[Recorded by Electronic Apparatus]
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[English]
The Chair: Order, please. The finance committee of the House of Commons is very pleased to be today in Calgary, and we thank all of our distinguished panellists for coming before us.
We have with us today: from the Alberta Association of Retirement Planners, Roberta Bedard; from the Alberta Association of Social Workers, Jake Kuiken; from the Avenue of Nations Business Association, Lorne Pendleton; as an individual - and an institution - Robert Blair; from the Calgary Chamber of Commerce, Doug Mitchell and Ray Huddlestone; from the Canadian Taxpayers Federation, Jason Kenney; from the City of Calgary, Bev Longstaff; from the Conference of Defence Associations, Samuel Blakely; from Mount Royal College, Department of Economics and Political Science, Greg Flanagan; from the National Foundation for Family Research and Education, Mark Genuis; from the Seniors Action and Liaison Team, Phylis Matousek and Walter Derksen; and from Syncrude Canada Ltd., Eric Newell.
I've probably messed up the pronunciation of a lot of the names and got you wrong. Are there any corrections I should be making?
Thank you very much for being with us. Our format is to start off with opening statements of about three minutes each. You'll each have an opportunity during the course of our questions and discussion to expand at length on what your suggestions to us are, and we'll be concluding with a brief summary from each of you, should you so wish.
Perhaps we could start with you, Mr. Blakely.
Colonel (Ret.) Samuel Blakely (Chairman, Conference of Defence Associations): I'm flattered.
The Chair: Good, we look forward to your suggestions to us.
Col Blakely: Thank you, Mr. Chairman. I'd like to introduce Colonel Sean Henry, who is a senior defence analyst with the Conference of Defence Associations. I guess it is a bit of an irony that he has travelled from Ottawa to Calgary in order to be here with me to present this to your committee.
Mr. Chairman and members, good morning. It is indeed a pleasure and a privilege to be called before this committee to comment on the fiscal situation of the nation, and in particular, to bring to your attention a number of points that argue against further cuts to the budget of the Department of National Defence.
The Conference of Defence Associations comprises 12 member organizations representing some 50,000 Canadians all across the country, in addition to 13 associated organizations and their memberships.
My remarks will be in two parts: first, a statement of the main thrust of the written submission I passed to you in early October entitled ``Defence and the National Interest''; and secondly, a response to the three questions on fiscal policy you have posed for my consideration and comment.
In the written submission, I made a number of major points to show how the defence establishment is a major building block in the foundation of the nation. Moreover, I noted that it supports the national interest both at home and abroad. Finally, I showed by means of data how cuts to the defence budget totalling some $29 billion since 1987 have weakened defence. For that reason, we argue strongly that DND has made a disproportionate contribution to deficit reduction and that no further cuts should be imposed over the next 10 to 15 years.
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About national interest, Canada faces serious threats in the realms of global economics and protection of its sovereignty. In both cases a healthy and effective defence, including modern armed forces, is a key component for success. In addition, there must be a strong national will to use those armed forces to pursue the national interest.
The defence white paper of 1994 provides a firm basis in policy to achieve these ends. However, because of budget reductions and the opposition of anti-defence interests, the policy in the white paper is being seriously compromised. Although the document calls for combat-capable armed forces for employment in operations ranging from peacekeeping through to war, there seems to be an ideologically driven thrust towards peacekeeping alone. This becomes something of a self-fulfilling prophecy when the budget cuts preclude the acquisition of equipment to fight and win on the high-technology battlefield of the 21st century.
If this trend continues, Canada's international reputation will fall even further than it has already, with commensurate damage to the national interest involving marginalization in world affairs and loss of opportunities in international trade. As I point out in the written submission, peacekeeping alone is not a bankable quantity as far as our friends and allies are concerned. When threats to security appear, they expect Canada, as a leading industrial nation of the G-7 group, to pick up its share of the tough and dangerous combat operations as well.
Before leaving this first part of my remarks, I wish to elaborate a point not covered extensively in the written document. This involves the well-publicized improvements to the operational capabilities that are supposed to emerge from far-ranging reductions of overhead and streamlining of administrative procedures within the Department of National Defence. Unfortunately, much of this is illusory, simply because the savings being achieved are not being reapplied to the remaining operational components. In fact, the money saved comprises the same cuts to the defence budget already noted...thus leaving the armed forces with the same problems, but in a smaller context. The situation has reached the stage where any further cuts to the DND budget would place the Canadian forces in a dormant state, incapable of undertaking and sustaining significant military operations.
In summary, the armed forces are a vital tool in the national inventory and directly support the national interest. In this respect they contribute directly to the well-being of the nation and its citizens. This occurs because of their contributions to the national sovereignty and to a stable and just international environment in which free trade can flourish.
In this respect it would be a mistake to equate cuts in defence spending to the maintenance or increase of social programs. In fact, they are parts of the same whole. As a senior government official once remarked, without national and international security there can be no social security.
Before proceeding, I would like to distribute updated versions of three of the charts we prepared for this written submission. You will note they indicate an economic slowdown in Canada and show a general correlation between the decline of defence and the weakening of the national economy.
The Chair: I don't mean to interrupt you, but are you just about wrapped up there?
Col Blakely: I have about three minutes left.
The Chair: I was going to suggest we start off with about three minutes each, just to make the points. We'll give you lots of time later on, if that's okay with you.
Okay, we're here to listen. We're in your hands. I just want to be fair to all witnesses.
Col Blakely: How long do you intend this to continue, Mr. Chairman?
The Chair: We will go as long as is necessary. This is important. We will go right till noon. We have just found in the past that it makes for better discussion if everybody can get their cards on the table and then we can deal with them. But I'll leave it in your hands; whatever you prefer.
Col Blakely: All right, thank you.
I shall now proceed to the second part of my remarks, which cover the three questions you have posed. Then I'll speed it up.
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Let me say at the beginning that I and members of the CDA cannot provide any magic solutions to resolve quickly and painlessly the huge fiscal problem we face in this country today. It has built up over a period of some twenty years and could take that long to recover.
My observation is that ultimately there is going to be some tough political sailing ahead for all levels of government, as is already evinced by some provincial governments. Governments must ultimately face the reality of cuts and apply significant reductions in spending to a wide range of sensitive services. They have started to do this, but we must go even further. Quite simply, Canadians must learn to live with less and reduce some of their expectations of government.
Your first question concerns deficit reduction targets and how they can be achieved. In simple terms, borrowing requirements and the deficit should be reduced and ultimately eliminated. This is to be done as promptly as possible. However, whether or not the zero point is reached in ten or fifteen years is largely immaterial so long as a well-defined plan to achieve it exists and is based generally on accepted assumptions.
Above all, stability in departmental budgetary planning levels is essential. This applies in double measure to DND, where continuous budget cuts have placed the planning process on quicksand.
Your second question is about budget measures to create an environment for jobs. Once again, a stable policy and fiscal environment would also provide the proper context for job creation and growth. Business needs to be given a range of incentives to expand and capture more markets at home and overseas. Expansion of the Team Canada technique would be very much in order.
Aside from tax and similar incentives, business ought to be encouraged to retain and utilize a reasonable number of jobs to allow those who are incapable of doing more to enjoy gainful employment. The government should also abandon the policy of encouraging people to stay put rather than to move where jobs exist. Finally, a re-examination of the taxation process should be undertaken to ensure that equity and fairness are established at both personal and corporate levels.
The third question applies to more cuts and devolutions. In the first place, replacing public activity with private or regulated monopolies is not necessarily an appropriate response. Competition serves a purpose. It would also be inappropriate to cease a broad range of social benefits arbitrarily. Rather, all programs ought to be reviewed to eliminate duplication and overlap if and where they exist.
Privatization or devolution ought to be pursued in areas where it makes sense to do so. In the case of DND and the armed forces there is a caveat about the need to preserve military operational effectiveness. Unfortunately the bureaucratic momentum driving the colossus of alternative service delivery seems to be overshadowing this need in some areas.
In summary, Canadians need to reflect soberly on ways in which the national interest will be served best in the new millennium. It is clear that strong measures will be required to put the national house in order. Above all, to run down and ultimately destroy defence is in no way conducive to achieving these aims. Instead, a healthy defence should be seen as a natural and useful underpinning of the national interest.
Thank you very much. I look forward to your questions and to participating in the round table.
The Chair: Thank you, Mr. Blakely.
From the Calgary Chamber of Commerce, Mr. Tibbles and Mr. Huddlestone.
Mr. Ray Huddlestone (Chairman, Calgary Chamber of Commerce): Merry Christmas, and welcome to Calgary.
The Chair: Thank you very much. We're hoping for a chinook. We thought we brought you one last night and we were going to take credit for it, but something happened overnight.
Mr. Huddlestone: I looked for it this morning and I couldn't find it.
Mr. Chairman and members of the committee, it's a pleasure to appear before you today. As you mentioned, Glenn Tibbles, who is the general manager of the chamber, is with me. I'm a volunteer and chairman of the tax and economic affairs committee.
Just a brief word about the Calgary Chamber. It's the second-largest in Canada, with over 4,000 businesses, both large and small, that are members. It has a very active volunteer contingent, with some 21 committees. The committee I chair, the tax and economic affairs committee, is just one of those committees. It prepared the pre-budget submission which we have left with the clerk and which we sent to the Minister of Finance on November 24, 1995.
We're pleased to see that in the 1995-96 budget Paul Martin acknowledged that the deficit should be reduced, or in fact eliminated. We also acknowledge that there are many pressures, particularly with political uncertainties in Canada, on the government in terms of reducing the deficit. However, this country must not be distracted from initiatives that benefit all Canadians in every province. We must continue to regain control over our fiscal destiny.
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To fail to deliver on the federal budget commitments means renewed financial market pressures, which would of course be extrapolated into increased interest rates and exchange rates. Since we are a trading nation this would have devastating effects. Admission that federal authorities are incapable of resolving the debt crisis cannot be allowed to happen. I'm sure that the federal government can do this.
I'll be very succinct with this. The Calgary Chamber's first comment would be that the federal government must stay the course of deficit reduction regardless of political, constitutional, or provincial pressures.
The Chair: That's a big hurdle to overcome!
Mr. Huddlestone: That's right. We know you can do it. Let's make a commitment to reducing the deficit to 2% of GDP in 1996, 1% per cent of GDP in 1997, and move to balance thereafter. The 1995 budget included cuts to reduce the deficit to 3% of GDP by 1997, however, the total debt and annual interest payments continue to grow.
Total federal debt will reach some $580 billion this year, 74% of GDP. The Canadian economy remains at considerable risk to negative movements and interest and exchange rates until the debt-to-GDP ratio moves downwards.
The last two years have been difficult ones for Canadians. This is evident in much of the economic data. The price being paid by ordinary Canadians for years of living beyond our means is evident in high unemployment and flat, declining real family income levels throughout the decades of the 1990s.
The business sector has put its house in order. Downsizing combined with high levels of investment are positioning Canadian industry to meet the challenge of global competition. The benefits of continuing your course of action will result in lower interest rates, higher economic growth, growing employment and greater flexibility of health, education and social programs. We urge the federal government to continue its commitment to eliminate the deficit by the end of this Parliament.
So our position is to stay the course. Don't deviate from it. We're almost there. Let's not give up the gains that we have made. In particular, I can say for people here in Alberta that a lot of us here, probably all of us, have suffered to some degree in the cutbacks but we see what the results are. We say that we're prepared to live with that and to help out as much as we can with the reduction of the federal debt and the deficit.
The second area I would like to cover deals with the area you asked a question about: how many budget measures do you use to create an environment for jobs and growth? Canada is on the verge of spontaneous stronger growth. Industry is competitive through downsizing and new investment. Inflation is under control. We think that there are some things that can be done to ensure our health in the future.
So the federal government must support self-sufficiency by ensuring contribution levels and tax sheltering levels are adequate to provide stimulus to Canadians to be self-supportive in their retirement years, this is particularly important, as you all know, as the age level of Canadians continues to grow higher and higher. We're living longer and have more people on retirement; we must prepare them for retirement years.
Ensuring changes in health, education and social policy results in both reduced costs and improved delivery by eliminating federal-provincial overlaps and increasing community control in delivery of the services. In other words, push these services out to where they can most effectively be looked after.
We believe in completely restructuring the Unemployment Insurance Commission to deliver programs aimed at providing unemployment insurance rather than social benefit support. Of course, I understand that on Friday of this week we'll hear more from Lloyd Axworthy on what's being proposed. We also call for providing for employment training and retraining linked to the realities of the marketplace rather than make work and, lastly, eliminating business subsidies. Business can do it on its own.
The Chair: Thank you very much, Mr. Huddlestone.
We have from our Seniors Action and Liaison Team, Phylis Matousek and Walter Derksen. Welcome.
Ms Phylis Matousek (Chair, Seniors Action and Liaison Team): Good morning and thank you for the opportunity to appear before you and give you our ideas. I'll just go over the top part, and make it very brief.
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Seniors represent approximately 10% of the nation's population, which would be approximately 2 million seniors over the age of 65. We've heard so much about deficit and debt, the incomprehensible figures in the billions and even trillions. Panic created by the Moody's-type companies of the world have brought about change. We're for change. If you consider the changes that have been made in society and the world in general in 70-some years, we can adapt to change. However, it depends on how those changes are made and who they affect. Are they affecting the most vulnerable in society? We think so.
