EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 30, 1995

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[English]

The Vice-Chair (Mr. Campbell): Good morning. Welcome to these first morning sessions of the finance committee in New Brunswick. They are part of the pre-budget consultation hearings that we're conducting this week across the country. Half of the committee is in western Canada and the other half is here this morning. We represent all parties in the House.

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We'll be having three round table discussions in Fredericton today. The procedure is really fairly simple. We begin with introductory interventions, which you have been asked to keep to four or five minutes. We're not rigid about that, but the reason for it is to leave ample time for discussion among panel members and ample time for questions from members of Parliament who are here this morning. So I ask you to try to respect that and to keep your opening remarks to only the salient points you want to leave with us and, hopefully, some responses to the questions that have been sent to you to stimulate discussion.

As I said, we will begin that way, proceeding to discussion among yourselves, followed by questions from the MPs. We will begin in the order in which you are seated. A couple of witnesses who are scheduled to join us have not yet arrived. I'm sure they'll arrive as we're under way, and we will put them in place.

Let me just go around the table and say who's here. From the New Brunswick Federation of Agriculture Inc., we have Vice-President Martin van Oord. Paul Daigle is here from the Atlantic Provinces Chamber of Commerce. From the Human Development Council, we have Cathy Wright and Randall Hatfield; from the New Brunswick Forest Products Association, Maxwell Cater; from the New Brunswick Federation of Labour, John Murphy; and from the Coalition de Moncton pour la justice économique et sociale, Everett Ferguson. Welcome to all of you.

We will begin with Mr. van Oord.

Mr. Martin van Oord (Vice-President, New Brunswick Federation of Agriculture Inc.): Thank you very much for the opportunity to speak to you today. We hope the hearings will be productive ones, with useful input from the organizations represented here and from all the other ones you will hear. We also hope this will help you to develop a well constructed budget.

We realize that when we speak of budgets, we speak of deficit reduction. The agriculture industry is very well aware of the fiscal realty, and I think we're very willing to pay our fair share. However, let us state at the outset that we believe we took a double-hit last year. Although Minister Goodale explained to us in Ottawa on budget night that we had suffered only a 19% cut, his calculations did not include the cuts to transportation programs for farmers - and I'm talking about the WGTA and the feed freight assistance program. When these are included, as they should be because they affect agriculture, the figure amounts to more than 40%. This is part of the context of our submission today.

We also urge government to consider the long-term consequences of its budgetary actions. We hope you will realize that support for agriculture is a necessary investment in an essential industry and a bright future. It is not simple expenditure with no return.

There are a few things I would especially like to talk about, cost recovery being of them. Cost recovery as a concept does not disturb our industry deeply; however, if the government service providers are seeking cost recovery, agricultural producers must be allowed to recover their costs as well. Otherwise, the sides of the equation can never balance. If our industry will accept cost recovery as a practical budget measure, will government commit to allowing us to recover our costs?

Please bear in mind that recent surveys credit Canada with the cheapest food basket in the world relative to family income. And who's supporting this? The situation cannot be sustained if the onus for a cheap food policy and cheap food is increasingly on the farmer.

Privatization may indeed work to our benefit if free market forces are allowed to prevail. It is necessary, however, for government to play a regulatory and inspection role in matters that reflect directly on our food quality and food safety. Our very high standards in these areas are a valued asset domestically and internationally, and they will become more so in the future as our global markets are expanding. We must also maintain our basic research capacity if we are to remain competitive. This function in a general sense is best served by government rather than by profit-oriented private interests.

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In some other areas of service we look for privatization and possibly deregulation as a way to generate new competitive private sector job opportunities.

One thing I would like to talk about is the level of service. There is no doubt that serious harm is being inflicted on the agricultural community by the recent deep cuts. Agriculture Canada's service levels have become so low in New Brunswick as to be almost insignificant. Whether by design or by misfortune the federal bureaucracy has been intolerably unresponsive or sluggish in dealings with such critical matters as feed freight assistance adjustments and the delivery of the whole farm safety net program.

Farmers and farm organizations have clearly done their part in these matters in a sincere attempt to be an honest partner. Is this kind of partnership really desired or are government statements empty rhetoric?

In conclusion, a viable agriculture industry is seen in many parts of the world as a matter of national security. No doubt the demand for food at home and abroad will continue to increase rather than decrease. This is a rich natural and human resource. Our nation can be a major player in one of the most significant industries in the world.

We cannot afford to destroy Canadian agriculture now. By working together we can make adjustments and meet necessary deficit reduction targets and carry on. The key is to allow us to help you make value decisions. With this is mind we will continue to be available to you for any substantive consultation, and we look forward to working with government towards our common goals.

Thank you.

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

Mr. Daigle.

Mr. Paul Daigle (President and CEO, Atlantic Provinces Chamber of Commerce): Thank you, Mr. Chairman.

Committee members, ladies and gentlemen, it is a pleasure to be here. I'd like to identify the organization I represent. It is the Atlantic Provinces Chamber of Commerce. We're an umbrella organization for four provincial chambers of commerce and 125 chambers of commerce and boards of trade across Atlantic Canada, representing some 17,000 business and professional people. We are the largest and most representative business organization in Atlantic Canada.

We welcome the opportunity to participate in these discussions, and we commend the federal government for continuing with its pre-budget consultations. It is important that Canadians have the opportunity to input into decisions that affect them, but only if we're being heard.

As our policy committee reviewed the agenda for these hearings and APCC's presentation from last year, the members unanimously expressed frustration and disappointment at the apparent lack of action and the slow pace of reform on the part of the federal government. It's fine to stage these hearings, but government has to begin to show that it is listening by taking concrete action on critical issues. In our judgment the government is failing to do this, especially in the areas of economic development and job creation.

In our presentations last year we expressed the business community's concerns about a number of things: a deficit target that we held to be too minimal; the need to re-profile retained revenues towards the re-engineering and re-creation of government, assisting those individuals in regions most affected by the fallout; the need for government to get out of direct service delivery wherever possible; the need for government to partner more effectively with private business organizations for the gathering and dissemination of information and for projects and services generally; the need for a coordinated approach to offset the combined impact of all proposed federal policy and programs changes affecting this region; the need for a balanced approach to rationalization and cutbacks, which recognizes regional disadvantages; the need to shift scarce resources toward regional development, thus helping with the transition to a whole new economy; and the need for the federal government to resist succumbing to the temptation to resolve the debt and deficit problems through increased taxes.

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We continue to be concerned, and we put forward a number of other recommendations that are as valid today as they were last year or even the year before when we first formulated them.

We can see that incremental progress is being made in a few areas, but not nearly enough has been done to help get the country out of the mess that it's in.

With respect to debt and deficit reduction, a national survey of chamber members showed that 85% of respondents were dissatisfied with the absence of a finite goal for eliminating the deficit. It is most unfortunate, we believe, that the government failed to set a more aggressive target than it did. When you consider the size of the federal debt and the cost of carrying that debt on an annual basis, which consumes over one-third of our total revenues, this is just a ridiculous situation.

We propose the setting of definite targets and we aim at eliminating this deficit over a period of three years. Let's bring it down to $25 billion, to $15 billion, to $0 billion. Let's get the deficit down to zero so we can once again begin to grow a healthy economy.

With respect to the tendency to reach for a tax solution, we remind the committee of the declaration of the Deputy Minister of Finance in June 1993, and I quote:

Canada is close to the highest tax jurisdiction among the seven largest industrial countries, and if personal tax rates are pushed much higher governments risk driving Canadian investment offshore or out of the formal economy.

We have to keep in mind who our competitors are. Our competition is primarily with the United States and their tax rate is 10% lower on GDP than ours.

Our conclusion is that there is simply no scope for additional tax increases. As a consequence, elimination of the deficit and progress toward debt reduction will have to be achieved primarily through expenditure cuts, the few non-tax revenue opportunities available, and whatever realistic growth might be attained in the economy. We contend that the latter is likely to be minimal in the short term.

Last year the APCC argued in favour of shifting scarce resources towards regional development in the understanding that healthy economies are balanced economies and that every $1 in federal government expenditures in regional economic development generates $1.9 in government revenues over the first five years. Studies have shown that expenditures of $1.3 billion - federal and provincial combined over 10 years - have led to an increase in GDP of $7.8 billion. That is 5.8 times.

The Vice-Chair (Mr. Campbell): Excuse me, Mr. Daigle, but before you proceed to what I hope will be those concluding remarks about economic development, you made a very forceful case on behalf of your umbrella organization for addressing the deficit quickly, without an increase in taxes. You've failed to tell us how we should achieve that if there are to be no measures on the revenue side. Could you elaborate?

Mr. Daigle: The federal government is investing roughly $16 billion in the Atlantic economy on an annual basis today, an economy whose GDP is $39.4 billion. Less than 3% of those moneys are directed toward regional development. It's less than 3%, when the return on regional development dollars, even in an economy -

The Vice-Chair (Mr. Campbell): With respect, Mr. Daigle, that's not an answer to the question I thought I was asking. You were beginning to discuss the benefits of economic development and of redirecting, in your words, scarce resources, but your first five minutes were all about reducing the 3% level, $25 billion, down to zero in three. I would like your suggestions, on behalf of your organization, about how we will get to zero in three years without increasing taxes.

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Mr. Daigle: Last year we made recommendations, as did others, suggesting the federal government seriously look at re-engineering and restructuring government by partnering far more effectively with the private sector and private sector organizations. In our judgment the federal government has failed to act in this way in a significant manner.

The Vice-Chair (Mr. Campbell): Has your organization done any research on or does it have any figures about what savings this would effect?

Mr. Daigle: We do not have figures on what savings this would effect. But if you look at what has happened in private sector organizations that have gone through fundamental re-engineering and restructuring exercises, what I think you will find is there are much greater efficiencies to be achieved than people generally realize. Not only this, you create a government able to support economic development in a far more supportive way than the case is at present.

The Vice-Chair (Mr. Campbell): Please proceed. You've set a very ambitious target of down to zero in three years and only spoken in vague concepts of how the savings might be effected, except to say there should be no taxes. Maybe you'll get into it in the development of your ideas during the last couple of minutes.

Mr. Daigle: With all due respect, Mr. Chairman, if those are unrealistic figures, we would like to know what the government is proposing in terms of a target.

