EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 29, 1995

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[English]

The Vice-Chair (Mr. Campbell): We are resuming our pre-budget consultations in St. John's this afternoon. I'm Barry Campbell, chair of this session in St. John's. I'm joined by other members of Parliament from all political parties: Dianne Brushett, Gary Pillitteri, Yvan Loubier, and Monte Solberg.

We have a number of witnesses this afternoon who have taken time out of their day to come to talk with us. I'm going to introduce you now, and then I'll just say a word about procedure.

With us are Earle McCurdy, from the Fish, Food and Allied Workers; Tracy Perry, of the Bay d'Espoir Chamber of Commerce; and J. Nelson Bradbury, from Bradbury and Company Consultants Ltd. Jorma Torkkeli is with us but has not come to the table, so I'll introduce him later. We also have John Scott here, from the Canadian Federation for the Humanities; Keith O'Neill, from the Newfoundland Home Builders Association; Doug May, from the P.J. Gardiner Institute for Small Business at Memorial University of Newfoundland; Lynn Peddle, from the St. John's Status of Women Council Women's Centre; Susan Adams, from the Women's Enterprise Bureau; and finally, from the Newfoundland and & Labrador Federation of Students, Zaki Saleemi.

I'll say a word on procedure. What we've been doing in these panels is giving witnesses an opportunity to give an opening statement in the range of five minutes so as to allow everyone to speak, although there is a bit of latitude. That is followed by an opportunity to react and respond to each other, and then there is a time for questions from the members of Parliament who are here.

The reason for the short opening statements is to hopefully encourage you to focus on the most salient points that you want to leave with the committee. It is often the case that sometimes what you say in the most succinct language is what we can take back most easily, but that's not to make light of or simplify what are very complex questions.

With that introduction, I will turn to Mr. McCurdy.

Mr. Earle McCurdy (President, Fish, Food and Allied Workers): Thank you,Mr. Chairman. I appreciate the opportunity to participate in this round table.

As it was only confirmed yesterday that I was going to be here, I would appreciate your forbearance on two points: firstly, I don't have a formal, prepared statement or anything to present, although I could make a few remarks; and secondly, at such short notice, I was unable to change a prior commitment, so I'll only be able to stay until about 3 p.m. or so. I will participate to that extent, though.

My remarks are perhaps more general than the specific questions might suggest, although I think they deal with those points, at least to some extent.

On the question of a deficit reduction target, one thing that concerns me is that the question is being looked at without any discussion of what will be an unemployment reduction target or an interest rate reduction target. Those are at least equally important, and depending on the answer to those, they could in fact go a long way towards successfully accomplishing an appropriately set deficit reduction target.

It's not possible to achieve a reduction of the deficit to a level that is desirable, necessary or acceptable simply by conscripting those at the lower end of the economic totem poll to engage in a war against the deficit and the debt. It won't work that way. There is no way sufficient savings can be realized. Ultimately, the glue of the country will become unstuck in such a process.

On the whole question of creating an environment for jobs and growth, I believe we really need, at the national level, a redefining of the whole notion of work. We have declining jobs in the conventional sense, and a combination of automation and new developments in the economy. I think, for example, active encouragement through direct action in public agencies and through things like tax incentives in the private sector to reduce work weeks would involve more people and share the available work. This would be productive, because what we really have to do is find a way for the benefits of the record-high productivity in our economy to be shared fairly in our society.

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I think this is a critical question, which I would certainly like to have seen on the short list of questions being examined by your committee.

There are a few fundamental contradictions or things I'm just trying to get my head around and reconcile in what appear to me to be conflicting aspects of public policy in the country.

For example, in the mid-1990s the national policy basically accepts national unemployment at the rate of 8% to 10%, in that range somewhere. There's the infamous NAIRU, which is not the former Prime Minister of India, but the non-accelerating inflationary rate of unemployment. Any lower level of unemployment in the country than about 8% or 9% - experts argue exactly where it falls - is seen to be counterproductive because it would fuel inflation.

So on the one hand we're saying we're going to be in the order of 1.3 million to 1.5 million jobs short in our country, while at exactly the same time, we're doing the opposite of what one would think would be a rational corollary to this. We're talking in this country about cutting back on the unemployment programs and making life more difficult for those who are unemployed. We're saying to people that, if you pull yourself up by the bootstraps, there's a job there for you.

Well, the reality is, no matter how hard people pull on their bootstraps, there are about1.5 million jobs fewer than there are people looking for them. And while individual diligence may change the identity of the person who falls off the short end, nonetheless there's going to be1.5 million of them falling off this short end. So it seems to me to be a fundamental conflict.

The UI program, in particular, is an attack on seasonal workers. At the same time we hear the promotion of tourism as a growth industry, when it's one of the most seasonal industries we have.

We're constantly told, some might even say lectured, about the importance of education and training. At the same time, there are major cutbacks in post-secondary education funding.

We had a Minister of Finance who went on the public media and said there would be no new taxes. Yet people who have to work on fishing boats just got hit with perhaps proportionately the biggest tax increase anyone has ever seen in this country in the license fees they have to pay.

We have an attack on the Canada pension plan, which is a program for all Canadians, when the $12 billion to $14 billion - I forget the exact figure - of write-offs in the RRSP program are seen as sacrosanct. I'm not advocating you make all that taxable. I'm saying the debate doesn't even examine what are the appropriate levels. There's no balancing done. We're told leaving RRSPs alone is the right way to go. RRSPs are, in practice, a pension program for only a portion of society in their actual application, and the CPP, which is everyone's pension plan, is under attack.

In summary, I guess we are in the middle of a campaign for national unity at a time when the programs uniting Canadians are being systematically undermined. I think the unity objectives are always going to suffer if we don't come to grips with what it is that makes Canada a distinct society. We have to come to grips with how we're different from our neighbours to the south, and certainly the historic development of Canada has been on a different philosophy.

So I think if we have to drop the fixation, obsession, fetish - whatever is is - with inflation. Obviously, inflation is an issue and a concern, but it's become an obsessive concern, in my view.

Also, a relaxing of interest rates would bring a lot of benefits with it. The post-inflationary interest rate in Canada in the last 15 years has been six times what it was during the previous 30 years. We can make life as miserable as we like for the 2 million, or 3 million, or 5 million Canadians at the bottom of the totem pole, and the fact of the matter is if we don't do something about interest rates, we'll still have horrendous debt and deficit problems.

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So I guess if the deficit is so important, those at the upper end of the economic ladder shouldn't mind being conscripted to go shoulder to shoulder with those at the lower end. Thank you.

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

Ms Perry.

Ms Tracy Perry (President, Bay d'Espoir Chamber of Commerce): I haven't prepared a formal opening statement either. I wasn't informed about that. But I did prepare a few points on the questions, so would you like me to touch on a few of those?

The Vice-Chair (Mr. Campbell): Certainly. Let me just say, for the benefit of all witnesses, that this is quite informal. I didn't want to suggest people had to have prepared remarks. It is often best if you don't. Just speak to what is very important to you, and try to respond to the questions. They were meant to create a bit of a guide and generate some discussion.

Ms Perry: Okay. As you stated earlier, I am the president of the Chamber of Commerce. Before coming here I met with the Chamber of Commerce to try to get some of their opinions as well.

I am also working with the provisional boards that are now in place trying to set up the new regional economic development board, which is what the provincial government in Newfoundland is doing for our community and economic development. So I spoke with some people involved in that as well.

Some of the main comments that came back were with regard to what our deficit reduction target should be. There is a strong feeling by business people that there are far too many programs, far too little awareness and far too much administration.

The feeling was government should govern, but not try to run a business. There is great concern over the standards that are going to be maintained for our country regarding health and education with the constant cutbacks to those two critically important parts of our economy.

As opposed to cutting back jobs in other sectors, health and education are the areas we should be looking at for keeping more people employed and ensuring we actually do increase our standard of education and certainly maintain our level of health.

Another big issue that often comes up and that everyone often talks about is how government always says it is laying people off and saving money by decreasing the size of the civil service. But what is actually happening in some parts of Newfoundland - what we have witnessed anyway - is that people are getting laid off as civil servants, receiving severance packages and then getting hired back as consultants for $200 to $300 a day. They are far better off than they were when they were on the civil service payroll, and the money is certainly still coming from government to them as consultants.

There is also a feeling that the price consultants charge to government as opposed to what they charge to business is absolutely ludicrous. If they know government is footing the bill, what they charge is way over and above what they would charge an average business person.

That was regarding the target for the deficit. If you are laying people off, then lay them off and encourage them to become involved in private sector businesses or whatever, but don't give them a severance package and keep paying them as well.

How may budget measures be used to create an environment for jobs and growth? This is really a hard one for everyone to get their heads around. But an attitude exists out there in the middle-class society, or the lower- to middle-class society, especially in rural Newfoundland. Why would you want to go to work? If you go to work you have to pay taxes, you have to pay for your children's medicine and education. If you go to work and you want to put your kids through university, you almost can't, because they can't get student loans since the money is based on your gross income.

It is almost like you're penalized for wanting to go to work, whereas if you are on welfare everything is paid for and you don't have to pay as much tax. There is a very real problem with attitude out there, and there is no real incentive to go to work.

There is another thing in terms of creating an environment for jobs and growth. The private sector is very, very upset at some of the initiatives of ACOA. There is a strong feeling that there is an unfair amount of dollars given to the private sector for competing with private enterprise. And there is a question as to the true net economic gain, because if government funds a business, then in a lot of instances in Newfoundland what has happened is another existing business goes bankrupt.

What is happening is that people in the private sector who would normally be borrowing and using their own money are leery of doing so. They are afraid the government is going to give someone else money and put them at an unfair advantage. So that is a very real problem in terms of creating an environment for jobs and growth.

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Another real problem we have in the private sector is with the people who do actually go to government agencies looking for money to start a business. They have to go to ENL, ACOA, and several different agencies. There are three federal agencies that give loans to business: FBDB, ACOA, and what used to be the Business Development Centres, which all have different names now. All three are federally funded agencies.

It's very confusing for the private sector business person, particularly when they go to ENL and ENL says they have to wait to hear what ACOA says, and ACOA says they have to wait until ENL comes back. Everyone has been asked by business people what they are doing in there, and it goes back and forth, back and forth for three or four months with one waiting to hear what the other one's going to say. It's unnecessary duplication, and by the time people actually get responses, in a lot of cases some people are so frustrated that they've just given up anyway.

So it's really too much duplication and too many government departments to have to deal with. The idea of a one-stop shop is really looked upon favourably in our area.

One more thing was said in regard to the unemployment changes that are being talked about. If the changes are as drastic as they are rumoured to be, then it's going to be very, very severe for rural Newfoundland. It's not going to be the answer. If anything, it's probably going to shut down a lot of parts of rural Newfoundland. I think more has to be done in terms of looking for real incentives there.

The Vice-Chair (Mr. Campbell): Is that about it? I'm just cautious of the time. Do you want to hold your other comments or do you want to take a quick stab at the third question? You were diligently going through the questions.

Ms Perry: I'll leave the third question.

The Vice-Chair (Mr. Campbell): Okay, but don't forget to come back to us as other opportunities present themselves. I want to get everybody's opening statements. Thank you.

Mr. Bradbury.

Mr. J. Nelson Bradbury (President, Bradbury and Company Consultants Ltd.): My name is Nelson Bradbury. I am a registered public accountant, also of the firm of Bradbury and Company Income Tax Consultants operating here in St. John's. I guess I view my presence here as the voice of a small independent business person who's been in business for approximately 20 years.

I'll just try to address as quickly as I can the three questions you've raised.

As far as deficit reduction goes, it is my feeling that it should be reduced to zero in a five- to seven-year period. I feel there is an extensive number of areas that can help achieve this. I guess what it all boils down to is that there's basically one pot of money we have to work with; whatever has to be paid into that pot of money has to be paid, and it's only to that extent that you can pay.

In my view you have to look at some of the larger government-sponsored programs that are on the go. I'm going to raise one here that I know is a sore point, and that is the TAGS program here in Newfoundland, which from what I understand is costing something in the area of $2 billion over a four- or five-year period.

You talk to a lot of small business people who for one reason or another go bankrupt or lose their business. They don't get any compensation. There's a construction industry out there that's in dire straits, which I'm sure you'll hear about a little bit later on. They don't get any compensation. I guess they get a lot of sympathy from people, but they don't seem to get anything out of it.

We have the UI program, which costs billions of dollars a year and which in some cases, in my view, makes excessive payments to people who may work for five or six or seven months and earn $50,000 or $60,000 and still qualify for UI benefits. The same is true to some extent with regard to people receiving benefits under the tax package.

I think there should be a strong review of that. What I mean by that is that we're probably looking at a 20-week benefit period or something along that line. I'm not saying that would apply to everybody, but most certainly there are some people out there who get UI when they don't need it at all, even though there's some clawback in the tax system. You should probably look at a work-for-welfare program or a work-for-UI program.