Scientists say that there is only one factor that differentiates animals from human beings, and that is the ability to feel shame. I wonder how many bureaucrats ever feel shame about targeting the most vulnerable in society: the poor, the sick, the elderly and children. When the United Nations comes out and criticizes Canada for its treatment of children, I wonder if any Canadian feels shame. I know I do.
Much has been said and will be said later on about taxes. This I think is the prime problem: the unfair tax situation. There are too many deferments for the wealthy and corporations. The value of deferred taxes on the part of corporations is now in excess of $36 billion. The unfortunate thing is that these corporations do not even pay interest. I have to pay interest. If I can't pay my income taxes in one fell swoop, I have to pay interest on the unpaid balance. We have a spending problem, yes, indeed we do.
We also have a revenue problem. Even the Canadian Chamber of Commerce last year admitted that it had taken $4.8 million in a handout from the federal government. We'll go into taxes a little bit later when Mr. Derksen has an opportunity to speak.
It's the government itself that is responsible for the deficit and debt, not the poor, not the seniors, not the sick, and not the elderly or the disabled. Another fact is, as government and industry downsize, what happens in the economy when all of these people no longer have work and no longer have a salary? The trickle-down theory didn't work under Ronald Reagan in the United States and it won't work here. There is no such thing as trickle-down economics.
Privatization, for example, of necessary services benefits only a few at the cost of many; for example, health care. In the private concept, private health care requires private health insurance. This is not only costly, it is restrictive. Many people cannot get private health insurance because of age, because of pre-existing conditions or because they simply can't afford it. What happens to these people? They either do without or they die, quite frankly.
Education is the same thing. There will be a two-tier system in education if we aren't very careful. As funding drops from public funding, tuition rates will rise, which means only the very affluent will be able to educate their children to take a place in an ever-increasingly competitive world. Pretty soon Canada could find itself with only a few trained, skilled individuals to compete. Private schools aren't the answer.
Devolution: That very word strikes terror into the hearts of many Albertans. If you look at the Klein government's track record - and I try very hard not to be partisan politically - devolution in Alberta would be devastating to those who are most vulnerable in our society. I truly believe that.
If you're talking about such issues as manpower training, that could very easily be given over to the provinces. It would be sensible and reasonable if each province and territory has its own unique employment opportunities. It seems appropriate also that industry could be responsible for specific training.
Such areas as the environment, fisheries and wildlife should not be turned over to the provinces. Areas such as pensions, for example, and social services, should never be turned over to the provinces, particularly in Alberta and Ontario.
Health care must remain the prime responsibility of a central government with firm national standards established, monitored and enforced. Perhaps one solution - I hate to say this word in this group of people - would be a temporary, and I mean temporary, surtax of 10% to be applied only to the debt.
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I know the GST was supposed to do that; apparently, it went other places. Or perhaps it could be a flat 10% across the board. That means everything, including pensions but excepting people receiving a GIS, war veterans' pensions, and those who are physically and mentally disabled. Perhaps this might attack the deficit and debt.
Seniors have taken a loss of up to 17% in their disposable income in Alberta. What does this mean? This means that, for example, if only half of the 260,000 seniors in Alberta lost $1,000 in their disposable incomes, which I lost last year, this means a loss of $130 million that did not get spent in the local economy. If half of those same seniors lost $2,000 in disposable income, which I lost this year, this means a loss of $260 million that did not go into the local economy. What you don't have, you don't spend.
I think I will just let it go at that right now. Mr. Derksen may have a comment or two to make on taxes.
Mr. Walter Derksen (Seniors Action and Liaison Team): Good morning, members of the panel, ladies and gentlemen.
I think Phylis pretty well said it all. The one thing I want to dwell on is the tax situation.
In spite of the fact that a number of people in this room would not agree with it, but we have been through several decades in which we have had tax deferrals of various degrees for the people who can most afford to pay their way. Tax deferrals include people who have offshore banking, RRSP deferred taxes, and also RRSP over-contributions. All these tax deferrals mean that those at the bottom end of our society, who are unable to pay into that sort of a tax deferral system, have to ultimately pay the price.
I would like to think that the federal government will not take the route of the Klein and Harris governments in clawing back from the people at the bottom end of the wage scale.
This includes seniors. The word is that the federal government is anticipating clawing back any amount over $25,000 to seniors individually or $50,000 as a family. It should perhaps consider clawing back the pensions of retired politicians and bureaucrats who didn't do a very good job when they were in office. If that approach isn't taken, it will only affect the poorer people in our society who have already been most affected by the provincial approach.
Thank you.
The Chair: Thank you very much. You're advocating getting rid of the tax deferral aspect of pension plans and registered retirement savings plans?
Mr. Derksen: That's true.
The Chair: Thank you very much.
Mr. Blair, please.
Mr. S. Robert Blair (Individual Presentation): Mr. Chair, thank you.
I'll be speaking from a paper of 10 pages on businesslike approaches to the public debt, which has been circulated to members of the committee and to which I'll often refer. I should offer it to anyone else at the table who might wish to see what I'm talking about as we go along.
The Chair: You mean everybody doesn't have a copy yet?
Mr. Blair: Not yet. Is it in front of you, Mr. Chair, because I'd like to refer to it for the members?
In opening, I'll just refer to three pages.
On page 3, I've provided written answers to the three questions that I received in advance. In the interest of time, I will not dwell on those. I will come back to them as you like.
On page 7, I've described to the committee a list of the main correspondence that I've received, sometimes with substantial reports and analyses, since speaking on this subject to the committee one year ago.
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On page 6 I've referred in particular to activities in the same direction as my testimony, having to do with citizens interested in ways to reduce the debt burden in Canada.
Then on page 8...I would like to call to your attention my tabling with the committee some basic information on the net worth and debt relationship in North America, of which the last four groups under the heading ``TWR Data, not published before'' will be going on the record this morning for the first time publicly. I have obtained the permission of the Ernst & Young firm, which has produced the most extensive study that exists for Canada on the net worth that exists in private households in Canada, their express permission, to table with you some selected data, which I think are very relevant to the subjects we should be considering.
By the way, may I take it that my written submission can be taken as on the record of the committee, even though I only refer to it?
The Chair: Absolutely; and I think it would be most helpful if you could summarize the main points for us.
Mr. Blair: Then may I give you a very quick summary.
Chairman, on this whole business of deficit-cutting, cost-cutting, I'd like to give you another point of view - and it's one from business. In this I don't want to be misunderstood, because I'm an absolute believer in frugality, thriftiness. It's even been said in the past that I'm a believer in stinginess. If there are a dozen books written on the history of business in Alberta, most of them have one or two chapters about the company I headed for twenty years here, and when I was characterized, when the authors were trying to put some kind of personality on me, the favourite anecdote was that I was known customarily to take my lunch at the pay-and-save counter. That, with mumbling in public speaking and too often needing a haircut, was the way I was seen. I believe greatly in frugality.
But in Canada I'd like to look at it from this point of view, that we're cutting deeply because of public financial problems. It's said sometimes that this country is broke, that it's about to hit the wall, that we have some of the highest debt. This is what is driving the cost-cutting that is going on.
I think the most important single thing for me to say today is that cost-cutting alone will not and cannot entirely fix our public finance problem in Canada. Even Preston Manning in his warmest dreams is not talking about reducing the public debt in Canada. He's simply talking about how we can reduce the deficit to slow down the growth of the debt.
In public just as in business, cost-cutting alone cannot fix our public finance problem. Cost-cutting alone is not - emphatically is not - the main business-like approach to a problem of excessive debt. That's my message number one, please. There are other approaches, and they are what I want to extend the committee's discussion into. There are balance sheet approaches.
Message two is that this cost-cutting is already doing damage at this time. Its effects, among other things, in Alberta, where my most direct experience is, are severely regressive. The effects are working hardest on the those who have the least.
Mr. Huddlestone has just said we've all suffered during the cutbacks. There is something to that. But typically here the effects of the cuts on seniors, on people of the lower incomes, have been deeper and more severe. Typically 30%, 40%, 50% of income, or disposable income, has disappeared. A serious situation of unfairness is developing in our country.
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Worse yet, just a few blocks from here we have the Colonel Belcher veterans hospital, where I'm told because of cost-cutting and devolution nursing services have been cut by approximately one-half. We now have the intensive care veterans on level two. There are 135 people with one nurse overnight. It's after two things, too: after a 28% increase in the charges their families are paying to the hospital, and in spite of taking into account that the hospital was donated to the veterans by the estate of a private citizen in the first place. To me this is an example that not only is cost-cutting is getting unfair - and I say this very seriously; I only say this knowing how serious it is - but I think we're running into the situation of failure of fiduciary obligation to some of our veterans, some of our seniors, and some of our disabled in this country.
To put days and weeks of preparation into three minutes is impossible. Thanks for that start. When I do come back into this discussion I'm going to be talking about this being a balance sheet problem, needing a balance sheet solution. In this country we have to be looking at the assets as well as the liabilities. So far all we're talking about is the liabilities and the need to cut costs.
The Chair: Thank you, Mr. Blair.
Now, from the Alberta Association of Social Workers, we have three representatives: Rod Adachi, Gayle James, and Jake Kuiken.
Mr. Kuiken, would you be good enough to make your presentation.
Mr. Jake Kuiken (President, Alberta Association of Social Workers): Thank you,Mr. Chairman. I represent the Alberta Association of Social Workers. We're a professional association of 1,600 members in Alberta. Across Canada we're part of the Canadian Association of Social Workers, which includes about 15,000 members. On an international basis, we're members of the International Association of Social Workers, which is a 58-country organization.
We have a number of concerns, Mr. Chairman. We want to begin by briefly noting that one of our major concerns is with Canada's role in national social programs. Over the last few years in particular, but already beginning in the late 1980s, the federal government has significantly reduced its role in national social programs, first by capping the Canada Assistance Plan, and last year in the federal budget with the introduction of the Canada health and social transfer legislation. We realize that will be implemented in the next year for the first time, and we would like to tell you it will have devastating impacts in Alberta, in addition to the very devastating impact of the provincial government budget cuts. The Canada social transfer will reduce the transfer from the federal government to Alberta by $212 million. Those cuts will be felt by post-secondary education, by health services, and by social services.
I understand from the paper this morning that Mr. Axworthy will be introducing his unemployment insurance reforms. I must tell you I was particularly disappointed to read that a program begun in this country in the 1930s and 1940s, designed to assist people while they were without income because of unemployment, has reduced its involvement in the lives of unemployed Canadians to the tune of 37%. Only 37% of the people who are unemployed in Canada actually draw benefits from the unemployment insurance program, according to the newspaper this morning.
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I also want to say we share Mr. Blair's concern about a balanced approach. I want to use one example. There is a tax expenditure which, if I recall correctly, is approximately half a billion dollars annually. It's the food and entertainment tax deduction.
While there may be some business reasons for introducing that kind of tax expenditure, I would like to contrast that with the fact that in Calgary, during 1995, Calgarians will receive 2.3 million meals through the Calgary Inter-Faith Food Bank. When you look at the contrast between tax deductible meals, even at 50%, and charitable meals, there's a crisis of values in this country. It's compounded by the fact that in Calgary alone there are 45,000 poor children.
Our view is that the federal government must take a very serious look at the kind of recommendations Mr. Blair has made. We need a balanced approach and there must be a balanced budget, but it must not come at the expense of the poor, persons who are disabled, health care programs or post-secondary education.
What Canadians need more than anything else is some sense of stability and some sense of purpose. I want to close my presentation with a couple of sentences from a paper written by Michael Mendelson, who's a senior scholar with the Caledon Institute of Social Policy. His comments are about the upcoming negotiations between the federal government and the provincial governments:.
- The Government of Canada can turn these negotiations into an opportunity for the resurrection
of cooperative federalism, reasserting the sharing of adversity which is the signature of
nationhood, while stabilizing and protecting part of our social security system if it wishes to do
so. That's the big if.
The Chair: Thank you very much Mr. Kuiken. Next is Mr. Len Landry from the Canadian Association of Petroleum Producers.
Mr. Len Landry (Vice-President, Fiscal Policy and Corporate Services, Canadian Association of Petroleum Producers): Good morning and thank you very much, Mr. Chairman and the committee. I'm Len Landry, vice-president of fiscal policy and corporate services with the Canadian Association of Petroleum Producers. I have with me today Pat Greenaway, who is our manager of fiscal policy.
The association represents about 190 producer corporations that produce about 95% of all Canadian oil and gas. I have made available for distribution a list and some graphs. If you have them, I'll just quickly go through them. The industry contributes greatly to Canadians and the Canadian way of life, and we'd like to make sure that's pointed out.
We employ directly 70,000 people and indirectly provide jobs for another 117,000. We provide to the governments of Canada anywhere from $3.5 billion a year to $5.5 billion a year. This predominantly goes to the provinces because they are the owners of the resource.
We put into the Canadian economy about $22.5 billion. This goes in large part to purchasing of goods and services from other Canadian producers, employment, and drilling, exploration and development of wells.
We also are a big contributor to the Canadian balance of trade. We export about $15 billion worth of petroleum. When you net off what eastern Canada imports, we are providing a net positive contribution to the balance of trade of about $10 billion. Canada would otherwise be in a deficit balance of trade of about $5 billion.
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The industry typically reinvests 100% of its cashflow. In 1994, in fact, it reinvested 122% of its cashflow. That was $13.2 billion and accounted for 17% of all Canadian non-residential investment in 1994.