The Vice-Chair (Mr. Campbell): Sir, I didn't say they were unrealistic figures. They're your figures, and I just asked you how you proposed we get there. Those are the kinds of ideas we want to take back to Ottawa.

Mr. Daigle: I will leave you a copy of our presentation from last year, in which we put forward some 16 pages of suggestions.

The Vice-Chair (Mr. Campbell): Thank you. Would you just conclude?

Mr. Daigle: One of the areas we think is extremely important to address is inherent in your second question. How may budget measures be used to create an environment for jobs and growth? We believe today we must first establish what constitutes such an environment in such a vastly changing economy as ours. We need to recognize and respond to Atlantic Canada as a regional economy, not simply as part of a national economy or as four provincial economies. This requires new thinking, new strategies, structures, organizations, institutions, and a new vision of Canada.

The Atlantic region economy demands a pan-Atlantic approach. We need to rethink how we plan and organize our regional economy for greater prosperity. What is needed is a bold new vision. The tendency is to continue to treat regions of the country as if they were part of the old national economy. For instance, the stated role of regional economic development in Atlantic Canada is, and I quote:

to anticipate and respond effectively to challenges, obstacles and imbalances in the economies of the four Atlantic provinces; the goal is long-term, sustainable job creation.

We believe this is a rather reactionary, somewhat narrow, and negative perspective. It fails to acknowledge a regional economy and does not espouse a regional approach.

We would rather see a far more bold and visionary goal that recognizes the fact of a regional economy. It could be, for example, a goal that should create in Atlantic Canada a world-class economy by a certain year. We should start looking at things like how we increase our export trade from 21% of GDP up closer to the national average. How do we increase our productivity levels in Atlantic Canada up to close to the national average, realizing our national productivity levels have to increase as well?

The Vice-Chair (Mr. Campbell): Mr. Daigle, I wonder if I might suggest you hold the rest of your presentation until a later round, as we're well over the introductory time and I want to give others a chance.

We turn then to Ms Wright and Mr. Hatfield.

Ms Cathy Wright (Executive Director, Human Development Council): Thank you. We certainly appreciate the opportunity to present some comments to you today. While we don't profess to be experts in the field, we hope we have some useful points for you.

The Human Development Council is a social planning council. We promote and coordinate social development in the greater Saint John area. This, of course, is why we're here today.

I think it's very important to recognize the task the committee has ahead of it. Not only do you have a difficult task, but you also have a task of paramount importance to setting a direction for the future of the country.

As I said, the questions are not totally within our expertise, but what we hope to do is provide a brief framework or context within which the radical cuts are being proposed and are presently being made.

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As an organization, cuts are not new to us. What you take in is what you spend. We have faced cuts in the last few years. In fact, we'd had to put into place creative ways to look at how to deal with those cuts.

Most recently, we have put all our staff on four days a week rather than full time. This kept us from being able to lay off one person. A number of federal task forces have looked at the world of work and how we can change that.

Obviously, one side of the ledger is the revenue side - in other words, taxation. There is a political will out there to reduce the deficit, but there's no political will to raise revenues. It should not be ignored as a means of addressing the bottom line in a fair and balanced manner.

Others with more expertise in this area have appeared before you across the country. They have recommended changes such as lowering the ceiling of RRSPs to $8,000 and establishing a 5% inheritance tax. We're one of the three OECD countries without an inheritance tax. Both of those savings could provide a minimum of $4 billion to $5 billion a year.

Still more could be done than just tinkering with the taxation system to really promote and provide for a fairer distribution of the burden of dealing with the deficit. I think Canadians are prepared to work together on it, but we need to ensure there's a fair distribution in place.

Recently on CBC's Ideas, they had an individual on who went to another end of the continuum and talked about giving the responsibility to the banks, removing all the sales tax and instead putting a one-quarter of one percent tax on all money withdrawn from the bank. So there's a wise variety of thoughts and perspectives being put forward on how to approach the taxation system in a fair and balanced approach.

The other side of the ledger - cuts - has really totally preoccupied the country as a whole. If we look in the media, it's very much doom and gloom and it's very fearful for the future of the country. What we'd like to draw your attention to is, if cuts are to be continually made, the committee has to understand both the short-term and long-term consequences of those cuts.

Long-term cuts could cut so deeply and radically they will really rob us of our human resources. I think we think more about money as the entity holding the country together and driving us, rather than as the resources of our people and our communities. If we don't provide the tools for people to become self-sufficient, then we're not going to be able to balance the social and economic integration the country needs.

Many of the tools are provided under the CAP, which is now moving to the CHST envelope. It's an envelope already containing yearly planned cuts for the next few years without any measurement of the impacts. And these are impacts affecting our country both economically and socially.

Locally, what we found through a recent family needs survey is there's an overwhelming concern among families about employment and educational opportunities for the parents as well as for their children. There's a concern for programs for teens, and there's also a real insecurity and uncertainty about the future. The number of people who are being affected continues to grow, and this is the kind of environment we're dealing with.

In closing - and I'm sure we'll have a chance to answer more questions - I'd like to draw a parallel to how the country has dealt with the issue of illiteracy and how we might, with similar vision and passion, tackle the economy and the way we provide tools for self-sufficiency.

Illiteracy was finally recognized as a serious issue, costing the country significant amounts of dollars and having very serious economic consequences for us. It was seen as needing to be addressed. There was a political will that finally was developed. The business community had a great deal of influence in developing this political will, as did community momentum.

What we did was we moved from blaming the individual to building partnerships with business, labour, government, educators, community groups, and even the non-readers themselves. The federal government took a lead role in addressing this issue, a leadership role that significantly influenced the province's commitment. New Brunswick is a case in point. The image in the media became one of understanding the issue and promoting success stories, far different from what we have now. It was a common goal adopted by the country to promote a more literate society.

Thank you.

The Vice-Chairman (Mr. Campbell): Thank you. You've raised a number of issues. I'm sure others will want to react to them. As a committee, we particularly like to hear your thoughts about specifics on the tax revenue side. You alluded to estate taxes. We should discuss this and any other specific ideas you have on that side of the equation. I guess issue has been joined with your fellow witness sitting to your right. So we'll have a chance to discuss very central issues to our deliberations.

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Mr. Cater.

Mr. Maxwell Cater (Executive Director, New Brunswick Forest Products Association): Good morning. I'd like to thank those responsible for inviting me here again this year to participate in these discussions.

Very quickly, the New Brunswick Forest Products Association is an association grouping the pulp and paper companies in New Brunswick and roughly 80% of the lumber production. We represent something like $2.5 billion of shipments from New Brunswick. We're the largest industrial employer in New Brunswick. We're one of the greatest job creators. We're a very cyclical industry, and we're trying to recession-proof ourselves for the next recession.

Prior to last year's meeting in Moncton we were sent quite a few documents on what our plight was with respect to revenues and expenditures. This year I'm sort of in the dark as to what has taken place in the last 12 months since the Moncton meeting. There have been a lot of questions arising from the last 12 months of efforts to reduce the deficit.

Many questions have come up. Are the targets being met? Right now, what percentage of our revenue is going to service our deficit? Have priorities been followed? Should there not be a more aggressive approach to deficit and debt reduction, as Mr. Daigle pointed out? Are we reducing duplication between federal and provincial governments? Are we supporting business expansion by creating a more favourable investment climate? These questions came up last year and there were recommendations. Are we doing them?

I don't find much transparentness in the last 12 months. This is my own personal observation, and I try to keep up on this. Last evening, watching the Ontario mini-budget, a lot of these things came back home. I learned last evening watching the programs that in B.C., for instance, 4% of their revenues go to service their deficit. In Alberta it was 5%; Ontario was terrible at 19%. On the federal side, we're over 30% to service our deficit.

You're looking for answers as to how we're going to further improve, if we have improved at all in the last 12 months. To start with, we have to keep plugging on interest rates, creating a climate in which interest rates are lowered, whether that's through solving our national unity problems or whatever. But the industry I represent is one in which a few points of interest make or break a company.

I haven't personally seen much evidence of frugality. I don't see anyone looking too much at me now about it, but, Mr. Chairman, if you have a problem at home or a problem in New Brunswick, it's frugality. We've seen this here in New Brunswick. It's the second time now they're going to reduce staff over the holiday period, much to the chagrin of the people who are going to be laid off and not paid during that time. If you have a problem at home and your financing is out of whack, you have to become very frugal, and I see very little of that in the federal system.

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The Vice-Chair (Mr. Campbell): Mr. Cater, because you have only limited time left I would just like tell you very quickly about a publication of the finance department called The Fiscal Monitor, which will answer many of the questions you have. The latest one I have with me is dated September 1995. It will indicate to you where we are and answer the concern you have that you're in the dark. The minister has made it clear that he considers us to be on track with the course he laid out in last year's budget.

As for whether we should go further, that is what we're here to discuss. You've asked that as a question, and that indeed is the question we're asking witnesses and if so, how.

As for your last point about frugality, we have representatives of labour here and they may have a response. There are clear indications all over the Ottawa and Hull area, if you come, about steps flowing from last year's budget in terms of jobs that are ending in the civil service and other steps that have been taken on the Hill and elsewhere. You referred to the Ontario budget measures yesterday, which are also a reflection of what -

Mr. Cater: By frugality I didn't intend to mean lay-offs. You don't kick half your kids out because you're overdrawn at the bank. You have to figure out how else to do it.

The Vice-Chair (Mr. Campbell): If you have specifics to suggest, we'd appreciate them.

Mr. Cater: We have to enhance the climate for job creation. You can't lay off 45,000 civil servants and hope we're going to save an awful lot of money, because people have to be working to pay back into the system.

The Vice-Chair (Mr. Campbell): I'll let you conclude and hope in our discussion you'll share with us some of the other specifics you would recommend to achieve that frugality.

Mr. Cater: Thank you.

The Vice-Chair (Mr. Campbell): Thank you, Mr. Cater, very much. We'll look forward to the discussion.

Mr. Murphy.

Mr. John Murphy (Executive Secretary, New Brunswick Federation of Labour): Thank you, Mr. Chairman, members of the committee. Welcome to New Brunswick. I wasn't before your committee last year when you visited New Brunswick, but our organization was. As members of the committee are well aware, there are extreme differences of opinion from different presenters who come before you.