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There should probably be some elimination of some of the early retirement packages given to federal civil servants. From what I understand, it is going to cost $1.5 billion during the next year to get rid of x number of federal civil servants. Unfortunately, we fellows in private enterprise don't have the luxury of being able to pay one of our people who has been with us for 10 or 15 or 20 years a $50,000 or $60,000 or $70,000 retirement package. I fail to see why a civil servant should expect any more. There are no guarantees.

There should be a look at a roll-back of government employee wages and benefits and a reassessment of levels of pay for government employees.

There should be a look at the cost of the operation of government itself. I refer to your committee here, which I'm told has 31 members on it. I don't know how many of you are here with your support staff, but when I look around and see eight or nine people, I'm sure the same could be done with a bit less cost with maybe fewer people.

The Vice-Chair (Mr. Campbell): Excuse me, Mr. Bradbury. Because we do such phenomenal work, you might think there are more of us than there are. There are only 15 parliamentary members of the committee, and we have split in two to travel across the country for these hearings. We also have alternate members who fill in when we're off on other duties.

Mr. Bradbury: Okay. I appreciate that. It was one of your own staff members who mentioned that.

The Vice-Chair (Mr. Campbell): Even the Reform Party participates.

Mr. Bradbury: Bless their hearts.

We should look at the elimination of some subsidies that are presently being paid to various industries, farmers, whatever the case may be.

You certainly need to look at your military. For example, I looked at a program last night, I think on the Discovery channel, and they were designing a helmet for the Canadian forces at God knows how many million dollars for just the design. I'd suggest that, among the U.S. forces and the German forces and whatever other forces there are around the world, surely to God we can find a helmet to fit our people without spending a whole bunch of money on it.

Those are my comments on your first question. I'm trying to be as quick as I can here, because I probably have too many. I didn't spend a lot of time of this. I didn't think a lot of things out, and I'm sure that a lot of people are going to have something to say about it.

As for the budget measures to create some environment for jobs growth, you might want to look at the employment within the civil service, the amount of overtime, the amount of contracting out.

Again, there is the work for UI situation. Here in Newfoundland we can use some people for enforcement and enhancement of our recreational fishery. These would be new jobs. I'm not saying take jobs from somebody else out there, but there's work to be done. You're paying some people some money, so why not, for example, let some of these people get some use out of that money?

You might look at some tax breaks for new corporations, what we would define as a Canadian-controlled private corporation, which is basically a small business corporation. There have been some breaks for them in Newfoundland.

You should look at - and I know that it is being looked at - the combination of GST and PST. That should cut down some overhead and probably would provide the opportunity for some jobs.

There should be some provision for civil servants who accept retirement packages not to go back into the workforce. That is happening extensively around here.

Do you want me to pass by some of this?

The Vice-Chair (Mr. Campbell): If you'd wrap up -

Mr. Bradbury: I'll just approach the third area of concern that you have with regard to what federal activity should be considered for further cuts or commercialization or privatization, as the case may be.

Look at the CBC, for example. I know that they've suffered heavy cuts recently, but maybe they shouldn't even exist in the form in which they exist.

You might look at privatization of some areas of work being done by various government departments.

Look at government space. Here we look at the RCMP building. I had the opportunity to go through it. The facilities they've got up there amaze me to no end. I can't understand why it's so extravagant. So I'm sure there's some room there. Maybe you want to sell that building to private enterprise and rent it back to the RCMP, or whatever the case may be.

I'll leave it at that for now. I could go on, probably for too long.

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

We'll move next to Mr. Scott.

Mr. John A. Scott (President, Canadian Federation for the Humanities): Now for something entirely different.

Thank you for the chance to offer three comments on your questions. I'll try to keep them precise.

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The target should be 3% of GDP, as recommended last year. Don't try to cut more deeply. Some would argue that the target must 1% or 1.5% deeper than the 3% target spent last year. However, in my view to aim for a more ambitious target is political cowardice at the moment.

Four weeks ago Quebeckers demonstrated a level of faith in their own future that was profoundly shocking to the rest of us. But it was an experience of faith the rest of Canada needs to catch.

In that respect I believe Mr. Bouchard is right. We woke up on Tuesday morning four weeks ago and asked ourselves, do they really think the financial future is so secure that they're willing to take that kind of chance?

Perhaps Bouchard and Parizeau told lies. Perhaps Quebeckers are more gullible than others. But perhaps there is another lesson to learn from the Monday night dance on the edge of disaster. Perhaps Quebeckers were saying the future is not simply that bleak, impoverished place to which all our youthful wastefulness has condemned us. Perhaps Quebeckers were saying to themselves and to the rest of us that it's time to see the future as equal to the task of sustaining our national wealth, including our national indebtedness. But we'll have a strong future only if we attend now to the needs of our nation and not just the needs of our bankers.

Yes, there is a constant need to set and achieve deficit reduction targets; and we did that two years ago, three years ago. We set it at 3% for next year. Don't be tempted to go deeper than that.

We must also be morally and politically responsible, even courageous. Our schools and hospitals are decaying. Our young people are being nourished on fear and frustration. It's time we turned our nation's attention to the human deficit.

The 3% deficit reduction target should be achieved by maintaining steady as she goes. Do what you're doing now. Keep the sensible, prudent fiscal strategy you have in place, but don't try to go for the bigger grab. It will destroy us.

We should also invest a portion of what we don't grab back, beyond that 3%, in long-term deficit reduction strategies. Particularly, I recommend your attention to the NABST report. The National Advisory Board's report on science and technology contained, in detail, some very clearly, practically thought out, recommendations from the industrial community, from the commercial community, from the science and technology community, from the humanities community, that I believe should not be ignored. A kind of feeding frenzy on the deficit is, I believe, distracting us from some of the longer-term issues and strategies that report contains. I'm not going to detail them here. You want us to move on quickly.

How can we use budget measures to create an environment for jobs and growth? They're crude, sometimes effective. Last year's measures, by and large, were both crude and effective. This year I fear there will be a temptation to do more of the same but raise the stakes.

The Reform Party is now setting the national moral agenda. Because of that the federal government may feel it can hide behind that moral agenda being set by Reform and it has a unique opportunity to tighten the belt just that final bit. Then we can slip back into easier spending practices maybe three or four or five years from now.

That's cynical. To grab the kind of frenzy, panic, we have at the moment and make Canadians pay more now while the hospitals are decaying is political opportunism, I think, that we must not allow ourselves to do.

I did strike out a piece here, but since Earle has made it, I'll make it too.

There is money in the pension plans now such that if we set up a proper taxation system it could invite reinvestment of some of the current pension scheme. I know the pension plans five, ten, twenty years down the line are looking bleak. But if there were a proper taxation environment now for reinvestment of some of the surplus, I believe some of the pension plans would be very useful.

My final point is this. You ask what areas of federal activities should be considered for further cuts, commercialization, privatization, and so on. My first recommendation is that you look at, listen to, and implement the reforms proposed by the auditor general, that poor, ignored gentleman sitting up there in Ottawa. He does a real public service that is too often ignored at budget time.

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Second, the surgical removal approach may not be the therapy of choice in all cases. Reconstructive measures may soon be needed if the federal government is to remain effective as a government. Canadians must come to experience Canada as a place, and this is a real problem. Quebec is a place, Newfoundland is a place, but Canada is not yet a place in our own imagination - that's a serious problem.

The government has a job to do in reconstructing Canada so it can be experienced as a place. In practical, budgetary terms this reflection reduces to the recommendation that the federal government consider extending its jurisdiction and its powers of taxation to enlarge its environmental and cultural authority in order to protect Canada as a place of its peoples.

I'm saying that we should maybe think of new kinds of taxation relating to culture and environment. New kinds of authority, constitutional authority.... We talk about dividing up the constitutional pie as it now exists. What's wrong with enlarging the constitutional pie? There are new powers that Canada should begin arrogating to itself in terms of the environment and in terms of culture. I say this because it is increasingly urgent, it seems to me, not only in the face of Quebec's increasingly self-imposed isolation but also in terms of what NAFTA is beginning to do.

The Vice-Chair (Mr. Campbell): As a clarification for the benefit of the panel here and of listeners, are you saying basically to maintain a $25 billion deficit, and we if get down to 3% that it is sustainable?

Mr. Scott: Yes.

The Vice-Chair (Mr. Campbell): You wouldn't try to chip away at that $25 billion, but rather continue adding to the debt $25 billion a year?

Mr. Scott: No.

The Vice-Chair (Mr. Campbell): I'm sorry, no or yes?

Mr. Scott: I would aim for, as your own projections put forward last year, hitting the 3% of GDP as our deficit reduction strategy target for the current year and maintain that.

The Vice-Chair (Mr. Campbell): Forever?

Mr. Scott: Forever. Part of our wealth is in our capacity to become indebted and work that through. I don't see any problem treating debt as part of the wealth.

The Vice-Chair (Mr. Campbell): All right, I wanted to clarify. In regard to your comment about investment from surplus in pensions, which pensions were you talking about?

Mr. Scott: I'm picking up on Earle's point about RRSPs, the private investment schemes that are out there. My understanding is - I don't know the details, Doug or Earle may be able to provide us more - that there is a current surplus in many of those programs.

Mr. Pillitteri (Niagara Falls): There ought to be surpluses if they're there.

Mr. Scott: And healthy ones, but perhaps they're healthier than they need be in the current environment.

The Vice-Chair (Mr. Campbell): So keep adding to the debt and -

Mr. Scott: That's your version of what I'm saying.

The Vice-Chair (Mr. Campbell): No, I want to make sure I understand, because it is a contrarian view. Others have disagreed about how to deal with the deficit.

Mr. Scott: Maintaining a sensible level of debt is what I'm saying - not to think about it.

The Vice-Chair (Mr. Campbell): We have over half a trillion dollars of outstanding debt. Clearly you think that's sustainable. How much further would you go?

Mr. Scott: I wouldn't like to go too much farther, admittedly.

The Vice-Chair (Mr. Campbell): So we go at $25 billion a year under your scenario that -

Mr. Scott: My projection at the moment is based on the natural encouragement of the economy that will come from an appropriate way of doing that. Attack those levels of indebtedness independently. We don't have a status quo.

The Vice-Chair (Mr. Campbell): I thought that was missing from what you said and I wanted to give you a chance to say it.

Mr. Scott: Sorry, that was missing, I apologize.

The Vice-Chair (Mr. Campbell): All right, thank you.

Mr. O'Neill.

Mr. Keith O'Neill (President, Newfoundland Home Builders Association): Thank you. I'm very pleased to be here this afternoon and I will try to present the views of the Newfoundland housing industry as they pertain to our province. As you know, you've already had a very concise overview from our national organization, the Canadian Home Builders Association.

We would like to go on record here as supporting those views. We spent tens of thousands of dollars in researching those points throughout the whole country in terms of how they relate to each province. My purpose here today is just to put a Newfoundland perspective on our housing industry.

I didn't take the points per se, but I would like to break them down in my own way. On the first one, the deficit reduction, we are basically in agreement with the approach that we just don't think we can sustain a greater deficit, adding on each year. We have to tackle this, and we are bothered by the detrimental effect it would have on future generations.

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However, let me take one point that really affects our industry - and it affects all Canadians. We feel, and it's been our opinion, that in the last year or so we've been almost in a void of leadership, especially on the economic level.

We give great lip-service to different things that people say are important, but let's take the underground economy. This is one area that really affects our industry but also affects everybody in Canada. We talk about deficit reduction, but there is revenue out there that's being lost. It's not being collected, and so there's no revenue from it. We, as Canadians, are suffering. You have on the one hand a certain segment of our society paying taxes, and you have this underground flourishing, increasing as a part of our society.

We have Revenue Canada talking about it. We clearly think it's only been given lip-service and so let's do some positive things. For example, what we're doing in our industry here in Newfoundland - and some other provinces are doing - is that we are now contemplating and trying to achieve certification of the different people who will belong to the construction industry. In this way, it will be possible to keep proper records of the workmen's compensation record, the employment record and everything else. We are trying to do that. It will add professionalism to our industry, but it will also cut out one segment of the underground economy. We really think the revenues the government could get back and could obtain from that part of our society are really amiss and there should be more of an effort made than the lip-service that is done now.

The issue I'd really like to talk about here today is your part B, jobs and growth. We in the housing industry in Canada are off approximately 40%, and in Newfoundland the starts are off 40.2% this year. Interest rates alone are not going to act as a stimulus to promote our industry. Right now, it's the lack of job and employment security that is the greatest factor causing fewer home starts.

What we find is that the federal government isn't providing any clear.... I talk about this void, this vacuum; there is no leadership. It's almost like their attitude is that things will get better down the road. But we have made several proposals that will act, we think, as a stimulus. In no way do we endorse the false stimulus of perking up an industry just to get it going for this year.

But we have put forward four points. They have been stated before by CHBA, and I'll just mention them here. However, there's one I would like to expound on.