We must also keep in mind that the petroleum sector provides two-thirds of the energy used by Canadians. In a cold, geographically large country this is not something that is easily replaced. It is an essential product.
Where does the industry stand financially? Our reserves-to-production ratios, meaning the number of years at which we could produce at the current consumption rate, have declined considerably in the last few years. For oil we have a 10-year reserve and for natural gas we have a 13-year reserve.
These numbers are not meant to be alarming. They are reflective of a very good, sound policy entered into by the government. Through increasing exports and production levels, we can have a more stable, healthy industry to the benefit of all Canadians. It is dependent, though, on the industry reinvesting at the high levels of its cashflow, which it has traditionally done in order to bring on new reserves.
The industry is not a significantly profitable one. A line graph in the package demonstrates that the industry has a rate of return on capital of only 2% to 4%, which is below that of the non-financial sector.
I also wish to point out that oil prices today in constant dollars, if you remove inflation and get back to what the real value is, are the same as they were in 1974. They rose through the period of the OPEC crisis in the 1980s, but currently they are back at the same level they were in 1974.
Gas prices have increased somewhat to almost double what they were in 1974, but the increase hasn't been substantial in many ways.
The Chair: Mr. Landry, will you be presenting us with some suggestions for our budget in your opening remarks?
Mr. Landry: Yes.
The Chair: Thanks.
Mr. Landry: The industry is a very significant contributor to the Canadian way of life and the Canadian government's ability to provide social services to Canadians. It's not a terribly healthy industry that can afford significant new taxes. In fact, we provided extra revenue to the governments last year via such things as the Public Utilities Income Tax Transfer Act, which caused an increase in utility rates.
Turning to your first point of deficit reduction target, as recently as November 1, Mr. Martin -
The Chair: Are you saying the abolition of PUITTA was a tax on the petroleum companies?
Mr. Landry: The abolition of PUITTA, the refund of income tax that wound its way through the province and then back through the utility companies to the consumer meant utility rates went up.
The Chair: But that wasn't a tax on oil.
Mr. Landry: The largest user of electricity in Alberta is the petroleum sector, so it accounted for about $70 million of increased cost to the industry, which stayed in the fisc of the federal government.
The Chair: Okay thank you.
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Mr. Landry: Minister Martin had commented that he was sticking to the course of 3% of GDP in the 1996-97 budget, and we support him on that. We see no reason to change from that course. We would like to suggest that the main tack for deficit reduction and getting finances of the federal government in order should still be focused on expenditure reduction as opposed to tax increases. There has been significant tax increase over the last ten years, and it hasn't solved the issue.
In looking at expenditure reductions, in the very broadest sense we ask the question of why there are large departments and programs at both federal and provincial levels of government dealing with economic activities such as agriculture, forestry, petroleum, fisheries, and Industry Canada. We have both levels of government involved in the very same types of activities promoting those industries, and I'm not sure industry really benefited from it or really needs it. I'm not suggesting which order of government is best capable of doing it, but I know we have both orders doing it now, and it's a duplication that may be unnecessary.
A further example is the method of tax collection in the country. We have Alberta, Ontario, and Quebec collecting their own corporate income tax, while Revenue Canada does the same thing. Again, we have a duplication that costs these provinces considerably and that costs business considerably to comply and file with the two orders. The end result is really no different than if one body were collecting it on behalf of all levels of government.
There's also the same thing on the side of consumption taxes. We have both the federal government and all provinces except Alberta collecting consumption taxes, a duplication of a bureaucracy of costs that may not be necessary, and we encourage you in your efforts to harmonize the GST.
How may budget measures be used to create an environment for jobs and growth? From our perspective, the key thing is that investment funds are very averse to risk and seek those areas where stability and certainty are the greatest. Therefore, what we need beyond what can be done in the budget is a framework in this country of certainty, of knowing who is in charge of what level of activity. Until we have that resolved to a greater extent, we bring the question of whether business will be nervous to invest.
More specific to the budget, the issue is that if we see taxes heading downward in the long run because the government is able to focus on the real priorities and issues it should be dealing with, then industry again would be more willing to invest.
The final question is on what areas of activity should be considered for further cost reductions. I just leave on the table some examples beyond the point I made earlier of the duplication of the economic department at the federal-provincial level. These are some very minor ones, such as the fact that on the east coast of Canada we have the federal government dealing with the regulation of the petroleum sector and we have each province in the offshore dealing with the regulation of the petroleum sector. There's some great rationalization that can be done there with the offshore petroleum boards and the National Energy Board.
We have the Geological Survey of Canada, which performs surveys and gathers data on our resources. We suggest maybe the Alberta Energy and Utilities Board model should be looked at, where the Geological Survey simply becomes a repository for information, no longer carrying out surveys, but the private sector, when it conducts surveys, is required to file the information with the Geological Survey.
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Those are minor, but they are something in our field and we would suggest you have a look at them.
The Chair: Thank very much.
I have been a very poor chairperson. We've had six witnesses and we've averaged ten minutes apiece. But I'm certainly in your hands as to how we proceed.
Our next witness is Mr. Flanagan, from Mount Royal College.
Professor Greg Flanagan (Department of Economics and Political Science, Mount Royal College): Thank you, Mr. Chairman; and I thank the committee for giving me the opportunity to be here today.
In preparation for this I met with department members, so it's really a collaborative approach. I have the benefit of belonging to a department that has both economists and political scientists in it, something now increasingly rare and possibly unique in the country. The department is quite active in the publication of articles and books. Our focus is really policy, because it's the area where we can bring together economics and political science.
I've tabled a presentation here that's quite lengthy. It has numerous specific recommendations. For now I'll just comment briefly on the three areas. Possibly in discussion we can go to some of the specifics.
To the question on a deficit reduction target, we feel the target should be closer to zero, or possibly running a surplus. At this phase in the business cycle we're heading for considerable problems down the way if we're not getting the budget under control now, because inevitably we're going to have a downturn and there will be increased government cost. So our deficit reduction targets are too low at the moment.
However, that having been said, we're not considering cuts, or increased cuts, to programs in this country. We'd like to see more effort to tackle the two major problems: the debt.... CertainlyMr. Blair and others have mentioned the debt as the problem. Our current revenues are more than sufficient to cover our current expenditures, if you discount the interest payments to service that debt. So the debt has become the problem.
The other problem is unemployment. We have a high level of unemployment in this country, and that needs to be addressed.
On the debt, we have a very wealthy country. I've documented here a number of external reports on the wealth in the country. It's our view that that wealth has been created in this country partially because of policies in this country that have benefited Canadians at really the grassroots level: the health care, education, and social services we've enjoyed in this country. We're substantially rich as a country, although our public accounts don't recognize that because the wealth is not there in the public accounts.
We're suggesting here major tax reforms, with a number of specific recommendations, not specifically tax increases or increase in rates but certainly a consideration of wealth taxes at this point. That wealth was achieved, it is concentrated in this country, and it might be time when the past generation that has accumulated that wealth might contribute to the federal problem...rather than future generations contributing through reduced expenditures.
The unemployment appears not to be cyclical. Some of our policies in the past have tried to deal with cyclical unemployment through aggregate demand expansion. It's our view that the current unemployment problem is largely structural, and that requires an altogether different kind of approach. The recommendations we have here on structural unemployment suggest creating an environment that stimulates individual initiative, self-employment, and all these areas. Again, it requires that we maintain and possibly enhance our health care systems, since healthy people are productive; enhance our post-secondary education systems, since educated people are productive; and our training systems, to get people into the areas that will be the new economy; but not expand aggregate demand. Those are really aggregate supply policies: increase the ability to produce at the individual level.
To the question about federal activities and cuts, commercialization, privatization, and devolution, we're not opposed to privatization where there's no longer a public mandate - and in many cases the world has changed - but we would want the committee to look seriously at the history in Canada of the role of nation-building. Our nation is not in good shape at the moment. There is considerable regional disaffection. It would behove the federal government to reconsider its role in nation-building.
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As well, if we, as nation, are going to rely more on market forces and market solutions, we have to face the income distribution issues. Markets can be largely efficient, but they aren't necessarily equitable. Our social services right now, with the devolution of social services, are being severely curtailed in really an arbitrary and ad hoc process across the country. So we'd like to see the federal government actually strengthen national standards.
One suggestion we have here in detail is the introduction of a negative income tax at a national level through Revenue Canada. This would be a negative income tax scheme that guarantees incomes across the nation.
The details are in the package there. In that way, the social services income maintenance and minimum standards in income would be maintained nationally.
Generally, devolution is not a good idea in the current state of the nation. Consider increased standards, increased flexibility, and portability of benefits across the nation so that we get that flexibility in the workforce and support an aggregate supply approach to the current unemployment problem.
Thank you.
The Chair: Thank you very much, Mr. Flanagan.
Mr. Pendleton.
Mr. Lorne Pendleton (Executive Director, Avenue of Nations Business Association): Thank you, Mr. Chairman, committee members. Welcome to Alberta.
I'm from Edmonton. I would like to give a bit of background so it's clear where I'm coming from. I am an executive director for a business association of small businesses in the inner city of Edmonton, which is called the Avenue of Nations.
The reason it's called the Avenue of Nations is because, for the most part, we are very much a multicultural community. It tends to be southeast Asian, but that really is beside the point.
The point I wish to make today concerns this microcosm of the Canadian fabric, which has this diverse background that's being blended together, from Quebec all the way down.
The people I respond to are small business people. The thing I find remarkable is that these small business people in the inner city of Edmonton are asking about the people in their community. The residents in the community are people who are doing without. They are largely the people to whom our social programs tend to be directed. We have much higher unemployment, for example. We have much lower education, which is typical of an inner city situation.
Without being critical, when people perhaps first come to Canada, or Edmonton at least, and arrive in that part of the community, it's the sort of community that for the most part they tend to want to leave.
Here's the point I wish to make. I'll speak to your second point, which is budget measures, and jobs and growth.
I've heard it around the table. I think it's time that we tried to do more toward working together. We should blend, if you wish, the two groups: businesses and residents.
I know it sounds very simplistic. But I am astonished, as a business person myself, to see the small business people - they are delighted to be in Canada, for the most part, because of the framework we provide for raising your quality of life - asking about the person who is using a coat hanger to fish out of a dumpster.
I certainly also find that some of my friends turn a blind eye to the unfortunate individual who is stumbling-down drunk.
Both of these individuals are problematic for businesses. The traditional solution is, well, get them the hell out of my way.
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But in the Avenue of Nations, sir, we're saying that we must work together. We must have a blended approach to this problem. We can't turn a blind eye. We must be compassionate.
I will leave by saying that training and improving the lot of the people who are down on their luck is very important to the people who have a little bit in our area. We need training.
Second, we need a much more balanced and fair approach to the cuts. I believe, sir, that we can look sometimes to the grassroots for the answers. I see an answer evolving in this part of Edmonton, surprising as that seems for Albertans. The business people I represent - and I believe it's the majority or I wouldn't say it - don't think that corporate Canada is going to be the only answer to solving our social problems.
Third, we do need a strong central government. We do need compassion in the use of our social programs. I have a few ideas that I'll mention when we elaborate.
Thank you.
The Chair: Thanks, Mr. Pendleton.
Roberta Bedard.
Ms Roberta Bedard (Vice-president, Alberta Association of Retirement Planners): Thank you, Mr. Chairman.
I must mention that the Alberta Association of Social Workers representatives here were probably very surprised to hear that I'm their president.
I am the president of the Alberta Association of Retirement Planners, so please forgive me, sir.
Having said that, I really do appreciate the opportunity for AARP, as I'll refer to us henceforth, to participate in these discussions. I was privileged to participate in the discussions earlier last year, as well as with Mr. Axworthy's committee.
It brought home to us that this actually can be an avenue for change. We did feel at the time that we had been heard, so again I thank you. I'll summarize as I go along and I'll be as brief as I can be.
The primary aim of budgetary planning must continue to be deficit reduction. I don't think any of our members have a difference of opinion on that. However, nothing exists in a vacuum. Those reductions must be carried out in such a way that they won't have a negative effect further down the road.
I think it's easy when we're doing planning not to look at all the parameters, and further down the road we can have some unexpected results unless we're really very careful. When we're planning the budget, we suggest giving consideration to the fact that a growing economy that doesn't produce tax revenues doesn't help reduce the deficit.
We might be better off planning for a stable economy with perhaps less stress on high profit and growth and more on jobs, which will generate purchasing power as well as income tax revenue. Growth will follow. We feel that a climate favourable to jobs and growth can be created by budget members. We also feel that job growth will be easier to generate within the small business sector. Whatever we can do to strengthen the position of small business will raise tax revenues.
Now, here is our particular interest. Small business does need people trained in computer applications, including research skills. We feel that interministerial cooperation will be essential to lead to meaningful training, so, yes, the money must be in the budget but there has to be cooperation between ministries, between departments, and between the federal ministries and departments and their provincial counterparts. If we can give meaningful training and improve small business performance we will then be reducing the UI and social assistance rolls and increasing tax revenues.
The infrastructure is already in place to provide such training through existing publicly funded educational institutions. We feel privatization of the educational system may have the potential to dilute the quality of the training unless really stringent federal standards are put in place. So why not use institutions where standards are already in place? And at this point, there are underused physical facilities.
As a matter of fact, our association has created such a training program with the Northern Alberta Institute of Technology. We've called it SWAT, the senior workers alliance for training, and this arose, sir, out of a presentation we were privileged to make at one of these round tables, so we've had one really good result out of these round tables.