As to where you went last year, how far you went, whether or not you went far enough, and whether you should go further, you're going to hear it again this year.

I'd like to set some of my brief opening remarks in context. It's certainly not something I would quote very often. I imagine if you looked at the full article you'd take something else out of it too, or suggest maybe I was taking something out of context.

I have a copy of a speech that was delivered by David Olive, editor of the Report on Business magazine for The Globe and Mail. He delivered this speech on October 24, 1995, in Toronto at a conference of the Conference Board of Canada. It's such an interesting speech that our parent body, the Canadian Labour Congress, has circulated it. He made a lot of references to the Quebec referendum situation, actually being very close to the voting date, but he was talking about Canada in terms of national purpose and how people in Quebec might look at our country in terms of national purpose.

He made some interesting comments, particularly in reference to how we are dealing with our deficit-debt situation, and in terms of national purpose. I'm just going to read a couple of the points he made because I think they're important for where we will go as a country down the road in terms of our financial situation and our economic situation. He says:

We are courting disaster by allowing ourselves to be trapped in a public discourse that articulates our current national project merely as ``doing less with less.''

In other words, the focus is on the deficit-debt situation. He goes on to conclude:

That if we do not make today's harsh medicine more palatable by making it more hopefully constructive and suggestive of tangible rewards for ordinary people, it soon will find no market anywhere in Canada.

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I think a lot of the labour people and people from socially oriented groups who appeared before you last year probably suggested very strongly that what we heard was going to come down in terms of our fiscal situation wasn't good news, and we thought that was too much.

If we are now going to revisit the situation, which you have to do in terms of preparing your annual budget, and are going to go further in terms of dealing with the debt and deficit situation in the aggressive manner that is being suggested by some, then I think one should bear closely in mind what this individual has said, and remember this is a person who is connected to the business community, not the labour or social community in Canada.

His comments, for that matter, are being echoed by others. Columnist Dalton Camp, who as most of you are well aware has a profile position in terms of the Conservative Party of Canada, is now writing columns for various newspapers, including the The Telegraph-Journal. He has also made references to the serious danger of continuing to point the finger at ordinary Canadians as being the problem that has to be tackled again and again in terms of downsizing our social programs. He is also saying we have to take a second look in terms of the revenue side, and in terms of those who are or are not currently paying their fair share.

Mr. Chairman, I'm not quite sure whether you were a member of the committee last year, but certainly some of the members this year were members of the committee last year.

The Vice-Chair (Mr. Campbell): We all tend to look alike, but I was in the west last year.

Mr. Murphy: I meant you were a member of the committee -

The Vice-Chair (Mr. Campbell): We all were.

Mr. Murphy: Whether one was in the west as part of that tour or in the east, there were a lot of presenters speaking to the alternative budget. I'm not going to get into the details of the alternative budget in my opening remarks, but I want to suggest to you today, as I'm sure others have already suggested, that a lot of the ideas, concrete recommendations, and proposals in that budget have not been seriously addressed. If they have been seriously addressed, they have not been reflected in the policy choices that have been made by the government. We are encouraging you to move in that direction and revisit that alternative budget.

It will be updated and made available, and we're asking you to give serious consideration to it. The job crisis is real, and if we're going to continue to cut, cut, cut it's going to get worse, and your revenue situation is going to get worse.

Once again, a headline in the The Telegraph-Journal a few days ago said 3,000 jobs were at risk. A survey by the Canadian Federation of Independent Business, representing small business, of their membership in New Brunswick said that's how they look at the economy in New Brunswick, which is supposedly a robust economy in the minds of some people, in the coming year.

Why slow consumer spending through the downsizing of the provincial public sector? They're not talking about the federal public sector, which has been downsized and is about to be downsized a lot more rigidly than the provincial public sector in New Brunswick at this time. Weaker orders from other businesses and higher payroll taxes have all conspired to cloud members' expectations in 1996.

Organized labour and other groups have suggested time and again you have to look at the revenue side of the equation from all aspects. That certainly includes the aspect of personal income taxes, the fairness in that system, and the breaks people get or don't get. It also includes the business side of the tax equation, particularly the corporate side of the tax equation.

It bothers me to no end when we talk forever about the level playing field with our trading partners, particularly the U.S., when we in Canada don't move to level the playing field in some other critical respects with, for example, a minimum corporate tax level or an inheritance tax, which one of the previous speakers mentioned. These will generate revenue. They do exist in other countries, as was mentioned, yet they are not part of the equation here. They are not treated seriously as methods to generate additional revenues so there's some balance in the system in terms of paying down the deficit, which everybody accepts, including us. The alternative budget also accepts that has to be addressed.

At the same time, we have to move toward protecting our social programs. It gets back to what that business speaker said to a business delegation, ``What is the sense of Canada, in terms of our national purpose? Do we have one?''

I would suggest you get his speech and read it. He alludes to the fact that the national purpose must be much more than simply ripping apart our social programs, moving in that direction, and letting the chips fall where they may.

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I'll conclude at that point, Mr. Chairman, and I look forward to participating in the dialogue to follow.

The Vice-Chair (Mr. Campbell): Thank you. There will be issues to respond to.

Because the estate tax issue has come up in other panels, and just so that we have all the facts on the table when it comes to discussing it because we have heard it from a number of presenters, we do have a capital gains tax on death. That is a form of estate tax. To suggest that we should have an estate tax and not also add that we do have a form of estate tax would be unfair for the purposes of the discussion. It's certainly worth discussion and observation by our panel in terms of reflecting on how that tax functioned when we did have it in Canada in terms of what sort of estate planning it fostered, and in terms of whether or not it is an effective tax or would solve our problem. We'll come back to all of that in the discussion.

[Translation]

I recognize Mr. Ferguson.

[English]

Mr. Everett Ferguson (Member, Coalition de Moncton pour la justice économique et sociale): Good morning, gentlemen, and thank you for participating in this debate.

Since I sat down here, I've heard nothing but the bottom line, with no human face. I will try to put a human face on the picture - not mine, but that of everybody else who is out there.

We're here dealing with the former budget. ``Budget'' does embody choices. Those choices must reflect the political values and priorities of the government. What I see here is evidence that we have not looked at the context in which we are working. We're looking at a context that has a social policy and economic policy. We see social policy always related to the debt and deficit, yet we see the Bank of Montreal earning $980 million in profits. Together the three banks have garnered over a billion dollars in profits, yet there's never a mention about the deficit on their side. Why?

The next part I'd like to get into is workplace and social policy. What responsibility does the workplace have to social policy besides the bottom line? As we look at the marketplace with regard to social policy, all we can see is the lowest common denominator and the maximization of profits. You can't put hospitalization and you can't put people in the marketplace only because they maximize profits. People are important.

I'll keep it short because I'd like to get into a debate with everyone around here.

The people are hurting. Gentlemen, we are saying to go no further. We can have social policy and deficit, just as we have maximized huge profits and had deficit. If we have to eliminate social policy in order to bring down the deficit, why not eliminate the high, maximized profits for the deficit?

The Vice-Chair (Mr. Campbell): At this point we've had issue joined, as they say, on a number of things. One of the benefits of these round table discussions is that various stakeholders are together. It helps us all appreciate the complexity of the issues and the tough choices, but gives each of you a chance to reflect on what others have said.

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This would be the moment to respond to what you have heard, to react to what you have heard; not really a moment to elaborate further on what you've already said, but a time to react and respond and question each other. Then we'll turn to questions from the MPs.

Who would like to make a comment, then, on what's been said by someone else, or to reflect on those observations?

Mr. Murphy.

Mr. Murphy: Perhaps I can start, Mr. Chairman, and I hope try to start on a positive vein, by picking up where Cathy Wright, with the Saint John Human Development Council, left off, and that is with the challenge of illiteracy in this nation and how that was dealt with in a very positive way when people finally came to realize it was a serious issue and it had to be addressed because it was costing our nation in many different ways, both financially and in the human suffering of the people who were victims of illiteracy. It was a joint approach, and the people who were the victims were involved in dealing with the issues. So were various social agencies that were concerned about the issue. But so were governments and so were the business community and the labour community throughout this nation, in many different ways, but with one focus, to reduce the level of illiteracy.

To pick up on that and relate it to your budget situation and what the last speaker said...there has to be that joint effort in addressing the deficit situation, but addressing it in a manner that is fair to all Canadians. I think more and more Canadians, and not from the social community and not from the labour community, are saying there's some obvious inherent imbalance in what's taking place.

We're not the only ones starting to say that now. Others are saying it. They're from different walks of life. They're saying there has to be some balance and they're pointing out the imbalances we've tried to raise in the past. If we're going to deal with our situation, then there has to be that level playing field across the board.

Business communities like to use that term about development of trade and where we're going as a society today in a global community. I suggest to you this committee has to address it in its dealings with the deficit. There is no balance at this time.

Balance includes trying different options. For example, there's a lot of - and I'm no economist - people throwing out options for how we can deal with what everybody agrees is a difficult problem. Probably it is our number one problem. Even Statistics Canada says 50% of our debt is because of interest payments. How can we manage to resolve that problem in some way that's fair across the board? A lot of ideas are being thrown out about, to the extent that borrowing is required, more borrowing from our central bank, at more favourable rates than on the foreign market.

What I'm suggesting, our organization is suggesting, is that there has to be that jointness in dealing with the situation, but it has to play itself out fairly across the board.

The Vice-Chair (Mr. Campbell): Would anyone else like to weigh in on anything at this point?

Mr. van Oord.

Mr. van Oord: I was very impressed with many of the things I heard. As you likely have figured out by now, I'm not originally from this country. I was born in the Netherlands. I'm going to tell you something that has puzzled me for the seventeen or eighteen I've lived in Canada. I have to say those years have been good ones. Canada is a beautiful country to live in.

I was raised in the Netherlands. The Netherlands is a little less than half the size of New Brunswick. It has between 16 million and 17 million people. I've never understood, in all those years - maybe I'm not smart enough to understand it - how come Canada, the largest country in the world, unbelievably rich in natural resources, with very few people, needs to have the social problems it has. How come in New Brunswick we have 11% unemployment?

Where I live just outside Fredericton I see loads of lumber going to the States. How come, with 11% unemployment, we can't cut up the stuff ourselves and make two-by-fours out of it?