The four points are these.

First is that we remove the goods and services tax from the land component of new home construction.

Second, we would increase the home buyer rebate to 4.5% from the 2.5% presently in place.

Third, we would make the renovation rebate a more practical and attainable proposition. Right now, this is a nebulous area of where do you really qualify for the GST rebate?

Fourth, our main point is the expansion of the use of RRSPs in our industry. We would like to make a strong case for this last proposal to be given serious consideration.

Whereas it's the dream of most Canadians to own their own homes, it has always been considered a God-given right of Newfoundlanders to do so. We Newfoundlanders are a very close family society. Our experience in the home industry is that there is a great deal of willingness by parents to assist their children in obtaining new homes. However, the savings of the parents are often tied up, and mostly in RRSPs.

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We strongly urge the government and your committee to consider the expansion and the recommendation that families be permitted to use these RRSPs to assist members of their extended family, their whole family, not just spouses and not just first-time buyers, in obtaining a new home. We feel that these measures, the expansion of the housing industry, can be revenue generating and can be a positive means of creating new jobs.

Thank you.

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

Mr. May.

Professor Doug May (P.J. Gardiner Institute, Memorial University): Thank you very much, Mr. Chairman. I'd like to thank the committee members for inviting me here today. I was asked to represent P. J. Gardiner, but I'm just another academic face at Memorial University, an economist by profession.

I've entitled my remarks, the few that I'll make, ``Hitting the Shoulder on the Fiscal Highway'' and since we're here in Newfoundland, the highway we're referring to is the TCH, the TransCanada Highway.

We live in interesting times. The economic and technological factors coupled with changing ideologies are creating new institutions and production arrangements. One senses that somehow fundamental shifts are occurring that will end paradigms, I think, can be traced back to the early part of the 19th century.

It's quite interesting when you look at economic history and see some of the institutions that the federal government has or the activities they're involved in, and to see how these activities started in the 19th century. Bureaucracy and institutions have their own lives, so they keep going.

We seem to be moving toward large trading blocs with global companies in a knowledge-based, image-based world. The standards deemed to be important to citizens and the rules under which we operate are increasingly determined in the international arena. At the same time the consumer/taxpayer wants goods and services that meet his particular preferences and needs.

What does this mean? In some sense, it means that power and rules under which we operate are being passed up to international governments and are being set on the international stage. For instance, as far as environmental regulations go, things we like to do are governed as much by our interest rates, and are partially governed by what happens in Washington, maybe even more so by what happens in Washington. At the same time, the consumer - and we see it here with school boards - wants control of the schools.

When we look into the 20th century, we see that parts of the activities the federal government is now engaged in become less relevant and the functions become less relevant. At the same time, the message for rent-seeking provinces is that they are becoming less relevant too. The power will increasingly be passed beyond the provinces down to the individual citizen. So I anticipate with a certain amount of interest the measures Minister Axworthy will be announcing in the next couple of days, because I think, maybe because of his background as a political scientist, he understands this paradigm.

What will be the role of the federal government, with or without Quebec or whatever? I think the role of the federal government will be that of trying to negotiate in the international arena for those partners who are in Confederation and trying to make sure there is a smooth functioning of the economic union.

Mr. Chairman, let me turn to the three questions before us. Let me say in a management sense - because I do teach in the faculty of business administration - that so often the way we seem to deal with things is by what's happening in 1995-96 or by what's happening in 1996-97.

I suspect that any manager, any business person, who's involved in these things doesn't think two years ahead, and neither should members of Parliament or the federal government. They should have their attention clearly focused on the next ten or twenty years. Where in fact do we want to be? How in fact can we get there? It doesn't matter what the Confederation looks like. That world will be the same, because it's not controlled particularly by us.

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Deficits are important simply because they are a warning sign about what we should do. However, I really don't like the questions as they are set up, since they seem to indicate a world without deficit is the ideal world. What does that mean? Does it mean if we don't have any deficit we're misusing our money; we're spending wildly? Is that an ideal world? I don't think so. I think it's a chance in fact to look at what exactly all governments are doing, local, federal, provincial, and it's a wake-up call to see exactly what services they're providing and whether those services are of value.

Let me concentrate a bit on the third question. A great number of federal activities could perhaps be cut, devolved, or passed on to other levels of governments and institutions. One of the things the federal government might try to do is pass on some activities not to the provincial governments but right to the economic zones and local governments, or even to individuals.

Let me talk about 19th century paradigms, the paradigms that came up when I looked back and many universities didn't have engineering departments. Scientific development was of interest. Let's look at your resource departments of the federal government. Let's look at Minister Tobin's Fisheries. How many people are there? What sort of research...? Are they the only institution that can engage in research? I think you should ask yourselves what value is going on in departments like that. You could easily - you could easily come up with the details - have one super-ministry.

Let me talk a bit about training, because I am involved in looking at training. It's a joint project, believe it or not, involving the university, HRDC, the provincial government departments, and the economic recovery commission. So we can cooperate at certain levels.

I don't know what the issues are here. I don't know why provinces want this. The politicians out there must know something we economists don't. I'm going to call the people at HRDC to find out if they know something I don't, at their research level.

What is the value...? It's a sort of flat earth society: all training is good. Why is all training good? Can you prove that? You have opinions out there. What scientific evidence is there? Could you go to HRDC and could you have one of those people contact me to show me the demonstrable effects of training; what value it has?

The Vice-Chair (Mr. Campbell): Mr. May, could I ask you to leave it there, in light of the time, and maybe pick up on some of those points in the discussion? I'm sure others will want to react to your last point, about what value there is to training.

We're going to change the order a little, to Lynn Peddle from the St. John's Status of Women Council and Women's Centre.

Ms Lynn Peddle (Coordinator, St. John's Status of Women Council and Women's Centre): I answered the three questions.

Many people in government seem to lose their enthusiasm for deficit reduction when the focus shifts from cutting social spending to other approaches to the deficit problem, such as reducing tax breaks. Some say we've been living beyond our means and cutting spending is the only way to deal with our debt and deficit. But the deficit and debt have little to do with interest rates and unfair tax policies, both of which benefit the wealthy and corporations.

Corporations have been making record-breaking profits. While these corporations complain about spending on valued public programs, they use corporate tax preferences to pay little or no taxes. In 1961, 21% of tax revenues came from corporations, whereas 32% came from people. In 1993, personal income taxes accounted for 48% of tax revenues, whereas corporate taxes made up only 7%.

The deficit target reduction should be $39 billion. According to the document Unfair Shares, profitable corporations owe the Canadian government $39 billion in back taxes. These should be collected. The strategy -

The Vice-Chair (Mr. Campbell): May I just ask, because we want to be very precise here, is the $39 billion deferred taxes or is it uncollected taxes?

Ms Peddle: Deferred, uncollected taxes.

The Vice-Chair (Mr. Campbell): What do we mean by deferred taxes? Those taxes currently owing to the government?

Ms Peddle: Yes.

The Vice-Chair (Mr. Campbell): On what do you base that?

Ms Peddle: It's a document called Unfair Shares. It was put out by the alternative policy....

The Vice-Chair (Mr. Campbell): We do have an accountant here who may know something about what's meant by ``deferred taxes''. I'll ask him later during the discussion period.

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Ms Peddle: Could I just finish? I worked really hard on this presentation?

The Vice-Chair (Mr. Campbell): I appreciate it. Please go ahead.

But I just can't allow things to go ahead that are left out there without suggesting we respond to them later if they may be misunderstood. I've tried to do that all along.

Please go ahead.

Ms Peddle: I'm a little nervous. I'd really like to keep going.

The Vice-Chairman (Mr. Campbell): I'm sorry.

Ms Peddle: As I said, $39 billion should be collected. The strategy to cut social programs to lower the deficit is wrong, because it has not been the cause of our deficit problems. How about a more progressive tax system, higher taxes for high-income people, an inheritance on large estates, a windfall profits tax, and closing existing tax loopholes?

Mr. Truglia - I hope I pronounced his name right - a senior analyst from Moody's, suggested that as long as we have high unemployment and underemployment in Canada, we will continue to suffer deficit problems.

Here's the second question. By continuing to cut spending, the federal government is actually making the debt problem worse. More spending cuts take more jobs out of our communities. Teachers, people who work in hospitals, and municipal government workers will all lose jobs. These job losses mean less money going to all levels of government, and less spending in the community. Cuts also mean that once-public services become available for only those who can afford them.

People want jobs. They want the government to focus on jobs. Government should re-examine policies like deregulation and free trade in light of their impact on jobs.

Moody's special commentary, which was released in 1993, states that the Canadian deficit is largely a product of the recession. With so many Canadians unemployed and underemployed, we are not generating the kind of economic activity we need for a healthy economy, and that is producing serious consequences, including driving up our deficit and debt.

Polls consistently indicate that most Canadians consider unemployment the number one problem facing the country. However, the views of the elite as reflected by those at the C. D. Howe Institute place a much greater emphasis on the deficit. Unfortunately, they seem to be the ones to whom the government is listening at this time.

The 1995 alternative federal budget accepts the government's goal of bringing the deficit down to 3% of GDP by 1996-97, but it meets this goal through job creation and economic growth, not through further cuts to Canada's social programs.

Creating more jobs is what people want. Moody's special commentary of 1993 recognizes that the Canadian deficit is largely a product of the recession.

I would like to point out that the problems of poverty, unemployment and underemployment require bolder and larger changes than picking on people who are already impoverished. The federal and provincial governments should reform the corporate welfare system, like tax breaks, deferrals and loopholes, which are costing billions of dollars every year and increasing corporate profits, rather than decreasing unemployment.

The third question leaves me with serious doubts about the future of our country for all Canadians, especially for most Canadians who are not rich. I do not like the language of our deficit problems. I do not believe the answer to our deficit problems will be eliminated with cuts, commercialization, privatization, or devolution. Federal cuts will not fix the debt problem.

If it is not a problem of economics, it is a problem of political will. We do need reforms.

Reform our Income Tax Act, by which 20 Canadian millionaires paid less than $100 each in income tax for three years in a row, from 1989 to 1991. Also, 190 Canadians who earned more than $250,000 in 1991 paid no income tax at all.

Business interests keep talking about the terrible legacy we are leaving our children in the form of a national debt. In fact, the much worse legacy we are in danger of leaving them, if we continue to diminish the role of government in our lives, is a society in which millions do not have jobs, the standard of living of the average family continues to decline, and the economic elite is ever more able to defend itself politically.

Cuts that are being phased out over time and their impacts will be felt down the road. A study entitled ``When the Baby Boom Grows Old: Impacts on Canada's Public Sector'' written by Murphy and Wolson, senior researchers at Statistics Canada, examined the impact of changes in the tax and welfare system over the next forty years. It revealed that, based on changes that have already been made to the tax and welfare system, most of the middle class will fall into the ranks of the poor. The ranks of the poor will double. And poverty among senior citizens will be six times what it is now. This is not the Canada of the future that I envisioned.

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Corporate leaders, right-wing think-tanks, and some politicians continue to call for more cuts to government spending. They say we cannot afford social programs like social assistance, health care, and education any more.

I believe they are wrong. Most of us do pay our way. We do want to pay our way. It is the corporations who have been profiting from Canada and not paying their fair share. It is time corporate leaders put their money where their mouths are. If they care so much about our country and our future, they should pay up.

I'd like to acknowledge Linda McQuaig, Neil Brooks, and the alternative federal budget.

Thank you.

The Vice-Chair (Mr. Campbell): Ms Peddle, you've said a lot of things. Many of them are provocative. I want to leave you with a few facts to weigh in the balance for later in the discussion.

You talked about the rich not paying their fair share. Let's get facts out on the table. The top 10% of tax filers, who account for just one-third of taxable income, paid half of the total income tax last year. That's half the total income tax on one-third of the taxable income.

So the suggestion that they're not paying their fair share is debatable. You may feel they should pay more. That's something we can discuss. But I don't want people to be left without the facts.

With respect to corporate taxes, you made provocative suggestions on two or three occasions that they're not doing their part in paying their share. When we come back to the discussion, you might speculate as to what that share would be, how we would determine it, where we should compare ourselves, and what impact it might have. We have business people here who might want to respond to that as well.

We'll move, then, to Ms Adams.

Ms Susan Adams (Executive Director, Women's Enterprise Bureau): Thank you for inviting me here today. I represent an organization that assists women who are starting businesses. I think it's becoming clear that small business is going to provide the opportunity for employment in this country in the future.

I guess the only comment I want to make concerns policies in budget discussions. Keep in mind the fact that small businesses do need encouragement and policies that assist in their financing.

I'll come back to Keith O'Neill's mention of RRSPs. Over the years, there have been discussions that suggest RRSPs will be an area government will look at to accomplish some deficit reduction.

This is the opportunity for self-employed people to provide for their own retirement. It's the only opportunity they have, so leave the RRSP system in place.