SWAT is a training program designed specifically for older workers, taking into account the learning style of the older brain, the need for brighter lighting, for lumbar support and an allowance for slightly slower reaction time.
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The courses have been designed. They range from where's the on switch to how to set up your own small business and how to become a researcher surfing the Internet. We feel this offers real opportunities for people in retirement who will want or need to develop a second career without having it be a downward shift.
If we're looking at the changes that are proposed or possibly proposed for the Canada Pension Plan, they become more and more important if people are going to have to retire or at least leave the workforce later in their lives. At the same time, downsizing leads them to leave their jobs at a younger age. Something is going to have to fill that gap.
If these people are going to be able to compete in today's and tomorrow's job market, meaningful training for the older worker must be provided. Taking the older worker out behind the barn and shooting him is not an option. If you say older people leave their work and don't have adequate training so they can't compete in today's job market, what alternatives are you leaving for seniors if we're not prepared to have them work and we're not prepared to support them socially either?
We feel that administrative and policy liaison between the federal ministries and departments would help eliminate duplication of services, but the devolution of provision of services downward to the provinces only as a budget-cutting or deficit-cutting tool couldn't be advantageous in the long run. It makes no sense to the individual taxpayer to reduce the federal deficit while increasing the load on the provinces. We must achieve these efficiencies without creating undue hardship. This has already been referred to people who are already suffering.
We feel there should be federal standards. If there aren't federal standards, we compromise the mobility of our various Canadian populations and also could adversely affect those provinces that offer higher standards of services. We already have seen what's happened with this in British Columbia and the steps they felt they had to take. If there are no federal standards, then other provinces might very well follow B.C.'s example.
We also might want to look at a reconsideration of favourable tax treatments given to specific interests. For corporate organizations already making a significant profit - the art community, religious and quasi-religious organizations - the tax treatments perhaps could be re-evaluated. It's not the life mission of taxpayers to subsidize profit-making corporations. A way must be found to increase tax revenues from these corporations without triggering a mass exodus from the country.
The Chair: Which corporations?
Ms Bedard: The ones that are making a healthy profit now. You must appreciate that I do not have a list of all the profit-making corporations, but if you need one I can sit in the Calgary Public Library and look through the references. I have a feeling that somebody somewhere knows who these people are.
The Chair: So what you're advocating is a higher corporate tax based on profit?
Ms Bedard: Not necessarily a higher corporate tax, but simply perhaps a revision of what the ordinary person thinks of as tax loopholes, because there are profit-making organizations currently receiving tax deferments and tax breaks. That maybe could be re-evaluated. You'll see in my final statement what our position is on that.
Funding for the arts should also be examined. There's no question of the importance of the arts to the quality of our lives, but there's a poet who said that if we have two loaves of bread we should sell one and with the dough buy hyacinths to feed our souls. Well, this is really nice, but I think we may have to face the fact that we only have one loaf of bread and maybe the hyacinths will have to wait, as much as that might be an unpopular thing to say.
I'll summarize very quickly.
The Chair: You'll have a chance to summarize later on.
Ms Bedard: In that case I shall stop.
The Chair: You'll all have an opportunity to summarize. I just want everybody to be able to put their cakes on the table because we see some very competing visions of Canada's future here.
Jason Kenney.
Mr. Jason T. Kenney (National Director, Canadian Taxpayers Federation): Thank you, Mr. Chairman. I too will try to be brief but would appreciate your discipline in this regard. I think I was cut off last year, when I was also at the end of the table.
The Chair: You were cut off because you talked for too long and because nobody liked what you said.
Mr. Kenney: Probably the latter.
I'm with the Canadian Taxpayers Federation, and we didn't like what you said in your report last year, Mr. Chairman. As a consequence of the recommendations this committee made in its report to the minister last December to increase taxes by some $2 billion annually, our organization launched a major national campaign, which resulted in over 20 rallies across the country and 240,000 Canadians signing petitions and coupons. I suspect some of you might have had some phone calls and faxes at the time suggesting it would be inappropriate to raise taxes.
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We want to make it clear right up front that our 85,000 supporters in every province of Canada have the same no-tolerance attitude toward the prospect of higher taxes in the upcoming budget.
Having said that, I want to constructively address each of the questions the committee has put before us.
First, what should the deficit target be? It's our view that the current deficit target is insufficient and murky, to say the least, and that the finance minister's current plan really is not a solution to the problem. Essentially what it does is, during the term of this government, add $100 billion to the stock of our debt and increase our debt-servicing payments from under $40 billion to over $50 billion a year.
All the program spending cuts made in the past two years simply make room for higher interest costs, which is a point I haven't heard anybody else make today. The unfortunate crude reality of the current budgeting exercise is that all of the cuts that have been made, some of them very painful, have simply made more room for the federal government to flush valuable tax dollars down the toilet of debt-servicing. That simply cannot continue.
That is why we suggest the government accelerate its deficit reduction targets and indeed establish a very firm balanced budget target beginning in fiscal year 2000. Interim targets of 2% of GDP in fiscal year 1997 and 1% in fiscal year 1998 would be appropriate, achievable, measurable targets, and those are the criteria the finance minister has been looking for.
How can those targets best be achieved? Once again, they can't be achieved through tax increases. The federal government and many provincial governments have by and large reached the point of diminishing returns with respect to taxation. This was evident in fiscal year 1993-94, when federal revenues actually declined because of the failure of the economy to generate the kinds of revenues governments have come to expect. The old models no longer work because we have reached that point of diminishing returns.
I hear people around this table and others in the public debate talk about a balanced approach and imply, although never very clearly or directly, that we need to raise taxes. I submit that after three decades of raising taxes and increasing overall government spending, a balanced approach would constitute at least holding the line on taxes and cutting spending. Perhaps after three decades of trying an approach that hasn't worked, we ought to try something different.
I've heard the definition of insanity is to keep repeating the same thing over and over again, even though it doesn't work. That's what we've been doing in this country with respect to our federal fiscal situation.
Federal revenues have doubled over the past ten years in nominal terms. There's been a 760% increase in federal revenues over the past 25 years. Total government revenues have increased from 35.7% of GDP to over 44% over the past 25 years. Canada has the highest direct taxes on individuals in the G-7 and the second-fastest-growing personal tax burden in the OECD. The total personal tax burden imposed by all levels of government has grown by some 16% over the past three decades in real terms, and the single greatest economic problem our country is facing is a continued diminishment of disposable income, which is hampering investment and consumer spending.
I've brought along a couple of charts, if you don't mind, Mr. Chairman, to make this point graphically, because often these numbers become virtually meaningless when we talk about the billions and the millions of dollars.
Here is a colour picture of how the old approach isn't working. This a picture of the fiscal history of the federal government from 1962 to 1994-95. The red shows the growth in federal debt, the green shows increases in federal revenues and the black shows increases in government spending. This indicates that notwithstanding the never-ending increase in government revenues, government spending every year has outstripped increases in revenues, and the debt has grown proportionately. In other words, the revenue solution doesn't work.
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There's another way of demonstrating this. On this chart the red line represents the federal debt. The blue line represents federal revenues. So we've had a constant increase in federal revenues. We tried the revenue solution year after year from 1962 to 1994 and what's happened? The red line has grown, digging us deeper into the debt hole.
The black line represents effectively the standard of living of Canadian families, the percentage increase in family income. As federal government taxes increase and the debt increases, there is a proportionate reduction in the income of Canadian families.
So if you want to find a scapegoat for the kinds of structural economic problems we're experiencing, I suggest those of you who are in the federal government and participate in these decisions look in the mirror.
The second question the committee asks is how may budget measures be used to create an environment for jobs and growth. We suggest that this government seriously consider a stimulative, targeted, phased-in tax cut that would provide an increase in the disposable income of Canadian consumers and increase the capacity of domestic investors in this country. It would create new jobs and consequently higher revenues for the federal government, allowing it to achieve an accelerated balanced budget target by the year 2000.
We have in our submission, which I think is rather an extensive one, suggested specific areas where in our view the federal government can reduce spending without unduly affecting those who are most vulnerable in our society. We suggest, among other things, the government begin through leadership from the top. We think, for instance, the minor changes in the MP pension plan earlier this year don't come anywhere near satisfying the reasonable expectation of taxpayers that MPs live on the same standard in their retirement income as the rest of taxpayers. We think it ought to be converted to a defined-contribution, self-funding plan. Similarly, there ought to be transparency in MP compensation by converting the tax-free expense allowance into a portion of taxable salary.
These are symbolic things. We know no big money is involved, but we think the symbolic leadership is critically important. The governments in Alberta, Ontario, Manitoba, and Saskatchewan have all demonstrated this kind of real, not token, leadership from the top, thereby creating the political will for others to accept sacrifice.
We recommend that the government pursue further reductions in transfers to crown corporations. That's an obvious area that's ripe for substantial reductions, given the $5 billion expenditure on crown transfers, including government loans that are made to crowns such as VIA Rail, Canada Post, the National Film Board, the Canadian Broadcasting Corporation, etc.
Given the auditor general's recent final-quarter report indicating there is no evidence to prove the efficacy of regional development programs, the question must be asked of this committee and the government, why do you continue to defend the maintenance of these programs, such as Western Economic Diversification and ACOA? Is it simply because these are good old-fashioned pork-barrel projects in the regions, or is it some kind of ideological proclivity of the government? Why not just wrap these things down? Every business group in the country suggests it's time to do so.
Further reductions in foreign affairs...and we do think further ways can be meted out of the defence budget.
On social spending we are disappointed, to say the least, that the excellent recommendations Minister Axworthy made last year have been buried six feet under. In so doing, the government has neglected to deal with the single largest area of budgetary expenditures, transfers to persons and some of the transfers to provinces, opting instead for a surreptitious reduction in provincial transfers over time. We think the recommendations made by Minister Axworthy should be brought back to life, notwithstanding the regional politics that may exist in the government caucus and elsewhere.
Finally, we do believe a stimulative budget would include fundamental tax reform, including serious consideration of the adoption of some form of flat tax. With the American Congress likely to adopt such a tax system by January 1998, one just cringes at the thought of a total income tax burden in Washington state, say, of 18% or 19% in January 1998, versus a total marginal tax burden of 54.5% across the border in British Columbia. That is not sustainable. So we suggest that fundamental tax reform, including the reduction of marginal rates, become a central item on the government's fiscal agenda.
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Thank you, Mr. Chairman.
The Chair: Thanks, Mr. Kenney.
Mr. Genuis.
Mr. Mark L. Genuis (Founder and Executive Director, National Foundation for Family Research and Education): Good morning. I'm with the National Foundation for Family Research and Education recently based out of Calgary. We've just moved into Calgary.
The brief I would like to present is divided into four components. The first three will focus on the question asked and the fourth one...actually, we'll stick with the three and summarize later, in the discussion.
It is our intention to discuss these budgetary issues as they relate to Canadian families, because they are the cornerstone of our economy and the cornerstone of our country, sir. The National Foundation for Family Research and Education is a private charitable foundation with a goal of studying and supporting families.
Any financial recommendations we make or examine are based entirely on research that we've conducted on families. Any financial recommendations are implications of the data that has been gathered from the careful examination of people's lives. We're not coming from a self-interest, a political motivation or a particular agenda, sir. It's simply from research on families and family life within Canada as well as in other areas of the world. So from there, I'd like to begin.
The first question is: what should our deficit target be and how can it best be achieved? It appears that the deficit policies of Canadian governments over the past 30 years leave families in Canada in a precarious financial position. Increasing amounts of each tax dollar are being funnelled into servicing debts rather than providing for the social and economic stability of our society or the creation of an atmosphere of increased incentive and opportunity for present and future generations.
In fact, the Hon. Mr. Martin has noted that public debt charges will be increased by $12.7 billion between 1993 and 1997, to the point where we'll be paying $50.7 billion to service our debt in 1997. Beginning in the present fiscal year, of course, revenues will exceed actual program spending, but because of our enormous costs to service the debt, we'll remain in a deficit position, thereby furthering the negative fiscal spiral and pressure on families.
It's clear that our fiscal habits are placing a great burden on the taxpayers and families of Canada. The government now is simply paying for perhaps less than responsible decision-making by predecessors. We recommend and request this trend be reversed.
We'd recommend to the committee that the minister work diligently to fulfil the goal of deficit elimination. Furthermore, we recommend amendments to the Income Tax Act that give families a more realistic opportunity to provide for and care for themselves.
Mr. Blair suggested that cuts alone were not sufficient. We would agree entirely, and what we would like to present are perhaps some ways of going about changes that would put people in a position of opportunity.
In regard to the second question, how may budget measures should be used to create an environment for jobs, we think the government's concern for the creation of employment opportunity in Canada is commendable. There's clearly room within the budget to promote a very positive environment for job creation while concurrently providing families with increased economic opportunity with which they in turn can make their own choices.
I'll provide a summary of some background information very briefly and then discuss some possible avenues. The national foundation has identified and is concerned with a number of growing trends in social pathology, some of which have been mentioned, which have a detrimental impact on the economy and the ability to create jobs.
The following are some relevant trends that have a clear and negative impact in these areas as well as demonstrating great human costs. As long as these trends continue, Canadian society will continue to lose significant valuable economic resources in both lost employment and costs incurred in attempting to treat these types of disorders.