People stress, and I think it's very important, that in the farming communities, especially out west, they've had some extremely big difficulties financially. The suicide rate among farmers is the highest of any profession.

The social impact of low income, of unemployment, of welfare, is something you cannot measure in dollar figures. We have to look at where we are going wrong. With so much of the stuff we have here we cannot work ourselves.

.0900

New Brunswick is the province in Canada with the highest value added to agricultural products. Why can't the rest of us, the other provinces, do the same thing? I believe that somewhere along the line we have overlooked something. There is no need for the high unemployment we have. We have to show a willingness to do something about it.

In regard to lumber - and I know they get paid more for it, and that's why it goes across the border - why can't we work it here in New Brunswick? We have 11% unemployment, which doesn't include people on welfare. If it did, it would likely make it 18%, 20%. I think we have to go back to the very basic strategy, and if people get work I feel a lot of your social problems will be solved.

I think that will be good for your deficit because your revenue goes up, but it's also good for the whole social structure of society.

Mr. Cater: We produce upwards of one billion FBM of lumber in New Brunswick a year, and I would guess the market for that lumber, in terms of the percentage we could use, is minuscule in New Brunswick.

I'd like to throw out something here that probably none of you are aware of, and these are statistics that we develop over the years and work on. We harvest 10 million metres of wood in New Brunswick a year and we support 28,000 jobs, direct and indirect; that's 2.8 jobs per thousand metres of harvest. The average in Canada is about 5.

We're a have-not province here. One reason we're a have-not province is that we also support jobs in southern Ontario, for instance, or southern Quebec, from the wood we harvest here. In New Brunswick, we're still hewers of wood, unfortunately. That's what you're saying, I understood that part of it. We're hewers of wood because while we are 726,000 people at this point we do not make anything, for all intents and purposes, that manufactures any forest products, right from a chainsaw, a piece of cutting equipment, a saw blade in a mill, a computer for a paper mill or a sawmill - all are made outside. All our trucks, engines, and trailers and everything are coming from southern Ontario; our trailers are from southern Quebec, and a lot of sawmill equipment is from Quebec.

So we cut the wood, we put in the two-by-fours, and away it goes down Highway 95. Until there's a climate that hasn't existed here before, that's what we're going to have. Pretty well all the white birch that is harvested here in New Brunswick, particularly on private land, goes across to Maine. They have labour-intensive jobs where they make golf tees and they make screwdriver handles; we haven't been able to do that here.

We haven't been able to do that here because of the social network we have. That's one reason. They'd sit home in front of the fire, first, before they would sit at a lathe and make golf tees. So we're still hewers of wood and there are good reasons for it; part of it is this socialistic approach we've taken here compared with the U.S., and we have to compare ourselves with the U.S. They are our biggest trading partner.

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

I am sure there are others who'd want to respond to that description, perhaps, of where the problem may lie. We are addressing how budget measures might change that.

Mr. Ferguson: I'd like to respond to the question of people sitting home doing nothing. I think that's one of the biggest problems we have, we stereotype people. Just because one or two people are that way, I don't think you have to stereotype the whole people, whether they are on labour, whether they are on social assistance or not. They are people, they have feelings, and they should not be treated that way. I think that's the problem I'm finding with this block funding - we'll get into this too; it relates to the point you just made - and decentralization to the provinces.

.0905

When we send block funding back to the provinces and decentralize a social policy, the people who are going to be hurt the most are the ones who you will stereotype, the minorities. They are the ones who will get hurt because the provinces are the most racist part of our society, and there is no protection for them, not even for the poor any more.

The federal government is getting out of it. We need the federal government, we need a strong sense of government, not a watered down one, to protect the benefits of the poor and the underprivileged. We can't leave it to the marketplace; the marketplace won't do it.

Mr. Daigle: I think part of the problem too is that we really haven't had to be competitive to a very large extent in global markets as we're required to today. We were able to live very comfortably from our natural resources in a national economy, where we had centred manufacturing in central Canada, high walls of protective tariff barriers. With free trade and disruptions in subsidies to transportation, and a whole new economy, that's changing.

The long-term trend line for resource prices is downwards; we're living with diminishing natural resources to a very large extent. What I'm arguing here is that we're looking at a whole different economy, and it comes back to the argument I was trying to make earlier, that we really have to acknowledge our economy is changing, from national to more regional economies. This is happening not only here, but in other parts of the world as well. I think it's important that the federal government recognize that, and respond to it in a very different way.

Money that is poured into Atlantic Canada today is poured into support for provincial economies. There is not a vision, there is not a regional focus, there is not a regional strategy or economic development plan, there is not a singular decision-making unit that's here. The moneys that come in from the federal government, for one, are not tied to pan-Atlantic initiatives, are not tied to any kind of a game plan we've agreed on; they're tied to concepts that in my judgment are hooked to our traditional notion of what our economy is all about, to a national economy.

I really think the scarce dollars we put into this economy have to be focused around a whole new vision, a vision that recognizes we are a regional economy, that New Brunswick, Nova Scotia, Prince Edward Island, and possibly Newfoundland, and maybe even further, constitute a regional economy.

In getting at the question, Mr. Chairman, that you're asking, what should the federal government do from a fiscal perspective, I think it has to acknowledge this, and I think it has to respond in terms of where it puts its dollars. Those dollars have to be far more conditional upon regional economic development than they have been in the past.

I don't think the kind of regional economic development that we have been getting is the kind of optimal vision and the kind of optimal economic development operations for our economy here in Atlantic Canada. This is the point I am trying to make about where should we reconfigure and reprofile scarce economic development dollars.

The Vice-Chair (Mr. Campbell): Thank you. Would others like to weigh in at this point? We will have questions from the the MPs beginning in a couple of moments, but there is still time if you want to respond.

Ms Wright.

Ms Wright: Judith Maxwell, whom probably many people are familiar with - she's very well-regarded and respected in the social and economic policy fields - had an interesting description of the role of government. She described the role of government as providing the underpinnings or supporting structures that people need in order to adapt to changing circumstances.

I think as my colleague has said, we are in a changing economy, and we need to redefine and reaffirm the role of government to assist people in the changing economy. If the way we are going to do this is to deal only with scarce resources, and not look at any other avenues of balancing that out, it means that we are unable to give people the kinds of tools they are going to need in order to adjust to our changing economy.

.0910

The Vice-Chair (Mr. Campbell): Thank you. We're going to turn in a moment to questions. I have a follow-up question for Mr. Daigle.

Your idea of reorienting or reallocating regional funds from their focus on the traditional economy, the economy we may think exists in Atlantic Canada, and redirecting them toward the economy that really exists or ought to exist is all very interesting and worthwhile and bears much serious consideration by the Atlantic provinces and by the federal government. But rather, the other part of your presentation was, as I understood it, to the effect that at the same time that we do that - take those scare resources and spend them smarter, if I can express it that way - you set out for us a fairly rigorous course of reducing the deficit to zero in three years.

While the discussion about reallocating existing spending is interesting and extremely important, you still haven't answered how we would get to zero in three years and where we find the $25 billion to $30 billion that it would take to get there. I want to give you one other chance to answer that.

Mr. Daigle: There's no easy way of doing it. When 60% of the federal budget is directed at social programs and one-third at interest payments, you really don't have a lot of room in which to move. Even if you do away with the federal government in its entirety, it will not solve the problem.

So I'm not saying it's an easy challenge. It's a very major challenge. We can't get at it without going after social programs, but I think we really haven't done enough to identify seriously what are essential services and what are not.

I go back to John's point, and I agree with him. There are distortions in the marketplace, and the perception of fairness and the reality of fairness are extremely important as we begin to reduce expenditures here. There are opportunities at least to continue to rationalize, not only on the social development side but also right across government.

I look at the case yesterday made by the Newfoundland Chamber of Commerce. Take a look at economic development and all the agencies and organizations that are involved in economic development. There is duplication and overlap for those of us who operate. That's only one segment.

Last year we put forward a number of suggestions with respect to the fisheries department, and meat inspectors at three levels - a lot of duplication. I like much of the efforts I see happening in transportation where there is a rationalization. But what's happening is that too often we're offloading onto other levels of government. It doesn't get the tax burden off the individual. It just shifts it, as we know, from one level of government to another.

There are instances, for example, of dissemination of information going on within government. Just the other day I had four different people from one department call me for the same information. Finally, I packaged it in one great big bulk folder and I sent it up to them. Here they were trying to put together an Internet program to disseminate information, I believe, on management services.

Why in heaven's name do we have federal government people gathering that information? Why can't these things be contracted out? Why can't you partner with private sector organizations rather than setting up parallel organizations in government competing with parallel organizations in the private sector?

It's all over the map. It's like in the book Reinventing Government. The fat is not always obvious. It's marbled throughout the system and it expresses itself in inefficiencies, structures that are outdated, and outdated management policies. We must get at that.

Having said that - and I'm not going read through all the pages where we made specific suggestions last year, and I refer you to the suggestions coming from the Newfoundland chamber - we cannot reduce the debt and deficit simply by rationalizing and restructuring government that we know; we must also get at some of the inefficiencies and some of the excesses that exist in social programming. Can the moneys we put into education be better spent? Can we lever a better return? For social services, the same.

The Vice-Chair (Mr. Campbell): I'll let Mr. Ferguson have one more word, and then we're going to questions.

Mr. Ferguson: Mr. Daigle claims that 60% of the budget is social policy. I would like to ask him what part of the budget is corporate welfare policy. How much of that is corporate welfare?

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As far as inefficiencies are concerned, you and I both know, just as well as in government, you have inefficiencies in the private sector as well.

Mr. Daigle: Yes, but at least there's a mechanism in the private sector for rationalizing more of those inefficiencies. You have a bottom line to answer to.

Having worked in both the private sector and in government, the disciplines are very, very different. There is a bottom line in the private sector. But to us, the bottom line in the government is Question Period in the House, or the next election. There is no long-term planning in government.

As a senior government official at one time, I was amazed at how often we purposefully avoided setting objectives that would be stated in outcome terms so that we could be held accountable for the results. This does not encourage efficiency in government. There's a bottom line in business that you have to answer to. There's a very different efficiency question here.

Mr. Ferguson: Well, to the first part of my question, what part does corporate welfare play in all of this?