Those are all of the comments that I'd like to make at this time.

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

We'll go to Mr. Saleemi. Then we'll conclude this round with Ms O'Brien.

Mr. Zaki Saleemi (Chair, Newfoundland and Labrador Federation of Students): Thank you very much.

I have no expertise in deficit reduction targets.

The Vice-Chair (Mr. Campbell): Then you may have some good ideas.

Mr. Saleemi: You never know.

I guess my intent in coming here was to provide you with an insight into what students are facing, or will be facing, with student programs that might be cut due to deficit reduction.

First, the Newfoundland and Labrador Federation of Students represents approximately 32,000 students across Newfoundland and Labrador.

Minister Paul Martin, in order to deal with deficit reduction, has put forth the Canada health and social transfer. The total savings from that will amount to $2.6 billion next year. Over the whole period of the scale-in of the CHST, which will be by 2008, I believe, this will be approximately $29.6 billion.

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But what does the CHST mean to students? What will some of the consequences be to students of institutes that will be facing certain cutbacks as a result of that?

With the collapse of the fishing industry in this province, we need to focus on other areas to create jobs. One of the key aspects in preparing Newfoundlanders for these new employment avenues is an affordable and quality education in this province.

As a preliminary result of the CHST, we've heard announcements from Memorial University that it will probably lose 15% of its operating budgets this coming fiscal year, which means $10 million. According to them, the only way to deal with these cuts would mean tuition increases, lay-offs, or salary roll-backs. These are grave concerns to students, especially if it means an increase in tuition. I do realize we don't pay the highest tuition in Canada, but for our province it has a serious implication.

I would like to address your second question. It seems that the government always puts education at the forefront of its agenda. It says education is the key. I guess it's the key to success or reduction: more jobs, better employment, quality education. But it seems that through the implementation of the CHST we'll be reversing that order in that we will be actually scaling out certain funding that has already been allocated to education.

Most of you are familiar with the CHST. It's block funding, and what it does is put health, UI and education together. It will basically pit education against health care, and who are we to say that we deserve more money than health care or UI in this province?

I'd like to leave my comments at that for the time being.

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

We'll conclude this segment with Ms O'Brien.

Ms Brenda O'Brien (Newfoundland and Labrador Women's Fishnet): I'm a member of the Newfoundland and Labrador Women's Fishnet. The woman who was supposed to present today is not here.

There were real concerns in our group about whether we should participate at all, because most of the women sincerely felt there was no benefit, that there are no longer any politicians who are listening to them. Here in Newfoundland we overwhelmingly elected Liberals to attack the problem of unemployment, and instead the only concern is the deficit. So they felt it wasn't worth the gas to come up from the southern shore and come to this committee, because they thought you were not going to hear us.

That wasn't helped at all by some of the words we heard this morning from a friend of ours who was attending, who said that people were treated really badly here, that women here weren't listened to, and that the only people who were really listened to, where people didn't laugh and chat during their presentations, were those from the business community.

The Vice-Chair (Mr. Campbell): Let me just respond by telling you I was chairing this morning. First of all, this morning's session was the longest of the sessions we've had. That was because people had a great deal to say and members had a great deal they wanted to ask. So the sense from the chair, in any event - I won't purport to speak for any of my colleagues - was that it was a very worthwhile session.

I want to leave you with another suggestion about the frustration level. The frustration may be because we're doing this differently. We are doing round tables. That means that groups cannot come in here as they have before and simply present their viewpoint and leave. Here you have to deal with the fact that there are other stakeholders around the table, and that frustrated some people today. There were contrary views, dramatically opposing views, around the table this morning, which is the best kind of forum for hopefully creative ideas and for us as politicians and you as stakeholders to realize the complexities of the issues and the impact of the decisions we make.

So while it got a little heated this morning and some people might have been frustrated, from my point of view it wasn't at all a useless exercise. I'm glad you made the effort of coming and I look forward to hearing what you have to say.

Ms O'Brien: Some people who were here this morning felt it was a useless exercise and that they weren't heard.

The Vice-Chair (Mr. Campbell): I'm glad you thought to give us a chance.

Ms O'Brien: I must say that I talked to the member from Nova Scotia, and in the end she did convince me to come. But I was quite concerned when she said that social activists who come and don't want to talk about how to reduce the deficit aren't being helpful. Let me add that I'm one of those people who don't want to talk to you about how we can reduce the deficit further.

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I think we have a real problem with unemployment and jobs. I certainly know people in rural communities in Newfoundland who are on TAGS and cannot possibly afford any more cuts to their benefits. In their communities, they have felt the tremendous impact of the cuts to UI and the impact of the fact that so many people are no longer eligible for UI. They're also feeling the effects of the lack of transfer payments from the federal government to the point where our health care is being jeopardized and our education systems are being jeopardized.

Let me tell you, all those things coming together make many of us feel really abandoned by our governments. We feel that our governments have no intention of governing for us. They're only governing for multinational corporations; the people who elected them to fight unemployment are not being heard.

Anyway, I would go on to say that in trying to deal with the problems of this country, your focus should be on looking at new ways to generate revenue, as was suggested by Ms Peddle.

There are many people out there who...you have suggested 10% are paying half the taxes of this country. I'd say they're clearly not paying their fair share. I am paying a much larger percentage of my income as taxes than when I have a very small income to spend.

Unlike many of them, I - and I worked for many years in the fishery - am now not eligible for TAGS. I am out working in the world of contract work, where I have no access to maternity benefits, UI benefits or CPP. I have no money to put away in an RRSP, let alone any money to be able to hide from my income of $10,000 a year, or whatever the limit is. I have a real problem with the fact that people who have large enough incomes can put away $10,000 or $15,000 in RRSPs and can hide away from paying taxes when I'm no longer even eligible for some of the basic benefits of this country. Certainly, people in rural communities really feel they've been abandoned by the system in the same way I feel I have been abandoned.

I really do believe we have to start looking at the subsidies we give to the elites and to the businesses of this country. We give them healthy workers and educated workers, and then we say they don't have to pay us back for those things through taxes.

The Vice-Chair (Mr. Campbell): Excuse me, Ms O'Brien, but you're not suggesting that corporations pay no tax and don't pay tax and are not liable for taxes, are you?

Ms O'Brien: I'm suggesting they don't pay nearly enough tax.

The Vice-Chair (Mr. Campbell): So your first point is -

Ms O'Brien: I'm suggesting that if we had our corporations and our wealthy people paying anywhere near what the taxation rate is in Germany, then we wouldn't have this deficit problem.

The Vice-Chair (Mr. Campbell): All right, so you're advocating higher taxes across the board on wealthier Canadians - wealthier than you - and on corporations?

Ms O'Brien: I would certainly recommend that we go more in the direction of Germany, Denmark and Sweden than in the direction of the United States. If we go in the U.S. direction, we'll have a democracy where 35% of the people vote, and that's not democracy. If that's what we want, that's the direction in which we should go. Or we can go in the direction of Mexico, which doesn't have a democracy.

So what I'm saying is that most of the people who -

The Vice-Chair (Mr. Campbell): We're talking about taxes. We're not talking about democracy.

Ms O'Brien: What I'm saying is that because of the unfairness of the taxation system in this country, and because of the fact that you tell me that people like me - people who live in a province where we depend on unemployment or benefits from TAGS - are the ones who have to take the cuts in place of the people who have most benefited from the things that have created this deficit -

The Vice-Chair (Mr. Campbell): Okay, would you -

Ms O'Brien: - that's not good enough. You are alienating us from the system so much that you're going to end up with no democracy, as has happened in the United States or in Mexico.

The Vice-Chair (Mr. Campbell): I see the connection. Thank you. There should be higher taxes for everybody else.

Ms O'Brien: My real concern is that there should be no cutbacks in our social spending in order to deal with the deficit. There are other ways to deal with the deficit and there are other things we should be focused on at this time.

The Vice-Chair (Mr. Campbell): Okay. I'm hoping that in the discussion people may pick up on the willingness of small business, the willingness of independent business, the willingness of the academic community - we have a lot of representatives here - to pay higher taxes, or that they may pick up on somebody who isn't in this room, who is out there or who we think is out there and should be taxed. This would be interesting for us to discuss.

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This brings us to the next segment, which is a discussion. I think I'm going to suggest a five-minute break for the committee and witnesses and then let's come back.

The goal of the next part of this session is not to repeat or reiterate what you've already said but to try to react to what you've heard from others. You have other stakeholders here at the table who have an interest in what happens, and if you want to respond to each other, this would be the time to do it. Then we'll open it up to questions from the floor. We'll resume in five minutes.

Before you go, one of our witnesses has to leave and will not be able to stay with us. I don't know, Mr. McCurdy, if you would have had an opportunity to react and wrap up. If you want to take the time right now, I think that would be acceptable.

Mr. McCurdy: I think there are certainly a couple of things Mr. Bradbury said that caught my attention. I suppose that comes as no great surprise.

We were talking about things like working for welfare and working for UI. He suggested things like putting people to work on enhancing the rivers and forests for recreational purposes. It's too bad he's not here. I have no problem with this and it is called creating employment. It's quite different from welfare. Workfare is an extremely expensive proposition. Just ask whatever ministers of the Crown have been responsible for make-work projects. All workfare amounts to is a demeaning version of make-work.

When people talk about workfare, it's really reflective of a judgmental attitude, which is to make people at the lower end suffer further. Anyone who will try to live for a month on what you get for able-bodied relief in this province, believe me, would be very pleased to go back to whatever else it was he or she had been doing previously, whatever the difficulties that go with it.

We get sidetracked from the real issues. The fact of the matter is, if you look at the total spending in Canada on social programs in relation to the overall debt and deficit problem, it's not going to be solved that way. It's as simple as that. We can't go and punish people.

The other thing is, of course, when you marginalize an ever-growing percentage of the population, there's a point at which society will no longer be able to take that. Then I suppose you'll have walled compounds like they do in Brazil and so on, where people live with fences 16 feet high outside their homes, barbed wire on top of that, attack dogs inside the perimeter, and maybe a second fence inside of that. Is this the way we want to go with our society? If we don't, we have to take a more balanced approach.

I know, Mr. Chair, without being a provocateur, that your interventions quite clearly betrayed your own bias on these issues. I noticed where they were targeted, to what type of interventions you aggressively replied and to what others you simply sat absorbed in without comment. I was told that's what was the case this morning and it was clearly the case this afternoon. You may not realize it, but you were pushing particularly hard on the women. I got off scot-free, and I'm sure as hell Mr. Bradbury, with his views, which were provocative -

The Vice-Chair (Mr. Campbell): Considering, Mr. McCurdy, that your views are as one with many of the things expressed by the women, I think that's an extremely unfair comment to make. Is that your intervention?

Mr. McCurdy: Well, I'd really like to get into a further debate with Mr. Bradbury.

The Vice-Chair (Mr. Campbell): But you have to leave.

Mr. McCurdy: I think one thing. People talk about the tax program. There is something people should bear in mind about a lot of the jobs in small business. I've never understood where some of the business community is coming from, although I understand where the Business Council on National Issues is coming from. My job depends on other people, not myself, who are out doing the dirty work, who are the primary producers. A lot of the wealth in our society comes over the side of the boat, up from the shaft of the mine, out of the lumber woods and places like those, and from there we build an economy.

I think what's sadly lacking is an appreciation of this. I think the direction of our whole economy is quite contrary to what people were led to believe when they voted in the last election. I think we're headed for decay unless we can reverse some of that and have a more balanced approach.

The Vice-Chair (Mr. Campbell): Mr. McCurdy, let me thank you for your intervention, just suggesting that taking it to the personal level doesn't enhance the quality of the discussion. And I think you make an enormous presumption in thinking you know where I'm coming from or what my beliefs or feelings may be.

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This committee represents a lot of different backgrounds, and you wouldn't know what I have fought for, or will fight for. My job as chair is in part to make sure people do not come before this committee and simply make statements that go unanswered, when they are unclear, imprecise or untrue. It does not enhance the discussion.

The role of the chair is in part to make sure that when someone comes here and says something.... There's been a lot of rhetoric this morning, and it continues this afternoon, and a lot of mythology that is expressed from all sides. Sometimes it's from what we'll call, for ease of description, the ``right wing'', when they'd describe a call for tough love and do not take account of the impact that cuts have on that side of the equation. Similarly, for ease of description, what we'll call the ``left wing'' come in here and repeat things that have been said in various places and don't have the precise understanding. If we can shed some light on it and have a more fruitful discussion, that's a useful outcome for all of us.

We're going to take a short break. It's 2:55 p.m. We'll resume just a moment after 3 p.m.

Thank you.

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The Vice-Chair (Mr. Campbell): We have touched on a great many issues, and one of the advantages of having representatives from various sectors of our society is that they are the best people to respond to some of the suggestions that are made by one group or another that would have an impact on them.