For example, if I may, there is the issue of youth violent crime in Canada. We've been talking and heard much about how crime is going down, but you don't ever hear about youth violent crime, about how it's increased 116% since 1986, and that it has double the rate of increase of adult violent crime. Drug-related offences are up 34% in youth between 1992 and 1994.
The rate of suicide in Canadian youth between the ages of 15 and 18 years, after we factor out population increase - and this comes from StatsCan - has gone up between 1992 and 1995 by 600%, over a 4-year period. That's a phenomenal increase in the suicide rate.
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But more alarming and more disturbing is the suicide rate in children 10 to 14 years. Again, after we factor in a population increase, between 1955 and 1992, we have a 1101% increase in suicide amongst 10- to 14-year-old children in this country.
Presently, the rate of clinical levels of emotional illness in our adolescent and young adult population is approximately 20%. If we're talking fiscally, people with tremendous emotional illnesses are much more likely to have difficulty producing on jobs. It's going to have an economic effect. It has a human cost also, all sorts of things, and that's at 20% now in our young population.
Canada's businesses now spend in excess of $12 billion a year on personal and stress leave. When we see these consistent trends in so many areas of our society, as researchers it behoves us to look at what causes these, because we are not exceedingly effective in dealing with these problems after they occur. So if we can prevent them, we'll be much further ahead.
To that accord, there has been some considerable research done worldwide in the area of concepts so basic as bonding, or attachment to parents in childhood. Recently we have conducted some research on this in an Alberta population, using some of the most comprehensive and recent statistical techniques available in the world, and they now allow us to look at causal processes. We no longer have to only discuss associations; we can discuss causes, and pathways of development.
We examined some new data, and to be brief, sir, the results of our information from the careful examination of people's lives have told us that insecure bonding to parents prior to the age of 10 years is a direct cause of clinical levels of emotional illness and behaviour problems, including youth crime. So this bond is one critical developmental variable in our lives.
We examined a number of childhood experiences that lead into a development of bonding. I won't get into them now, but if there are questions after I'd be more than happy to respond to them.
The Chair: Could you maybe come to your recommendations to us for the budget?
Mr. Genuis: I will, sir.
The Chair: Just very quickly, please.
Mr. Genuis: I will do that. I'd be happy to, if there are any questions, talk about how this comes about.
But the essential nature of this is that there is another piece of work done in what we call a ``meta-analysis'', which is a tremendous breakthrough beyond narrative reviews of literature. In this area, a meta-analysis was conducted throughout the world on the area of non-parental care, looking at the effects of non-parental care of more than 20 hours a week on children prior to the ages of five years old. The researchers combined all of the research from all over the world, every published document; they described what happens with non-parental care, how good is it, how bad is it, is it neutral, what happens.
What the researchers found from all this data, sir, is that regular non-parental care of more than 20 hours a week, prior to the age of five, is a significant risk in the development of insecure bonding to parents, emotional difficulties in childhood, and behaviourial problems in childhood. There are minor, but not significant, detrimental effects in the area of cognitive development.
And so on to the recommendations, and I can discuss that more if there are questions.
The federal government has allocated $1.5 billion for the development of 150,000 new day care or child care spaces in Canada. This plan, sir, according to all of the data internationally, will contribute to the negative cycle of child development, and that's our future in this country.
The Chair: Okay.
Mr. Genuis: What we recommend, very briefly -
The Chair: I understand. Don't go ahead with the child care program.
Mr. Genuis: Rather than just cut the child care program, we would recommend, in agreement with the motion on tax credits for families presented in caucus on March 30 by Mr. Szabo, to leave them more money in their own pockets, if you will, so that they could make choices, and not try to tell people how to live their lives, so that families will truly have a choice and would have increased economic opportunity to take care of themselves, independently of the government. We feel that then families will be able to make the best choices for themselves, sir. And this is again not our opinion, but this is based solidly -
The Chair: I understand. Thank you very much, Mr. Genuis.
Mr. Newell.
Mr. Eric Newell (Chairman, President and CEO, Syncrude Canada Ltd., and President, National Task Force on Oil Sands Strategies): Thank you, Mr. Chairman. My name is Eric Newell. I'm CEO of Syncrude Canada Limited and president of the Alberta Chamber of Resources. I'm from Fort McMurray, so I apologize for being a little late. I recognize my duty as the last speaker to be very brief, and I will stick to the three to five minutes, Mr. Chairman.
The Chair: If you do, I'm going to give you a prize.
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Mr. Newell: I'll try for that prize.
I want to thank you for asking me here to represent the National Task Force on Oil Sands Strategies. This certainly represents the asset side of Bob Blair's balance sheet analogy.
This task force represents many stakeholders. We had about three dozen companies, both levels of government, university and aboriginal groups and other public agencies on it. We thoroughly examined the opportunity represented by Canada's most extensive petroleum resource. We did make our findings public in May of this year.
Since that time, our task force members have been discussing the report's recommendations with the federal and Alberta governments and with suppliers of goods and services, municipalities and others who have an interest in both the opportunity and the thoughtful approaches needed to develop it.
I want to leave you with two preliminary thoughts on this matter before I move directly to the three questions.
The first is the oil sands opportunity is in the enviable position of being investment-ready. The reason for this is sixfold. The resource is known; it's larger than Saudi Arabia. The technology is proven. The development skills have been honed; we're a highly skilled workforce. We have an enviable record of environmental management. We have the interest of potential investors there. And our market is expanding. So point one is that the conditions are right.
The second point is one that many people have talked about, and that's job creation. I don't know of any other single private sector opportunity in Canada that can produce more jobs. Our study by Informetrica indicated that with our vision for the oil sands, there would be 44,000 jobs created within thirty years and these would be widely spread across Canada. In fact only 40% will be in Alberta. Ontario and Quebec will benefit greatly.
We think it would take an anticipated investment level of somewhere between $21 billion and $25 billion over the next thirty years, so it's very large. In the course of doing that, it would generate 1 million person-years of work, a positive trade balance for the country of $106 billion and an increase in the national GDP of 0.6%, and it certainly would enhance Canada's long-term energy security. Maybe of special importance to this committee is the fact that the potential is there for additional government revenues of $97 billion being generated over the next three decades.
We've recommended for both Canada and Alberta that a generic fiscal regime, that's the same tax and royalty regime for all of the players in the oil sands, be used to replace the present very ad hoc, individually negotiated arrangements, which don't allow for investor security at all.
This group will be relieved to know this regime contains no requests for grants, loans or loan guarantees. In fact it specifically recommends against them. If you have concerns about the cost to the tax system, you can also put those to rest. There is no cost to the federal government. There are only gains to be made.
All of this may sound too good to be true, but I can assure you it is. An independent analysis indicates the impact on the federal fiscal balance will be positive right from day one with the new investments under the proposed oil sands regime. What we're talking about over the next few years is about $3 billion worth of announced projects. These would all be up and going before 2000.
Now for the questions. On the deficit reduction target, I honestly believe it needs to be very aggressive and we need to seek a balanced budget within the next six to seven years. In other words, we're fairly supportive of the position and the pace the finance minister has outlined.
This will have to be achieved through a combination of things, certainly through government restructuring that takes into account some of the social issues we're talking about here, and similarly through program realignments and government revenue increases that come from economic growth and not tax increases. We're solidly behind those recommending no tax increases.
In answer to the second question on jobs and growth, a moment ago I presented you with such an opportunity of growth. Canadians are very ingenious. They have a lot of innovation. We have a highly skilled country and we're rich in natural resources, so let's create the environment to move those opportunities ahead.
Finally, on the third question, I would defer to my panel colleagues, except to say that the progress the government is making towards privatization and commercialization has been, for the most part, well received. That should continue. In other words, governments really need to define what is their core business and provide for that.
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In terms of devolution to other levels of government, I think more effort needs to be made in harmonizing the regulations and avoiding the duplication. I think there's a lot to be made on that level, rather than with outright cuts.
One example we live with all the time is the field of environmental regulations around approvals. This encompasses many jurisdictions, and it needs to be both effective and efficient. I think that can be done by improving federal-provincial processes to reach a better harmonization and on a quicker pace.
Thank you.
The Chair: Thank you, Mr. Newell. I regret you didn't do it in three minutes.
Can we take a five-minute break?
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The Chair: Okay. I think we're ready to go.
I've asked Mr. Blair, because I did cut him off and because his suggestions are quite unique, to elaborate briefly on his balance sheet approach as well as on the suggestion he made to this committee last year that a number of wealthy individuals and corporations who have benefited greatly from Canada in the past might be prepared to contribute to paying down the debt.
Mr. Blair.
Mr. Blair: Thank you, Chairman Peterson. Since I'll be referring to a table in answer to your request, if there is anyone who does not have a copy of this, there are many more copies in the room now. We ran out for a moment.
Chairman, may I start by quickly reading quickly three paragraphs, please. In case anyone wants to look at the context, they are on page 4, beginning at paragraph 5.
The effective way to assess and solve a problem of excessive size of debt is as a balance sheet problem. The information needed to approach liabilities is information about assets. The businesslike question is how to convert some assets into debt reduction, to reduce debt size to manageable levels. I'll refer again to paragraph 5 on page 5.
After appearing on a good dozen national television and national radio shows featuring this discussion, which all began before your committee a year ago, I found over the year that the single remark that touches off the quickest recognition is that we have inadvertently managed to park too much of the debt in the public accounts and too much of the wealth in the private accounts.
On page 9, paragraph 5, you see that an effect of reduction of debt should be like paying down excessive debt of a business out of other assets, a moment of setback then return in full out of improved performance. It's businesslike. And what a nation we would have afterward.
I now refer to page 8, to a presentation of factual data that I believe is very relevant to this because here we begin to discuss what those assets are. I've made some points down the left-hand column and supported them with data down the right-hand column, and the data is explained elsewhere in this paper.
Mr. Chairman, I think these are the interesting things, the most interesting things to be talking about in these days. What is going on? At first we're all part of North America, and in North America, while public debt has increased, so has private wealth increased greatly. For the technically inclined, on this page the terms ``wealth'' and ``net worth'' are interchangeable. Where I've used the expression ``wealth'' from other people's language, it means ``net worth'', net of all liabilities. In the United States, net worth has been increasing.
Interestingly, the net worth has been increasing almost totally for the top quintile, the top 20% of households. Even more interesting in this survey, in the period of survey, the only component of society measured in terms of net worth whose position has improved has been the component which is the top one-half of 1% of United States households. The remaining 99.5% of U.S. households in this particular period, 1983-89 - I think that's quite representative - were either stagnant or lost ground in terms of their household net worth. So one of the problems in the world, for the philosophically inclined, is that we are experiencing a remarkable and excessive concentration of wealth.
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Another point to these things - and this is information that Parliament should have, in my view - is that the average Canadian household's net worth is about 20% higher than the average American household's net worth when both are measured in Canadian dollars. That's a point of fact.
The Chair: If I could just interrupt, Mr. Blair, from my reading of your report, you're basically saying that because of this great accumulation of wealth in the private sector, you're not recommending that we take immediate steps for the next budget, but you're saying we have to study it and we should have a conference to do so.
Mr. Blair: I say that in my recommendation on page 10. All this page does, Mr. Chairman, is show that there is a capacity, that this public debt is a big problem. But public debt in relation to private net worth in Canada is not.... It's not hard to say that $500 billion is a huge number, but according to the best study that exists, it compares to some $6,200 billion of net worth of households in Canada, of which some $2,000 billion is liquid.
There is our answer, if we can find out how some of us will volunteer. Lots of us have put our thoughts into this. I really think this is the direct way to get at the debt problem. Trying to cut the seniors any further is not.
The Chair: I want to thank you for a very innovative approach to this issue.
[Translation]
We will now begin the question period.
[English]
For those who don't speak French, you might want to use your little transmission sets for simultaneous translation.
[Translation]
Before giving the floor to Mr. Crête, I would like to introduce the members at the other end of the table.
[English]
Mr. Herb Grubel from British Columbia; Messrs. Crête and Brien from the province of Quebec;Mr. Brent St. Denis from northern Ontario; and Ron Fewchuk and David Walker from Manitoba.
[Translation]
Mr. Crête, you have the floor.
Mr. Crête (Kamouraska - Rivière-du-Loup): During the tour that we're on this week, one thing has become even clearer than before: there's a certain vision underlies the way of seeing things and all the suggestions that are made to this committee. Where do we want to go? Where do we want Canada to head for?
Let me give you a few examples before putting my first question. At a time when we're told that Minister Axworthy should go much further than he has done in the unemployment insurance reform package and that he seems to have set his reform aside, we read this morning in the Globe and Mail that the reform will be tabled Friday morning.
This prompted such a strong reaction in the Maritimes that a meeting of all the Maritimes Premiers with Mr. Chrétien and Mr. Tobin was called. The impact of this reform will be very significant. I say this to indicate that in the scale of things in Canada, some carry much more weight than others.
There's something else that is striking in the presentations we hear. It's the problem of our architecture. Today, in this country, a proportion of the population, namely 49%, thinks that things are going so badly that they feel like picking up and leaving for another country. That's another significant indicator of the fact that something fundamental must be changed.
Similarly, do you know that in Canada, there are at least 300 ministers to handle the affairs of30 million people? In many countries with populations of 50, 60 and even 70 million people, you will not find 300 ministers to manage things. The proportion is not the same. It's completely excessive.
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I would like to raise a last point. What is important for citizens is the transparency of the system. The diversity of opinions that we hear shows very clearly that everyone sees the system through a different prism and that we can draw very different conclusions because we are incapable of truly identifying who is responsible for what.