Mr. Daigle: I'm not sure what the numbers are.

Mr. Ferguson: Well, you know what the percentage of the social welfare is, but you don't know what the corporate welfare amount is.

Mr. Daigle: One of the things I would like to remind you of is that the chambers of commerce and business-representative organizations have recommended that government get out of the subsidy business to business wherever possible.

I think there's still a need for government to invest in research and development. We can't simply cut without investing in our future.

The Vice-Chair (Mr. Campbell): For Mr. Ferguson's benefit, there is commonly recognized to be about $5 billion in tax expenditures relating to the corporate sector, including roughly $2 billion that is the tax treatment of small businesses. So in and around $5 billion would be the figure that would show up in the information if you wanted to look at the tax expenditures.

Mr. Ferguson: Yes, I'd like to see that because we're always talking about the social welfare side, but we never mention the corporate welfare side in relation to the deficit.

[Translation]

The Vice-Chair (Mr. Campbell): Let's start now with questions.

We'll go to Mr. Loubier.

Mr. Loubier (Saint-Hyacinthe - Bagot): Ladies and gentlemen, welcome to this session of the Finance Committee and thank you for inviting us to Fredericton which, by the way, is a very beautiful town. It's my first visit and it certainly won't be the last!

I have three questions for Mr. Daigle, with his permission.

The first one is about something he mentioned in his presentation. A little earlier, you said that the federal government had to bring the deficit down to zero in three years, without mentioning, however, what we should do to get there.

If I remember well, the brief you submitted last year did not offer many suggestions regarding practical solutions the federal government could explore to get rid of the deficit. On one hand, you said it was imperative to bring the deficit down to zero and on the other, you claimed that support for regional development had to be maintained since the economic impact of each dollar spent on regional development could be estimated at $1.90.

If we push your argument further, we realized that the dollar invested in regional development by the federal government is, in fact, a borrowed dollar and therefore, it will certainly not have the economic impact you estimated at $1.90 since, eight years down the road, that dollar will have to be multiplied by two.

In other words, the dollar invested today in regional development by the federal government will represent, in eight to ten years, an expenditure of $2. So, over eight years, your economic impact estimated at $1.90 is completely wiped out.

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As a matter of fact, the last analysis done by the Auditor General of Canada is a case in point. Over the last ten years, we have invested billions of dollars in regional development, and the Auditor General is wondering what has been the impact, in the middle term, as far as consolidating the industrial structure of Canadian businesses is concerned.

This is the first consideration I put on the table, and I wonder if you could comment.

[English]

Mr. Daigle: I think that I have, to the extent possible, suggested where we think you should direct your efforts in getting after the budget.

As I mentioned, I have worked in government, and unless you're sitting there with the books, knowing exactly where the resources are being directed, you're not in a very good position to say you should specifically do this and do that. People on the inside who have that information should be making those particular decisions.

We are suggesting ways, principles, and some specifics as to areas at which they should look and things they should target in order to achieve those ends. We recognize it's a very ambitious objective, but the responsibility for doing that rests with senior government officials. The responsibility to try to wrestle with those kinds of decisions - and to be able to wrestle with them - doesn't rest with those in the private sector or those in the public who don't have the full picture. I certainly know that from experience.

However, there are things that are obvious, things we have mentioned where you can gain greater efficiencies and where you can reduce. We suggest you look in those areas and make some decisions, decisions that our organization is suggesting have not been made.

It is not obvious that these decisions have been made. If it's a case of communications, if we're not listening, then tell us once again. But we - and I heard one other member on the panel here around the table saying this - are not convinced that the hard decisions have been taken yet.

Let's go back to regional development. Here's what we're talking about. The federal government is significantly investing in this region now, with $16 billion, 40%. It's over 40% of our total GDP. If we're going to be investing those dollars, I would rather invest them to try to get a better return instead of getting a one-to-one return.

I also said that we are not convinced our regional economic development efforts are optimal. In our judgment, the reason they're not optimal is that the focus and the framework in which economic development is being carried out do not recognize that we are operating - as I said earlier - in a regional economy that requires a different approach. If we do a better job in re-profiling those dollars at regional development and do a better job in terms of our efforts in regional economic development, there's no reason why we can't even get a better return.

These are issues we are asking the federal government to take a serious look at. If you've looked at them and have come to a different conclusion, we would like to know. For instance, we have no indication that the federal government has taken that different look, that look at regional development that recognizes Atlantic Canada as a regional economy, and we have no indication that the government is working to organize and to motivate the governments and the participants in that economy to take a very different approach.

If you've been looking at it we would like to know.

[Translation]

Mr. Loubier: Mr. Daigle, you said a little earlier that you were willing to think about eliminating direct subsidies to Canadian corporations, which total about $2.5 billion. I was surprised to heard that because last year, when I went to Moncton - I also did a tour of the Atlantic provinces - ,none of the representatives of the Chambers of Commerce suggested doing without the $3.2 billion of business subsidies which existed at the time.

So, I'm asking the question once again. Is it your organization's position that, to contribute to the stabilization of our public finances, Canadian corporations should no longer benefit from direct subsidies?

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Instead of always picking on social programs, wouldn't it be appropriate to set an example and to suggest - as I asked several of your Maritimes colleagues since the beginning of this tour - eliminating immediately business subsidies?

You have to be consistent, somehow. When you talk about free trade, free enterprises and competition, you have to bee willing to immediately do without government subsidies.

[English]

Mr. Daigle: I think the business community, nationally and certainly regionally, has indicated its desire to set an example, to make a contribution toward resolving the debt and deficit problem.

One of the problems I see is that very often we talk about business subsidies and do not recognize, at least publicly, that we're trying to stimulate economic growth and development. If it's just simply a subsidy or a handout to business that doesn't give society a return, I have very grave and serious concerns about it. Very often most of these so-called subsidies, tax breaks, and tax avoidance schemes we hear about were actually designed by the government to try to entice people to go into business, to grow their businesses, and to expand their business so that they could generate income and jobs and create prosperity.

If we think we can deal with the debt and deficit problem simply by cutting - and when we do, I think fairness and the perception of fairness across the board are very important; otherwise, we will not have the social glue to hold things together as we go through this difficult period. But if we think we do not have to invest in our future, then I have grave concerns as to how we're going to finance social policies we cannot now afford.

And we keep passing the burden on to future generations. It may not cost us more, but it's going to cost our children and their children more to carry these social programs unless we can find the magic to create greater prosperity to help pay down some of that, to help to afford it.

One of the problems with our social programs - and the problem with having a strong federal government - is that the federal government doesn't have the money it used to, and as a result, as we all know, it is losing its power and its influence to support these kinds of social programs and to provide the glue holding this country together.

We have very grave concerns about that and we're prepared as a business community to do our bit, but I just remind the government officials: let's make sure we know what it is we want to create and where we want to provide incentives to create. We say jobs and economic development are important.

[Translation]

The Vice-Chair (Mr. Campbell): Mr. Loubier, it's Mr. van Oord who wants to answer.

[English]

Mr. van Oord: I'm a small businessman, a dairy farmer. What you call business subsidies we call consumer subsidies. I think you have to be very careful to see all subsidies in the same way. For a long time Canada has had a cheap food policy. I have the statistics here that show there's no other country in the world where it takes so little of your wages to buy a certain food basket. That's okay, and I think the philosophy behind it is, of course, that the less you spend on one thing, the more you can spend on other things.

If you say you want to take subsidies away, that's fair as far as the agricultural community is concerned, but you must then allow us the room to charge what we should get for our products. I'm not talking about big profits. I'm talking about fairness. For instance, if you want the agricultural community to come up with this cheap food basket on the one hand, you've got to help us on the other. It's not always business subsidies. Sometimes it's consumer subsidies.

[Translation]

Mr. Loubier: Mr. van Oord, I was not talking about the agricultural sector, with which I am quite familiar because it was my line of work for six years. I was talking about the industrial sector, in general. If I understand the answer given by Mr. Daigle, the business community he represents would agree to a cut of $2.5 billion in social programs, but would not be willing to do without the $2.5 billion dollars of business subsidies.

I am going to ask you my last question.

The Vice-Chair (Mr. Campbell): Mr. Loubier, I believe Ms Wright would like to add something.

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[English]

Ms Wright: Thank you very much.

I just want to respond to my colleague's comments.

First of all, in terms of thinking about the economy, we know a report in the paper just the other day said the GDP is up. We know that profits are up. In terms of thinking about who benefits from social programs, let's think about how the business community benefits from social programs - the kind of education that your workforce brings to their jobs, the kind of health care that we all benefit from.

I think I want to reiterate the comment that we're trying to make: we need a balanced and fair approach to this. If we don't stop picking on social programs and try to see them as an investment and as part of our economic development.... Our economy is growing. The reports say that, the results say that, but our people are not growing. The numbers of people who are being forced.... In terms of income and in looking at all of fundamental rights we want to have in place in this country, we're in serious trouble. Our balance is way off.

Thank you.

The Vice-Chair (Mr. Campbell): We've started something here.

Mr. Loubier.

[Translation]

Mr. Loubier: I would like to ask my last question because I feel it's going to add something to the discussion.

The Vice-Chair (Mr. Campbell): Well, okay.

Mr. Loubier: I am directing this to the representatives of the business community.

A little earlier, you said the business community was willing to contribute to the rationalization of the federal government budget. In that case, would you agree that the federal government undertake an in-depth review of the corporate tax system - and this ties in with the suggestion made a little earlier by Mr. Murphy, when he quoted a journalist in the business community - , so that it won't be only a few Canadian businesses acting as good corporate citizens, but the whole business community and every single corporation by contributing in a fair an equitable manner?

Since there has not been a comprehensive review of the Canadian tax system for a number of years - of course, some provisions have been added and others have been removed, but there has not been an in-depth review - , people believe, rightly or wrongly, that our tax system is not fair. It is a fact that some corporations pay their fair share, but some others manage not to do so because of all kinds of schemes and loopholes in the tax system.

This goes so far that, in the business section of any newspaper, we can see that tax deductions can be traded. A corporation can sell its unused tax deductions. I find this appalling, especially when I think about the state our public finances are in. This is a question I'd like to you to answer.

[English]

Mr. Daigle: I go back to a comment you made about something you attributed to me. I don't think we agreed to do away with x millions of dollars.