So at this point I would really like to open it up to general discussion. There are a number of questions out there to respond to, react to. Again, there is not time to reiterate your points, but rather to react and respond, and then we will open it up to questions from MPs.

I think that as we left Ms Peddle had her hand up, so I will start there.

Ms Peddle: I was going to respond to some of your comments about some people using rhetoric. I think we could have very different viewpoints in our definitions of rhetoric or where actually we come up with statistics.

But moving right along, first of all I would like to respond to the comments Tracy Perry had made about what's the sense of working when welfare will pay for everything. It is very sad that you would have this viewpoint.

As someone who was a single mother, who received a university education with a $30,000 student loan, I received a social services subsidy at $61.30 every two weeks. So you really have a wrong viewpoint. People who are living on social assistance in this province are living way - thousands - below the poverty line. We have to be careful with our language, because when people encourage government to enforce workfare and training fare, we are really taking away from our brothers and sisters who are already working.

I'll send you some information about the truth and reality of what it is like living on social assistance in this province, because you should know that.

Ms Perry: I should clarify that I am generalizing there where I shouldn't be, because I realize that social assistance is a very important source of income for many families, and it is there for a very good reason, because many people really do need it. However, over the years the system has been abused and abused excessively.

Ms Peddle: Three per cent.

Ms Perry: Is that all it is?

Ms Peddle: Yes.

The Vice-Chair (Mr. Campbell): Can I make a suggestion? It is an excellent and interesting discussion. I'm happy to sit back, as members are, and listen in. But please speak one at a time, and your microphones will go on automatically.

Ms Perry: What I meant in saying that - and it may be different in different regions, I am relating to my own home town - is that it is really sad down where I live, and I didn't realize how bad it was until I went back home. There really is no incentive for people to go to work. They really feel they are better off staying where they are and doing nothing as opposed to going out and trying to find work, because they're just penalized and taxed and everything and they lose everything anyway. So in a lot of cases - and it may not be everywhere, but it does exist in our region - there is this mentality that if you are on welfare then at least you know that at the end of the day your bills are paid.

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In our area, a lot of people on welfare have skidoos, boats, cabins, trucks and houses. I'm just generalizing. I certainly believe in the system and what it's there for - I certainly do. It's just that I do think we need closer monitoring of abuse and more incentives built in there for people who want to work and who want to improve their conditions. That's really all.

Ms Peddle: I'll send you some information. You need a lot of education around what's really happening around social assistance.

The Vice-Chair (Mr. Campbell): Who would like to intervene?

Mr. May.

Prof. May: One of the puzzles I have, which a friend of mine, economist Pierre Fortin, has talked about, is lightening up a bit on the inflationary target and trying to lower interest rates, and with that you try to create jobs. I think its carrying on a point that Earle made. That is a potential strategy for growing yourself out of the deficit.

I have a question maybe directed to you, Mr. Chairman. What would you feel is wrong with that approach? What do you see as the cost of allowing the inflation rate to move up?

The Vice-Chair (Mr. Campbell): I'm with Mr. Fortin. We'll be having additional discussions about that issue and the role of the Bank of Canada. We've had it at other panels. Many people who have looked at the situation - Mr. Loubier speaks to it often at our meetings - look at the role of the Bank of Canada interest rate policy and the amount of debt the Bank of Canada holds and say therein lies some of the solution. It may be, but it is a very complicated issue that is hard to get our heads around.

It has an impact on inflation. It has an impact on the value of the Canadian dollar. There is some question about whether there is an appropriate level of debt that the bank should hold and what is that level. There are lots of questions that swirl around. It's a worthwhile inquiry. I don't want to suggest that it isn't, but it's exceedingly complex.

I want to end my response, as unsatisfactory as it may be, with the caution that there are no easy solutions. If it made sense for governments to pursue that kind of policy and eliminate for us the sense that we're held hostage to foreign borrowers and we have this terrible problem, I think more governments would do it. They don't, and that makes me suspicious as to how achievable it is and how successful it would be.

We ran up the debt through spending or lack of adequate revenue, whichever side of the equation you put yourself on. I think that's where we have to find most of the answer on eliminating it. There are no magic bullets, but the interest rate one is of great interest to a lot of people and should continue to be discussed.

Mr. May, I think we have others who want to react to that point, so I'll call on Mr. Scott.

Mr. Scott: I want to pick up on a couple of things. The approach that you and Doug are now talking about, that is to say if we spent our way into this mess the only way we can get out of it is by cutting back on our spending, I accept entirely as one aspect of what's going on. The other aspect, however, is that we perhaps have to somehow or other engender some kind of new growth. That's what Tracy and Lynn have been talking about - getting people off programs that are both demeaning and destructive.

One of the things I have to report that are good out of the Newfoundland situation at the moment is that there is a fragile but I think very healthy move to improve labour relations in an already reasonably good labour relations environment. The advisory council on the economy has recently hosted a number of initiatives in which labour and management are increasingly getting together, and there is a strong sense of change in the wind that will bring labour and management closer together, and long-term contracts will emerge. Keith has already mentioned the possibility of overcoming problems with the underground economy by registering various tradespeople.

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Healthy things are beginning to happen in the local and national economies that are very important, but also very fragile. So please don't take any abrupt and dramatic decisions over the next little while that will threaten the kind of healthy development that is beginning to emerge in this province and perhaps elsewhere.

The Vice-Chair (Mr. Campbell): One thing that is clear is that we're still absorbing the reality following from last year's budget, let alone talking about the next one.

We're going to open it up to questions.

Prof. May: John, I wasn't suggesting that we only.... I think there are a couple of things, and maybe lowering interest rates is one. There's no one magic wand out there. You have to try a number of things.

The other thing Minister Axworthy may be thinking of - although I might do it slightly differently than he did - is lowering UI premiums. You have to think of a payroll tax, which most people think falls on business. In fact, it falls a lot on labour, so I'm not sure why you'd want to do that.

Finally, and I think this has come up with Tracy, a lot of these cutbacks are going to be tough. As we get off TAGS, it's going to be really tough on certain parts of this province. One thing we have to worry about that is not a reality in other parts of Canada - it may be in parts of Nova Scotia or the Gaspé - is that certain once-viable communities may no longer be viable, and they'll have to adapt to that. They may go under. So I think there's some potential for bankruptcy. As those communities go under, it may even threaten the province. I don't think it's a healthy thing for provinces to go under.

Mr. Chair, this is probably a bad joke, but it's downsize, dumb size and in Newfoundland we have capsize.

The Vice-Chair (Mr. Campbell): It's an unfortunate analogy.

Prof. May: Yes, so we want to be careful.

The Vice-Chair (Mr. Campbell): I have an observation and a quick question for the group, and then we'll turn to questions.

We have 600,000 people in the greater Toronto area who are on welfare or some other form of assistance, so it's not just a localized problem. The kind of assistance they get differs from region to region, but the problems are as real in my area as they are here.

Many of you have suggested actions on the revenue side, the tax side. We have business representatives here who may want to respond to that.

Ms O'Brien: I want to address a couple of things that were said. First, I don't think we spent our way into this problem. This was a case of interest rates being so high that the deficit skyrocketed. Our record of social spending is much lower than most European countries, but it is slightly higher than the U.S. If it's only the U.S. that we compare ourselves to, then it may seem somewhat high.

I want to address some of what Tracy said, because we're going to be seeing many more people on welfare. By April, over 65% of the people who have received TAGS will no longer have TAGS. The problem won't be that they aren't looking hard enough for work and then are sitting around saying it's just as easy to stay on welfare; the reality is that there are no jobs. We have to deal with that reality.

During the coffee break we were sitting down and talking, and out of five of us, three had worked in the fishery previously. We all have university degrees, but only one of us has a full-time job. The reality is that there are not many jobs out there, and an awful lot more people will be in hopeless situations. I think governments have a role in creating hope and in creating a climate in which people can see that they can be productive members of society. I think that's what we're reneging on now. We're saying that government no longer has a role in creating jobs and making sure that people can contribute to society.

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

Mr. O'Neill: I'd like to speak on the employment side. I'm in total agreement with what I hear on the employment side. I see this as our biggest problem in Newfoundland. I've had the privilege of working in all corners of Newfoundland and Labrador. By and large I find our people to be very interested in working, and I think they have a tremendous ability to adapt. One of their greatest strengths - if they weren't involved only in one of the resource industries like the fishery, mining or forestry - is that they've always been able to turn a hand to something else, and most of the time that has been construction.

They are very talented people and are used to working. There was a tremendous work ethic in our province. When I started off as a young person in the construction industry, it was a job and a challenge. People came here from other provinces and other parts of the world. When they moved on to other places, they often sent for the Newfoundland foreman or for a particular Newfoundlander. They sent for them.

We are still capable of that. We lived through the 1980s and, as in the rest of the western world, we've seen abuses and that, but by and large there are a lot of people out there today. Young people are genuinely looking for work, with the attitude that they'll take almost anything. Somehow we have to key into how we're going to give these people employment opportunities.

It bothers me to look at our federal policies right now. It's what is cost-effective or what's it costing. I don't think we have an open mind on what the benefits will be. Our association has put forward different studies to show certain areas where there can be a benefit from some cost, or how what appears to be a reduction in revenue will actually be taxation and revenue generating. There seems to be a powerful element in our society - and I don't want to pick on the C.D. Howe Institute or anything - that has a tremendous effect. We aren't hearing enough from these round tables.

Mr. Saleemi: Through the proposed cuts, it seems the federal government's intention is to abandon post-secondary education through the proposed CHST, etc. That is very detrimental to the quality and the accessibility of education across the board in Canada. Not only does it affect Newfoundland, it affects every province.

If the federal government does alienate itself from the responsibility of post-secondary education, who do they expect will pick it up from there? It seems that everybody has hinted that education is one of the areas that should not be touched or for which cuts are not necessary, because these areas are very important. They include health care as well, and that's about it.

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

Mr. Bradbury.

Mr. Bradbury: Thank you, Mr. Chairman.

I have listened to the comments of Lynn, Brenda and Keith and I must say I agree with all three of you in what you're saying.

As an accountant, I say, look, we're spending all this money, we're giving all this money out; we shouldn't be, but we're giving all this money out, be it to welfare recipients or tax recipients or UI recipients as the case may be, and it's billions of dollars. I don't know how much is the share in Newfoundland, but it's still probably billions.

Isn't there something we can do with that pot of money on an annual basis, even if it's some form of a lump sum or a grant in lieu of, to have these people create something for themselves, and if they can't create it for themselves, then to give - I don't like to use the word ``give'', by the way, that's what I'm trying to get away from - but to have those moneys available to an organization so they can create a productive job for those in the groups we're talking about who want to go to work, are willing to go to work, and have the skills to go to work?

The obvious fear you have here is that if you give this money out, these people get to go to work at the expense of somebody who is already employed. If you do that, you've obviously accomplished nothing.

But I still think, as Keith said, we Newfoundlanders have enough ingenuity to create something, and it probably doesn't make any difference whether the person who gets that chunk of money makes a widget, if he can sell that widget for what it costs to produce and he makes not a cent on it, so long as the widget hasn't undercut somebody else who has presently produced that widget. If you see where I'm coming from, I'm saying let's get some productivity out of this, and you may even get some tax revenue back out of this too, because some of that money that's recycling may be taxable income and it doesn't impede the amount of money that any of the individuals we're talking about receives as a net.

The Vice-Chair (Mr. Campbell): Very quickly, Mr. Scott. Ms Peddle will want to respond, and then I want to go to Mrs. Brushett. There will be a wrap-up. You'll be able to pick up on it.

Mr. Scott: I have three rapid-fire responses, one to Mr. Bradbury.

I think when they finally write the history of the TAGS project, it will be seen that the two elements of that project that did not work and should have worked, and would have done what you're saying, are the Green Plan and the community opportunities pool. First, the COP and the Green Plan didn't work in TAGS; they should have worked and didn't.

Secondly, I have to leave. My apologies. Thank you.

Third, I prefer this style to what you did last year. This is much more useful than last year.

The Vice-Chair (Mr. Campbell): Thank you for that. We find it useful as well. I'm sorry you can't stay with us for the remainder of it.

Ms Peddle.

Ms Peddle: I have to respond, because the reality of people living on social assistance is that it's really difficult to get out. They're spending more money on social services investigators in this province and have dropped back divisions of employment opportunities.

Also, I'll give you an example - and I can use Quebec as an example because those are the figures I know are accurate - of what's happening with workfare. Fifty two million dollars was recently paid to companies like Wal-Mart, Canadian Tire, profit-making huge companies, to buy positions. All of these people were on welfare. They were $8,000 pockets each. They went to work. When the money ran out they were all laid off, put back on social assistance again, and there wasn't one job created out of that.

So we're both talking about the same things, but unfortunately people who haven't lived the life of what it's like to be a social assistance recipient have a really bad impression of it. There's a lot of poor-bashing going on right now, and we're concentrating on the poor when we should be concentrating on profit-making corporations in this country.