The Standing Committee on Finance is one of the tools that could be used to achieve this vision that we could have, but right now, I have the feeling that we don't have a very clear vision.
Politicians are responsible for seeing to it that there is a vision, be it in one or two countries, and that this vision is abundantly clear to all.
Now that each one of us has said what others should be doing to improve the situation, I would like to hear those who wish to do so tell me that they would be prepared to participate in a sort of a national forum where the condition for sitting down at the table would be to state what effort one is prepared to make. What effort would you be prepared to make as representatives of a group or a certain community?
Let me give you an example. A workers' association could say that it would agree to use union dues to pay part of the wages of house construction workers for one, two or three years. With regard to the employers, it would be something else.
I'm putting this question to you as participants. Can you give us examples? This morning, the Conference of Defence Associations told us that we mustn't touch anything at all for 15 years. Others also gave us examples. However, that represents the permanent status quo and does not solve anything.
First of all, would each one of you be prepared to sit down at a national forum? Secondly, what proposal would you be prepared to put on the table, without committing your organization, for the purposes of debate? I'd be very interested to see whether there is anyone here who'd be prepared to make that kind of suggestion.
Mrs. Bedard: I'd really like to do that. We already started in Alberta, as I said a bit earlier. I don't know whether that's the idea you're referring to. I'm trying to speak French and I hope you'll forgive me because my French is not perfect.
Our association already started doing something with regard to retirement planning. We try to set up courses for workers over 30 years of age. We would like these courses to be given to workers throughout Canada, including Quebec, even if our policies are not always in agreement.
You can't take someone who's 50 years old and put him next to someone who's 22 and ask them both to learn the same thing.
We would like to do something like that. In my opinion, it's a very good idea.
Mr. Crête: Are there any other suggestions?
Mr. Blair: I would like to be able to speak both languages. My answer would be yes. Yes, it's a good idea.
The Chairman: Congratulations. You speak French very well. Mr. Grubel.
[English]
Mr. Grubel (Capilano - Howe Sound): Thank you, Mr. Chairman.
I have the honour and privilege of representing the Reform Party on this committee. I would like to tell you that as an individual, as well as for my party and my leader, I am in full agreement with all the people who come here and say the deficit should not be eliminated on the backs of those most vulnerable.
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I must tell you that I was in great distress when I heard a woman saying three or four times in the course of her representation in Winnipeg that in Canada there are 1.5 million starving children. I heard one witness saying - and I'm sorry I don't remember the name - that the United Nations has condemned Canada for not taking care of its children.
I heard Jake say that in Calgary alone there are 45,000 poor children. You didn't say that they were starving or that they were hungry. Nevertheless, this is a number we hear all the time, and it's extremely distressing.
But I must also tell you that I don't believe it. I just wonder whether you could tell me how you define and measure this, how you are able to look us in the eyes and tell us that there are 45,000 poor children right here in Canada. How do you define it?
I want to tell you that I travelled around the world and on all continents I have seen poverty. I have seen starving children. I've yet to see any in Canada. That's not to say there aren't any; don't misunderstand me. It's not to say there aren't poor people in Canada. I just wish to know for the record how the lobby group for the underprivileged discovers and defines that we have 1.5 million starving children in Canada.
Mr. Kuiken: I'd be pleased to respond, Mr. Chairman.
First of all, I view the figures generated by the federal government through Statistics Canada. Secondly, I would like to invite the committee member to come with me to the Calgary Food Bank at lunchtime or tomorrow morning to one of the programs in Calgary called FANS, or Food and Nutrition in Schools. These are children who come to school without breakfast. I would like you to come with me.
Mr. Grubel: Thank you very much.
How did you get 45,000?
Mr. Kuiken: I used Statistics Canada.
Mr. Grubel: How does Statistics Canada define poverty?
Professor Gayle James (Secretary, Alberta Association of Social Workers): Mr. Chair, may I answer?
The Chair: Go ahead.
Prof. James: Statistics Canada defines poverty with the poverty lines being an artificial construct in a certain sense, in that there are families and people in the country who are spending roughly 58% of their incomes on the very basic necessities of food, shelter and clothing. That is one way; it's the bottom quintile, if you will, of families and children in Canada. Secondly, somewhat less than 50% of that poverty line is where our welfare payments exist to people. You may know that in this province we've recently removed approximately 50,000 families from public assistance.
I too have travelled around the world. I've been president of my profession internationally and I've seen abject poverty in many places. I certainly don't advocate it. By the same token, we have to accept poverty as relative. We talked about bonding earlier, and we talked about the kind of relationship and the kind of damage done to children who go without.
I would add, Mr. Chair, that you are in the province where we have the biggest gap between men's and women's wages. We have a child poverty rate second only to Newfoundland, and those figures were taken prior to our turfing people off assistance. We have one of the two most mobile populations. We have a greater percentage of women in the labour force. We have the highest divorce rate in the country and the highest propensity for substance abuse. So we care particularly about what happens in programs that are now going to be modified severely through the Canada Assistance Plan.
Mr. Grubel: Thank you very much. I appreciate all these pathologies of our society and I wish they weren't there. I'm looking for answers on how to fix them.
However, I do not find it particularly useful to go around this country because your cause, the cause I would like to associate with, is losing credibility when it uses without any qualifications the numbers provided by Statistics Canada.
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For those of you who don't know, in any city over 500,000, a family of four earning less than $30,017 per year is considered to be poor. We are told by your representatives that children in a family in Canada making $30,000 a year are starving. I do not believe that serves your cause. I understand there are people and children who are inadequately taken care of when single mothers who are out of work are living on the kind of minimum welfare some of the provinces provide.
I don't believe it is the responsibility of far-away Ottawa to fix that. Far-away Ottawa, I believe, does not have the understanding or appreciation of all the needs and trade-offs that need to be made right here in Alberta, right there in Newfoundland, or right on Vancouver Island. I do not understand by what moral authority a group of elite individuals has the right to go to Ottawa and say, you dictate what ought to be the welfare program in Calgary.
Mr. Kuiken: You suggested there ought to be trade-offs, and I assume there would be. I would like to ask whether you would be prepared to trade off tax expenditures for entertainment and meals for a special fund to help hungry children.
Mr. Grubel: Just wait, and you will see the flat tax proposal. There will be no more tax expenditures. I think we are all moving in this direction. I would like to ask -
Mr. Kuiken: So the Reform Party supports the elimination of tax expenditures?
Mr. Grubel: Exactly. There would be no more RRSP deductions, or anything of that sort.
I urge you, when you come next year, to have an alternative number to 45,000. It's somewhat more solid than what I heard. It includes families of four that make $30,000, right here in Calgary.
Mr. Kuiken: And I assume you'll accept my invitation to come with me tomorrow morning.
Mr. Grubel: It's not a question. I said it two or three times. This is not to deny there are poor people and they should be taken care of. It's a blemish on our society if we don't. But I challenge you to make your case stronger, because the vast majority of people out there are voting for all those right-wing governments by specifying it is not 45,000. I want to know the true number.
Mr. Kuiken: I can assure you this voter doesn't.
Mr. Grubel: Thank you.
The Chair: Thanks, Mr. Grubel. With all due respect, I think all of us have visited food banks in our ridings. We can't be with you tomorrow morning because we're leaving tonight, as soon as we get out of here, to go to Vancouver.
Mr. Walker, please.
Mr. Walker (Winnipeg North Centre): Thank you very much, Mr. Chairman, and the many witnesses we have here today.
We have come to a critical point in the budget process when we listen around the room. People gloss over differences, which we leave and then have to deal with. It's most helpful for us if we put on the table what we're hearing, and then get back. If my following appears to be in any way aggressive, I don't mean it to be aggressive. I mean to help you come to grips with an issue we have to come to grips with.
We heard to start with about the target for budget reduction. Somebody said in passing he or she thought 3% was a good target. The Chamber of Commerce and Jason both said they thought we should vote for 2%, 1%, and then a balanced budget. The difference between 3%, 2%, 1% and 0% is very rough. I'm going to give you a rough figure of $8 billion in cuts. So each percentage point in your mind represents about $8 billion in cuts.
Jason quite rightly points out that in some areas federal government expenditures continue to rise. They rise, for the point of our conversation, in two major areas. These include what we transfer to the provinces through equalization, which doesn't affect Alberta but affects seven other provinces, or CAP and EPF in historical terms, which goes right back to what Mr. Kuiken and his two associates were talking about.
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It also affects old age security. If you project over the next 10 years, and I don't mean to be aggressive, it goes from $20 billion to $26 billion. So there will be increased expenditures along those lines.
Now, if you look at -
Mr. Grubel: [Inaudible - Editor]
Mr. Walker: Herb, I rarely interrupt you -
Mr. Grubel: I just wanted to help you.
Mr. Walker: It's very hard for two former academics to not interrupt each other.
The way we look at it in the Department of Finance - and I'm speaking as parliamentary secretary here - is that we try to bring our own house under control. Looking at our departmental expenditures, we spent about $40 billion and we've taken several billion dollars out. So when we finish the round announced last year by the Minister of Finance next year, we'll end up with roughly $40 billion in expenditures.
Mr. Blakely argues that defence spending is not enough, but defence expenditures in the envelope we're talking about, $40 billion, now represents 23% of the direct expenditures of the Government of Canada. For simplicity's sake, one in every four dollars that we spent as a government in direct programming was in defence.
If the government continues its strategy on the cash component of the social transfer, by the time we finish this process and make our recommendations we will have consumed two years. We will have the issue of transferring less money to social and health programs than to the military.
There is the question of reducing its expenditures by $8 billion a year, which people have recommended. We have adjacent direct requests and other peoples' indirect requests that the tax bill is too high.
We have a military issue, and to quote Mr. Blakely from page 3, ``Canada's military establishment is in disarray''.
It doesn't matter what figures you want to use. Mr. Kuiken's figures are as good as anybody's, that 45,000 children are starving or in desperate need. My own constituency of Winnipeg is considered to be the child poverty capital.
As I said here, what do you do? How do you sort this out? We don't have you here at a round table to blur over what $8 billion means, or to blur over that the military might be in disarray. But we have to put these things on the table, so we're honest with each other about what it's all about. So I throw this out not to any particular person, but to just get a response, because we have come to this intersection.
Are we a country that spends more on the military than on social policies? Are we a country that says it's better to be generous today and give the middle class a tax break because it's under such tremendous pressure, or do we just turn around and say, let's stop everything; let's deal with child poverty and start over again?
That's the sort of thinking we have to go through, because the report on the chairmanship of Mr. Peterson becomes a benchmark people begin to see. When we came to this point in history, what did we decide to do? So I throw this open.
The Chair: Mr. Henry.
Colonel (Ret.) Sean A. Henry (Senior Defence Analyst, Conference of Defence Associations): If I may respond on behalf of the chairman, I think that figure of 23% is perhaps a bit misleading. I think what you are talking about is the government's operating expenditures, which is discretionary spending. It is quite a small percentage of the overall total government expenditures.
If you look at it the other way, defence barely makes up 6% of all of the government's budget now. Within the discretionary part or the operating expenses, perhaps your figure is correct, but it is misleading to the extent it doesn't include the entire government budget, of which defence comprises 6%, and it is falling.
Mr. Walker: We have a disagreement, then, in terms of what we really control.
Leaving the side point to deal with transfers to individuals, transfers to the provinces, UI and debt reduction, the core figure of the government in Canada is now only $40 billion, which represents 5% of our GNP. Of that, $10 billion is assigned to the military. It's a little more than that, but call it that for now. From our point of view, that's how we begin to deal with this issue.
What are we doing in Ottawa versus what are we doing in the provinces and what are we doing to individuals?
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Col Henry: In order to cut off the larger figures, you do have to change the legislation, because the discretionary spending is shrinking. Discretionary spending is now below the annual deficit. In other words, the annual deficit is heading down through 30%. The discretionary spending is already below 30%. So even if you got rid of all the discretionary spending, you still would not be addressing the deficit problem. What I think we need to look at is changing the legislation so that you can get at these larger expenditures.
Mr. Kenney: Mr. Walker obviously raises a very difficult predicament that you all find yourselves in every day of the week. I know this pressure increases on you every year as you approach budget season. I think there is some value in these kinds of round tables. They force every group representing a different perspective to understand the difficult trade-offs you have to make.
Let me just make two comments. I think Mr. Walker's problem that he expresses is predicated on what I would call a sort of zero-sum mentality.
One solution is that we can all agree that we must pursue economic growth and concomitant revenue growth. The question is: how do we get that economic and job growth, and the consequent revenue growth? Do we get it by spending more on borrowed money and infrastructure programs? Do we get it by continuing to spend more on social transfers? Or do we get it by promoting investment in the private economy and consumption on the part of consumers by increasing disposable income?
In other words, my proposition, which is that we provide people with tax relief, is not simply a political scheme; I honestly believe that it can result in economic growth and, consequently, revenue growth, which can then help all the people representing the various interests around this table to protect those interests.
Second, I would point to what I tried to suggest in my presentation, which is that we ought to be trying things we haven't tried before. One thing that we have tried before, again, again and again, is to increase the tax burden. Apparently it hasn't worked, as those charts demonstrated. As revenues have increased, that's been outstripped by spending growth and an increase in the debt.