To go back to another comment, one of the problems in being very specific - and you know this better than I do - is that there are a lot of trade-offs to be made in order to try to achieve targets that will allow us to finance our obligations to the extent that we can. The point I'm trying to make here is that when we rationalize and restructure and make these decisions, we want to make sure we leave enough on the table to ensure that we have an economy that will grow and will continue to grow to carry us through the next recession and beyond. So there are a lot of factors at play, which you realize.

We said last year that it may very well be time for a review of our tax system, but I also said that if we do as much with the next review as we did with the Carter commission report, I would suggest you save your money and save us all the expense of doing a review of the tax system. I do believe we have to take a serious look at the fairness of our taxes and our tax system in Canada. We have to do away with a lot of distortions out there and the perceptions in people's minds as to fairness, or the lack thereof. My concern, however, is that if we're going to look at the tax system, I reiterate that we have to make sure we have the political will to carry out the implementation of the recommendations that are brought forward.

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

I want to move to Mr. Solberg next, but there were other hands up. I wonder if I could maybe recognize Mr. Murphy, who hasn't spoken for a few moments, and then we'll go to Mr. Solberg. After the other MPs have asked their questions there will be time for a wrap-up, and you can pick up on some of these points if you haven't otherwise had a chance to do so.

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Mr. Murphy.

Mr. Murphy: Certainly I appreciated the questions raised by Mr. Loubier of Mr. Daigle.

I find that, in all fairness, you've couched your responses, your words.... Call it business subsidies, call it regional development, call it what you want, but it's government taking our tax dollars, which include your tax dollars, business tax dollars, people's tax dollars, and using them in different ways. It seems to use our tax dollars bluntly to give outright grants to business is no longer kosher. You no longer talk about that any more. But to use our tax dollars for regional development will continue; and we'll aggressively talk about that. We in the labour movement support that.

But as Cathy Wright said, and you mentioned yourself, trade-offs...but I guess it's how we're going to define ``trade-offs''. The reality is there also has to be investment in the human side of the equation. We find with this relentless attack - it's continuing here today - on social programs....

The statistics talk differently about social programs. They've been brought under control. Compare our social spending with that of other countries. It's under control. I've tried to warn you. Other people are trying to warn the business community and Canadians in general. We are going too far - much too far - and we're going to pay the price. We're going to pay the price as a society.

Once again, we buy into government playing a proper role, facilitating economic development, because it's economic development that's going to give us the jobs, as my colleague here said, and it's jobs that are desperately needed. But there has to be fairness across the board.

And yes, a wasted tax commission is a waste. We don't want that either. But you talk about political will. Well, is there political will on the part of the business community to subscribe to the end product? The end product is definitely going to say the tax concessions, the tax subsidies, are much too rich for this day and age, and something has to be aggressively done about it. I think the finger will be pointed more at the business community, because people generally have been hit, and hit hard, in the last decade.

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

In turning to Mr. Solberg, I just want to add one other element, as an Ontario MP, to the discussion of regional development. In my riding and in the greater Toronto area I have continued to meet people in business who are small business people and who complain to me that they are at a disadvantage. Mr. Daigle talks about wanting to redirect regional economic development funds. People from Ontario, where we benefit from no such earmarked development and investment funds, complain that the level playing field doesn't exist. When they go to seek contracts and opportunities, they run into companies from this region, other regions of the country, who benefit from regional development funds. That's not fair to them as they're trying to get started.

So there's a whole other development -

Mr. Loubier: Come on. A lot is given to Ontario.

The Vice-Chair (Mr. Campbell): Mr. Loubier, I'm not talking about anybody giving. I'm talking about people in the private sector competing with other private sector businesses for business in this country. It's another observation that should be brought to the equation as we discuss these points.

Let's save the response -

Mr. Daigle: I can't let that go unchallenged.

When it comes to the federal government putting money into the regions of the country that are peripheral, it's called ``regional development''. But the Auto Pact, the St. Lawrence Seaway, even the so-called Canada pipelines, seem to be national policies that benefit...whom? They benefit central Canada. We don't call it ``regional development'' -

The Vice-Chair (Mr. Campbell): Mr. Daigle, I'm talking about small business people competing with small businesses in this region or in western Canada, small businesses that have in the past had grants or concessions from specific earmarked regional development funds, which companies in central Canada, small businesses, don't benefit from. I don't dispute the other point you're making.

Mr. Daigle: Certainly northern Ontario is a different -

The Vice-Chair (Mr. Campbell): I'm not talking about northern Ontario.

Mr. Daigle: But I'm saying if you have all the money directed into building the infrastructure and you've had 128 years of supporting that with a subsidized system we're paying for down here, and other parts of the country are paying for, by paying more and more for consumer goods and services because the system supports the build-up of infrastructure in central Canada, then it behooves me to say you are preaching at us for receiving handouts when, quite frankly, I think the handouts we're receiving are a pittance compared with what's been poured into central Canada for 128 years.

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The Vice-Chair (Mr. Campbell): I wasn't preaching at you. You yourself raised the figure of $15 billion a year coming into this region for however many years.

I want to make sure that all the issues are on the table. We travel across the country and we hear from different groups. The federal government in the end has to make decisions in the overall interests of the entire country and the entire economy. It wouldn't be fair not to share with you those observations from small business people in another region of the country who see the whole regional development issue differently.

Mr. Solberg.

Mr. Solberg (Medicine Hat): Thank you very much, Mr. Chairman.

I'd like to weigh in here because I think this whole debate points to the ridiculous nature of regional subsidies and business subsidies of all kinds. I think what we're seeing by this debate first of all is how divisive it is when you favour one region over another, how it retards growth in many instances.

Mr. van Oord was talking about value added. Well, I can tell you that the best thing that ever happened in the west was getting rid of the Crow rate, because finally we won't be subsidizing farmers to ship raw products out of the country or to central Canada. In fact, now we will have a value-added industry when it comes to grain and cattle and that kind of thing in the west.

So I think these regional development policies, business subsidies, whatever you want to call them, whether it's the St. Lawrence Seaway or whatever, distort and retard growth in ways that are unfair to other regions.

We've talked a lot about the revenue side. We've talked about taxation and about how maybe there are loopholes we can plug up and things like that. We could talk about that some more, but I do want to point out that when a corporation pays tax and then shareholders are also taxed, those people are actually being taxed twice. I think it's important to point that out.

I also want to make a point to Mr. Ferguson. He was talking about the profits the banks make, and they are huge profits, I agree. But I think it's worth noting that roughly 50% of the shares in the chartered banks are held by labour pension funds. In the case of the Association of Municipalities of Ontario, it is people with an average annual income of $30,000 who are invested in the banks and are the beneficiaries of the profits of those banks to a large degree.

So although it's very easy to point to those headlines, if you turn around and all of a sudden say we have to go after that profit, we must be mindful of the fact that there are people who are going to pay a price. Corporations don't pay taxes; people ultimately pay taxes. In this case, many of them are people who don't have large incomes and are not extremely wealthy. In fact, they're people who can't rely on the Canada Pension Plan any more because it's not going to be sustainable. They're relying instead on investments in Canadian companies, like the banks.

So I just wanted to offer that up. Please feel free to respond.

I just want to say one more thing here. We've talked a lot about the revenue side. If we went after all the revenue we felt we could get right now, I'm going to suggest to you that it would not be nearly enough to come anywhere close to where we need to go to balance the budget. It has been pointed out that social programs do make up a large percentage; of the total program spending, they're about 70%. In overall spending that would be less because you have the interest over and above that. But we can't do anything about the interest; we have to pay that. So it's about 70%.

We've said that if we eliminate the business subsidies, if we go after all the revenue we can get through further taxation measures, forgetting for a moment the implications that will have on dampening growth in the economy, we're still going to be woefully short of where we need to go to balance the budget. My challenge to you is to tell us where we're going to get the remainder of the money if we want to balance the budget.

The Vice-Chair (Mr. Campbell): Does anyone want to respond to that?

Mr. van Oord.

Mr. van Oord: I very much like your comment about the Crow rate. I could have saved you $1.6 billion if you would have made that comment a year ago. If the elimination of the Crow rate is the best thing to happen out west, why did you pay $1.6 billion to the people out west to compensate for it? You should have kept it in your pocket; you would have felt a lot better.

I think you're saying dangerous things. It's good for out west, but you are part of a government that just paid out $1.6 billion. The cheques are in the mail.

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Mr. Solberg: I would like to make a point here. First, I'm not part of the government, I'm part of the opposition. Second, there is no question that there is a tremendous growth right now in value-added industries as a result of that decision. It will benefit western Canada immeasurably, and to pay.... All we were doing, sir, was subsidizing central Canada, very ironically, because we would send all this product into central Canada and down into the United States to be processed. So at the end of the day, transportation subsidies are extremely inefficient; they really penalize the area that they supposedly help.

Mr. van Oord: I think you're going to have trouble with your chairman now over your comments about subsidizing central Canada.

Mr. Murphy: First, with respect to the banks and investors in the banks - I guess that means the shareholders and so forth - in reference to pensions and people belonging to those pension funds, that is true on the other side of the equation. With respect to union organizations, very few have control over their pension plans to begin with in terms of where they might go or not go. Second, the beneficiaries of pension plans are also...in any enterprise, for example, the management people within that enterprise will benefit every bit as much as, if not more so than, the workers further down the ladder.

As for paying twice, I think a lot of individuals in Canada are paying a lot more than twice. We're taxed at source in terms of our wages. We're taxed again when we spend. And if we do invest money, we're taxed once again, too.

I do agree with you on the need for value-added production in this country. Certainly we, as a labour federation in this province, have promoted it time and again. I've been with the Federation of Labour since 1972 and in one of my earlier submissions, which as a matter fact related to budgets and the budget process nationally...was the necessity for less shipping out of this province of one of our natural resources. It wasn't a farm product that you can grow again or trees that you can grow again, it was our ore body - the zinc deposits in northern New Brunswick. Everybody agreed we should have a second smelter up there because there was enough raw ore going out, and adjustments were made in that particular budget in that year.

Mr. Solberg: I just want to step in here, because I don't want to get too far off the point that I was getting to. Probably everyone agrees that value added is a very good thing to do, and there should be ways to allow that to happen in Canada. But the point I was really getting to was with respect to balancing the budget, which is the whole point of this exercise.