The Vice-Chair (Mr. Campbell): Mrs. Brushett.

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Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chair, and thank you again, each of you, for coming this afternoon. It certainly is stimulating.

Just where Lynn finished off, maybe I'll read you some information from the department in terms of the amount of taxes being paid. It says that the top 10% of Canadians who file taxes in this country pay 50% of all the taxes that run these programs. So they are paying.

The second point I want to remind you of is that the bottom 40% of those who file income tax account for 11% of the income, but in the aggregate this large group paid no net taxes at all.

So I just point these facts out to you so that we try to keep the system as fair as possible and have people in this realm paying. I'm sure Mr. Loubier, my colleague from Quebec, may have some disputes there later, but this is from the Department of Finance.

I wanted to talk about UI to Mr. May for just one moment, in the sense that there is a surplus in the UI account at the present time, and premiums, known as payroll taxes, are substantially higher than a lot of people would like to see them. We will be reducing those premiums in Lloyd Axworthy's paper that's coming out in the next few days. And reducing those premiums is an attempt for business to create more jobs, and that is part of the economic or job stimulus in this country. So those who request lower payroll taxes... We're also trying to work in that direction, again, in the name of job creation.

For your information, our job creation that has occurred this year has been in the export sector, and this is new money coming into this country. That's very significant because 60% of the gross domestic product in Canada is the domestic economy. Where the challenge lies today is to get these jobs in the domestic economy and to get the confidence back in Canadians to do job creation.

Mr. May also talks about training, and what we should be doing in terms of UI training and the TAGS is a very significant question in the minds of Canadians. Historically, we haven't had a great success in training and using those taxpayers' dollars.

Some of the primary sector industries here in Newfoundland have been becoming much more substantial in recent months - mining, forestry, the bays full of cod once again, we're hearing. I'm wondering what we can do to set up training programs at the local level in our UI offices that will create jobs that will be sustainable for our youth in these industries and not under the old syndrome of make work or make job training that is not sustainable.

Do any of you have comments on that?

Prof. May: I wrote a paper, which was never published, for Doug House of the Economic Recovery Commission. My sense is that especially when we're reforming UI a lot of the barriers to adjustment are that the education level of many of the people - and this is particularly true for people on welfare and also those who are on UI but who have used welfare - is not at the post-secondary level but quite often at the more basic levels. If I'm to believe François Vaillancourt, who's done some work on this, our highest returns are at the elementary and high school level.

In terms of training, I think the best, perhaps the most productive training - and it varies across different demographic characteristics - is on-the-job work experience. What we do know is that it's very difficult for people, even with HRDC offices, to pick winners and losers. It almost invariably does not work.

The difficulty I see in this province is that we maybe have, out of TAGS and other areas, 20,000 or 30,000 people, and 350 jobs for Voisey Bay. So it's hard to know exactly how to adjust.

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Could I make one last point about some type of value-weighted training, because this is following our talking to the minister and why the minister says you can't get results. Quite often the training that was associated with the fisheries is training for a lifetime. These people have gone from AFAP to NCARP to TAGS. When we look at these studies in the United States it takes a very long period of time to see what programs have been successful.

I believe there are nuggets of excellence out there. I think there may be things that work. More often than not Ottawa doesn't listen to what's happening at the local level.

Let me use an example from Mr. Pillitteri. If we're growing grapes, we plant something and in May or June we don't know which vines or which varieties are working. We haven't let them mature enough, so that's one of the difficulties.

The Vice-Chair (Mr. Campbell): I'm sure he appreciates the analogy.

Ms Brushett.

Mrs. Brushett: Just to follow up on that, our objective through HRD is to give more autonomy to the local offices so that they can determine their community needs. You're almost sounding as if nothing works. Don't you have some hope that with the forestry, the fishery, these opportunities for sustainability, there is something that works? We bring the literacy level up for those people who are at the very bottom so that they have this flexibility of mobility where a job will occur.

Prof. May: What we have found is that if you're going to put your money down, basic education is probably the best way to go, because in a knowledge-based economy if you're not literate and numerate you're not going to go anywhere.

I'm an agnostic. I think there are things that work out there if we pore over the data carefully enough, but I just don't know what they are. It's similar to Voisey Bay. There are lots of people who've walked over to Voisey Bay and there are things going on there, but they didn't bother to look down. I think what I'm trying to do in my research is to look down.

Ms Peddle: One thing about hearing about people going to get jobs.... Once again there are no jobs to go to, around the bay especially, no matter how much education we have. Every year 1% more of the people here in Newfoundland receiving social assistance have post-secondary education. The problem is there are no jobs for these people to go to.

They want to work. I have a lot of younger friends in Newfoundland who have educations or are entrepreneurs who would love to stay in the province and open small businesses. But because of the policies and regulations and the hoops you have to jump through, that's not a reality for people. There's just a lot of problems there. It's very difficult to keep hearing about people going to jobs when there are no jobs. It's very difficult to hear about poor people and the unreal expectations for people who are living way below the poverty line right now.

Ms O'Brien: I just have a few words about training and TAGS. Certainly, I know whenever any women who have worked in the fishery get together it's definitely one of the main topics that come up. A lot of people felt they were initially forced into training in order to keep their benefits with no thought about what it was they wanted to do or whether this would benefit them. So there were people you jumped on.... The classic example is the hairdressing courses. They jumped into courses such as that because private educational institutions came and said we have a course here for you, you'd better register now or you're going to be cut off from your benefits. Many people were intimidated into inappropriate training this way.

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Just a month ago I was sitting up the shore. We were having a little meeting and we were all talking about this graveyard course that was being offered. People were being sort of forced to get into the graveyard clean-up training course. We were talking about how people were including this in their plans. They must have these plans if they're going to keep their benefits and whatever. Just as we were saying ``This is ridiculous. People should just say, no, I'm not participating in meaningless, foolish courses just so a private entrepreneur can make money off an educational institution'', the TAGS counsellor calls to see if this woman would go to this graveyards course. It was just so funny. I mean, this is the truth.

But at the same time as I'm telling you these awful training scenarios, I don't want to be saying that there shouldn't be training. Workers are concerned about the fact that they're competing with their sons and daughters, so they really want to have training, and they believe there should be government-funded training. And there are many other people who want training.

So we should not use these bad examples to say there should be no training. What there should not be is unplanned, unfocused training.

Mr. Pillitteri: You just mentioned a graveyard course. Did you look into it?

Ms O'Brien: No, I [Inaudible - Editor]

Mr. Pillitteri: You should look into it, because this is a new breed of people who are getting into the business.

As a matter of fact, I had a course in my riding through Niagara College, and the people benefited. It was just last week. The competition coming in, instead of charging the exorbitant prices that some funeral homes are charging when they're burying their loved ones.... It's a new course that has just come in. They're one-third to one-half the price. I was astonished. You should look into the course.

The Vice-Chair (Mr. Campbell): So there is a new business opportunity there. We'll come back to that.

Mr. Saleemi: I have a quick comment on what Mrs. Brushett said with regard to increasing the basic education level.

This spring we saw a draw-back of $2 million, and as a result 200 seats across the province were cut at the adult basic education level. With these cuts, we are seeing a chain reaction. You say we need more education, but at the same time you are taking away those opportunities from us.

Could you elaborate on that?

Mrs. Brushett: That is a key point, because we have 45- or 50-year-old people who have been displaced from the fishery or primary sector industries, and where or how do they fit into the work society at this point in time? Virtually everything is computerized or telecommunications or high technology, and if your reading skills....

For example, a company in Nova Scotia is exporting phenomenally large volumes of furnaces. They were giving orders one day to some of the men on the work floor, who were looking puzzled. The manager of the plant wondered why he didn't understand what he was saying. The level of comprehension was much lower than he assumed it was for adults in that position, so they couldn't function quickly and literately at the level he wanted them to.

So he started computer training and literacy upgrading on the job. He gave one hour of time to those men, and they gave one hour after 5 p.m. So they got two hours, three days a week, of extra time in basic literacy and computer learning.

I'm looking at the mines, forestry and the fishery, if it comes back - the primary sector industries. How do we take people who are 50 years old and keep them working? That's where I'm looking. I'm looking at those people more than at the younger people who are just beginning their career paths.

Mr. Saleemi: You had a very eloquent speech there, but the point remains that you intend to cut education. You intend to take it off the federal agenda. Where are you going to get your 2¢ worth if you don't have a say? The provinces are going to dictate. You might be able to dictate now, but in the future we won't see any input from the federal government on where the emphasis is.

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Mrs. Brushett: We haven't controlled education. We have funded it, but we have not controlled the agenda. It is a provincial jurisdiction.

Ms O'Brien: I want to say that training, particularly the ABE that was recently cut - it is offensive for the federal government to be walking out, particularly in the poor provinces. There is no way that through our own tax base we will be able to pay for training on our own.

But that is not the point I wanted to make. I want to mention something about the surplus in the UI account, and I think this addresses something Mr. Bradbury spoke about earlier.

When we talk about getting together and putting money together to try to find better ways, a lot of us are frightened to talk about that, because whenever we talk about redesigning systems, we really talk about is reducing systems. I hate talking about redesigning UI, because every time you open the door it's cutback, cutback, cutback rather than making more incentives for the system or whatever.

I don't know if this goes anywhere, but on one hand.... First of all, we have a surplus in the UI account. We have a surplus because so many of us can no longer get UI benefits. We're forced out into the workplace to pretend we're contracted, self-employed workers, but we are really employees that employers will no longer pay UI benefits for.

So on the one hand it is true that it is a payroll tax and it is a problem, but on the other hand, when you say you are going to reduce the premiums to business.... More of us benefit because they must be willing to pay for their UI benefits now - I am frightened to hear you say you are going to do that, because I see that coming hand in hand with further cuts, so that even more of us are ineligible for UI.

Mrs. Brushett: When we reduce a premium, it is reduced to the employer and the employee, so you have more money in your pocket to spend.

Ms O'Brien: You have a $5 billion surplus. That may reduce the surplus so that in future there won't be as much money going into that pot. What I am saying is that we must have as much money going into that pot, so that people like me and some of the other people can actually access benefits.

There is a double quandary here. If you are going to make it so that we can't get benefits, and none of us can access any of that surplus and that surplus gets smaller, that's a problem.

Mr. Pillitteri: This afternoon it has been said that as politicians we were not listening. I want to assure the people around this table that I have been listening.

Mr. Scott is not here, but he said we should not be political cowards and go below 3% of GDP. I'll assure him that I could have been a political coward by not asking the question or making some remarks, but I do want to make remarks and ask questions.

Mr. May made a remark about the economist and Mr. Fortin, and then we will go withMr. Walker. For every economist who sees things one way, we find another one who has a different point of view. If it was as simple as listening to one side's economist.... A couple of times a year we have the benefit of these round tables. If we all agreed, we would have no problem. This is why we come to the people and ask which is their suggestion.

Mr. Saleemi asked whether we are really going to leave the field of post-secondary education. We've always funded and the provinces have administered the post-secondary education. The only difference is that most provinces have never spent the money where they're supposed to be spending it, with the exception now that we've left it free to the provinces to spend it where they want.

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There's nothing new now. It's been there before. We've given the ability to the province and we'll see how they're going to be spending it. Bill C-76 was only a two-year bill, and actually we should possibly continue to lobby the provincial governments and see they spend the amount of money transferred to them in the right place.

I want to ask Mr. O'Neill a question. You made a remark about removing the GST from land use. You also said the rebate on the houses should go from 2.4 to 2.5 and so stimulate the creation of more jobs by going into the building industry. I'd like to ask you two things, one regarding building and one regarding immigration. The two should go hand in hand. What is the population in Newfoundland and how many do you expect to stay in Newfoundland or how many people are coming into Newfoundland? If you've done a study, sir, what is the residency per household in the province of Newfoundland?

Mr. O'Neill: With our urban centres now and with the declining population in some of our rural communities, that's a very tough question to answer. But I will say that the Canadian Home Builders Association has made presentations to the federal government as early as 1989 and on an ongoing basis. It showed the goods and services tax to be a very negative tax and also showed the cost-benefits of removing it. We're conscious of - we don't want to just offer these things for the sake of the immediate stimulation.

CMHC is a well-respected organization, a branch of the federal government, which estimates that according to the demographics we here in Canada need between 157,000 and 167,000 new annual housing units. This year we're only going to build 112,500.

Mr. Pillitteri: Mr. O'Neill, I don't like to disagree with you, but let me say to you I also come from a municipal council. When we did our official plans for the next 20 years, we also had to see what and how much the growth of that community would be. We had to have the demographics of the growth within that community so we could have so much land use within the official plan.

Within our area we found we only had 2.7 occupancy. Therefore, if I found that to be over here in Newfoundland, where there are only 2.1 or 1.7 - where there aren't two people - living in one residence, I would not be in so much favour of supporting it for building where there are no people to occupy that building. That is what you call creating work.