With respect, we have to find the right mix to get economic growth. The minister agrees with that. People right across the political spectrum agree on that point. I submit that we're not going to get economic growth by further pressuring taxpayers and continuing to diminish investment capital and disposable income.
The Chair: Less taxes mean more taxes. Is what you're saying.
Is there anybody else who wants to respond? Yes, Mr. Flanagan.
Prof. Flanagan: Mr. Walker raises some interesting issues. He's again referring to dealing with the deficit through cuts.
I think the issue of wealth has to be addressed in this country. The United Nations places us first as the most wealthy nation in the world. The World Bank places us as the second-wealthiest country in the world. Our own Statistics Canada places us with enormous wealth. Mr. Blair has tabled some data here from an independent study that shows us as extremely wealthy. Our average wealth is 10% higher than that of the United States, which is considered a very wealthy nation.
I think also that wealth has to be tied with the policies that assisted in creating it. The government debt has been built up over a long time, over a generation. And those policies have obviously contributed to that wealth generation.
I don't want the wealth to be lost. We're very wealthy as a country. We've got a problem in our public sector that's burdening us and raising all these terrible questions as to what we should cut. Do we cut defence and become a defenceless country? Do we cut our social programs and leave people in the street?
We've got to seriously address wealth and income distribution in this country, for one thing. Then we have to deal with the issue of the public-private balance.
In essence, as an economist, Mr. Kenney is essentially saying that a dollar in somebody's pocket is going to generate more growth than a publicly spent dollar.
I can't agree with that. I think private dollars in this country are leaving this country; they're not promoting growth in this country. They benefit a select group, who get richer by their independent decisions, rather than the majority in this country.
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I want to see some figures on that elasticity with respect to that dollar change. If it's there, I'm all for it if it generates the growth. I just don't believe it in this case. Consumer demand is not there on the issues. The wealthy, when they get released taxes, are not the spenders. They're not generating the jobs.
The consumer goods currently are being produced with less and less labour. We've had a tremendous technological revolution here that is meeting the goods they're cranking out of there from capital, essentially. There's very little labour, so that's not going to create jobs.
I don't want to be a Luddite and suggest the technology shouldn't be there. Let's reap the benefits of that technology but then, more importantly, the income distribution again becomes an issue.
Thank you.
The Chair: Thanks, Mr. Flanagan.
Mr. Landry.
Mr. Landry: The point I had tried to make earlier was that there's a great deal of overlap between the orders of government that leads to expenditures that maybe aren't all that helpful. We see agriculture departments at both levels, as is the case with forestry, fisheries, petroleum, whatever. It could be that industry is being helped to death. What we have is an extensive level of involvement in industry activities when industry in Canada has proven itself quite capable now of competing internationally, of going out to find markets, and of looking after itself.
I would just suggest to you that if you're looking for priorities in where funds should go, and if you're looking at the expenditures of some of the economic types of departments, there are $6 billion spent on those economic departments federally that you might want to look at.
The Chair: Mr. Walker, please.
Mr. Walker: Mr. Landry, I let your point go when you went over it the first time, but it's the very point I'd like to deal with. You said there's duplication. Now, you're sitting here in Calgary. Are you saying to us that there are certain areas the provincial government should be out of, and which areas should they be out of?
Mr. Landry: I said that between the two orders of government, there has to be a decision made on who should be involved in some areas. Who is the one that should carry that mantle? Is it the province or is it the federal government? I'm not here at this point to say which one it should be. Right now we have both of them involved, which certainly is a waste of the public funds.
Mr. Walker: So, for example, you're not saying Alberta should give the collection of corporate taxes over to Ottawa.
Mr. Landry: We have said that, yes.
Mr. Walker: Yes?
Mr. Landry: We have been on record as saying that it's a quite simple system to turn it back to the federal government. The province would save some $8 million to $9 million.
Mr. Walker: Are there any other comments on my opening remarks? Yes, sir.
The Chair: Mr. Huddlestone.
Mr. Huddlestone: Do I have three minutes?
The Chair: It's such an important question that you can have 26 minutes.
Mr. Huddlestone: There are two things I would like to address. One was your comment about reducing the debt. The Calgary Chamber of Commerce certainly is a great supporter of holding the line, of reducing the debt. Along with Mr. Kenney, who I don't always agree with, we think it should be done aggressively. It's not that we don't like balance - I thought the word Mr. Blair used this morning was a very apropos word - in the financial system. Whether it's unemployment insurance, or health care, or education, we care as much about social policy as anyone else. But you have to have the dollars there to be able to improve those systems. It's fine to talk about balance, but you want to make sure you don't lose sight of the ball. The ball is the fact that we have to get our financial house in order.
In many cases, this is unfortunately driven by people outside of this country who are looking at us and our debt and are saying it's too high, whether we like it or not. They look at that, and whether or not they invest, which is what creates the wealth that we have in many cases - and Syncrude probably is a great case - is based on that look at the conditions in the country of investment. That's why we're saying we're all in favour of the debt reduction targets of Mr. Martin, but we think there's a stretch to be put in there, and the stretch we are suggesting is one that's possibly attainable.
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The other aspect I'd like to mention quickly is that the Calgary Chamber really represents a large number of small businesses. They need policies from your government, in the budget and elsewhere, that help them in running their businesses. In this country, they are the generators of most of the jobs. We were just talking about jobs a few minutes ago. Job creation is coming from small business. That's not to say that there aren't jobs at Syncrude or at other large developments, but if you look across the country it's small business that brings in all the jobs.
For instance, here in Calgary we have a lot of people who are working like mad to build their businesses and who are hiring people. We look to you people to bring in policies to support business and to get rid of regulatory situations where people are spending an inordinate amount of time just dealing with government requirements, whether it's the goods and services tax or other regulations, environmental or whatever. Some sense has to be brought to it.
The Chair: Thanks, Mr. Huddlestone.
To close this, we'll hear from Mr. Newell, please.
Mr. Newell: Thank you.
First, I think it has to be a two-pronged approach. That's why we come down on the side of a deficit reduction with a 3% target. That's probably all we can really manage and it's kept things going in the right direction. I have to beat the other side of the equation. We have to create the environment to create the wealth generation that gets the jobs going too.
Canada is rich in a number of areas. I like to think that our first advantage is our people. We have a very highly skilled and motivated workforce that we dare not lose. Second, we do have a lot of strengths in technology. Third, we're blessed with an abundance of natural resources. What we really need to do in this country is a lot more of that value-added resource development. In other words, let's stop shipping the logs and start shipping the lumber. That will create the highly skilled manufacturing jobs.
I'm not trying to get into an argument with Ray, but as far as big businesses like Syncrude go, one of the big benefits of us is that we spin off a lot of small businesses. Last year alone we had contracts with 2,600 small businesses and enterprises across this country. That's just one company, Syncrude, and that's generated out of our business. That's right. That's where the growth is coming from.
I'd like to pick up on the theme that came out earlier from one of the speakers down here. I think we need to get a lot more community-based actions going. I don't have a lot of numbers to throw at you, but let me give you one example of what we did in Fort McMurray. We knew the cuts were coming up there, so we got a stakeholders group together. The stakeholders there were two school boards, the City of Fort McMurray, all the improvement district around there, the hospital, the health authority, the college and the two big oil sands plants.
It took us two years. It was very threatening for people. We looked at all of the different models for running a city to try to see if we couldn't come up with a more effective way of delivering the services so we didn't cut the quality of life. That's what we were all after. Let's be honest. I have kids. Sure, I'm a capitalist, but I have kids.
Some hon. members: Oh, oh!
Mr. Newell: We did that and we looked at all the ways up to and including one board to run everything.
Now, that was too much for people and we didn't get maybe as far as some of us thought. If you took just those administrative groups in those communities and added up their budgets.... I know it's only a small town of 35,000 people, but it was $160 million. We identified $40 million that we could attack. We cut and we found $8 million just like that. We've been able to solve those things.
But more than that, what came out of it was trust. People knocked down the stove-pipes they had, stopped throwing rocks at each other and started working together. Out of that, we were able to amalgamate all of the outlying regions. Now we have the Regional Municipality of Wood Buffalo. Geographically, it's the largest municipality in North America. We went from three governments to one government. The mayor - he's the youngest mayor in Canada - who chaired this was re-elected with a 92% majority.
So I think there is a lot of potential. We have to stop throwing rocks at each other and start working together. I do a lot in the area of business education and partnerships. I have four very senior people who report directly to me, and all they are doing right now is going out into communities in Alberta and setting up business education councils and creating co-op apprenticeship positions, all of this work training. If you do that, you get the private sector and the communities in there to share in the cost of the thing. And you have to get us all thinking that it's an investment in our future.
The Chair: That's a great message, Mr. Newell.
Mr. Blair, I was going to turn to Mr. St. Denis, but we'll give you a chance to come back on any of these that you want.
Thank you, Mr. Walker.
Mr. St. Denis.
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Mr. St. Denis (Algoma): Thank you, Mr. Chairman.
It's a treat to be back in Calgary, even if it's just for 24 hours. I'd just say for the record, though I'm sure most of you know, that the Prime Minister was elected leader of our party in Calgary back in 1990, so this is a special place for the folks on this side of the table anyway.
The Chair: And we really got a lot of Liberals elected out here.
Some hon. members: Oh, oh!
Mr. St. Denis: You would have to bring us back to reality.
Before I come to my question, I would like to set the record straight, with the greatest respect to my friend Herb Grubel. I think I speak for the folks on this side of the table when I say we don't accept the caloric intake definition of poverty. I don't think in a society like ours it's acceptable that we can leave anybody behind.
Ms James, you mentioned it is relative. We can debate the relativity of it, but it has to be relative. We must all progress together, because if we do leave a segment of our society behind by defining poverty in absolute terms, poverty here and poverty in India, we don't advance as a country. I wanted to let you know that even though we have respect for each other, we don't agree on that particular point.
I'd like to get feedback from a few of you on the issue of national standards. We try to ask this question at least once at each stop. Now that we're in Alberta I think it's especially relevant. We tend to hear from provincial premiers on the importance of the federal government giving away powers to the provinces. I think the view must be that powers transferred from the federal government to the provinces must be in the best interest of all Canadians.
Notwithstanding the opinions of political leaders on these things, what is your sense of what the people want in terms of national standards, be they in education, be they the continuation of health standards, be they social standards, environmental standards and do on? Do the people want the federal government to be there, not meddling in the day-to-day affairs as these programs are delivered, but making sure it's still a Canada that we have when it comes to ``from sea to sea to sea''?
Prof. James: I'll take a stab at it. At least in the two or three sectors in which I operate, which are largely the university, the social work community and education in the more general non-advanced education sense, there's a general belief that it's our social programs that have tied the country together. As those have become unravelled and have provided unequal benefits to Canadians through differential standards, we've come unravelled as Canadians. That has a great deal to do with our concept of national unity.
In short, unless we preserve those programs and preserve the standard of living, education, health and justice in this country below which no Canadian can fall, we are all in very deep trouble. If one carries devolution to its somewhat illogical conclusion, we'll have a series of Balkan states. That worries at least the sector we come from considerably. Others might have things they want to add.
We want the same kinds of standards, for example, in the CHST as we have in the Canada Health Act. We want more of a standard for welfare payments than residency requirements.
None of us who grew up in the prairies or had our families grow up here wish to relive the 1930s.
Mr. Kuiken: To add to that, one of the specific standards that should clearly be added to the social component of the Canada health and social transfer is an appeal mechanism. You're aware that under the Canada Assistance Plan everyone was guaranteed a right of appeal. Under the Canada health and social transfer that's not the case. Someone can be denied assistance for whatever reason and have no recourse, and that just doesn't seem reasonable as a standard.
The Chair: Thanks.
Mr. Pendleton, please.
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Mr. Pendleton: I'd like to go back to the community base, which I believe I represent in part anyway, given that we have business and the people who perhaps need the help the most being mixed together in the group.
One of the things I hear that I'd like to pass on, which you've heard before, is the small business person is still crying for more simplification of government requirements. That is moving in the right direction, but we're still not there in terms of gathering revenue from business.
There's another point I'd like to comment on that I've heard about. I perhaps haven't looked at it closely enough to know what the answers are, but I've heard more and more people saying one of the things on the community level that's extremely important in holding this whole equation together is the volunteer resource.
I move into this very cautiously, because I don't pretend to understand it. I've certainly been seeing it in the last year I've been involved in this community. It's a huge resource. It seems it's under-recognized. There's value there, and it seems something could be done to recognize it. I won't go as far as to say we should reward it.
The Chair: Thanks, Mr. Pendleton.
Ms Bedard.
Ms Bedard: In answer to the question as to whether there should be federal standards, our association and certainly I would support what Gayle James has said. In the very basic needs of our population, not only what ties us together but what allows us to survive as Canadians, we need to have federal standards.
When I prepared this small presentation, I depended a lot on my directors and other members of my associations. I will quote what one of them wrote to me regarding the budget deficit:
- Reduce and eliminate duplication of government services, but try to get away from the
provision of services by ten individual fiefdoms rather than the federal government.
The Chair: Thanks.
Mr. Flanagan, please.
Prof. Flanagan: I just want to say I support the notions of community-based and national standards. Those are tricky ones to develop, but that's really the crux of the matter here. We want national standards, and we've given a number of specific recommendations within the paper in order to achieve national standards that support and abet individuals in their communities.
I hear the small business issues from different speakers here. A number pertain to encouraging and promoting small business as a means of employment and to self-employment initiatives, using, for example, our Bank Act to encourage loans to small businesses, which I believe is going on, and also to encourage people in their individual training for jobs they know exist in the community.