Mr. Murphy: And that's exactly where I'll go.

Mr. Solberg: Okay.

Mr. Murphy: In that particular budget, which I believe came out in the mid-1970s - Allan MacEachen was the author of it - they put in a provision to develop that second smelter in northern New Brunswick. That was in the mid-1970s, but we don't have it to this day because industry, and Noranda in particular, decided in their wisdom that we did not need a second smelter and the good paying jobs and the spin-off jobs that would go with it.

Unless the governments are going to have a role in terms of the games industry might play or not play with respect to value-added production in this country - or if we're simply going to leave it to the free marketplace - we will be no better off ten years down the road than we are today. There has to be a deliberate effort to create these good paying, value-added jobs. Yes, we have to trade to achieve that, and we've always subscribed to that because Canada and New Brunswick have always been trading provinces or nations. But in the end, the jobs are the answer. That's what we said in our opening remarks. There is a job crisis, but you're not going to resolve that job crisis by choking consumer spending.

That survey I alluded to talked about one of the concerns, which was low consumer spending. You can't destroy -

Mr. Solberg: I want to deal with these points as you raise them.

You talked about the government playing a role. We just received an Auditor General's report that is extremely critical of regional economic development programs for a number of reasons, some of which have been touched on. The fact is that they don't create long-term jobs.

Mr. Murphy: Does that mean the inefficiencies cannot be corrected?

Mr. Solberg: Let me ask you this. Can they be corrected if you're using the taxpayers' money and taxes collected from some businesses to turn around and then actually compete with those very same businesses? Shouldn't we look at the historical record, which, to be very generous, is not very good with respect to regional economic development in Atlantic Canada, and in fact right across the country?

The Vice-Chair (Mr. Campbell): Mr. Solberg, if you have a final question, it is time for it.

Mr. Solberg: The issue again is that we are a long way away from balancing our budget. If you plug all those loopholes and you come at it from the revenue side as much as you can, you're still left with the challenge. If you do away with the business subsidies, you're still left with a large challenge when it comes to getting to balancing the budget. I'm going to suggest to you that you have to look at social programs, because if you don't, compound interest will look after it for you, because in a very few years we'll be in a situation in which total expenditures are exceeded by the interest on the debt.

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Mr. Murphy: And when you do that you look strongly at interest rates and the creation of job opportunities.

The Vice-Chair (Mr. Campbell): Mr. Murphy, thank you. I want to recognize Mr. Ferguson and then move to this side of the table. There will be time for a quick wrap-up.

Mr. Ferguson: I suggest to you that in 1950 corporations paid 50% of the tax, and today they're paying 7.8% of the tax. That's why we can't afford to pay our social programs: because the business side is not doing its share. It's quite obvious, if you follow your statistics, that the social part of the debt is only 6%. It's not 70%, as you said. I dispute that.

The Vice-Chair (Mr. Campbell): Mr. Cater, you've had your hand up for a long time. I'm sorry I missed you in going by. Can business pay more taxes?

Mr. Cater: Well, a lot of issues went on there, but to start with the last one.... In New Brunswick, for instance, we get a lot of complaints about crown land stumpage; the province is losing on it. The province is losing on it be damned. The province is gaining immensely on it, to the tune of $2.5 billion a year. Stumpage may be $35 million going in, but....

It's the same as this. I would tell you a story here. In this last recession we've just come out of, the one that started in 1990 and went on for three years, every pulp and paper mill in New Brunswick lost money, and many had negative cashflows, which means you don't go on running for long. The result of that was that two mills went down. One just started up recently, and the other one was down for two years.

Those mills that are down...and I refer to one in Bathurst, where I worked. When that mill is down, property tax going into New Brunswick - $750,000...municipal taxes, property taxes. When mills are losing money in New Brunswick.... You have mills losing money here, $3 million, $5 million a month...and you didn't have to go far to see them. But the Province of New Brunswick wasn't losing money, because all the payroll tax is going in, the sales tax, the GST, workers' compensation, the income tax from those workers, the stumpage for the wood used.... These are the taxes that industry pays. It's not only the corporate tax. It's all the payroll taxes, which add up. You will find they have increased over the 50% you were talking about, or whatever they were.

The Vice-Chair (Mr. Campbell): Mr. Cater, thank you. I want to recognize Mrs. Brushett and then Mr. Pillitteri, and then we'll have a chance for everyone to wrap up.

Mrs. Brushett (Cumberland - Colchester): I would like to make a few comments to dispel some of the statements made a little earlier.

We have dealt with businesses in the last budget by cutting subsidies to business. We cut them by approximately $2 billion in this last budget. I just want to throw that out to you, in the sense that we are trying to look at a fair, balanced approach in dealing with reducing the deficit in this country so we meet the needs of all Canadians.

Mr. Daigle made a point about the differential between the percentage of taxes in the United States in relation to GDP and what it is here in Canada. The differential, he says, is 10%. From our research and our indications it's more like 5%. It isn't as broad as people would say.

I think the difference is we do have to compare ourselves with the United States, because they're our biggest trading partner. So it is very important that we make sure we're on the right track and understand these differentials. Part of that differential is that in the United States the payroll taxes are a little higher, whereas here in Canada it's the personal income tax that is higher.

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On that point, as we've travelled through the east these last few days, it has been brought to our attention several times that there's room to increase payroll taxes. Yet others say we have to decrease them as a stimulus for jobs and growth.

I think we dispel some of this myth when we see that our payroll taxes are not as high as in some places. At the same time, we have a surplus in the UI account and we are looking at restructuring it. I think you'll see this government will look toward reducing those premiums for the employer and the employee so we might have more disposable income in our pockets for consumer spending, asMr. Murphy suggests we must have.

There's one other point I would like to clarify as we talk about the Atlantic region and regional development. When we look at the amount of money that comes into the region, somewhere between 41% and 51% of our dollars come from the federal government. Whether they are in the form of transfer payments to the hospitals or universities, old age pensions, UI, or venture capital through ACOA, somewhere between 40% to 51% of our entire economy here in the Atlantic region is due to federal dollars coming in. As we have to make these cuts to deal with our deficit, we feel it much harder in this region. That 40% to 51% is not from business or economic growth, it's transfers of dollars that funnel through social programs under the umbrella of regional support or regional economic development.

The challenge to each and every one of us here is to suggest how we can deal with our region, being here in Fredericton today. How do we deal with it so we can save the moneys for deficit reduction, but at the same time deal with the programs?

The Vice-Chair (Mr. Campbell): Are you directing that to anyone in particular?

Mrs. Brushett: I'll leave it open, because I think that's the fundamental question.

The Vice-Chair (Mr. Campbell): Okay, we can hear from a couple of people.

Mr. Cater.

Mr. Cater: My comment previously on the 2.8 jobs per thousand metres is related to what you're saying. We have this federal money coming in, but New Brunswick is supporting as many jobs outside New Brunswick as it is in New Brunswick. There has never been any recognition of that by anybody.

Mrs. Brushett: What do we do to change that, to get more jobs here in the Atlantic area?

Mr. Cater: In order to change that, a working climate has to be created so we can develop our secondary wood products, to start with. We don't want to see the two-by-fours going out. We want to see them being made into window frames and door frames and whatever gadget we can market at a higher value. It is well known that the multiplier from secondary wood products is greater than from primary forest products.

Mrs. Brushett: What can the Department of Finance do to facilitate that? That's the question today.

Mr. Cater: We just talked about the money coming in for regional development, and I mentioned frugality a while ago. When I look at the list of where that money goes I realize the rules aren't set up properly, because the way they're set up now anyone can access that money. If they have a good story they'll get the money. It ties into the bank profits. ACOA is the banker of last resort, but it's used as a banker of first resort in a lot of instances. The money's not being directed to the right places in a good many instances. I'm not saying that's rampant or anything, but it could be looked at with a much sharper pencil than it has been until now.

Mrs. Brushett: Would you like to forward some suggestions? I'm a member from Nova Scotia. My family is from New Brunswick, and I'm familiar with the lumber industry. Would you like to focus on some of the ways we could sharpen that pencil? We want some specifics and we're very sincere about this. That's why we're here. You can take time following this session.

Mr. Cater: The pencil has to be sharpened by the people who decide where the money should go. We'd like to see money coming in. But it has to be money that results in a return in increased employment and increased benefits for the region.

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The Vice-Chair (Mr. Campbell): I should point out we all have maritime roots of some sort or other. Mr. Pillitteri lived in Halifax. My father was born in Fredericton. Mrs. Brushett seems to have family all over the Maritimes.

Mr. Pillitteri.

Mr. Pillitteri (Niagara Falls): You know, this morning we were bashing who is getting more subsidies, and which side is getting subsidies.

By the way, in answering my colleague, and also the other.... We could easily privatize theSt. Lawrence Seaway and we would get rid of those subsidies in there.

To inform my colleague on the other side, of course we have more wheat and corn in Ontario than we know what to do with, and certainly we don't need the subsidy within the Crow rate. A lot of that stuff that was subsidized was going the other way; it was going west rather than to central Canada.

I want to make some other comments, since I am from Ontario. I just wanted to make those remarks about what we are receiving, and I wanted to reiterate what the other parts are receiving.

I heard here this morning that what you call a minimum corporate tax.... In effect, our minimum corporate tax, whatever corporate tax we're paying here in Canada, is higher than that of the United States; and it is our largest trading partner.

I also want to get away from the point we're here for...to have some of your opinions on how we go about either trying to reduce the deficit or trying to hit zero, or lower.

Let me say one thing. Mr. Cater said this morning that since a year ago he has seen no results from the last budget. Let me remind you that since this government took place...and since we're being a little partial, I'll say you as a private sector produce 460,000 jobs in Canada. You have dropped in employment from 11.5% to 9.2% across this country. So you've had some environment to create a few jobs here in Canada.

But you also said, Mr. Cater, you haven't really seen the fruits. Let me say to you that in the last budget we cut, over three years, $25 billion. Every target this government has set since it took office it has met, for the first time in more than twenty years. Every deficit target has been met. We are well on our way. We met the target this year...possibly $1 billion to $2 billion lower than we had set...and going down to 3% of the GDP in 1997.