Mr. O'Neill: I don't want to just come up with a figure, but let me give you a personal example. There are six in my house. My eldest is 31 and the next is 25. I'd love to have the opportunity to help them. I could move out, and if the government permitted me to use my RRSPs, my wife and I, just as an example - I'll put my money where my mouth is - would use our RRSPs to buy homes for our children who want to stay in Newfoundland. So you talk about 2.1 or 2.7, but I say it's more like 4-point-something here in Newfoundland.

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A voice: [Inaudible - Editor]

The Vice-Chair (Mr. Campbell): Thank you; it's 4.1.

We're going to Mr. Loubier, who has been extremely patient.

[Translation]

Mr. Loubier (Saint-Hyacinthe - Bagot): Before asking my questions, I would like to respond to the one Mr. May asked earlier, when he referred to Mr. Pierre Fortin, who is in fact a good fried of mine.

Why shouldn't the government try what Pierre Fortin proposes as a new social contract between employers and employees to control inflation and try to ease interest rates somewhat? I could tell you that there are many reasons why not, but I will cite three.

Mr. Pillitteri referred to the first reason earlier. When the government invites a dozen economists around the table, there are two, Mr. Fortin and one other, who advocate a monetary policy with eased interest rates and a new social contract, and the other 10 all agree on a very conservative monetary policy, with very high interest rates that will control an inflation rate that has been non-existent for about a year now.

Secondly, with all due respect to Mr. Thiessen the Governor of the Bank of Canada, he wasMr. Crow's right-hand man. The latter was criticized for his very rigid monetary policy, to such an extent that part of the explanation for the 1990 recession and its consequences is precisely the exaggerated high interest rate policy led by Mr. Crow. Mr. Crow was told to leave, but he was replaced by a carbon copy of himself. Therefore, there's not much difference.

Moreover, in his last report, the Governor of the Bank of Canada stated that, unfortunately, the Bank had not anticipated the slowdown in job creation that took place last winter and spring. He practically apologized for having set interest rates too high compared to American interest rates and he candidly stated that he had even contributed to this year's slowdown in the economy. When I think of the thousands of jobs that were not created because of this lack of judgement, I start to think that this is costing us quite dearly.

For the past two years now I've been repeating that the time may have come to try a formula other than the one applied by Mr. Crow, one that has continued to be applied in the past two years by his successor, Mr. Thiessen. We should not even consider that policy anymore.

And yet, Pierre Fortin clearly demonstrated that there is no other way out of a situation like this. Not only must we create short-term employment, but we also have to accommodate the major restructuring that we're going through. Given the opening of markets and the industrial restructuring that was undertaken about 15 years ago, we have to find new ways of doing things.

Just because 10 economists say that we have to keep doing what we've been doing for the past decade, with the consequent catastrophe for public finances and unemployment, it doesn't mean we have to do so. On the contrary, we have to collect original ideas even if only one economist puts them forward. If, at the outset, those ideas are different from the others and different from the formula that's been applied for the past 10 years, it may be worthwhile to try them out.

My question is for Ms Perry and Mr. Bradbury. I've been asking this question since the beginning of our hearings because I want the chambers of commerce and business circles to express a strong position.

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Last year, the Minister of Finance stated that in the next three years, he would cut direct subsidies to business by about half, which means that they would go from $3.2 billion to $1.9 billion next year and $1.5 billion the following year, if memory serves me.

For the past while we've been talking about social programs. How would you respond to the suggestion that the Minister of Finance completely eliminate subsidies to business as of this year? These subsidies are often major sources of political patronage that serve no purpose since, according to Mr. Bradbury, these ACOA funds are used to subsidize certain businesses that unfairly compete with other businesses in the same sector. According to him, it's a total mess. So what do you think of my first suggestion? I'll have another one for you later.

[English]

Ms Perry: At the risk of offending a lot of people who really love these programs, I have to say that I once said if I were ever in politics I'd never be elected a second time because I'd completely eliminate these programs.

The private sector business person who is working completely on his own initiative and who isn't aware of these programs - because there are a lot of people who aren't even aware of these programs and who don't have friends who are bureaucrats and don't have friends who are politicians - really gets left out. He is placed in an unfair competitive advantage when another company does get these advantages. The person who is working on his own initiative is working 18 or 20 hours a day, seven days a week, and for what?

[Translation]

Mr. Loubier: Thank you. Once again, I note a positive response to this.

Here's my second question. As you know, certain companies can benefit from more than just direct subsidies. There are also what is known as fiscal expenditures which enable many companies, everywhere in Canada, to avoid paying their fair share of taxes year after year. On the other hand, there are other companies which do their duty as good corporate citizens and pay their fair share of taxes to the federal government. Given the federal government's budgetary situation, which is not very rosy, and given that many companies pay their fair share of taxes, wouldn't the government be justified in doing an in-depth review of corporate taxation, in an effort to be fair toward those who do do their duty, and also to close the loopholes that may exist and thus arrive at a situation where we don't necessarily have an increase in taxes, but at least a minimum tax so that all corporations pay their share?

[English]

The Vice-Chair (Mr. Campbell): In fact, we have three representatives of business here who may all want to respond: Ms Adams, Mr. Bradbury and Ms Perry.

Mr. Loubier: Madame Adams and you, too. This question is for you too.

The Vice-Chair (Mr. Campbell): Who wants to start?

Ms Perry: I should add that in saying what I just said about cutting all programs completely, I do believe as well that without some government funding, if there's no spending, there won't be economic growth. So I don't believe in complete elimination but there are a lot of problems with these programs.

Ms Adams: Which companies are you referring to that aren't paying their fair share of taxes? You referred to some that are and some that aren't, and I don't know what your reference is.

[Translation]

Mr. Loubier: Up until 1988 or 1990, if I remember correctly, the federal Finance Minister kept an up-to-date database on the profits made by Canadian corporations and the tax-exempt profits of these corporations year after year. Starting from one of the dates I just mentioned, the Minister of Finance stopped publishing this data. So we don't know the current situation. But if memory serves me, the situation up until 1988 went something like this: several tens of billions of dollars in profits had been made in Canada and had not been taxed in any way, shape, or form because of the various tax avoidance opportunities provided for in federal tax legislation, which has not been reviewed in about 25 years. When I say review, I'm not talking about minor tinkering, but an in-depth review that would seek to eliminate top loading and the diversion of sums that can reach billions of dollars that are not paid to the federal government.

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I'm sure you read the papers every day just as I do. When I look at the classifieds for business opportunities, I note a phenomenon that came about very recently, and that has only existed for the past four or five years. There are companies who do not use tax deductions for operation losses, for example, and who offer these unused deductions to other companies who can take advantage of them. These transactions in tax deductions that can be done through the newspaper are quite odious.

There's another phenomenon. For the past three or four years, in the newspaper - you can find this in today's Globe and Mail, in fact - very high-income corporations and individuals are invited to invest in tax havens in the Caribbean, for example. Those are part of the tax loopholes. Very high-income corporations and individuals can transfer capital to these countries and get preferential tax treatment because of tax agreements signed by the federal government and the governments of these countries that allow the transfer of profits and losses and tax avoidance.

It was in that sense that I was asking my question. Given the federal government's budgetary situation and the good will of business people, and especially the tendency to cut elsewhere than in one's own pocket, especially in the social program sector, it might be a good idea to examine corporation taxation and see whether or not we could fill the gaps in order to improve federal public finances.

[English]

Ms Adams: You're talking about an area in which I have no expertise. My expertise is with small business. Small business is not even looking at these types of things. From what I'm familiar with, I'm not able to answer that question. I do know small business is finding it a struggle - the provincial payroll taxes, the exceptional time and costs incurred in administering GST and PST for the two levels of government. At the end of the day, when they are under $200,000, they pay 25% of their profit in tax.

We're dealing with people here who have mortgaged their houses a couple of times, who have signed all of their personal assets away in guarantees, who have taken on a considerable risk. The only benefit in that for them is if there is some profit at the end of the day. They are paying 25% as the small business rate until they reach $200,000 in accumulated income, at which point they start to pay at 50% of the profit. They're employing people; they're working long, hard hours; they're incurring significant risks in their personal lives and their business.

That's the group of business people and businesses with which I am familiar. It is a big issue for them. Concerning the major corporations that are going offshore and that type of thing, I don't have any expertise in that area.

[Translation]

Mr. Loubier: Ms. Adams, a clarification please. In order to be fair for small and medium-sized businesses like your own or the ones you are representing here, wouldn't it be appropriate for you to suggest to the Finance Committee that it, in turn, suggest to the Minister of Finance that he examine corporate taxation so as to ensure that large corporations who do not pay taxes at the moment do their fair share, as do the small and medium-sized businesses that you are representing here today?

If everyone had done their share over the years, as we have the right to expect, perhaps we wouldn't be experiencing financial difficulties that are as serious as the ones we have today. It is in that sense that I'm asking for your support.

[English]

The Vice-Chair (Mr. Campbell): There's a challenge for you, Ms Adams.

Ms Adams: Again, I don't know. I don't understand the companies and what you're talking about with them. In my work I have never seen a company that is not paying an awful lot of taxes. One would hope that all Canadian companies are being treated in the same way. I assume that what's law for one company is law for another company. At some point in time, not today, I would love.... I've always been curious when people talked about this, because in my experience with business I saw companies that paid the 50% in taxes, and companies that paid the 25% in taxes.

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Mr. Bradbury: I want to comment on Mr. Loubier's questions and help out Ms Adams a bit. There's an old principle about paying income taxes - you have to make a dollar before you pay a tax dollar, and I'm talking legitimately. So your rates, while a bit off, are close enough for discussion. They apply in Newfoundland. The combined federal and provincial tax rate on the first $200,000 is 17.84% because of a 5% provincial tax reduction, and 41% or 42% of whatever.

I want to address the points raised with regard to the elimination of ACOA subsidies. As you pointed out, I'm in favour of throwing all of them out the window. I probably would not go that far, but you don't want to give subsidies to a business that is competing with a visiting business and given an advantage. There are other ways of giving subsidies to a new business, whether through tax credits, tax reductions or utilization of work for welfare or work for UI programs.

Eliminate tax loopholes for corporations. In Canada we define a small business as someone who has under 500 employees and so many million dollars in sales. To us real small business people, those are not small businesses, but since that's the definition we're working within, fine and dandy.

There aren't many tax loopholes around any more. Revenue Canada has made great efforts in the past few years to close those so-called loopholes. I presume the flat tax you were suggesting may or should apply to corporations. Those of us in Newfoundland in small business have to make a taxable dollar before we can pay a tax dollar. Small business is not just paying corporate income taxes. Unemployment insurance is 1.4 times the amount deducted from the employee. The matching portion of the CPP, the GST, RSP, the health and post-secondary education tax - the list goes on. Enough said on that. I guess I'm saying that I don't endorse a flat tax or even a minimum tax.

You mentioned the offshore activity with some Canadian corporations and individuals. In some cases it's big business. I suppose the Irving group of companies is one of the famous ones. Maybe there should be a harder look at a company like that to see how it manages to go about doing what it does. Other companies probably do have offshore activities.

If you look at the VAT, and having worked with Revenue Canada for 13 years and having been on the outside for another 15 years, I certainly see what happens. I know why it happens - it's so that some of these people won't have to pay Canadian income tax on some of their dollars.

But why does it happen? I think part of the reason is that our tax rates are so high, especially the individual tax rates. If you get over $60,000 in taxable income, you're at 51% in Newfoundland. That's probably the biggest encouragement to ship money offshore - if you're able to do it and won't be found out. Businesses that deal internationally - the fish business, for example - can easily do that. It's easy.

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The Vice-Chair (Mr. Campbell): We've kept people much later than we planned.Mr. Loubier has another additional point, and some of you might want to speak to this point.

[Translation]

Mr. Loubier: Perhaps that's because the discussion is very interesting, Mr. Chairman.

[English]

The Vice-Chair (Mr. Campbell): It's extremely interesting. We're going to be an hour over our time.

[Translation]

Mr. Loubier: That's right. I just have one brief comment. I didn't expect you to agree with a reform of taxation to eliminate tax treaties signed with the governments of tax havens.

I was looking at your official magazine, CA Magazine. Last June and July, an article written by two experts in tax avoidance recommended that accountants set up trusts or corporations in countries like Bermuda, Barbados, etc, to avoid paying taxes. The same authors stated: if Revenue Canada were aware of all the operations that took place, the department would protest.

If I understood your reasoning correctly and if I rely on your official magazine, you're encouraging the establishment of corporations and trusts in those countries. That's no joke. In 1992, the Auditor General of Canada estimated that 16 billion dollars in revenue leaked out of the country through these tax havens.

