything more than we have to. All we're asking for in terms of those two is fairness between the federal government and municipal government.

We'd like to spend a minute on the infrastructure program, an issue that came up earlier. We feel very strongly about the program because it was very successful in Manitoba. We believe that a continuance of the program throughout the country will possibly not only help municipalities but certainly provincial and federal governments as well because there are a lot of good aspects to it.

First of all, I think we all are very aware that each of us paid one-third of the cost towards the program, so the cost is actually split the three ways. None of us gets hit for the total amount.

One thing we'd like to emphasize is that this is also open to private enterprise to participate in. That's one of the areas we'd really like to see expanded. There have been some good examples in Manitoba of private enterprise getting involved in some of the infrastructure programs, and that's where we'd like to see the money coming from as much as possible - private enterprise contributing to the cost of infrastructure.

The example we'd bring forward is the natural gas expansion in parts of Manitoba. I think that was an excellent one. We saw some private money coming into that one as well.

.1350

The program created a lot of jobs. It created a lot of economic activity. I think these are points we want to make an issue of because the jobs and the economic activity bring us all further revenue. Whether it's provincial, federal or municipal governments, the revenue generated by that economic activity gives the return on the cost to us. So the money we put into it is reduced substantially by the activity coming back out of the jobs that are created.

The other point we would like to make is with regard to the duplication of services. I think that's something we spoke about earlier. There are a lot of areas we could look at such as transportation. As the deliverer of economic development services, there are three different levels offering economic development programs. I think those are areas we can work together on rather than each doing our own thing. We would really appreciate the opportunity to work with the federal government to review the delivery of services and see where there is duplication and reduce that.

The final point we wanted to make - and it's been expressed here earlier today - is that we have to all remember there's only one taxpayer, whether paying provincial, federal or municipal taxes. We all get the money from the same source and that's the one taxpayer, and I think we have to work together on that. Thank you.

The Chair: Thank you.

Would you like to have a summary, Ms Rempel?

Ms Rempel: One point I would like to emphasize is the area of research. We realize and agree that current research priorities must be continually reviewed and updated. Research targeted through the agriculture sector is vital for the future sustainability of our industry. Primary production of food is the basis and the very foundation of a strong national economy. We urge you to use a great deal of care and prudence in where budget cuts are made, and how and when. We look forward to continued consultation with you.

The Chair: Thank you.

Mr. Lindsay, you have 30 seconds.

Mr. Lindsay: Basically, sir, I'll leave you with two quotes from a former director of the Bank of England, the second richest man in England in 1920. He said that all complexities, confusion, distress, strength, economic depressions, instabilities, inflation and devaluation, experiences of the world, rise not from defects in constitutions, not for want of honour or virtue in common people, not from a desire to be selfish or to see others suffer, but from the downright ignorance of the nature of money, the nature of credit and nature of financiers who control and manipulate them. Until the privileges and powers of private bankers are taken back from them, and nations and their people recover that which has been appropriated by them, great fortunes, indentured servants, exulted elite, demagogues and autocrats in government as their pawns will remain.

The Chair: Thank you very much. Mr. Roth.

Mr. Roth: We're very appreciative of having the opportunity to meet with the finance committee, and we certainly look forward to consultation in the future to address some of the economic woes of this country. Thank you very much.

The Chair: Thank you. Mr. Marion.

Mr. Marion: I also am appreciative of being able to be before you today.

To the Manitoba caucus, I look forward to their hard work and efforts to stabilize the Whiteshell Laboratories situation. I think more than anything it should be viewed as an opportunity. Once you have the opportunity to get a partnership, possibly with the province and surely with private enterprise, it will be nothing but a big asset that will generate a return for us as taxpayers.

I also would like to thank the committee members. I appreciate that there has been some frustration expressed today. It's certainly quite a task you have before you. I don't envy you for having to be in that position. It's quite a difficult task, and I wish you good luck on that.

The Chair: With your help. Thank you.

Evelyn Jacks.

Ms Jacks: I too would like to express my appreciation for the opportunity to speak to you today, and to extend to you a sincere hand and help we can give you at The Jacks Institute with regard to income tax legislation and its simplification, or in any other way.

I would like to leave you with two thoughts. First, I believe that together we must make it our goal not to spend any more money than we take in, and to do that immediately. Second, it also must be our goal to create wealth in this country.

The Chair: Thank you. Mr. Emberley.

.1355

Mr. Emberley: Thanks, Mr. Chairman. I wish to thank you for the opportunity. I want to thank Martine Bresson for assisting me to come here. And I want to thank you for the design of your format. Rather than just one single presentation, and then that's it, there is almost a dialogue. You've initiated a constructive process with this format; I'm very grateful.

If any of you folks want to have some fun and get a university degree in economics for $30, go to the CBC and get a copy of last week's Massey lectures by John Ralston Saul. You'll learn more from that set of tapes than the average person learns in four years of university

Thank you, Mr. Chairman. I have a copy -

The Chair: Thank you, Mr. Emberley. Ms Pankiw.

Ms Pankiw: Mr. Chairperson, we also express our thanks for the opportunity to be here and to communicate to you and the group. In closing, we suggest that everyone pay their fair share of taxes.

The Chair: Thanks, Mary. And lastly, Andrew.

Mr. Alleyne: Mr. Chairman, again I express the committee's appreciation for the format of this discussion. I think it has been a very useful process.

The Winnipeg Chamber of Commerce does represent 1,300 member firms. About 62% of them have fewer than 10 employees. The business community is just seething to create jobs. If we can reduce government red tape and get the deficit and our taxes down, we can create a lot more jobs and contribute to our community. Thank you very much for that opportunity.

The Chair: Thank you very much. To all of you who thanked us for being here, that's not the point. We're grateful for your gratitude, but we are even more grateful for your being with us and bringing us your unique experiences and ideas. We've had a real diversity of issues here.

We know the agricultural sector has been hit badly. We've made the most fundamental change in terms of getting rid of the Crow rate subsidy that had been in existence almost all of this century, and we know it's not easy on you.

Mr. Lindsay, I wish the world were as it were.

On municipalities, you have pointed out to us - I think you've driven home to me personally - how important it is that we, all levels of government, get our act together.

Everybody here has talked about ending duplication. We are over-governed. If we were setting out from scratch to design a system of government in this country, I am sure we would be able to eliminate many layers of government and many layers of duplication and overlap. That's going to be a challenge for us: to get more out of the system, more for the people, looking at who can best deliver services and who should be delivering them. This is going to be an interesting challenge that we face together.

Mr. Marion, you're part of that. You also have the great disadvantage of being a single-industry town. It's great to see you fighting for it, and we know how difficult that issue is.

You've given us some very excellent ideas, Evelyn Jacks, about some of the principles we should keep in mind: simplification, privatization in some areas, reducing barriers to travel within Canada. If we could do it in one day, why couldn't we do it otherwise? Why is it cheaper to fly to Florida than to Vancouver?

Mr. Emberley, this is going to sound terribly patronizing, and to Mary and Albert as well, but my goodness, to see people who are so vigorous intellectually and fighting so strongly for the things you believe in is an inspiration to us. You've made very important points to us today. We won't forget them.

And Andrew, the chamber has played an important role in giving us specific ideas. We look to the chamber not only for its role in advocating cuts to the deficit and the debt, but we are looking to you also to create those jobs of the future. We'll work with you.

On behalf of all members, I would like to thank you all for an excellent presentation.

We adjourn until 2 p.m.