I heard remarks about going down to zero within three years. Give us some specifics, because this is what you are here for. We could talk about the past. We have been on target. This government has been on target. We want to hear more of what you propose for the future. I'll leave that open.

Mr. Cater: I would just like to make a quick correction there. When I said I didn't see any results, I didn't mean there were no results. What I meant was that last year before this consultation process we received from Ottawa, in both official languages, a document an inch thick. This year we've received nothing.

An hon. member: It's frugality.

Mr. Cater: Maybe it's frugality.

Anyway, I didn't say there weren't any results. I knew you were $2 billion to the good, but I heard that by word of mouth from someone else. I never saw it.

I don't see much when I watch Parliament in the evening. I don't see Mr. Martin up there, thumping the desk, any more. I've seen him very seldom.

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The Vice-Chair (Mr. Campbell): We'll have a very quick wrap-up from Mr. Murphy, and then I'd like to give you each a chance.

One of the wonderful things about this format is that so many issues are raised and all the stakeholders are here together at the table, so you're not just talking to us, you're talking to each other. We hear some very useful ideas and some reactions to ideas that seem useful at first blush, then we hear the other side. It's very beneficial for us. I hope you find it beneficial as well.

When we close, we usually end with this opportunity for a very brief wrap-up. I'll give Mr. Murphy the first word and then we'll go around the rest of the table.

Mr. Murphy: Very well, Mr. Chairman. I take it you are from the government. Mr. Solberg disputed who's government and who's not government.

The Vice-Chair (Mr. Campbell): Yes, I am.

Mr. Murphy: Mr. Pillitteri is obviously from the government.

The Vice-Chair (Mr. Campbell): I guess one might say the Liberal members at the table are part of the government.

Mr. Murphy: Having clarified that, I'm going to quote the red book promises, and it won't matter if you're upset at me because supposedly my time's up anyway.

First, Mr. Pillitteri alluded to the job targets. I have a hard enough time keeping up with Frank McKenna and what he's doing or not doing here, so I don't spend as much energy on the federal government and seeing it in detail, but as I understand the budget, the job target was 400,000. According to information we've been supplied, you're in the area of 200,000 being created.

Mrs. Brushett: It was 450,000.

Mr. Murphy: Well, it's even higher then. If it's a fact that you're in the area of 200,000, then we're not on target in terms of jobs.

The Vice-Chair (Mr. Campbell): No, no, the comment was that there have been in excess of 400,000 new jobs in the last two and a half years.

Mr. Murphy: Well, I have different figures. I guess it starts with the figures.

Another area is the minimum corporate tax. Again, I'm no accountant, but it's my understanding that in the United States they have a minimum corporate tax. After you go through all the loopholes and manoeuvres, in the end you're going to pay a minimum level of corporate taxation. It's my understanding that in Canada it doesn't work that way. If it does, then why is it that, according to Stats Canada's information, not ours, we have such a significant number of corporations that pay no taxes, as well as individuals who pay no taxes?

So it's one thing to have a level of taxation, which we have for personal income tax. That doesn't mean you'll end up paying it, because there may be other provisions in the tax system that allow you to get out of paying your taxes. One can say they're incentives or trade-offs or whatever. For Canadians, certainly for myself and the people I represent, I think it's the bottom line that counts. All of us have to pay our fair share.

In finishing, with respect to the Liberal government's promises, in 1993 they talked about a number of things to the people of Canada. I'm quoting some of them here. One was ``a two-track fiscal policy, matching a drive for jobs and growth with a comprehensive approach controlling debt and deficits.'' The party spoke about a series of measures to put Canadians back to work and to foster economic growth.

The party said ``Our goal must be to reduce the deficit in a manner that is compatible with putting Canadians back to work'' and asked whether we really want Canada to become ``a polarized society, divided into rich and poor, educated and uneducated, with a shrinking middle class.'' From the start, my message was that not only people in the labour movement and not only people in the social community are starting to say that is coming about.

I suggest that in this coming budget you address all sides of the equation. While yes, you did tackle corporations, it was in a very mild, tenuous way. There has to be a little more even-handed action across the board; social programs have been hit far too much.

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

We'll go to Mr. Daigle.

Mr. Daigle: Thank you, Mr. Chair. I have just a couple of things before wrapping up.

The Auditor General's report was mentioned. I did read the Auditor General's report, at least chapters 17 and 18. The message I got from the auditor's report on regional economic development is that there was dissatisfaction; the goals that were set were not measurable goals and there were inefficiencies across the board in the system.

Probably the best performance of regional economic development commissions was our own ACOA in terms of addressing issues and accounting for the work they have done. I just wanted to point that out.

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We also talked about a percentage tax as a percentage of GDP, Canada versus the U.S. We're talking about all governments' taxation, because from a business perspective, it doesn't matter whether we pay Fredericton, Halifax, Ottawa, or the local municipal government; there is a very deep concern and a great chasm that we understand to be 10%, and I want to point that out.

The Vice-Chair (Mr. Campbell): Okay. We're over time and we have another panel that was supposed to have started seven minutes ago. So perhaps everyone could wrap up very quickly, please.

Mr. Daigle: What I'd like to say is that has been an excellent discussion. We obviously have major problems in this country, major problems in very changing times. Quite frankly, I think you and all of us are caught between a rock and a hard place.

We had a good system. John A. Macdonald's national dream, a national policy, worked well for a hundred and some years. Well, that is no longer the economic system for the 21st century.

We're fighting over crumbs here, it seems to me, rather than getting on with the job of how do we create prosperity and how do we share in that prosperity. We want to work with the system.

The Vice-Chair (Mr. Campbell): Thank you. One of Ms Wright or Mr. Hatfield. Very quickly, please.

Ms Wright: I'd like to say that on the revenue side of the ledger, it was encouraging today. We've heard Minister Martin talking about looking at the tax system and we've heard the Auditor General.

I was encouraged by Mr. Daigle's comments that if we're going to look at it, let's have the political will to really address the recommendations that came out. That's very encouraging.

On the expenditure side, in terms of our social investment, we need to remember that we established social programs under fundamental principles, and not everyone is able to quickly adapt to the changing environment. We need to reaffirm what the role of government really is, and we need to recognize that we did not take a comprehensive look at our social programs in this last year. The whole process got short-changed.

The third thing is, we need to remind ourselves about the example of literacy: It's the recognition of the economic consequences of it, the federal government's lead role, the common national goal that was established, and the communities' involvement.

Fourth, thank you for the opportunity to be here.

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

Mr. Cater, very briefly.

Mr. Cater: I'd like to thank the group for having me here again.

We have to create a working environment to create more jobs here. That, to me, is going to mean changes in social programs, unfortunately, much as we hate to see it.

We have to look at every penny. It makes me ill to read that a federal politician over Christmas last year flew to Brazil at a tremendous price on a honeymoon or something.

The politicians' pensions, which is a little bit -

The Vice-Chair (Mr. Campbell): You didn't literally mean a honeymoon, did you?

Mr. Cater: Yes, I literally mean a honeymoon.

The Vice-Chair (Mr. Campbell): I'm unaware of the situation you're talking about.

Mr. Cater: It was in the Ottawa papers after Christmas.

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

Mr. Cater: A lot of that stuff goes by unnoticed. We look at every cent. If we did away with the government, it wouldn't solve our problems, but everything we do will help.

The Vice-Chair (Mr. Campbell): Well, as somebody has observed before this committee before, if we close down the Senate and the House of Commons, we would save $300 million and we would still have a $32 billion plus deficit.

Mr. Cater: But that's no reason not to look at it -

Some hon. members: Oh, oh.

Mr. Cater: - and I don't mean shutting you down.

The Vice-Chair (Mr. Campbell): Mr. Cater, I was going to make my own punchline by saying as that person said, well, it's a good start. Thank you.

Mr. Ferguson.

Mr. Ferguson: It's nice to have a smile before we leave.

It's been an interesting challenge for me, as well as for the coalition. We have tried to put a face on the deficit problem. I have recognized a little more the problems of the business side. I'm hoping that the business side will recognize that there are people in it.

It brings me back to a thought that ran across my mind about Expo '67 - I don't know whether any of you were there or not. I worked there for the length of time that I was there.

The premise of that was ``Man and His World''. They began by first looking at the man and then preparing for the world. I would like to see us look at a new Canada by looking at the people and looking at our economy at the same time. We can marry the two of them.

Mr. Daigle, I didn't pick on you.

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Let's not have a government of the marketplace, by the marketplace, for the marketplace. Let's consider people.

Thank you.

The Vice-Chair (Mr. Campbell): The last word is from you, Mr. van Oord.

Mr. van Oord: Thank you. I guess I should be very honoured to be the last one.

I think what we heard today was very good. I hope the government realizes that if you talk deficit and cutting, you have to look at what you cut. I can say I'm going to save $200 or $220 by not paying my N.B. power bill. Of course, six weeks from now, I won't have any power to run my farm. I'm not saving; I'm causing myself trouble.

I think one thing the Canadian government will have to look at very seriously is talk about level playing fields. Within Canada, we do not have a level playing field. There are things in place that disadvantage us over other parts of Canada.

The clearest example is, if you want to bring grain from Montreal to Halifax, you have to use Canadian ships. That's protectionism. We all want some protectionism, but it doesn't help us.

I ask the government, as I think Mr. Murphy said very clearly, to look at things from all angles, because saving a dollar might cost you $2 sometimes too. Help us to create an environment in which we can prosper and where there is prosperity for everybody. If one thing encourages me very much around this table, it is the big advantage...of responsibility for everybody in this country.

Thank you.

The Vice-Chair (Mr. Campbell): It remains then for me to thank all of you for taking time out of your busy days to share your thoughts with us and to have a very frank exchange of views among each of you, who are all stakeholders in this country. It has been extremely useful to us as a committee, and I hope it has been useful to you.

Pre-budget consultation is a permanent feature of budget-making in Canada these days. This is our second year of doing this, and you can look forward to us being back in this region again next year.

I am only a little embarrassed that as the finance committee we have not come in on time and under budget as we endeavour to do in our round table discussions. We're a little over time, and I'm going to ask now that the other witnesses for the next panel here in Fredericton come to the table. We'll get them identified and we'll start the next panel.

Thank you very, very much. The meeting is adjourned.