I would expect the official organ of an organization like yours to have a somewhat more nationalist tone - this is a term I'm very familiar with - with regard to taxation rather than encourage tax leaks through loopholes and tax treaties signed with countries like Bermuda. One might expect somewhat more professionalism and encouragement to invest here at home. Those are not investments. This is parking money to avoid paying taxes, because in Bermuda as in Barbados, the tax rate varies between 0 and 3% for corporate profits and high-income individuals.

[English]

Mr. Bradbury: I'd like to make a comment on that. I agree with your comments on that CA magazine, since I happen to be a CGA and a registered public accountant here in Newfoundland. Be that as it may, and no slight was intended to my fellow accountants, the tax treaties you refer to - the absence of them is the problem. We don't have tax treaties with some of these countries you referred to. They will not enter into a tax treaty, because they make their money off foreign corporations, banks, businesses, trusts and so on. The Turks and Caicos Islands and the Bahamas are what you're referring to.

Maybe that will help you with a little more background. Despite the magazine, I don't necessarily endorse or help the development or set-up of an office or corporation. Some of them are set up legitimately and there is nothing wrong with them, but others are set up to avoid paying taxes here in Canada, and that's probably the majority.

I can't give you a short solution to that. I could probably come up with one, but it will take more cooperation than what we have control over here in Canada.

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

Mr. Solberg.

Mr. Solberg (Medicine Hat): Mr. Chairman, I want to switch gears just for a moment, but first I want to make a comment to Mr. O'Neill. I won't ask him to respond. He can do that in his wrap-up if he wishes.

One of the implications of going with your idea of using RRSPs for housing would be that a lot of the money currently used by other businesses for investment would disappear. So we would certainly help the housing industry, but then we would hurt other industries throughout the country. There are always trade-offs to these things, so taking from one to give to another may not be a solution. It may just be moving some of the current wealth around. I just want to point that out.

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I also want to talk for a moment about the fiscal side. We've been talking a lot about taxation. We've been talking about monetary policy. I'm sorry Mr. Scott has gone, because I wanted to challenge him on his assertion that if we relaxed our spending cuts and just left things at 3% of GDP, we would eventually grow out of a deficit situation.

There was an interesting graph in The Financial Post two weekends ago that made a very good point. I didn't crunch the numbers myself, but on the face of it it made sense to me. Based on current assumptions about interest rates and growth in the economy at the present level of cuts we've gone through, the graph asserted that in 11 years the total interest on the debt would exceed the total revenues in the country and we wouldn't even have to have a debate about where to cut because it would all be cut. I thought that was an interesting graph.

I want to offer a chance to comment to people who have been asserting that we don't have to cut, that we can come up with money through growth or through higher taxes. I'd like to offer that graph to them or that argument and ask them to say a few words on it and to affirm they really do feel that simply by easing the monetary policy a bit, by taxing corporations and individuals more, we could grow our way out of this situation.

Mr. O'Neill: I would like to say, Mr. Solberg, that we are presently allowed to invest 20% of our RRSP portfolio offshore. So even if we just took a percentage of that, or all of that, or changed that and invested it in Canada, maybe we'd be a lot better off. So that would be a lot of money and we wouldn't even need all of that 20%.

Are we summing up or are we just responding?

The Vice-Chair (Mr. Campbell): Perhaps a couple of you may want to respond toMr. Solberg. I don't know if he has another question. Then we'll wrap up.

Mr. Solberg: I will ask one more question or make a statement. This will be for Mr. May.

Yesterday in Halifax a gentleman appeared before us who said some things I thought made some sense with respect to training. Basically he said if somebody comes to him who's reasonably literate and reasonably well-spoken and has good social skills, he is more than willing to train them on the job. If we put more emphasis on on-the-job training we can avoid the situation others have referred to where you train people for jobs that really don't exist.

I wonder if you'd care to say anything about that and whether or not there needs to be more emphasis on the on-the-job training and if there are ways to encourage that.

Prof. May: There is a demonstrated benefit to on-the-job training. We know that from the universities through our co-op programs.

One of the difficulties we face in this province - and maybe with the provincializion of training programs it's almost like giving us a stick of dynamite and saying Merry Christmas - is where our people would get that training. For example, specifically in our co-op program in business and engineering there are not enough jobs here in the province. Therefore, to get the necessary experience and training we'd have to send people away.

I don't think there are panaceas, but it's a very important area for investigation. It's probably a fruitful one, too.

Mr. Solberg: I'll just follow up on that. Perhaps some of the other members can help me out here. I believe yesterday someone - maybe it was you, Mrs. Brushett - was talking about someone who was looking for engineering students - and I don't recall if it was you - who couldn't find enough of them in Atlantic Canada.

Mrs. Brushett: Pratt & Whitney is looking for welders and high-tech engineers.

Mr. Solberg: Right. They couldn't find enough of them. That was part of the reason why I wanted to ask this question about on-the-job training.

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Prof. May: When you come up with particular examples like that, you have to look at what's going on. One of the innovative things HRDC has done - funnily, an idea that came out of this region - is to try through the Internet and e-mail to put students in contact with potential employers. So if Pratt & Whitney is looking for people, I would ask them to please contact the co-op division of the university and I'm sure we'll try to accommodate them.

The Vice-Chair (Mr. Campbell): Thank you. We're going to wrap up quickly with final observations from everyone, just a very quick wrap-up and last shot at it.

I'll start with Ms Adams.

Ms Adams: I'd just like to say thank you for the opportunity to participate. This is the first time I and my organization have participated in anything like this. It's been a valuable learning experience and a valuable opportunity to listen to a variety of opinions. I like the idea of you people coming here to ask people in Newfoundland what their concerns are.

Ms Peddle: I'd like to thank everybody for this opportunity. I don't get the chance to sit down and talk about the Canadian economy very often. This is the first time, actually.

I'd especially like to thank once again the Bloc member. I find it interesting that in the last year of all the parties that feminist activists could relate to it was the Bloc that had an alternative outlook. Also I deeply appreciate the realistic look at corporations that are not paying their fair taxes and for getting away from poor-bashing. That's deeply appreciated by a woman who's lived way below the poverty line.

I'd also encourage Mr. Bradbury to think whether he would like people in Newfoundland to work for less than minimum wage, if that's what he's encouraging. The SWASP program we have here, which is training-fare, the student work abroad services program - when you figure out they're getting a tuition credit, they're working for $3.10 an hour. I believe that's a human rights violation and we should be very careful when we promote workfare and training-fare across this country. Thank you.

Ms O'Brien: I'd like to reiterate my point that I don't believe we can have any further cutbacks in our TAGS program. We can't afford the cuts we're going to be getting in our transfer payments in the coming year that were in the last budget.

This province cannot reduce any further its health care and levels of education. The people of this province and the poor people of this country cannot take any further cuts. In fact, what we're doing is really destroying the social contract of this country and turning it into a very different place. It's not the place Canadians have said they want to live in.

Prof. May: I have three or four points. First, with respect to Pierre Fortin, he's asked for evidence on the cost of a couple of increased points in inflation. I would like to hear the Bank of Canada's response to that. That would be interesting.

Secondly, on tax expenditures, in another life I looked at tax expenditures in terms of accelerated profit and capital cost allowances for the Economic Council and for the Department of Finance. The return for every dollar of lost revenue was 20¢ on the dollar. That was the good news. The bad news is that we invested in machines, not people, and therefore it cost us employment. It increased unemployment.

Thirdly, what the Minister of Finance is doing with respect to Treasury Board and promoting the activities of the auditor general I think is praiseworthy. We need much more monitoring and we need a glass box to see exactly what is going on.

Fourthly, with respect to this province, in the rural areas particularly as we're cutting back - we're not North York or Willowdale - I would very carefully monitor the adjustment.

My last point is, I hope, a positive point. Members and the Minister of Finance have to keep their eyes on the future and decide what sort of country and what sort of economic union they wish to promote 10, 15 or 20 years down the road.

Mr. O'Neill: I'd like to thank the committee for giving me the opportunity of appearing here today. I'd like to thank our members of Parliament for notifying me and letting me know they would be here.

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I would like to make some points. This is difficult in this day of our great nation, but we are a rather distinct society down here. We've been here for 500 years and we have been survivors. We've known some good times but we've also known many rough times.

Things that might be applicable to other parts of the country might be felt in a very severe way here. So I would add my voice to other comments you've heard here - please think of the ramifications.

It's critical that we have as much positive news as can happen here, especially in employment. I think this is the future. If we want to have a future, we will have to be creative and have a careful eye on what will hurt us. One thing that will assist us is the creation of jobs so that we don't have more out-migration and can keep our graduates and young people in this province.

Mr. Loubier, I'm a businessman and the president and general manager of several companies. We work hard and we pay our fair share of taxes. I think all Canadian companies should pay their fair share of taxes. I don't know of any loopholes, so I don't think there should be any loopholes for anybody else.

In our province and many other provinces, and in the federal government, we have auditors general who work hard to bring to the attention of Parliament and all the different legislatures the abuses that go on in government. I made the point earlier on the housing industry that we don't listen. As politicians, are we afraid to say, they're right, let's correct that? I totally concur with the comments I heard here. I think you should force government to listen to the auditor general.

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

Mr. Bradbury.

Mr. Bradbury: My view of the questions you put to us.... Obviously, you have a tough job creating jobs and keeping the deficit down and so on. My view is that there should be no further tax increases. We're paying enough taxes right now, but one area to which you can probably look for a tax increase is large multinational corporations. For example, the Bank of Montreal just had a $900-million-plus profit. If that's who we're referring to as the biggies, then I have no problem with a 1% or 2% surcharge on any taxable or net profit these fellows have over $500 million, let us say.

The Vice-Chair (Mr. Campbell): That's what we did in last year's budget.

Mr. Bradbury: Well, do it some more, but don't touch any of the small business people. We've had it.

The other point I want to address, and I think this is where we're falling down to a large extent.... There are some big dollars there, but the problem with federal politicians is that they don't look at $10,000 or $100,000 as big dollars. We do. If you people look in enough areas, you'll find that those amounts add up to a billion bucks after a while - probably a few billion dollars.

Ms Perry: I'm going to answer question three, but I'll try to be fast.

I completely disagree with more cuts to social assistance and unemployment insurance, because that would be extremely detrimental to Atlantic Canada. I believe in trying to eliminate some of the abuse, however, in terms of young people who just get out school, go to Toronto and work for10 weeks, and then come home for the winter. That type of thing should be looked at much more closely, but I think the largest area the government has to look at for cuts is within itself, within the civil service.

Where I'm involved in community economic development, this is what we have been doing over the past several months. We have been sitting with the people in our communities and hearing from them what their needs are.

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I strongly believe the government would be much more effective in creating an environment for jobs and growth by putting the employees for economic development at the local level. People like me are more than glad to work for $30,000, and I know the people and I know what our way of life is like, whereas someone in Ottawa is probably getting paid $80,000, knows nothing about us, and is making policies that are detrimental to us. I think you could save a lot of money by having a much smaller civil service and more local autonomy over decision-making.

I also have to agree with Mr. Bradbury. Please do not increase any taxes, especially on small business and the private sector. When I graduated from university two years ago, I didn't have a job. My three co-op work terms were in Ottawa and Moncton, and I could have returned there but I wanted to stay in Newfoundland.

I did something that everybody, including my family, thought I was crazy for doing at the time, and I moved back to rural Newfoundland, to a town with a population of about 1,200. I started my own consulting business. In my first year I made $20,000, and I was pleased as punch. I worked seven days a week sometimes. Eighteen-hour days were normal. I think we have to encourage more people to get out there and do that kind of thing. We can't expect to work for $80,000 or $90,000 any more. It's crazy. We don't need that much to live.

I've only been home for two years and I've already made a down-payment on a house in rural Newfoundland. So I tried and I made it, and I'm quite happy about that, but I would like to see more incentives for our youth. I know the jobs aren't out there as such, but with an education, they are.

I moved back to my home town. Many of my friends there who didn't get an education are on unemployment and welfare. In the past year I was offered four jobs, so it's critical that we keep education foremost.

The Vice-Chair (Mr. Campbell): Thank you. This has been an excellent panel and our longest, which is a testament to the force of your ideas. I want to thank you all, especially those who hung in to the end. I apologize to panel members and to all participants, MPs and witnesses, for having imposed such a long panel, but it was worth while.

Ms Perry: I left out one important thing. Another area of waste in government is figureheads: the Senate, lieutenant-governors, limousines, cars -

The Vice-Chair (Mr. Campbell): But hopefully not the finance committee.

Ms Perry: I went over some of these questions with various people. I had not heard much about the Senate before these questions came up, but several people said that if the Senate did what it is supposed to be doing, you could see it. Apparently the Senate is perceived as being a figurehead -

The Vice-Chair (Mr. Campbell): At this late hour I will not get into that whole....

Thank you, everyone. We appreciate your input and help in our tasks ahead.

The researcher reminds me to remind you that this is now a permanent feature of budget-making in this country, so expect that sometime around this time next year we'll be back asking you how we're doing, where we should go and what we should be doing.

This meeting is adjourned.