We need all these kinds of things, but established at the national level. I would reiterate that the proposal for a negative income tax is to create a national standard on some minimum-income basis, given that the ten fiefdoms and more have created all sorts of disparities across this nation.
It's a very cost-effective way of administering a whole range currently administered in the federal government by major bureaucracies. I would hope the committee would have a look at those specific proposals.
The Chair: Thanks, Mr. Flanagan.
Last is Mr. Blair.
Mr. Blair: It occurs to me that Mr. Newell's community approach and Mr. St. Denis' national base....
I'd recommend to you a future consideration of the way the Turtleford Chamber of Commerce in Saskatchewan looks at this situation, with their proposal that on average $10 a day by Canadians for one year is equivalent to the entire foreign-held national public debt of Canada, and that it's time we took some direct action and took care of this situation.
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This line of thought that began in a very small community in northwestern Saskatchewan has, to my knowledge, now moved out past Lloydminster and is headed for Fort McMurray. Some of us have joined the Turtleford Chamber of Commerce, and I think these fellows are closer to making sense than a lot of high-finance people.
Here we're talking about what has been described by chief executive officers of banks and other eminent people as an absolute financial crisis in Canada. Our dependency on foreign capital has been raised here time and again. This is the kind of direct reference that I just take the opportunity to make.
I could support just about everybody around this table. Actually, I even agree with Jason that we can't do it out of revenues. I agree we cannot correct the public finance problem out of revenues; we cannot correct it out of cutting those who already have blessed little left. A direct citizen approach to our public finance problem is becoming a national imperative, if you can help pull us together.
I know we're supposed to be talking about next year's budget, but another way of looking at it is that these minutes are the only minutes we have in a year to speak to Parliament and the Department of Finance. This is it. This is wonderful. It's an opportunity for citizens, some of whom have put a lot work into their preparation for today. If you put hourly chargeable rates on some of the advice you're getting today, this is a very valuable meeting, I expect.
Thank you.
The Chair: Thanks, Bob.
Just very briefly, Mr. St. Denis. Then I have one more final question from Mr. Grubel and then we'll wrap up.
Mr. St. Denis: I have a comment for Mr. Kuiken. I believe the provinces can create those appeal mechanisms.
Mr. Kuiken: I appreciate that. My point was that it be required by federal standard. It's not under the Canada health and social transfer, and it ought to be.
Mr. St. Denis: Fair enough.
The Chair: Thanks.
Mr. Blakely.
Col Blakely: I just want to make the point that spending on defence for the current fiscal year is 6.7% of the total federal expenditures, and it could well be headed downward. To elaborate on Colonel Henry's previous point, if you would refer in your deliberations to charts 4, 5 and 7 of our submission, that will help to explain it.
Finally, we're not here to speak against social programs or to say that defence should be carried or expanded on the backs of anyone. What we're doing is asking you to keep it in context and to ensure that Canada can play a reasonable and responsible part in international affairs so that we can maintain our credibility for a lot of other reasons. We can't expect to get all the benefits of international trade if we're not prepared to accept our share of responsibility, and it's going to cost some money.
The Chair: Thanks, Mr. Blakely.
Mr. Grubel.
Mr. Grubel: I have just some quick comments, which I'm sure will elicit some responses. One of them is for Mr. Blair.
Mr. Blair, we've had witnesses who were saying that the problem is not that the foreigners hold the debt; the problem is that in this free society of ours everybody can protect their own wealth whichever way they want to. The big problem is that if there is a lack of confidence in the ability of Canada to service its debt, it's Canadians who are taking their money abroad. Are you recommending that perhaps we should stop that?
I would like to ask people whether we had a nation in the 19th century, before the 1930s in Canada, before we had national standards. Do you believe there is a nation in the United States that does not have national standards?
Finally, for Mr. Kenney and Mr. Walker, I have a quick point. We have heard expert witnesses here who have said that if they had a government that incisively and persuasively announced a program to eliminate the deficit within a couple of years, we would have a tremendous increase in confidence in the future by both Canadians and foreigners.
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You know that this recovery we've had has been driven by exports. Canadians have not been spending because they are worried about the future. They hear all these horror stories that are going around that this country is going bankrupt and that every few years we have to cut spending even more.
The Chair: Would you stop spreading those rumours, Herb?
Voices: Oh, oh!
Mr. Grubel: They're worried, and rightly so. The point is, as Jason mentioned, we should get together and stop throwing stones at each other. We can say that we all know we're in this trouble so let's get it over with. We would, in fact, get a quick recovery, taxes would increase, and we would get out of this hole.
The Chair: Thanks, Herb.
You've got one sentence, Bob Blair, that's all. I can see you doing this to us, though.
Mr. Blair: I think the serious answer is that I do not propose a curtailment of the uses of capital, but I do think you could seriously consider stopping the giving of charitable deduction status to organizations in Canada that send their people out to promote the removal of capital from Canada.
I put at the head of that list, for example, the Fraser Institute.
Thank you.
The Chair: Bravo. Now we're getting down to some nitty-gritty and specifics. Can we have a vote on that? All those in favour? Agreed.
Mr. Grubel: I happen to know the Fraser Institute. Where did they recommend to people that they should send their money abroad?
Mr. Blair: It was at the Westin Hotel in Calgary with an audience of about 1,000 to which I was invited the other evening.
The Chair: Okay. Thank you very much, Mr. Grubel.
You each have thirty seconds to summarize. I will keep strict count. It will cost you a dollar, which will go in my pocket, for every second you want to go over, so please be lengthy.
Voices: Oh, oh!
The Chair: Mr. Blakely.
Col Blakely: We're asking that in your deliberations you preserve the integrity of spending for the Department of National Defence.
The Chair: Thank you. That's great.
Mr. Huddlestone: We must all recognize the urgency of continuing strong action on our budgetary deficits and moving decisively toward the balancing of our accounts.
The Chair: Thanks. That's great.
Who's next? Ms Matousek.
Ms Matousek: The only thing that I would say is that we must address the deficit and the debt - however, not at the expense of the most vulnerable. When you have people who do not have any money, the marketplace dries up. Where will all the people who are in business sell their product or service if there is no money available for people to buy these products?
I think it comes right down to a point at which we have to make up our minds as to what level of society we want to live in. Do we want to live in a era of moral bankruptcy? Is this what we want? I think this is the first basic choice that everybody has to answer first.
Thank you.
The Chair: Thank you.
Mr. Derksen.
Mr. Derksen: I would like to say that we have to have a level playing field as far as all taxpayers are concerned. I don't think we can make exceptions to the people who can most afford to either avoid paying taxes or defer taxes. Ultimately, the people who can least afford it end up paying a share of those taxes.
The Chair: Thank you.
Mr. Blair.
Mr. Blair: Please extend the scope of discussion to include, in the future, direct measures for the direct reduction of the basic problem, which is the excessive size of the public debt. The solution exists to our problem much more than in what I feel will be not only endless, but hopeless, arguments between us as to which necessary service to cut next.
The Chair: Thank you, Mr. Blair.
Mr. Kuiken.
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Mr. Kuiken: I'd like to read a short paragraph from the World Bank annual report of 1995:
- Successful countries, in fact, have moved on both these tracks. There is no - and can be
no - delinking of economic reforms and effective social policy. Economic growth is crucial.
No country has achieved sustained improvements in living standards without it. But investing
in people to create human capital - which is the main attribute that people draw on in order to
live more productive lives - is equally critical to raising living standards.
Mr. Flanagan.
Prof. Flanagan: I would say you should maintain and, if possible, enhance the federal programs and standards, but deal with the fiscal problems directly, which are really the debt and the unemployment levels. Programs that will relieve those will relieve our other problems. Thank you.
The Chair: Thank you.
Mr. Pendleton.
Mr. Pendleton: Perhaps what I'm saying is that we should encourage more of a movement toward less of this adversarial situation that we find between, if you wish, business and social concerns. At the grassroots, we're finding, in a number of communities across Canada, that there are some really good solutions that can perhaps be used on the national level.
The Chair: Thank you.
Ms Bedard.
Ms Bedard: Consider the broad consequences of any specific budgetary actions that are taken. Perhaps aim for a stable economy with job growth, rather than a growth economy that does not generate tax revenues.
Work to help the small business sector. Ministries and their provincial counterparts should liaise and cooperate rather than get into turf protection. Specific interest group tax treatments should be re-evaluated.
The Chair: Thank you.
Mr. Kenney. I bet I can guess what you're going to say.
Mr. Kenney: I'm so predictable.
Last year, when I was done, Mr. Campbell said: ``Let me get this straight: you want us to balance the budget by raising taxes and increasing spending.''
Mr. Chairman, the summary statement I would make is that all of us from all sides of the spectrum with all divergent interests need to focus on economic growth and job creation. That's one thing we can agree on.
We submit that the only sustainable way to get that job creation is to remove the extraordinary disincentives that exist to work, save and invest in this country, which have created a structural unemployment of 10%. That is simply unacceptable in terms of its economic, human and fiscal cost. Let's solve all of those problems by creating employment, unleashing the productive capacity of our private economy, and reducing the tax burden.
The Chair: Thank you, Mr. Kenney. I was wrong; I couldn't have guessed what you were going to say.
Mr. Genuis.
Mr. Genuis: Thank you. You've heard a considerable amount about investing in Canada. I would submit that this all begins with investment in the family, where Canada is built and developed, for today and tomorrow.
You've also heard in previous presentations that quality day care is a solid fiscal investment. I'm here to tell you that there is absolutely no empirical evidence anywhere in the world to support that. In fact, it's exactly the opposite.
The Chair: Thank you very much. I have the wonderful task of summarizing today's hearings. I'll be through in about half an hour.
Voices: Oh, oh!
The Chair: Everybody here has said that we've got to deal with the deficit. No problem. It's just that there is no agreement whatsoever on how we do it.
As far as cuts are concerned, we have people at the table who said you can't cut seniors, defence, incentives to the petroleum industry, or transfers for welfare, health or post-secondary education.
We've got to increase expenditures on training.
So we've already got a shopping list of increased expenditures, or what we can't cut. We've had people say that we can't have any new taxes. They say the tax levels are already high by any international standard.
We have heard people say there must be new taxes.
All corporate tax deferrals.... Let me go on record as saying this. We'll probably see you again next year. When you're talking about tax deferrals, what is it you object to? Is it tax loss carry-overs from previous years or future years? Are you upset about capital cost allowance, which is when you can't write off your investment in a capital asset in one year but you can defer that write-off over a period of time to capital cost allowances? Those are really the two big deferral areas, so it would be helpful if you investigated which industries are ripping us off in this area.
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We've heard a call for a wealth tax on death.
We've heard for a tax perhaps on assets - or at least looking at our asset base - as a means of using corporate techniques to deal with our debt. We would welcome any further studies that are brought forward on this very innovative approach that has been suggested by Mr. Blair.
We've heard a call for a temporary surtax of 10%, and we've heard a call for elimination of the food and entertainment tax deduction. I'll warn you that this is violently opposed by the tourism, food and beverage industries - the hotels and restaurants - because they say we're now not competitive and these are very high employers of labour.
We have heard a call for a negative income tax. It would require a lot more work for us to look at the implications of this, but we'd be prepared to look at Mr. Flanagan's studies.
We've had some suggestions that we have to get rid of overlap, duplication and red tape. As I see it, the implication is that we're overgoverned as Canadians, and I suspect that it's absolutely true. As politicians at all levels, we have to get our acts together while remembering that there's only one taxpayer. We're there to serve only one person - not ourselves, but the people of this country. I think it's going to require an enormous act of goodwill for governments to come together to reassess what each of us can do well, to eliminate the overlap, the duplication, the red tape.
People, meaning everyone involved with looking at those who are the least advantaged in our society, have called for national standards. We've heard this right across Canada. I take it you don't trust the provincial governments. It's as simple as that. You have faith only in the federal government as long as there are national standards concerned.
Let me say this: in a tough time, it's very tough for us to find new ways to spend. In the past, our country has evolved constitutionally. Sections 91 and 92 cover areas of provincial and federal jurisdiction. The federal government does not have the constitutional jurisdiction to go into many of the areas it is in. Because it had the power to raise taxes by indirect means, i.e. income taxes, which became a great source of income, we gradually intervened through our spending power to try to create these national standards and create a much more humane country from coast to coast.
I'm not sure we can keep up the spending power in every one of these areas to the extent that we have in the past. I know we can't, because there have already been cuts. So we have to probably come to some type of national consensus as to the areas where we will have to withdraw, at least temporarily and until our state of fiscal health is restored. That's part of the very important debate ahead of us.
We heard very interesting comments about community-based action up in Fort McMurray, and I think that could serve as a great example to many single-industry towns, as well as to others. We have to deal with community leaders right down to the grassroots to create these initiatives, jobs and wealth creation.
The Turtleford Chamber of Commerce.... Bob's probably going to buy us all memberships.
I really felt Eric Newell had an interesting comment when he said we have to stop throwing rocks at one another. Let's go about our task. You've contributed a tremendous amount today in bringing your expertise and points of view to us. You've been typical of what people have been like during our travels across this country.
There are many different interests. There is no unanimity about the way in which we must go about the task of arriving at fiscal health in our country, but you are committed to that fiscal health and you are committed to our country, and I would like to thank you all very much.
We adjourn until 2 p.m.